A.I. is a strategic capability which successful companies cannot do without. This makes A.I. a Board issue. It is not just an IT issue. This article outlines different leadership styles which have emerged as Boards have entered a new era in defining their success and prospects for business growth. Clara Durodié is on a mission to empower Boards and their NEDs through sharing knowledge of what A.I. means at the Board level in order to enable Directors to ask the right and the hard questions when it comes to adopting A.I. as a strategic capability.
A.I. in business: a strategic capability
Board members have had ample time over the past 24 months to ask the right questions, choose the right advisers, and to draft a strategic vision centred on AI. By Q1 2017, smart boards already know that they must have an AI architecture strategy which has to be implemented before their competitors’. They have also signed off budgets for newly created Data Science teams. They know that now is time for action.
The past 24 months have been the catalyst for revealing three main types of Board and senior executives:
The Visionaries. They understand A.I. and have the determination to lead their business through implementing it.
The Comfortables. They understand A.I. but lack the desire to correctly prioritise the matter and are “a little bit preoccupied with other matters”, as one of them candidly described their perpetual procrastination.
The Unawares. They don’t understand A.I. and don’t want to find out more, purely because “This. A.I. is just another fad. Our clients will always want to interact with people”.
This is a rare breed. They have already chosen their A.I. advisers carefully, those advisers are not necessarily the usual suspects. Visionary leaders can identify trends. They are driven to be ahead of their competition. They are intellectually curious and keep themselves informed well beyond the usual sources: The Financial Times and The Economist. They know where to direct their business to increase market share and profitability. They have written comprehensive Board papers on A.I. in business, and have actively pushed them to approval. They constructively challenge their fellow Board members. Like other leaders, their diaries are exceptionally busy. Unlike other leaders, they make the time to inform themselves. They are in a relentless quest to find a new technology angle to to preserve their market share and serve their clients better.
They also know that choosing their advisers is the key to a successful A.I. architecture implementation. They know that A.I. is a vast and complex field, which can only be navigated safely with the help of advisers who have an indisputable pedigree in A.I. That pedigree is a measure of the advisers’ depth and breadth of A.I. knowledge, their sole focus on A.I. and, critically, of their ability to implement the A.I. solutions which they recommended. An indisputable and unique pedigree is not a well-known ‘big-four consultants’ which advises with almost every financial services company there is.
The Visionaries know that Boards that use a big four consultant for their A.I. strategic adviser, will receive the same advice which everyone else receives and most likely liaising with junior staff rather than Partner level. There is no intrinsic and strategic value to appointing advisers which everyone else uses! More importantly, the ‘big-four consultants’ do not focus on A.I. and the lack of A.I. specialism is evident in their work.
Finally, the Visionaries know that there is a limited window for A.I. adoption from which a strategic advantage can be leveraged. They are unstoppable. They live to reshape their business in a technology fit enterprise, ready to take market share from their competitors. They have already deployed A.I. in their enterprise with great success and have proven that this is an essential technology.
You can find them as a minority in almost every Board. They sit somewhere between the Visionaries and the Ignorants. They understand that the A.I. narrative is not going to disappear. They usually exist in businesses which have recently started to understand that A.I. is a need not a want. In some cases, they are leaders of services businesses which have, for long time, benefited from (1) labour arbitrage, namely charging UK fees for services provided by a workforce usually domiciled in India or more recently Poland and (2) client captivity, meaning that they have made it so expensive and cumbersome for their clients to change service providers that clients choose to stay put over moving.
The Comfortables have a vague understanding that A.I. has been redefining market forces which determines who stays in business and who ‘goes away’. They usually partner with lone voices inside their company who have the strength of character and vision to say that “if we don’t employ A.I. we’ll lose our jobs”.
Despite all of this, the Comfortables lack the focus and grit to pursue an A.I. strategy. They find superficial excuses like “we are a little bit preoccupied with other things right now”.
In some cases, this often transpires because they lack proper advice. They go ahead with whatever A.I. solution comes their way because everyone is talking about, endeavouring to be an early embracer of A.I. technology, they simply set themselves up for “told you so, it doesn’t work” and “stop chasing those shiny things”. A.I. systems are not created equal, and pouring resources into the wrong A.I. system is another way to destroy value in a business and damage one’s reputation and standing.
They are seen less and less. However, they are prevalent in sectors like wealth management / private banking where the main belief is that their business models will continue to exist just because their clients prefer to engage face to face.
The Unawares are defensive and dismissive. They dismiss any conversation around the topic of A.I.
They are not curious about what A.I. is and what this technology can do to grow their business. They actively dismiss any information on A.I. provided to them. You’d see them leave events right before the applications of A.I. in wealth management section. Nothing, absolutely nothing, could convince them otherwise. However, deep down they are aware that this technology is shaking up the status-quo. But they also know that they’ll retire in a few years’ time or they’ll move jobs, so why rock the boat now? This is a cause of significant concern, because the well-being of a business should be an ongoing concern which is more important than one person’s retirement or place of work. Executives should be genuinely and actively concerned in equal measure with preserving shareholders’ value as well as protecting their employees and their clients.
When the Unawares win the argument, it’s a Pyrrhic victory.
Financial Services as a business space is unforgiving. The market forces which have been taught in business schools are changing shape and scope. The large management consultancies have been rushing to develop new frameworks, new names and have published new insightful strategy papers. Boards may read them all, but they are left with a massive challenge ahead: how do we make it happen? There are numerous examples of successful companies which lacked the leadership when they needed it the most: when market forces have changed and when only visionary leaders were able to steer their business away from an inevitable crash.
Unsurprisingly, Goldman Sachs and Blackrock have been amongst the first to advance A.I. solutions within business processes. It is unsurprising that Boards of large organisations benefit from the headspace needed to evaluate their business strategies in the context of transformational A.I. developments. Upon close inspection of their Board composition, it becomes clear that ‘Visionaries’ always form the largest majority.
A.I. is a business need
In 2017, 50% of organisations are planning to use machine learning (a subset of artificial intelligence technologies) to better understand customers while 48% percent are planning to use machine learning to gain a greater competitive advantage.
Top future uses of machine learning include:
automated agents/bots (42%),
predictive planning (41%),
sales & marketing targeting (37%), and
smart assistants (37%).
375 qualified respondents participated in the study, representing a variety of industries, with the majority being from technology-related organisations (43%), business services (13%) and financial services (10%). Many organisations spend years amassing customer data. By the time this data is entered into CRM solutions, it’s often already outdated and almost useless. This is why salespeople often ignore customer information their company provides to them. A.I. changes this by using both up-to-date internal and external sources – including cloud, social, mobile and Internet of Things (IoT) – to arrive at meaningful and actionable recommendations. Soon, marketers will use A.I. to augment their intelligence about stakeholders for every campaign they run, helping them develop precise and relevant messaging to the right customers, in the right places based upon their current needs, desires and sentiments.
The Boards and business leaders who understand the implications of A.I. will use it to reinvent how they interact with customers at every point of contact, including sales, marketing and customer service and to identify efficiencies in middle and back office as well as investment management functions. These executives understand their role as leaders.
Choose your advisers carefully
The visionary leaders understand that A.I. is a strategic alliance which will help define and achieve business profitably for decades to come. These are the people who have the power to make a business flourish. These executive are our clients at Cognitive Finance Group. Our Advisory practice was established to assist with scoping, selecting and implementing the right A.I. solutions for sustainable growth and competitive advantage.
Our sole specialism in A.I. for financial services is helping our clients to inform their own thinking at the scoping stage (what is A.I. and how it will help my business?) all the way to the implementation stage (can you build a prototype and then roll it out?). We cover a dynamic and ever expanding ecosystem of about 14,000 A.I. and robotics companies.
We make recommendations based on technical merit alone. We don’t take any incentivised commissions from the A.I. vendors, thereby preserving our objective assessment of A.I. systems. Our independent recommendation is guaranteed.
Stay tuned for the next Cognitive Finance Paper, where Clara will discuss various A.I. systems which can assist Boards in streamlining their paperwork using document summarisation A.I. technology to enable a more efficient decision making and reduce the time devoted to Board papers.
If you want to raise your NED career to the next level, please visit: www.NEDonBoard.com