Though a rhetorical theme , We can safely defer the discussion about whether artificial intelligence will eventually take over board functions. We cannot, however, defer the discussion about how boards will oversee AI — a discussion that’s relevant whether organizations are developing AI systems or buying AI-powered software. With AI adoption in increasingly widespread use, it’s time for every board to develop a proactive approach for overseeing how AI operates within the context of an organization’s overall mission and risk management.

According to a recent global AI survey, although AI adoption is increasing rapidly, overseeing and mitigating its risks remain unresolved and urgent tasks: Just 41% of respondents said that their organizations “comprehensively identify and prioritize” the risks associated with AI deployment. Board members recognize that this task is on their agendas: According to the 2019 National Association of Corporate Directors (NACD) Blue Ribbon Commission report, “Fit for the Future: An Urgent Imperative for Board Leadership,” 86% of board members “fully expect to deepen their engagement with management on new drivers of growth and risk in the next five years.”

Why’s this an imperative ? Because AI’s potential to deliver significant benefits comes with new and complex risks. For example, the frequency with which AI-driven facial recognition technologies misidentify nonwhite or female faces is among the issues that have driven a pullback by major vendors — which are also concerned about the use of the technology for mass surveillance and consequent civil rights violations. Recently, IBM stopped selling the facial technology altogether. Further, Microsoft said it would not sell its facial recognition technology to police departments until Congress passes a federal law regulating its use by law enforcement. Similarly, Amazon said it would not allow police use of its technology for a year, to allow time for legislators to act.

The use of AI-driven facial recognition technology in policing is just one notorious example, however. Virtually all AI systems & platforms in use today may be vulnerable to problems that result from the nature of the data used to train and operate them, the assumptions made in the algorithms themselves, the lack of system controls, and the lack of diversity in the human teams that build, instruct, and deploy them.Many of the decisions that will determine how these technologies work, and what their impact will be, take place largely outside of the board’s view — despite the strategic, operational, and legal risks they present. Nonetheless, boards are charged with overseeing and supporting management in better managing AI risks.

Increasing the board’s fluency with and visibility into these issues is just good governance. A board, its committees, and individual directors can approach this as a matter of strict compliance, strategic planning, or traditional legal and business risk oversight. They might also approach AI governance through the lens of environment, social, and governance (ESG) considerations: As the board considers enterprise activity that will affect society, AI looms large. The ESG community is increasingly making the case that AI needs to be added to the board’s portfolio.

How Boards can assess the quality & impact of AI

Directors’ duties of care and loyalty are familiar and well established. They include the obligations to act in good faith, be sufficiently informed, and exercise due care in oversight over strategy, risk, and compliance.

Boards assessing the quality and impact of AI and oversight is required should understand the following:

• AI is more than an issue for the technology team. Its impact resonates across the organization and implicates those managing legal, marketing, and human resources functions, among others.
• AI is not a siloed thing. It is a system comprising the technology itself, the human teams who manage and interact with it, and the data upon which it runs.
• AI systems need the accountability of C-level strategy and oversight. They are highly complex and contextual and cannot be trustworthy without integrated, strategic guidance and management.
• AI is not static. It is designed to adapt quickly and thus requires continuous oversight.
• The AI systems most in use by business today are efficient and powerful prediction engines. They generate these predictions based on data sets that are selected by engineers, who use them to train and feed algorithms that are, in turn, optimized on goals articulated — most often — by those developers. Those individuals succeed when they build technology that works, on time and within budget. Today, the definition of effective design for AI may not necessarily include guardrails for its responsible use, and engineering groups typically aren’t resourced to take on those questions or to determine whether AI systems operate consistently with the law or corporate strategies and objectives.

The choices made by AI developers — or by an HR manager considering a third-party resume-screening algorithm, or by a marketing manager looking at an AI-driven dynamic pricing system — are significant. Some of these choices may be innocuous, but some are not, such as those that result in hard-to-detect errors or bias that can suppress diversity or that charge customers different prices based on gender. Board oversight must include requirements for policies at both the corporate level and the use-case level that delineate what AI systems will and will not be used for. It must also set standards by which their operation, safety, and robustness can be assessed. Those policies need to be backed up by practical processes, strong culture, and compliance structures.

Enterprises may be held accountable for whether their uses of algorithm-driven systems comply with well-established anti-discrimination rules. The U.S. Department of Housing and Urban Development recently charged Facebook with violations of the federal Fair Housing Act for its use of algorithms to determine housing-related ad-targeting strategies based on protected characteristics such as race, national origin, religion, familial status, sex, and disabilities. California courts have held that the Unruh Civil Rights Act of 1959 applies to online businesses’ discriminatory practices. The legal landscape also is adapting to the increasing sophistication of AI and its applications in a wide array of industries beyond the financial sector. For instance, the FTC is calling for the “transparent, explainable, fair, and empirically sound” use of AI tools and demanding accountability and standards. The Department of Justice’s Criminal Division’s updated guidance underscores that an adequate corporate compliance program is a factor in sentencing guidelines.

From the board’s perspective, compliance with existing rules is an obvious point, but it is also important to keep up with evolving community standards regarding the appropriate duty of care as these technologies become more prevalent and better understood. Further, even after rules are in force, applying them in particular business settings to solve specific business problems can be difficult and intricate. Boards need to confirm that management is sufficiently focused and resourced to manage compliance well, along with AI’s broader strategic trade-offs and risks.

Risks to brand and reputation. The issue of brand integrity — clearly a current board concern — may most likely drive AI accountability in the short term. Recent issues faced by individuals charged with advancing responsible AI within companies found that the “most prevalent incentives for action were catastrophic media attention and decreasing media tolerance for the status quo.” Well before new laws and regulations are in effect, company stakeholders such as customers, employees, and the public are forming opinions about how an organization uses AI. As these technologies penetrate further into business and the home, their impact will increasingly define a brand’s reputation for trust, quality, and its mission.

The role of AI in exacerbating racial, gender, and cultural inequities is inescapable. Addressing these issues within the technology is necessary, but it is not sufficient. Without question, we can move forward only with genuine commitments to diversity and inclusion at all levels of technology development and technology consumption.

Business continuity concerns. Boards and executives are already keenly aware that technology-dependent enterprises are vulnerable to disruption when systems fail or go wrong, and AI raises new board-worthy considerations on this score. First, many AI systems rely on numerous and unknown third-party technologies, which might threaten reliability if any element is faulty, orphaned, or inadequately supported. Second, AI carries the potential of new kinds of cyber threats, requiring new levels of coordination within any enterprise. And bear in mind that many AI developers will tell you that they don’t really know what an AI system will do until it does it — and that AI that “goes bad,” or cannot be trusted, will need remediation and may have to be pulled out of production or off the market.

The ”NEW” strategic imperative for Boards

Regardless of how a board decides to approach AI fluency, it will play a critical role in considering the impact of the AI technologies that a business chooses to use. Before specific laws are in effect, and even well after they are written, businesses will be making important decisions about how to use these tools, how they will impact their workforces, and when to rely upon them in lieu of human judgment. The hardest questions a board will face about proposed AI applications are likely to be “Should we adopt AI in this way?” and “What is our duty to understand how that function is consistent with all of our other beliefs, missions, and strategic objectives?” Boards must decide where they want management to draw the line: for example, to identify and reject an AI-generated recommendation that is illegal or at odds with organizational values .

Boards should do the following in order to establish adequate AI fluency mechanics:

• Learn where in the organization AI and other exponential technologies are being used or planning to be used, and why.
• Set a regular cadence for management to report on policies and processes for governing these technologies specifically, and for setting standards for AI procurement and deployment, training, compliance, and oversight.
• Encourage the appointment of a C-level executive to be responsible for this work, across company functions.
• Encourage adequate resourcing and training of the oversight function.

It’s not too soon for boards to begin this work; even for enterprises with little investment in AI development, it will find its way into the organization through AI-infused tools and services. The legal, strategic, and brand risks of AI are sufficiently grave that boards need facility with them and a process by which they can work with management to contain the risks while reaping the rewards.AI Fluency is the new strategic agenda.

AI is set to transform the banking industry, using vast amounts of data to build models that improve decision making, tailor services, and improve risk management. According to the EIU, this could generate value of more than $250 billion in the banking industry. But there is a downside, since ML models amplify some elements of model risk. And although many banks, particularly those operating in jurisdictions with stringent regulatory requirements, have validation frameworks and practices in place to assess and mitigate the risks associated with traditional models, these are often insufficient to deal with the risks associated with machine-learning models. The added risk brought on by the complexity of algorithmic models can be mitigated by making well-targeted modifications to existing validation frameworks.

Conscious of the problem, many banks are proceeding cautiously, restricting the use of ML models to low-risk applications, such as digital marketing. Their caution is understandable given the potential financial, reputational, and regulatory risks. Banks could, for example, find themselves in violation of anti discrimination laws, and incur significant fines—a concern that pushed one bank to ban its HR department from using a machine-learning resume screener. A better approach, however, and ultimately the only sustainable one if banks are to reap the full benefits of machine-learning models, is to enhance model-risk management.

Regulators have not issued specific instructions on how to do this. In the United States, they have stipulated that banks are responsible for ensuring that risks associated with machine-learning models are appropriately managed, while stating that existing regulatory guidelines, such as the Federal Reserve’s “Guidance on Model Risk Management” (SR11-7), are broad enough to serve as a guide. Enhancing model-risk management to address the risks of machine-learning models will require policy decisions on what to include in a model inventory, as well as determining risk appetite, risk tiering, roles and responsibilities, and model life-cycle controls, not to mention the associated model-validation practices. The good news is that many banks will not need entirely new model-validation frameworks. Existing ones can be fitted for purpose with some well-targeted enhancements.

New Risk mitigation exercises for ML models 

There is no shortage of news headlines revealing the unintended consequences of new machine-learning models. Algorithms that created a negative feedback loop were blamed for the “flash crash” of the British pound by 6 percent in 2016, for example, and it was reported that a self-driving car tragically failed to properly identify a pedestrian walking her bicycle across the street. The cause of the risks that materialized in these machine-learning models is the same as the cause of the amplified risks that exist in all machine-learning models, whatever the industry and application: increased model complexity. Machine-learning models typically act on vastly larger data sets, including unstructured data such as natural language, images, and speech. The algorithms are typically far more complex than their statistical counterparts and often require design decisions to be made before the training process begins. And machine-learning models are built using new software packages and computing infrastructure that require more specialized skills. The response to such complexity does not have to be overly complex, however. If properly understood, the risks associated with machine-learning models can be managed within banks’ existing model-validation frameworks

Here are the strategic approaches for enterprises to ensure that that the specific risks associated with machine learning are addressed :

Demystification of “Black Boxes” : Machine-learning models have a reputation of being “black boxes.” Depending on the model’s architecture, the results it generates can be hard to understand or explain. One bank worked for months on a machine-learning product-recommendation engine designed to help relationship managers cross-sell. But because the managers could not explain the rationale behind the model’s recommendations, they disregarded them. They did not trust the model, which in this situation meant wasted effort and perhaps wasted opportunity. In other situations, acting upon (rather than ignoring) a model’s less-than-transparent recommendations could have serious adverse consequences.

The degree of demystification required is a policy decision for banks to make based on their risk appetite. They may choose to hold all machine-learning models to the same high standard of interpretability or to differentiate according to the model’s risk. In USA, models that determine whether to grant credit to applicants are covered by fair-lending laws. The models therefore must be able to produce clear reason codes for a refusal. On the other hand, banks might well decide that a machine-learning model’s recommendations to place a product advertisement on the mobile app of a given customer poses so little risk to the bank that understanding the model’s reasons for doing so is not important. Validators need also to ensure that models comply with the chosen policy. Fortunately, despite the black-box reputation of machine-learning models, significant progress has been made in recent years to help ensure their results are interpretable. A range of approaches can be used, based on the model class:

Linear and monotonic models (for example, linear-regression models): linear coefficients help reveal the dependence of a result on the output. Nonlinear and monotonic models, (for example, gradient-boosting models with monotonic constraint): restricting inputs so they have either a rising or falling relationship globally with the dependent variable simplifies the attribution of inputs to a prediction. Nonlinear and nonmonotonic (for example, unconstrained deep-learning models): methodologies such as local interpretable model-agnostic explanations or Shapley values help ensure local interpretability.

Bias : A model can be influenced by four main types of bias: sample, measurement, and algorithm bias, and bias against groups or classes of people. The latter two types, algorithmic bias and bias against people, can be amplified in machine-learning models. For example, the random-forest algorithm tends to favor inputs with more distinct values, a bias that elevates the risk of poor decisions. One bank developed a random-forest model to assess potential money-laundering activity and found that the model favored fields with a large number of categorical values, such as occupation, when fields with fewer categories, such as country, were better able to predict the risk of money laundering.

To address algorithmic bias, model-validation processes should be updated to ensure appropriate algorithms are selected in any given context. In some cases, such as random-forest feature selection, there are technical solutions. Another approach is to develop “challenger” models, using alternative algorithms to benchmark performance. To address bias against groups or classes of people, banks must first decide what constitutes fairness. Four definitions are commonly used, though which to choose may depend on the model’s use: Demographic blindness: decisions are made using a limited set of features that are highly uncorrelated with protected classes, that is, groups of people protected by laws or policies. Demographic parity: outcomes are proportionally equal for all protected classes. Equal opportunity: true-positive rates are equal for each protected class. Equal odds: true-positive and false-positive rates are equal for each protected class. Validators then need to ascertain whether developers have taken the necessary steps to ensure fairness. Models can be tested for fairness and, if necessary, corrected at each stage of the model-development process, from the design phase through to performance monitoring.

Feature engineering : is often much more complex in the development of machine-learning models than in traditional models. There are three reasons why. First, machine-learning models can incorporate a significantly larger number of inputs. Second, unstructured data sources such as natural language require feature engineering as a preprocessing step before the training process can begin. Third, increasing numbers of commercial machine-learning packages now offer so-called AutoML, which generates large numbers of complex features to test many transformations of the data. Models produced using these features run the risk of being unnecessarily complex, contributing to overfitting. For example, one institution built a model using an AutoML platform and found that specific sequences of letters in a product application were predictive of fraud. This was a completely spurious result caused by the algorithm’s maximizing the model’s out-of-sample performance.

In feature engineering, banks have to make a policy decision to mitigate risk. They have to determine the level of support required to establish the conceptual soundness of each feature. The policy may vary according to the model’s application. For example, a highly regulated credit-decision model might require that every individual feature in the model be assessed. For lower-risk models, banks might choose to review the feature-engineering process only: for example, the processes for data transformation and feature exclusion. Validators should then ensure that features and/or the feature-engineering process are consistent with the chosen policy. If each feature is to be tested, three considerations are generally needed: the mathematical transformation of model inputs, the decision criteria for feature selection, and the business rationale. For instance, a bank might decide that there is a good business case for using debt-to-income ratios as a feature in a credit model but not frequency of ATM usage, as this might penalize customers for using an advertised service.

Hyper parameters : Many of the parameters of machine-learning models, such as the depth of trees in a random-forest model or the number of layers in a deep neural network, must be defined before the training process can begin. In other words, their values are not derived from the available data. Rules of thumb, parameters used to solve other problems, or even trial and error are common substitutes. Decisions regarding these kinds of parameters, known as hyper parameters, are often more complex than analogous decisions in statistical modeling. Not surprisingly, a model’s performance and its stability can be sensitive to the hyper parameters selected. For example, banks are increasingly using binary classifiers such as support-vector machines in combination with natural-language processing to help identify potential conduct issues in complaints. The performance of these models and the ability to generalize can be very sensitive to the selected kernel function.Validators should ensure that hyper parameters are chosen as soundly as possible. For some quantitative inputs, as opposed to qualitative inputs, a search algorithm can be used to map the parameter space and identify optimal ranges. In other cases, the best approach to selecting hyperparameters is to combine expert judgment and, where possible, the latest industry practices.

Production readiness : Traditional models are often coded as rules in production systems. Machine-learning models, however, are algorithmic, and therefore require more computation. This requirement is commonly overlooked in the model-development process. Developers build complex predictive models only to discover that the bank’s production systems cannot support them. One US bank spent considerable resources building a deep learning–based model to predict transaction fraud, only to discover it did not meet required latency standards. Validators already assess a range of model risks associated with implementation. However, for machine learning, they will need to expand the scope of this assessment. They will need to estimate the volume of data that will flow through the model, assessing the production-system architecture (for example, graphics-processing units for deep learning), and the runtime required.

Dynamic model calibration : Some classes of machine-learning models modify their parameters dynamically to reflect emerging patterns in the data. This replaces the traditional approach of periodic manual review and model refresh. Examples include reinforcement-learning algorithms or Bayesian methods. The risk is that without sufficient controls, an overemphasis on short-term patterns in the data could harm the model’s performance over time. Banks therefore need to decide when to allow dynamic recalibration. They might conclude that with the right controls in place, it is suitable for some applications, such as algorithmic trading. For others, such as credit decisions, they might require clear proof that dynamic recalibration outperforms static models. With the policy set, validators can evaluate whether dynamic recalibration is appropriate given the intended use of the model, develop a monitoring plan, and ensure that appropriate controls are in place to identify and mitigate risks that might emerge. These might include thresholds that catch material shifts in a model’s health, such as out-of-sample performance measures, and guardrails such as exposure limits or other, predefined values that trigger a manual review.

Banks will need to proceed gradually. The first step is to make sure model inventories include all machine learning–based models in use. One bank’s model risk-management function was certain the organization was not yet using machine-learning models, until it discovered that its recently established innovation function had been busy developing machine-learning models for fraud and cyber security.

From here, validation policies and practices can be modified to address machine-learning-model risks, though initially for a restricted number of model classes. This helps build experience while testing and refining the new policies and practices. Considerable time will be needed to monitor a model’s performance and finely tune the new practices. But over time banks will be able to apply them to the full range of approved machine-learning models, helping companies mitigate risk and gain the confidence to start harnessing the full power of machine learning.

(AIQRATE, A bespoke global AI advisory and consulting firm. A first in its genre, AIQRATE provides strategic AI advisory services and consulting offerings across multiple business segments to enable clients on their AI powered transformation & innovation journey and accentuate their decision making and business performance.

AIQRATE works closely with Boards, CXOs and Senior leaders advising them on navigating their Analytics to AI journey with the art of possible or making them jump start to AI progression with AI@scale approach followed by consulting them on embedding AI as core to business strategy within business functions and augmenting the decision-making process with AI. We have proven bespoke AI advisory services to enable CXO’s and Senior Leaders to curate & design building blocks of AI strategy, embed AI@scale interventions and create AI powered organizations. AIQRATE’s path breaking 50+ AI consulting frameworks, assessments, primers, toolkits and playbooks enable Indian & global enterprises, GCCs, Startups, VC/PE firms, and Academic Institutions enhance business performance and accelerate decision making.

Visit www.aiqrate.ai to experience our AI advisory services & consulting offerings

The excitement around artificial intelligence is palpable. It seems that not a day goes by without one of the giants in the industry coming out with a breakthrough application of this technology, or a new nuance is added to the overall body of knowledge. Horizontal and industry-specific use cases of AI abound and there is always something exciting around the corner every single day.

However, with the keen interest from global leaders of multinational corporations, the conversation is shifting towards having a strategic agenda for AI in the enterprise. Business heads are less interested in topical experiments and minuscule productivity gains made in the short term. They are more keen to understand the impact of AI in their areas of work from a long-term standpoint. Perhaps the most important question that they want to see answered is – what will my new AI-enabled enterprise look like? The question is as strategic as it is pertinent. For business leaders, the most important issues are – improving shareholder returns and ensuring a productive workforce – as part of running a sustainable, future-ready business. Artificial intelligence may be the breakout technology of our time, but business leaders are more occupied with trying to understand just how this technology can usher in a new era of their business, how it is expected to upend existing business value chains, unlock new revenue streams, and deliver improved efficiencies in cost outlays. In this article, let us try to answer these questions.

AI is Disrupting Existing Value Chains

Ever since Michael Porter first expounded on the concept in his best-selling book, Competitive Advantage: Creating and Sustaining Superior Performance, the concept of the value chain has gained great currency in the minds of business leaders globally. The idea behind the value chain was to map out the inter linkages between the primary activities that work together to conceptualize and bring a product / service to market (R&D, manufacturing, supply chain, marketing, etc.), as well as the role played by support activities performed by other internal functions (finance, HR, IT etc.). Strategy leaders globally leverage the concept of value chains to improve business planning, identify new possibilities for improving business efficiency and exploit potential areas for new growth.

Now with AI entering the fray, we might see new vistas in the existing value chains of multinational corporations. For instance:

• Manufacturing is becoming heavily augmented by artificial intelligence and robotics. We are seeing these technologies getting a stronger foothold across processes requiring increasing sophistication. Business leaders need to now seriously consider workforce planning for a labor force that consists both human and artificial workers at their manufacturing units. Due attention should also be paid in ensuring that both coexist in a symbiotic and complementary manner.
• Logistics and Delivery are two other areas where we are seeing a steady growth in the use of artificial intelligence. Demand planning and fulfilment through AI has already reached a high level of sophistication at most retailers. Now Amazon – which handles some of the largest and most complex logistics networks in the world – is in advanced stages of bringing in unmanned aerial vehicles (drones) for deliveries through their Amazon Prime Air program. Business leaders expect outcomes to range from increased customer satisfaction (through faster deliveries) and reduction in costs for the delivery process.
• Marketing and Sales are constantly on the forefront for some of the most exciting inventions in AI. One of the most recent and evolved applications of AI is Reactful. A tool developed for eCommerce properties, Reactful helps drive better customer conversions by analyzing the clickstream and digital footprints of people who are on web properties and persuades them into making a purchase. Business leaders need to explore new ideas such as this that can help drive meaningful engagement and top line growth through these new AI-powered tools. 

AI is Enabling New Revenue Streams

The second way business leaders are thinking strategically around AI is for its potential to unlock new sources of revenue. Earlier, functions such as internal IT were seen as a cost center. In today’s world, due to the cost and competitive pressure, areas of the business which were traditionally considered to be cost centers are require to reinvent themselves into revenue and profit centers. The expectation from AI is no different. There is a need to justify the investments made in this technology – and find a way for it to unlock new streams of revenue in traditional organizations. Here are two key ways in which business leaders can monetize AI:

• Indirect Monetization is one of the forms of leveraging AI to unlock new revenue streams. It involves embedding AI into traditional business processes with a focus on driving increased revenue. We hear of multiple companies from Amazon to Google that use AI-powered recommendation engines to drive incremental revenue through intelligent recommendations and smarter bundling. The action item for business leaders is to engage stakeholders across the enterprise to identify areas where AI can be deeply ingrained within tech properties to drive incremental revenue.
• Direct Monetization involves directly adding AI as a feature to existing offerings. Examples abound in this area – from Salesforce bringing in Einstein into their platform as an AI-centric service to cloud infrastructure providers such as Amazon and Microsoft adding AI capabilities into their cloud offerings. Business leaders should brainstorm about how AI augments their core value proposition and how it can be added into their existing product stack.

AI is Bringing Improved Efficiencies

The third critical intervention for a new AI-enabled enterprise is bringing to the fore a more cost-effective business. Numerous topical and early-stage experiments with AI have brought interesting success for reducing the total cost of doing business. Now is the time to create a strategic roadmap for these efficiency-led interventions and quantitatively measure their impact to business. Some food for thought for business leaders include:

• Supply Chain Optimization is an area that is ripe for AI-led disruption. With increasing varieties of products and categories and new virtual retailers arriving on the scene, there is a need for companies to reduce their outlay on the network that procures and delivers goods to consumers. One example of AI augmenting the supply chain function comes from Evertracker – a Hamburg-based startup. By leveraging IOT sensors and AI, they help their customers identify weaknesses such as delays and possible shortages early, basing their analysis on internal and external data. Business leaders should scout for solutions such as these that rely on data to identify possible tweaks in the supply chain network that can unlock savings for their enterprises.
• Human Resources is another area where AI-centric solutions can be extremely valuable to drive down the turnaround time for talent acquisition. One such solution is developed by Recualizer – which reduces the need for HR staff to scan through each job application individually. With this tool, talent acquisition teams need to first determine the framework conditions for a job on offer, while leaving the creation of assessment tasks to the artificial intelligence system. The system then communicates the evaluation results and recommends the most suitable candidates for further interview rounds. Business leaders should identify such game-changing solutions that can make their recruitment much more streamlined – especially if they receive a high number of applications.
• The Customer Experience arena also throws up very exciting AI use cases. We have now gone well beyond just bots answering frequently asked questions. Today, AI-enabled systems can also provide personalized guidance to customers that can help organizations level-up on their customer experience, while maintaining a lower cost of delivering that experience. Booking.com is a case in point. Their chatbot helps customers identify interesting activities and events that they can avail of at their travel destinations. Business leaders should explore such applications that provide the double advantage of improving customer experience, while maintaining strong bottom-line performance. 

The possibilities for the new AI-enabled enterprises are as exciting as they are varied. The ideas shared are by no means exhaustive, but hopefully seed in interesting ideas for powering improved business performance. Strategy leaders and business heads need to consider how their AI-led businesses can help disrupt their existing value chains for the better, and unlock new ideas for improving bottom-line and top-line performance. This will usher in a new era of the enterprise, enabled by AI.

(AIQRATE, A bespoke global AI advisory and consulting firm. A first in its genre, AIQRATE provides strategic AI advisory services and consulting offerings across multiple business segments to enable clients on their AI powered transformation & innovation journey and accentuate their decision making and business performance.

AIQRATE works closely with Boards, CXOs and Senior leaders advising them on navigating their Analytics to AI journey with the art of possible or making them jump start to AI progression with AI@scale approach followed by consulting them on embedding AI as core to business strategy within business functions and augmenting the decision-making process with AI. We have proven bespoke AI advisory services to enable CXO’s and Senior Leaders to curate & design building blocks of AI strategy, embed AI@scale interventions and create AI powered organizations. AIQRATE’s path breaking 50+ AI consulting frameworks, assessments, primers, toolkits and playbooks enable Indian & global enterprises, GCCs, Startups, SMBs, VC/PE firms, and Academic Institutions enhance business performance and accelerate decision making.

Visit www.aiqrate.ai to experience our AI advisory services & consulting offerings )

India’s Investments in the digital financial infrastructure—known as “India Stack”—have sped up the large-scale digitization of people’s financial lives. As more and more people begin to conduct transactions online, questions have emerged about how to provide millions of customers adequate data protection and privacy while allowing their data to flow throughout the financial system. Data-sharing among financial services providers (FSPs) can enable providers to more efficiently offer a wider range of financial products better tailored to the needs of customers, including low-income customers.

However, it is important to ensure customers understand and consent to how their data are being used. India’s solution to this challenge is account aggregators (AAs). The Reserve Bank of India (RBI) created AAs in 2018 to simplify the consent process for customers. In most open banking regimes, financial information providers (FIPs) and financial information users (FIUs) directly exchange data. This direct model of data exchange—such as between a bank and a credit bureau—offers customers limited control and visibility into what data are being shared and to what end. AAs have been designed to sit between FIPs and FIUs to facilitate data exchange more transparently. Despite their name, AAs are barred from seeing, storing, analyzing, or using customer data. As trusted, impartial intermediaries, they simply manage consent and serve as the pipes through which data flow among FSPs. When a customer gives consent to a provider via the AA, the AA fetches the relevant information from the customer’s financial accounts and sends it via secure channels to the requesting institution. implementation of its policies for consensual data-sharing, including the establishment and operation of AAs. It provides a set of guiding design principles, outlines the technical format of data requests, and specifies the parameters governing the terms of use of requested data. It also specifies how to log consent and data flows.

There are several operational and coordination challenges across these three types of entities: FIPs, FIUs, and AAs. There are also questions around the data-sharing business model of AAs. Since AAs are additional players, they generate costs that must be offset by efficiency gains in the system to mitigate overall cost increases to customers. It remains an open question whether AAs will advance financial inclusion, how they will navigate issues around digital literacy and smartphone access, how the limits of a consent-based model of data protection and privacy play out, what capacity issues will be encountered among regulators and providers, and whether a competitive market of AAs will emerge given that regulations and interoperability arrangements largely define the business.

Account Aggregators (AA’s):

ACCOUNT AGGREGATORS (AAs) is one of the new categories of non banking financial companies (NBFCs) to figure into India Stack—India’s interconnected set of public and nonprofit infrastructure that supports financial services. India Stack has scaled considerably since its creation in 2009, marked by rapid digitization and parallel growth in mobile networks, reliable data connectivity, falling data costs, and continuously increasing smartphone use. Consequently, the creation, storage, use, and analyses of personal data have become increasingly relevant. Following an “open banking “approach, the Reserve Bank of India (RBI) licensed seven AAs in 2018 to address emerging questions around how data can be most effectively leveraged to benefit individuals while ensuring appropriate data protection and privacy, with consent being a key element in this. RBI created AAs to address the challenges posed by the proliferation of data by enabling data-sharing among financial institutions with customer consent. The intent is to provide a method through which customers can consent (or not) to a financial services provider accessing their personal data held by other entities. Providers are interested in these data, in part, because information shared by customers, such as bank statements, will allow providers to better understand customer risk profiles. The hypothesis is that consent-based data-sharing will help poorer customers qualify for a wider range of financial products—and receive financial products better tailored to their needs.

Data Sharing Model : The new perspective:

Paper based data collection is inconvenient , time consuming and costly for customers and providers. Where models for digital-sharing exist, they typically involve transferring data through intermediaries that are not always secure or through specialized agencies that offer little protection for customers. India’s consent-based data-sharing model provides a digital framework that enables individuals to give and withdraw consent on how and how much of their personal data are shared via secure and standardized channels. India’s guiding principles for sharing data with user consent—not only in the financial sector— are outlined in the National Data Sharing and Accessibility Policy (2012) and the Policy for Open Application Programming Interfaces for the Government of India. The Information Technology Act (2000) requires any entity that shares sensitive personal data to obtain consent from the user before the information is shared. The forthcoming Personal Data Protection Bill makes it illegal for institutions to share personal data without consent.

India’s Ministry of Electronics and Information Technology (MeitY) has issued an Electronic Consent Framework to define a comprehensive mechanism to implement policies for consensual data-sharing. It provides a set of guiding design principles, outlines the technical format of the data request, and specifies the parameters governing the terms of use of the data requested. It also specifies how to log both consent and data flows. This “consent artifact” was adopted by RBI, SEBI, IRDAI, and PFRDA. Components of the consent artifact structure include :

1. Identifier : Specifies entities involved in the transaction: who is requesting the data, who is granting permission, who is providing the data, and who is recording consent.
2. Data : Describes the type of data being accessed and the permissions for use of the data. Three types of permissions are available: view (read only), store, and query (request for specific data). The artifact structure also specifies the data that are being shared, date range for which they are being requested, duration of storage by the consumer, and frequency of access.
3. Purpose : Describes end use, for example, to compute a loan offer.
4. Log : Contains logs of who asked for consent, whether it was granted or not, and data flows.
5. Digital signature : Identifies the digital signature and digital ID user certificate used by the provider to verify the digital signature. This allows providers to share information in encrypted form

The Approach : 

THE AA consent based data sharing model mediates the flow of data between producers and users of data, ensuring that sharing data is subject to granular customer consent. AAs manage only the consent and data flow for the benefit of the consumer, mitigating the risk of an FIU pressuring consumers to consent to access to their data in exchange for a product or service. However, AAs, as entities that sit in the middle of this ecosystem, come with additional costs that will affect the viability of the business model and the cost of servicing consumers. FIUs most likely will urge consumers to go directly to an AA to receive fast, efficient, and low-cost services. However, AAs ultimately must market their services directly to the consumer. While AA services are not an easy sell, the rising levels of awareness among Indian consumers that their data are being sold without their consent or knowledge may give rise to the initial wave of adopters. While the AA model is promising, it remains to be seen how and when it will have a direct impact on the financial lives of consumers.

Differences between Personal Data Protection & GDPR ?

There are some major differences between the two.

First, the bill gives India’s central government the power to exempt any government agency from the bill’s requirements. This exemption can be given on grounds related to national security, national sovereignty, and public order.

While the GDPR offers EU member states similar escape clauses, they are tightly regulated by other EU directives. Without these safeguards, India’s bill potentially gives India’s central government the power to access individual data over and above existing Indian laws such as the Information Technology Act of 2000, which dealt with cyber crime and e-commerce.

Second, unlike the GDPR, India’s bill allows the government to order firms to share any of the non personal data they collect with the government. The bill says this is to improve the delivery of government services. But it does not explain how this data will be used, whether it will be shared with other private businesses, or whether any compensation will be paid for the use of this data.

Third, the GDPR does not require businesses to keep EU data within the EU. They can transfer it overseas, so long as they meet conditions such as standard contractual clauses on data protection, codes of conduct, or certification systems that are approved before the transfer. 

The Indian bill allows the transfer of some personal data, but sensitive personal data can only be transferred outside India if it meets requirements that are similar to those of the GDPR. What’s more, this data can only be sent outside India to be processed; it cannot be stored outside India. This will create technical issues in delineating between categories of data that have to meet this requirement, and add to businesses’ compliance costs.

In the past months due to lockdowns and WFH, enterprises have got an epiphany of massive shifts of business and strategic models for staying relevant and solvent. Digital transformation touted as the biggest strategic differentiation and competitive advantages for enterprises faced a quintessential inertia of mass adoption in the legacy based enterprises and remained more on business planning slides than in full implementation. However, Digital Transformation is not about aggregation of exponential technologies and adhoc use cases or stitching alliances with deep tech startups. The underpinning of Digital transformation is AI and how AI strategy has become the foundational aspect of accomplishing digital transformation for enterprises and generating tangible business metrics. But before we get to the significance of AI strategy in digital transformation, we need to understand the core of digital transformation itself. Because digital transformation will look different for every enterprise, it can be hard to pinpoint a definition that applies to all. However, in general terms: we define digital transformation as the integration of core areas of business resulting in fundamental changes to how businesses operate and how they deliver value to customers.

Though, in specific terms digital transformation can take a very interesting shape according to the business moment in question. From a customer’s point of view, “Digital transformation closes the gap between what digital customers already expect and what analog businesses actually deliver.”

Does Digital Transformation really mean bunching exponential technologies? I believe that digital transformation is first and foremost a business transformation. Digital mindset is not only about new age technology, but about curiosity, creativity, problem-solving, empathy, flexibility, decision-making and judgment, among others. Enterprises needs to foster this digital mindset, both within its own boundaries and across the company units. The World Economic Forum lists the top 10 skills needed for the fourth industrial revolution. None of them is totally technical. They are, rather, a combination of important soft skills relevant for the digital revolution. You don’t need to be a technical expert to understand how technology will impact your work. You need to know the foundational aspects, remain open-minded and work with technology mavens. Digital Transformation is more about cultural change that requires enterprises to continually challenge the status quo, experiment often, and get comfortable with failure. The most likely reason for business to undergo digital transformation is the survival & relevance issue. Businesses mostly don’t transform by choice because it is expensive and risky. Businesses go through transformation when they have failed to evolve. Hence its implementation calls for tough decisions like walking away from long-standing business processes that companies were built upon in favor of relatively new practices that are still being defined.

Business Implementation aspects of Digital Transformation

Disruption in digital business implies a more positive and evolving atmosphere, instead of the usual negative undertones that are attached to the word. According to the MIT Center for Digital Business, “Companies that have embraced digital transformation are 26 percent more profitable than their average industry competitors and enjoy a 12 percent higher market valuation.” A lot of startups and enterprises are adopting an evolutionary approach in transforming their business models itself, as part of the digital transformation. According to Mckinsey, One-third of the top 20 firms in industry segments will be disrupted by new competitors within five years.

The various Business Models being adopted in Digital Transformation era are:

• The Subscription Model (Netflix, Dollar Shave Club, Apple Music) Disrupts through “lock-in” by taking a product or service that is traditionally purchased on an ad hoc basis, and locking-in repeat custom by charging a subscription fee for continued access to the product/service
• The Freemium Model (Spotify, LinkedIn, Dropbox) Disrupts through digital sampling, where users pay for a basic service or product with their data or ‘eyeballs’, rather than money, and then charging to upgrade to the full offer. Works where marginal cost for extra units and distribution are lower than advertising revenue or the sale of personal data
• The Free Model (Google, Facebook) Disrupts with an ‘if-you’re-not-paying-for-the-product-you-are-the-product’ model that involves selling personal data or ‘advertising eyeballs’ harvested by offering consumers a ‘free’ product or service that captures their data/attention
• The Marketplace Model (eBay, iTunes, App Store, Uber, Airbnb) Disrupts with the provision of a digital marketplace that brings together buyers and sellers directly, in return for a transaction or placement fee or commission
• The Access-over-Ownership Model (Zipcar, Peer buy) Disrupts by providing temporary access to goods and services traditionally only available through purchase. Includes ‘Sharing Economy’ disruptors, which takes a commission from people monetizing their assets (home, car, capital) by lending them to ‘borrowers’
• The Hypermarket Model (Amazon, Apple) Disrupts by ‘brand bombing’ using sheer market power and scale to crush competition, often by selling below cost price
• The Experience Model (Tesla, Apple) Disrupts by providing a superior experience, for which people are prepared to pay
• The Pyramid Model (Amazon, Microsoft, Dropbox) Disrupts by recruiting an army of resellers and affiliates who are often paid on a commission-only mode
• The On-Demand Model (Uber, Operator, TaskRabbit) Disrupts by monetizing time and selling instant-access at a premium. Includes taking a commission from people with money but no time who pay for goods and services delivered or fulfilled by people with time but no money
• The Ecosystem Model (Apple, Google) Disrupts by selling an interlocking and interdependent suite of products and services that increase in value as more are purchased. Creates consumer dependency

Since Digital Transformation and its manifestation into various business models are being fast adopted by startups, there are providing tough competition to incumbent corporate houses and large enterprises. Though enterprises are also looking forward to digitally transform their enterprise business, the scale and complexity makes it difficult and resource consuming activity. It has imperatively invoked the enterprises to bring certain strategy to counter the cannibalizing effect in the following ways:

• The Block Strategy. Using all means available to inhibit the disruptor. These means can include claiming patent or copyright infringement, erecting regulatory hurdles, and using other legal barriers.
• The Milk Strategy. Extracting the most value possible from vulnerable businesses while preparing for the inevitable disruption
• The Invest in Disruption Model. Actively investing in the disruptive threat, including disruptive technologies, human capabilities, digitized processes, or perhaps acquiring companies with these attributes
• The Disrupt the Current Business Strategy. Launching a new product or service that competes directly with the disruptor, and leveraging inherent strengths such as size, market knowledge, brand, access to capital, and relationships to build the new business
• The Retreat into a Strategic Niche Strategy. Focusing on a profitable niche segment of the core market where disruption is less likely to occur (e.g. travel agents focusing on corporate travel, and complex itineraries, book sellers and publishers focusing on academia niche)
• The Redefine the Core Strategy. Building an entirely new business model, often in an adjacent industry where it is possible to leverage existing knowledge and capabilities (e.g. IBM to consulting, Fujifilm to cosmetics)
• The Exit Strategy. Exiting the business entirely and returning capital to investors, ideally through a sale of the business while value still exists (e.g. MySpace selling itself to Newscorp)

The curious evolution of AI and its relevance in digital transformation

So here’s an interesting question, AI has been around for more than 60 years, then why is it that it is only gaining traction with the advent of digital? The first practical application of such “machine intelligence” was introduced by Alan Turing, British mathematician and WWII code-breaker, in 1950. He even created the Turing test, which is still used today, as a benchmark to determine a machine’s ability to “think” like a human.The biggest differences between AI then and now are Hardware limitations, access to data, and rise of machine learning.

Hardware limitations led to the non-sustenance of AI adoption till late 1990s. There were many instances where the scope and opportunity of AI led transformation was identified and appreciated by implementation saw more difficult circumstances. The field of AI research was founded at a workshop held on the campus of Dartmouth College during the summer of 1956. But Eventually it became obvious that they had grossly underestimated the difficulty of the project due to computer hardware limitations. The U.S. and British Governments stopped funding undirected research into artificial intelligence, leading to years known as an “AI winter”.

In another example, again in 1980, a visionary initiative by the Japanese Government inspired governments and industry to provide AI with billions of dollars, but by the late 80s the investors became disillusioned by the absence of the needed computer power (hardware) and withdrew funding again. Investment and interest in AI boomed in the first decades of the 21st century, when machine learning was successfully applied to many problems in academia and industry due to the presence of powerful computer hardware. Teaming this with the rise in digital, leading to an explosion of data and adoption of data generation in every aspect of business, made it highly convenient for AI to not only be adopted but to evolve to more accurate execution.

The Core of Digital Transformation: AI Strategy

According to McKinsey, by 2023, 85 percent of all digital transformation initiatives will be embedded with AI strategy at its core. Due to radical computational power, near-endless amounts of data, and unprecedented advances in ML algorithms, AI strategy will emerge as the most disruptive business scenario, and its manifestation into various trends that we see and will continue to see, shall drive the digital transformation as we understand it. The following will the future forward scenarios of AI strategy becoming core to digital transformation:

AI’s growing entrenchment: This time, the scale and scope of the surge in attention to AI is much larger than before. For starters, the infrastructure speed, availability, and sheer scale has enabled bolder algorithms to tackle more ambitious problems. Not only is the hardware faster, sometimes augmented by specialized arrays of processors (e.g., GPUs), it is also available in the shape of cloud services , data farms and centers

Geography, societal Impact: AI adoption is reaching institutions outside of the industry. Lawyers will start to grapple with how laws should deal with autonomous vehicles; economists will study AI-driven technological unemployment; sociologists will study the impact of AI-human relationships. This is the world of the future and the new next.

Artificial intelligence will be democratized: As per the results of a recent Forrester study , it was revealed that 58 percent of professionals researching artificial intelligence ,only 12 percent are actually using an AI system. Since AI requires specialized skills or infrastructure to implement, Companies like Facebook have realized this and are already doing all they can to simplify the implementation of AI and make it more accessible. Cloud platforms like Google APIs, Microsoft Azure, AWS are allowing developers to create intelligent apps without having to set up or maintain any other infrastructure.

Niche AI will Grow: By all accounts, 2020 & beyond won’t be for large, general-purpose AI systems. Instead, there will be an explosion of specific, highly niche artificial intelligence adoption cases. These include autonomous vehicles (cars and drones), robotics, bots (consumer-orientated such as Amazon Echo , and industry specific AI (think finance, health, security etc.).

Continued Discourse on AI ethics, security & privacy: Most AI systems are immensely complex sponges that absorb data and process it at tremendous rates. The risks related to AI ethics, security and privacy are real and need to be addressed through consideration and consensus. Sure, it’s unlikely that these problems will be solved in 2020, but as long as the conversation around these topics continues, we can expect at least some headway.

Algorithm Economy: With massive data generation using flywheels, there will be an economy created for algorithms, like a marketplace for algorithms. The engineers, data scientists, organizations, etc. will be sharing algorithms for using the data to extract required information set.

Where is AI Heading in the Digital Road?While much of this is still rudimentary at the moment, we can expect sophisticated AI to significantly impact our everyday lives. Here are four ways AI might affect us in the future:

Humanizing AI: AI will grow beyond a “tool” to fill the role of “co-worker.” Most AI software is too hidden technologically to significantly change the daily experience for the average worker. They exist only in a back end with little interface with humans. But several AI companies combine advanced AI with automation and intelligent interfaces that drastically alter the day to day workflow for workers

Design Thinking & behavioral science in AI: We will witness Divergence from More Powerful Intelligence To More Creative Intelligence. There have already been attempts to make AI engage in creative efforts, such as artwork and music composition. we’ll see more and more artificial intelligence designing artificial intelligence, resulting in many mistakes, plenty of dead ends, and some astonishing successes.

Rise of Cyborgs: As augmented AI is already the mainstream thinking; the future might hold witness to perfect culmination of man-machine augmentation. AI augmented to humans, intelligently handling operations which human cannot do, using neural commands.

AI Oracle : AI might become so connected with every aspect of our lives, processing though every quanta of data from every perspective that it would perfectly know how to raise the overall standard of living for the human race. People would religiously follow its instructions (like we already follow GPS navigations) leading to leading to an equation of dependence closer to devotion.

The Final Word

Digital business transformation is the ultimate challenge in change management. It impacts not only industry structures and strategic positioning, but it affects all levels of an organization (every task, activity, process) and even its extended supply chain. Hence to brace Digital led disruption, one has to embrace AI-led strategy. Organizations that deploy AI strategically will ultimately enjoy advantages ranging from cost reductions and higher productivity to top-line benefits such as increasing revenue and profits, richer customer experiences, and working-capital optimization.

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The buoyancy around artificial intelligence adoption is palpable. It seems that not a day goes by without one of the giants in the industry coming out with a breakthrough application of AI, or a new nuance is added to the overall body of knowledge. Horizontal and industry-specific use cases of AI abound and there is always something exciting around the corner every single day.

However, with the keen interest from global leaders of multinational corporations, the conversation is shifting towards having a strategic agenda for AI in the enterprise. Business heads are less interested in topical experiments and minuscule productivity gains made in the short term. They are more keen to understand the impact of AI in their areas of work from a long-term standpoint. Perhaps the most important question that they want to see answered is – what will my new AI-enabled enterprise look like?

The question is as strategic as it is pertinent. For business leaders, the most important issues are – improving shareholder returns and ensuring a productive workforce – as part of running a sustainable, future-ready business. Artificial intelligence may be the breakout enabler of our time, but business leaders are more occupied with trying to understand just how AI can usher in a new era of their business, how it is expected to upend existing business value chains, unlock new revenue streams, and deliver improved efficiencies in cost outlays. Let us try to answer these questions.

AI is Disrupting Existing Value Chains

Ever since Michael Porter first expounded on the concept in his best-selling book, Competitive Advantage: Creating and Sustaining Superior Performance, the concept of the value chain has gained great currency in the minds of business leaders globally. The idea behind the value chain was to map out the interlinkages between the primary activities that work together to conceptualize and bring a product / service to market (R&D, manufacturing, supply chain, marketing, etc.), as well as the role played by support activities performed by other internal functions (finance, HR, IT etc.). Strategy leaders globally leverage the concept of value chains to improve business planning, identify new possibilities for improving business efficiency and exploit potential areas for new growth.

Now with AI entering the fray, we might see new vistas in the existing value chains of multinational corporations. For instance:

Manufacturing is becoming heavily augmented by artificial intelligence and robotics. We are seeing these technologies getting a stronger foothold across processes requiring increasing sophistication. Business leaders need to now seriously consider workforce planning for a labor force that consists both human and artificial workers at their manufacturing units. Due attention should also be paid in ensuring that both coexist in a symbiotic and complementary manner. Logistics and Delivery are two other areas where we are seeing a steady growth in the use of artificial intelligence. Demand planning and fulfilment through AI has already reached a high level of sophistication at most retailers. Now Amazon – which handles some of the largest and most complex logistics networks in the world – is in advanced stages of bringing in unmanned aerial vehicles (drones) for deliveries through their Amazon Prime Air program. Business leaders expect outcomes to range from increased customer satisfaction (through faster deliveries) and reduction in costs for the delivery process.

Marketing and Sales are constantly on the forefront for some of the most exciting inventions in AI. One of the most recent and evolved applications of AI is Reactful. A tool developed for eCommerce properties, Reactful helps drive better customer conversions by analyzing the clickstream and digital footprints of people who are on web properties and persuades them into making a purchase. Business leaders need to explore new ideas such as this that can help drive meaningful engagement and top line growth through these new AI-powered tools.

AI is Enabling New Revenue Streams

The second way business leaders are thinking strategically around AI is for its potential to unlock new sources of revenue. Earlier, functions such as internal IT were seen as a cost center. In today’s world, due to the cost and competitive pressure, areas of the business which were traditionally considered to be cost centers are require to reinvent themselves into revenue and profit centers. The expectation from AI is no different. There is a need to justify the investments made in this technology – and find a way for it to unlock new streams of revenue in traditional organizations. Here are two key ways in which business leaders can monetize AI:

Indirect Monetization is one of the forms of leveraging AI to unlock new revenue streams. It involves embedding AI into traditional business processes with a focus on driving increased revenue. We hear of multiple companies from Amazon to Google that use AI-powered recommendation engines to drive incremental revenue through intelligent recommendations and smarter bundling. The action item for business leaders is to engage stakeholders across the enterprise to identify areas where AI can be deeply ingrained within tech properties to drive incremental revenue.

Direct Monetization involves directly adding AI as a feature to existing offerings. Examples abound in this area – from Salesforce bringing in Einstein into their platform as an AI-centric service to cloud infrastructure providers such as Amazon and Microsoft adding AI capabilities into their cloud offerings. Business leaders should brainstorm about how AI augments their core value proposition and how it can be added into their existing product stack.

AI is Bringing Improved Efficiencies

The third critical intervention for a new AI-enabled enterprise is bringing to the fore a more cost-effective business. Numerous topical and early-stage experiments with AI have brought interesting success for reducing the total cost of doing business. Now is the time to create a strategic roadmap for these efficiency-led interventions and quantitatively measure their impact to business. Some food for thought for business leaders include:

Supply Chain Optimization is an area that is ripe for AI-led disruption. With increasing varieties of products and categories and new virtual retailers arriving on the scene, there is a need for companies to reduce their outlay on the network that procures and delivers goods to consumers. One example of AI augmenting the supply chain function comes from Evertracker – a Hamburg-based startup. By leveraging IOT sensors and AI, they help their customers identify weaknesses such as delays and possible shortages early, basing their analysis on internal and external data. Business leaders should scout for solutions such as these that rely on data to identify possible tweaks in the supply chain network that can unlock savings for their enterprises.

Human Resources is another area where AI-centric solutions can be extremely valuable to drive down the turnaround time for talent acquisition. One such solution is developed by Recualizer – which reduces the need for HR staff to scan through each job application individually. With this tool, talent acquisition teams need to first determine the framework conditions for a job on offer, while leaving the creation of assessment tasks to the artificial intelligence system. The system then communicates the evaluation results and recommends the most suitable candidates for further interview rounds. Business leaders should identify such game-changing solutions that can make their recruitment much more streamlined – especially if they receive a high number of applications.

The Customer Experience arena also throws up very exciting AI use cases. We have now gone well beyond just bots answering frequently asked questions. Today, AI-enabled systems can also provide personalized guidance to customers that can help organizations level-up on their customer experience, while maintaining a lower cost of delivering that experience. Booking.com is a case in point. Their chatbot helps customers identify interesting activities and events that they can avail of at their travel destinations. Business leaders should explore such applications that provide the double advantage of improving customer experience, while maintaining strong bottom-line performance.

The possibilities for the new AI-enabled enterprises are as exciting as they are varied. The strategic areas shared herein are by no means exhaustive, but hopefully seed in interesting ideas for powering improved business performance. Strategy leaders and business heads need to consider how their AI-led businesses can help disrupt their existing value chains for the better, and unlock new ideas for improving bottom-line and top-line performance. This will usher in a new era of the enterprise, enabled by AI.

Ascendancy of artificial intelligence (AI) revolution has been made possible by the machine enabled , ensemble configured algorithm revolution. The machine learning algorithms researchers have been developing for decades, when cleverly applied to today’s web-scale data sets, can yield surprisingly good forms of intelligence. For instance, the United States Postal Service has long used neural network models to automatically read handwritten zip code digits. Today’s deep learning neural networks can be trained on millions of electronic photographs to identify faces, and similar algorithms may increasingly be used to navigate automobiles and identify tumors in X-rays.

 But current AI technologies are a collection of big data-driven point solutions, and algorithms are reliable only to the extent that the data used to train them is complete and appropriate. One-off or unforeseen events that humans can navigate using common sense can lead algorithms to yield nonsensical outputs.

Design thinking is defined as human-centric design that builds upon the deep understanding of our users (e.g., their tendencies, propensities, inclinations, behaviors) to generate ideas, build prototypes, share what you’ve made, embrace the art of failure (i.e., fail fast but learn faster) and eventually put your innovative solution out into the world. And fortunately for us humans (who really excel at human-centric things), there is a tight correlation between the design thinking and artificial intelligence.

 Artificial intelligence technologies could reshape economies and societies, but more powerful algorithms do not automatically yield improved business or societal outcomes. Human-centered design thinking can help organizations get the most out of cognitive technologies.

Divergence from More Powerful Intelligence To More Creative Intelligence

Whilst algorithms can automate many routine tasks, the narrow nature of data-driven AI implies that many other tasks will require human involvement. In such cases, algorithms should be viewed as cognitive tools capable of augmenting human capabilities and integrated into systems designed to go with the grain of human—and organizational—psychology. We don’t want to ascribe to AI algorithms more intelligence than is really there. They may be smarter than humans at certain tasks, but more generally we need to make sure algorithms are designed to help us, not do an end run around our common sense.

Design Thinking at Enterprise Premise

Although cognitive design thinking is in its early stages in many enterprises, the implications are evident. Eschewing versus embracing design thinking can mean the difference between failure and success. For example, a legacy company that believes photography hinges on printing photographs could falter compared to an internet startup that realizes many customers would prefer to share images online without making prints, and embraces technology that learns faces and automatically generates albums to enhance their experience.

To make design thinking meaningful for consumers, companies can benefit from carefully selecting use cases and the information they feed into AI technologies. In determining which available data is likely to generate desired results, enterprises can start by focusing on their individual problems and business cases, create cognitive centers of excellence, adopt common platforms to digest and analyze data, enforce strong data governance practices, and crowd source ideas from employees and customers alike.

 In assessing what constitutes proper algorithmic design, organizations may confront ethical quandaries that expose them to potential risk. Unintended algorithmic bias can lead to exclusionary and even discriminatory practices. For example, facial recognition software trained on insufficiently diverse data sets may be largely incapable of recognizing individuals with different skin tones. This could cause problems in predictive policing, and even lead to misidentification of crime suspects. If the training data sets aren’t really that diverse, any face that deviates too much from the established norm will be harder to detect. Accordingly, across many fields, we can start thinking about how we create more inclusive code and employ inclusive coding practices.

CXO Strategy for Cognitive Design Thinking & Behavioral Science

CIOs can introduce cognitive design thinking to their organizations by first determining how it can address problems that conventional technologies alone cannot solve. The technology works with the right use cases, data, and people, but demonstrating value is not always simple. However, once CIOs have proof points that show the value of cognitive design thinking, they can scale them up over time.

CIOs benefit from working with business stakeholders to identify sources of value. It is also important to involve end users in the design and conception of algorithms used to automate or augment cognitive tasks. Make sure people understand the premise of the model so they can pragmatically balance algorithm results with other information.

Enterprise Behavioral Science – From Insights to Influencing Business Decisions

Every January, how many people do you know say that they want to resolve to save more, spend less, eat better, or exercise more? These admirable goals are often proclaimed with the best of intentions, but are rarely achieved. If people were purely logical, we would all be the healthiest versions of ourselves.

 However, the truth is that humans are not 100% rational; we are emotional creatures that are not always predictable. Behavioral economics evolved from this recognition of human irrationality. Behavioral economics is a method of economic analysis that applies psychological insights into human behavior to explain economic decision-making.

 Decision making is one of the central activities of business – hundreds of billions of decisions are made every day. Decision making sits at the heart of innovation, growth, and profitability, and is foundational to competitiveness. Despite this degree of importance, decision making is poorly understood, and badly supported by tools. A study by Bain & Company found that decision effectiveness is 95% correlated with companies’ financial performance.

 Enterprise Behavioral Science is not only about understanding potential outcomes, but to completely change outcomes, and more specifically, change the way in which people behave. Behavioral Science tells us that to make a fundamental change in behavior that will affect the long-term outcome of a process, we must insert an inflection point.

 As an example, you are a sales rep and two years ago your revenue was $1 million. Last year it was $1.1 million, and this year you expect $1.2 million in sales. The trend is clear, and your growth has been linear and predictable. However, there is a change in company leadership and your management has increased your quota to $2 million for next year. What is going to motivate you to almost double your revenues? The difference between expectations ($2 million) and reality ($1.2 million) is often referred to as the “behavioral gap” . When the behavioral gap is significant, an inflection point is needed to close that gap. The right incentive can initiate an inflection point and influence a change in behavior. Perhaps that incentive is an added bonus, President’s Club eligibility, a promotion, etc.

Cognitive Design Thinking – The New Indispensable Reskilling Avenue

Artificial intelligence, machine learning, analytics and mobile and cloud engineering will be the top technology areas where the need for re-skilling will be the highest.whilst there is a high probability that machine learning and artificial intelligence will play an important role in whatever job you hold in the future, there is one way to “future-proof” your career…embrace the power of design thinking & behavioral science.

 In fact, integrating design thinking , behavioral science and artificial intelligence can give you “immense synergies ” that future-proof whatever career you decide to pursue. To meld these three disciplines together, one must:

 Understand where and how artificial intelligence and behavioral science can impact your business initiatives. While you won’t need to write machine learning algorithms, business leaders do need to learn how to “Think like a data scientist” in order understand how AI can optimize key operational processes, reduce security and regulatory risks, uncover new monetization opportunities.

Understand how design thinking techniques, concepts and tools can create a more compelling and emphatic user experience with a “delightful” user engagement through superior insights into your customers’ usage objectives, operating environment and impediments to success.

Design thinking & Behavioral Science is a mindset. IT firms are trying to move up the curve. Higher-end services that companies can charge more is to provide value and for that you need to know that end-customers’ needs. For example, to provide value services to banking customers is to find out what the bank’s customer needs are in that country the banking client is based. Latent needs come from a design thinking philosophy where you observe customer data, patterns and provide a solution that the customer does not know. Therefore, Companies will hire design thinkers as they can predict what the consumer does not know and hence charge for the product/service from their clients. Idea in design thinking is to provide agile product creation or solutions.

Without Design Thinking & Behavioral Science, AI Will be Only an Incremental Value

Though organizations understand the opportunity that big data presents, many struggles to find a way to unlock its value and use it in tandem with design thinking – making “AI an colossal waste of time & money.” Only by combining quantitative insights gathered using AI, machine/deep learning, and qualitative research through behavioral science, and finally design thinking to uncover hidden patterns and leveraging it to understand what the customer would want, will we be able to paint a complete picture of the problem at hand, and help drive towards a solution that would create value for all stakeholders.

(AIQRATE, A bespoke global AI advisory and consulting firm. A first in its genre, AIQRATE provides strategic AI advisory services and consulting offerings across multiple business segments to enable clients navigate their AI powered transformation, innovation & revival journey and accentuate their decision making and business performance.

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With the global lock down caused by the COVID-19 and the unforeseen loss of business momentum , the luxury of time now seems to have disappeared completely. Businesses that once mapped strategy planning in one- three-year phases must now reset and scale their strategic initiatives in a matter of days or weeks. In one of the survey initiated by Harvard university , about 70 percent of  top fortune 1000 companies senior executives said the pandemic is likely to accelerate the pace of their business transformation. The acceleration is evident already across sectors and geographies. Consider how multiple banks have swiftly migrated physical channels online. How healthcare providers have moved rapidly into tele-health, insurers into self-service claims assessment, and retailers into contactless shopping and delivery.

The COVID-19 crisis seemingly provides a sudden glimpse into a future world, one in which artificial intelligence has become central to every interaction, forcing both enterprises and individuals further up the adoption curve almost overnight. A world in which digital channels become the primary customer-engagement model, and automated processes become a primary driver of productivity—and the basis of flexible, transparent, and stable supply chains. A world in which agile ways of working are a prerequisite to meeting seemingly daily changes to customer behavior. This being powered by a robust AI driven algorithmic engines . If a silver lining can be found, it might be in the falling barriers to improvisation and experimentation that have emerged among customers, markets, regulators, and organizations. In this unique moment, enterprises can learn and progress more quickly than ever before. The ways they reset and revive post crisis will deeply influence their performance in tomorrow’s transformative world, providing the opportunity to retain greater agility as well as closer ties with customers, employees, and suppliers. Those that are successfully able to make gains  will likely be more successful during recovery and beyond.

Now is the time to reassess business strategy and curate AI strategy core to the business models & processes—to provide near-term readiness to employees, customers, and the broad set of stakeholders to which businesses are increasingly responsible and those that position you for a post crisis world. In this world, some things will snap back to previous form, while others will be forever changed. Playing it safe now, understandable as it might feel to do so, is often the worst option.

A Black Swan event demands new strategic approaches : AI Strategy comes to the rescue

Every enterprise knows the virtues of  how AI pilots new business models in “normal” times, but very have implemented AI strategy @scale and velocity suddenly required by the COVID-19 crisis. That’s because in normal times, the customer and market penalties for widespread “test and learn” can seem too high, and the enterprises obstacles too steep. Shareholders of public companies demand immediate returns. Finance departments keep tight hold of the funds needed to move new initiatives forward quickly. Customers are often slow to adjust to new ways of doing things, with traditional adoption curves reflecting this inherent inertia. And organizational culture, with its own siloes, hinders agility and collaboration. As a result, enterprises often experiment at a pace that fails to match the rate of change around them, slowing their ability to learn fast enough to keep up. Additionally, they rarely embrace the acceleration needed to move quickly from piloting initiatives to scaling the successful ones, even though analyst studies have shown that swift moves to curate AI strategy early and at scale, combined with a sizeable allocation of resources against AI implementation , correlate highly with value creation  As the COVID-19 crisis forces your customers, employees, and supply chains into digital channels and new ways of working, now is the time to ask : Does my enterprise have an AI strategy to reimagine customer experiences , innovate new products & services and transform my business for competitive advantage ? Strange as it may seem, right now, in a moment of crisis, is precisely the time to boldly advance your move to curate an AI strategy .

AI Strategy Curation : Strategic Focus Areas :

Crafting an AI strategy goes beyond building light weight , beta mode algorithms , pursuing adhoc business problems for driving AI engagements or cobbling up together a bunch of AI geeks ; it requires a strategic approach driven by boards , CXOs’ , business leaders and decision makers to focus on the following key areas :

1.Craft Novel Business capabilities embedded with AI

By now you have built your contingency response model and insights hub;  you need to coordinate your crisis response. This insights hub provides a natural gathering point for crucial strategic information, helping you stay close to the quickly evolving needs of core customer segments, and the ways in which competitors and markets are moving to meet them. Mapping these changes helps address immediate risks, to be sure, but it also affords looking forward in time at bigger issues and opportunities—those that could drive significant disruption as the crisis continues. Just as AI has disrupted business models and value chains in the past, the COVID-19 crisis will set similar “ecosystem”-level changes in motion—not just changes in economics but new ways of serving customers and working with suppliers across in a new ecosystem.  In the immediate term, for example, most enterprises are looking for virtual capabilities for their previously physical offerings, or at least new ways of making them accessible with minimal physical contact. The new offerings that result can often involve new partnerships or the need to access new platforms and digital marketplaces in which your company has yet to participate. As you engage with new partners and platforms, look for opportunities to move beyond your organization’s comfort zones, while getting visibility into the places you can confidently invest valuable time, people, and funds to their best effect. AI based strategy that involves building recommended intelligence systems,  reasoning and intuition to address complex problems and explore ideal future states, will be crucial.

2. Embed AI into your core business model

Going beyond comfort zones requires taking an end-to-end view of your business and operating models. Even though your resources are necessarily limited, the experience of leading enterprises suggests that focusing on embedding AI in to the areas that touch more of the core of your business will give you the best chance of success, in both the near and the longer term, than will making minor improvements to noncore areas. Enterprises that make minor changes to the edges of their business model nearly always falter in their business goals. Tinkering leads to returns on investment below the cost of capital and to changes that are too small to match the external pace of disruption. Enterprises that rapidly adopts embedding AI driven algorithms and using those to redefine their business at scale have been outperforming their peers. This will be increasingly true as companies deal with large amounts of data in a rapidly evolving landscape and look to make rapid, accurate course corrections compared with their peers. On a short term basis , this may mean , opening up business models for introspection , however, embedding AI into the core business areas : marketing , sales , supply chain , finance will radically change your enterprise’s ability to derive insights & intelligence.

3. Reset your business strategies with AI

No enterprise can accelerate the delivery of all its strategic imperatives without looking to M&A to speed them along. This is particularly true with AI strategy, where M&A can help companies gain talent and build capabilities, even as it offers access to new products, services, and solutions, and to new market and customer segments. More broadly, we know from research from previous black swan events  that enterprises that invest when valuations are low outperform those that do not. In more normal times, one of the main challenges enterprises face in their AI led transformations and adoption is the need to acquire AI  talent and capabilities through acquisitions of startups that are typically valued at multiples that capital markets might view as dilutive to the acquirer. The current downturn could remove this critical roadblock, especially with enterprises temporarily free from the tyranny of quarterly earnings expectations.

In the next part of the series , I will elaborate on the steps and interventions that are required to craft & curate an AI strategy . Stay Tuned…..

The strategic perspectives provided herein will provide you crucial overview of the AI’s increasing prevalence amongst Indian industry, government and peripheral ecosystem and the significant impact AI will generate for India in the coming years and the possible strategic considerations that India needs to initiate to attain AI supremacy. The ensuing details also highlights the relative comparison amongst India, China and USA on the steady progress being done in AI adoption. VC firms, PE funds and investors attempting to understand where to target investment, what offerings and capabilities would lead to better performance and gains, and how to capitalize on AI opportunities, it’s crucial for them to understand the International economic potential of AI for now and projections in the coming years. Cutting across all these strategic considerations is how to build responsible AI operating models and keep it transparent enough to maintain the confidence of customers and wider stakeholders.

International AI Capitalization Report – China & NA Leads, India hot in the heels

Without doubt, AI is going to be a big game changer in the international setting. A previous set of reports from multiple analysts concluded that AI could contribute up to $15.7 trillion to the global economy in 2030, more than the current output of China and India combined. Of this, $6.6 trillion is likely to come from increased productivity and $9.1 trillion is likely to come from consumption-side effects. Global GDP will be up to 14% higher in 2030 as a result of the accelerating development and take-up of AI from the standpoint of direct economic impact of AI, China and USA will have greatest gains in GDP. Even though USA will reach its peak of AI led growth faster due to huge opportunities in parallel technologies implementations and advanced customer readiness for AI.

China, on the other hand will have a slower but stable rise in GDP gains, post COVID 19 because a large portion of Chinese GDP comes from manufacturing, a sector which is highly susceptible to AI disruption in its operation, and also a higher rate of capital re-investment within Chinese economy compared to EU and USA. As productivity in China eventually catches up with USA , USA will focus more on importing AI-enabled products from China due to economically cheap alternative China provides. Hence by 2030, China will see much larger impact in its GDP.

Is the Differential for Developing countries like India too steep in catching up with AI? –   AI is still at its early stages, which means that irrespective of the fact that the exponential technology landscape is skewed towards the developed economies as compared to developing, the developing economies and their markets could still lead the developed markets from AI standpoint. This makes countries like India, with a strong focus in Technology sector, a strong contender.

The economic impact of AI in GDP for India ,will be driven by:

1. Productivity gains from businesses automating processes (including use of robots and autonomous vehicles).
2. Productivity gains from businesses augmenting their existing labor force with AI technologies (assisted and augmented intelligence).
3. Increased consumer demand resulting from the availability of personalized and/or higher-quality AI-enhanced products and services.

The consumer revolution set off by AI opens the way for massive disruption as both established businesses and new entrants drive innovation and develop new business models. A key part of the impact of AI will come from its ability to make the most of parallel developments such as 5G connectivity.

India’s Macroeconomic Landscape of AI

India is already way ahead of many other countries in implementing artificial intelligence (AI). More than 40% of the enterprises are going beyond pilot and test projects and adopting the technology at a larger scale coupled with 1400+ global capability centers that have become frontiers in pushing AI led innovation and transformation for their parent organizations. The Indian government’s Digital India initiative, too, has created a favorable regulatory environment for increased use of AI.

Recipe for AI Success in India – Digital Deluge & Data Detonation

As India undergoes rapid digital transformation, data centers and the intelligence behind the data collected will enable the government and industry to make effective decisions based on algorithms. This means increasing opportunities for adoption (and investing over) AI in the country.

Intel is betting on Artificial Intelligence (AI) to drive demand for its electronic chips, for which it is aiming to train 15,000 scientists, developers, engineers and students on AI in India over the next one year. The company will host 60 courses under its ‘AI Developer Education Program’. These will train people on ways they can adopt AI for better research, testing or even building of products. Intel is looking at India due to the country’s large base of technical talent. The country is the third largest global site for AI companies. As India’s largest e-commerce marketplace Flip kart is looking to put in use its mammoth pile of data to predict sales of products months in advance. The company is working on an artificial intelligence (AI) solution that will give it an edge over rivals by helping it make smarter decisions in ordering, distribution and pricing products on its platform. Ultimately, the AI system will allow Flip kart to boost efficiency and reduce the cost of products for customers. While rival Amazon, which has around a 10-year head start over Flip kart, is known to have some of the most advanced sales prediction engines, the Indian company has the advantage of having a bigger data set of the country’s online consumer market.

AI Inroads in the Private Sector

AI has now a significant impact in the day to day lives of the regular mass of the country. Now that the Indian IT sector has reached a certain intermediary peak of digitization, the focus, now , is more on automating the repetitive problems and finding more optimized, efficient or refined methods of performing the same tasks, with less time duration and lesser manpower. The result is the standardization of some very critical app based services like virtual assistants, cab aggregators, shopping recommendations etc. This will eventually lead to AI solutions to real world problems.

The AI Startups Sphere of India- Startups are clearly playing a major role in innovating faster than enterprises, which has led to several partnerships. SAP India has invested in Niki.ai, a bot that improves the ordering experience. Then there’s Ractrack.AI, where a bot improves customer engagement and provides insights; it functions as a virtual communications assistant to convert the customer into a client. Racetrack is helping companies turn leads into meaningful engagements by using AI. Another startup, LUCEP, converts all potential queries into leads with their AI engine. The objective is to generate insights from data and simplify customer interaction with a business and also convert them into leads. Indian startups saw $ 10 billion in risk capital being deployed across 1,540 angel and VC/PE deals between January and December 2019. VC/PE firms predict that AI would be key themes to invest in for next few years.

AI in Public Sector– Ripe for Digital Revamp and AI Adoption

A Blue Ocean for AI Investment due to Digital India Initiatives – Though both corporates and startups are making significant inroads in instituting AI in their service architecture and product offerings, and sometimes as part of their core business strategy itself, the challenges in the public sector in instituting AI can be quickly overcome due to huge Digital Movements instituted by the Indian Govt. like Digital India, Skill India and Make in India. This will create a solid bedrock of Data and Digital Footprint which will act as a foundational infrastructure to base AI implementation on, opening a huge blue ocean in public sector, rich for AI investment.

A New Workaround for Regulatory Challenges in Public Sector AI Implementation – One of the peculiar problems the public sector faces in mainstream implementation of AI is the fact that since AI is a continuously self-learning system, capable of analytical or creative decision making and autonomous implementation of actions, who will then be accountable in taking responsibility for its actions, should they turn out to be not so favorable. This is because of the fact that since AI has a degree of autonomous decision making, it makes it difficult to pre-meditate its consequence. The AI systems are meant to augment and enrich the life of the consumers. In such a situation, deciding liability of AI system’s actions will be difficult. Therefore, a lot of deliberation will be required to carefully come to a precise conclusion surrounding implementing these systems with ethical foundation and propriety.

Although many countries like US and some European countries are in the verge of implementing regulations and laws surrounding concepts like driver less vehicles, India still don’t have the regulations sanctioned. This, but need not be a bad news. India is cut to establish a completely revamped legal infrastructure, thereby completely circumventing the need for continuous regulatory intervention. Also, there is a favorable atmosphere in India as far as AI is concerned which will foster a spike in activities in that avenue.

Indian Governance Initiatives – Huge Scope for Investment of AI – As India emerges as a premier destination for AI, scope for investment opens in the governance aspect, in several ways. Governance schemes have a unique trait of the baggage of large volume and large scale implementation need, which can be tackled with Deep learning. For example, in Swachh Bharat Initiative, specifically construction of toilets in rural India, public servants are tasked with uploading images of these toilet constructions to a central server for assessment. Image recognition can be used to target unfinished toilets. It can also be used to identify whether the same official appears in multiple images or if photos were uploaded from a different location other than the intended place. Other initiatives such as the Make in India, Digital India & Skill India can be augmented with AI to deal with scale. The range of application for AI techniques could range from crop insurance schemes, tax fraud detection, and detecting subsidy leakage and defense and security strategy.

An AI system can improve and enrich the agriculture of India by enhancing the bodies like The Department of Agriculture Cooperation and Farmers Welfare, Ministry of Agriculture runs the Kisan Call Centers across the country etc. It can help assist the call center by linking various available information like soil reports from government agencies and link them to the environmental conditions. It will then provide advice on the optimal crop that can be sown in that land pocket. As the need for large scale implementation and monitoring of governance initiative becomes more pronounced, the need for AI becomes absolute and it will open doors to considerable AI investment in the future of India.

Finally, Looking Ahead – A Collaborative Innovation led ecosystem

AI innovations which fall under assisted, augmented and autonomous intelligence will help users understand and decide which level of intelligence is helpful and required in their context, thereby making AI Acceptance easier for the people. At the same time, this AI continuum can be used to understand economic ramifications, usage complexity and decision-making implications. While academia and the private sector conduct research on various AI problems with diverse implications in mind, the public sector with its various digital initiatives (Digital India, Make in India, etc.) can identify areas where parts of the AI continuum can be utilized to increase reach, effectiveness and efficiency, thereby giving direction to AI Innovative Research. A collaborative innovation environment between academia and the private and public sectors will help provide holistic and proactive advisory delivery to the population, for example through public call centers, linking information from various government sources. At the same time, the rich data generated from these interactions can be used to draw deep conclusions. Collaboration between the three pillars could further help get a comprehensive view of problems and find intelligent and innovative ways to increase the efficiency and effectiveness of services delivered to society. India is at a cusp of taking a upward trajectory on establishing AI supremacy ; a strategic roadmap across public, private , SMB’s , Academic and startup sectors will accelerate the path to AI adoption and unleashing new sources of economic output for the country . The journey to attain AI supremacy has begun ……

Piloting thru the COVID era means grasping sudden strategic shifts. Social distancing and process turmoil have taken hold in every aspect of our lives, forcing us to change our routines and reevaluate our goals and expectations in real-time. And, unsurprisingly, these waves of upheaval have triggered a reset on most business operations and on commercial assumptions. We are all resetting the playbook in the new normal.

We are faced with an unprecedented challenge during this disruption. For years leaders have been told that if they are unable to lead ourselves, they cannot possibly lead others. But what does that look like right now? It is a struggle to process this globally shared experience that is simultaneously isolating and deeply personal. In a time when we need to be connected and certain, we may feel disconnected and unsure. On top of that, theory and practice are in constant collision. Navigating the unknowable and uncontrollable future of our businesses is no longer some academic or design-thinking challenge, it is reality. The future is no longer distant, it is right here right now. Hemingway captured this contradiction brilliantly in The Sun Also Rises: When a character is asked, “How did you go bankrupt?” the response is, Gradually and then suddenly.” 

Seeking command and control during this time of next-level upheaval simply will not work. Instead, we must cultivate ingenious mindset. Ingenious leaders are operators and innovators at the same time, and they encourage their followers to be the same. This style of leadership does not come naturally to everyone, but learning to master it is crucial to growth, and it must be prioritized and reactivated in the COVID era. Many corporate leaders are expert operators who drive efficiency and optimization, but not high on innovation and growth. Becoming an ingenious leader requires nurturing new ideas that address consumer pain points using the mindset and tools of a creator. Especially now, in this frightening and fluid new world, business leaders must learn to operate and create. So what is the first step toward being an ingenious leader? How do we elevate ourselves and our teams in this moment? 

Reset

Reset is not surrendering. Reset means embracing The New Normal as our shared reality, not a temporary dilemma to be endured, eventually returning to past goals and expectations. Reset is a crucial element of thoughtful agility. It empowers a team to set down the past, and move forward, unrestrained, into the future. It draws a circle around the knowable that helps us to identify the unknowable, giving us clarity on what we can control and what is beyond our control. Without that clarity, we are unable to set a path into the future. With that clarity, business leaders can make decisions based on new commercial truths, react and pivot quickly, reactivate and discover new growth, and lead their teams with conviction. They can become truly ingenious. Pressing the Reset button also requires us to acknowledge that past precedent is no longer a future predictor of business behaviors and outcomes. Leaders must have flexible mindsets around beliefs about market and consumer signals and shifts. It’s time to let go of past commitments and re-align our enterprises to a new-base business reality. 

Realign

Once we have activated the Reset button, business leaders must prepare to realign and embrace the New Normal . This is where we practice ingenious leadership by shifting focus away from the knowable and controllable and toward the unknowable and uncontrollable. This is where we embrace discomfort and dig into the challenge of transforming our enterprises in two key areas: growth and capability.

Resurrect

To resurrect growth, we will need to innovate into radically changed markets to address new, often sudden strategic shifts in customer needs and problems. We are living in a fragile moment of intense change that requires us to lean into these rare opportunities to discover The New Future. Enterprises must abandon the familiar model of Total Addressable Markets (TAM), where past budgets and behaviors existed pre-disruption. We must shift now to a Total Addressable Problem (TAP) view of the world, where new needs, behaviors, and budgets guide our choices. Leaders should be experimenting and testing ferociously to understand the new TAP view of the world and dig into the problems that people are facing right now. Instead of thinking about the past, leaders must focus on present problems their enterprises are uniquely positioned to solve. 

Run better , Run different

To transform enterprises’ ability to resurrect growth, we will need to adopt and embed new strategies that transform teams and organizations with adaptability and speed to run better & run different. Leaders must cultivate resilience of growth in both capability and culture. Tackling all of this during the COVID era takes empathy and courage. Fortunately, we can see courage, innovation, and exploration all around us. Organizations and individuals are creating ingenious solutions to problems we never knew we would face. Futurologist, Yuval Noah Harari pointed out that we’re currently witnessing “… social experiments on a massive scale that will change the world. We can’t predict what will happen because the main thing is that we have so many choices. It’s not like there is just one predetermined outcome to this epidemic. “The choice we face means dual objective of augmenting the growth post recovery and finding new spots of opportunities. This gives us the opportunity to create growth mindsets, systems, and cultures that transcend traditional strategic planning and efficiency. We can embrace resilience and the capabilities to lead through uncertainty, and rise to meet the New Normal in the leadership code