Business Strategy in the Artificial Intelligence Economy

J. Mark Munoz, Al Naqvi

• Publisher: Business Expert Press
• Year: 2018
• Print ISBN: 9781948198981
• eBook ISBN: 9781948198998
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

Technological breakthroughs relating to artificial intelligence has redefined business operations worldwide. For example, the ways in which data is captured, processed, and utilized to optimize customer interactions has grown by leaps and bounds. The change is redefining the structural dynamics of business strategy, economic theory, and management concepts. Leading technology companies around the world have expanded their research in artificial intelligence. With IBM's launch of Watson, a new cognitive era has started. Investment firms have backed numerous emerging artificial intelligence companies. Meanwhile, there is paucity of academic and business research on the subject. This book project is a pioneering examination of how artificial intelligence is transforming the contemporary business strategy.

CHAPTER 1

Introduction

Al Naqvi and J. Mark Munoz

The race to gain a decisive and astounding jump of 40 percent in productivity (Purdy and Daugherty 2016) is on. The world is seeking a solution to its productivity woes and the answer lies in the rise of Artificial ­Intelligence (AI). The growth of AI is rapid, selective, and impromptu. Each of the three factors is a super volcano waiting to erupt and its eruption will create major and uncontrollable tectonic change in the social, economic, and political order. Unmanaged entry into the fourth, and perhaps the final, industrial revolution may have consequences for both who dare to embrace and those who stay on the sidelines. But regardless of the choice made, no one will be able to escape the ominous rise of the AI. The proliferation of AI has taken place in stages. The changes that took place as well as their implications are described in the following sections.

The Rapid Rise

AI has been around for at least 60 years and has gone through waves of optimism followed by disappointing results and investment stagnation. Much to the annoyance of investors, it often overpromised and under-­delivered. Back in the research labs AI community continued to work diligently to expand the field. Fortunes changed when data revolution enhanced the processing capacity and provided access to tremendous data. It was as if an oxygen-deprived person breathing through a hose suddenly woke up and began running a marathon in a planet full of oxygen. The winter of AI lifted, never to return. Developments in mathematical algorithms contributed to the creation of machine learning by leaps and bounds and the AI revolution was born. This time around though, it was not going back. All that it needed was here, and all that remained was to create more and more intelligence. The concentration and integration of various interdependent technologies led to the emergence of the new revolution. Billions are being invested and the pace of innovation and related applications is increasing at an exponential rate. The world is not ready to embrace the technology and perhaps the technology is not ready to embrace the world but that is not stopping the ongoing amalgamation of the two. The fast and furious introduction of the technology is outpacing the ability to develop and deploy legal and regulatory frameworks and governance mechanisms.

The Selective Rise

AI is developing selectively across countries, cities, and regions. This inequitable induction of technology will give tremendous intellectual and financial advantage to certain areas while reducing the competitive advantage of others. Cognitively advanced systems when combined with advanced robotics will be able to perform complex work. The cities and countries that will be home to these technologies (and the firms developing them) will create an unconquerable competitive disparity between themselves and the rest of the world. Such a gap will not close since the advantage of technology leaders will grow exponentially.

The Impromptu Rise

The developments are fast and unplanned. More than anything else, AI is poised to increase global unemployment. Productivity increase implies job loss for many. Raising the alarms of unemployment is often conveniently rejected by labeling the harbingers as nihilists or Luddites. This is a mistake. The authors have argued in other papers that the lessons from the previous industrial revolutions cannot be applied in the current revolution. The differences are significant. First, unlike other technologies, the AI technology can learn and optimize. Second, the AI technology may soon be able to adapt and respond to its environment in a significantly powerful way than the traditional machines. Once self-driving autonomous cabs are out on the roads, the entire cab-driving profession will be wiped out. And it is unlikely that all or most of those out-of-work cab drivers will be retrained as AI engineers. Plain and simple, what is needed is a planned rollout such that social and economic costs are minimized.

Contemporary Artificial Intelligence (AI) Environment

The Obama administration attempted to create an agenda for the artificial intelligence technology. It is expected that the Trump administration will also continue to support the development of the field. The Obama administration analyzed the rise of the big data technology and then ­followed it by separate analysis of the AI revolution. Two reports were issued by the White House and both recorded the perils and promises of AI (White House 2016al; 2016b). In the end, however, the optimism of promises prevailed over the perils of the technology as the U.S. government set a road map for progress in AI. With its eyes on the potential productivity gains of an incredible 40 percent (Purdy and Daugherty 2016), the U.S. government wasted no time to give unconditional support to the industry. Relentless pursuit of technological progress ensued as billions of dollars of private investment poured into the AI field.

When the monster comes out of the bush, there will be some damage. Frey and Osborne calculated that just about half the jobs can be impacted (Frey and Osborne 2013). Brynjolfsson and McAfee (2015) have observed that the four measures of economic health, per capita gross domestic product (GDP), labor productivity, number of jobs, and median household income, tend to grow in tandem but not in the last 15 or so years. GDP and productivity have parted ways with income and jobs, as the first two have increased but the latter two have declined. They call it decoupling (Brynjolfsson and McAfee 2015; McAfee and Brynjolfsson 2016). Others have acknowledged that the need for high-skill jobs would grow but what is rated as a high-skill job today may not sustain such a classification for far too long (Autor 2015; Autor and Dorn 2013).

AI enables productivity enhancement, changes work processes, and can create jobs (Rao 2017). New technologies threaten about 40 ­percent of jobs in the United States and approximately two-thirds of those in the developing world (Gershon 2017). A report from Ball State University showed that in the United States almost 9 out of 10 jobs were lost to robots and not to trade (Hicks and Devaraj 2015). If this is some ­indication of how things will look in the future, job creation might become extremely hard. So, the ill-fated dilemma takes shape. If jobs go to humans, that means the United States will be less productive than global competitors and may miss out on the 40 percent productivity potential. If jobs go to robots, then how will the country create new middle-class jobs?

There is a high interest in AI and the future is promising. Due to its impact on product variety, personalization, attractiveness, and cost benefits, AI will contribute to 45 percent of all economic gains by 2030 (PWC 2016). Nesbitt (2017) indicated that AI impacts trade by: (1) enabling supply chains, (2) creating efficiency in compliance software, (3) speeding up and creating better contracts, and (4) improving access to finance.

Support for AI has been evident. There were about 1,500 AI-related start-ups in the United States in 2016, receiving funding of around $5 billion (Rao 2017).

Other types of support are necessary for AI to thrive. There needs to be a strong AI program, which should have full support of the government. However, it is strongly recommended that such a program be monitored and governed so that advance policy steps can be taken before masses are exposed to the consequential suffering. Of course, this implies the development of an exceptionally powerful safety net program as well as other programs to support retraining and continuing education. An extremely strong focus on education specific to AI is critical and highly recommended.

Book Objectives and Structure

The objective of this book is to capture the viewpoints of thought leaders from around the world and share their ideas on business strategy formation in a world of AI. Given that there is scarce l...

Table of contents

• Cover
• Halftitle
• Title
• Copyright
• Abstract
• Contens
• 01_Chapter 1
• 02_Chapter 2
• 03_Chapter 3
• 04_Chapter 4
• 05_Chapter 5
• 06_Chapter 6
• 07_Chapter 7
• 08_Chapter 8
• 09_Chapter 9
• 10_Chapter 10
• 11_Chapter 11
• 12_Bios
• 13_Index
• 14_Adpage