Romy Hughes, director at change management specialists Brightman Business Solutions, explains how AI is changing decision-making for the better
New technology in the workplace is rarely revolutionary: 99 times out of 100, when a new technology is introduced, it merely digitises an existing process to make it more efficient. While a new technology is often marketed as revolutionary, most of the time the changes it introduces are at best evolutionary.
Digital Transformation, by contrast, has earned its rather lofty title because it does exactly what it says – it doesn’t just iterate existing processes, it transforms them and the businesses that run on them.
Digital transformation has the capacity fundamentally to change how a business operates, from opening up new revenue opportunities and introducing new data on which to make more informed decisions to challenging the relevance of certain job roles. Most outcomes are intentional and expected, yet occasionally they can be entirely unexpected.
One ‘unintended consequence’ of digital transformation is its impact on management culture and how management decisions are made, to the point where executives end up relying less and less on their gut feelings and more on the insights and recommendations of AI algorithms.
Digital transformation, AI and big data give businesses access to a wealth of management data and insights never previously thought possible. With every customer interaction, supply chain step and marketing response able to be recorded and analysed at scale and in real time, the sheer amount of information that can now be analysed is staggering.
Correlations between datasets that could never have been predicted can now be discovered and acted upon, with AI engines continually tweaking their algorithms to predict outcomes even better.
Once an organisation reaches this point, it will have the opportunity to delegate even the biggest decisions to AI: Where should the company invest its profits this year? What is a good price to pay for X? What is the most profitable product to promote in the next two quarters? Which region is at risk of political unrest in the next 5 years and how can this be mitigated?
These are very big questions, with far too many variables for a handful of individuals to make an informed decision. Yet this is how boardrooms operate every day. You could say that almost every strategic management decision is based on nothing more than a gut feeling, because no single individual could possibly analyse all the facts required to make a genuinely informed decision, were they even able to locate them.
AI brings the possibility of genuine facts-based decision-making closer to reality. If an organisation is willing to give up control and take some calculated risks to test and build confidence in their algorithms, it has the potential to be run by facts not feelings for the first time.
So, what are some of the benefits of facts-based decision-making?
*More sustainable growth Most companies don’t grow in a consistent, linear fashion but, due to the nature of sales cycles, holiday periods, reporting cycles, remuneration structures etc., typically experience periods of rapid growth followed by relative stagnation. This boom-and-bust pattern is not conducive to an organisation’s long-term health because it puts too much pressure on staff. Why risk the burnout of your supply chain, support staff, frontline workforce etc. for an impressive headline in just one quarter?
AI can help a business grow faster than its peers and at a more predictable and sustainable rate. Fifteen per cent growth spread out over the year is far better than the pain of 12% in Q1 and 1% in the subsequent three quarters.
*An end to the damage caused by hero culture Traditional corporate culture tends to make heroes of disruptors. But are disruptors always good for a business?
When we think of great business leaders, it’s those with disruptive personalities that spring to mind – the likes of Steve Jobs, Elon Musk and Richard Branson. But good leaders don’t have to be disruptive. Tim Cook was a surprise pick for the Apple leadership. The unassuming former head of operations could not have been a greater contrast to Steve Jobs. Yet, under his steady – some might say dull – decade long leadership, Apple has grown at an astonishing and consistent rate from a $400 billion to a $2 trillion corporation.
Businesses certainly need innovators, but innovators and disruptors are not always the same and one doesn’t have to come with the other. Many executives who become ‘heroes’ for overcoming a crisis either fix something they broke in the first place or let a small niggle grow into a crisis before they do anything about it. This is no way to run a company.
Personality-led management and decision-making is bad for business and with AI-led decision-making leading to more consistent, predictable growth, it is increasingly unnecessary.
Marrying data with strategic vision
That said, it is worth acknowledging that the decision-making process is not something that can be quantified in its entirety and there is a limit to how much it can be automated.
Good management relies on good instincts as much as it relies on good data. And good leadership requires something much more. A good leader doesn’t derive their power from data, but from having a vision and a personality strong enough to see their vision through to reality. Leadership requires someone with an imagination vivid enough to see the impossible and to make it real. There isn’t an algorithm in the world that can do that.
Even so, there is no question that digital transformation is a game changer that will unlock the capability to make much more informed decisions, leading to faster growth delivered more consistently and sustainably. And while the role of leaders will never be replaced, there is plenty of room for more data in the decision-making process. With more data and insights available to us, we will see a gradual cultural shift away from disruptive heroes to much more considered decision-makers.