The importance and use of artificial intelligence (AI) are matters every large-scale organisation needs to address from its own perspective. It’s easier said than done, however, because integrating AI into the operations of a large company is no small feat.
The AI transformation of a large organisation is an extensive and challenging undertaking that requires investments, planning, smart trade-offs, personnel training, determined development, and above all, time.
“Having the right tools for the organisation's needs isn’t enough; the tools also need to be compatible with the organisation’s strategy, processes, structure, and even culture. Moreover, they need to be well-established in their use. All this takes years in a large organisation, which is all the more reason to have begun early enough,” says Markus Mäkelä, head of AI and business strategy specialist at LUT.
Mäkelä divides the organisational impacts of AI into two categories: impacts on strategies and impacts on the organisation itself, including processes and organisational structure.
Since large and medium-sized organisations may, for instance, have highly established processes, implementing changes can be difficult. Meanwhile, processes may not have been defined systematically enough, which brings additional work to the planning of changes.
The payoff, however, is substantial.
“Changes in strategy, culture, and processes can lead to a leap in competitiveness – even in market share. This is especially true now, as we’re still in the early stages of the generative AI transformation. Those kinds of leaps aren’t commonly feasible in business and usually require a competitor to fail or for a company to react quickly to an unexpected shift in consumer needs.”
What kind of strategy suits the age of AI?
AI should be compatible with the organisation's strategy, but it’s even more important to determine what the strategy needs to be like in the age of AI in the first place. Addressing this matter requires an understanding of what AI can enable. Organisations should already have AI expertise during their strategy planning process.
”AI should primarily support a company's competitive advantage or an organisation's individual strengths. In fact, this applies to all technology in a company,” says Mäkelä.
In certain cases, AI may even change a company’s business model. It may be of great help in interpreting the market's weak signals and in the product development process, for example. In addition, AI can change the core competencies of a company by helping interpret customer needs more accurately. In that way, they can be better incorporated into the strategy and value proposition.
Strategy modifications mean modified competitive advantages
In practice, AI can help businesses learn to innovate more effectively. This can enable them to leapfrog competitors in market share.
Strategically skillful use of AI can sometimes lead to jumps in market share.
AI can also affect a company's platform strategy by, for example, altering opportunities to exploit network effects. In addition, AI may impact the relative duration of the competitive advantage that the strategy aims for and how much strategy development emphasises agile adaptation to newly feasible business models.
”As a whole, AI can influence companies’ value-creating strategic choices, because it can render certain choices relatively more valuable than otherwise. In other words, it can shift the balance between alternative strategic choices,” Mäkelä explains.
AI leads to lighter middle management
AI can have significant impacts on an organisation's processes, employee skill requirements, and job descriptions. At an individual level, it’s important to learn to work effectively as a partner with AI.
Mäkelä points out that AI enables at least the partial automation of routine tasks and basic organisational communication. It can also improve work that requires brainstorming and creativity, such as product development.
Sometimes, these new business process changes may even enable a company to adopt a completely new business model that can dramatically improve competitiveness.
New forms of automation introduced by AI can also affect organisational structures. Research shows that AI can streamline middle management in organisations, because tasks such as monitoring work, reporting, and sharing information with subordinates are naturally well-suited for AI.
“That’s why corporate organisational charts may become more hourglass-shaped, other things being equal. AI can, over time, lead to quite different organisational structures, as early-career work may decrease,” Mäkelä says.
The need for middle management work may decrease, and organisational charts will reflect any changes. Matrix organisations may also become more relevant.
For example, many development projects may adopt an agile team organisation or another modular organisation model. On the other hand, AI could make the more rigid matrix structures more practical.
”AI may add clarity to decision-making situations, transparently arguing what the optimal solution for the whole organisation would be. This will reduce suboptimisation and speed up decision-making.”
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