As new technologies take centre stage in an increasingly data-driven world, the Chief Information Officer (CIO) role is more critical than ever. One of the most disruptive technologies of the 21st century, firms are increasingly drawn to Artificial Intelligence (AI) as a business differentiator. It is more widespread than ever before, as approximately 80% of global businesses invest in AI, with 47% of digitally advanced companies already defining AI strategies. In my recent research with collaborators from Shanghai, Philadelphia, and Hong Kong, we found that Chief Information Officers significantly affect the development of firms’ AI orientation - the strategic framework for investing, managing, and applying AI technology within a firm.
From disease mapping to mass customisation, the applications of AI are limitless, and the benefits are yet to be fully realised. Successful cases of firms integrating AI speak for themselves, often resulting in maximised profits and productivity. For example, sports equipment company Under Armour experienced a 51% revenue increase after applying an AI-based cognitive computing platform to enhance its users’ health and fitness data. Conversely, failed AI initiatives may incur substantial losses; after spending four years and USD 62 million, the Anderson Cancer Center could not develop an effective AI-based cancer diagnosis system.
How can businesses ensure AI's seamless and successful navigation and leverage its benefits while reducing associated risks? AI may be characterised by machine intelligence, but we must prioritise human guidance for it to succeed.
Look no further than the CIO.
CIOs promote AI orientation
To prepare for AI's changes to markets, firms should consider establishing a CIO position and ready themselves to address any potential scenarios where power distribution or reporting structures are affected by the changing composition of upper echelon management.
Analysing reports from 1,454 publicly listed firms on the China Stock Market & Accounting Research database (CSMAR), we found that firms with CIOs are more likely to develop AI orientation. This is because CIOs provide the technical knowledge and understanding necessary to align AI with a firm’s strategic business objectives.
Board characteristics boost business AI orientation
While CIOs plant the seeds of AI, boards cultivate them. Our study found that boards with higher educational diversity and R&D experience tended to work more closely with CIOs, increasing firms’ likelihood of developing an AI orientation.
Our findings suggest that practitioners pay attention to how board characteristics shape firms' abilities to develop an AI orientation. CIOs eager to strengthen their company's AI orientation should start by developing strong relationships with board members, particularly those who possess prior knowledge.
Board members with past AI experience can provide solid cases for how things should be done. Having board members with AI orientation experience serving on past boards makes other board members more willing to hear a CIO’s suggestions. This exposure effect is especially strong in the context of AI orientation because board members likely have little access to other strong objective standards related to AI orientation decisions.
Why the data matter
That CIOs affect firms' AI development seems like a natural phenomenon. However, the presence of CIOs in top management teams is surprisingly rare, particularly in emerging markets. According to the ExecuComp database, only 4.6% of the 1,763 firms listed on the S&P 1500 Index in 2018 had formal CIO or CTO positions. Meanwhile, only 1.8% of 3,600 public firms listed on the CSMAR in 2018 had a formal CIO role.
Importantly, our research demonstrates that the mere presence of a CIO should not be taken for granted as they can drastically shape the AI orientation of a company. Companies should remain committed to creating CIO positions to effectively realize the positive impacts of AI on their business.
