Are businesses ready for the benefits and opportunities of AI?

A few years ago, I was asked to write an article on digital transformation for retailers in the Middle East. I wrote that most organizations tend to apply new technology to optimize or enhance old ways of doing things, while the true opportunity is to explore new forms of value creation for customers. I also noted that the digital world offers more efficient ways to manage ongoing contact and dialogue with customers leading to stronger, more loyal customer relationships. Today, with the recent advancements in artificial intelligence (AI) and the amazing speed and development trajectory ahead, I am faced with a very scary thought for business leaders: Are companies ready for the benefits and opportunities that AI promises? And, more importantly, will they keep up with the speed of change needed to realize the rewards?  

From my experience, and to be perfectly honest, most businesses are not designed for change and, in most cases, are designed, measured, and managed in ways that slow down, complicate, and even block most efforts to change. Therefore, if the benefits and opportunities promised by further advances in AI will require businesses to change anything, and they most certainly will, then we are all in for a very tumultuous and frustrating phase of development in businesses around the world.   

To make a bold statement, I would bravely assert that most businesses have outdated, if not obsolete, organizational models, considering the scope and speed of pending change in the years ahead. I would also widen this general premise to describe the last 25 years as largely focused on digital transformation in most industries and predict that the next 10-20 years will likely be focused on organizational transformation—driven by the crisis of not keeping up with changes in customer needs, preferences, and behavior. 

To make a prediction, I would guess most businesses will follow the same path of applying the new technological advances to old ways of doing things with the goal of optimization and efficiency. However, if history proves anything, most of us cannot fully envision the new forms of value creation that these technological advances will bring. 

In the early 1900s, who would have imagined that Édouard and André Michelin would publish what would become the gold standard restaurant rating guide known globally in the culinary elite? It was originally published to stimulate automobile sales, and thus tire usage, and included maps, tire replacement instructions, and locations of mechanics and gas stations. In fact, who would have imagined that mass-produced cars, available to middle-market price segments, would lead to the massive increase in need for roads, bridges, gas stations, monuments, hotels, restaurants, mechanics, and more? 

Think about that for a minute, and then apply that scale and scope of change to what would happen in the next 10-15 years if the majority of middle- and upper-class families would, say, have their own AI-powered household robot/assistant. Hard to believe that most people today would envision and understand the full breadth of opportunity before them, let alone the scope of changes to needs, preferences, and behavior of those market segments. 

Most businesses are designed to measure and manage their performance based on today’s goals, or, in many cases, based on an understanding of past performance goals that may or may not remain relevant. They are not designed to look forward. Even those businesses with a solid strategic development plan typically measure their progress based on the next quarter’s performance or the year ahead at best. For the most part, and aside from small bubbles of strategic thinkers hidden in organizational hierarchies, businesses are not future-thinking at scale. 

I will also predict that those businesses that take, at least in part, an iterative and experimental approach to development will gradually discover these new forms of value creation and evolve their offerings to embrace the benefits and opportunities before them. However, most businesses would require almost a complete re-design of their organizational models to be ready for this scenario.  

To break it down, an organizational model is comprised of the organizational structure (how teams are organized), the management model (how resources are allocated and how decisions are taken), and performance measurement systems (how things are analyzed to monitor progress and determine success or failure). Rather than go on about the flaws and drawbacks of the many variations of organizational models found in businesses around the world, I will focus on some key ideas that could serve simply as guiding principles or may even represent absolute imperatives for the future of businesses.