Aug 7

Aug 7 Artificial Intelligence: Practical Business Applications

Businesses must continuously adapt to meet new challenges and compete in an evolving landscape. Artificial Intelligence is the new technology frontier for the 21st century, and companies who fail to adapt will be left behind. Managers must understand this landscape and strategically align their business to succeed by leveraging the newest technologies, while being careful to augment the most important aspects of machines with the unique skill sets that only humans can provide.

Artificial Intelligence can have broad ranging implications for business, but the impact primarily falls into one of three categories. Process automation is the most common form of AI. It is the “automation of digital and physical tasks-typically back-office administrative and financial activities-using robotic process automation technologies.” Examples may include extracting information using natural language processing, or performing repetitive tasks that require analyzing large volumes of data. This type of AI can impact business by streamlining processes, reducing costs, and even reducing headcount (Davenport and Ronanki, HBR). Process automation will transform the job market and the nature of work over the coming decades. More jobs will be focused on “knowledge work” and strategic planning, and less on repetitive tasks. Most people see the loss of millions of jobs as the main “con” of artificial intelligence. Predictions indicate that tens of millions of jobs will be replaced by computers over the next two decades (Marr, Bernard).

Cognitive Insight projects can be utilized in business to build predictive models. This is achieved by detecting patterns in large datasets. These machine learning models are “trained” with existing data and learn over time. The purpose of this type of AI is not to replace repetitive tasks, but to actually improve the competitive advantage of a company. Examples of Cognitive Insight projects include predicting when a customer will buy, detecting fraud, or improving actuarial models (Davenport and Ronanki, HBR).

The third category of AI is Cognitive Engagement, whereby chatbots or intelligent agents are implemented using natural language processing to take over traditional customer service and advisory roles. Cognitive models can be used to augment the abilities of humans, and create a more dynamic and complete product experience. For example, a customer service agent can utilize a cognitive model to quickly dig into a vast library of information, research a problem, and return a useful result that can be communicated to a client. To contemplate the “cons”, managers need to be wary of what Cognitive Engagement models can actually deliver. The technology is relatively new and can have limitations. For example, Facebook developed a messenger bot that was unable to answer 70% of customer questions without human intervention. There may be significant obstacles in development and implementation that a company may have to overcome (Davenport & Ronanki, HBR).

The implications of Artificial Intelligence can be put into context by Porter’s Five Forces model. Managers who can leverage AI will be able to shape industry competition by improving their overall position in the marketplace. Competition from rivals can be fierce when many companies within the same industry have similar strategies and product offerings. A company may be able to differentiate themselves on product or cost with the successful implementation of AI. Companies may also face threats from new entrants. When a specific industry shows potential as a profit site, new entrants are inevitable. Barriers to new entrants can be increased by a company holding patents, proprietary knowledge, and specialized technology. Artificial Intelligence can be a source to enhance all three. Companies also face a threat of substitutes, or face high bargaining power of suppliers and buyers. These forces can drive down prices and affect profitability of a company. To combat substitutes, suppliers and buyers, a company may be able to use AI to enhance brand loyalty, improve customer satisfaction, and increase product differentiation, thereby overcoming all three external forces. These factors can lead to a change of scope in competition and enhanced strategy. If managers can keep a focus on the future and are open to new ideas and possibilities, they can utilize Porter’s model to effectively leverage Artificial Intelligence and position their company for continued success (Porter, Michael E.).

References

Davenport, Thomas and Rajeev Ronanki. Artificial Intelligence for the Real World. January–February 2018 issue (pp.108–116) of Harvard Business Review.

Marr, Bernard. What Is The Impact Of Artificial Intelligence (AI) On Society? Bernardmarr.com

Porter, Michael E., “The Five Competitive Forces that Shape Strategy”, Harvard Business Review, HBSP Product Number R0801E-PDF-ENG, January 2008, Vol. 86, Issue 1, Pages 78-93.