Why Your AI Transformation is Broken

C-suite executives are rushing to implement their AI transformation strategies. Visions of cost savings, streamlined workforces, and exploding productivity are making them foam at the mouth.

Despite this AI feeding frenzy, however, many of the same execs are becoming disillusioned by the whole AI transformation boondoggle.

AI tools and access to popular large language models (LLMs) are running up costs. Software developers have devolved into vibe coders as they churn out massive quantities of error-prone, unmaintainable code. Knowledge workers are forgoing the thinking parts of their jobs to produce drivel masquerading as work output.

What gives? No one questions the transformative power of the technology. The business benefits are certainly right around the corner. Why, then, are AI transformation strategies foundering?

The simple answer: executives haven’t taken the time to answer the basic question why.

AI can certainly transform the business. But to what end? What are organizations trying to accomplish?

Déjà Vu All Over Again

If those questions elicit a sense of déjà vu, you’re not alone. We’ve been down this road before.

Remember digital transformation? Organizations of all sizes rushed to leverage digital technologies to transform their businesses — with many successes, to be sure, but with a commensurate number of failures.

What differentiated the successes was a clear statement of value — the why that we need now so desperately.

Why digitally transform? The answer: to better meet customer needs. Digital transformation has always been about the customer: how to leverage digital technologies to better align the business with customer needs and desires.

The lesson for AI transformation is simple: the why should always be about the customer. We might even go so far as to say that AI transformation is, in fact, digital transformation — with "digital technologies" updated for the AI era.

Do You Know Who Your Customers Are?

To understand the full breadth of digital transformation — and, by extension, AI transformation — we must broaden our definition of customer.

First, customers are human. They may be individuals or groups of humans (as is the case for B2B), but customers aren’t bots or AI agents. Behind every AI "customer" are humans with human needs and desires.

Second, we must extend our definition of customer to include employees. Employees provide value to their organizations and receive value in turn, just as paying customers do. In fact, including employees is critical for AI transformation success.

In other words, digital transformation (and, by extension, AI transformation) is about meeting the needs of all the humans that interact with your organization — putting those humans at the center of your business.

Why AI Transformation Has Gone So Wrong

For many organizations, AI transformation involves replacing human interactions and human activities with automated ones.

We can save so much money by replacing human customer service reps with AI avatars or chatbots! We can improve productivity by replacing level 1 support with AI agents! Just think of all the money we’ll save!

Not so fast. Efficiency and cost savings at the expense of the customer (including the employee) are a path to failure.

Instead, put customers and employees first and build an efficient and cost-effective business around them. This approach leads to leveraging digital technologies only when appropriate to meet these goals — and now that approach includes AI.

Putting the Customer at the Center

Taking a customer-centric approach to AI transformation raises the bar on the effort your organization must undergo to achieve the goals of the transformation.

For example, ask yourself what the most delightful customer experience would be for someone reaching out to your contact center.

If the customer wants an automated experience, make sure it is efficient, streamlined, and intelligent. But if the customer wants to interact with a human, then make sure that experience is wonderful.

Support all communication channels with a unified support staff. Answer the phone (or chatbot or text, etc.) on the first ring. Make sure the person answering the phone can actually solve the customer problem.

The point here is that AI can help you achieve these human interaction goals. There are tools today that turn your average customer service rep into a paragon of customer delight.

Instead of disintermediating the rep, empower them.

True, empowering human reps is more difficult than shifting all interactions to a chatbot — but taking this approach is the difference between the success and failure of your AI transformation.

What About the Employee?

Putting the employee at the center of your AI transformation is as important as putting your paying customers there — although the motivation for doing so is more subtle.

Without an effective employee-first AI transformation strategy, you will fall into two primary pitfalls when implementing AI for your organization’s personnel:

Pitfall #1: the dumbing down of your employees. 

If employees can simply use ChatGPT to write that report or put together that PowerPoint, then they no longer have to think about how to accomplish those tasks. Over time, they’ll become less and less proficient at tackling any activity that requires real thought. The end result: cube farms full of useless boneheads.

Bonus pitfall: universities have the same problem. Students are using AI instead of thinking. So if you try hiring at the entry level to address this problem, you’ll simply onboard more useless boneheads.

Pitfall #2: no junior people to become senior people. 

Replace your level 1 and level 2 support staff with AI (or junior developers or financial analysts or whoever). Keep the more senior staff to handle the trickier problems that the AI can’t solve. Everything is fine until those senior people move on, and now you have no junior people who have been learning the ropes to replace them.

Bonus pitfall: you might think you can hire more senior people who’ve come up through the ranks in other organizations. Only those organizations have also replaced their junior staff with AI. Oops.

To avoid these pitfalls, organizations must have a well-thought out employee AI training and governance strategy. People must know which AI tools to use, when and how to use them, and most importantly, when not to use them.

In fact, this repositioning of human effort is at the heart of every successful AI transformation. It’s human nature to take the easy path, and AI is adept at creating such paths. Sometimes, however, the easy path isn’t the best one for achieving an organization’s strategic goals.

The Intellyx Take

To get your AI transformation back on track, refer to the lessons of digital transformation. Many organizations looking to transform made the same kinds of mistakes: favoring cost savings and efficiency over customer (and employee) delight.

It may appear that AI offers transformative levels of cost savings and efficiency — but such benefits are illusory. In the end, you’ll push away customers and dumb down your workforce, thus defeating the purpose of the transformation.

Instead, learn the lesson of digital transformation and put humans at the center of your AI transformation.

True, you’ll end up passing up some short-term cost savings and productivity benefits. But remember: those are tactical concerns, while business transformation (a.k.a. digital or AI transformation) must be strategic.

As with digital transformation efforts of the past, many organizations won’t take my advice. Just make sure your competition falls into that trap rather than you.