The Hidden Dangers In an AI Pivot
- By Lachlan Colquhoun
- May 22, 2023
The current business and technology landscape has two prominent features: the explosion of generative AI implementations and a lull in terms of the macroeconomy.
The two observations have a relationship, as the title of a recent Gartner survey of chief executive sentiment suggests. The “2023 – the Pause and Pivot Year” report links macroeconomic conditions and technology intentions.
Some of it, of course, is just chance. There is no explanation or link to why the AI revolution is happening during economic uncertainty. Still, the market conditions influence how business leaders look at and embrace change.
The Gartner report shows that the CEOs of commercial organizations are targeting growth and are concerned about inflation and the impact of a potential recession.
Growth is the top priority, with technology second. As CEOs contemplate uncertain market conditions, AI presents as both a growth engine and a cost-reduction force for the long term. AI is ranked as the top technology which CEOs believe will impact their business in the next three years.
The consensus is that even if there is a recession and the pause button is pressed, hesitancy will be overcome in the latter part of 2023, and 2024 will be about pursuing growth. A perfect time, then, to pivot and implement new technology to set up the organization for a growth spurt.
In search of efficiencies
It is a trend observed in Australia and New Zealand by Brian Ferreira, a VP and executive programs team manager at Gartner, who says CEOs in this region are “open to spending more on technology” if it supports growth or holds market share.
“This is why it continues to be a top priority,” said Ferreira.
“In some cases, they chose to increase spending risk for better technology outcomes rather than waiting for technology to prove itself and possibly risk business stability.”
AI aligns very much with that description, and unsurprisingly it has taken off in the ANZ region as many organizations seek new business, client and operational efficiencies. Fast adopters are already upskilling all staff on AI capabilities and view generative AI as a new core business capability that will impact industries and business models.”
The fear of missing out is also a factor. Gartner says that while AI is at a tipping point, CEOs who have not yet invested are concerned that they are missing out on something that will drive their organizations in the future.
However, one wonders if there is a contradiction between another CEO priority — talent retention — and the AI push.
“Fast adopters are already upskilling all staff on AI capabilities and view generative AI as a new core business capability”
AI is something of a workplace disruptor, sowing seeds of uncertainty around continued employment and even the longevity of careers.
Investment bank Goldman Sachs brought out a report on AI this month which estimated that 300 million global jobs could be lost or diminished through the implementation of artificial intelligence and that two-thirds of all occupations will become partially automated.
Change fatigue
Australia-based consultant Mark Cameron, who operates a company called Alyve, sees change management as a critical marker for the success of AI implementations and says many companies are getting it wrong.
“As companies use AI and other emerging technologies to stay competitive and operate more efficiently, we see that a staggering 70% of organizational transformations fail due to poor change management,” said Cameron.
“Change fatigue can set in quickly when a shift is poorly led. Change-makers must take a people-first approach to improve the chances of successful adaptation.”
So the goal, then, is to implement AI and retain talent, but it’s clearly not easy. As for AI, the IBM Global AI Adoption Index says that 44% of organizations are implementing AI into their current applications and processes, but only half are reporting success.
A complicated confluence
What to make of this confusing picture? AI is being implemented rapidly by organizations that are pursuing growth and don’t want to miss out on the technology revolution even if the technology hasn’t yet proven itself but is failing with change management while desperately wanting to retain top talent.
The Gartner report suggests that some organizations understand this dilemma and are responding to it.
Brian Ferreira says that the “combination of technology adoption together with a capable workforce is a critical business asset for future success.”
“We’re seeing an increase in efforts to ensure solid talent programs are integrated with technology transformation,” he said.
In the current economic environment, this is seen as managing inflation “by ensuring the business adopts operating efficiencies and holds market share by not passing on inflationary costs to customers.”
It is a complicated confluence of factors that requires skillful navigation. At other periods before AI, a typical response from aggressive businesses was to skill up and retool during a lull in the cycle. So in some ways, history is simply repeating itself.
However, AI is such a powerful and new unknown that CEOs must handle it with extreme care. Pausing and pivoting make sense, but many factors go into the next move as organizations position for the next upswing in the business cycle.
Lachlan Colquhoun is the Australia and New Zealand correspondent for CDOTrends and the NextGenConnectivity editor. He remains fascinated with how businesses reinvent themselves through digital technology to solve existing issues and change their entire business models. You can reach him at [email protected].
Image credit: iStockphoto/tayaferdinand