Artificial intelligence and adaptive governance in the corporate sector of Bhutan: the new normal

It is a strange time for all of us. Indeed, the Covid-19 has brought the entire world to its knees and truly disrupted the conventional ways of how we live our lives and function in our society. While such disruption has inflicted a lot of pain and inconveniences in all aspects of human endeavour, it has particularly affected business enterprises severely. Globally, businesses as varied as hospitality to manufacturing to airlines are struggling to stay afloat.

However, during such crises, it presents opportunities and introspection times for the corporate sector of Bhutan to engage in disruptive thinking that would allow organisations to re-examine their long term competitive positioning to deal with the uncertainty of any nature. Already disruptions due to emerging technologies like Artificial Intelligence and other smart cognitive technologies are upending the normal business operations, leading AI to become an important area of research on organisational strategy. AI with its self-learning ability can drive and create changes in existing business models that are harder to predict and consequently can render significant disruptive uncertainty on businesses and societies. However, the impact of AI can be examined through the lens of disruptive innovation, a unique pathway to creating novel offerings, and achieving strategic growth. Further, the concept of Adaptive Governance (AG) offers one appropriate organisational response to the disruption that goes beyond the existing value network optimisation driven largely by top-down decision-making. Such AG usually lies at the intersection of the organisation’s structure, processes, and digital competence that may suitably meet the AI implementation challenges within an organisation.

In today’s ‘new normal’ due to thinking technologies, which was further exasperated by the Covid-19, disruptions pose significant challenges to existing organisational and ecosystem’s operations. Although organisations across industry sectors engage in strategies to deal with their new business environment through risk management strategies, most traditional approaches are usually treated as a compliance issue that can be solved by drawing up rules and forcing all employees to comply with. Such an approach is generally driven by the need to prioritise risks and resources. That is, it seeks to address the risks associated with a change that has a higher probability with severe consequences. This approach to managing risk, however, fails to address disruptive change associated with what is known as a Black Swan event, which is characterised by a high improbability and high-impact effect and ironically appears inevitable after the event.

Therefore, disruptive change is different from the normal change in the sense that it is, a) unpredictable and abrupt, and b) the severity of risks is usually felt after the occurrence of events. The consequences of emerging artificial intelligence on organisations have the potential to assume such a Black Swan proportion if organisations fail to strategise appropriately. Therefore, businesses in Bhutan need to prepare for and exploit disruptive changes brought by AI that trigger innovative technological solutions that normal change management strategies cannot address adequately.

Using the concept of adaptive principles from complex socio-ecological systems, Adaptive Governance (AG) model offers as one way to suitably support and enable decision making to deal with potentially disruptive effects associated with AI.

Therefore, an organisational adaptive capability will have to be examined by focusing on two key elements of the organisation, which seek to answer two high-level questions: 1) How are Training and Skills development shaped to enhance digital competency to adapt to the changing workforce environment as a consequence of AI? 2) What are the required new governance practices to identify and respond to changes associated with AI?

 

Basic concept of disruptive innovation

Disruptive Innovation theory places technology as playing a significant role in the disruption and the term Disruptive Technology is used to describe those technologies that provide different values from the existing mainstream technologies. Often such disruption alters the bases of competition by changing the performance metric along which firms are normally gauged. In such innovation, the new entrants with fewer resources enter the market by producing products and services wrapped around an enabling new technology that are initially inferior along the performance attributes demanded by mainstream customers. But such offerings are however cheaper, more affordable, and convenient, which then attract niche customers that value entrant’s offerings over the unaffordable expensive alternatives. However, as the performance of the technology improves over time to a level sufficient enough to meet the requirements of the mainstream customers, the new product abruptly disrupts the old technology and replaces it from the mainstream market.

Such disruption can strategically arise from two avenues: low-end markets or entirely new markets. Low-end market disruption comes from the segment of the market which is overserved. Such a market is not generally given importance by bigger and profitable incumbents as it offers lower profit margins. Initially, much smaller new entrants to this market do not substantially affect the existing mainstream businesses as incumbents’ priority is on their core customers with bigger purchasing power, and where higher attractive profit margins exist. This lack of attention then allows new entrants to gradually work their way up the upper tiers of the market by constantly improving their technology, and ultimately capture the profitable segments as well, disrupting the once-powerful giant incumbents.

Whereas, new market disruption means that an entirely new market is created where none existed before, and essentially entails targeting non-consumption with new products, where customers have not had access to previous generations of such products and services. For instance, common popular wearable devices are products that created an entirely new market for tracking physical activity and fitness.

Further, disruption can sometimes go beyond the low price inferior performance category and include high end but inferior performance product that go on to dominate the market eventually. One such example is Cellular phones; despite initial inferior coverage, higher prices, and less reliability it went on to disrupt dominant land-line technology as the performances and the price of the cell phones improved over time.  In the beginning, the cell phone adopters were mostly corporate executives who valued different dimensions of performance, which included portability and convenience that cell phones accorded and hence did not mind paying more for the products. Whereas, the mainstream market still preferred landlines as they were reliable, less costly, and had wider existing coverage.

Artificial intelligence

Today, Artificial Intelligence is widely discussed in all spectrums of life and is connotated with both good and evil without any meaningful understanding of what AI is. AI in essence is generally a set of interrelated technologies that can solve problems autonomously to achieve defined objectives without guidance from a human agent.  AI systems display characteristics of human intelligence such as planning, learning, reasoning, and problem solving, in addition to displaying social intelligence and creativity. Various applications and techniques that come under the broad AI term include neural networks to speech recognition to deep learning algorithms.

Such technologies have become all too pervasive, appearing in many applications that positively delight our daily lives. For instance, Chatbots such as Siri or Google Assistant on personal phones, or Cortana on desktops which are powered by AI have made getting information more easily accessible, which is a new way of gaining access to information fast.

Such learning and performing capacity of AI thus creates a potential for transformative impact on society in multiple areas and will affect how humans interact with computer systems across a wide range of industries. The autonomous vehicle is one notable example that is expected to disrupt not only how people will drive but will have broader implications beyond transportation and logistics, and affect diverse fields such as emergency responders, policing and care service delivery. Similarly, many emerging smart technologies enabled by AI can completely alter the rule of competition in various other business sectors, and the only way organisations can hope to win is to learn how to play a new game properly. Therefore, AI-led innovation as a key element of their long-term competitive strategy has become imperative for the corporate sector of Bhutan to thrive in today’s disruptive new normal and uncertain environment.

 

Contributed by Jigme Singye, Ph D 

(Engineering)

Postgraduate Research (Faculty of Business), Australia

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