Board Of Directors And The Digital Revolution

Directors of public companies would serve their shareholders well by leaning into change and embracing macro trends. Everyone has heard of AI and ML but the bigger opportunity is harnessing the company’s data to drive “time to insights” of decisions. One of the best investments a company can make is in the new enterprise software capabilities companies like Palantir and Datalogue have brought to market.

As a board member, you probably shouldn’t fear AI, automation or the rise of the robots. You should, however, have a healthy fear of falling behind. Falling behind by failing to see that there’s a revolution happening right now. A revolution that will be as transformative as the digitization of our businesses. If you are still catching up to digitize, you should probably learn from the scars left by being late on key trends like mobile enablement. You may want to consider how to lay the foundation for this next revolution. This next AI enabled revolution is the cognitive revolution. The cognitive revolution is about using your company’s data.

Economists define a prediction as the process of filling in missing information by taking information you have, often called data, and using it to create information you don’t have. By filling in the information that we don’t have, we can all make better, more informed decisions. Predictions are an important input to decisions. Less costly, tech enabled predictions lead to better decisions.

Prediction powered decisions are the foundation for the cognitive revolution. Decisions where predictions are the only inputs are oftentimes completely automatable while those where predictions are a major input can be augmented by better, cheaper predictions. For example, deciding whether a credit card transaction is fraudulent is almost entirely dependent on our ability to predict fraudulent transactions based on historical data. Today, most fraudulent transactions get resolved completely autonomously through predictive analytics. On the other hand, diagnosing a patient with a complex disease requires having a nuanced conversation to extract the right information which is then fed to diagnostic aid systems which rely on the data provided by a care provider to augment a diagnostic decision.

Data, computational capabilities and algorithms are the building blocks of predictions and therefore the elements of the toolkit for the cognitive revolution. Data is a by-product of digital systems which means that boards and business leaders need to catch up on digitization efforts if they are falling behind. These efforts could be prioritized according to the importance of the function to the core business.

The digital native companies have shown us that adding predictions to a properly digitized business, allows us to repurpose cognitive talents of the employees away from automatable decisions and towards higher value activities such as new product development and customer support to drive satisfaction. This can lead to completely new markets (i.e. AWS).

The opportunity of creating more data through the digitization of core functionalities can enable the company to outperform peers. The digital transformation is underway, we’ve got digital transformation officers accelerating and prioritizing efforts but what can we do about the cognitive transformation? Should we sit back and wait for those things to be completed before getting started?

Companies that forward invest in the cognitive transformation will jump ahead. An example of cognitive transformation can be seen at Charter Communications, featured in Nvidia’s AI focused conference, GTC showing how they get ahead of the curve to offer unprecedented service for their customers by leveraging predictions to understand their network operations more quickly.

The visionaries who decided to embrace the cognitive revolution now at Charter aren’t alone. We’re seeing the same thing at Airbus where Adam Bonnefield leads the charge to find ways to transform the business by leveraging low cost predictions and at Johnson and Johnson where the enterprise data grid sets the foundation for low cost, agile predictions that can be applied to develop more innovative products.

Here are a few lessons that business leaders may wish to consider to lead the cognitive revolution:

  1. Measure what matters. The right metrics matter for aligning to a goal and ensuring progression towards it. Throughout the digital transformations process metrics evolved and changed as organizations matured. The same is happening in the cognitive transformations. Some metrics to watch in top performing organizations are: time to data, time to insight and time to decision, all of which require infrastructure for automated measurement.
  2. Make people accountable for what matters. Accountability is key for hitting the goals and managing the metrics. This principle is why we’ve seen the rise of the digital transformation officer. As companies embark on their journey they may need a new, dedicated team. Consider mid-level managers who help bridge business and data and a top level executive (to whom this middle management layer reports to).
  3. A data driven culture matters. As your organization moves away from speculative and experiential decision making to data driven decisions you’ll need to drive deep cultural change. When communicating the need for change, remember to start with “why” and then communicate the benefits of becoming data driven.
  4. Data is an asset. Some companies today have entire business models centered around selling data. Though this might not be what you’re business model it’s critical that you treat data as an input to some of your critical business processes. There are early rumblings at the top of large organizations that data could in the future be on the balance sheet.

A transformation as fundamental as one that’s changing the way we make decisions as humans is nothing to take lightly. We should feel fear. The digital revolution has dislocated entire industries and eliminated jobs. The broad strokes of history may repeat themselves as we move forward with change. As we keep studying the leaders of the cognitive revolution—the undaunted— we’ll keep posting the observations we see.

Companies need to invest to maximize the data they have and harness this for insights. The “time to insight” metric is one boards should ask management to measure. It will be a key driver for competitive differentiation.

Boards that embrace innovation will help to “future proof” the companies where they serve. The biggest threat to corporations is obsolescence. The rate of change is geometric and change will be as slow as it is today!

Note: This article was written with Tim Delisle, CEO of Datalogue 

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