How will AI change strategy? That’s the single most common question the three of us are asked from corporate executives, and it’s not trivial to answer. AI is fundamentally a prediction technology. As advances in AI make prediction cheaper, economic theory dictates that we’ll use prediction more frequently and widely, and the value of complements to prediction – like human judgment – will rise. But what does all this mean for strategy?
How AI Will Change Strategy: A Thought Experiment
E-commerce could move from shopping-then-shipping to shipping-then-shopping.
October 03, 2017
Summary.
AI is a prediction technology. Its improvement is akin to turning up the volume knob on a speaker dial. But rather than volume, you’re turning up the AI’s prediction accuracy. What happens to Amazon’s strategy as their data scientists, engineers, and machine learning experts work tirelessly to dial up the accuracy on the prediction machine? In this example, it shifts Amazon’s business model from shopping-then-shipping to shipping-then-shopping, generates the incentive to vertically integrate into operating a product-returns service (including a fleet of trucks), and accelerates the timing of investment due to first-mover advantage from increasing returns. All this is due to the single act of turning the dial on the prediction machine.
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HBR Learning
Strategy Planning and Execution Course
Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Strategy Planning and Execution. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.
How to develop a winning strategy—and put it to work.