Newsletter #15: The rise of the Chief AI Officer - competitive or complementary to the Chief Digital Officer?

As Wall Street looks for evidence in the earnings of the Magnificent Seven for incremental revenue driven by this milestone technology, there’s no question, we’ve entered the next phase of Generative AI.?

While those results might take more time for some of the Seven vs others (Newsletter #14: What can we learn about AI from Magnificent Seven earnings last week? ), there’s an emerging leader entering the C-suite to drive these efforts, the Chief AI Officer.

Just as we saw the rise of the Chief Digital Officer 10 years ago tied to the emergence of Digital Transformation, a similar story is playing out but likely on a much larger scale given what’s underway.

1: Rise of AI Leadership

I won’t bore you with all the reasons for the rise of AI leadership but I will point to the one that I think might be the most important and likely the most nuanced.

Every CEO and his / her kids, every direct report, every Business Unit leader, every middle management leader etc have all experienced the magic of Generative AI directly, without any filter, thanks to ChatGPT.

Sam Altman and OpenAI did the world a massive favor by democratizing access to a technology as powerful as any we’ve seen since the beginning of the Internet.

Like anything in life, it’s one thing to hear about it anecdotally, it’s another thing to study it but it's an entirely different thing to experience “the magic” firsthand.?

This firsthand experience of the magic horizontally across the executive suite and vertically through each successive layer of management is what’s driving awareness, commitment and action.?

Once you see it, you can’t unsee it. Generating a different kind of conviction and bias to action.

“‘If I were talking to a CEO a year ago, and I was like, ‘You’d be a fool not to have a head of AI.’ They’d be like, ‘Come on, give me a break,’ said Peter Krensky . ‘And now they’re like, ‘I know, that’s why I have one.’

"Krensky estimates that currently about a quarter of Fortune 2000 companies have dedicated AI leadership at the VP level or above. He expects it to be about 80 percent a year from now."

"While the position will be more commonplace at bigger companies — especially those in banking, tech, and manufacturing — he’s also seeing it crop up at midsize organizations and in government agencies.” (“The hottest new job is ‘Head of AI’ and nobody knows what they do” by Vox )

2: It isn't Chief Digital Officer vs Chief AI Officer, it's CDO + CAIO

While it’s a reasonable criticism to suggest a CAIO might be redundant with a CDO, I think it’s important to consider them to be complementary and how / why they should co-exist.

A CDO is a role that’s more holistic and macro, focused on the tech stack and systems more broadly.

A CAIO is a role that’s more specialized and micro, focused on the AI stack, systems more specifically.

Yes, there are dimensions of overlap but just like the equivalent between Sales and Marketing which is where great CMOs and CROs can generate highly differentiated GTM strategy and more importantly, results, when their efforts are the 1+1=3 kind.

Stating the obvious here but using the assessment of LLMs as an example is in of itself no small task.

Just when you think you have it figured out, along comes 07.18.23 when Meta launches Llama 2 and makes a commitment to the Open Source community that fundamentally alters the way most companies evaluate the notion of Private / Closed vs Open Source. Overnight. (Newsletter #13: “Did Mark Zuckerberg + Satya Nadella just rewrite the rules of the AI game on 07.18.23? Seems that way… )

“And even though it will take time for AI to boost productivity, market interest in AI has already increased rapidly, with more than 16% of companies in the Russell 3000 mentioning the technology on earnings calls, up from less than just 1% of those firms in 2016."

"Roughly half of that spike came after the release of ChatGPT in the fourth quarter of 2022."?

"Our economists’ previous research has shown that such mentions tend to predict increases in company-level capital spending.” (“AI investment forecast to approach $200 billion globally by 2025 ” by 高盛 )

“Innovations in electricity and personal computers unleashed investment booms of as much as 2% of U.S. GDP as the technologies were adopted into the broader economy."

"Now, investment in artificial intelligence is ramping up quickly and could eventually have an even bigger impact on GDP, according to Goldman Sachs Economics Research."

"Over the longer-term, AI-related investment could peak as high as 2.5 to 4% of GDP in the U.S. and 1.5 to 2.5% of GDP in other major AI leaders, if Goldman Sachs Research’s AI growth projections are fully realized.” (“AI investment forecast to approach $200 billion globally by 2025 ” by Goldman Sachs)

Overcoming the barriers to investing in AI with a clear path to ROI is something that speaks to the need for both a CDO and CAIO, collaborating to overcome these approachable obstacles.

Brought to life nicely via the image below from Databricks and Dataiku report: “AI, Today - Insights from 400 senior AI professionals on Generative AI, ROI, tech stack & more ".

3: CAIO vs CDO’s Areas of Focus

Let’s be more specific about the difference between these two leaders and their respective Areas of Focus.

One of my favorite ways to do that is to provide a list of strategic questions that reflect, more tactically, the AOFs and the way each generates value for the organization.

CDO

Their focus is on driving their company’s overall digital transformation and digitization efforts.

Their role encompasses a broader range of digital technologies beyond AI as they focus on all aspects of digital transformation including online presence, customer experience, data-driven decision-making, process automation, fostering a culture of digital innovation, healthy partnerships etc.

Strategic questions the CDO focuses on:

1: How do we align digital initiatives with the company's long-term strategic goals and vision?

2: What are the potential risks and challenges associated with digital transformation, and how do we manage and mitigate them effectively?

3: What are the best practices for managing digital transformation in legacy systems and overcoming technological debt?

4: How can digital technologies be used for personalized and data-driven marketing and customer retention strategies?

5: What partnerships and collaborations can be established with digital startups, tech vendors, or industry leaders to drive innovation?

CAIO

Their focus is driving their company’s strategic implementation of Artificial Intelligence and Machine Learning technologies.

Their role involves identifying AI opportunities, developing AI strategies, building AI teams and collaborating with various business units to implement AI solutions while ensuring ethical AI practices and data privacy compliance to achieve innovation and digital transformation goals.

1: What are the most promising AI use cases that can deliver tangible value and impact across different business functions?

2: What are the industry trends and emerging AI technologies that could disrupt or enhance our business model?

3: What are the necessary skill sets and talent requirements for building and leading a high-performing AI team?

4: What AI-powered tools and platforms are available, and how do we choose the right ones for our specific needs?

5: How do we create a scalable and future-proof AI infrastructure to support the organization's long-term AI goals?

6: What are the best practices for managing AI-related intellectual property and ensuring data ownership and usage rights?

7: How can AI be integrated into existing products and services to enhance customer experiences and drive innovation?

8: How can AI be utilized for continuous process improvement and innovation within the organization?

9: How do we ensure transparency and interpretability of AI algorithms, especially in critical decision-making processes?

10: What are the potential risks and challenges of AI adoption, and how do we manage and mitigate them effectively?

4: CAIO Profile

This is where things get especially interesting and I’m sure my perspective below on the profile of the CAIO is going to generate some “constructive criticism” but here we go…

Here’s the initial 5-part framework I’d use to find this rockstar:

1: Strategic Vision, Creativity + Innovation

Can’t overestimate the importance of clear and forward-thinking to cultivate an inspiring vision that moves people while connecting the dots between business goals, AI enabled tech stack and most importantly fusing the people, process and technology bit to generate results.

Given the pace of change and implications of this milestone technology, critical for this leader to be open minded - "strong opinions, loosely held" kind - so as to be able to unleash the creativity that drives innovation powered by what’s next without having any paralysis by over analysis in the mix as things continue to evolve, fast.

2: Leadership + Communication Skills

Leadership, leadership and more leadership.

You can’t have enough of it for all sorts of obvious reasons including the complexity in driving genuine cross-functional collaboration and innovation. So hard but so so so important.

Inherent in Leadership is Communication but I called it out because the importance of establishing a shared language codifying all these terms / acronyms etc is beyond critical.

If I had a dollar for every time deep technical terms were described with different words that led to different groups talking past each other without realizing it, generating the equivalent of technical debt in business / operations terms that became very expensive, quickly…

3: Major in Strong Product / Customer Centricity and Minor in Strong Technical Background

I’m sure this one is going to get me in trouble with some of those in this community but it’s not that I don’t think an Engineering background isn’t super valuable, it’s just at this stage in the game, I think it’s more valuable to have a leader who comes from the Product world.

Having deep empathy for the user's jobs-to-be-done framework meets the leader's cross-functional chops helps drive #1 and #2 above more so than the depth of their technical chops.

Keeping one foot behind me of course as this is my POV at this moment in time…8 or so months after the launch of ChatGPT… ;)

4: Business Acumen

This reinforces my thoughts on #3 above.

Critical for this leader to understand and have a deep appreciation for all things Distribution, balancing out the weight and importance of the technical side of the house.

Also, more specifically, their Business Acumen makes them more effective in managing the expectations of the C-suite, helping the team focus on solving the right problems and unlocking collaboration through the development of rationale that’s more agnostic aka travels well across the organization.

5: A Do’er aka the Leader's Get Things Done Quotient

Using marathon terms, we’re in the 1st or 2nd mile of the race.

With so much happening so fast, this person needs to have a bias to action.

Proactive, resourceful and comfortable making difficult decisions with incomplete information as well as resilient because there will be all sorts of opportunities to learn from what didn’t vs did work.

Someone who is always keeping in mind that not making a decision is a decision.

“That’s the case with 可口可乐公司 Global Head of Generative AI, Pratik Thakar , who previously led the company’s global creative strategy."

"Thakar has been using AI to streamline and amplify the company’s advertising products. That included recently using AI to make roughly 15 percent of a commercial , which sliced the production time from a year down to two months.”

“ Conor Grennan , a dean at 美国纽约大学 - 斯特恩商学院 , who recently took on the additional title of head of generative AI, sees the title as more of an initiative and thinks of it as akin to a chief learning officer or chief productivity officer."

"In the position, he pushes people across 美国纽约大学 , from students to professors to administrators and recruiters, to use AI to become more efficient and better at their tasks."

"Grennan, who has an MBA and had previously studied English and politics, thinks it’s actually better for many organizations if their AI leadership doesn’t come from a tech background so that the person is better able to explain its benefits to a wider audience of mere mortals.”

“‘You don’t need to know the software running your iPhone, just order an Uber,’ Grennan said."

"Instead, what’s important for the role, he says, is creativity with language and breadth.”

“‘They need to be an excellent communicator, they need to have a view of the entire firm, at least at the 30,000-foot view. And also it has to be somebody who really understands what generative AI can do,’ Grennan said. ‘You don’t capture everything by putting it in the tech department.’” (“The hottest new job is ‘Head of AI’ and nobody knows what they do ” by Vox )

That’s it for this week’s newsletter.

Hope you enjoy the rest of your Sunday and talk to you all next week!

Alec