AI Needs To Be More Strategic—What Does That Mean?

Unlocking the Full Potential of Artificial Intelligence: A Strategic Approach

As businesses continue to explore the possibilities of artificial intelligence (AI), it’s becoming increasingly clear that strategic efforts will yield far greater returns than tactical deployments. But what exactly does it mean to take a strategic approach to AI? According to Tom Davenport, a renowned AI and analytics expert, the key lies in understanding the difference between tactical and strategic implementations. While tactical AI projects focus on incremental improvements and automation, strategic efforts involve a fundamental transformation of the business, driven by a deep understanding of the company’s overall strategy and goals.

The Importance of a Strategic Focus

A recent study on generative AI published by MIT researchers found that companies that took a strategic approach to AI were more likely to achieve substantial value from their efforts. These companies saw AI as a transformative force, rather than just a means to achieve productivity bumps or create fancy pictures. In contrast, tactical AI projects, which focused on individual-level, broad-and-shallow implementations, failed to provide significant value. As Davenport notes, “Enterprise-level, deep-and-narrow generative AI projects that are consistent with a company’s business strategy… do often yield measurable value.”

Sangeet Paul Choudary, founder of Platform Thinking Labs, echoes this sentiment, emphasizing that strategy is about answering two fundamental questions: “Where do we play? How do we win?” He argues that many executives who claim to be developing an AI strategy are actually just trying to figure out how to apply AI to their existing business, rather than reimagining their business model and competitive advantage. This narrow focus can lead to missed opportunities and a failure to unlock the full potential of AI.

Lessons from the Shipping Container Industry

To illustrate the potential of AI to transform industries, Choudary points to the example of the shipping container. When containers were first introduced, they were seen as a means to automate cargo movement, reducing the need for dock workers. However, the impact of containers went far beyond automation, rippling across the supply chain and enabling the development of global logistics. As Choudary notes, “What happened next was that trucks, trains, and ships agreed on a common standard for the shipping container, and that totally unlocked logistics at a global scale.” This, in turn, changed the logic of manufacturing, enabling companies to move to component-based production and global supply chains.

Similarly, AI has the potential to dramatically collapse the cost of performing certain forms of knowledge work, such as document translation. However, the implications of AI go far beyond automation, requiring companies to reimagine their business models, competitive advantage, and relationships with customers. As Choudary notes, “The assumptions on which your business is structured fundamentally change, and with that, you have to reimagine your business, you have to reimagine what kind of competition will come, and you have to reimagine what’s the basis of advantage.”

A Roadmap for Strategic AI Adoption

So, how can companies unlock the full potential of AI? Davenport recommends the following steps:

First, understand the differences between strategic and tactical AI, and prioritize strategic efforts that align with the company’s overall strategy and goals. Second, foster a corporate culture that encourages experimentation and innovation, and ensure that senior leaders are aware of the potential of AI and motivated to employ it aggressively. Third, start with tactical AI projects, but with an eye to how they might fit together to achieve a broader strategic objective. Fourth, identify the levers required to achieve AI value, including changes in business strategy, leadership, culture, AI talent, organization, and technology. Finally, communicate and work with all levels of the business, and monitor and measure the impact of AI efforts on business change, rather than just incremental savings.

By taking a strategic approach to AI, companies can unlock its full potential and achieve transformative results. As Davenport notes, “Strategic returns are measured in business change, not incremental savings. These deep changes to an organization won’t happen overnight, but the investment and effort over time to achieve them can position an organization for a long and successful future.”