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Talking About the Risks of AI and Cognitive Technologies

According to the recently published PwC’s 22nd Annual Global CEO Survey, 85% of the surveyed CEOs overwhelmingly agree artificial intelligence (AI) will have a significant impact on their business within the next five years. For this reason, they have plans to pursue AI investments.

This is despite the fact that the information gap between the data CEOs are requiring to make informed decisions and what they are getting from their teams has not closed. Lack of analytical talent, data siloing and poor data reliability are the primary reasons the data they receive is inadequate.

Nonetheless, the application of AI and the underlying cognitive technologies such as machine learning, computer vision, natural language processing (NLP), audio and signal processing, speech recognition, predictive systems and robotics are wide-ranging, with the potential to improve performance in nearly any activity that generates large amounts of data.

Highly-powered algorithms which are the basis of these computer systems are presented with large amounts of data and subjected to supervised, semi-supervised, unsupervised, reinforced and deep learning.

The goal is to train the algorithms to identify relationships or patterns between the inputs and the outputs and use those rules to predict future outcomes with input data alone.

For example, in healthcare, AI is being used to study patient clinical data and recommend diagnoses. In finance, machine learning algorithms are being used to analyze transactions and uncover fraud and money laundering.

In the retail industry, predictive algorithms are being trained to automatically group customers into various categories based on their needs or buying patterns. These insights are then used to prioritize sales efforts and tailor promotions.

In other cases, companies have piloted NLP technology to monitor social media sentiment. The technology automatically identifies conspicuous topics of consumer conversations and sentiment surrounding those topics.

The generated insights are being used to influence decisions on improving marketing and customer service.

It is no surprise then that CEOs are now exploring how to implement these new technologies in their business.

Hype-driven or well-informed investments?

As much as AI is a source of significant business opportunities, the same technology is also a source of significant threats that must be evaluated. This is essential for helping leaders make informed and intelligent investment and risk decisions.

It is foolhardy for leaders to jump on the AI bandwagon and expect to capture the promises of AI and cognitive technologies if they lack an understanding of whether, how, and where to invest in applying these technologies.

When almost everyone is talking about the opportunities of AI and cognitive systems, it’s easy to cave in to hype-driven or ill-informed investments and overlook the fact that AI and cognitive technologies are not the solution to every business problem or situation.

That is why it is critical to evaluate the business case for investing in these technologies and assess the potential impact on your company’s business model, culture, strategy and sector.

Take a holistic view of your business processes, products and markets to weigh where the use of AI maybe be practical, profitable and crucial.

Algorithms are only as good as the data they learn from

Given that AI capabilities are data-driven, closing the information and talent gaps is key to unlocking AI’s potential. AI-powered algorithms improve over time through their experience of using data.

They learn relationships between variables in historical data sets and their outcomes. The relationships are used to develop models, which in turn are used to used to predict future outcomes without needing to be explicitly programmed by a programmer.

The systems change and evolve depending on the data that is fed to the algorithms. This therefore requires the data that is fed to the systems to be accurate, complete, diverse, and free from errors and bias. If the data is incomplete, error-prone or contains innate bias, the algorithms are likely to display false patterns as well as magnify the bias leading to misleading outcomes that have far-reaching repercussions.

Since AI and cognitive technologies deliver outcomes based on historical or existing data presented to them, leaders need to acknowledge that these systems will not necessarily provide flawless outcomes.

That is why it is critical to have appropriate data governance structures and talent in place to monitor where and how these technologies are deployed across the organization.

Skilled personnel play the critical role of overseeing biases and risks emanating from algorithms. For example, these people help identify and mitigate risks associated with programming errors.

Understand the black box of AI

As business leaders lay the foundation to pursue AI investments and entrust key decision making processes to intelligent machines, it is worthy to demystify the ‘black box’ of AI.

This is the notion that we can understand the inputs and outputs of an AI-powered system, but don’t understand what happens inside.

Accountability is an important element of decision making, and in order to make AI systems accountable for their decisions, AI-based decisions need to be explainable in order to be trusted.

Rather than blindly entrust machines to make important decisions, leaders therefore need to develop an understanding of how the technology works and how it makes decisions.

Thus, business leaders must be able to identify and explain the layers of decision making which underpin the operation of the systems and influence the final outcomes.

For example, are you able to identify and explain which connections have predictive value in the multilayered deep neural networks? Although it’s impossible to analyze all the connections in a deep neaural network, it’s important to prioritize what you need to know, what you want to understand, and why.

Over time, through testing and measuring, or trial and error, you will be able to understand the thought process behind algorithms, trust the decisions they make and ensure a robust governance structure is in place to monitor these technologies as they mature.

Surge in Cyber Attacks

Big data has been a boon to the development of AI and cognitive technologies. Thanks to advances in technology, our digital lives are producing staggering amounts of data each day.

As a result, interest in AI application is surging as decision makers try to make sense of all the data at their disposal.

Nevertheless, leaders need to be aware that the more data is generated the higher the probability of cyber criminals or hackers targeting the company’s AI systems to steal personal data or business confidential information.

A major data breach can have unintended consequences that can create legal, brand and public relations issues for the business.

Therefore, as leaders seek to capture the opportunities of AI and cognitive technologies, they mustn’t turn a blind eye to the limitations of these systems.

They must also consider the various ethical, moral, and legal issues associated with the AI systems that their organizations deploy.

Thanks for sharing:

Related posts:

  1. Reimagining Business Processes in an Era of Cognitive Technologies
  2. CFOs Beware: Don’t Get Caught Up In the Hype of New Technologies
  3. Talking about Digital Transformation
  4. Globalization and Emerging Risks (Part 2)
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The Art of Risk Management

This is the title of the article by BCG published a few years ago. The article discusses the principles that should govern the approach to risk management by companies of all shapes and sizes.

The authors make several points with which I agree. Here are some excerpts:

  • Risk management is essential in today’s volatile economy. In a continuously changing economic environment, companies cannot assume a stable risk landscape.
  • Stop thinking of risk management as primarily a regulatory issue. Embed risk management in the mindset of the broader organization.
  • Risk management is a value-creating activity that is an essential part of the strategic conversation inside the company. The goal of that discussion should not be to eliminate or minimize risk but to use it to create a competitive advantage.
  • Risk management starts at the top. The organization needs to demonstrate that it has made risk management a high priority and an integral part of the decision-making process by appointing a dedicated risk leader who reports back frequently to the CEO and the board to discuss the latest trends and any changes in the company’s risk scenarios.
  • Risk cannot be managed from an ivory tower. Risk Management should not exist in isolation from the rest of the organization, with an insufficiently granular understanding of the actual business-specific risks the company faces. To avoid this outcome, integrate risk management into the company’s entire routine management processes, including planning, capital allocation, controlling, and reporting.
    • Understand the scope of the risks the company faces.
    • Plan for how the company will manage those risks.
    • Act to mitigate the risks or take advantage of strategic opportunities.
  • Avoid relying on black boxes. Although sometimes appropriate, over-reliance on complex metrics or models can muddy the risk management process, turning it from a transparent management activity into a frustrating black box. The appropriate level of complexity is company-specific and depends on the industry, business model, availability of data, level of experience, and mandatory legal requirements.
  • Align risk management with a company’s overall business strategy. Companies need to identify all relevant risks – not just those that can be easily quantified. Some of the relevant risks for a company may be those that are qualitative and especially difficult to quantify.
  • Risk management is more than a policy; it is a culture. The objective of a company’s risk-management system should be not only to enforce new policies but also to create a risk-aware culture that addresses risks proactively, not reactively, and manages them to create new sources of competitive advantage.
  • Effective risk management depends on the free flow of information throughout the organization. Unless employees at all levels of the organization are actively involved in the risk management process, it will be difficult to maintain the unrestricted flow of information. This can result in the most important data getting buried in one part of the organization unavailable to other parts of the business.
  • Risk management deals with uncertain futures. As a result, the goal should not be to develop precise metrics or future outcomes but to strive for a general understanding of the probabilities and potential impact of various trends or scenarios on business performance and enable decision-makers to confront the uncertain nature of risk and act accordingly.
  • Risk management is never about finding “the answer.” Rather, it is about continually refining the organization’s assumptions about the future and its understanding of the implications of those assumptions for the company’s business. Assumptions about risk often change quickly, so the relevant parameters, probabilities, impacts, and correlations should be revisited frequently.
  • It is possible to prepare for unknown risks by building an organization that so excels at crisis management that it is resilient even in situations in which it is blindsided by unprecedented challenges. For example, through developing the ability to detect, capture, and exploit information patterns as well as to think outside existing frameworks and risk landscapes.
  • Avoid the downside, but don’t forget the upside. Companies should use risk management also to identify new opportunities and to exploit them systematically. For example, scenario planning should be used to define not only worst-case scenarios but also best-case scenarios. Think in advance about how a company can make the best use of the latest market developments and trends and ultimately make the right decisions.

I enjoyed reading the article and highly recommend it.

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Leading in Uncertain Times

One of the biggest challenges facing business leaders today is making the right decisions that will ensure their organizations succeed, survive, and remain competitive in an increasingly uncertain and complex environment.

A recent post, The best way to lead in uncertain times may be to throw out the playbook, by Strategy+Business has several good points.

The article is about the COVID-19 pandemic, how global companies navigated through the crisis, and how best to prepare for future disruptions. Here are some key points and my comments.

  • Rather than follow a rigid blueprint, executives must help organizations focus on sensing and responding to unpredictable market conditions.
    • Comment: Senior leaders play a vital role in providing clarity about the organization’s strategic direction, creating alignment on key priorities to ensure the achievement of enterprise objectives, and ensuring the business model is continuously evolving to create and capture value in the face of uncertainty. They must not rest on their laurels and stick to the beliefs and paradigms that got them to where they are today and hope they will carry them through tomorrow. Regulatory changes, new products, competition, markets, technologies, and shifts in customer behavior are upending many outdated assumptions about business success. Thus, the businesses you have today are different from the ones you will need in the future hence the importance of continuously sensing changes in the global economy. Employees and teams often feed off the energy of their leaders and tend to focus their attention where the leader focuses attention. If the leader is comfortable with current business practices and rarely embraces the future or challenges the status quo, then the team is highly likely to follow suit.
  • When it became clear that supply chains and other operations would fracture, organizations began scenario planning to shift production sources, relocate employees, and secure key supplies.
    • Comment: Instead of using scenario planning to anticipate the future and prepare for different outcomes, it seems most of the surveyed organizations used scenario planning as a reactionary tool. Don’t wait for a crisis or a shift in the market to start thinking about the future. The world is always changing. As I wrote in The Resilient Organization, acknowledge that the future is a range of possible outcomes, learn and develop capabilities to map out multiple future scenarios, develop an optimal strategy for each of those scenarios, then continually test the effectiveness of these strategies. This does not necessarily mean that every change in the market will impact your business. Identify early warnings of what might be important and pay closer attention to those signals. In other words, learn to separate the signals from the noise.
  • The pandemic forced the organization’s senior management team to re-examine how all decisions were made.
    • Comment: Bureaucracy has for a very long time stood in the way of innovation and agility. To remain innovative and adapt quickly in a fast-changing world, the organization must have nimble leadership and an empowered workforce where employees at all levels can dream up new ideas and bring them to life. Identifying and acting on emerging threats and potential opportunities is not the job of the leader alone but every team member. To quote Rita McGrath, in her book Seeing Around Corners, she writes, “Being able to detect weak signals that things are changing requires more eyes and ears throughout the organization. The critical information that informs decision-making is often locked in individual brains.” In addition to the internal environment, the leader must also connect with the external environment (customers, competitors, regulators, and other stakeholders), looking for what is changing and how.
  • It’s worthwhile for leaders of any team to absorb the lessons of sense-respond-adapt, even if there is no emergency at hand.
  • Sensing: Treat the far-flung parts of your enterprise as listening stations. The question leaders must ask is, “What are we learning from our interactions beyond the usual information about costs and sales?” Train your people to listen for potentially significant anomalies and ensure that important information is not trapped in organizational silos.
    • Comment: Cost and sales data are lagging indicators that reveal the consequences or outcomes of past activities and decisions. Although this information can help leaders spot trends by looking at patterns over time, it doesn’t help understand the future and inform what needs to be done for the numbers to tell a different story. In addition to lagging indicators, pay attention to current and leading indicators and understand the relationship between these indicators and outcomes.
  • Responding: Improve communication across intra- and inter-organizational boundaries. Leaders should view business continuity as an essential function that acts as connective tissue for the enterprise.
    • Comment: In addition to creating mechanisms that allow the free flow of information both inside and outside the organization, decision-makers should also be comfortable receiving information that challenges their personal view of the world, even if it’s not what they want to hear. Create a culture of psychological safety where people are not afraid to share bad news for fear of getting punished, but rather are acknowledged and rewarded for speaking up. Leveraging the diversity of thought enables leaders to anticipate the future as an organization, decide what to do about it collectively, and then mobilize the organization to do what’s necessary.
  • Adapting: Challenge assumptions, and question orthodoxies. There’s always the temptation to mitigate threats simply by applying existing practices harder and faster. One way to get at those deeper issues and encourage double-loop learning is to ask, “What needs to be true for this to be the right approach?”
    • Comment: In an increasingly uncertain environment, it’s difficult to survive and thrive with an old business model or outdated technologies. Many businesses fail because they continue doing the same thing for too long, and they don’t respond quickly enough and effectively when conditions change. As a leader, stay curious and connected to the external environment, look for market shifts, understand what needs to be regularly refreshed and reimagined, adopt new technologies and capabilities, and adapt in ordinary times but also during times of transition. Unfortunately for many leaders, it’s just more convenient for them to continually downplay the fact that conditions are changing than take the appropriate course of action that drives business success.

How are you preparing your organization for potential future disruptions?

Thanks for sharing:

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The Collaborative Organization

These days the term collaboration has become synonymous with organizational culture, creativity, innovation, increased productivity, and success.

Let’s look at the COVID-19 pandemic as an example. At the peak of the crisis, several companies instructed their workers to adopt remote working as a health and safety precautionary measure.

Two years into the pandemic, they are now asking their employees back to the office full time or are planning to adopt a hybrid model.

The need to preserve our collaborative culture and accelerate innovation are two of the top benefits being cited by organizational and team leaders for bringing workers back.

Collaboration is indeed essential for the achievement of team goals, functional objectives, and the overall success of the organization.

Today’s breakthrough innovations are emerging from many interacting teams and collaborative relationships.

When teams, functions, and organizations collaborate, the whole is greater than the sum of its parts; group genius emerges, and creativity unfolds.

But, what makes a successful collaboration? What are the key enabling conditions?

  • It extends beyond the boundaries of the organization. Business success is a function of internal and external relationships. Instead of viewing your business in vacuo, understand that you are part of an ecosystem. External to your organization, who do you need to partner with to enhance your value creation processes, achieve/exceed your objectives, or successfully execute your strategy?
  • Ensure the objectives are clear and there is shared understanding by everyone. Unclear objectives are one of the topmost barriers to team and organizational performance.
  • Foster a culture that encourages opinions and ideas that challenge the consensus. People should feel free to share their ideas and not hold back for fear of others penalizing them or thinking less of them. Collaboration is hindered when one or two people dominate the discussion, are arrogant, or don’t think they can learn anything from others.
  • Groups perform more effective under certain circumstances, and less effective under others. There is a tendency to fixate on certain topics of discussion amongst groups which often leaves members distracted from their ideas. To reduce the negative effects of topic fixation, members of the group should be given periods to work alone and switch constantly between individual activity and group interaction.
  • Effective collaboration can happen if the people involved come from diverse backgrounds and possess complementary skills to prevent conformity. The best collective decisions or creative ideas are often a product of different bodies of knowledge, multiple opinions, disagreement, and divergent thought processes, not consensus or compromise.
  • New technologies are making collaboration easier than ever, enabling us to increase our reach and broaden our network. Although new technology helps, it will not make your organization collaborative without the right culture and values in place. First, define what you want to achieve through collaboration then use these tools to promote creative collaboration.

How else are you championing collaboration within your organization to create value and succeed?

Thanks for sharing:

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