Three steps for leaders to harness AI-powered decision-making

How is AI transforming leadership and empowering leaders to make informed, data-driven decisions in today's rapidly evolving digital landscape?

In today’s rapidly evolving digital innovation era, artificial intelligence (AI) is revolutionising not only industries and technologies, but also the very essence of leadership. Traditionally, leadership has been characterised by human intuition, experience, and judgment. However, the rise of AI is challenging these traditional approaches, paving the way for a new era of data-driven decision-making and strategic leadership.

AI-powered decision-making is empowering leaders to make more informed, objective, and impactful choices. By harnessing the power of data analytics and machine learning algorithms, AI can provide leaders with insights that were previously inaccessible or too complex/expensive to process. A 2022 study published in MIT Sloan Management Review, for example, found that this newfound ability to extract hidden patterns and trends from vast amounts of data is enabling leaders to make more strategic decisions that align with long-term business goals.

The implications of AI-powered decision-making are far-reaching, transforming the way leaders approach workforce management, strategic planning, business innovation, and executive decision-making. With AI, leaders can effectively optimise resource allocation, identify talent gaps and skill shortages, and personalise employee engagement strategies. AI can also provide new opportunities for real-time experimentation and insights into market trends, customer behaviour, and competitor strategies, allowing leaders to make proactive and informed decisions that drive business growth and innovation.

How should AI be used to help make business decisions?

To embrace the transformative power of AI in decision-making, leaders must cultivate a culture of curiosity, data literacy and continuous learning. This involves equipping employees with the skills and knowledge to understand, explore and interpret AI-generated insights, enabling them to collaborate effectively with AI systems. Additionally, leaders must establish clear guidelines for safe and responsible AI implementation, ensuring that AI drives innovation, stakeholder benefit and sustainable business.

Mary-Anne Williams is the Michael J Crouch Chair for Innovation and Professor in the School of Management & Governance at UNSW Business School. AI is rapidly emerging as a transformative force poised to change sectors from healthcare to transportation, according to Professor Williams, who also leads The UNSW Business AI Lab, which works with partners to discover new business opportunities, overcome challenges to AI adoption and accelerate the next generation of leaders and entrepreneurs. “Generative AI has dramatically amplified the need for business leaders to learn more about AI capabilities, the risks, and how to create business value and drive return on investment safely and responsibly,” she explained.

Learn more: The UNSW Business AI Lab

AI’s ability to analyse vast amounts of data and extract actionable insights is revolutionising the way leaders make decisions. Traditional decision-making often relied on intuition, experience, and incomplete or hidden bias. AI, on the other hand, can objectively analyse vast datasets, identifying patterns including bias, correlations, and trends that would be difficult or impossible to identify by human analysis alone. This data-driven approach enables leaders to make faster, more informed and objective choices in real-time, reducing the risk of errors caused by human bias and emotion, and incomplete information.

“Human decision-making is impacted and limited by our biology, in ways that AI is not,” said Professor Williams. “We know humans suffer from over 150 cognitive bias such as anchoring and confirmation bias that deeply affect decision-making. Our judgements are inconsistent and affected by our mental and physical state, for example, we tend to make better decisions in the morning when our brains are fresh and after eating when our brains are well nourished.”

The impact of AI on leadership strategies

The integration of AI into decision-making is necessitating a shift in leadership paradigms. Traditional leadership styles that emphasise intuition and experience are increasingly giving way to data-driven and adaptable leadership approaches that leverage AI technology. Leaders must be able to effectively interpret, communicate and build on AI-generated insights, while also remaining flexible and open to adjusting strategies based on real-time data and feedback.

Professor Williams observed that leaders are increasingly recognising AI's potential to drive innovation and efficiency, yet some remain cautious due to concerns over ethical implications, data privacy, and the ability to manage and integrate AI with existing systems effectively. “It's a balance of embracing the transformative power of AI while navigating the complexities it introduces to the corporate ecosystem,” said Professor Williams, who noted research shows that leaders who can use AI for decision-making outperform AI on its own and leaders who are unable to use it.

AI is enabling leaders to make decisions faster and adapt more dynamically to changing market conditions. AI systems can provide real-time insights into customer behaviour, market trends, and competitor strategies, allowing leaders to respond swiftly and effectively to emerging opportunities and challenges. This enhanced agility is crucial for businesses operating in today’s rapidly evolving digital landscape.

Read more: This time it will be different: are the robots really coming for your job?

“AI can significantly enhance decision-making by providing leaders with data-driven insights and foresight into trends, as seen in predictive analytics for market movements. For instance, a retail CEO might use AI to analyse consumer behaviour, predict future buying patterns, and tailor inventory accordingly, ensuring the right products are in stock at the right time,” Professor Williams explained.

3 steps for leaders to harness AI for better decision-making

As AI continues to permeate organisational decision-making processes, leaders must adapt their strategies to effectively leverage this powerful technology. There are a few important steps leaders can adopt to harness AI in a way that will lead to better decisions:

1. Cultivate a curious data-driven mindset

Leaders who grasp the significance of data and its ability to inform strategic choices are better equipped to navigate the complexities of the modern business landscape. This data-driven mindset involves viewing data not just as a collection of numbers, but as a repository of valuable insights that can reveal hidden patterns, predict future trends, and inform sound judgement.

Leaders should actively seek out and incorporate data-driven insights into their decision-making processes. This involves regularly reviewing data dashboards, engaging with data analysts, and fostering a culture of data literacy within their organisations. By empowering employees to understand and interpret data, leaders can create a collaborative environment where data drives innovation and growth.

“Leaders can turn curiosity into expertise,” said Professor Williams. “They can start by integrating data review into their daily routine, treating it like a compass that guides strategic direction. They can question how data can better inform their strategies, and by surrounding themselves with diverse perspectives that challenge and refine their analytical thinking.”

2. Develop AI fluency and expertise

To effectively leverage AI, leaders must develop a deep understanding of its capabilities, limitations, and ethical considerations. This involves immersing themselves in the world of AI, exploring its underlying algorithms, and gaining proficiency in data analytics techniques. By mastering the language of AI, leaders can confidently evaluate AI-generated insights, identify potential biases, and make informed decisions that align with organisational goals and ethical principles.

Read more: How AI can help solve the pressing problems of banking and finance

Leaders should invest in their own AI learning and development, committing to continuous education in the field. This could involve enrolling in executive training programs, attending AI conferences and workshops, or seeking mentorship from AI experts. By actively engaging with the AI community, leaders can stay abreast of the latest advancements and ensure that their organisations are at the forefront of AI innovation.

“Developing AI fluency and expertise allows leaders to become comfortable and confident with AI enabling them to leverage it and ensure its wise usage to drive business value and make a difference,” said Professor Williams.

3. Establish principles and governance for safe and beneficial AI

As AI becomes increasingly integrated into decision-making processes, leaders must establish clear guidelines to ensure that AI is safe and that it creates value for customer and benefits for society and the environment more broadly. These guidelines should address issues such as reliability, fairness, bias, and accountability, ensuring that AI decisions are not discriminatory, unfair, or devoid of human oversight and control.

Leaders should be transparent about how AI is used in their organisations, providing clear explanations for AI-driven decisions and establishing mechanisms for addressing potential issues. This transparency fosters trust among employees, stakeholders, and the public, ensuring that AI is seen as a force for good rather than a source of concern.

Professor Williams said that leaders can steer the AI to be safe and beneficial by embedding principles like fairness and transparency into the blueprint of their AI strategy. “They can lead by example, actively participating in ethics training sessions and discussions, to signal that AI governance is a top priority, not just a box to check. Leaders need to weigh the relative barriers/risks and assess the value/benefit of AI to develop effective strategies to develop and deploy AI that can power better, faster and cheaper decision making,” said Professor Williams.

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By embracing these three essential steps, leaders can effectively harness the power of AI to make better decisions, enhance strategic planning, and position their organisations for success in the data-driven future. AI is not merely a technological tool; it is a catalyst for a paradigm shift in leadership, empowering leaders to navigate the complexities of the digital era with greater insight, agility, and responsibility.

The UNSW Business AI Lab is led by Professor Williams and works with partners to discover new business opportunities, overcome challenges to AI adoption and accelerate the next generation of leaders and entrepreneurs. For more information please contact Professor Williams directly.