CTAI Knowledge Base

Background

We’re often asked, “What should our AI strategy look like?”.

In co-author Andrew Welch’s early-2023 essay, Strategic thinking for the Microsoft Cloud, he mused that, “I really wonder how many will miss out on the AI wave because they lack the wisdom or the willpower to make the most of it.”

Then, in June 2023, under the headline Your employer is (probably) unprepared for artificial intelligence, The Economist suggested that divergence in technology investment - and the success of that investment across firms - has resulted in a “two-tier economy” wherein “firms that embrace tech are pulling away from the competition.” The piece cited several examples:

  • A nearly 11% rise in average worker productivity in Britain’s most productive firms from 2010 to 2019, a period where the least productive firms saw no rise;

  • A tripling of productivity growth in Canada’s most productive vs. least productive firms from 2000 to 2015;

  • Tim Koller’s (McKinsey) findings that when ranking firms based on return on invested capital, “the 75th percentile had a return 20 percentage points higher than the median in 2017,” which was itself double the gap in 2000.

Discussing AI in recent years, we have often thought about the fable of the boiled frog, whereby a frog placed in boiling water jumps out, but a frog placed in warm water that is gradually heated lacks awareness of his impending demise until it is too late. Indeed, The Economist piece goes on to explain:

“Robert Gordon of Northwestern University has argued that the ‘great inventions’ of the 19th and 20th centuries had a far bigger impact on productivity than more recent ones. The problem is that as technological progress becomes more incremental, diffusion also slows, since companies have less incentive and face less competitive pressure to upgrade.”

—The Economist, 16th June 2023

It is yet unknown if artificial intelligence is more akin to the “great inventions” of the 19th and 20th centuries, or if it will ultimately represent another more incremental evolution of existing capabilities. The former - as seems more likely given the immense investments being made today - will present significant challenges to nearly every organization that, having become accustomed to incremental change, is suddenly faced with a “great inventions” caliber paradigm shift that AI seems to portend.

Or, as we continue to remind the CIOs with whom we work closely, the grace period for organizations to get their act together and position themselves for the next wave is growing much shorter, and the margin for error much narrower.