How machine intelligence changes the rules of business


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Today markets are being reshaped by a new kind of firm—one in which artificial intelligence runs the show. This cohort includes giants like Google, Facebook, and Alibaba, and growing businesses such as Wayfair and Ocado. Every time we use their services, the same thing happens: Rather than relying on processes run by employees, the value we get is delivered by algorithms.

Software is at the core of the enterprise, and humans are moved off to the side. This model frees firms from traditional operating constraints and enables them to compete in unprecedented ways.

Ant Financial Use Ai

In 2019, just five years after the Ant Financial Services Group was launched, the number of consumers using its services passed the one billion mark. Spun out of Alibaba, Ant Financial uses artificial intelligence and data from Alipay—its core mobile-payments platform—to run an extraordinary variety of businesses, including consumer lending, money market funds, wealth management, health insurance, credit-rating services, and even an online game that encourages people to reduce their carbon footprint.

The company serves more than 10 times as many customers as the largest U.S. banks—with less than one-tenth the number of employees. At its last round of funding, in 2018, it had a valuation of $150 billion—almost half that of JPMorgan Chase, the world’s most valuable financial-services company.

Unlike traditional banks, investment institutions, and insurance companies, Ant Financial is built on a digital core. There are no workers in its “critical path” of operating activities. AI runs the show. 

The age of AI is being ushered in by the emergence of this new kind of firm. Ant Financial’s cohort includes giants like Google, Facebook, Alibaba, and Tencent, and many smaller, rapidly growing firms, from Zebra Medical Vision and Wayfair to Indigo Ag and Ocado.

Microsoft’s CEO, Satya Nadella, refers to AI as the new “runtime” of the firm.

The changes extend well beyond born-digital firms, as more-traditional organizations, confronted by new rivals, move toward AI-based models too. Walmart, Fidelity, Honeywell, and Comcast are now tapping extensively into data, algorithms, and digital networks to compete convincingly in this new era.

The AI Factory

At the core of the new firm is a decision factory—what we call the “AI factory.” Its software runs the millions of daily ad auctions at Google and Baidu. Its algorithms decide which cars offer rides on Didi, Grab, Lyft, and Uber. It sets the prices of headphones and polo shirts on Amazon and runs the robots that clean floors in some Walmart locations. It enables customer service bots at Fidelity and interprets X-rays at Zebra Medical.

In each case the AI factory treats decision-making as a science. Analytics systematically convert internal and external data into predictions, insights, and choices, which in turn guide and automate operational workflows.

In some cases it might manage information businesses (such as Google and Facebook). In other cases it will guide how the company builds, delivers, or operates actual physical products (like Amazon’s warehouse robots or Waymo, Google’s self-driving car service). 

Collisions between AI-driven and traditional firms are happening across industries: software, financial services, retail, telecommunications, media, health care, automobiles, and even agribusiness. It’s hard to think of a business that isn’t facing the pressing need to digitize its operating model and respond to the new threats.

  • In fact, in a recent study we looked at more than 350 traditional enterprises in both service and manufacturing sectors and found that the majority had started building a greater focus on data and analytics into their organizations. 
  • At Microsoft, Nadella is betting the company’s future on a wholesale transformation of its operating model.
  • Amazon, Walmart is rebuilding its operating model around AI and replacing traditional siloed enterprise software systems with an integrated, cloud-based architecture.
  • Walmart to use its unique data assets in a variety of powerful new applications and automate or enhance a growing number of operating tasks with AI and analytics.
  • Google, Facebook, Tencent, and Alibaba, which have become powerful “hub” firms by accumulating data through their many network connections and building the algorithms necessary to heighten competitive advantages across disparate industries.
  • When Uber looked for a new CEO, the board hired someone who had previously run a digital firm—Expedia—not a limousine services company.

Digital scale, scope, and learning create a slew of new challenges—not just privacy and cybersecurity problems, but social turbulence resulting from market concentration, dislocations, and increased inequality. 

Navigating these opportunities and threats will be a real test of leadership for both businesses and public institutions.

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