A great article from Harvard Business
Review on how to integrate AI in a company. This should be compulsory reading at many board meetings. AI is a moving target so understanding what exactly it can do for your organization may be illusive. But understanding how to integrate it within a company is not only possible but a necessity. Within a short few years the gap between companies who have done it successfully and the rest will be unbridgeable.
Too many business leaders still believe that AI is just another ‘plug
and play’ incremental technological investment. In reality, gaining a
competitive advantage through AI requires organizational transformation
of the kind exemplified by companies leading in this era: Google, Haier,
Apple, Zappos, and Siemens. These companies don’t just have better
technology — they have transformed the way they do business so that
human resources can be augmented with machine powers.
How do they do it? To find out, we conducted a multistage study over
five years, beginning with a survey of senior managers and executives,
followed by interviews and surveys across a wide range of industries to
identify technology implementation strategies and barriers, and in-depth
studies of five leading organizations. Our key takeaway is
counterintuitive. Competing in the age of AI is not about being
technology-driven per se — it’s a question of new organizational
structures that use technology to bring out the best in people. The
secret to making this work, we learned, is the business model itself,
where machines and humans are integrated to complement each other.
Machines do repetitive and automated tasks and will always be more
precise and faster. However, those uniquely human skills of creativity,
care, intuition, adaptability, and innovation are increasingly
imperative to success. These human skills cannot be “botsourced,” a term
we use to characterize when a business process traditionally carried
out by humans is delegated to an automated process like a robot or an
algorithm.
How do leaders get the most out of AI?
From our research we have developed a four-layer framework that shows
organizational leaders how they can create a human-centric organization
with super-human intelligence. The four layers are not “steps,” which
would imply a sequential progression. The four layers of intentionality,
integration, implementation, and indication (the Four I model) must be
stacked all together, or else the use of AI will fail to deliver a
sustainable competitive advantage. Here’s how it works.
The first layer of the Four I model is intentionality of purpose,
beyond the mere pursuit of profits. An intentional organization knows
why it matters to the world, not just its shareholders. A good example
of intentionality in the use of AI comes from Siemens, which evolved
from a shareholder-profit-maximizing power generation and transmission
company into a leading provider of electrification, automation, and
digitalization solutions with energy-efficient, resource-saving
technologies driven by AI and the Internet of Things (IoT) in service to
society. This cultural shift toward a higher human-centric purpose
impacted not just marketing and product design but also the strategic
decision to, as Scott D. Anthony, Alasdair Trotter, and Evan I. Schwartz
wrote
for HBR, “divest its core oil and gas business and redeploy the capital
to its Digital Industries unit and Smart Infrastructure business
focused on energy efficiency, renewable power storage, distributed
power, and electric vehicle mobility.” While financial performance and
shareholder value will always be important, creating human-centered,
technology-powered organizations will actually drive financial
performance in the age of AI.
To that end, Siemens
is launching a combination of hardware and software that enables AI
throughout its Totally Integrated Automation (TIA) architecture, an
approach that aligns Siemens’ mission with its AI strategy. The TIA
architecture uses AI as a bridge that spans from corporate headquarters
out to industrial end users. Siemens’ proprietary “MindSphere” is a
cloud-based IoT operating platform that reaches into Siemens’ industrial
user-operated controller and field device products. The MindSphere’s
neural processing unit module allows human users to benefit from
Siemens’ in-house AI capabilities, while also enabling human users to
impart their own experience to train the machines. According to Siemens
Factory Automation specialist Colm Gavin, “With artificial intelligence
we are able to train, recognize, and adjust to allow more flexible
machinery. Because, do we want 10 machines to package 10 different types
of products, or a tool that accommodates different packages and
different sizes and automatically adjusts to the new format?” Smarter
machinery with TIA architecture leverages AI to advance the company’s
intentionality, while increasing flexibility, quality, efficiency, and
cost-effectiveness for its end users.
Alternatively, a negative example of the relationship between
intentionality and AI is illustrated by recent issues confronting
Facebook. Facebook’s mission, “to give people the power to build
community and bring the world closer together,” sounds noble. Yet recent
use of its AI has raised concerns from advertisers and civil rights groups
alike. The social media giant has struggled to align its mission with
its use of AI that seems to have the opposite effect: Facebook’s content
“feed” is driven by algorithms that prioritize inflammatory,
misleading, and socially divisive content. Facebook’s use of AI seems to
drive social division, which is antithetical to its purpose as a social
media company, and is having financial consequences. Because its
algorithms have promoted disinformation, violence, and incendiary
content, major advertisers are now cutting ties with Facebook, dealing a
strong blow to the company that derives 98% of its income from ad revenue.
Some of the largest brands in the world, including Coca-Cola and
Unilever, pulled advertisements from Facebook for promoting content
antithetical to their brand’s values, resulting in a one-day drop of
8.3% in market value, or $56 billion.
The second layer of the Four I model is integration
of human and AI resources across the organization. To lead in the
technology era, companies must shift away from silos to organizational
structures with flexible teams that integrate people horizontally and
vertically, from product creation to strategic decision making. As one
executive we spoke with explained, before the AI shift, it was necessary
for workers to have deep knowledge of a narrow area. Today, deep
analytical content can come from AI. What is needed is the ability of
workers to synthesize information, which means collaborating across
functions and working in cross-functional teams. To foster innovation
and adaptability, organizations need to transition from rigid
hierarchies to flexible, agile, and flatter structures. Google, Haier,
and Zappos may have differences in their organizational structures, but
the common elements are flatness and fluidity. The recommended structure
is more like a playground for smart, talented people to generate
customer-centric products. Employees have fluid roles in
cross-functional teams around problems as opposed to individual roles
and responsibilities. These teams spontaneously form when problems
arise, then dissolve when the work is done, reallocating human resources
as needed.
The other side of this — which can easily be forgotten — is that
human and AI teams should also be structured in an integrated manner.
This allows humans to transcend their ordinary cognitive limitations,
without placing unreasonable reliance on a robot to perform human tasks
that require high degrees of care and skill. An example comes from the
medical context, where AI offers tremendous potential not as a
substitute for, but as a supplement to, physician-driven care. Recent research
in the journal Nature found that, “good quality AI-based support of
clinical decision-making improves diagnostic accuracy over that of
either AI or physicians alone.” This means high-stakes, highly-skilled
human decision-making can benefit from AI so long as it is integrated
properly within the human decision-making context.
The third layer of the Four I model is implementation.
Implementation requires engaging human talent, tolerating risk, and
incentivizing cross-functional coordination. An executive at a large
pharmaceutical we spoke with said, “you have to get people to believe in
the technology.” We saw this in another of the companies we spoke with
when we learned that despite having integrated AI, managers were
modifying the output values from the algorithm to fit their own
expectations. Others in the same company would simply follow the old
decision-making routine, altogether ignoring the data provided by
algorithms. Therefore, human behavior is central to implementing AI.
Top performing companies spent significant time communicating with
employees and educating them, so that the human talent understood how
machines made their jobs easier, not obsolete. To build trust in AI, it
is imperative for leaders to communicate their vision transparently,
explaining the goal, the changes needed, how it will be rolled out, and
over what timeline. Beyond communication, leaders can inoculate their
workforce against fear of AI by arranging for visits to other companies
that have undergone similar transformations, providing a model for
workers to see with their own eyes how the technology is used.
We saw many approaches to this in our research. Pilot projects where
technology is rolled out in a limited scope give workers some ownership
over the adoption process. Giving workers an opportunity to tinker with
the technology before a final adoption decision is made eases the
transition. Financial services firm Capital One even created an internal
training institute called Capital One University that offers
professional training programs to promote a broader understanding of
analytics throughout the organization’s culture.
The fourth layer of the model is indication or
performance measurement. Ultimately, success and progress need to be
measured, and leading companies have moved from traditional productivity
measures to aspirational metrics. Using the right indicators can drive
improvements and help a business focus on what they deem important.
Aspirational metrics that incentivize innovation and creativity
encourage employees to exercise those uniquely human traits. The lesson
is to be careful what you measure. Monitoring the wrong performance
indicator has a strong tendency to lead to the proverbial tail wagging
the dog. Humans are clever, and if incentives are not properly aligned
with intelligently designed performance metrics, human workers will
resort to lazy, clever, and cynical hacks to game the system, maximizing
the appearance of performance under one measure while actually failing
to deliver the output that management was actually hoping for when they
implemented that measure.
Most companies use KPIs, but in our research we saw that successful
companies more often used Objectives and Key Indicators (OKRs). What we
learned was that KPIs by themselves don’t encompass strategic and
ambitious goals needed in the age of AI and they don’t motivate to reach
for the sky. The goal of OKRs is to precisely define how to achieve
ambitious objectives where failure is imminently possible, through
concrete, measurable specifications. They encourage creative, novel, and
aspirational performance by showing progress toward a goal even if the
goal itself is unattainable. Google famously started using OKRs in 1999; a
change some even credit as a critical element of Google’s success. At
Google, OKRs have helped develop transparency. Everybody knows the
company’s goals, what everyone is doing, how they have done in the past,
the trajectory they are on, and how they are getting to where they want
to go.
Building Companies on Super-human Intelligence
Our research shows that AI is so much more than just the latest
incremental improvement in existing technology, however deploying it
effectively takes leadership and coordination across all sectors of a
company. Unlocking the full potential of an organization’s human
resources by adopting AI strategically requires revisiting the very
structure of the company and how it measures its progress toward
fulfilling its mission. These issues are core issues to the identity of a
company and modifications here are fraught with insecurity and risk,
but this is a risk needed to compete in the age of AI. Intentionality,
integration, implementation, and indication must be layered in order to
create a human-centric enterprise governed by super-human intelligence.
Achieving this requires talent at all levels to have systems-thinking,
understand how the work being done meshes with that of others elsewhere
in the organization, how it meets customer needs, and how it impacts the
company’s strategy and financial picture. By following the Four I
model, companies can unlock super-human intelligence without losing the
human touch.
We were surprised to discover how few organizations have unlocked
this secret. But we were encouraged by the progress of the ones that
had. With this model, we hope, more companies can create the conditions
for realizing super-human intelligence and performance, delivering
sustainable competitive advantages in the age of AI.