Understanding AI

As a way to warm-up for the in-person AI program at MIT, USA this November, I started my AI learning journey through an online program with MIT 3 weeks back - Artificial Intelligence: Implications for Business Strategy.

Why learn AI as part of my Craft Mastery? 

Because AI is now a part of RYD Business Excellence journey as AI is already disrupting businesses across industries. If our big hairy audacious goal is to nurture great businesses from our land, then we have to disrupt our own business model much before it gets disrupted to make a much bigger difference to our customers.

Here are my top 5 learnings and insights from the online MIT AI program so far:

1. The real question about AI is - How can people and computers be connected so that collectively they act more intelligently than any person, group or computer has ever done before?

It is not a battle between humans and AI. It is a partnership between humans and AI to make a much bigger difference in the world through collective intelligence of humans and AI.

Even more powerful question is - How can this human-computer system (also known as collective intelligence) improve over time to contribute to make our world a better place in ways not possible before?

2. For AI to be of value to our business, it is important to have an understanding of our business strategy which needs to be deeply thought through and executed; instead of throwing darts while blind-folded hoping one of the darts will hit the bulls-eye.

3. Your strategy for using AI should be consistent with your company's strategic approach in general. As per Michael Porter, businesses can choose one of the four strategic approaches - Cost Leadership, Differentiation, Cost Focus and Differentiation Focus.

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From Competitive Advantage by Michael Porter, a firm's relative position within its industry determines whether a firm's profitability is above or below the industry average. The fundamental basis of above average profitability in the long run is sustainable competitive advantage. There are two basic types of competitive advantage a firm can possess: low cost or differentiation.

The two basic types of competitive advantage combined with whether the company is operating industry wide or focussed on a particular customer segment leads to three generic strategies for achieving above average performance in an industry: cost leadership, differentiation, and focus. The focus strategy has two variants: cost focus and differentiation focus.

i. Cost Leadership
​In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are varied and depend on the structure of the industry. They may include the pursuit of economies of scale, proprietary technology, preferential access to raw materials and other factors.

A low cost producer must find and exploit all sources of cost advantage. If a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it can command prices at or near the industry average.

ii. Differentiation
In a differentiation strategy, a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price.

iii. Focus
The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The focuser selects a customer segment or a group of customer segments in the industry and tailors its strategy to serving them to the exclusion of others.
The focus strategy has two variants.
a.  In Cost Focus, a firm seeks a cost advantage in its target segment,
while 
b. In Differentiation Focus, a firm seeks differentiation in its target segment.

Both variants of the focus strategy rest on differences between a focuser's target segment and other segments in the industry. The target segments must either have buyers with unusual needs or else the production and delivery system that best serves the target segment must differ from that of other industry segments.

Cost focus exploits differences in cost behaviour in some segments, while differentiation focus exploits the special needs of buyers in certain segments.

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Source of the image: https://www.consuunt.com/porters-generic-strategies/
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Your company's strategic approach will help you understand what business problem to use AI for to make a bigger impact through your business.

4. AI feeds on data. If you are not collecting vast amount of data in a structured way, then learning about AI will not contribute to your business. This means putting in Process Excellence is a key input to AI implementation. 

In our RYD Business Excellence journey, make your organization AI-intelligent when your business is on Mountain 3 (Mountain of Growth) to finally implement AI in Mountain 4 (Mountain of Scale) to scale your business with ease, grace and velocity.

5. What becomes amply clear is that running businesses with a 'jugaad' attitude is no longer a viable way forward. It is important to become a business scientist to learn the art, science and math of building a great business; and implement that with the meticulousness of a scientist. As we do that, we will learn AI along the way to make a massive difference in the world living our purpose through our business.

AI has further validated that our best friend on our good to great journey is Joy of Learning.

Keep learning, implementing and contributing to joyously lead yourself and your business from good to great, realize your dreams and have it all with ease and grace; while having lots of fun and adventure along the way 💜

Loving you,
j.