The power of “what if?” in governance
Digital twins as a tool for board of directors
The Governance Lens series offers boards timely overviews and practical recommendations on issues shaping the current business landscape.
In the board’s oversight of strategy, decision-making aids can be valuable assets. One such tool with potential is digital twins—simulated replicas of physical assets, processes, and markets. The technology can simultaneously represent multiple complex systems, making it particularly well-suited for the dynamic business environment.
Deloitte’s recent digital twins article suggests the innovation may have an array of cross-industry use cases. That could be one reason why the tech’s market size is projected to grow at a compound annual growth rate (CAGR) of 25% through 20321. Such a trajectory could reflect an evolution in how organizations use simulations to inform major decisions.
Board governance considerations
For directors, digital twins could also help enhance the effectiveness of board meetings. The technology’s potential value is connected to its ability to generate multiple “what-if scenarios” before resources are committed. As such, using digital twins to inform major strategy decisions could offer a competitive advantage.
At companies already utilizing this emerging capability, the innovation also introduces new oversight considerations. Digital twin outputs are probabilistic rather than deterministic, meaning they offer likely outcomes, not certainties. Model accuracy depends heavily on data quality, and biased inputs can potentially yield misleading insights, which may expose the organization to significant risks.
Starting the dialogue
For those thinking about adopting digital twins—be it in the boardroom or the company writ large—the following questions might serve as conversation starters:
Regardless of approach, boards that thoughtfully incorporate digital twin capabilities into their strategic processes may gain advantages in navigating complexity. Given the growing uncertainty in the business environment, leveraging these tools to assess multiple futures may help directors execute their governance duties with greater effectiveness.
1 Mohsen Attaran and Bilge Gokhan Celik, “Digital twin: Benefits, use cases, challenges, and opportunities,” Decision Analytics Journal 6 (March 2023): 100165.
