How can you use AI to redefine competitive advantage?

How can organisations turn technological ambition into sustained business impact? How will AI affect competitive advantage and drive value, and how can firms stay ahead?

The technology is only a small part of it, says Michael Jacobides, Donald Gordon Professor of Entrepreneurship and Innovation and Professor of Strategy and Entrepreneurship at London Business School. “There's a heck of a lot of hype, but also possibilities for change.”

Jacobides discussed these possibilities at a recent Think Ahead event with Clare Mortimer, Partner in Data and AI at Deloitte LLP and Lorenzo V Bianchi MBA2010, Chief Product and Technology Officer at Sector Alarm. The panel was moderated by Jeremy Walker, journalist, entrepreneur and corporate venture investor.

Mortimer cited two recent Deloitte studies that illustrate how far businesses still have to go when it comes to AI. One found that 91% of organisations were planning to invest more in AI in the year ahead than they had in the past. The other found that 84% of organisations had not yet looked at their fundamental business processes when they were thinking about where they took AI.

In a live poll during the event, 56% of the Think Ahead respondents said integrating AI into the organisation was the biggest barrier to turning AI into real business impact. Most companies simply aren’t there yet, said Jacobides. “AI is rumour rather than reality for most organisations that I know. People are apprehensive in integrating it.” He pointed to the phenomenon of AI therapists.“We feel that something is displacing us.”

Bianchi, who has spent most of his career tying technology investment to commercial outcomes, also referred to the “element of fear”. Roles are shifting and blurring in ways that can feel confusing and threatening. At Sector Alarm, he sees this in real time. A product manager with an AI is no longer limited to a scope or developing a roadmap; now they can code and produce a prototype and give it to a developer to finesse.

Sector Alarm has transformed with AI, says Bianchi. “We used to be a company that bought technology and then sold it. Now we are a company that actually develops and owns technology and this repositioned us in the value chain and allowed us to rebuild our own hardware and external facing product.” Others are making similar decisions. “I'm seeing a lot of my peers actually thinking about using API to develop their own CRM. Build versus buy is back on the table.”

AI is shaking up the professional services landscape. Traditional firms like Deloitte are now seeing new types of firms emerge, which disrupt their former employers with offerings that combine technology and professional services as a package. “The exciting stuff is to figure out what how these things will reverberate in the economy,” said Jacobides. “In the next few months we will see some real impacts in terms of the business model and monetisation and pricing of a good number of services.”

Incumbent firms are being forced to be clear about how exactly they generate value, and this creates an opportunity for reinvention, said Mortimer. How organisations choose their partners is changing too: “Historically we formed ecosystems based on known capabilities. Now we're deciding who we want to work with to develop in a future that we know is unpredictable. And in order to engage in that relationship, I need to have confidence that it's going to evolve in a way that aligns with my organisation’s core values.”

Which human skills are going to be most valuable in relation to the adoption and application of this technology? “Asking the right questions,” said Mortimer. Critical thinking and curiosity are the key capabilities. “Don’t just learn anything. Learn how to learn.”

Jacobides, who has written about this recently for Think, said: “Managerial work is becoming more important because you need to understand what makes sense and what doesn't. The skills are different because fluency is now almost free. So insight becomes more important, understanding context, understanding how to push it.”

Mortimer stressed that planning for resilience will be important. “You’ll do things that fail, but failure can lead to greater successes.” She draws a parallel with the numerous innovations at pace during the pandemic. “We will be living in a different world, doing different jobs in a different environment before most of us retire. The challenge is for us to be able to adapt at that pace.”

Jacobides agreed. “The ones that don't adapt will go down, whereas the ones that do will be able to move forward. People expect different things from us in the presence of these tools. Are we responding or are we not responding? It goes to the heart of the business model. What is my value add? Do I need to rethink either my footprint or the connection with others?”

Choosing to invest in AI takes a leap of faith from the CEO and the board, said Mortimer. “To adopt new technologies, you have to stop doing some of the things you used to do and that that's

a really bold leadership decision.” The announcements and the capital allocation are the easier parts, added Jacobides. The harder part is the hard yards of putting it into practice.

People often have a childish excitement about AI, he said. Rather than understanding that this is part of org design and you need to simplify and reduce the complexity of what you have, there's an element of, “I will have the entire jar of cookies! I saw this demo, it's great, let me have that!”

“In a world where everyone has access to the same AI, the tool is not going to be the edge,” said Mortimer. “The place where you differentiate is when you genuinely use it as the catalyst to change the business.”

Which is easier said than done. “What's difficult is changing people's behaviour,” said Bianchi. “A technological transformation is not just about system and tools. It requires the right team size, the right shape in the tech function specifically. You have to have the right processes and incentivise [the right things]. The value leaks in the last mile. A great product that nobody uses returns nothing.”