How Artificial Intelligence Can Deliver Sustainable Advantage
Artificial Intelligence or AI is becoming mainstream. The adoption of AI technologies by industries such as financial services, hi-tech and communications and healthcare is gathering momentum.1 AI and automation which includes a plethora of technologies from robotic process automation to deep learning, speech-to-text to computer vision, and big data to analytics, is making maximum impact on functions like marketing, sales and supply chain management.2
Currently, Google, IBM, Microsoft, Amazon and Infosys are the leading vendors of AI products and platforms. Blue Prism, UiPath, Infosys and Automation Anywhere are the leading vendors of robotic process automation. These vendors also provide a wide range of products and services. Significant investments are being made by organizations to build capabilities either by developing them internally or through acquisitions.
While most of the above technologies offer benefits, enterprises need to make clear choices and investments in relevant technologies to gain both short-term and long-term business benefits. The challenge for business leaders and technologists is to look beyond the maze of products and develop AI-enabled capabilities that are aligned to the long-term business strategies.
Based on the current AI product and service offerings in the industry and the way organizations are adapting AI capabilities, four possible patterns have emerged for AI adoption. Implementing each pattern offers some benefits and paves the path towards building better business capabilities.
- Productivity enablers: Existing mundane and simple business processes are automated using RPA to minimise human intervention and improve cycle time
- User experience enhancers: Several AI products exist in the market that can be deployed in organizations to enhance user experience for both internal users and external customers
- Business (siloed) capabilities: From time to time, organizations are keen to build business solutions specific to solve a particular business problem or related to a specific business unit.
- Core capabilities: Organizations need to identify their core capabilities that are aligned to the broader business strategy and can be AI enabled to deliver enterprise-wide benefits to potentially create competitive advantage
Based on the nature of benefits, the above patterns are broadly divided into two categories:
- Capabilities that deliver operational effectiveness
- Capabilities that offer strategic competitive advantage
Adopting AI to enhance productivity and enable superior user experiences requires relatively lower effort compared to core capabilities and can be rolled out reasonably quickly with small budgets. Building these capabilities help an organization achieve operational effectiveness, which is desirable but not sufficient. As Michael Porter said, “operational effectiveness is not strategy”; it is not sufficient to achieve sustainable advantage.
Investing in business (siloed) solutions improves productivity in the short run along with building some level of differentiation. However, building enterprise-wide core capabilities, which demand realignment of the organization’s operating model, leadership commitment and continued investment, promises a higher level of differentiation over a longer period of time. Hence, these intelligent capabilities provide a sustainable strategic position against the competition.
Embedding intelligence into core capabilities is critical for mature businesses. These businesses have already made significant investments into existing business capabilities and currently, enjoy superior market position by delivering the expected value to their customers.
However, these enterprises need to adopt changes to their operating model, leadership thinking and the existing system landscape to maintain their current market position in the future. The urgency to change is more important for larger, mature businesses with a system landscape that is highly fragmented and strewn with point solutions. Such businesses need to take drastic measures and build a necessary strategic foundation to compete with newer, smaller and more agile enterprises that are well prepared for the AI-enabled future.
Business leaders, along with technology leaders, must realign their business strategy and define an appropriate strategic architectural foundation to deliver enterprise-wide intelligent capabilities. Building intelligent capabilities to deliver sustainable advantage requires significant leadership commitment and resources.
This topic was discussed in detail in the white paper ‘Building Intelligent Capabilities for Sustainable Advantage’3. The paper provides insights into emerging patterns in AI adoption, discusses various patterns for better competitive position, and recommends an approach to build intelligent capabilities, through strategic architecture, to gain sustainable advantage. You can access the full paper here.
1What AI can and can't do yet for your business, McKinsey
2Roundup of machine learning forecasts and market estimates 2019, Forbes
3The paper was originally published in Journal of Enterprise Architecture.