AI can become your next strategic problem

AI can become your next strategic problem

Imagine a world in which management without reflection implements decisions recommended by complex algorithms. These algorithms have evolved into black boxes beyond managerial cognition; yet business requires them to remain competitive.

In their recently published essay in the Academy of Management Review Hanken researchers Mikko Vesa and Frank den Hond, together with Dirk Lindebaum (Cardiff Business School), argue that this is a very real and growing concern for today’s business.

Under such circumstances artificial intelligence can become the source of, rather than the solution to, strategic problems. This is because of two reasons. Firstly, because algorithms can only analyze what has already occurred; i.e. historical data; they cannot account for the unexpected or the unknown. This is a major problem in current business environments that are characterized by high volumes of turbulence. The past, accessed as data, simply does not predict the future particularly well.

Secondly, over-reliance on algorithms for analysis and decision-making can render managers blind to original purpose, limits and role of this technology. This causes a self-inflicted state of learned helplessness. In such a state, management begins to service the algorithm rather than the algorithm serving the management.

What this means is that business should avoid over-reliance on artificial intelligence and algorithmic decision-making. Whilst such technologies can be one powerful source of competitive advantage, the final responsibility for corporate conduct rests with human management.

The article:

Lindebaum, Dirk, Mikko Vesa, and Frank den Hond. 2019. Insights from the Machine Stops to better understand rational assumptions in algorithmic decision-making and its implications for organizations. Academy of Management Review (in-press).
DOI: 10.5465/amr.2018.0181