AI: The #1 Shortcoming Every CEO Should Know

The promise of AI is enormous, and what it’s already delivered is groundbreaking. As Arthur C. Clarke noted “Any sufficiently advanced technology is indistinguishable from magic.” And, at times, AI does resemble magic. But it has one major shortcoming.

AI, for all it can do, lacks intention.

Why does that matter? Imagine a NFL Football Coach telling his team, “According to our AI predictive engine we’re going to lose this Sunday to the Dallas Cowboys by 7 points. Wish I had better news for you.”

That Coach wouldn’t last five minutes in the NFL.

Coaches are paid to win. They’re paid to assemble and train a winning team. They're paid to devise a playbook against each rival to exploit their weakness and neutralize each strength. They're paid to recruit the finest athletes and motivate them to perform above and beyond what team members think they’re capable of.

In short, NFL Coaches act with intention, and so should every CEO. More to the point, a CEO should demand the entire organization act with intention.

I worked at Pepsi where Forecasting was elevated to an art form, but from the CEO on down executives drove performance. For example, while I was there we worked on delivering and Earnings Per Share (EPS) improvement over five years that would ensure a multi-billion dollar return to the Shareholders. To accomplish that, a robust strategy was devised that included expanding the profit margin by holding Cost of Goods Sold (COGs) steady in the face of increasing volumes. That implied the Cost/Unit had to decline, which in turn meant that Productivity had to significantly improve.

The Productivity improvements, which were absolutely necessary to achieve the company’s EPS targets, were achieved with a well-managed, tightly orchestrated program of Six Sigma/ Total Quality Improvement.

It wasn’t a matter of Predicting results, it was a matter of Driving them.

I’ll provide one more example from Pepsi, this one embracing AI. Predictive algorithms concluded that key raw material prices were set to rise by X% in the planning year, but the Purchasing Managers didn’t just sit at their desk and watch it happen. They assessed hedging strategies, evaluated substitutions, looked at forward purchasing of materials, and exercised any one of a number of alternative approaches to deliver better than market rates for key raw materials.

I don’t want to miss the point that AI can be extraordinarily valuable if properly used in Decision Making. For example, one global Retailer I know uses a predictive engine to project foot traffic in each store to make sure they are properly staffed. ?A well-known hotel chain digests Sentiment and Reputational data from multiple internet sources to predict what properties are going to see an uplift and adjust their rates accordingly to drive improvement in Revenue Per Room (RevPAR).

The key is to recognize AI as a formidable tool to aide in decision making, while applying Executive Intention to drive (not just predict) performance.

[SIDEBAR: If you're wondering just how pervasive the discussion of AI has become, just take a look at this cover story from Cosmopolitan Magazine]