If Industry Leaders Reap The Benefits From AI, Big Data And Robotics, How Can SMEs Stay Relevant?

By:  Masao Takahashi and Vijay Raju

Robotics, AI and Big Data provide great opportunities for startups and agile SMEs, right?

Think again. According to research the World Economic Forum did with Accenture, the bulk of gains goes to the 20% industry leaders in each industry. Without broader implementation of these new technologies, “an ‘industry inequality’ could emerge, creating a small group of highly productive industry leaders and leaving the rest of the economy behind,” with small and medium enterprises in particular at risk.

That would be problematic because these small and medium enterprises that operate at the regional and national level serve as the backbone of the economy in many countries. Their ability to adapt to this change will make or break societies in their respective contexts. In the U.S. alone, there are 200,000 companies in the revenue range of $10 million to $1 billion. They employ 41 million people, or a staggering one out of three jobs overall.

So how can these companies stay relevant in this era of exponential change? We’ve identified the five best ways:

1. Understand the new global operating context

The global operating context is changing dramatically with geopolitical tensions, societal unrest and the rampant emergence of new technologies. In this era of connected systems and data-driven businesses, there is tremendous promise for growth. The private sector is moving faster than government’s ability to design policies, and when scandals like the Cambridge Analytica’s data usage through Facebook emerge, reactive measures emerge that slow growth. There are long-term challenges associated with job loss through robotics, fake news and smartphone addictions, to name just a few.

How do leaders make sense of this new context and make decisions? Timothy Snyder of Yale University recommends that leaders use history to understand how such questions existed even in previous eras and to identify patterns. Darcy Winslow, president of the Academy for Systems Change, recommends that leaders engage with diverse stakeholders to challenge their own assumptions, beliefs and mental models. This shift from a belief-driven reaction to an informed and responsible choice is crucial to understand and make sense of this new context.

2. Be ethical by design

Technology doesn’t need to be a master or a slave. It needs to be our friend and we need to embrace it. To marry technology to the society, we need to embed ethics in design. Companies need to heavily invest in ethics training among employees and also, in improving corporate governance standards.

How to embed ethics in computer science is a puzzle even for top academics, and many engineers think that it is not their problem. Companies tend to leverage the lead users to solve unintended problems and they could also use diverse stakeholder groups to explore unintended consequences of a product so that they can incorporate the learning to turn them into responsible products.

In many countries, capital and mentorship are still available to a small group of entrepreneurs connected to a close-knit community. A strong foundation in ethics and corporate governance builds a long-term roadmap for success – be it attracting global investors or building partnerships – and this could also be a source of competitive advantage in the future.

3. Adopt a systems approach to resolve the short term versus long term dilemma

A systems view is imperative for leaders who want to lead their respective organizations into the future. As a leading management consultant says, leaders tend to magnify risks, devalue rewards and reduce time horizons as a response to mounting pressure. Darcy Winslow says, “Everything in this world is connected to everything else. It is important to understand this interconnectedness and it will foster a sense of collaboration beyond our traditional partners to identify sustainable sources of value.”

Imagine a platform business model working with external partners aggregating hotel rooms or taxis. You are working with a broader set of stakeholders and not just employees to produce business outcomes. To succeed, you need to play at the systems level and solve the challenges that include policies, laws, infrastructure, education (how to instill ethics and responsibility in school and university curriculum). Social harmony is the foundation for economic growth and leaders need to take an active leadership role in shaping and designing their ecosystems.

4. Rethink security and make it a top priority

While digital and connected systems present interesting new possibilities, a company needs to be secure to reap the benefits of a successful digital transformation. Historically, security has been under the ambit of government. But governments cannot control the cyberspace as no entity actually owns or controls the Internet. Cyber policies and cyber policing are limited by the laws that work within their geographical boundaries.

Rod Beckstrom, chairman of Stanford’s Cybersecurity Policy Program, explains the big shifts in the security front. “There is geopolitical hacking going on between nations, leaking of tools used by government intelligence operations and increase in intensity of attacks because of artificial intelligence and machine learning.”  Companies need to be proactive and secure themselves. Leaders need to make security a top priority for the organization and also, mobilize employees at every level to support this priority.

5. Be mindful

Before we influence a system, we must start with the self because systems change is inherently an inner and outer journey. Leaders cannot afford to make strategies for the future based on assumptions of the past and opinions of the present. They have to be able to see things as they are to make sound decisions. Timothy Snyder of Yale says, “We tend to get carried away by everything new. We need to pause and be mindful. We need to ask, what would be a good life with all these technologies.” Paul Saffo, a futurist, warns: “In 30 years, when we look back at 2017, we’ll be laughing at the fact that the focus was on digital revolution when the real revolution was happening in biology.”

Joichi Ito from MIT Media Lab sums it up beautifully: “The more you know, the less you know. You need to be humble. You are a participant as well as the designer of the system.” This is even more true for companies operating in countries where the systems are broken or underdeveloped and where the governments haven’t thought about the policy frameworks and protocols necessary to govern the system effectively. Leaders of the small and medium enterprises need to step up and play the leadership role in shaping the ecosystem in their respective countries/regions. These leaders are the bridge between the global forces that push them to change and the local constraints that stop the change.

There is definitely willingness among these leaders to be the change. A leading banker from Africa says, “In Nigeria and most of Africa, the systems are not in place but we have huge potential to serve the customers both the middle class and the ones at the bottom of the pyramid. But to get there, all the leading players need to collaborate and shape the ecosystem. In the process, our customers will win, our country will win and we will all win.”

We need to harmonize these good intentions and channel it through a structured community to help everyone win as individuals, organizations and societies.