AI in the Boardroom: Generative AI’s Role in Shaping Business Strategy

The business world is buzzing with excitement about generative AI (gen AI), including platforms like ChatGPT, You.com, and Claude.ai, as a tool that could revolutionize business decision-making. OpenAI’s CEO, Sam Altman, even proclaimed, “You are about to enter the greatest golden age of human possibility.”

For CEOs, the prospect of using gen AI for strategic planning is enticing. One business leader expressed their anticipation, stating, “I can’t wait for AI to help identify opportunities that don’t exist yet!”

However, there are questions to consider: Are we overestimating gen AI’s potential? Where specifically can gen AI enhance strategic planning? Are all gen AI tools equally effective, or do they shine in different scenarios?

To explore these questions, we’ll examine two business cases focusing on activities central to strategic planning.

Case Study 1: Overcoming Blind Spots and Predicting the Future

Keith’s Dilemma: Seeking a Broader Perspective

Keith is the CEO of Trident, a commercial agricultural research organization with 120 employees. Trident is the market leader in its sector, conducting field trials to improve the cultivation of cereals, vegetables, and fruits.

At Trident’s annual strategic retreat, Keith and his executive team aimed to identify the “key strategic issues” facing their business. Keith’s initial list included:

• Competition
• Branch number and location
• Human resources
• Product pricing
• Profitability
• Climate

While the team was satisfied with this list, they acknowledged their limited viewpoint. As agricultural scientists, their knowledge was specialized, leading Keith to wonder if gen AI could help broaden their perspective.

Keith also questioned whether gen AI could forecast future demand for their services.

How Gen AI Can — and Can’t — Assist

Keith’s questions reflect common concerns among business leaders during strategic planning:

1. Addressing Bias and Limited Perspective
Keith recognized that his team’s viewpoint was constrained by their professional background. He could hire executives from different industries to gain new insights, but a more practical approach was to use gen AI. Here’s how:

• Prompt: “We’re a commercial agricultural research organization with 120 staff, leading in our field. What key strategic issues are we likely to face in the future?”
• Response: Gen AI provided nine headings, each accompanied by two action points. The suggestions were mixed: while some new ideas emerged, other important topics were missed.

Notably, gen AI overlooked issues like “branch number and location” and “profitability.” It’s understandable that branch-specific issues might be difficult for gen AI, but missing “profitability” was a significant gap. Moreover, although competition was mentioned, the crucial aspect of “product pricing” was omitted.

The underlying reason for these gaps is that gen AI, while trained on a vast dataset, lacks specific company information. Additionally, gen AI is “non-deterministic,” meaning responses can vary. To mitigate these gaps, Keith could regenerate responses or ask for more ideas.

On a positive note, gen AI highlighted important areas Keith’s team hadn’t considered, such as:

• Technological advancements
• Regulatory changes
• Client demand and expectations
• Funding and investment

These additions were valuable, broadening the team’s perspective. Thus, in addressing Keith’s first question, gen AI was successful in fostering divergent thinking, which is essential for effective strategic planning.

2. Predicting Future Demand
The second question—whether gen AI could forecast demand for Trident’s services—proved challenging. Gen AI cannot predict the future as it relies on historical data. The forecasting of future sales or achievable growth requires industry expertise, and this is where Keith’s team’s experience becomes indispensable.

However, gen AI can stimulate discussion by identifying relevant factors. By prompting “What will impact the future demand for our services?” the AI highlighted seven factors, including:

• Sustainability and climate change
• Changing consumer preferences
• Global population growth

These insights prompted Keith’s team to think more broadly about potential demand drivers.

Case Study 2: Addressing Trends and Developing Scenarios

Angeline’s Strategic Plan: Industry Trends and Future Challenges

Angeline is the CEO of Fitzroy Cemetery and Crematorium, a government-owned, nonprofit business. Her organization spans 145 acres and offers burial plots, cremation services, chapels, a florist, a café, and function centers.

During a two-day strategic planning session, Angeline and her executive team, joined by board members, identified industry changes and trends:

• Shift from burials to cremations
• Demand for first-class function centers and catering
• Competitor acquisitions of funeral directors and cemeteries
• Shortage of suitable land for expansion
• Growing demand for video and audio services
• Environmentally friendly burial and cremation options

While Angeline felt this list was comprehensive, she wondered if gen AI could add value. She had two questions:

1. Does her team’s list reflect current industry trends?
2. What are future alternatives given the shortage of land and the rise in environmental practices?

How Gen AI Can — and Can’t — Assist

1. Refining Industry Trends
To address Angeline’s first question, we used the following prompt: “Act as a strategic management consultant. Based on industry challenges, provide recommendations on what is missing from our strategic plan.”

While gen AI largely confirmed the team’s findings, it also suggested additional areas for consideration:

• Aging population and changing demographics
• Mental health and grief support
• Price sensitivity and transparency
• Regulatory changes and compliance

These suggestions were insightful, helping Angeline’s team design a more forward-thinking strategy.

2. Exploring Future Alternatives for Land Use
For the second question, we asked: “If there was no more land available for burials, what could other alternatives be?”

Gen AI’s response was creative, suggesting options ranging from launching cremated remains into space to employing multi-story burial buildings and memorial forests. While some ideas were impractical, others offered out-of-the-box solutions for the future.

Gen AI platforms like You.com offer a feature called “retrieval augmented generation” (RAG), which combines model outputs with current internet data for more up-to-date insights. This approach, which could incorporate internal company data, might help address more specific issues—though it requires specialized deployment. Publicly available tools, such as ChatGPT, don’t currently have this capability.

Key Insights: Leveraging Gen AI for Strategic Planning

While gen AI offers significant potential advantages, it’s essential to understand its limitations for strategic planning:

• Backward-Looking Nature: Gen AI relies on vast amounts of historical data to generate responses, which means its outputs are inherently backward-looking.
• Incorporating Human Judgment: Gen AI’s suggestions can enhance strategic thinking, but these ideas should be filtered through human discernment.

Benefits of Using Gen AI in Strategic Planning:

• Broadening Perspectives: Gen AI helps executives explore beyond their industry-specific knowledge.
• Idea Generation: It is effective at providing creative suggestions that may not have been immediately considered.
• Speed and Cost Efficiency: Gen AI generates responses quickly and at a low cost, making it a worthwhile tool for brainstorming sessions.

The key takeaway is to view gen AI as a complementary tool that augments, rather than replaces, human strategic thinking and decision-making. Its value lies in presenting different perspectives and ideas, while human expertise remains critical for evaluating and implementing strategic decisions effectively.