We need to go beyond business as usual powered by AI
Does it happen to you to go into a new situation and have flashbacks like “I’ve been here before, doing this”? Today we hear sentences like: “data is the new gold”, “Artificial Intelligence (AI) is like nuclear energy”, “AI will be more revolutionary than electricity”. And we envision a world of unlimited possibilities at our fingertips. We understand that for the success of our company’s transformation, we need data-driven, empowered, inclusive and responsible leadership. But when I advise executive teams on how to transform their companies, I have flashbacks, I see the same irrational responses I have been observing in transformation projects over the last 20 years. Silo mentally, groupthink, power struggles, company politics, lack of accountability, conflicting values systems.
Some people think I’m exaggerating. They say: “This doesn’t apply to us, to my company, to my executive team.” Well, research published in Harvard Business Review in 2019 reported that the biggest surprise for recently appointed CEOs was how little time they were dedicated to developing business and strategy and how much time they spent managing conflicts, people, and information because they did not have a functional executive team.
They discovered to their surprise that they have a loose group of individuals where they expected to have a team. If you think this only applies to rookie CEOs, in 2008, Fred Adair published research on how CEOs tend to overestimate the effectiveness of their own teams compared to the assessment made by the team members themselves. Most of the time, you wouldn’t know.
Knowledge is not power, it’s a commodity
Today, most people in management positions are baby boomers and generation Xers, but even millennials have been sold the idea that knowledge is power. The problem is, since the internet, knowledge became a commodity. So, what matters for the last twenty years is not knowledge anymore, is knowing how to use that knowledge, available to anyone, to add value to our customers and businesses.
Today, know-how is power, not knowledge. But with the rise of AI, we are seeing something different. Both knowledge and know-how at business level are not differentiators anymore. Successful ideas in business models, knowledge and know-how are shared freely or at low cost with anyone.
Because the capacity of AI to collect and process data is so immense, it opens possibilities of transformation so big that might obliterate current knowledge and know-how. What makes a difference right now is the ability to make sense of the transformation that is happening before anyone else does. Today, sensemaking is power.
With AI, new services in categories will be created to disrupt your market. Either you do it or the competition will. Probably the most accurate word to describe the current challenges is uncertainty. Uncertainty means that there are several possible options, and you don’t know which is going to prevail. Your current knowledge might apply or not, your organization might be fit for the job or not.
You know a lot, you know how to do business in different circumstances, but there are contradictory trends, signals and possibilities. People expect you to know the way forward, to give sharp answers, to design a winning strategy, but uncertainty means you cannot be sure about any of those. With uncertainty we must make a unique sense of the events, exclusive to us and our business. No one can do it for us. When managers are still in the knowledge is power mantra, they will not share data openly, they will not empower and include, they will not foresee the ethical implications of their decisions, they will not make the most of your company’s resources.
AI is not a technical solution
Competitive advantage will not be technical. Technology is available to anyone with resources. Your competitors will have access to the same level of technology. But the readiness of your leadership team to make sense of what happens in the current level of uncertainty is unique to you.
Can you imagine AI applied to your business as a 100% technical solution? Think facial recognition, for example. Can you imagine this tool applied to your services or products as a 100% technical project? I bet you can see legal, ethical, social, political implications as well. It will impact all dimensions of your business; therefore, you need to have them considered upfront.
You must design your business strategy considering these dimensions. For that, you need an effective executive team. To drive AI transformation, we need an effective executive team collaborating to produce business transformation. One of the biggest mistakes we can do with AI is to consider it just another I.T. project. This is not about technology. This is about transforming your business model, processes, strategy and mindset.
I.T. projects tend to have a moderate success level. Between 50 and 80% depending on the international organization reporting it. And the usual reasons are: lack of sponsorship, lack of leadership alignment, and wrong company culture. If we see AI as just another I.T. project it will fail to reap its benefits. We just can’t afford to have AI as a pet project of the CIO or CTO.
AI is a job for the executive team
When I say that AI is a job for the full executive team, it’s not about sponsoring. The executive team must drive AI transformation. The challenge with this is that executive teams tend to be the worst team in company, exactly where you need to have the best one.
It’s told that sometime before 1989, a Soviet Official visiting London was surprised by how efficient the bread distribution was. Wanting to take the chance to improve the bread distribution in the Moscow, he asked an economist that was showing him around: “Who is in charge of London’s bread supply?” The economist thought about different implications of the question and then said “Nobody!”.
A mental model is a representation of reality. It can never be identical to reality because it is influenced by our previous knowledge, assumptions and experience. If you have the mental model that the bread supply of a city is a complex, centralized system controlled by one person, this will determine your business model, your strategy, your organization, your business processes, your leadership style, etc.
We cannot transform business models and processes with AI without first transforming our mental models of how the market operates and successful companies develop business. Transformation depends on the executive team mastering four tools: mental models, critical thinking, sensemaking, and trust.
Mental models to better understand the business landscape and its relations with our actions. Critical thinking to address flaws in our thinking process and get to better decisions. Sensemaking to deal productively with uncertainty. Trust to get things done.
These are not some gimmicks that we follow as a prescription. A winning strategy is the result of a thinking process. Make it biased, acritical, and unable to make sense of uncertainty and you will get bad decisions that will sink your company.
We know it from science: there’s no pure data. Science asks very narrow and frequently out of context questions. Each question is asked separately in an experiment. If you bundle scientific answers to any questions together without critical thinking, systems thinking and awareness of your mental models, the sense you make of the information they provide will be very different according to your individual biases, and so will be the decisions.
Solving the trust issues with AI
As data is biased, data driven insights can become biased as well. There has been increasing concern about gender, racial, ethnic or social status biases of specific algorithms in the market. As with science, it’s all in the questions: What is in the data set? What are the questions being asked? What are the information selection criteria? How to make sense of that information? What is the best way to decide on it?
Biased data creates a trust problem. The current deficit of trust in AI is twofold: trust in the algorithm, and trust in the company’s ethics using it.
Solving the trust issues is a job for c-level. What research shows is that often executives don´t trust each other in the executive team. Think about it, when you are at c-level, these are the people you compete with for budget, resources, exposure, influence. In short, your career depends on you beating them to the CEO job. Whatever it takes – that’s how many see it.
Trust is not abundant in an executive team. So how can such a team generate trust in your organization and what your organization does in the market without solving some internal issues before?
Creating trust in artificial intelligence is a job for natural intelligence. But we have been impairing natural intelligence at c-level because we think linearly, we have unconscious biases, we fail into groupthink, we use irrational criteria to make decisions. We expect AI to correct the flaws in our thinking process, to be able to generate new business models. When in truth, we need to correct the flaws in our thinking process to generate new business models with AI This is the paradox. We need to go beyond business as usual powered by AI.
Beyond business as usual powered by AI
In my latest book, Chief Executive Team, I share research of the last 25 years proving that an effective executive team beats its competition at designing viable strategies for the company, engaging people with its execution and securing competitive advantage in the market. Regardless of business sector or market situation.
Earlier this week, I was speaking to a CEO about resuming the work we were doing with his executive team before lockdown. I asked how things are and he told me that the team is more effective than ever. He was actually questioning how much of the structural work we were doing is still needed. This is what happens in crisis situations: the external enemy brings the team together. Once the adversary disappears, the drive to be an effective team also wanes and we to go back to business as usual.
Research shows that market share gained in crisis situations tends to last long after the crisis is gone. This is the right time to create a new level of thinking to lead your company into your next business model, strategy and organization. This cannot be driven by AI. It is the job of the executive team to create the vision and strategy that will drive your company to achieve it with AI.
If your company is to have a future it must be created by your empowered AI, not the opposite.