3 Ways To Use AI For Strategic Decision Making

Leadership discussions on AI often center on defining an AI strategy, much like formulating plans for marketing or operations. Yet, a more profound and potentially impactful prospect is emerging: embedding AI at the heart of strategic decision-making.

Can AI replace the intricate and inherently human skill of strategy development?

The Limitations Of AI For Strategic Decision Making

In an internal interview, Yuval Atsmon, a senior partner at McKinsey, outlines six phases of AI integration in strategic decision-making:

1. Descriptive analytics — leveraging dashboards to grasp performance metrics.
2. Diagnostic intelligence — analyzing past data to understand performance drivers.
3. Predictive intelligence — using market signals and historical data to forecast future scenarios.

Atsmon notes that these initial three stages are already widely adopted. However, he believes the next three phases are on the distant horizon:

1. AI providing strategic advice.
2. AI being granted a degree of decision-making authority.
3. AI making fully autonomous decisions without human intervention.

Therefore, although AI can contribute to strategic decision-making, it cannot independently formulate strategy. Crafting strategy requires a blend of analytical and creative thinking — capabilities that, at present, remain distinctly human.

Nevertheless, AI can play a supportive role in strategic decision-making through several avenues, including:

1. Better Debates

In a conversation with Rob Bier, author of “Smooth Scaling: 20 Rituals to Build a Friction-Free Organisation”, we explored how the rise of technology has transformed three key aspects of strategic decision-making:

1. Access to data is fundamental for sound strategic decisions. Advances in the internet, cloud computing, and related technologies have addressed this need.
2. The next step is data analysis. The proliferation of MBA graduates and individuals with similar analytical training over the past two decades has widely distributed the necessary analytical acumen across industries and organizations.
3. Yet, there’s a persisting challenge — the caliber of discussions within executive boards and throughout organizations.

Bier points out “that debates in the boardroom mirror the dynamics of any organizational discussion, plagued by issues such as; bullying, passive-aggressive behavior, political manoeuvring, miscommunication and a lack of genuine dialogue, leading to sub-optimal strategic decisions. While AI can enhance our data handling and analytical capabilities by identifying patterns, correlations, anomalies and trends — these are relatively minor enhancements to help humans. Imagine, however, if AI could facilitate more effective and meaningful debates and discussions.”

In addition to the dysfunctions Bier identifies, there’s a critical need to remove ego, circumvent the echo chamber effect — where participants merely reaffirm each other’s viewpoints, and to empower those with less authority to speak truth to those more powerful than themselves.

Ray Dalio, the founder of Bridgewater Associates, implemented radical transparency to address these challenges, a move recently criticised for allegedly fostering a culture of intimidation and fear. Is there another way forward?

Bier observes that we’re already comfortable with AI note-taking tools in our online meetings, despite privacy concessions. He suggests, “Soon, AI coaches might join our meetings, offering advice to encourage quieter members to contribute, to enhance empathy, or to highlight key points missed from a presentation. These AI tools are on the cusp of providing insightful feedback on our dialogues.”

Receiving critique during a meeting from a peer can be challenging; it’s tough to be told to ‘read the room’ amid a tense debate. Will feedback from a machine be likely to be met with antagonism? This depends on the users’ previous experience and confidence in LLMs such as ChatGPT, as well as the user’s own confidence. However, as AI usage proliferates, it is likely that we will become more willing to accept an AI opinion.

Moreover, Bier highlights that AI can serve as an impartial voice in discussions, akin to the court jester in Shakespeare’s King Lear, unafraid to challenge the status quo. For instance, AI could highlight unrealistic projections in real-time, prompting deeper scrutiny and debate.

Bier anticipates that by 2025, AI tools will be standard in offering coaching, posing questions, and provoking thought on strategic matters.

2) Democratising Strategic Decision Making

Christian Stadler, a professor at Warwick Business School and author of “Open Strategy,” illuminates a novel application of AI in strategic decision-making, emphasizing its potential to scrutinize and validate strategies with a broad internal audience. Echoing its utility in steering boardroom discussions, AI can prove invaluable in orchestrating debates among larger groups. Stadler illustrates this with a scenario where a CEO seeks to understand a 10% revenue dip, using AI to gather insights from 2,000 employees. This process evolves with a subsequent round, introducing contrasting perspectives for further debate, culminating in AI consolidating these insights to inform the executive team’s strategic decisions.

3) Ideation

Both Bier and Stadler highlighted the potential of generative AI as a tool for creating strategic ideas. Yet, to fully harness its benefits, strategic decision-makers must become familiar with prompt engineering by crafting specific instructions or queries to optimize AI ideas.

Ultimately, AI can augment human decision-making but falls short in mastering the comprehensive skill set required for strategic planning. The concept of AI CEOs remains a distant prospect, given that the intricacies of strategic choices demand the sophistication of Artificial General Intelligence. Therefore, humans find themselves with a window of opportunity to use judgement and wisdom when assessing various options. They can harness empathy to connect with the appropriate stakeholders, and apply their practical skills to effectively utilize the tools at their disposal, thereby enhancing the strategic decision-making process.