Digital Transformation: Strategic Planning with Generative AI
by Dr. Anton Gates
February 28, 2024
AI has been used for large-scale data analysis and research for the past decade. But now, companies have started using AI to aid in better decision-making. Generative AI is rapidly being adopted by savvy companies and leaders for strategic planning to address dynamic market conditions and create competitive advantage through continuously monitoring strategic plans. However, leaders have been reluctant to use Generative AI in strategic planning, fearing that the powerful technology might replace them. This is not true. Generative AI cannot replace the human experiences of leaders with organizational connections, experiential customer insights, and deep industry knowledge. When combining leaders' experiences with Generative AI, leaders can avoid fixation on constraints and forecast trends and performance through complex models and AI-powered predictive analytics. If company leaders do not embrace Generative AI-enabled decision-making, they risk losing ground to those who do.
Using Generative AI in Strategic Planning
Generative AI is expected to have the biggest impact on business since the emergence of the Internet. It can assist leadership teams in developing strategic planning models for conducting complex predictive analytics and generating insights that are not achievable through human analysis alone. Providing Generative AI access to robust data sources and instructing it to generate projections will produce insights in a fraction of the time needed for human analysis. Generative AI’s robust capabilities and ease of use are evident by its ability to evaluate massive amounts of data to reveal trends and patterns in historical performance and synthesize those insights into strategic planning models. For instance, a client recently instructed AI to analyze historical data to determine if consumer, political, and environmental factors influenced sales results over the prior three years. AI searched weather forecasts, social media platforms, news outlets, and other sources and identified correlations between natural gas futures, social media chatter, and supplier stock prices. Generative AI revealed a predictable pattern between the identified phenomenon and company product demand. The Generative AI report included recommendations for exploiting future marketplace anomalies. AI-enabled modeling is a highly effective and powerful asset for supporting strategic plans. However, Generative AI is not infallible. Its insights should not be applied untested. Human engagement is crucial for applying industry, customer, and competitor knowledge to generate the most impactful strategic planning decision with Generative AI. Leaders who do not adopt AI in strategic planning will jeopardize the competitiveness of their companies and fall behind in the rapid adoption of Generative AI that is expected in 2024.
AI-Enabled Strategic Planning
In an era where data is as valuable as currency, Generative AI is at the forefront of transforming decision-making in digital strategy. By leveraging the robust capabilities of Generative AI, executive leaders can navigate the complexities of today’s business environment with unprecedented precision and foresight. Generative AI’s ability to analyze vast amounts of data and identify insights is a competitive advantage that enables leaders to predict trends and develop innovative strategies. Leveraging Generative AI for strategic planning and business problem-solving is most effective if leaders are guided by a framework. A practical framework will have three critical elements: training Generative AI to find and analyze phenomena potentially connected to business outcomes, leveraging Generative AI to create compelling storylines to illustrate the correlation between phenomena and business outcomes, and leveraging Generative AI to implement and monitor strategy.
Find and Analyze Phenomena: Generative AI can help executives identify the significant variables influencing their business outcomes. To aid in creating robust algorithms and models, Generative AI can find and analyze historic competitor behaviors, political events, weather, technological advancements, social media chatter, regulation, and other factors to determine their influence on historical outcomes. Generative AI can be instructed to examine different combinations of environmental and competitive factors to produce novel scenarios that depict what may have transpired to achieve historic performance. These results will help determine which scenarios to model for strategic planning, which to ignore, and which to study further. An excellent approach to Generative AI modeling is to run three to four different scenarios with different strategic planning models simultaneously so that modeling can be flexible and speed up decision-making.
Correlating Narratives: After creating various scenarios, leaders can use AI to craft compelling and rich value statements and stories to garner buy-in from stakeholders of the strategic plan. Leaders can use Generative AI to analyze data about stakeholder groups and generate stories with compelling value propositions to address each group's probable questions, opportunities, and worries. Generative AI can then produce multiple narratives for each stakeholder group to refine the creation of narratives that resonate with stakeholders.
Crafting and Monitoring Strategy: Once marketplace phenomena have been modeled and stories and narratives supporting phenomenological occurrences have been approved, Generative AI can produce strategic plans incorporating marketplace phenomena and the supported narratives. Leaders must apply their knowledge of industries, customers, and competitors to instruct Generative AI to refine strategic plans to maximize projections for customer, employee, and stakeholder value creation.
Leaders who do not adopt and apply Generative AI for strategic planning or who do not adopt effective frameworks to leverage Generative AI for strategic planning may encounter significant challenges with remaining relevant in competitive markets that are rapidly adopting Generative AI to create competitive advantage.
The Future of Strategic Planning with AI
The foundation of strategic planning today is made up of historical data and assumptions. After cycling through lengthy approval processes, strategic assumptions, and risk assessments, projected outcomes are rarely revised, outdated, or irrelevant by mid-year. Generative AI is transforming the future of strategic planning by providing the ability to analyze data, monitor risks, and identify critical insights missed through traditional strategic planning methods. Generative AI allows real-time market and situation analysis to evaluate decisions and make recommendations based on deep data analytics. Once a decision has been made on a Generative AI-produced insight, it can be instructed to update models based on revised assumptions and changes to business strategy. Embracing and leveraging the speed and processing power of Generative AI provides the ability to model in real-time and apply the insights at a rate and efficiency unattainable through human analysis. In preparing to use Generative AI in strategic planning, leaders must identify high-quality and reliable data sources for integration. The more integrated independent data sources, the better. Generative AI generates more dynamic outputs as the number of data sources increases. Low numbers of data sources and poor-quality data increase the probability of AI hallucinating about findings in data that do not reflect reality.
The fast and broad adoption of Generative AI does not come without challenges. Data privacy and security are growing concerns. Privacy and data security will become more challenging as data sources are available for aggregation during Generative AI analytics. Diligence is required to safeguard protected data and continuously monitor and improve security protocols and systems.
Conclusion
Generative AI has become increasingly essential in strategic planning, changing how businesses create value for their customers and stakeholders. Leaders should not worry that Generative AI will take their place but rather use it to meet the diverse and changing needs of customers and stakeholders. With rich human experiences, Generative AI can be useful for forecasting trends and performance using complex models and analytics. Companies that ignore Generative AI for strategic planning may lose their edge over competitors who use it. Generative AI can help study markets, make convincing business cases, and develop effective strategy plans to achieve the best strategic results for business. Adopting Generative AI in strategic planning is vital for staying competitive and relevant in the evolving business environment.
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