Do you have an Artificial IntellIgence Strategy – or are you JUST pretending TO?

Not long ago one of my clients told me he badly needed “Artificial Intelligence for Dummies.” It was an interesting comment, coming from a highly skilled former senior consultant and current industry leader. I was reminded of the internet hype in the 90s, when firms made fortunes via fundraising and spectacular non-working projects for the new economy.

Is AI (Artificial Intelligence) akin to The Emperor’s New Clothes? In that Hans Christian Andersen tale, two weavers promise an emperor a new suit of clothes that they claim is invisible to people who are unfit for their position. When the emperor parades before his subjects in his new clothes, no one dares to say that they do not see the clothes for fear that they will be seen as “unfit for their positions, stupid, or incompetent.” Finally, a child cries out, “But he isn’t wearing anything at all!” My insightful client’s request for an Artificial Intelligence for Dummies book made the point that it feels just like the 90s, when there were spectacular stories of technology and a threatening sense of the consequences of not understanding it.

Brave leadership reshaped the future

And with AI, we might very well end up in the same place we did then, with technology maturing, many promises made, and many broken. Only a few new, large-scale enterprises grew as a result of the investments and emerging technology of the 90s—and this pattern has repeated itself throughout history. Technology, investment, and brave leadership have all reshaped the future during periods when both promises and dreams were broken.

Innovation and Artificial Intelligence

Innovation is about gaining, sustaining, and using market advantages for as long as possible while, at the same time, learning in preparation for future situations—all while not knowing exactly whether, when, or how that new learning will be used. Innovation is about preparation. Recall the three horizons first defined by Baghai, Coley, and White (1999):

  • The first horizon (H1) concerns itself with smaller, incremental innovations that build on existing business models, extending the existing S curve of the company. These can normally be accomplished with little structural change and lead time.
  • The second horizon (H2) is more creative and proactive, expanding and building new businesses into new directions.
  • The third horizon (H3) is sometimes characterized as “moon shots” or “skunk works.” This is a much more explorative approach to creating future S curves that will be commercialized in H2 and end up producing significant cash flows in H1.

Now to artificial intelligence. Ask yourself: on which horizon does AI belong, and how should you approach and use it?

Keep in mind that the increase of patent applications and investments in artificial intelligence in the United States and China is tremendous: there are 28,000 filed patents, 35,000 AI companies, and over $20B in investments from 2016 alone, which are forecast to boost global GDP by $16T (The Economist, 2017). The most likely reason behind the growing interest in AI is the growing computing power and new computer architecture that can perform vector operations (an important component of AI) much better than traditional computer architectures. It’s not going out on a limb to say that totally new computer architecture and algorithms will take AI even further in the future. And it doesn’t take a crystal ball to know that you will benefit from getting ready for a future where more than 50 percent of today’s jobs have been replaced, Universal Basic Income is introduced, self-aware robots have entered the market, and a totally new market logic is established.

Strategy for getting ready

The most important question to consider before deciding on your strategy for artificial intelligence and technology innovation is, “What do we want technology and artificial intelligence to do for our organization?” While the answer to this question will, of course, be unique to each organization, it will typically fall into one of the four categories (adapted from Van Biljon’s formulation of the goals of innovation):

  1. You want artificial intelligence and technology to help you grow your revenue in total, increase the number of customers you serve, or increase the price or value of your offering.
  2. You want artificial intelligence and technology to help you reduce costs and increase efficiency.
  3. You want artificial intelligence and technology to help you solve particular regulatory or other compliance problems in your organization.
  4. You want to be a more socially responsible and ethical organization, serve the community, decrease negative externalities like pollution, or treat your employees better, e.g., by paying them a living wage.

The importance of a clear strategy for Artificial Intelligence and disruptive technology

Nobody is predicting a slower pace for development and innovation diffusion of AI, robotics, big data, and other disruptive technology. Nobody is predicting a more stable situation: the world’s population is growing, global challenges are increasing, and the political situation around the world is driving de-stabilization even more. Preparing a clear strategy for AI-driven technology innovation is probably the most imperative initiative that all C-suites can pursue, both today and for the coming years. Without a clear strategy you cannot make the right decisions about managing today’s business in the first horizon, much less the second and third.

Ready to tackle the challenge?

Follow these seven steps to set a strategy for Artificial Intelligence and other disruptive technologies.

  1. Decide on the rationale—the “Why” question.
  2. Identify relevant external drivers: Political, Economic, Social, Technological, Legal, Environmental, and Demographic factors that will influence your organization’s ability to defend and expand market possibilities.
  3. Analyze your organization’s need, based on these key external drivers.
  4. Assess and measure your organization’s readiness with respect to leadership, capabilities, and competencies for radical innovation.
  5. Link need and the organization’s readiness in leadership, culture, capabilities, and competencies. Define clear KPIs for monitoring and managing the degree of readiness.
  6. Set additional clear KPIs for monitoring and managing your innovation portfolio (from the first to the third horizon). Link the needs of today (H1), tomorrow (H2), and the further time horizon (H3).
  7. Align with IT strategies, corporate strategies, HR strategies, and marketing strategies.

Remember The Emperor’s New Clothes and set your direction with a clear strategy for disruptive technology driven by Artificial Intelligence.