Strategic Management 4.0 and Balanced Scored Card 4.0. (2024)

Strategic management of companies and organizations has to change in the human-ai age because of the rapid advances in generative AI technologies that can create new value and opportunities for businesses. Generative AI refers to the ability of machines to generate novel and useful outputs such as text, images, music, code, etc. based on human inputs, data, or rules. Generative AI can help companies innovate faster, improve customer experience, optimize operations, and enhance decision making.

One of the key challenges for strategic management in the human-ai age is to define the ontology for each company, which is the set of concepts and relationships that represent the core variables of the business. #Ontology is important because it helps to structure and organize the data and knowledge that generative AI can use to create outputs that are relevant and aligned with the company's goals and values. Ontology also helps to ensure that generative AI is ethical and responsible, by defining the boundaries and criteria for what is acceptable and desirable.

To thrive in this new era, companies need to transform themselves by adopting a strategic and holistic approach that considers the following points:

• Start with your #vision and #mission: Your vision and mission statements define your purpose, direction, and values as an organization. They also communicate your value proposition to your customers and stakeholders. You need to align your vision and mission with the ontology you have defined for your company, and use them as a guide for your strategic planning process. This is also how you start with your own why: how you create value for your customers and the specific ways in which AI can help you create new value or enhance existing services. For example, Spotify has defined its vision as "to unlock the potential of human creativity—by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by it." It has used its ontology of music streaming to create a strategy that leverages generative AI to provide personalized recommendations, playlists, podcasts, and radio stations.

• Use the Balanced Scorecard framework: The Balanced Scorecard is a tool that helps you translate your vision and strategy into measurable objectives and actions across four perspectives: financial, customer, internal process, and learning and growth. You need to identify the key performance indicators (KPIs) for each perspective that reflect your desired outcomes and align with your ontology. You also need to define the targets, initiatives, and resources for each KPI that will help you achieve them. This is also how you combine your internal capabilities with external opportunities: you leverage your strengths and use AI to gain further advantage by capitalizing on them. Likewise, you use AI to identify your weaknesses and help minimize them so that external threats may become opportunities or at least are no longer threats.You also collaborate with other stakeholders in your ecosystem, such as customers, suppliers, regulators, and competitors, to create synergies and co-create solutions. For example, Airbnb has used the Balanced Scorecard framework to create a strategy that focuses on four perspectives: revenue growth, guest satisfaction, host quality, and employee engagement. It has used generative AI to create outputs that support these perspectives, such as dynamic pricing, instant booking, smart home devices, and talent development. It has also partnered with other companies such as Expedia, Booking.com, and Tripadvisor to offer more choices and convenience to its customers.

• Create a market need rather than meet it: Many companies in the Internet age failed because they did not truly reinvent themselves through the Internet. Rather, they continued to offer the same solutions they offered just via the Internet. On the other hand, others like Facebook Gaming , Google , Amazon ,and Netflix found a way to create truly unique value by conceptualizing entirely new products and services such as social media , search engines ,and streaming videos. These would not exist without the ability to create "new products" which the customer did not know he wants because they did not exist. You need to adopt a similar mindset and use AI to innovate and disrupt your industry by creating new market needs and fulfilling them. This is also how you use the learning and growth perspective of the Balanced Scorecard: you invest in developing new skills, capabilities, and technologies that enable you to create new value propositions and business models. For example, Alibaba has created a market need for e-commerce in China by using AI to provide personalized recommendations, dynamic pricing, and intelligent logistics. It has also expanded into new domains such as cloud computing, fintech, and entertainment by using AI to offer new services such as facial recognition, online lending, and content creation. It has also invested in developing its own AI platform, Alibaba Cloud, and its own AI research institute, DAMO Academy.

• Use the #dmaic framework: DMAIC is an approach of process optimization which identifies how a process can be optimized. It stands for Define, Measure, Analyze, Improve, and Control. This framework of keeping processes under statistical control goes very well with AI as it shows that each process can be satisfactory or not based on its purpose as well as when a process is out of control - not delivering what it should. In the same way, AI is a form of machine learning that can automate this thinking, so an organization must know enough about statistics to understand how and why these automatic evaluations suggest process optimizations and how they came to these conclusions. This is also how you use the internal process perspective of the Balanced Scorecard: you improve your efficiency, quality, and reliability by using AI to optimize your core processes and activities. For example, Unilever has applied DMAIC to optimize its supply chain by using AI to forecast demand, plan production, manage inventory, and reduce waste. It has also used AI to monitor its processes in real time and detect anomalies that could affect quality or efficiency.

• Have #agility to adapt and apply findings: Knowledge without action is not wisdom. You need to be able to translate your insights from AI into concrete actions that improve your performance and customer satisfaction. You also need to be able to learn from your failures and successes, and continuously improve your processes and products based on feedback and data. You also need to foster a culture of experimentation and learning that encourages innovation and risk-taking. This is also how you use the financial and customer perspectives of the Balanced Scorecard: you measure your results and impact by using AI to track your revenue, profitability, market share, customer loyalty, satisfaction, and retention. You also use AI to generate insights and recommendations that can help you improve your financial performance or customer experience or adjust your strategy if needed. You also communicate your progress and results to your stakeholders using clear and compelling reports and dashboards. For example, Netflix has used AI to generate insights from its massive data on user behavior, preferences, and ratings. It has used these insights to improve its content recommendation, personalization, and production. It has also been agile in applying these findings to create new features, formats, and genres that cater to different segments and markets. It has also fostered a culture of experimentation and learning that allows it to test new ideas, measure their impact, and scale them up or down accordingly. It has also used AI to create reports and dashboards that showcase its performance and impact.

By following these points, you can transform your company for the human-ai age and achieve sustainable growth and competitive advantage (at least for now).