The “Doorman”? More about them later . . .
I was spurred into action this morning by a discussion “The CEO’s Fear of Missing Out (FOMO) on AI” started by Pedro Berrocoso.
It is not just CEOs!
The cost of operating the finance functions rose 7.5% year-over-year in 2023 according to The Hackett Group.
In challenging economic times that is not good news.
Better news is that the top performing quartile were able to trim finance function budgets by 1.3% in the same period.
Digitization, staffing cuts and eliminating the need for manual intervention are credited for the achievement of this top 25%.
Getting rid of unnecessary “stuff” is a major contributor to productivity, and doesn’t require capital investment.
I am constantly reminded of the thought provoking observation I heard from an executive at Walmart (apologies if I have mis-attributed), “Elimination is the best form of Automation”.
Everyone is predicting that AI will dramatically accelerate the automation trend and magnify the benefits.
The “white heat” of the AI revolution is something to behold. Granted: AI, and Machine Learning specifically, is nothing new. But the excitement and popular appeal of Large Language Models, LLMs, such as ChatGPT, Bard et al (and, maybe more importantly, Small Language Models – but that’s another story!) is incredible.
Companies big and small are racing to incorporate AI into their products, afraid of being left behind. It’s a gold rush and an arms race all in one.
On Generative AI (GAI) and LLMs, SLMs et al, Alex Singla, Global leader of QuantumBlack, AI at McKinsey, reminds us that “for most Generative AI insights, a human must interpret them to have impact”.
“The notion of a human in the loop is critical.”
My good friend and co-founder, Tom Gruber, gave an excellent TED Talk on this idea of “Humanistic AI” which you can see here . . .
Which brings me to this discussion on “the human and the machine”.
Rory Sutherland, long time WPP executive, Vice Chairman at Ogilvy UK and author of “Alchemy: The Surprising Power Of Ideas That Don’t Make Sense”, wrote a brief, but fascinating, piece called “The Doorman Fallacy”.
“The Doorman Fallacy is what happens when your strategy becomes synonymous with cost-saving and efficiency; first you define a hotel doorman’s role as ‘opening the door’, then you replace his role with an automatic door-opening mechanism.”
“The problem arises because opening the door is only the notional role of a doorman; his other, less definable sources of value lie in a multiplicity of other functions, in addition to door-opening: taxi-hailing, security, vagrant discouragement, customer recognition, as well as in signalling the status of the hotel. The doorman may actually increase what you can charge for a night’s stay in your hotel.”
So, when it comes to digitization and AI, we should think very carefully about the customer outcomes and experience we are aiming for.
If we miss that point, we waste time and money and lose the race.
We need to invest as much time in working out what delivers the maximum customer value as we do on the promise of AI.
If we get both right, we will be in great shape . . .