AI Is Rewriting Strategy. Soumitra Dutta Explains What Changes

AI is changing not only the pace of decision making; it’s changing how an organisation turns strategy into action and, perhaps, what it means to have a competitive advantage in the first place․INSEAD professor Yves Doz and Portulans Institute co-founder Soumitra Dutta explore the shift in a recent article, noting that organisations are now becoming systems in which human and artificial agents increasingly interact with each other․ Here are some key insights we have gleaned from that article: 

The AI advantage may go to fast learners

AI enables companies to turn even standard business operations into learning experiences. As Doz and Dutta state: "Every interaction‚ transaction‚ or machine-to-machine exchange can become a learning surface․"What's important is what the company is doing with the information it's producing․ If a customer's interaction provides useful information, the benefit is in how quickly the firm can use that understanding to shape the next interaction.

Doz and Dutta suggest that strong firms will learn "faster‚ at higher density and at scale"․ The competitive difference may therefore be in the speed at which the loop between action‚ perception and changed behavior operates․

Strategy is moving into the machinery of the business

If decisions are made or shaped by software, strategic priorities need to be reflected in the software making those decisions.Doz and Dutta say that "strategic intent must be translated into constraints‚ decision logic and infrastructure"․ For example‚ a bank that is committed to trust must translate that commitment into risk limits‚ escalation rules‚ and compliance processes․

An underestimated risk is a strategy that nobody chose
Thousands of individually rational decisions by autonomous systems can together unwittingly drive an organisation in a direction that nobody wanted․For example‚ a business seeking trust may find its systems optimize for engagement or speed‚ while a business seeking to create resilient supply chains may find its supply-chain agents consistently favouring the lowest price․

This is why‚ according to Doz and Soumitra Dutta‚ leaders should "compare intended strategy with produced strategy"․

An executive's job is moving up a level

Senior executives are moving away from making every operational decision themselves. Instead, their role is to define what the organisation is trying to achieve, design the systems through which intelligence becomes action, establish limits for autonomous systems, and watch for activity that is inconsistent with the organisation's strategic intent.