Chapter 7

Adopting d ata-driven culture

Leadership and change management
for business optimization

LEADERSHIP AND CULTURE CHANGE IN BO

Business optimization (BO) is a strategic management initiative that brings

about a fundamental change in the people, processes, technologies, and
economies of a business. The organizational structure and dynamics of
the business change as it becomes more agile, lean, cohesive, and holistic.
The organization becomes more capable of rapid and effective responses to
external stimuli and able to initiate its own changes as a result of AI.
A business functions by executing its business processes. This execu-
tion of processes provides value to the user. The value can be external or
internal to the organization. Optimization, in particular, focuses on the
most efficient and effective way to achieve the value. The impact of this AI
adoption effort is the changes to the way decisions are made in organiza-
tions. For example, with the help of A I-based analytics, customer-facing
staff has substantial additional information to make decisions on the spot.
Such AI-enabled and reengineered business processes eschew the hierarchi-
cal approval processes. AI-based processes flatten the organizational hier-
archy and thereby radically change the organizational culture. Managing
this change in the cultural mindset of the organization is an interesting
challenge in adopting AI, and it mandates astute leadership.
Changing the mindset of people (both staff and customers) is a greater
challenge than the reengineering of activities and tasks within a process.
Changing to a data-driven culture requires the business leaders to pay due
attention to human behavior, motivations, work environment, business
operations, and governance. The impact of automation and optimization
on the knowledge workers and the customers requires special attention.
The manner in which people accept, respond, and operate the AI solutions
determines the success (or lack thereof) of the BO initiative. Astute leader-
ship is a crucial element in transitioning to optimized business.
Additional attention is required to the quality-of-service (QOS) factor.
Optimized services are affected by quality of data, reliability of devices,
and relevance of analytics through to visualization, security, and percep-
tion (more discussion in Chapter 8). The customer’s perception of quality

177
178 Artificial Intelligence for Business Optimization

and security is a supreme indicator of business value. A reliable and resilient

business builds capacity and capabilities to handle cybersecurity and qual-
ity requirements in an iterative and incremental (ongoing) manner. Business
strategies combined with agile instill adaptable behaviors, strengthen skills
through training and mentoring, and enable the business to be adaptive,
responsive, and resilient.
Leaders are entrusted with envisioning, preparing, and leading the execu-
tion of AI-based optimization. Leaders also manage the ensuing change to
a data-driven culture. Leaders prepare the organization for risks, disrup-
tions, and unexpected outcomes. Foremost is the people risks that impact
staff, users, managers, and support roles such as accounting and audits.
This preparedness of the organization before, during, and after business
optimization with AI is the key differentiator in providing customer value.
Managing the employees and other contract staff within an organization,
keeping up their motivation, and keeping them abreast emanating from the
application of AI in optimizing business processes of the changes are crucial
ingredients of successful BO. Success in achieving career aspirations by indi-
viduals and ensuring personal job satisfaction requires right attitude together
with careful planning and subsequent nurturing of that attitude and plan.
The core value of the business dictates what the business is all about. This
is the primary reason why the business exists. Leaders ask the question:
How will the core value change as a result of BO? Or, does it need to change
at all? A radical business transformation can change the core value of the
business, for example, from being a nonprofit charity to a profit-making
business. Another example of change is that from being an entirely physical
business to an online or virtual business.
Leaders create an environment for business optimization that is not lim-
ited to technologies. Encouragement and rewards for people, funds, and
resources to train and change their mindsets, and adoption of the required
frameworks and standards for process improvement, are crucial leadership
activities during BO. Culture change in business complements automation
and optimization of processes and services.

Change of mindset
Adopting AI-based data-driven culture in an organization requires a change
in mindset. Realization of value from AI and real-time decision-making is a
result of people implementing and using the solutions. BO requires people to
change the way they work, and therefore, their mindset. (This change was
discussed in Chapter 2, Table 2.1.) Flexibility of a business is its ability to
change internally so as to respond to external pressures. This flexibility is due
to the use of AI in business processes. Change is inevitable due to this flexibil-
ity. As various systems and functions like marketing, financial management,
HR, vendor management, workload distribution, SCM, HR, and compliance
 Adopting data-driven culture 179

undergo a change, it also requires a corresponding change in the mindset.

These aforementioned systems change the way they store data and consume
the cloud-based analytical services. Advising customers, vendor manage-
ment, application integration, data feed management, and supplying data to
supporting operations require to be managed as they all undergo change.
Changes from automation create less impact than changes from opti-
mization. Routine business processes that are well suited to automation
improve the time, accuracy, and number of people employed. Optimization
requires greater problem-solving skills and focuses on higher value-added
services. Therefore, optimization changes the basic structure of the business
process and the value it provides.
Cloud computing, mobile computing, and IoT Big Data analytics and
ensuing real-time decision-making provide desired business outcomes so
long as knowledge workers1 with the business processes accept those opti-
mized changes. The right people using the updated processes and making
the right decisions at the right time and place require carefully managed
change. Developing an approach to the change required of knowledge
workers is a leadership responsibility. 2

Managing the people risk

The complex and changing nature of interactions between people and
data-driven processes poses a risk to successful BO. Optimization redefines
the roles within the organization including their reporting hierarchy. Roles in
an optimized business require advanced problem-solving and complex people
management skills that are more challenging than in automation. Changes in
business due to optimization require resources skilled in critical thinking, ana-
lytical problem-solving, and change management. Users need the capabilities to
manage by exceptions and intervene using natural intelligence (NI) in order to
manage customer expectations. NI provides the crucial, subjective inputs and
also helps alleviate the ethical and moral challenges in data-driven decisions.
Leadership facilitates changes in behavior to reduce people risks. These
changes are based on the following considerations:

• Viewing people, processes, and analytics as a holistic combination

to provide customer value. People issues to be handled along with AI
implementation. This enhances the capabilities of people to use ana-
lytics in decision-making.
• Planning for the impact of business and social factors on each other
during automation and optimization of processes. In particular, the
way the social order changes in the organization.
• The initial hiccups which may result in slowing down of services due
to the adoption of AI and managing the expectations of the customers
and staff when that happens.
180 Artificial Intelligence for Business Optimization

• Providing all necessary training and mentoring to build the capacity

and capability for the staff to be adaptive, responsive, and resilient by
AI-enabled business processes. Providing coaching to users, including
customers, on the new ways of interacting with the organization.
• Developing the organizational ability to anticipate and respond to
changes in AI technology by continuously scanning the technology
landscape.
• Organizing modeling and implementing business processes based
around the users rather than business hierarchy.
• Encouraging modeling of end-to-end process requirements that will
provide a clear indication of how people are affected.
• Promoting a holistic quality environment in the organization by using
agile iterations and increments.
• Ensuring active leadership participation in the initial planning before
commencing AI adoption. Leaders handle the concerns and issues of
people even in the planning stages of automation and optimization.
• Leading by example and providing clear vision and direction to the
organization. This can be achieved by using AI-based decisions and
making them known.
• Adapting formal risk management and a risk-based approach to AI
adoption. This includes monitoring risks and preparing to adapt and
respond to changes due to automation and optimization on a continu-
ous basis.
• Including metrics, compensation, and rewards in the overall BO
strategy.
• Applying Composite Agile in outlining capabilities and delivering
projects.
• Supporting the capability of a business to remain resilient and sustain
operations through changes due to AI.
• Supporting establishment, management, assessment, and use of col-
laborative business processes.
• Supporting and providing all necessary training and coaching to the staff.
• Ensuring security and privacy within the A I-enabled business pro-
cesses. This includes monitoring risks and preparing to adapt and
respond to changes due to automation and optimization on a continu-
ous basis.
• Facilitating dynamicity in business processes – change the business
processes of the organization to quickly and effectively respond to the
changing needs of the customer in a location - and time-independent
manner.
• Ensuring corporate responsibility by providing standards and consis-
tency through governance frameworks, improved corporate account-
ability, and regulatory compliance through timely, accurate, and detailed
reporting on the business performance.
 Adopting data-driven culture 181

• Ensuring security and privacy of customer data as the business pro-

cesses change, old data becomes redundant, and new data is brought in.
• Managing environmental responsibilities with Lean and efficient busi-
ness processes, efficient data centers, and sustainable human resource
(HR)
­ policies.
• Enhancing electronic presence through social media by exposing the
right areas of the organization to customers, potential customers, and
business partners.

Managing human behaviors

People are involved in all business functions, including financial manage-
ment, customer relationship management, and supply chain management.
People are also involved in HR (people management). Each business func-
tion requires decisions, and data analytics provides the ability to make
those decisions faster and cheaper. Creating an environment for data-driven
decisions requires each user (staff) to understand the importance of the
source, storage, and usage of data. An important source of data is the user
themselves. Understanding and managing human behavior in the adoption
of data-driven culture is the leadership responsibility. Leaders understand
that it is the combination of the environment they create and the behaviors
they support, which will result in a successful outcome for BO.
Leaders create situations that make it easier for the right people to take
the right decisions. Confidence in the use of analytics in decision-making
is a multipronged approach requiring demonstration of successful decisions
across the organization. For example, first-time success in approving a loan
by a customer-facing staff in a financial institution is a story promoted by
the leadership across the institution. This promotion creates the necessary
impetus for other decision-makers to start using the AI solutions and pro-
vide faster and more accurate service to the customers.
As a part of managing the change in the business, leaders also have to
handle ambiguity and confusion. Anticipating ambiguity and confusion is
important – for no matter how sophisticated the AI solution is, its usage by
people is bound to have elements of ambiguity and confusion.
The subjective aspect of data usage by people includes costs, regulatory,
security, privacy, and reliability issues. People are interested in the source of
data, how much it costs them, whether the data and analytics are protected
by regulatory compliance as well as technical security, and whether the
analytics will jeopardize their privacy. People work on trust and reliability
of the analytics they are using. Large social media organizations acquire
data directly from users and then they further provide it to other vendors in
the analytical market through Analytics as a Service (AaaS) to others. AaaS
can be a cause for concern for end-user customers who need assurance of
security, privacy, and reliability of the services.
182 Artificial Intelligence for Business Optimization

Human behavior is also a factor of perception. Therefore, optimization

relies heavily on the quality of information and insights generated by AI in
a business process. In particular, quality needs attention across business
silos that include both internal and external stakeholders. Chapter 8 further
focuses on these important aspects of quality.
Sociocultural factors impact the implementation of AI and the transfor-
mation of workers to knowledge workers. Staff manage the business risk
as services are automated and optimized. But staff also face the risks ema-
nating from AI adoption. For example, as the number of people required
to execute a process reduces, the staff can perceive that as a threat to their
jobs. Cost savings and business efficiency alone are unlikely to drive the
enterprise-wide acceptance of A I-enabled services. Therefore, cost savings
associated with an activity are less important than the acceptance and use
of a process by people.
Incumbency is highlighted as a significant people-based business risk
during BO. Automation may not always result in acceptance by people.
This is mainly because automation introduces uncertainty in the minds of
staff in terms of their own future. Optimization further exacerbates this
challenge of uncertainty in the minds of users.
Regulation is required to ensure the security and privacy of data.
Regulations, however, can also contribute to the slower adoption of A I-based
decision-making across multiple industries. For example, data breaches
in a taxi company can lead to slow adoption of AI in an airline company.
Collaborations across multiple industries lead to the challenge of regulations
impacting adoption.
Due consideration to these soft (people) factors is required and that is a
leadership responsibility.

HUMAN RESOURCE ( HR) MANAGEMENT

The Human Resource (HR) function of an organization has to handle two

distinct aspects of culture change due to BO. One is the handling of change
across the organization. The second is changes to processes and opera-
tions of departments with the adoption of AI. HR is responsible for revised
processes and services. However, HR processes based on cloud services
(e.g., Software as a Service or Infrastructure as a Service) also change with
AI: for example, the upgrading of data science capabilities through inter-
nal training, the process of recruitment, and the compensation and reward
structure – these all change with AI adoption.

HR process changes
The following HR processes change with AI:
 Adopting data-driven culture 183

• Performance metrics to monitor, reward, and promote people are

optimized with data analytics.
• The recruitment process eliminates the intermediary processes and
directly uses analytics-based profiling.
• Redefining roles and responsibilities due to changes from BO and man-
aging transition of roles. This will include mentoring and coaching for
AI-enabled decision-making. Existing expertise in the organization
can be upskilled to use AI in business processes. Once developed, this
same expertise is used in mentoring other staff.
• Defining new roles in BO that will provide data analytics and that will
learn to use data analytics in decision-making.
• Anticipating changes to behaviors in HR personnel resulting from
optimization.
• Enhancing professional skills development through training, men-
toring, and recruiting. This would be customizing training based on
the competency level of the teams within the program of work. Train
and mentor champions to promote A I-based processes. Invite these
experts to provide training.
• Training for the entire end-to-end business processes. This training
starts with the key goal of the process and then helps the users under-
stand the activities and tasks impacted by AI.

Organizational process changes

The following organizational processes change with AI adoption:

• Modeling processes by investigating their activities, roles, deliverables,

and practices. Identifying the diverse pull for each of these process ele-
ments by the corresponding methods, then work to reduce the effect
of this handling that methods friction and pull in separate directions.
• Involve end-users and sponsors in the entire adoption effort so they
are able to anticipate and participate in the change arising in the pro-
cesses. The iterative and incremental approach to adoption ensures
that the users have the right expectation from the changes.
• AI presents new business opportunities and challenges. Business pro-
fessionals need training and mentoring to handle the challenge.
• AI and networking increase the opportunities to work remotely. This
change creates newer roles and challenges of handling privacy and
security of processes
• Data analytics, visualization, risk, and security are all included in the
soft issues of culture that impact employees, suppliers, customers, and
shareholders
• Communicate across the organization the need to transform with the
adoption of AI. Identify the elements from the higher-level (business-level)
184 Artificial Intelligence for Business Optimization

processes that can benefit from AI. Embed AI-based within those higher-
level processes.
• Align processes with each other by reducing “methods friction.”3 This
is called “process alignment.”
• Align the business internally to its existing technologies and systems
and externally to its business partners and customers.

Virtual and collaborative teams

The creation of virtual teams based on the niche skills of various employees,
consultants, and managers can lead to multiple offerings by the business as
various players can get together to serve the needs of a particular customer.
Such virtual teams enable the business to tap into the skills of consulting
professionals outside the business for shorter and specific durations. While
the purpose of such reengineering of processes is not staff reduction, they
do lead to a much more Lean-Agile team structure.

Training business people

Business people (nontechnical) need training on ongoing basis to help them
utilize optimized business processes. Three questions non-tech employees
should be able to answer4: How does AI work? What is it good at? And
what should it never do? This requires training and mentoring for business
users to have a good understanding of the basics of AI. Second, the business
user is trained to spot the activities and tasks that are optimized through
AI. And third, the users are trained on the security and privacy of AI in
their own processes.
Based on Knickrehm, 5 the following needs to be planned in changing the
culture of the organization:

• Augment human skills in business with AI rather than aiming to

replace humans altogether. Total replacement of humans is envisaged
in pure automation; but in BO, humans are complimented by AI
• Reinvent operating models and reengineer processes in order to
accommodate data-driven decision-making. Business process reengi-
neering discussed in the previous chapter deals with the creation of
newer models of business and its processes. These processes are aimed
at providing value to customers with efficiency and effectiveness.
• Redefine the jobs for the staff and associates which will accurately
reflect their ability to make business decisions using A I-based insights.
• Rethink organizational design to a flatter, collaborative organiza-
tional structure rather than a hierarchical one.
• Encourage staff to partner in the new organizational initiative rather
than being “told” to do what they are supposed to do.
 Adopting data-driven culture 185

Ascertaining current skills and competencies in the organization and plan-

ning for upskilling can be based on frameworks such as the Skills Framework
for Information Age6 (SFIA). SFIA can be used across multiple business pro-
cesses with the organization.

Educating the customer

Customer value is enhanced by direct and accurate access to the organiza-
tion and its services. This access transforms the business into an “available”
business that enables the customer to obtain personalized services from the
business. For example, an airline passenger with access to the flight schedule,
times, and check-in facility is able to manage himself or herself much better
than with the corresponding manual flying procedures. Similarly, accessibil-
ity to multiple sources of information such as weather, road conditions, and
news reports can all add up to a pleasurable and safe travel experience.
In addition to training and upskilling the staff and associates who are
providing the service on behalf of the organization, it is also important to
pay attention to the changes that the customer will experience as a result
of AI-based decisions. For example, the most change that customers expe-
rience is a chatbot using IVR (interactive voice response) to answer their
questions. Customers can also be educated to use “Self-Serve Analytics”
to figure out the basic, automated answers to queries on loans, credit
card facilities, airline prices, and hospital bookings. Customers weigh in
the advantages of using Self-Serve Analytics, providing they are not over-
whelming. Customers also interface with the business through sites, such as
Twitter and Facebook, enabling the organizational systems to interact with
external systems.

• Employees – Organization moves to a lean structure. High value-adding

permanent staff to support core functions and drive business transfor-
mation and services. This is supplemented by managed vendors and a
resource pool of skilled specialists brought in as required through an
optimized recruitment process.
• Rewards for I nnovation – A suitable reward and recognition values
framework is required across the enterprise.
• Customer Focus – Business areas, including technology, are often
internally focused with “people operating around them.” A move to a
more customer-centric focus is required.
• Management Capacity – The ability of an area of business to undergo
change is often limited by the capacities and capabilities of manage-
ment. Building the soft skills of management is part of the successful
transition.
• Vendors play a significant role in managing public and private cloud-
based vendor management as part of managing business change.
186 Artificial Intelligence for Business Optimization

ADOPTING AI FOR AN AGILE CULTURE

Agile is a culture in its own right. Businesses strive for quality to maximize
customer value. An agile culture enables businesses to respond effectively to
internal and external changes. Agility also initiates changes of its own. AI
contributes to agility by providing timely updates on the status of a business
to facilitate decision-making.
A flexible business model and associated Agile corporate culture are
capable of handling sudden external changes. Accompanying the need for
structural flexibility of business is the need for the underpinning systems
(e.g., HR, customer relationship management, CRM) to facilitate such
nimbleness. BO integrates these technologies and tools with processes and
people, thus paving the path for a flexible business structure.
BO changes an organization’s internal operating structure, alters its
relationship with external parties, and affects the business ecosystem. BO
crosses the boundaries of systems and processes resulting in agility.
Embedding AI in business processes changes the way the entire business
operates. Decentralized command and control with distributed operations
enables a maximum number of staff to make decisions. Changes are brought
about in development and maintenance, budgets and costs, support and ser-
vices, architecture and infrastructure, and legal and environmental aspects
of business. Sociocultural, psychological, and motivational issues are part
of leadership challenges in BO. Systems Thinking, as described by Senge
in Fifth Discipline,7 helps in managing these changes. Unhelkar (2010a)­8
has further argued for the need to handle people issues by getting together
project sponsors, business stakeholders, customers, and users, along with
architects, designers, developers, and testers, to implement solutions.
The agility of business depends on the type and size of business. For exam-
ple, a small travel company can adopt agility in its operational processes
using basic data analytics, whereas a large hospital transforms all its busi-
ness functions to Agile. Thomsett (2010)­9 advises beginning any business
transformation with a series of “fierce” conversations around culture, val-
ues, and behaviors. Such conversations, he argues, will ensure that the peo-
ple are totally involved and are fully aware of the potential cultural impacts.
BO benefits such open and robust conversations. Eventually, BO makes an
organization agile, customer-driven, and an enabler of personalized services.
Following are the advantages of AI to customers on the sociocultural level:

• Enhances customer experience through personalized and location-

specific services due to fine granular analytics.
• Provides customers with a range of additional products and services
due to collaborating businesses.
• Provides customers with the ability to demand rapid changes to their
existing orders with reduced risks.
 Adopting data-driven culture 187

• Enables a customer business to quickly initiate changes to the existing

order.
• Facilitates ease of compliance for the customer, and this is achieved
by providing the customer with timely data on regulations, securely
and privately.
• Extends customer global reach through wide offerings of products and
services with the use of communications technologies and Web services.
• Improves the quality and efficiency of products and services.

The sociocultural environment of the organization becomes more agile and

flexible as AI is adopted by the organization. For example, with AI, the
demographics of customers on social media are better understood. These
analytics provide valuable information on customer sentiments and their
trends. The organization can respond in anticipation, making it agile.
Adopting AI also changes the way goods and services are sold online.
Agility with collaboration expands the reach of the organization beyond its
geographical boundaries. The expanded reach provides agility to the busi-
ness to serve wider customer needs.
Agility is also the ability of a business to creatively generate new products
and services, come up with innovative ways of handling the competition, and
prioritizing its risks. An Agile business creates many opportunities due to its
creative and innovative culture. Enabling innovative approach to business
often calls for changes in business practices and business operations. The need
to foster an innovative culture is also high in BO, which enables people to
experiment with processes and technologies to improve and optimize them.
The Lean Six Sigma approach in the business methods space, or even
governance standards, such as the Information Technology Infrastructure
Library (ITIL),
­ 10 can be customized to carry out BO. These process frame-

works can enable BO by capitalizing on the people, processes, and tech-

nologies of the organization.
Agile culture is also a cybersecurity-aware culture. Agility is flexibility
without sacrificing the internal and external security, and also its physical
and electronic aspects.
Successful transformation underpins the principles and practices of a
legal framework that can be used to understand the contractual obligations
of the organization, particularly related to electronic transactions arising
from collaborative commerce. This is particularly important as AI Internet
technologies are embedded within processes.

CONSOLIDATION WORKSHOP