Why Startups Need an AI Strategy

Adopting AI technology has become a crucial factor for startups to survive, scale, and maintain competitiveness in today's business world. The 2023 McKinsey global survey indicates that around one-third of business executives have started integrating artificial intelligence (AI) into different core business functions. This shows that AI significantly opens up new opportunities, such as process automation and improving customer experiences.

So, what is an AI strategy? It serves as a comprehensive blueprint aligning AI initiatives with overarching business objectives. Whether a startup is product-centric or service-oriented, a well-defined AI strategy is indispensable. The strategic incorporation of tools like OpenAI's GPT is just the first step toward optimizing processes and tasks. However, higher value comes as companies get deeper into AI. Building proprietary data models to address specific use cases and solve market needs allows businesses to advance quickly in their industries.

AI platforms are being adopted in different industries. Recent reports from Statista show that AI is being widely utilized in service operations, strategy, and corporate finance, with almost all industries reporting a usage rate of approximately 20 percent in these areas. The financial services industry has been using AI the most for product/ service development, with over 30 percent of respondents incorporating AI into their processes by 2023. AI adoption is not just a trend; it brings real value, allowing companies to grow faster and increase their revenue and ROI. Additionally, a study from Statista revealed that companies who use AI to enhance product and service development, supply chain management, and human resources processes increased their revenue by over 10%, demonstrating how the integration of an AI platform in a startup can make a positive impact on the organization.

Many tech companies are developing AI for business purposes. However, it can be challenging for entrepreneurs to identify which AI platform suits their business or whether a startup can afford to use AI tools. To address these questions, exploring a framework to determine AI potential and integrating it into the organization's core structure is essential.

Framework for Applying AI in Business

When designing an AI framework, it is important to consider how AI can solve a business problem with an immediate and measurable Return on Investment (ROI). For instance, consider a healthcare startup that aims to automate extracting information from clinical records. Without proper planning, missing data can lead to setbacks and delays. Similarly, in a pizza restaurant, customer orders may vary significantly depending on the day of the week. For example, every Friday, there may be a large surplus of Hawaiian pizza, while demand for Margherita pizza consistently exceeds supply. This is where AI can help by identifying patterns in data. A pizza restaurant owner can use an AI platform to forecast when certain types of pizza are most in demand and adjust production accordingly.

Establishing a framework for applying AI in business is crucial to ensuring effective and efficient use. Follow these steps as a guide:

1. Evaluate AI’s potential to improve business operations: Assess which areas of your operations could benefit from using AI platforms. This evaluation could lead to new efficiencies, cost savings, and improved decision-making.
2. Establish Goals and Objectives: Analyze what you aim to accomplish during this phase. Are you integrating an AI platform to enhance customer experience, streamline operational processes, or forecast market trends? Additionally, consider the timeline within which you expect to achieve these outcomes.
3. AI Security and Measurement Strategies: Establishing a comprehensive security framework for AI systems requires identifying and safeguarding sensitive data throughout its lifecycle.
4. Ethical Deployment and Adaptation to Regulatory: Businesses must ensure that their AI strategy incorporates strong transparency and ethical use. For instance, according to a ruling by the U.S. Copyright Office, AI-generated images cannot be copyrighted. A case in point is the story of Kristina Kashtanova, the author of a graphic novel who used the AI image-generation tool Midjourney to create the illustrations in her book. Although she claimed copyrights of the illustrations on the book, the copyright office concluded that the images generated by Midjourney were not original works of authorship protected by copyright. While she was able to prove that the prompts, such as “cute baby dinosaur Shakespeare writing play purple,” were from her authorship, the highly detailed involvement in the process was not sufficient to make the output protectable. Therefore, employing as much human creativity as possible to create content using generative AI tools is essential. For example, providing prompts such as "a purple dinosaur wearing a white shirt" is different from "a purple dinosaur wearing a white shirt and sweatpants in a picnic holding a teacup." However, even highly detailed involvement in the process may not be enough to make the output protectable. Reviewing AI systems for ethical implications and ensuring compliance with regulations is crucial.
5. Set data collection and Processing: evaluate the ability of your data collection and processing infrastructure to ensure that you can keep up with the demands.
6. Promote AI Literacy: Develop a program that covers fundamental AI concepts and their application within your business context. Ensure your team is capable of using AI platforms; provide online courses and workshops to them to get hands-on training on the different roles and applications that AI will have in the organization.?
7. Set AI Performance Metrics: Establish clear performance benchmarks to measure how the AI strategy achieves business goals, review them regularly, and adjust them if needed.?
8. Resource Allocation for AI: This step involves a meticulous approach to distributing resources like budget and infrastructure. Conducting an analysis will help you identify whether AI specialists, training, and development programs will be needed.
9. Design AI strategy with flexibility and adaptability: Regularly assessing the effectiveness of your strategy is crucial as AI technology rapidly evolves. Keeping up with the latest technological advancements, market changes, and internal business shifts is important to ensure your strategy remains effective.

Startups that strategically embrace AI gain a competitive edge, drive innovation and create lasting impact. Therefore, whether you are an aspiring entrepreneur or an established founder, consider integrating AI into your startup's framework to ensure the success of your endeavours.