Why Did AI as a Capability Just Get More Important?

By Karim Lakhani, Harvard Business School |  September 21, 2020

What I’ve observed is that the much-talked-about but often delayed and deferred digital transformation of the typical company has been massively accelerated because of the COVID-19 pandemic. And that transformation work is an antecedent to artificial intelligence being deployed and scaled.

When I’ve had discussions with major retailers in the past, I’d hear, “We had all these plans for omni-channel this or that.” They had plans to make the customer experience seamless — and it was always stuck in governance loops and meetings. Then, [with the emergence of the pandemic,] they had no choice. They had a week to move everybody remote, get them online — and guess what? They were able to do it.

Some people may be hoping for the “good old days” to come back. I hope we learn from this and rethink our business models and operating models.

Humanity Underestimates Exponential Systems

If you think about what’s going on with COVID, it is an exponentially rising disease. As with most exponential systems, they lay low for a long time, and then suddenly accelerate. Humanity consistently underestimates these exponential systems — and it bites us really badly.

Most traditional systems have fixed capacity. The COVID-19 crisis is one of an exponential system hitting up against a fixed-capacity system. When we talk about flattening the curve, it’s about making sure this exponential system doesn’t conflict with our fixed-capacity [healthcare] systems.

Companies like Microsoft and Google and Amazon Web Services are designed to be exponential. [But at most other companies], the decision-making processes are like craftwork. You have people fitting and filing and adjusting [your data and technology] and making sure everything fits. That’s the world of spreadsheets. But now, we need to industrialize the process by which predictions and decisions get made. That’s why you need the AI systems.

If you don’t invest in digital and AI, if you don’t build these capabilities, you’re going to be dead.

Don’t Put Existing Processes in Cement

My lesson from watching Moderna Pharmaceuticals very closely is they are a tech company that happens to be in pharmaceuticals. The thing that hit me is that the Chief Digital Officer, Marcello Damiani, is also the Chief Operational Excellence Officer.

He says, “We can’t make crappy processes more efficient . If our processes are not up to snuff, then we need to change them.” He sees that when you bring in digital, you need to change your processes as well. For them, in R&D, clinical trials, manufacturing, supply chains, and HR, every single process needs to be re-looked at. Moderna says you need a new architecture to the organization—as opposed to adding AI to old processes that are not working.

This has to be a C-suite decision. That’s how important adopting these AI technologies is going to be to your organization. If you’re not thinking about process change and organizational architecture change with these technologies, then you’re putting traditional processes in cement. …

Verizon is another example. [They had to figure out] from the service workforce point-of-view how to virtually enter their customer’s home to help them install and repair equipment. [And in their retail stores, if the staff is busy,] there might be 50 other stores where personnel could answer their question. So now, somebody from a different store can start interacting with you, and give you advice, on your mobile device. You can even do self-checkout.

‘If You Don’t Build These Capabilities, You’re Going to be Dead’

The baseline experience [for most companies online] is still primitive. There’s a risk of a real digital divide between companies. Our experiences with Amazon and Google and Facebook and Netflix have shown what customer service and customer experience looks like when it’s done well, and now that most of us have had that experience, our expectations have changed. When somebody else tries to [compete], they better do a really good job—as opposed to just saying, “Now you can do online ordering.”

My view is you don’t have a choice. If you don’t invest in digital and AI, if you don’t build these capabilities, you’re going to be dead. The companies that do are going to so outpace you, it won’t be funny. There are going to be real winners and losers coming out of this pandemic.

Karim Lakhani is a professor at Harvard Business School, founder of the Laboratory for Innovation Science at Harvard, and co-author of the book Competing in the Age of AI. This piece is an edited version of an interview with InnoLead conducted in July 2020. 

This piece is a part of the Fall 2020 special issue of IL’s magazine, which collects advice and insights from 25 contributors. Read the full “Innovation Matters More” magazine.