Too Few Businesses Are Reaping the
Potential of AI Transformation Because They're Taking A "Hackathon"
Rather Than A CEO-Led Approach Focused on Specific Strategic Goals,
Says L.E.K. Consulting Study
BOSTON, Dec. 4, 2024
/PRNewswire/ -- The artificial intelligence revolution is here, but
many businesses are struggling to use AI in ways that lead to
performance gains, competitive advantage and new revenue
streams.
That's in part because they're not successfully navigating the
"AI Delta" – the performance gap between creating value from
successful AI adoption and value erosion from poor AI strategy or
execution.
Success requires a different kind of strategic and management
approach than earlier forms of digital transformation, according to
Your AI Transformation Needs a Different Leadership
Approach, a new report from global strategy consultancy
L.E.K. Consulting.
"Prior waves of transformation were based on technology that had
very specific benefits and very specific functions for specific
kinds of businesses," said report co-author Darren Perry, Managing Director at L.E.K.
"E-commerce is a case in point. Organizing and collecting data is
another. Those earlier waves of digital transformation – they were
technology-focused challenges."
"By contrast, AI transformation is not fundamentally about
technology. It's about automating decisions with data, which is a
different kind of challenge," Perry said.
Given the broad range of possibilities for AI and its array of
applications, it has significant implications not only for how a
company approaches strategy, but also for how it manages talent and
for the qualities and sensibilities of c-suite leadership, in
particular the CEO and CFO.
"You'd be hard pressed to find an industry, business, role in
the value chain of a company or function that won't be materially
affected by AI, which can be very enticing and interesting. But it
can be paralyzing for a business to think about what to do with it.
People are falling into the trap of 'let's run the thousand-person
hackathon to gin up ideas.' That will not get you far when it comes
to creating value," said co-author Chuck
Reynolds, Managing Director at L.E.K.
Identifying the strategic problems AI must solve at the
company
The L.E.K. study involved a survey of 150 c-suite leaders from a
range of industries. Fifty-seven percent of those whose companies
are finding early success with AI adoption said "strategic vision"
was a top factor in their readiness for AI transformation. In other
words, these companies choose one or two strategic problems they
need to solve to avoid being disrupted – customer experience
shortcomings or supply chain issues, for instance – and focus AI
efforts on those areas.
"AI transformation entails thinking about and approaching data
as a product of the organization, not a byproduct. It's not just
one team's responsibility to do that. In addition, the culture
needs to be one of disruption," said Perry.
Meaningful direction from the very top
"Since AI transformation needs to come from the connective
tissue, the lifeblood of the organization, it's the CEO who needs
to pull all the different parts together," said Reynolds.
The approach that some organizations have taken is to set an AI
policy and then encourage employees to explore and use the
technology as they see fit. This is a positive step, but it isn't
enough.
"Bottom-up strategies are too disorganized for a successful AI
transformation. A top-down strategy, with a plan and implementation
guidelines set by leadership, or a hybrid strategy, with top-down
directives and a combination of bottom-up initiatives, yields much
better outcomes. It just won't work unless leadership owns it. You
can't delegate it," said Reynolds.
At companies successfully transforming with AI, 67% have CEOs
who are highly or fully engaged in the process, according to the
L.E.K. survey. That's only true for 34% of CEOs at companies that
aren't meeting with significant success.
A new kind of company leadership for AI
transformation
Modulating company culture and getting multiple parts of the
organization collaborating on AI transformation demands a new kind
of leadership, according to the report.
"Executive teams needn't be technology experts to lead a
successful AI transformation. But they do need to know about AI and
its possibilities to understand how they can create value or
introduce risk for the business. Hence, improving AI literacy in
the C-suite – including the CEO and CFO – must be a top priority,"
said Perry. "You need a CEO who's willing to embrace AI
transformation as a strategic challenge and bring various pieces of
the organization together to solve it. It's a matter of active
leadership as much as it is a particular skillset."
A level of AI literacy must infiltrate the
organization
AI transformation requires a new talent strategy. Forty-one
percent of executives reported a mismatch between the AI talent the
organization has and the AI talent they need. Another 47% said that
while they have the right AI team, its efforts are too siloed. It
takes a different set of capabilities to think about decisions that
organizations make, understand the data and deploy AI solutions to
create value for organizations.
The breadth of AI as a discipline may be exacerbating the
situation. For instance, Generative AI or AI-based agentic
workflows requires different expertise than traditional machine
learning, making it hard to scale the overall AI capability.
About L.E.K. Consulting
We're L.E.K. Consulting, a global strategy consultancy working with
business leaders to seize competitive advantage and amplify growth.
Our insights are catalysts that reshape the trajectory of our
clients' businesses, uncovering opportunities and empowering them
to master their moments of truth. Since 1983, our worldwide
practice — spanning the
Americas, Asia-Pacific and Europe — has guided
leaders across all industries, from global corporations to emerging
entrepreneurial businesses and private equity investors. Looking
for more? Visit www.lek.com.
Media contact
LEKConsulting@allisonworldwide.com
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SOURCE L.E.K. Consulting