Small tweaks, big difference: staying ahead in the age of AI 

I recently found myself crawling through central London in my car, unable to pass the myriad of cyclists making their way frenetically around the capital. While it’s a price worth paying, especially for the green agenda, I reflected on when and how such regression in motoring travel times came about.

The when is 2010 and the how links directly to a man called Dave Brailsford. When Brailsford took over British Cycling, and its distinctly unimpressive past record, he brought with him a mindset shaped by the aggregation of marginal gains; a philosophy that encourages focus on any-and-all aspects of the mission, that could deliver improvement however small. Brailsford reasoned that marginal gains could be made in seemingly unrelated aspects of the sport, from leg warmers to assist muscle readiness between events to specially designed pillows to improve the cyclists’ sleep. His record speaks for itself, with a haul of gold medals at the 2012 London Olympics and a first ever Tour de France title the same year by Sir Bradley Wiggins.

Silly rules and petty irritations

Away from searching for that elusive one percent of marginal improvement in a hotly-contested sport, much lower-hanging fruit is available to companies in all sectors, if they just stopped and put themselves in the shoes of their customers. According to Reed Hastings, co-founder and former co-CEO of Netflix, in the company’s pre-streaming days - when the business model was to distribute movie DVDs by mail with the aim of disrupting the market dominant Blockbuster - they had to be both inventive and extremely user-friendly. Having paid $48 himself for the late return of the movie Apollo 13, he wanted to ensure that his customers never had a similar negative experience. There were no late penalty fees at Netflix, and an accommodating attitude towards lost DVDs. Nothing profound here, just some simple changes to remove frustrations and improve customer experience.

Hastings’ answer to Blockbuster was to introduce simplicity to the Netflix offering. He did this to disrupt. But what about using a similar method against disruption? Can the same principle be applied? Surely companies that are match fit will not only be best placed to preserve market share in the face of AI-driven competition, but also enlightened enough to make most use of it to improve their product.

So many businesses have fundamentally sound commercial concepts but manage to surround themselves with a compendium of silly rules and petty irritations which, if not detrimental to their businesses, are certainly corrosive to market share. This goes for supposedly top-flight online banking and other financial platforms to budget airlines and a host of other goods and service providers, not forgetting the headache of hiring a car with or without insurance.

Stuck in the past

Many companies progress and become quite successful (dominant market share, first mover advantage), but this does not mean they are as secure as they think or are reaching their potential. The real difficulties come when imperfect systems and processes become bedded in, and are overseen by a management team schooled in the old ways. A cosseted CEO perhaps feels protected by a historical degree of monopoly power in an established industry with high barriers to entry, but AI has the potential to go around, under or over those barriers.

Even among those taking note, it would appear some conclude that the heft and resolve, not to mention cost, required to reorientate a moving train in these circumstances is just not worth it, not when they are already in sight of their quarter-end earnings target. Things change when new and far more nimble competitors like Netflix tilt at an incumbent’s lazily-held market share. It tends to have an alerting impact. But frequently by then it’s too late. Blockbuster filed for bankruptcy in 2010.

AI: competitor or partner

In the world of most companies, for Netflix read AI. This dexterous addition to an industry can be a competitor or partner, and frequently both. It is necessary therefore for management to address the new realities in two ways: (a) position their firms to withstand AI-driven competitive forces through marginal improvements; and (b) embrace those innovations that can enhance existing systems and processes.

Smart management teams will compete on both fronts. Law firm Allen & Overy provides a good example of point (b) in action. It developed an AI-driven tool called ContractMatrix to draft common legal documents from non-disclosure agreements to mergers and acquisitions contracts. A spokesperson explained at the launch late last year that they were looking to disrupt the legal market before someone disrupts them.

The customer is always ‘king’

Before or alongside similar innovation, I would recommend CEOs first proactively look for those marginal improvements that collectively could make a difference. There is no need to pay huge consultancy fees. Simply assemble an internal team headed by a senior manager, the head of marginal improvements (HMI) reporting directly to the CEO, not notionally but with frequent access. I believe a fresh set of eyes with a relevant and impressive track record should be hired from outside.

The team should engage with the company in every way possible. Get them to collate and rate their experience from one to 10. Were they endlessly declining cookies and pressing buttons on calls that never seem to link to what customers want, or indeed pick up at all? What is the after-sale service like? You could keep going with the list, but it will be different for every business and so should be prepared and refreshed frequently under the oversight of the HMI. 

Small but eye-catching tweaks that improve the product or service and remind the customer that they are - and always will be - ‘king’ should not be underestimated. With so many enterprises unlikely to take the time, these changes alone could separate the winners from the losers as we venture forward in this new world.

‘Culture eats strategy for breakfast’

However, reality dictates that the potency of any such plan will be set, not by CEOs per se, but by corporate culture. At least, the latter will determine the mountain corporate leaders will have to climb. Although embedded culture can be the enemy of change (and an opportunity for new players to exploit), other entities are rooted in a ‘can-do’ mindset and will benefit disproportionately.

Any company simply watching and waiting in the current climate risks unseating Kodak from the top of the ‘what just happened’ hall of fame. “Culture eats strategy for breakfast”, management consultant Peter Drucker once said, an observation set to be tested like never before.