Organizations today are trying to make sense of Artificial Intelligence (AI). They are keen to assess the impact of AI on their business and more importantly want to know how much time do they require to prepare for it. The idea of AI has been around for over 50 years; however, many experts believe that, it is ready for a big move now – and this is making them nervous.

I first encountered AI about 30 years ago when I was working on my thesis. At that time, Expert Systems and AI were considered as technologies with great future potential. Since AI was a part of my thesis, I started learning more about it. One day, while I was working in the lab, my friend Mike stopped by and said, “I heard that you are doing your thesis using AI”. I said, “Yes”. So tell me, Mike continued “What is the maturity of AI today?” and I said, “ look Mike, today, AI is advanced enough to identify a kitchen in the house, then look for a shelf in the kitchen that has a cookie jar on it, pick up the jar, open the cover of the jar and select a chocolate chip cookie from it.” I stopped and said, “so what does that tell you about the maturity of AI? “and he said, “Oh! It means it has a maturity of a two-year-old. Any two-year-old can do everything that you just described”. I just looked at him and said, “you know, you are right!”.

Now, fast forward 30 years to the current state. Today, AI is bigger than a two-year-old. With sensors and chips embedded in every possible product, advances in neural networks and computing power and with billions of devices connected to the Internet and more getting connected every day – the data required to learn (about any domain) is certainly available. AI, therefore, can do a lot more. For leaders, however, the question is, what is the impact of this avatar of AI on their business? 

Since the penetration of AI is different for different businesses, it is difficult to find the impact and know how to prepare for it. Our experience shows that a few key questions can shed some light on this issue for leaders.

1. What are key drivers of the business?
   Organizations that focus on key business drivers, inherently do better than their competitors. However, AI can easily take over, if the drivers are more about consistency in operations rather than about creative solutions. For example, in a real-estate business, the key drivers of profitability are location and cash-flow management. AI can quickly make a difference by identifying the best locations and by finding best ways to manage the cash-flow. (If your competition is using AI you will lose your advantage). However, if the business driver is creativity, it may take some time for AI to affect that business – although AI is making big strides in building creative solutions.
2. What role is business playing in its relevant ecosystem?
   This is one the key questions every leader must think about. If the current business simply exists because of market inefficiencies, it will vanish sooner than later – and any organization involved in it needs to find a solution, quickly. Also, if the business is not adding significant value to the entire value chain or if it is involved in delivering routine tasks – AI will replace it – it will deliver it through automation. We are already seeing the signs of that in IT industry. Even if the
   business is adding value today – say logistical services, the new AI based products and services getting developed may provide that value soon.
3. How customers perceive the value delivered by the business?
   Customers perceive the value differently for different businesses. If the customer values price and convenience in a business, then offering a customer experience may not be of much help. A great example is Amazon. Many large book-store chains went out of business in the United States as Amazon started delivering that value through their on-line offerings. Experience at the book store did not work as a differentiating factor. AI also helped Amazon (by analyzing implicit profiles) increase its revenues by offering many relevant offerings to its consumers – creating a win-win situation. On the other hand, if the business is about providing unique customer experience at a specific location (Disney for example) the AI may have a limited role – at least for now.
4. What is the degree of complexity in your business?
   Routine diagnostics provided by a general physician based on symptoms, is something AI can take over easily. A few experiments suggest that, in many cases, AI doctor can do the diagnosis faster, better and with a greater accuracy. However, if the doctor is dealing with a patient that has multiple diseases and requires an operation (where interdependencies are not easily understood), AI could work better as an assistant.
   Today, many organizations are using AI for streamlining operations, building new products and services, doing research and translation services, and for accelerating testing services. If you are in one of these businesses, chances are, AI will replace it soon. The key is to understand the difference between a complicated business and a complex business. If the business is complicated, AI is already impacting it. If it is complex, the degree of complexity will determine the role and penetration of AI…

The maturity of AI in every business is different and its impact is determined by the type of business, the complexity of business and – how easy it is for AI to optimize the key business drivers and customer value preferences. Understanding the domain through these filters can prepare the leaders better for its impact. We believe that AI could be highly beneficial, if the organizations embrace it by looking at it as an opportunity rather than as a challenge.

-Milind Pandit

At Koinvent, we help leaders think deeper, work smarter and manage better. If you would like to learn more about Koinvent, please visit our website at www.koinvent.com or send us an e-mail at contact@koinvent.com.