The Use of Artificial Intelligence to Improve Strategic Management Practices in Organizations

Artificial Intelligence (AI) has caused significant disruptions across various sectors and is equally poised to cause significant disruptions in the area of strategic management. AI’s digital transformation is mainly data-driven and can help drive optimization in organizations. Specifically, AI utilization in different areas of business management presents enormous opportunities. However, AI has also generally been said to pose significant challenges in its implementation, at least in these early stages of adaptation. This necessitates the need to examine the potential impact of AI utilization in the strategic management of organizations to establish whether the technology will help enhance strategic management practices, thereby optimizing the productivity and performance of organizations. As a result, this essay explores the impact of using AI as a tool for improving strategic management practices in organizations by delving into the support the technology can provide for strategic decision-making processes.

The Concept of Strategic Management

For organizations to achieve their goals and objectives, they have to develop appropriate strategies and implement them. This process is commonly known as strategic management (Miller). Strategic management is often associated with those in the organization’s management team tasked with making decisions that will ensure the realization of the organization’s objectives and goals. This is because it entails making informed decisions through methods such as data analysis and environmental assessment, a role that is often reserved for management teams. As business operations become more complex and uncertain in a technologically advanced world, there is a need for enhanced strategic management practices. Specifically, strategic decision-making requires a certain level of managerial cognition that may be difficult to come by in an increasingly complex and uncertain environment (Keding 105). The quantity of data strategic decision-makers are expected to analyze in the current environment is huge, yet they have cognitive limitations. However, technological advancements have also brought about opportunities that businesses can leverage to improve the aim of strategic management practices in organizations. A more effective knowledge source, such as AI, can help deal with the complexities of decision-making in the current era of digital transformation.

Understanding Artificial Intelligence

AI is a term generally used to refer to computer technology that seeks to simulate human intelligence using machines. Some of the forms of human intelligence that AI seeks to simulate include decision-making, perception, reason, and problem-solving (Keding 92). AI models’ ability to simulate human intelligence can help address some of the cognitive limitations that strategic decision-makers may have. Simulated human intelligence enables AI to interpret data, learn from the data, and use the lessons to accomplish tasks using three critical aspects of AI: analytics, predictive AI, and Machine Learning (Keding 92). The significance of these aspects of AI is in the ability of AI models to be trained in a way that they are able to solve certain problems that require human intelligence, including business problems. Notably, the algorithms used in AI models give this technology the ability to self-learn through the concept of machine learning. The incorporation of machine learning in AI models can be said to be a key ingredient of the enhanced capability of AI as a technology. Thus, machine learning as a key aspect of AI is what makes AI more effective in performing certain tasks that require human intelligence while addressing modern challenges such as data overload.

The Impact AI Can Have on Strategic Management

Based on the various capabilities of AI highlighted above, it is evident that AI can play a critical role in strategic management. AI models can provide a superior knowledge source in strategic decision-making due to features such as algorithms (Keding 92). Algorithms are better at decision-making in several circumstances due to the ability to connect different problem variables through the analysis of big data. Big data is a source of enormous knowledge that can enhance the quality of decisions made if tapped. While humans’ cognitive limitations make it challenging to tap the full potential of big data as a knowledge source, the features of AI make it a formidable tool. AI is not only able to analyze big data but is also able to learn from it.

Due to its features, AI can be a critical tool in numerous segments of strategic management, such as market analysis. For example, AI can be used to analyze data on customer behavior and establish trends and patterns that are useful in enhancing an organization’s marketing strategies (Jobanputra et al.). Since the process of identifying such trends and patterns is predicated on the real-time analysis of big data, the speed and efficiency of the decision-making process, as a crucial component of strategic management, is likely to improve. Also, due to the volume of data relied upon, the business is likely to make an informed and accurate decision due to its ability to easily identify information from big data that can easily be overlooked when using the conventional means of strategic management. The ultimate outcome of using AI in strategic decision-making processes is the overall improvement of strategic management practices in an organization.

Limitations of AI

Notwithstanding the potential benefits of the use of AI in strategic management, AI technology is run on the basis of inputs and outputs, making it a purely data-driven system. As a pure data system, AI may overlook important parameters in decision-making, such as ethics and values. Although the rationality of AI simulates that of humans, it is purely data-driven and may not always make the right decisions in every context (Keding 92). The accuracy and reliability of the data used by businesses in training an AI model matter. These shortcomings do not mean that AI cannot be used as a tool that augments the role played by strategic decision-makers as opposed to being used as a replacement.

The primary role that AI can play in strategic management is to augment the role played by strategic decision-makers with a view to improving the quality of decision-making in an organization. Due to AI’s capability to overcome some of the limitations associated with the cognitive capacity of strategic managers in an increasingly complex and uncertain environment, organizations can leverage technology to enhance the performance of their managers. For instance, AI can be used to point decision-makers to the most relevant data through algorithmic decision-making. However, there are still concerns about the effectiveness of algorithmic decision-making in certain contexts, such as in situations where the expected strategic decisions are uncertain and novel (Keding 92). This concern overlooks the fact that AI can self-learn using existing data. The capabilities of AI, as well as its limitations, justify its use as an augmentative technology and not a replacement when it comes to strategic decision-making.

Ethical and Legal Challenges of AI Use

AI adoption raises some ethical issues that cannot be ignored. First, there is a real fear that AI can perpetuate bias. Bias can be actuated through manipulation or discriminatory data on which the AI model has been trained (Zuiderveen 1972). When an AI model is trained using biased data, the likely result is that it will be equally biased. Some of the common incidences of bias that have been associated with AI relate to reports of discrimination based on systemic discriminatory characteristics such as race. When the data that an AI model is relying on is labeled and defined in such a manner as to perpetuate discrimination, one should not expect a just result. The expected biased result remains true even in circumstances where the sample data used to train the AI model is biased. Thus, the wrongful use of AI can have far-reaching consequences. 

Privacy is another issue that organizations interested in AI have to grapple with. The use of AI has presented an unprecedented challenge in terms of securing individuals' data. The possible scenarios of privacy breaches in AI are multifaceted since breaches can occur at any stage of the AI process. For instance, privacy violations can occur during the input and output of data (Liu et al. 5). The large-scale collection and analysis of data is in itself a threat, especially for shared AI models that are widely used. Additionally, AI is a more advanced technology that can be easily used to extract personal information from those who interact with the technology without their knowledge or consent. Accordingly, organizations have an ethical responsibility in their use of AI that they should not abdicate.

In summary, the benefits that organizations can derive from the use of AI in making strategic decisions are numerous. Generally, AI has the potential to improve strategic management practices in organizations by enhancing the speed, efficiency, and accuracy with which strategic decisions are made. While AI as a technology is not devoid of certain limitations, most of the limitations can be addressed. In any case, organizations can opt for the use of AI to augment the role played by management teams in strategic management teams as opposed to using AI as a replacement. Nonetheless, the advent of AI has also brought about ethical and legal concerns that organizations must address by ensuring their use of AI is ethical and legal.