Book Review by Andy Ghillyer
The complete reinvention of your business has now become standard operating practice. If you’re developing a five-year strategic plan that doesn’t include some element of reinvention of your core business processes, you are wasting your time, and your competition will probably eat your lunch.
In their new book, Competing in the Age of AI: Strategy and Leadership When Algorithms and Networks Run the World, authors and Harvard Business School Professors Marco Iansiti and Karim Lakhani warn that Artificial Intelligence (AI) is transforming how businesses function at a fundamental level and will consequently require a greater degree of reinvention than most companies are currently anticipating.
The authors track the development of enterprise information technology––the precursor to AI––from the mainframes of the 1960’s through the client-servers of the 1980’s to the internet-based systems developed by companies such as Oracle and SAP in the 1990’s. The key point here is that these systems remained aligned with traditional functional and organizational boundaries. If you reach back to Ford’s assembly line (based on Taylor’s scientific management principles) in 1918, and then compare Foxconn’s assembly line for the iPhone today, the fundamental principles haven’t changed. If anything, the availability of increasingly detailed real-time data (parts, assembly-time, unit completion rates) has only served to increase specialization. For example, the Foxconn facilities in Zhengzhou operate ninety-four production lines assembling the iPhone in about four-hundred meticulously planned and monitored steps. The scale may be impressive, but in architectural terms, the company is just as siloed as Ford’s operation from a century ago.
Artificial Intelligence (AI)
Given the current media preoccupation with robots taking our jobs, you could be forgiven for assuming that AI is just about leveraging opportunities for automation. Nothing could be further from the truth. As the authors explain in great detail, based on research with hundreds of companies and “field-based observations on many of the most interesting companies from the United States, Europe, and Asia,” the next digital evolution isn’t robots but a new generation of AI-based firms.
In computer parlance, it’s the difference between digital agents (the components of an algorithm) and their human counterparts that underscores the dramatic functional changes that take place when a company becomes AI-based. The sclerotic flow of information through reports, summaries of those reports, and the endless stream of emails cc’d to everyone just-in-case, is no longer needed. Communication between digital agents is virtually instantaneous with zero marginal cost.
The capability for machine learning inherent within these algorithms will turbocharge your growth, assuming your business architecture is configured to handle it. In real-world terms, having the capacity to show you things Amazon thinks you might like based on your search history will be of little use if you can’t manage inventory to fill the order if you decide to ‘impulse purchase’ the item the algorithm selected for you.
This is the bottom-line message: Don’t chase AI solutions based on FOMO without fully understanding the transformational power of these digital solutions. Without careful planning, you could either catapult or crash your company.
Competing in the Age of AI presents a fascinating and data-driven look into the future of AI-based businesses and offers valuable guidance for rethinking how your company will need to operate in this new environment.
Andy Ghillyer is a Contributing Writer at Soundview. He lives in Tampa, FL where he specializes in writing for the B2B and academic markets while raising a growing menagerie of cats and dogs.
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