How AI Is Changing Strategy: Rethinking What Your Business Is Designed to Do

Adi Ignatius (0:02)

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Alison Beard (0:47)

I'm Alison Beard.

Adi Ignatius (0:48)

And I'm Adi Ignatius. This is the HBR IdeaCast.

Alison Beard (0:58)

Adi, for the last few weeks, we've been exploring the ways that AI is changing leadership and organizations today. We've looked at talent, communication, innovation, and now we're going to put it all together and look big picture at strategy.

Adi Ignatius (1:11)

Yeah. So there are a couple big questions on my mind. First, if every company can access these amazing AI tools to generate ideas, analyze information, write software, to carry out complex tasks, what does competitive advantage even look like? And second, how should companies start redesigning their organizations, their workflows to take advantage of what AI and what humans could do?

Alison Beard (1:35)

And how do you do that every day when the technology is so unpredictable yet getting more powerful? So those are just a few of the questions that I put to our guest today, Ethan Mollick. He is an AI expert, an associate professor at Wharton, and author of the forthcoming book, Co-Existence, The Next Phase of AI. He has lots of thoughts about what strategy looks like in the AI era, how companies should be using it to rethink their business and organizational structure, and what human capabilities become even more important as these new tools improve. Here's our conversation.

You've been closely tracking advances in AI and constantly experimenting with all the new tools. What is different today than even a few months ago in terms of how new developments should guide the way that leaders are thinking about strategy in particular?

Ethan Mollick (2:28)

One is the exponential curve continues. AI just keeps getting better. There isn't really a sign of that stopping right now. The second is that agents are real, which are AI tools can go off and do work on their own autonomously and do real process work, real important things, and that has become a viable approach to work.

Alison Beard (2:45)

Yeah, it seems like a lot of companies right now are thinking of AI as really a productivity exercise. You know, you're automating tasks, you're saving time, you're reducing costs.

How does, you know, a genuinely strategic AI transformation strategy differ from that? What do you think companies should be doing now?

Ethan Mollick (3:07)

I think it's actually pretty hard to do a few things. One is viewing this purely as a productivity tool gets you in trouble in a lot of different ways. People are getting ROI from AI, right? Predictability gains are real. The problem is, is that those productivity gains get eaten up by the organization, which is if you don't change a part of the process, AI is mostly a single player entity and you end up with more of everything. So if you don't change your KPIs, people can produce more PowerPoint, they produce more code. That's not actually what you want. So leadership needs to decide what this thing is. And the second is AI is getting very capable. And I worry that if our default is automation, we end up in a situation where we just keep handing tasks to AI and don't think hard enough about where humans fall into this process. And that leads to a lot of danger as well.

Alison Beard (3:46)

Is your argument that leaders need to move from asking sort of where can we use AI in this existing business alongside humans to a question that's more like, you know, how does AI change our business going forward?

Ethan Mollick (4:03)

At this point, we have ample evidence that AI can regularly do the kind of work that would take a human to 18 weeks in a reasonable amount of time, reasonable amount of money with high success rates.

That implies a lot of different things. It implies that what your organization does has to change. How you think about the boundaries between jobs is changing. I talk to C-level leaders all the time, and one of the first effects they see of AI, and we saw this also in our research, is that jobs start to blur. Coders do design work, designers do coding, product managers do everything. How do you start thinking about what the boundaries of your organization are? What's the product you're trying to produce? Is it an interim product of a PowerPoint? What was the point of the PowerPoint in the first place? You start to run into really fundamental questions about what the goal of the organization is, how you accomplish that, what are your values for getting there, and they're urgent. This isn't sort of theoretical, let's sit down in an academic way. It is your organization already changing from the inside. What do you do about that?