Unleashing AI's Potential for Global Business Leadership with David De Cremer | Paula Caligiuri

An interesting thing is actually Deloitte recently published a survey that 80% of the boards in the US never talk about AI.

80%.

80%. Wow. AI is going to be everywhere in business, but our board doesn't understand it. If you have a doctor, predictions may be accurate 92% of the time, new algorithm be 93.8% accuracy, but together it's 97%.

Welcome to International Business Today, where we discuss the most critical issues in international business with top academic experts and thought leaders. I'm Paula Caligioria, professor in the International Business and Strategy Group at northeastern universities Demore McKim School of Business, the sponsor of this podcast. Today I am so happy to be joined by David de Kremer, the Dunton family dean of the Damore McKim School of Business at Northeastern University. David is the author of numerous books and articles, including Leadership by Algorithm. David, welcome to International Business Today.

Thank you, Paula. Happy to be here.

So, David, you study artificial intelligence and the future of work. That's been your primary area of research for a while. Tell us a little bit about that.

Well, indeed, looking at artificial intelligence, and I just want to point out right away I'm not developing the technology, I'm looking what the implications are of using it in our business settings, in organizations and in society. So how did it change the way we work? How is it going to change the way we work? And as a business school professor, obviously I zoom in on how does it affect how teams work? What does it mean for leaders, business leaders, what do they need to do? Because many of them are afraid of technology. They're afraid because they don't understand technology. Because in every magazine today, we can read AIs everywhere. And AI is going to change everything. Of course, people who don't understand the technology, they're afraid. Even our executives. Right now, an interesting thing is actually Deloitte recently published a survey that 80% of the boards in the US never talk about AI.

You're kidding. 80%.

80%. Wow. So they're governing our companies. And as you know, as a business school professor as well, AI is going to be everywhere in business, but our board doesn't understand it.

So what should leaders know? I mean, what should those boards be talking about? What should leaders be talking about? What should they be aware of? What qualities do they need?

Well, the first thing is that leaders need to understand what AI is capable of and what it's not capable of. So I always call these the limitations of AI in a business setting. Again, there's a certain myth that has been grown because there's so much buzz around artificial intelligence that we believe there is artificial general intelligence, almost that human like intelligence. And business leaders, of course, like the idea because what are the opportunities that artificial intelligence can bring to business is, can make people work more efficiently. If they work more efficiently, they'll be more productive. And more productive means higher revenue. And the reason why this is so popular in business is because AI has self learning capabilities today. Meaning you can learn from data based on human feedback, you can learn more, and after a while, basically you don't even need the human feedback anymore. Now this is a very appealing argument for business leaders who want to make more revenue and have less costs. But it's a little bit of a stretch because I always tell business leaders, this is the AI that's developed in a lab. It's developed by researchers, not in a business setting where you have multiple stakeholders to take into account, but simply in a lab where, let's see what is possible. You understand the risks go up once you bring it into business because you have multiple stakeholders to take care of. And sometimes these interests may not even align because they have different interests. Customers may not want what employees want to do. Society has a different point of view on it, so it becomes much more complex. And this is something if business leaders don't understand really the limitations of AI. I see this often. They create the belief that, oh, AI is just here to replace people. So we're still in the discussion in many of many companies today where business leaders believe, okay, AI will replace humans. Now does that have to be a bad thing? No, it's a good thing from a business point of view because we earn more, companies earn more efficiency, less retirement funds to pay robots don't get sick, AI doesn't take a holiday. All perfect. But is this really the reality? Because at the same time, what about humans? AI is developed by humans. AI should be in service of humanity. So AI should actually enhance our human intelligence in more optimal ways across the board to say so. Now if we only narrow down AI in terms of efficiency. It seems like the only thing humans care about is efficiency. We're not unidimensional, we'll multiple dimensions. As a behavioral researcher, I also look at how does the presence of AI influence the motivation of employees? Are they willing to work with AI?

Are you seeing some examples of when that's working well, like when leaders have harnessed the capabilities of AI and leveraged it in a way that was enabling individuals to be more creative, more innovative, whatever.

Yes, I mean, there are many examples. Again, AI also does a lot of good. Especially what I like is the health applications. I mean, more accurate diagnosis, better treatments, better predictions. But it's always in collaboration with a human. So research shows consistently, if you have a doctor, predictions may be accurate 92% of the time. The algorithm could be 93.8% accuracy, but together it's 97%. This shows both AI and humans have a specific skill. It's that skill that you bring together that that's really going to create the value. So if you see in business again going back, it's simply automating or replacing humans. The big responsibility that companies today have is thinking and already implementing what kind of new jobs there will be. You know, the popular saying is, oh, AI is going to help us to be more creative. Because humans, they're uniquely creative, they have emotional intelligence, they can really assess what we need towards the future. Let them work more on those tasks. AI does the routine and repetitive tasks and that makes a lot of sense. The only problem is that in my own consultancy work or dealing with executives, because of their lack of knowledge about AI, you see that they're still stuck in that paradigm of replacing but not augmenting.

Right?

And that has a, that has a problem. There's a problem there because they're so much focused on automation. And at the moment companies are not investing enough to create the jobs of the future. Just to give you an example, let's say 95% of managerial jobs will be automated in the next five years, which is probably true because most managerial jobs, so also white collar, not blue collar, white collar jobs. Here they involve 60 to 70% of the time data management. We use mostly metrics with our KPIs. It's perfect for algorithms. So I call this management by algorithm. The new MBA always say, and if you think about it, administrators think like this as well. Now, if 95% of these jobs can be replaced and humans bring the unique last 5%, what companies should be doing is can we upscale those 5% for the new jobs, the new 100% of jobs, are we making those investments? No, most of the investments today go to AI adoption.

So what should we be doing for those 5%? What should companies be doing?

Well, first of all companies, what they like to do is that society pays for these costs. And governments, you see this a lot when it comes down to governance, for example, of AI. And now we have more and more business leaders coming out and saying, yes, there may be problems with the intelligent machines that we put out there in the market because people cannot be trusted to use it only for good things. So this, they seem to be aware of their responsibilities as well, but they still leave it up to the government. Oh yeah, they can do the governance. Well, it's in a similar way what we see a lot, and this is globally, it's not only in the US where we like to. Companies like to see that the society picks up the bill of creating those new jobs or anything that comes along with innovation. So it means they need to become more responsible in assessing exactly what kind of new jobs are needed to make sure that basically humans will keep having a job and at the same time benefit from the powers of AI. That augmenting effect. And this is again the issue, and this is why I write my books, do my research is really, hey, it's time to become tech savvy enough so you understand AI in its potential and its limitations that you understand this is exactly how you can use it to create value with your company and that workforce is willing to work with it. Now once you understand that, then you also see how will this change the jobs? Because right now, with most business leaders not knowing the technology very well, they invest most of their budgets in the adoption. But the real value is created in the effective implementation, which involves something else than simply buying the technology. It involves looking at how is it going to change our management structure? How do we do identification of talents, which talents do we need once the AI is here? How do we train people? From now on, HR is involved. How do we work with the data? How do we manage data across departments? How do we make departments, talk to each other? What is basically the purpose of our company? Do we ask the right kind of questions? And everyone knows these questions. See, there's so much more happening than simply buying the technology. And most business people are still stuck in that idea. Oh, we just buy the technology. Leave it up to tech experts. So I call it the myth of technology driving technology Transformation. Everything with tech, that's tech experts, but also in a business context. But tech experts, are they trained to be business experts? No. Are business experts trained to be tech experts? No. Do they communicate? They don't communicate. Hence many digital transformations fail.

It's really the integration of the two. Is that what the new book is on? You have a new book coming out, The AI savvy leader. Isn't that it? Is that what this new book is about?

Yes, exactly. So it's built on my observations of the last few years, going into companies. Of course, as a professor you do consultancy as well. You give keynotes. You talk to a lot of people from the corporate world. And after a while, I started to realize that in academia, we're all talking about augmentation. Oh, yeah, okay. AI and humans work together. So I wrote a piece with Garry Kasparov, the grandmaster chess, using his experience with Deep Blue in 1997 when he was defeated by the computer. He always says, this was the first time I was the first human being being fired by a computer, basically because he lost his job. And what I learned from all these, he did a lot of tournaments afterwards, working together with laptops and chess masters, looking at what the best combination was. And what we learned was really there are three types of AI. We always said artificial intelligence, authentic intelligence, which is ours, human leading to augmented intelligence. So three types of AI that you have to understand. So, of course, as an academic, you go very deep. But then when I came out with my first book, Leadership by Algorithm, started talking to more businesses, I noticed, like I just mentioned, they're still stuck in. Oh, no, no, it's. We're replacing. Replacing. No one was talking about augmentation because everyone's talking about automation. But of course, automation is a very quick way of increasing efficiency. So no one, really. Most business leaders that I see only see AI will help them to beat the bottom line, will get cheaper, and it's also more accessible. So, hey, we're winning here. But what are they doing on the long term? What are they doing with their human workforce? So I noticed that the things that we as academics were doing in terms of understanding AI in the workforce, that idea was completely not alive in the business world. And you notice that with every digital transformation, I saw it so many times. Business leaders sidelined. Once they approved the budget to buy the technology, they sidelined. So tech experts were supposed to be asking business questions to see we have the right kind of data. What do we use AI for? Because business leaders are simply not available because they're not tech experts. So you see, that was the big problem there. So that motivated me to really write that book and also saw it in my own executive classes. People in their mid-50s even coming to me saying, professor, shouldn't I become a coder? Rather than these leadership skills, interpersonal skills, why do they still matter? Well, I always say, well, if you don't care about being a human being, about having your humanity, then you shouldn't care. It's fine, start working like a robot. But of course, that's not what we want, because that's also not the purpose.

Of an AI, but are there certain characteristics? So as you said to those executives and programs, are there certain characteristics they should be fostering? Like what to our listeners, what would you share that they should be working on now in order to be better at using AI? Fragmentation instead of just replacement.

So the first thing is, and that's surprising to a lot of people, so many of the leadership styles that you may have had in the past, like the ability to build trust, being empathic, visionary, inclusive, they still matter today. And I would say they matter even more than ever. Because once you bring in technology, what we see in our own research as well, most people are afraid of it to some extent. So rather than acceptance and using it effectively, a lot of people are averse and try to avoid it. And also, if an AI fails, people don't want to use it anymore. Even if it's still superior to you after the failure, we still don't use it because the trust is very low. So what you can see is as a leader, you need to be tech savvy enough, I'll always say, to understand what the value can be to your organization, because you still have to be visionary and be able to communicate and inspire. You need to explain the why. Secondly, you need to try to build a trust that people will use it and are willing to use it. So this requires two things, that you understand the technology enough to make sure you have the right governance and the right kind of policies in place. Like, is it transparent enough? Is there not a human out of the loop, but in the loop so that you have human control, because this, it's all psychology. On the other hand, you also have to make clear to people that you have certain credibility in understanding this is why we use AI. I understand it to some extent because I see the relevance for your job. And you explain. So as any leader, you try to facilitate change. And in that sense, these skills are very important. Agility, being able to build relationships and rapport with your people, being tech savvy enough. So I describe exactly the kind of level that you need in terms of understanding how much AI in a company is actually statistics. Because most of the AI we use today is still supervised, because supervised is transparent. So we have some control. If it's unsupervised, a black box, and the risk for stakeholders harming stakeholders, interest is too high then. So understanding all these little details and bringing it into your leadership style, that's basically the book. It's nine ways of taking back control and making AI work for your organization.

That's terrific. I mean the basics like you said, trust, communication, vision, all those fundamental leaderships skills are going to be important also in this new AI reality. Really interesting. You've also done some interesting work on the concerns about leadership procrastination. Tell us a little bit about that research. That's a really interesting topic.

Yeah, people like the concept of procrastination. So procrastination usually, I mean we all suffer from it. So basically everyone has a certain level of procrastination. Some people just suffer more from it than others. And you all realize you probably everyone who was a student knows like okay, some people wait until the deadline and some wait even longer and then miss out. But why? Where does that tendency come from that we, we think we have more than enough time and then when it comes down to it, we have a problem. So first of all, when people ask you something and let's say it's in a few months time, we only see the general request, we don't see the details or what it means concretely to you in terms of like oh, what do I have to do then when I work on this, how much time is it going to cost? We don't take that into account. Once it gets closer in time, then suddenly we see all the details and we get stressed. So it's not a behavior that normally serves us, it's something that actually harms us. And you see this with a lot of leaders. Now what I was always interested in, is it really the person or is it also the situation? As you know, in many organizations, including universities, there's procrastination in the system as well. And this can be caused by bureaucracy, this can be caused by irrational behavior, power games, whatever, but they delay. And if you delay at a higher level, it trickles down. So a lot of leaders end up in positions where basically they're forced to delay things and enhancing procrastination tendencies. Anyway, so it's really. The book is about the interplay between an organizational setting and its power dynamics and the tendency for humans in general to procrastinate and how they play together and how you can disentangle them.

Really interesting. And you're certainly not a leader that procrastinates, but you are a new leader at Damore McKim as our new dean. How is your research, whether the AI leadership. I know you do work in ethics. How is all of your research informing your role as dean of the business school?

Well, that's a good question because that's something that I wanted to ask myself. That's one of the reasons why I stepped in the role as, you know, as an academic, you study in a relatively safe environment because you can objectify the topic. You can basically take the arm's length distance and say, like, okay, I'm looking at it, but I'm not really involved. So there's some relative safety. But after a while, once you get into certain leadership roles. I've been leading research centers. I was a head of department, I was a research dean. You become interested as well. Like, okay, can I do the whole. The whole thing? Because as a dean, you basically need to know everything and you're responsible for everything. So it's comparable to a CEO role for an academic. And I was intrigued by the prospect of saying, like, I write about it, I do research about it, I teach about it. And after having done what is it about 12 years of executive education. Yeah, I felt like, okay, I wanted to know which theories are really true and which theories just don't work. So some of the things that I'm trying as a dean now is also working on the psychology of people. What is it that they expect? What is it that I have to communicate? So you learn a lot about framing. I may have good intentions, but if it's not received the way that I intended, may work against me. So those are dynamics. Very interesting to learn as well. So, for example, when you want to change something. Now, today at Azure School, we want to work more closely with the university, be part of the university system. I'm always saying, like, look, it's important that we also understand the perspective of the university to understand how they see us, to understand what we need to do to make that collaboration work. So it's not only that you expect. Most people have a tendency to expect that the other will move first. Sometimes you have to move first as well. So those are things that basically on a daily basis, you're confronted with as a leader. And I enjoy learning about this. So for me, it's also a discovery about. I think we all have that talent, but it's really putting it in practice and seeing whether it resonates with people. And I must say, as an academic, I've learned a lot about my own research as well, whether it's really valid or whether the theories in our field really work. And I've already found out a few things that I'm thinking these theories maybe should be out there.

Well, we'll have to have you back on another episode to talk about the. Here's what really works as leading a business school so, David, I just want to close with your advice. You've lived and worked on four continents. What advice would you give the listeners of international business today on being a leader in different cultures?

Well, I think it's an important question because although we've seen political tensions, the COVID 19, which showed us like, does global still exist? Some people are questioning it, but I would say, I mean, global is our only option. We'll have to collaborate. We have one planet, so it's not even an issue. You have to be a global leader today. That's also what the Mormon gimmick school of business wants to do. Our responsible business leaders of the world, that's the kind of people that we want to train. So what does that actually mean? You need most of all experience. So research even shows that if you lived in more countries and it's not the length, you can live in two countries for 20 years each. That's not going to help you. But having had experience of different countries actually will make you more savvy in being adaptable. Cultural agility, as you call it. And that's an important skill. So that means, like, yes, try to be exposed to many different experiences and listen to it, observe. So that's one thing I've definitely had to learn as well. Going to work and live on four different continents requires that you understand the culture you're in. Because you're a guest there. You need to understand your position as well. But on the other side, I've also learned that your authenticity cannot be completely taken away by the need to completely assimilate in the culture. Because don't forget, people know you're a guest, people know you're coming from another place. They're also eager to learn themselves. So you need to bring some authenticity in the role as well. But I think it's a little bit like earning idiosyncratic credits. You assimilate first, you listen, you see, communication may be different. When do you talk, when do you listen? This may change across cultures. May also be like, do you comply more with authority or less? Some people in the US we express much more our feelings, we want to do it. Whereas in Asia, certain countries, when I was in Singapore, it's very. It's determined by the hierarchy. So those are things that you need to adjust to and find your place in it and then show your authenticity because that will be added value. So it's really finding that balance between listening and authenticity, assimilating and being distinctive. And I thought that was always the most enjoyable part of it because you feel you've mastered something. And that's a great feeling.

And that's a great piece of advice. What we know out of the cultural agility work is that humility is so critical to really stop and learn the environment. No matter how brilliant you are, as whatever your profession is, you still need to understand the context that you're in in order to be successful. But like as you said, we want to be authentic while we're doing it.

Yes. Yeah.

That's so important. David, thank you so much for being on International Business Today.

Thank you, Paula.

To our listeners, thank you for joining us for today's episode of International Business Today. If you enjoyed it, please share it with your network. As always, we'd love to hear from you.

Dad.