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Strategy & Artificial Intelligence

Strategy & Artificial Intelligence

Artificial Intelligence (AI) is becoming a transformative force in business strategy, influencing domains from resource allocation to competitive dynamics. As AI systems get better at making predictions, they essentially convert uncertainty into risk, which can be measured and managed. This shifts the focus of strategy from prediction-oriented to choice-oriented, where the key question is which set of actions will yield the most value. Traditional strategy formulation focuses on predicting the future and positioning the firm accordingly. However, advancements in AI have changed the way predictions are made, shifting the responsibility of prediction from strategists to machines. As a result, strategists should now concentrate on making better choices given AI's predictive output. To leverage AI effectively in strategy, strategists must have a good understanding of what AI can and cannot do. They should also realize that AI doesn't diminish the role of strategy; it amplifies it by providing more precise predictions and freeing strategists to focus on value creation through choices. Moreover, strategists should focus on areas where AI is less likely to render human judgment obsolete, such as understanding customer needs, formulating a compelling value proposition, or innovating new business models. The article concludes that AI's role in strategy is not to make strategists obsolete, but to enhance their decision-making capabilities. By doing so, AI enables strategists to create a more valuable future for their organizations. It’s not the predictions that will provide competitive advantage, but the strategic choices that businesses make based on those predictions.

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