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Findings from the 2021 Artificial Intelligence and Business Strategy

Global Executive Study and Research Project

By MITSLOAN Management Review

November 02, 2021

 

by: SAM RANSBOTHAM, FRANÇOIS CANDELON, DAVID KIRON, BURT LAFOUNTAIN, AND SHERVIN KHODABANDEH

 

The 2021 MIT SMR-BCG report identifies a wide range of AI-related cultural benefits at both the team and organizational levels. Whether it’s reconsidering business assumptions or empowering teams, managing the dynamics across culture, AI use, and organizational effectiveness is critical to increasing AI’s value to an organization. This report offers a detailed analysis of a dynamic between culture, AI use, and organizational effectiveness.

 

Executive Summary

The benefits of artificial intelligence go well beyond improved efficiency and decision-making. AI can also improve organizational effectiveness and strengthen teams and enterprise cultures.

Artificial intelligence can generate cultural as well as financial benefits for organizations. With AI systems in place, teams can perform tasks with more pride and confidence and collaborate more effectively: They can actually get stronger. These cultural benefits can penetrate the foundation of business operations, improving assumptions that drive organizational behaviors and ensuring the pursuit of smarter goals.

When conducting our research, we heard story after story from executives familiar with AI implementations in their organizations. The overarching message was clear and backed up by survey data: Business culture affects AI deployments, and AI deployments affect business culture.

This MIT SMR-BCG report — based on a global survey of 2,197 managers and interviews with 18 executives — identifies a wide range of AI-related cultural benefits at both the team and organizational levels. Among survey respondents with AI implementations that improved efficiency and decision-making, for example, more than 75% also saw improvements in team morale, collaboration, and collective learning. Culture change from using AI transcends the legitimate, but myopic, promise that AI will liberate workers from drudgery.

These cultural changes are more than a side benefit. AI-related cultural and financial benefits build on each other. Survey respondents who saw significant financial benefits from their AI initiatives were 10 times more likely to change how they measure success than those who saw no such benefits. In some cases, AI helped leaders identify new performance drivers, which led to new assumptions, objectives, measures, and patterns of behavior, along with new areas of accountability. AI also helped these organizations realign behaviors and become more competitive.

Building a culture that supports innovation with AI has an effect on competitiveness. Our research found that respondents who use AI primarily to explore new ways of creating value are far more likely to improve their ability to compete with AI than those who use AI primarily to improve existing processes. Respondents who said they use AI primarily to explore were 2.7 times more likely to agree that their company captures opportunities from adjacent industries — because of AI — than respondents who use AI primarily to improve existing processes.

Whether it’s reconsidering business assumptions or empowering teams, managing relationships among culture, AI use, and organizational effectiveness is critical to increasing AI’s value to an organization. This report offers a data-driven analysis of these relationships at both the team and organization levels.

Introduction: Cultural Benefits of AI

AI implementations that improve effectiveness often strengthen team and enterprise cultures. Executives intimately involved with developing and implementing AI solutions offered numerous examples of how artificial intelligence helped their organizations become more efficient and make better decisions. What’s more, their team cultures were changing in response to these new levels of effectiveness; the cultural changes encompassed what teams learned, how they learned, how they worked together, and, in some instances, what they enjoyed about their work. Many teams that used AI became stronger teams.

Pierre-Yves Calloc’h, chief digital officer at Pernod Ricard, the world’s second-largest seller of wine and spirits, offers a case in point. The company began using AI technology to optimize salespeople’s store visits. Historically, the sales staff had relied heavily on their own experience to decide which stores to visit. The company expected that its new AI-based system of digital assistants, which uses data to prioritize stores, would encounter resistance. However, salespeople embraced the technology, which augments rather than replaces their own knowledge.

Calloc’h fostered trust in the system by involving recognized business experts in the tool’s design and gathering extensive feedback from pilot users. His team ensured that the reasons for the AI system’s recommendations were clear, and clearly communicated, to the salespeople. In addition, his analytics team used interviews with the business experts to explore unexpected insights and feed those insights into the recommendation engine. That bolstered the tool’s credibility among the experts and improved the effectiveness of the tool itself. According to Calloc’h, salespeople told him, “There’s no way I’m going back to my previous way of doing things. I trust that the system has been looking at a lot of options when recommending the 20 stores that I should visit this week. I’ll add some because there is outside information that I have and the tool doesn’t have.”

The technology also provides employees with new recommendations that strengthen their sales pitches. “The system is recommending listing only relevant products matching the store profile, for instance, because of the category of consumers living around the store and other factors. That gives salespeople more confidence, more clarity, and higher morale,” says Calloc’h. Using AI not only directly improved efficiency and decision quality but indirectly changed team culture through its effects on confidence, clarity, and morale.

Our global survey attests that Pernod Ricard isn’t alone in experiencing AI’s effect on team culture: Many respondents who saw improvements in efficiency and decision quality because of AI also saw team-level improvements in morale (79%) and other cultural areas.

But AI’s effects on culture don’t stop at the team level. Our research further suggests that the cultural benefits of AI adoption can extend to organizations as a whole. For example, we found that some executives employ AI to reassess strategic and operational assumptions. Increasingly, executives are recognizing that they can use AI to discern performance drivers that they themselves cannot identify through intuition and experience alone. Radha Subramanyam, president and chief research and analytics officer at CBS, describes the broadcast network’s efforts to critically assess long-standing organizational assumptions about how it measures the success of TV shows. “I gave our AI teams 50 years of KPIs [key performance indicators] and 50 years of consumer research,” she recalls. “I said, ‘Here are the things that we believe are important in this consumer research — quantitative and qualitative. I’m giving you all the raw data. Are the things that I habitually look at the right KPIs to drive my mega-KPI, or are they wrong?’”

The analysis affirmed the utility of two historical KPIs but also added two new KPIs to the set. “We got better by going through this AI exercise,” Subramanyam noted. “The analysis changed what we were looking for and helped improve our performance.” For CBS, AI provided both the opportunity and the means for reexamining fundamental assumptions about business operations and organizational effectiveness. The assumptions that guide team behaviors and enterprise goals are central to organizational culture.¹

Revising organizational assumptions and measurements is fairly typical of organizations that adopt AI: 64% of companies that have integrated AI into their processes say that their use of AI led to changes in their KPIs. In some cases, AI solutions directly reveal new performance drivers, as at CBS, where they led to new KPIs. In other cases, using AI enables stronger performance, which obsolesces legacy measurements that no longer reflect desired goals. Realigning behaviors to achieve new objectives often has a direct effect on culture.

Our research identifies a continuous dynamic among culture, AI use, and organizational effectiveness. (See Figure 1.) We use this Culture-Use-Effectiveness (C-U-E) dynamic to explain mutually reinforcing relationships at both the team and organization levels. These relationships offer a useful perspective on how AI adoption can influence managerial assumptions, team behaviors, and overall organizational competitiveness.

You can read the rest of this excellent article in the below link:

The Cultural Benefits of Artificial Intelligence in the Enterprise (mit.edu)