CHAPTER 11

Conclusion

J. Mark Munoz and Al Naqvi

The advent and rise of artificial intelligence (AI) is an undeniable reality and an irreversible trend. It is true that in the short history of six or so decades of AI, several attempts were made to make the ­technology mainstream. Such attempts did not succeed. Dreams were shattered and investment wasted. But from the ashes of such failures emerged the ­modern AI revolution, which is not only sustainable but is also appearing as a formidable force in the world.

Artificial intelligence’s strategic reach shapes productivity and a ­country’s GDP (PWC 2016) and will positively impact several industries such as health care (data-based diagnostic support), automotive (autonomous fleets for ride sharing), financial services (personalized financial planning), retail and consumer (personalized design and production), technology, communication, and entertainment (media archiving and search), manufacturing (enhanced monitoring and auto-correction), energy (smart meters), transport and logistics (autonomous trucking) (PWC 2016).

In business, the advent of AI has redefined operations in areas relating to supply chain and logistics management, attention to customer needs, and the enhancement of digital experiences among many others ­(Popomaronis 2017).

The ability of AI to reconfigure business operations has led to dramatic results. For instance, NatureSweet, a U.S. company, formerly had employees walk around greenhouses to identify dying plants or insect infestations. This being a slow, laborious, and expensive process the firm decided to try integrating AI in their operations. Linking AI with ­cameras, they started monitoring the plants 24/7 and gathered instantaneous feedback (McFarland 2017).

On a daily basis, in companies all over the world, organizations are integrating AI in their businesses to boost operational efficiency. It has become an important tool and the means to understand their organization, market, industry, competition, and customers better.

Consequently as companies undertake efforts to improve and differentiate themselves, AI starts to play a critical role in the process. It elevates in importance from being a mere technological tool to a factor of strategic importance. Business strategy is about competitive advantage. In the past, competitive advantage was a function of industry structure, core competency, or facts such as differentiation. As society developed and the information revolution started, information and knowledge became the key factors in establishing a sustaining competitive advantage. The AI revolution, also known as the cognitive or the fourth industrial revolution, is redefining the rules of the game. Everything begins with the strategy of a firm. AI is no exception. However, AI should not be viewed as a tool, a factor, a driver, or a component of business strategy. It should be viewed as the strategy. In other words, companies should realize that their entire strategy at this time is and needs to be about the competitive dynamics unleashed by AI.

The featured chapters in this book highlight the fact that AI interfaces with key business operations. In particular, five realities are evident:

1. AI is an organization influencer—the use of AI in the organization impacts in operations in diverse ways. It alters the organization in one form or another.
2. AI is defined by the organization—the scale and scope of AI usage in an organization is defined by organizational attributes. For instance, an organization that has a strong ability for technological absorption or has a high cultural affinity for AI will likely progress faster in advancing AI in the firm.
3. Management drives AI—the extent of support from the management team will impact the pace in which AI will be used in the organization.
4. External factors affect an organization’s AI performance—there are numerous factors that influence AI utilization in a company. These factors include the supporting infrastructure and architecture for the AI platform to be executed well, the level of advancement of competitors, the demands of the market, as well as consumer trends and expectations among others.
5. An organization needs a holistic AI strategy to succeed—it is not enough for organizations to implement one or two AI initiatives as they see fit or when time or budget permits. Whether desired or not, AI permeates into several organizational operations including areas such as sales, marketing, human resources, information technology, and finance among others. An AI plan needs to be tied into the organization’s overall goals and strategy.

Table 11.1 below outlines modalities in which AI impacts organizational operations and highlights the need for a coherent strategy.

Table 11.1 Artificial Intelligence (AI) and organizational implications

Business function	Organizational impact	Implications
Management	The use of AI in organizations means that management has to think of new ways of planning, leading, organizing, and controlling.	Organizations need to create a comprehensive AI plan.
Marketing	Organizations will need to redefine the notion of the 4Ps of marketing—­product, price, place, and promotion. A ­cognitive perspective of customer implies ­developing never-seen-before insights about customers. It also means knowing more about customer than the customer knows herself.	Reinvigorated marketing plan will be necessary.
Human resource ­management	AI and the use of robots in organizations will require adaptations in the way people are selected, hired, and trained. AI is redefining not only how HR is managed but also the role and responsibility of AI in the HR departments.	Innovative organizational architecture involving new structures and policies will have to be created.
Information technology	The continuous infusion of new technologies would require nimble and highly innovative organizations that can quickly respond to changes. Data management, cloud, and machine learning will become the critical ­additions to all IT organizations.	An AI unit within IT departments will need to be formed, alongside a top-level AI steering committee.
Financial management	Organizations will have to rethink about ways in which financial decisions are made. Access to capital markets, investor expectations, and financial modeling will change.	Finance and accounting departments will have to assimilate AI in their work systems.
Ethics	New ethical decisions, especially those dealing with the impact of AI on people and the world, will have to be made.	AI will need to be woven in the organization’s ethical goals and strategies.
Entrepreneurship	Parameters regarding the pursuit of profits under risk and uncertainty will likely change.	Employees need to be motivated and rewarded for AI business ideas.
Production and operations	The rate, speed, and scope in which production and operations take place will accelerate in an AI environment requiring adaptations from organizations.	Organizational structure and costs will need to be planned for as AI and robotics are used in organizations.
Internationalization	Organizations will know the world ­operating terrain better and faster with AI, thus requiring companies to better manage and prioritize information ­gathering and usage.	Organizations can internationalize at a faster rate and scope, with ease of data gathering and analysis as a result of AI.
Strategy ­development	Innovative and out-of-the-box strategies will need to be created to adapt to rapid organizational changes that will take place.	Organizations need to integrate AI in their strategic plans, or create a comprehensive AI strategic plan.

As shown in Table 11.1, AI is poised to redefine organizations and how they operate. Planning for these changes in top-, middle-, and lower-level management ranks would be critical. For a successful AI strategy to succeed, an organization-wide commitment and buy-in would be necessary.

A coherent strategic perspective is necessary. There are many moving parts to consider alongside a fast-changing operational environment. For instance, other strategic factors worth considering include: (1) assessing opportunities and weighing in technology, competitive pressures, and pain points, (2) uncovering key priorities, (3) making sure resources relating to talent, culture, and technology are ready, and 4) thinking through appropriate governance and control measures (PWC 2016).

Table 11.2 highlights recommended courses of action organizations can take in an AI environment.

Table 11.2 The strategic AI plan

Organizational need	Recommended action agenda
Organizations need to create a ­comprehensive AI plan.	Create a committee to develop a comprehensive strategic AI plan involving representatives from each department. This committee can evolve to become an AI circle and will continue explore ways to optimize the use of AI in the organization.
Reinvigorated marketing plan will be necessary.	Review existing marketing plans and identify areas of improvement.
Innovative organizational architecture involving new structures and policies will have to be created.	Review organizational structure and policies to create an AI-friendly or AI-compatible work environment. Provide AI-related training for all employees.
An AI unit within IT departments will need to be formed, alongside a top-level AI steering committee.	Develop AI specialists (AI-team) within the IT department who will be first responders on AI issues.
Finance and accounting departments will have to assimilate AI in their work systems.	Review existing financial plans and identify areas of improvement.
AI will need to be woven in the organization’s ethical goals and strategies.	Create an AI ethical statement and a set of strategies.
Employees need to be motivated and rewarded for AI business ideas.	Offer rewards and merit pay increases for AI idea of the month as well as in participating in knowledge transfer.
Organizational structure and costs will need to be planned for as AI and robotics are used in organizations.	Embrace an AI culture by educating managers, employees, and organizational stakeholders on the merits of AI. Ensure participation in the AI circle.
Organizations can internationalize at a faster rate and scope, with ease of data gathering and analysis as a result of AI.	Review existing internationalization plans and identify areas of improvement.
Organizations need to integrate AI in their strategic plans, or create a comprehensive AI strategic plan.	Create a comprehensive strategic AI plan. Prepare to update and review results over time.

The strategic AI plan pointed out in Table 11.2 stresses the value of planning ahead for AI and creating a culture that encourages AI-related ideas in the organization. An environment that is AI-compatible will reap significant benefits relating to knowledge absorption, operational efficiencies, and cost savings among others.

In the process of strategic planning, organizations need to carefully anticipate potential barriers and strategize accordingly. Possible barriers include high cost and complexity of project implementation, legalities, employee training, and the management of information and data security. In fact, only about 20 percent of organizations possess the key skills to succeed with the AI technology (Rao 2017). Significant organizational assessment, risk planning, and thorough preparation have to be made.

The authors note that organizations have a choice in how they respond to the AI economy. Firms that plan ahead and strategically implement a well-conceived action plan will likely gain unique competitive advantages.

When the Internet arrived, many firms were unable to adjust. They found themselves lost and unable to comprehend the new dynamics. Blockbuster Video focused on expanding stores even when Netflix was designing alternative models. Bookstores all over the world did not see the emergence of Amazon as a threat until it was too late. Similarly, a tremendous change is taking place in the industry. The traditional auto sector seemed to be shocked by the rise of Tesla and autonomous cars. The pharmaceutical industry is rushing to embrace the technology to ward off competition from emerging AI firms. The traditional agri-businesses are acquiring AI companies to automate agriculture. The financial industry is embracing automated trading. All of these point to the beginning of what lies ahead.

It is important to note that the external environment in which the organization operates also impacts its ability to succeed in an AI environment. For example, government policies that support AI research and development or provide incentives for its usage can benefit companies. The presence or proximity of industries that sell AI-related goods and ­services can lower system acquisition costs. The quality of work and research in the industry shapes AI quality and performance. Available talent or expertise in AI through local universities affects the accessibility and ­quality of the organization’s labor pool.

In support of business, governments need to take a proactive role to support the growth of AI. Mehr (2017) identified the need for governments to: (1) incorporate AI in their goals, (2) engage the citizenry, (3) build on existing resources, 4) consider data preparation, (5) manage ethical risks, and (6) strengthen employee potential.

Organizations would also benefit when the “AI ecosystem” is conducive to the expansion of AI. For instance, in communities where venture capitalists and bankers back AI, universities introduce AI courses and research labs, and the government offers tax breaks for AI initiatives—AI would likely flourish and dramatically contribute to company success.

The world of AI is a current reality and a cornerstone of the future. The market for AI is currently in its infancy with a size of only around $644 million in 2016, but this figure is expected to rise to $15 billion by 2022 (Rao 2017). AI will contribute approximately $15.7 trillion to the global economy by 2030 (PWC 2016).

Individuals, organizations, and countries have important roles to play and will shape the direction it takes. Planning for AI now, and pursuing a well-conceived strategic action, is definitely a step in the right direction.

References

McFarland, M. 2017. “Farmers Turn to Artificial Intelligence to Grow Better Crops.” CNN Tech, available at http://money.cnn.com/2017/07/26/technology/future/farming-ai-tomatoes/index.html (accessed September 20, 2017).

Mehr, H. 2017. “Artificial Intelligence : 6 Steps Government Agencies Can Take.” State Scoop, available at http://statescoop.com/artificial-intelligence-6-steps-government-agencies-can-take (accessed September 20, 2017).

Popomaronis, T. 2017. “11 Tech Leaders Share the Real Truth About Artificial Intelligence (and What Really Matters).” available at https://.forbes.com/sites/tompopomaronis/2017/08/29/11-tech-leaders-share-insights-on-artificial-intelligence-and-what-actually-matters/#2c7c758e6668 (accessed September 20, 2017).

PWC 2016. “Sizing the Prize. PWC’s Global Artificial Intelligence Study: Exploiting the AI Revolution.” available at https://.pwc.com/gx/en/issues/data-and-analytics/publications/artificial-intelligence-study.html (accessed September 21, 2017).

Rao, A. 2017. “A strategist’s Guide to Artificial Intelligence.” Strategy + Business, available at https://.strategy-business.com/article/A-Strategists-Guide-to-Artificial-Intelligence?gko=0abb5&utm_source=itw&utm_medium=20170523&utm_campaign=respB (accessed September 20, 2017).