The Intelligent Executive: Leveraging AI for Strategic Advantage
In the fast-paced world of private equity (PE), effective change management is crucial following any merger or acquisition. A recent survey revealed that 54% of PE-backed companies experienced at least one CEO change between acquisition and exit. This high turnover rate underscores the need for PE firms to select candidates who can make an immediate and robust impact. In today's tech-driven landscape, one critical skill set stands out: Artificial Intelligence (AI) readiness.
With 42% of large corporations actively deploying AI, the ability to effectively utilize these tools, train employees, and derive measurable benefits has become a key responsibility for CEOs. In fact, information services company Gartner predicts that by 2025, 70% of new applications developed by enterprises will use AI or machine learning technologies. For PE-backed companies aiming for rapid growth and efficiency, AI readiness is not just an advantage—it's a necessity.
Here are the key questions and areas an incoming CEO should be asking about to demonstrate their AI readiness:
Understanding the Quality and Quantity of Your Internal Data
AI, especially generative AI, relies heavily on an organization's underlying data. The principle of "garbage in, garbage out" is particularly relevant here, as unclear, complex, or unclean data can derail AI initiatives from the start.
An incoming CEO interested in digitally transforming their new organization should ask:
What data do we currently have?
How is that data being utilized?
Can this data be cleaned and leveraged to create new revenue streams?
While data analysis may seem beyond the scope of a CEO role, it is crucial that this role encompasses an understanding of the organization from top to bottom. The underlying data that would power any AI initiative for a company falls within that scope and cannot be ignored.
Market Projections and Industry Trends
Despite concerns about job displacement and replacement, AI will actually create more opportunities than it eliminates. In fact, by 2025, there will be 100 million AI jobs globally, indicating a robust future for AI in the workforce. An incoming CEO must be ready to navigate significant institutional change and prepare their organization for the future of work.
The new CEO, as well as the PE firm, should therefore be curious about the following:
Where does the company stand in its digital transformation?
Which departments can benefit from AI immediately?
How can AI streamline operations without disrupting culture?
While Chief Technology Officers (CTOs) or Chief Information Officers (CIOs) may lead implementation, the CEO must oversee the broader impact on the company, its employees, and its culture. They should also closely monitor the investment and gauge the ROI over various time horizons.
Potential Barriers to Adoption
While AI and digital transformation offer exciting opportunities, the incoming CEO must critically assess the potential benefits of AI implementations against any risks they might pose, both in the short and long term. An incoming CEO needs to have the foresight to anticipate bumps in the road and implement strategies to overcome these hurdles as they integrate themselves and this technology into the workplace.
Following that line of thinking, a new CEO should be promoting this initiative by asking:
Is our existing technology stack compatible with AI integration?
What are the upfront costs of implementation and training?
What's our projected timeline for seeing ROI?
Have we consulted all relevant stakeholders in our implementation decisions?
While 92.1% of businesses investing in AI report measurable results, including a 50% increase in employee productivity, success requires foresight and strategic planning. A new CEO must recognize AI's potential, understand its functions, and effectively communicate its value to all stakeholders.
Collaboration with Existing Leaders
AI transformation is not a solitary effort. CEOs must work alongside their executive team to implement AI without disrupting different departments within the organization. By aligning their vision with existing leadership, CEOs can craft a holistic strategy that innovates while embracing the organization's unique needs. They should collaborate closely with:
CTO or CIO: For technical implementation and integration
CFO: To manage investment and track ROI
COO: To oversee operational changes and process improvements
CHRO: To manage workforce transition and upskilling initiatives
By factoring in the varied perspectives of the existing leadership team, a cohesive digital transformation strategy can be created. This blended strategy accounts for existing factors within the organization while still introducing enough new ideas to be bold and impactful.
Live in Action: COiN and J.P. Morgan
J.P. Morgan's COiN (Contract Intelligence) platform provides a powerful example of AI's transformative potential in streamlining complex business processes. By automating the contract review process, COiN was able to eliminate 360,000 hours of manual labor, significantly improving efficiency and reducing the risk of human errors. This not only saved the bank immense resources but also ensured higher accuracy and compliance, which are critical in the highly regulated financial industry. COiN's success highlights how AI can revolutionize traditional operations, offering scalable solutions that enhance productivity while mitigating risk.
The bank's strategic decision to hire renowned AI experts Manuela Veloso and Tucker Balch illustrates how external expertise can drive technological innovation. Their leadership helped guide the development and integration of AI within J.P. Morgan, proving that external thought leaders can offer fresh perspectives and the technical depth needed to unlock AI's full potential. A visionary CEO who understands AI's strategic value can spearhead such transformations, ensuring that AI is not just a tool, but a catalyst for long-term organizational growth and competitive advantage.
The AI-Ready CEO - A Competitive Necessity
When selecting a new CEO, PE firms must prioritize AI readiness as a critical skill. A leader who understands AI's potential, can navigate its challenges, and can drive its implementation will be better positioned to lead a portfolio company to success in today's tech-driven business landscape.
By choosing a candidate with the experience, knowledge, and soft skills needed to lead an organization through the AI revolution, PE firms can expect better metrics, not only for the new CEO but also for the portfolio company and the fund at large. As AI continues to reshape industries, having an AI-ready leader at the helm will be more than an advantage—it will be a necessity for staying competitive and driving growth.
