Navigating a Path to Success in the Age of AI
In one form or another, I have been using the tools and techniques described below since 1994. As an executive, I have used them myself to develop and execute strategies resulting in successful new business units and turnarounds. As a consultant, I have used them to improve the strategic position and financial performance of clients in many industries.
These tools and techniques are particularly valuable in situations with high strategic uncertainty, such as when grappling with the implications of game-changing technologies like generative AI, digital twins, and other collaborative intelligence technologies.
AI and related technologies are evolving rapidly, presenting challenges and opportunities. To thrive, organizations must adopt a dynamic strategy development and execution process built on foresight, agility, and adaptability.
This article introduces five essential components of such a process. Incorporating them into a redesigned strategy development and execution process will enable your organization to succeed in the age of AI. (Subsequent articles will provide more detail on each. Click the links in the list below to view these articles.):
Weak Signals
"Weak Signals" refer to early indications of potential changes in the business environment that could significantly impact an organization in the future. These signals are often subtle and easy to miss, as they often appear first in unconventional information sources. Recognizing these signals early enables decision-makers to develop strategies that capitalize on potential opportunities or mitigate potential risks.
Strategic Experiments
The rapid advancement of AI and related technologies introduces significant strategic uncertainty. Organizations should undertake multiple, small-scale strategic experiments to deal effectively with this uncertainty. This multi-threaded approach enables organizations to test various strategies and adapt quickly based on real-world feedback rather than waste valuable time attempting to devise the single best way forward.
Real Options
Each strategic experiment is a “real option” that provides the managerial flexibility to learn/adapt or to expand, contract, or terminate the investment based on initial results. Real Option Valuation enables decision-makers to see the value of this flexibility, which is hidden by traditional valuation approaches, such as Net Present Value or Internal Rate of Return. This more flexible approach to capital and project investment management is essential for managing the resources required to adapt successfully in rapidly changing markets.
Evergreen Strategies
A static or slowly evolving strategy is a recipe for obsolescence in a rapidly changing market. To avoid this outcome, organizations must implement an evergreen strategy process. This approach keeps strategies in sync with rapid market changes, requiring continuous alertness to trends (a byproduct of sensing weak signals) and a quick adaptation mechanism (provided by strategic experimentation).
Early Warning Systems
Every strategy, even one resulting from an Evergreen Strategy process, is based on a set of critical assumptions (changes in the environment beyond a company’s control), and its successful execution is built on a set of critical success factors (important contributors to success that are within a company’s control). Navigating a path to success in uncertain situations requires a management system that provides early indications that assumptions are proving to be valid/invalid and critical initiatives are on/off track so that executives can make appropriate course corrections when necessary.