Generative AI Reshaping Business Operating Models and Overcoming Scaling Challenges

Generative AI is fundamentally transforming business operating models, promoting agility, collaboration, and customer-centricity, while presenting challenges in scaling initiatives. Key obstacles include high computing costs, skills shortages, data governance issues, and ethical concerns. Organizations must adopt strategic approaches focusing on cost management, talent development, and ethical practices to successfully leverage generative AI for competitive advantage.

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Generative AI Reshaping Business Operating Models and Overcoming Scaling Challenges

Uploaded by

Md. Abdullah Al Mahmud

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Download as DOCX, PDF, TXT or read online on Scribd

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Generative AI: Reshaping Business Operating Models and Overcoming Scaling

Challenges

Generative AI (gen AI) is not just another technology; it's a catalyst for fundamental change in
how businesses operate, requiring a comprehensive overhaul of traditional models. This article
explores the profound impact of gen AI on business operating models and outlines the key
obstacles to scaling these transformative initiatives.

I. Transforming Business Operating Models with Generative AI

Gen AI is prompting a shift towards more agile, collaborative, and customer-centric models.
Here are some key changes:

 Hybrid Operating Models: Centralized control is giving way to hybrid approaches,

such as the "hub and spoke" model. A central team manages gen AI models, while
decentralized teams customize and deploy them. Currently, 63% of executives are
deploying gen AI using a hybrid model. CEOs must update operating models to enable
this hybrid decision-making.
 Evolving Workforce and Skills: Gen AI is automating routine tasks, placing greater
importance on skills like creativity, critical thinking and empathy. Roles are evolving
faster than organizations can update the org chart, requiring leaders to define new roles
and necessary skills. Companies must invest in upskilling programs to prepare
employees for AI-driven workflows.
 Faster Decision-Making: Traditional top-down decision-making is becoming a barrier
to innovation. Organizations need to reimagine workflows and decision-making
processes, empowering people to drive change. Gen AI enables faster decision-making
by helping teams pivot quickly.
 Collaborative Culture: Scaling gen AI is everyone’s job. A collaborative culture with
interdisciplinary teams is essential to ideate and implement gen AI initiatives.
Organizations must evolve operating models to enable a cross-enterprise approach to gen
AI adoption.
 Innovation and Experimentation: Organizations shouldn't expect perfection on the first
attempt. Innovation should be the guiding principle for transformation. Leaders should
encourage experimentation within guardrails, recognizing innovation and scalability are
intertwined.
 Customer-Centric Focus: Businesses must adopt operating models centered on services,
products, and platforms, prioritizing customers. A governance model is essential for
transparency around gen AI use in service delivery, product development, and across the
ecosystem.
 Integration of IT and Business: Gen AI is bridging the gap between IT and the
business, with technology driving innovation and the business propelling the technology.
CEOs must break down traditional divisions and integrate functions more holistically.
All leaders are now responsible for both technology modernization and business
performance.
 Automation and Augmentation: Gen AI isn't just about automating tasks but about
improving processes and introducing new workflows. Leaders should transform
operations into hubs of strategic planning and use AI to augment human skills.
Employees must understand how AI assistants can improve efficiency and adaptability to
changing business needs.
 Hybrid by Design: A hybrid architecture that combines on-premise capabilities with
cloud agility is essential for scaling gen AI initiatives.

II. Key Obstacles to Scaling Generative AI Initiatives

Despite the transformative potential, scaling gen AI initiatives faces several major obstacles:

 Cost of Compute: The massive computing resources needed for gen AI lead to high
costs. Cloud costs related to deploying gen AI are twice as high as the cost of the models
themselves. CEOs should set cost guardrails and assess compute needs early.
 Model Costs and Complexity: The cost and complexity of gen AI models are barriers to
adoption. Larger models have higher costs and require more maintenance. CEOs must
choose the right model for each task and cultivate a model-agnostic mindset.
 Skills Shortages: A lack of gen AI skills is a major constraint, hindering digital product
initiatives. Organizations must invest in upskilling and training programs.
 Data Issues: Data quality, access, and governance are challenges. Concerns about data
accuracy and bias are major barriers. A lack of proprietary data is a barrier for many
CEOs.
 Ethical and Regulatory Concerns: Ethical issues and regulatory uncertainties cause
organizations to proceed cautiously. Many organizations are forgoing gen AI benefits
due to ethical concerns.
 Integration with Existing Systems: Integrating gen AI with existing business processes
is complex. Organizations must integrate systems, applications, and data flows to
streamline operations.
 Lack of Collaboration: Insufficient collaboration between different functions hinders
scaling. Organizations must evolve their operating models to enable a cross-enterprise
approach.
 Risk Management: Unique risks introduced by gen AI, including compliance, privacy,
and bias, are significant.
 Talent and Culture Change: Employees may be uncomfortable with the pace of gen AI
adoption, requiring careful change management. Organizations must prioritize people
over technology in their gen AI strategy.
 Uncertainty: Many leaders lack a clear understanding of how to implement and scale
generative AI. There is no single path to success with gen AI; leaders must be ready to
experiment and adapt.

III. Navigating the Challenges

Scaling gen AI requires a strategic and holistic approach, focusing on:

 Cost Management: Implement clear cost controls and assess computing needs early.
 Talent Development: Invest in upskilling programs and foster a culture of continuous
learning.
 Data Governance: Address data quality, access, and ethical concerns.
 Ethical Practices: Prioritize transparency, trust, and fairness in AI implementation.
 Change Management: Embrace change and experimentation.

Generative AI is revolutionizing business operating models, driving a shift towards more agile,
collaborative, and customer-centric approaches. However, scaling these initiatives requires
careful navigation of significant financial, technical, ethical, and organizational challenges. By
focusing on cost management, talent development, data governance, and ethical practices,
organizations can harness the full potential of gen AI and gain a competitive advantage.
Organizations that embrace these changes and adapt their operating models accordingly will be
better positioned to leverage the full potential of gen AI and achieve a competitive advantage.