Six Hard Truths CEOs Must Face In The GenAI Era

Whether generative AI is your wildest dream or your worst nightmare depends on how your organization reacts today and prepares for tomorrow —

By Christian Bieck, IBM Institute for Business Value, et al —

Generative AI has the potential to shake up the way your business has always worked, driving unprecedented productivity and revealing new avenues for growth. But those tremors could also crack the foundation—and send everything you’ve built crashing to the floor.

The risk is real, but sticking to the status quo isn’t any safer. As generative AI throws everything into question, CEOs understand that they can’t stay the course and stay in the race. More than two-thirds say the potential productivity gains from automation are so great that they must accept significant risk to remain competitive—and 62% say they’ll take more risk than the competition to maintain their competitive edge.

In this high-stakes environment, CEOs must strike the right balance between caution and courage—while moving faster than ever before. 43% say they’ll increase the tempo of their organization’s transformational change in 2024, compared to just 19% that expect to slow down. As CEOs pick up the pace, they need to unite disparate teams to deliver growth while also managing data privacy concerns, legal liabilities, and technical complexity.

To make their wildest generative AI dreams reality, CEOs need to let go of “what has always worked” and start tackling the hard truths holding them back. For technology to transform the business, first the business must evolve.

• 59% of all CEOs surveyed—and 72% of our top-performing CEOs—agree that competitive advantage depends on who has the most advanced generative AI.
• 72% of CEOs see industry disruption as a risk rather than an opportunity.
• 62% of CEOs say they will need to rewrite their business playbook to win in the future, rather than play to existing strengths.

“If someone else destroys our old business model, we will be ruined. But if we destroy our old business model, we will survive.”
Nobuhiro Tsunoda, Chairperson, Ernst & Young Tax Co., Japan

CEOs must face six hard truths—from people challenges to operations hurdles to data and technology limitations—to outcompete in the age of generative AI.

1. Transformation: Tech short-cuts are a dead end

As the tectonic plates of enterprise IT shift, CEOs must decide where their tech is structurally sound, where they need to build scaffolding—and where they should tear it down to the foundation.

With new applications coming into view every day, CEOs have many paths to choose from—and no guarantees about which will deliver the most value. Yet, making the right technology investments is one of the key factors that set top-performing CEOs apart. 90% of these leaders say their organization’s digital infrastructure enables new investments to efficiently scale and deliver value, compared to just 71% of all CEOs.

There are many paths to success, but CEOs need to prioritize tech improvements that will support long-term business strategies. This is the work no one wants to do—but neglecting this task for exciting new use cases will constrain future growth.

2. Talent and skills: Your team isn’t as strong as you think

In a world where generative AI separates the winners from the losers, people are a CEO’s biggest technology problem. No matter how good a team is today, it isn’t good enough to compete tomorrow.

CEOs understand that their people will make all the difference. Already, half are hiring for generative AI-related roles that didn’t exist last year. Yet, most say their organizations are straining under the pressure. More than half of CEOs say they’re already struggling to fill key technology roles—and it’s unlikely this task will get easier any time soon. Overall, CEOs say 35% of their workforce will require retraining and reskilling over the next three years—up from just 6% in 2021.

3. Innovation: The customer isn’t always right

Customers don’t know what they’ll want tomorrow. It’s not that they’re indecisive—it’s that the next big thing could change everything. This may be why CEOs say product and service innovation is their top priority for the next three years—up from sixth place in 2023.

Generative AI can help companies tap into vast stores of customer data, from in-depth market research to individual device metrics, to come up with paradigm-busting product ideas. It can even validate far-out concepts against real-world business criteria, letting employees focus on the creative work required to bring the best ideas to life. With these game-changing capabilities on the table, 86% of global digital product leaders say generative AI is now a critical part of digital product design and development.

4. Ecosystem partnerships: Sentimentality is a weakness when expertise is in short supply

CEOs need to trust the partners they bring to the table—and that trust can take years to build. But valuing connections over capabilities could be kryptonite for CEOs as they jockey for a competitive edge with generative AI.

Looking to the future, CEOs know they need to be selective about which partners they prioritize. Nearly two-thirds say their organization’s strategy is to concentrate on fewer high-quality partners. This is perhaps to keep key vendors close at hand, as 60% of CEOs expect critical expertise and capabilities to be increasingly concentrated in a small cluster of organizations.

5. Decision-making: Sparring partners make the best leaders

The C-suite shouldn’t always agree. Each officer comes to the table with their own perspective and area of expertise. No individual view offers objective truth. Rather, it’s the full picture they paint together that shows CEOs which direction the organization should take.

Just as sparring strengthens fighting skills, emphatic discussion leads to better decisions, especially in times of uncertainty. But CEOs need to set clear ground rules to keep these conversations constructive. If leaders believe no holds are barred, debates can devolve into all-out brawls. These melees tend to be counter-productive, with nearly half of CEOs saying competition among their C-suite execs impedes collaboration from time to time.

6. Vision and culture: People hate progress

Generative AI promises to bring opportunities that were once pure fantasy into the realm of possibility. But moving beyond productivity gains to business model innovation will require buy-in at all levels of the organization—and many employees see generative AI as something that’s happening TO them, not a tool that works FOR them.

CEOs see the people problem this is creating. Nearly two-thirds (64%) say their organization must take advantage of technologies that are changing faster than employees can adapt—and 61% say they’re pushing their organization to adopt generative AI more quickly than some people are comfortable with.

CEOs that settle for productivity gains will miss out on the biggest part of the generative AI opportunity: top-line growth.

When you’re on a burning platform, big risks are just good business

Taking a leap of faith toward a new technology can seem like a risky move. But sometimes playing it safe is the greatest risk of all.

By embracing the unknown—and playing to their organization’s strengths—CEOs have a chance to gain an edge with generative AI. But that doesn’t mean running forward blindly. CEOs must acknowledge the assumptions that underlie each risk calculation, re-run the numbers when things change—and respond quickly when it’s time to change course.

The days of executing on a five-year strategy are over. As clouds of uncertainty limit visibility, CEOs should instead focus on building the capabilities that will be central to long-term success. If teams have the capacity to be agile and adapt, the organization can jump at new opportunities as they appear, rather than constantly playing catch-up.

Getting there requires honestly assessing their organization’s tech-readiness, market position, and skills and capabilities gaps today. By facing the hard truths holding them back, CEOs can unlock the generative AI opportunity—and succeed in a future defined by disruption and change.

About IBM

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Source: IBM

Tags: Artificial Intelligence (AI), automation, disruption, Ecosystem, IBM, Innovation, market dynamics, outlook / predictions, partnership, survey, Transformation, trends