Digital Managers

November 11, 2017

 Photo Source: Wikimedia Commons

 

         In corporations and small businesses across America and the world, senior management has mostly believed that their positions as leaders in their organizations occupy a special class of employment that is protected against the application of artificial intelligence (AI).  The senior manager’s role with its need for emotional as well as intellectual skills appeared until recently to remain safe from automation by AI and robotics. However, research shows that corporate and small business management will find that their jobs as managers will change significantly as new tools powered by artificial intelligence work their way into offices and yes, even the C-suites.  How can management delegate work to AI where it makes sense, and what will management need to know to succeed with new AI tools and robotics?  Bernd Schmitt of Columbia University noted, “As creative AI systems become more active, robots will make suggestions on how to do work, where to look for answers, how to make decisions, and how to organize and to lead.”   In many respects, AI and robotics will naturally displace humans from certain types of activities where decision making is based on analytical data. Machines have the advantage of much faster analysis of data than an individual.  In “What to Expect From Artificial Intelligence,” management experts envision a shifting role in management from making predictions to applying judgement. (MIT Sloan Management Review,)  As artificial intelligence improves in making predictions and as it also becomes more widespread and inexpensive, more prediction roles will be delegated to computers.  People perform predictions all day long, from estimating how long it will take to drive to a business meeting and which candidate will be best for the job, to how best to allocate profits back into the business.  In certain circumstances, some predictions can be handled by a computer.  For example, one of the cornerstones of the banking system is the decision to offer credit or a loan.  Embedded in that decision is the prediction of whether the applicant will at some point in the future pay back that loan.  Artificial intelligence, using a wide variety of information, offers strong predictive capabilities in this area. (American Journal of Economics and Business Administration) However, predictions alone are not the same as decisions, and judgement is necessary to make the right choice. “Judgement is the ability to make considered decisions—to understand the impact different actions will have on outcomes.” (What to Expect From Artificial Intelligence, MIT Sloan) The loan officer’s judgement will look at more than the predictions but as the whole person and consider the value of accepting the risk of the loan. The challenge of the future will be developing people with good sound judgement to best apply the new predictive capabilities of artificial intelligence.

 

     Interestingly, decision making will in some cases be delegated to machines that can function faster and with less biases than human managers to achieve greater efficiency and competitiveness. In an article in the Harvard Business Review titled “4 Models for Using AI to Make Decisions” by Michael Schrage, the author suggests that machines will find a home soon in the executive suite of the companies that want to compete successfully in a more data driven market place.  He notes, interestingly, that “Executives who wouldn’t hesitate to automate a factory now flinch at the prospect of deep-learning algorithms dictating their sales strategies and capex (author note: capex = capital expenditure). The implications of success scare them more than the risk of failure.”  It may be the case that machines will have access to more data than the CEO and make better decisions about capital expenditures than the boss.  But does this mean that machines will be replacing the leadership?  Probably not, but leadership will require different types of individuals that are capable of working with machines and better applying judgement to the results.

 

      Artificial intelligence is entering management circles in ways that will change how management works.  In some respect automation will relieve management from making certain predictions and analysis that computers will handle more easily.  However, the human capacity for judgment and view of the big picture will be more valued and necessary than ever.  Smart managers will look carefully at applying artificial intelligence where it provides a competitive edge for the company.  Moreover, the great managers will  encourage the development of human un-automatable human capabilities in judgement not only in the executive level but throughout the entire organization.

 

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