Answer Happy

TECHNOLOGY INSIGHT 2.2 Schrage's Models for Using AI to Make Decisions Schrage (2017) of MIT's Sloan School has proposed the following four models for AI to make autonomous business decisions: 1. The Autonomous Advisor. This is a data-driven management model that uses AI algorithms to generate best strategies and instructions on what to do and makes specific recommendations. However, only humans can approve the recommendations (e.g., proposed solutions). Schrage provided an example in which an American retailing company replaced an entire merchandising department with an AI machine, ordering employees to obey direc- tives from it. Obviously, resistance and resentment followed. To ensure compliance, the company had to install monitoring and auditing software. 2. The Autonomous Outsource. Here, the traditional business process outsourcing model is changed to a business process algorithm. To automate this activity, it is necessary to cre- ate crystal-clear rules and instructions. It is a complex scenario since it involves resource allocation. Correct predictability and reliability are essential. 3. People-Machine Collaboration. Assuming that algorithms can generate optimal decisions in this model, humans need to collaborate with the brilliant, but constrained, fully auto- mated machines. To ensure such collaboration, it is necessary to train people to work with the AI machines (see the discussion in Chapter 14). This model is used by tech giants such as Netflix, Alibaba, and Google. 4. Complete Machine Autonomy. In this model, organizations fully automate entire processes. Management needs to completely trust AI models, a process that may take years. Schrage provides an example of a hedge fund that trades very frequently based on a machine's rec- ommendations. The company uses machine learning to train the trading algorithms. Implementing these four models requires appropriate management leadership and col- laboration with data scientists. For suggestions of how to do so, consult Schrage (2017), who has written several related books. Kiron (2017) discusses why managers should consider AI for decision support. An interesting note is that some competition among companies will actually occur among data-driven autonomous algorithms and related business models. QUESTIONS FOR DISCUSSION 1. Differentiate between the autonomous advisor and the people-machine collabora- tion models. 2. In all four models, there are some degrees of people-machine interaction. Discuss. 3. Why it is easier to use model 4 for investment decisions than, for example, market- ing strategies? 4. Why is it important for data scientists to work with top management in autono- mous Al machines?