Executive Summary
CFO Leadership Breakfast on Artificial Intelligence

Odgers Berndtson, in partnership with the Rotman School of Management, co-hosted a CFO Leadership Breakfast featuring Ajay Agarwal, Professor of Entrepreneurship at the University of Toronto and author of “Power & Prediction: The Disruptive Economics of Artificial Intelligence.” Ajay led an eye-opening session on the transformative power of AI and its impact on business. Below is a summary of key takeaways from the session.

Key Takeaways

1. We are on the precipice of the greatest re-allocation of capital since the second world war. The disruptive economics of AI systems are transforming industries, emphasizing the importance of understanding the power of AI in prediction and decision-making.
2. AI is high-quality prediction, and prediction is foundational to business. There is no ‘magic’ in AI – AI is made up of computational statistics that perform prediction. The rise in AI is leading to a steep drop in the cost of prediction, and a surprising range of tasks in every business can be framed as prediction.
3. Business leaders can agree that AI is powerful, but many don’t know where or how to start. Many leaders focus on the inputs when developing a plan for AI rather than the outputs. When the focus is on the technology rather than the business objective, the strategy becomes distracted by the inputs rather than outputs. AI should be driven by business objectives.
4. The recommended approach to AI for business leaders is a two-tier strategy.
• Lane One: Establish a project that can be completed within 12 months and bring a meaningful gain that does not disrupt the industry. In the short term, the plan should be to increase productivity by 10-20% (i.e., increasing top-line revenue or decreasing cost). Most importantly, there is no change to the workflow and the project can be led by a business unit/corporate function. Example of Lane One targets include fraud detection in banking or verifying an insurance claim.
• Lane Two: Longer-term projects require buy-in and support from the C-suite. These projects would be deployed in 2-5 years with 200-500% productivity gains in return. These projects would be a total system redesign unlocked by AI and requires deep thinking by leaders. One historical example is the adoption of electricity in factories in the late 1800s. By 2025, all organizations should be leaning in and have a team dedicated to developing a lane two strategy.
5. Those who are open to redesigning their business operations will come out on top. Pre-2018, 95% of organizations were typically advised to “wait and see” and be a “fast follower” for new tools. It is different with AI; it would be dangerous to “wait and see” as AI is the first tool in history that learns from users. The more data it has, the better the prediction. The better the prediction, the better the data. Once an organization gets ahead with the technology, it’ll be tough for competitors to keep up.
6. We cannot wait for AI and the technology to be developed – we need to work together to move AI forward. Learning from others results in efficient knowledge transfer between organizations and can be essential for successful AI implementation. Building a collaborative ecosystem of AI experts, industry partners, and regulatory stakeholders fosters knowledge exchange, innovation, and best practices in AI implementation.

Survey Results

Based on the findings of our pre-event survey targeting CFOs, Board Directors, and Audit Chairs, Odgers Berndtson identified key insights regarding the readiness of organizations to implement Artificial Intelligence (AI). Click here to view full results.

Opportunities:

• Embracing Digital Transformation: 81% of respondents emphasized the critical importance of digital transformation to their company's strategy. This represents a significant increase from 60% recorded five years ago, underscoring the pervasive integration of digital initiatives into overall business strategy across diverse industries.
• CFOs as Leaders in AI Adoption: A noteworthy 67% of CFOs expressed medium to high confidence in their ability to spearhead the transition towards AI-driven operations, reflecting their readiness to embrace and lead AI in their role in this transformative era.

Risks:

• Stagnation in AI Adoption: Despite widespread recognition of the importance of AI, a staggering 81% of organizations remain entrenched in the planning or preliminary stages of AI adoption, or worse, have yet to consider AI as a strategic imperative.
• Data Governance Concerns: Data governance emerged as the primary concern, cited by 38% of respondents. This underscores the formidable challenge organizations face in navigating the complexities of data requirements essential for AI implementation.
• Lack of Confidence in Leadership: Financial executives expressed significant reservations regarding the competency of their organizational leadership in executing AI strategies. Only 33% exhibited confidence in their organization’s leaders ability to implement AI, while only 31% believed their Boards could contribute meaningfully to the process.

These findings collectively highlight the pressing need for organizations to accelerate their AI initiatives while addressing critical challenges surrounding data governance and leadership competency to unlock the transformative potential of AI in driving strategic objectives.