Strategy in the Time of AI

“The only thing worse than bad health (a flawed strategy) is a bad name (intuition)"

Love in the Time of Cholera – Gabriel Garcia Marquez  

In the manufacturing domain, we are entering the age of the ‘Lights out’ factories where machines will work in perfect unison unfettered by the encroachment of us mere mortals to deliver immaculate defect-free products at productivity rates far exceeding today’s ideal standards. These machines will make decisions on what to produce, at what rate and adapt on the fly to changed circumstances, be extremely fleet-footed in changeovers, deliver mass customization at scale and provide unmatched resilience.

Cross the shop-floor and the situation will look pretty much similar. Functions like Customer Service which contended with the creaky IVR technologies for too long are now witnessing a technology driven crescendo where robotic chat-bots are fast replacing the IVR and even us fallible humans. Consumers seem to love that and enterprises love it because it brings down the cost of service tremendously.

The Sales function is yet another story. Selling (in the B2C context at least) is by and large a very impersonal affair and no one seems to mind that. The rise of online sales at the expense of personal selling is a more of a fait accompli. The recent HBR Article ‘How AI will Change Strategy’ offers a brilliant thought experiment on Amazon flipping its model from ‘Shopping then Shipping’ to ‘Shipping then Shopping’ which could further propel Amazon’s sales exponentially through the virtuous application of massive data driven AI.

Even the Human Capital function is not immune to the allures of AI. AI is having an increasingly wider impact on the entire employee lifecycle management processes from ‘hire to retire’. From helping you hire the right folks to helping keep them motivated and deriving the best productivity from your human capital, the reach of AI extends across the entire human capital spectrum.

Talk about any function and AI seems to be seeping in just too fast into that function. Even if we consider the impact of AI by industry verticals, the story is not different. AI is having a profound impact across all industry segments and the reality is that we are just getting started.

In essence, we are entering a phase where organizations of all stripes and their respective functions will get massively transformed by the advent of AI. Well, almost all! Strategy as we know it today at least remains the sole province of the human intellect at its very best. How will this very strategic function (pun intended) be shaped and transformed by AI and what implications does this hold for the future organization of tomorrow? Will this last bastion of human prowess at its very intellectual best also fall prey to the rising tide of AI?

In all facets of an organization (functions/roles), the comparative advantage of humans over machines has been steadily declining and in many cases, the situation has actually reversed. Knowledge work which prided on being the sole preserving of humans toiling in the fruits of their intellectual labor has been disrupted as much as the menial and rote work that automation had first set its sights on. We seem to be entering the age of ‘White Collar is the new Blue Collar’ where knowledge will not confer any sustained competitive advantage. 

Strategy has always been part science and part art. It requires the exquisite blend of insights delivered through deep grained analysis coupled with experience driven human ingenuity to deliver the serendipitous magical concoction which greases the wheels of an organization to keep it moving on a growth trajectory.

Strategy also has been the preserve of the top echelons within an organization who have moored their respective organization’s ship through choppy waters and have delivered the goods in getting their organization to where it is today. This top leadership team chartered with driving the future vision is definitely subject to a survival bias having made it thus far successfully. It will require a significant leap of faith for them to let go off their guard and be receptive to a future where strategy borrows heavily from the power of data unleashed by AI.

The enormous datafication of all organizational processes is creating a data deluge which if harnessed appropriately will drive the future competitive advantage for enterprises. AI may not still quite stake claim to the soft factors (teamwork, collaboration, empathy etc.) although it is definitely gaining prominence even in these areas through translation of everything into data.

The rise of the technology behemoths over the past decade, where all decision gets driven by data (without any room for intuition) is instructional for the future of strategy. Every major facet of Strategy will get reshaped by the advent of AI. From figuring out which markets to enter, what white spaces to tap, which blue oceans to create and which red ones to exit, to what resources (talent, intellectual property etc.) to acquire to strategic portfolio allocation decisions, AI will have a role in figuring it all.

So is it time yet for us to replace ‘Culture eats strategy for breakfast’ with ‘AI eats strategy for breakfast’? Maybe not, if we pivot the right way. The focus of Strategy needs to shift from trying to answer all questions to finding the right questions to answer and then taking the leap of faith in AI to deliver the goods. From our erstwhile approach of taking data driven insights and then layering (corrupting) them with our intuition & experience which led to sub-optimal decisions, we need to shift to a future where we ask the right questions off the data and then get out of the way to enable a AI driven strategy. 

We will eventually enter the era of ‘Lights-Out’ business where it may appear that we entirely concede to AI and give strategy a thumbs-down. Strategy would however always continue to play a pivotal role to channelize and tame AI towards nobler goals. Strategy will definitely need to embrace AI in its wake and co-exist in a symbiotic relationship with AI. The AI genie is out of the bottle and there is no turning back. Senior leadership teams should take heed to leverage this very strategic asset meaningfully and ensure that we collectively win in the future.