For the first time since the pandemic, the supply chain did not, in and of itself, feature as a top concern for the C-Suite. The supply chain has stabilized, and the “new normal” is no longer new. It is the way of the future. Businesses have adapted to the constant threat of disruption in a VUCA world, and accordingly, have emphasized agility and resilience. Investments in the supply chain and procurement spaces will emphasize digital transformation and embracing AI.
I have spent time reading the Q4 2023 surveys from the following companies:
- Deloitte’s 2023 CEO Priorities Survey: Deloitte
- EY CEO Outlook Survey (October 2023): EY
- McKinsey on AI in Supply Chains: McKinsey
- PwC’s Insights: PwC
- The Conference Board: C-Suite Outlook 2024 | Leading For Tomorrow: TCB
All surveys conclude that investing and embracing AI is a key priority for the C-Suite.
According to the Conference Board C-Suite Outlook for 2024, the following are the high-impact issues and top focus areas for 2024.
Embracing AI: High Expectations and Significant Challenges
As the C-Suite navigates the complex business landscape of 2024, a key focus area is the integration and maximization of Artificial Intelligence (AI) in their operations. AI is not a fad and is not going away. It is more than just a buzzword; it’s a transformative force reshaping how businesses operate, innovate, and compete.
High Expectations for AI
According to the Q4 2023 surveys by McKinsey, Deloitte, EY and PwC, and The Conference Board, CEOs have high expectations from AI, with close to 90% foreseeing it significantly increasing the efficiency and productivity of labor and their firms overall. This optimism extends to gains in innovation and creativity, as AI enables new ways of solving problems and creating value.
The Need for Organizational Adaptation
However, embracing AI and harnessing its full potential requires substantial changes within organizations. About 80% of CEOs acknowledge that adopting AI will necessitate new capital expenditures, and a striking 94% agree that it will demand new skills and training. This indicates a clear need for investment in both technology and human capital.
As Satya Nadella, CEO of Microsoft, once said, “We are not just transforming our products; we are transforming how we work, how we learn, and how we change.” This sentiment is echoed by many CEOs as they navigate the integration of AI into their organizations.
When a business starts its AI journey, it needs to quickly realize it isn’t just about investing in new technology. They need to rethink their workflows, invest in training their people, and foster a culture that embraces change.
Cross-Functional Collaboration and Business Model Transformation
Around 74% of CEOs believe maximizing AI’s potential demands more cross-functional collaboration, with 76% stating it requires significant business model transformation. Yet, there’s a gap in implementation: almost half of CEOs (48%) and 44% of C-Suite executives feel their organizations are not effectively addressing the use of AI across employee and business unit levels.
For example, the CEO of IBM, Arvind Krishna, said in an interview, “AI is an integral part of IBM’s business model transformation. We are using AI to predict market trends, optimize our supply chain, and provide better customer service.”
Case Study: Netflix and AI
Netflix, the global streaming giant, provides a clear example of the transformative power of embracing AI. Their recommendation engine, powered by sophisticated AI algorithms, is a core element of their business strategy. This engine analyzes user behavior and preferences, then provides personalized recommendations for TV shows and movies.
This not only increases user engagement by helping users discover new content tailored to their interests, but it also provides invaluable data to Netflix about viewing trends and preferences. The company then uses this data to make decisions about what content to produce or license. By integrating AI into their business strategy, Netflix has transformed the way content is distributed and consumed, demonstrating the vast potential of AI when effectively incorporated into business operations.
Governance and Risk Management
As wonderful as AI can be, it is not without risks. The integration of AI introduces new layers of organizational risk, as acknowledged by 56% of CEOs and 62% of C-Suite executives. Additionally, half of the CEOs and 51% of C-Suite executives view AI as a potential disruptor to labor, posing significant talent management challenges. Despite widespread discussions around AI governance standards, only 37% of CEOs and 43% of C-Suite executives believe AI will increase their regulatory burden.
Incorporating AI into the Broader Business Strategy
The challenges outlined above emphasize the need for CEOs and their leadership teams to commit to technological expertise within their organizations. This involves examining organizational design and crafting governance structures to manage AI opportunities and risks effectively.
Digital Transformation and AI
As part of broader digital transformation initiatives, the integration of AI technologies is crucial for enhancing efficiency and customer experience. CEOs must strategically invest in AI, ensuring it aligns with their company’s goals and is integrated seamlessly into existing processes.
Companies across various industries are leveraging AI to enhance efficiency and improve customer experience in innovative ways. Here are some notable examples from My Customer (dot) com, and I highlight two here:
- KFC’s Facial Recognition: KFC has collaborated with Baidu in China to implement facial recognition technology. This system predicts customer preferences based on factors like time of day, age, gender, and mood, offering personalized meal suggestions. This method not only speeds up the ordering process but also enhances personalization.
- Macy’s AI Shop Assistant: Macy’s is testing a cognitive AI technology called ‘Macy’s On Call’. This smartphone-based assistant provides customized responses to customer queries, such as product locations or store services. This solution addresses the common issue of unavailable in-store assistants, freeing up human staff for more complex customer interactions.
Talent Management and AI
The potential displacement of labor by AI creates a complex challenge for talent management. CEOs must navigate this by investing in training and development programs that equip employees with the skills needed in an AI-driven future.
Companies are implementing worker-friendly policies, focusing on transparent transition plans, and investing in upskilling programs. These initiatives aim to ensure workers remain relevant in the evolving job landscape by embracing new technologies and enhancing their soft skills. Additionally, companies recognize that AI can also create new job opportunities in areas such as AI development, system maintenance, data analysis, and ethical governance. Navigating these job transitions requires a combined effort from workers, employers, and policymakers to foster environments that support learning and adaptation, ensuring AI enhances work rather than displaces it.
AI and the Supply Chain
In addressing AI’s impact on supply chain and procurement, C-suite executives are focusing on:
- Strategic AI Integration: Implementing AI for improved efficiency, cost reduction, and enhanced decision-making in supply chains and procurement processes.
- Data Management: Investing in robust data systems to support AI’s needs, ensuring quality and accessibility of data.
- Skilled Workforce: Hiring AI-savvy personnel and training existing staff to manage and interpret AI systems effectively.
- Risk Management: Identifying and mitigating risks associated with AI, including data security and ethical concerns.
- Supplier Collaboration: Partnering with external vendors and technology providers to enhance AI integration in supply chains.
- Supply Chain Resilience: Strengthening supply chain resilience through diversification and contingency planning.
- Sustainability Focus: Leveraging AI to support sustainable practices and considering environmental and ethical impacts in supply chain decisions.
- Continuous Monitoring: Establishing systems for ongoing evaluation and improvement of AI applications in supply chain processes.
AI, Sustainability, and Innovation
Incorporating AI into sustainability initiatives can drive innovation and open new markets. CEOs must explore how AI can enhance eco-friendly practices and contribute to the company’s overall sustainability goals.
The AI-Driven Future
As we progress through 2024, CEOs are at a crucial juncture. Embracing AI is not just about technological investment; it’s about reshaping organizational cultures, redesigning business models, and rethinking talent strategies. The CEOs who succeed will be those who view AI not as a standalone tool but as an integral part of their comprehensive business strategy, one that addresses both the immense opportunities and the significant challenges it presents. The decisions made today in AI will undoubtedly have a profound impact on the future trajectory of businesses globally.
Up next, I am researching to publish a white paper on the topic later in the spring. In the meantime, reference the Q4 surveys I referenced earlier to learn more.
How is your organization investing in AI? Tell me in the comments. 👇
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