Rise of the Machines: AI and the Future of Business

In recent memory, the world has seen profound changes in almost every facet of business and society, and the change is ongoing. Though it’s taken center stage — with good reason — the pandemic isn’t the only urgent issue facing humanity. In a torrent of contemporary challenges, COVID-19 accelerated some changes that were inevitable, brought the need for others into stark focus and served as a backdrop for the constant flux of an evolving world.

The business community has a starring role to play in every major issue of our time, and the opportunities and risks in each are significant. Taking an active role in shaping the future is more important than ever as leaders navigate and co-create the “next normal.”

Whether we will have the Roaring ’20s or the Groaning ’20s remains to be seen, but strong leadership will be essential as companies learn from the past, confront urgent issues head on and plan for the future.

“To survive,” says Rajkumar Venkatesan, Ronald Trzcinski Professor of Business Administration at Darden, “companies need a customer-centric, strategic plan for how to deliver a unique buying experience to every customer at every juncture of their buying journey — and do it at scale.”

AI in Everyday Life and Business

For decades, popular culture has depicted artificial intelligence in the context of a dystopian future in which machines, typically in android form, rise up and overthrow the human race.

While AI may take over humans in the movies, in real life it’s taking over how humans consume movies. Netflix and other streaming platforms have changed the game on how viewers absorb entertainment, and such companies combine increasingly sophisticated algorithms with machine learning to offer a plethora of tailored content. On the upside, this gives customers a better entertainment experience than ever before; on the downside, the same algorithms are used to hook viewers and induce them to binge-watch.

The entertainment sphere offers just one example of the proliferation of AI in everyday life and business. The economic base of the postindustrial world is defined by technology and service industries — and the rapid way machine learning is changing them — as much as the Industrial Revolution was marked by shifts in manufacturing. Machine learning is permeating the business world, and all companies need to be nimble and adapt to new customer standards of delivery and delight.

These days, consumers expect companies to make their lives easier by understanding, predicting and delivering preferences they might not even know they have; personalized customer engagement is the name of the game.

“To survive,” says Rajkumar Venkatesan, Ronald Trzcinski Professor of Business Administration at Darden, “companies need a customer-centric, strategic plan for how to deliver a unique buying experience to every customer at every juncture of their buying journey — and do it at scale.”

An Imperative to Adapt

“Machine learning offers a variety of sophisticated tools that produce deeper customer insights much faster than any group of humans could achieve,” says Venkatesan. “The way it works is you use data, AI and algorithms to personalize your company’s acquisition strategy, retention strategy, growth strategy and even promotion of word-of-mouth among consumers.” Venkatesan takes note of companies that have found success and increased customer loyalty by taking technology even a step further to address needs a consumer might not realize, both social and physical: Peloton devotees find a sense of community through its network. Coca-Cola’s Powerade Command Center evaluates and then accounts for athletes’ hydration levels, creating unique formulas that go beyond taste preferences.

Connecting all those dots to execute on market demand is more than might be feasible under the old way of doing things, which makes businesses’ adaptation to AI an imperative.

But that imperative for businesses to adapt comes with large-scale consequences, and society itself may need to adapt.

What AI Means for the Workforce

While consumer expectation and business strategy have changed the way the workforce delivers goods and services through technology, the other side of the coin is that those factors are ultimately changing what is needed from the workforce itself.

“We’re likely to offer the same types of services with fewer human employees in the future,” predicts Anton Korinek, associate professor of business administration at Darden and an authority on AI, expressing an opinion shared by other experts and policymakers. A concern that existed before March 2020, it has only been exacerbated by the pandemic.

Korinek says that many of the jobs frozen because of public health measures are unlikely to return after the crisis ebbs. “The main game has been to change business processes and the delivery of services so that people are not in immediate physical proximity to each other,” he says. And customers, he explains, have grown accustomed to the digital services that have replaced jobs.

In the midst of COVID-19, people have made habits of the kind of convenience that comes with cutting out the commute and staying home for activities like shopping, exercise, entertainment and dining. Even when venturing into the world, social distancing has led to more efficiency for the customer, as people can check into hotels and restaurants using touchscreens, and health care and other service providers schedule fewer overlapping appointments, in addition to offering Zoom consultations.

Tough Decisions for Business

This leaves business leaders facing some tough decisions. Before the onset of the pandemic, economists predicted an impending jobs crisis, with consultants at McKinsey, for one, estimating that 400 to 800 million jobs may be displaced in the face of automation within the coming decade. The coronavirus pandemic accelerated the inevitable as containment measures shut down hospitality and retail, among others, industries in which workers are in the most danger of displacement.

Korinek, who also serves as a professor of economics in UVA’s Department of Economics, points out that creative destruction is nothing new, but what’s different about the present situation is that workers displaced by the process subsequently face worse job prospects. “The big worry is not simply the fact that jobs are being displaced, but that the new jobs being created are not of the same quality with the same kinds of incomes as before,” he says. “Displaced workers may be forced to go down the jobs ladder to take on work that is lower paid, sometimes with poorer working conditions.”

This danger is not limited to lower-paid positions. Middle management positions in data-driven, white-collar sectors of the economy — such as finance, accounting, law and information technology — are especially susceptible to more sophisticated automation.

“The big worry is not simply the fact that jobs are being displaced, but that the new jobs being created are not of the same quality with the same kinds of incomes as before,” he says. “Displaced workers may be forced to go down the jobs ladder to take on work that is lower paid, sometimes with poorer working conditions.”

The Future: Short Term, Long Term and Very Long Term

The jobs that are currently under less threat of automation are those that require uniquely human “soft skills” like planning, people management and strategic decision-making. “What humans are still better at is understanding social situations and putting things into context,” Korinek says. “Machines also cannot quite understand all the nuances of language yet.” Roles that require human traits like empathy, creativity and motivation are the ones that provide an opportunity to reshape the future of work for now.

In the short term, it would be helpful for companies to invest in training programs to reskill workers for the jobs AI is creating. But it’s not necessarily enough. “Retraining certainly makes a lot of sense and will help a significant fraction of the workers who have been displaced, but it won’t be a panacea,” Korinek asserts, calling for concerted policy action to support the “left behind” regions in poorer areas that will suffer the most in the extended future. “We should also make a conscious effort to actively create jobs for the displaced workers.”

As for the long term, “I do believe that we should prepare for the possibility that at some point there may not be enough work for everybody to be gainfully employed,” he adds. “That means making sure that there is a social safety net so that the left-behind workers will be able to obtain sufficient benefits and their standards of living don’t decline.”

The upside of such a scenario is that if machines become so sophisticated that they can displace human workers on a large scale, they would also be able to generate an unprecedented amount of wealth that could be shared broadly across society, Korinek adds. “In the very long run, if machines become sufficiently capable, maybe humans can just retire and enjoy the fruits of what they have created.”

The preceding appears in Acting in the Present, Shaping the Future: Leaders in Unprecedented Times, a white paper produced by Darden Executive Education & Lifelong Learning. 

Venkatesan and Korinek are faculty leaders of the interdisciplinary Darden Intelligence Initiative, a joint venture of Darden's Institute for Business in Society and Batten Institute. The initiative investigates the ongoing digital transformation of society.