From MIT Sloan Management Review: “Winning With AI”

From MIT Sloan Management Review

Pioneers Combine Strategy, Organizational Behavior, and Technology

October 15, 2019

Sam Ransbotham,
Shervin Khodabandeh
Ronny Fehling
Burt LaFountain
David Kiron

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AI promises rewards but also comes with risks ― namely, that competitors figure out how to successfully use it before you do. This year’s 2019 MIT SMR-BCG Artificial Intelligence Global Executive Study and Research Report shows early AI winners are focused on organization-wide alignment, investment, and integration.

Executive Summary

After several decades of progress, AI technology is now poised to become a significant source of value for a wide range of businesses. In the 2019 MIT Sloan Management Review and Boston Consulting Group (BCG) Artificial Intelligence Global Executive Study and Research Report, 9 out of 10 respondents agree that AI represents a business opportunity for their company.

In addition, a growing number of leaders view AI as not just an opportunity but also a strategic risk: “What if competitors, particularly unencumbered new entrants, figure out AI before we do?” In 2019, 45% perceived some risk from AI, up from an already substantial 37% in 2017. This shift suggests an increasing awareness of and concern with competitors’ use of AI. In China, perceived risk from AI is even higher.

Significant challenges remain, however. Many AI initiatives fail. Seven out of 10 companies surveyed report minimal or no impact from AI so far. Among the 90% of companies that have made some investment in AI, fewer than 2 out of 5 report business gains from AI in the past three years. This number improves to 3 out of 5 when we include companies that have made significant investments in AI. Even so, this means 40% of organizations making significant investments in AI do not report business gains from AI.

The crux is that while some companies have clearly figured out how to be successful, most companies have a hard time generating value with AI. As a result, many executives find themselves facing a set of AI realities: AI is a source of untapped opportunity, it is an existential risk, and it is difficult. Above all, it is an urgent issue to address. How can executives exploit the opportunities, manage the risks, and minimize the difficulties associated with AI? How should they navigate all three factors?

Our findings — based on a survey of more than 2,500 executives and 17 interviews with leading experts — provide a data-driven view of what organizations that succeed with AI are doing and what real success with AI looks like. Companies that capture value from their AI activities exhibit a distinct set of organizational behaviors. They:

Integrate their AI strategies with their overall business strategy.
Take on large, often risky, AI efforts that prioritize revenue growth over cost reduction.
Align the production of AI with the consumption of AI, through thoughtful alignment of business owners, process owners, and AI expertise to ensure that they adopt AI solutions effectively and pervasively.
Unify their AI initiatives with their larger business transformation efforts.
Invest in AI talent, data, and process change in addition to (and often more so than) AI technology. They recognize AI is not all about technology.

The net effects of these behaviors, and their underlying commitments, are to address difficulties generating value with AI, manage unavoidable competitive and implementation risks from AI, and effectively exploit AI-related opportunities.

Addressing Difficulties

To a large extent, difficulties with generating value from AI show up in the data as organizational rather than technological. Companies that focus solely on the production of AI (data, technology, tools) are less likely to derive value than those companies that actively align business owners, process owners, and AI owners. Leaders enable their organizations to consume AI as much as to produce AI.

AI efforts led by C-level executives and closely coordinated with the company’s broader digital transformation are more likely to generate value than those that are led by other executives or unintegrated with digital transformation. Companies that treat AI as a “technology thing” struggle to deliver value: An IT focus on AI tends to generate less value than a broad strategic focus.

Those companies that obtain business value from AI build internal teams and rely less on outside vendors; they selectively import experienced AI talent for technical leadership roles; and they upskill their existing workforce to enable AI literacy and understanding of how to manage with AI. Despite talent scarcity, companies of all sizes across industries report similarly positive outcomes when they make these three talent investments.

Managing Risks

Our research surfaced two broad ways that companies are managing risks that emerge either directly or indirectly from their and others’ AI deployments. First, companies that have obtained value from AI are more likely to manage proactively: They make bigger, sometimes riskier, investments. These aren’t gambles, however, but rather, calculated strategy.

Second, in fast-moving market environments, strategic alignment becomes more challenging and more critical to get right. Misalignment, accordingly, becomes a greater and more common risk. Successful leaders pay attention to AI but as one tool in a broader strategic context; this, combined with a focus on organizational ability to consume AI, mitigates the risk of strategic misalignment. Some interviewees describe reinforcing alignment benefits once AI is successfully at work, pointing to successful AI applications that produce integrated customer perspectives, new metrics, and cross-functional behaviors that enable work to be done more effectively.

Exploiting Opportunities

Companies that derive value from AI are more likely to integrate their AI strategy with their overall corporate strategy. Organizations that are most effective at obtaining value from AI more likely generate value from AI-driven revenue, rather than from cost savings alone. Most executives believe that the highest future value from AI will be on the revenue and growth side rather than on the cost side.

Genuine success with AI — over time — depends on generating revenue, reimagining organizational alignment, and investing in the organization’s ability to actually use AI across the enterprise. None of this is easy to achieve. It is clear, however, that a growing number of executives have determined that finding the right approach to AI is in their company’s best interests. This report highlights several practical considerations and steps executives should take to reconsider their corporate strategy with an eye toward what can be achieved with AI — not only by their own organizations but by their competitors.

See the full article here .

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