What do Apple, Microsoft, Google, Tesla, and NVIDIA have in common?
In addition to ranking in the global top ten for market capitalization, they’re all leveraging the rise of artificial intelligence to drive business. But tech alone isn’t enough to make your company the next Google or Tesla.
There is no question about the business value of innovation tech. In fact, revenue from the AI software market is five times what it was in 2018—and Statista projects it’ll only grow further and faster in the next few years.
Dr. Jorge Calvo, AI expert and deputy dean of GLOBIS University, recently spoke at a GLOBIS USA seminar about the rise of AI potential in business. “AI has come to business and our lives to stay,” he says. “In the coming years, AI will be like electricity: It will always be around us.” But he also says that winning businesses are strategically balancing tech savviness and business competency for greater economies of scope—something he calls “augmented leadership.”
That means future business leaders won’t just need to OK the use of technology by R&D experts several floors below them. Augmented leaders understand what AI can do for business and know how to balance the human and the machine.
Business Technology Needs Assessment
Another word for disruptive is innovative. So if you’re not great with technology, here’s the good news: anyone can be innovative. You just need to understand how digital transformation can power your company.
4 Foundational AI Functions for Digital Transformation
Leaders assessing their businesses for innovation tech need to understand where we are, globally speaking, in the evolution of AI.
The AI we work with today is capable of four basic functions:
- Descriptive analysis – This is how AI observes and reports what’s happening, like when you ask Alexa how the weather is outside, or when a user analysis says raincoat sales are on the rise.
- Predictive analysis – This is when AI tells us what will happen, like when AI reports that umbrella sales are likely to rise during rainy season based on previous years of data collection.
- Prescriptive analysis – This is when AI starts telling us what we should do, like when GPS gives instructions for how to avoid a flood zone during heavy rainfall.
- Autonomy – At this stage, AI takes over entirely. It analyzes past and future data, determines the current state of things, makes a prediction, and course corrects. This is the world we’re heading for, in which our closets dispense a raincoat on a cloudy morning and our autonomous car adjusts to take the safest route to work.
It’s worth noting that the first two types of analysis require collaboration with humans. In fact, most AI still needs us—we work together to improve the quality and speed of output.
When it comes to leveraging AI to disrupt and dismantle operations, AI’s most immediate benefit is universal access. This manifests through the internet of things, cloud computing, 5G, and other applications. But the pure speed of AI’s acceleration also allows it to become both more valuable and cheaper with every year.
Wise leaders will see the competitive advantage of differentiation and cost leadership. Now is the time to innovate, experiment, and plan accordingly.
4 Ways to Use AI Strategically
Many business leaders resist automation solutions out of fear—particularly, fear of being replaced by AI. But Calvo insists that AI is not coming to take human jobs. It’s here to enhance human ability.
That’s not to say clueless executives won’t be replaced by others who stay on top of tech trends. The real competition isn’t coming from machines, but from other humans.
In 2019, PwC’s CEO survey reported that 85% of CEOs anticipated a significant change in business practices due to AI, as well as an estimated $15.7 trillion USD in AI-driven global GDP gains by 2030. As a result of these and other findings, companies big and small have begun using AI for training, product design, and operations efficiency.
In other words, AI has a lot of potential. Calvo suggests looking for strategic applications in four key areas:
- Profit – AI can increase performance and competitiveness, bringing you higher returns.
- Sustainability – AI can help you prepare to take on competitors from other industries as you (and they) expand.
- Growth – AI can help your business enter the new digital and smart economies, expanding your economies of scope.
- Innovation tech – AI can create disruptions for new products, services, business models, and operations.
How to Augment Your Enterprise
So AI has strategic applications and lots of disruptive potential. But remember, businesses don’t just need big data management to survive. It’s far more important to balance digital leadership competencies with business leadership competencies.
That means you need a strong company culture and understanding of business, as well as a good grasp of new technology.
There are four ways companies are manifesting these needs. Calvo visualizes them on a scale of digital leadership competency vs. business leadership competency.
Lacking in both areas, organizations in this quadrant tend to have low revenue and profitability. Translation: They’re not likely to survive long.
Despite a strong understanding of tech, organizations that put digital know-how above all else tend to lack business expertise. As a result, they are constantly investing and suffering low profitability despite decent revenue.
On the flipside of digital-focused companies are business-focused companies. These organizations have strong business knowledge, but low understanding of new tech. This imbalance leads to poor revenue, but high profitability. They’re good at reducing costs and adjusting to a shrinking market—but they’re also stuck in that shrinking market.
Augmented leadership companies
This is the sweet spot. With strong business knowledge and strong tech competency, these organizations enjoy high revenue and high profitability. In fact, they tend to perform 6.5 times higher than those in other quadrants.
Getting your company into this quadrant isn’t about how many employees you have with tech backgrounds, or how long you’ve been in business. It’s about having the courage and humility to disrupt and dismantle your organization with agile leadership.
Balancing Competencies for Economies of Scope
Companies everywhere are seeking the meaning of disruption and the value of innovation tech. Business leaders in this shifting landscape shouldn’t get too wrapped up in reactive measures—or believe that data alone will save the day.
Calvo emphasizes that we need to keep humans “in the loop” for best business performance. There are still many things AI can’t do, from directing AI strategy to involving employees and collecting data responsibly.
As for business leaders still doubtful of AI, “Companies want to protect their legacy. This is human,” acknowledges Calvo. “We need to have a sense of urgency when we are leading change, but if we have this mindset of ‘if we don’t change the company will die,’ then we kill innovation. We move to a reactive mode.”
Instead, he recommends focusing on the positive. Forget what you’re afraid to lose—look ahead to the long-term transformative benefits instead.