(This text is a part of a series on Artificial Intelligence for Board Members and Senior Executives.)
Synthetic intelligence (AI) is a double-edged sword that presents as many dangers because it does alternatives. AI can rework enterprise, revolutionize processes, improve effectivity, and drive innovation. Organizations actively embrace AI for customer support, gross sales and advertising and marketing, predictive analytics, and extra. AI can even current new, unexpected challenges..
The potential dangers posed by AI are very actual and might disrupt operations and create chaos that’s damaging and dear. Nevertheless, the largest threat of all is the chance of disruption must you not actively have interaction AI inside your online business.
Let’s begin with a more in-depth have a look at every of those dangers.
Potential Risks from AI
New Cybersecurity Risks
AI offers hackers new subtle instruments, particularly with new open-source AI know-how. We see extra cybercriminals, particularly overseas dangerous actors, harnessing AI to generate extremely efficient phishing campaigns and cyberattacks. Since OpenAI launched ChatGPT in November 2022, there was a 1,265% increase in phishing emails.
One of many largest challenges is deepfakes. Utilizing AI, hackers can impersonate anybody, together with CEOs and decision-makers. Take the case of the Hong Kong finance employee who was tricked into paying out $25 million due to deepfakes. The employee was suspicious when he obtained an e mail, purportedly from the CFO, asking for the discharge of funds, however the clincher was when the employee joined a Zoom name that confirmed the CFO and his colleagues. The employee was the one human on the Zoom name. The others had been all an AI-generated deepfakes.
We’re coming into into an AI arms race the place we’d like AI-powered options to guard us from hackers utilizing AI. Guarantee your safety distributors are utilizing the most recent AI know-how and that your administration crew understands the potential menace posed by AI.
AI Risks to Company Fame
AI can put company reputations in danger if not correctly applied and monitored.
Take the case of Air Canada, which broken their fame because of the means they dealt with an AI-powered customer support glitch. A passenger touring to attend a household funeral didn’t ask for a bereavement fare, so after they went again to Air Canada to request a reimbursement for the low cost, the AI-powered chatbot advised the passenger, “No drawback.” There was an issue, nonetheless, since Air Canada’s insurance policies clearly state {that a} low cost should be requested earlier than journey. Air Canada selected to battle the case in courtroom, fairly than present the small low cost requested. Preventing the case in courtroom broken Air Canada’s fame.
Watch out the place and the way you deploy AI instruments and be diligent about monitoring their efficiency. Extra importantly, contemplate the influence in your fame when dealing with points associated to AI.
AI Can Current Authorized Risks
Like every know-how, AI is imperfect, and people flaws can result in authorized points.
For instance, Hey Digit, a monetary know-how firm, was supposed to avoid wasting prospects cash and assure no overdrafts. A defective AI algorithm resulted within the firm pocketing a portion of the curiosity and overdraft charges and penalties for purchasers. It additionally led to the Client Monetary Safety Bureau (CFPB) taking action against Hello Digit. Hey Digit will seemingly need to defend their AI answer in courtroom.
AI allows some unbelievable issues, however simply because AI can do it doesn’t make it authorized. For instance, Fb (now Meta) AI facial recognition know-how can establish folks in a photograph with you. What sounds utterly harmless – right here you’re in a photograph your good friend took – truly violates Illinois’ biometric privateness act. The settlement cost Facebook $650 million.
AI Can Pose Operational Risks
Automated operational processes utilizing AI require administration oversight and a consideration of human conduct as properly.
In 2021, Zillow’s stock price plummeted primarily as a result of they relied on a defective AI algorithm to foretell home costs. Zillow was buying homes primarily based on these predictions. AI is usually a highly effective device for predictive analytics, however even AI can solely make predictions primarily based on historic data. Occasions just like the COVID-19 pandemic are certain to skew predictive analytics, and did so to the detriment of Zillow.
Any operational change should additionally contemplate the human issue. Individuals should embrace new AI processes. For instance, UPS developed ORION, an AI-powered platform to route packages and vehicles. However for Orion to work, UPS needed to persuade staff to adapt how they labored to the brand new system. At first, staff didn’t like adapting. It took time to get staff to make use of the brand new AI-powered procedures. In the end, Orion decreased gasoline and upkeep prices and allows drivers to make extra deliveries. Nevertheless, ORION nearly failed as a result of staff didn’t actually need it.
Danger of Disruption
The best threat of all shouldn’t be aggressively adopting AI when your opponents are.
According to IBM, 42% of enterprise-scale organizations have deployed AI, and 40% are exploring AI adoption fashions, together with 59% which have accelerated their AI funding.
AI is already dramatically impacting gross sales and advertising and marketing, product growth, service operations, and provide chain administration. Firms that fail to leverage AI to create a aggressive benefit, threat falling behind (see “AI’s Competitive Advantage”).
AI Opportunities Present a Aggressive Benefit
To make use of AI to the perfect aggressive benefit, organizations should decide the place synthetic intelligence can yield the best returns (see “CEO’s Guide to Generative AI: Proactive Advice for 2024”).
McKinsey’s analysis reveals generative AI use circumstances normally fall into four areas: buyer relations, gross sales and advertising and marketing, software program engineering, and analysis and growth.
Listed below are a number of the most promising areas of alternative offered by AI for organizations:
- Gross sales and advertising and marketing – AI is bettering advertising and marketing and growing gross sales by enhancing buyer engagement. For instance, Capgemini makes use of an AI platform to trace purchaser intent by means of the gross sales funnel, growing the variety of certified leads 5 instances. Starbucks makes use of AI to investigate buyer knowledge to customise provides and apply dynamic pricing to extend buyer loyalty and common order worth.
- Product growth – AI is invaluable in predicting buyer needs and behaviors, making it very best for product growth. Sew Repair makes use of AI to curate personalised outfits for purchasers, analyzing preferences, trend tendencies, suggestions, and different elements to customise outfits and affect stock selections.
- Service operations – AI can facilitate customer support. For instance, Unilever’s AI system decreased customer support response time by 90%. Firms additionally use AI for predictive analytics for functions resembling scheduled upkeep. GE Aviation, for instance, had decreased unplanned downtime by 50% and saved $1 billion in upkeep prices.
- Provide chain administration – Because the UPS instance reveals, AI can optimize transport and logistics. Maersk makes use of AI for real-time cargo monitoring, making it simple to alert prospects within the occasion of delays. Delly’s Meals Service in Brazil makes use of AI for dynamic pricing optimization, growing their gross margin by 1.1% (an enormous quantity in a low-margin enterprise) by managing altering market costs.
Any group that wishes to compete in at this time’s market will undertake AI, however C-level executives should preserve their eyes open. While AI has dangers that have to be managed, AI can yield super advantages, giving any firm a aggressive benefit over bigger opponents.
Should you care about how AI determines the winners and losers in enterprise, how one can leverage AI for the good thing about your group, and how one can handle AI threat, contact me at glenngow.com. I write and discuss how senior executives, board members, and different enterprise leaders can use AI successfully. You’ll be able to learn previous articles and be notified of recent ones by clicking the “follow” button here.