People Strategy in an AI World

Who wins in the AI revolution is less about AI adoption and more about how businesses, large and small, frame their future and their workforce. I’ve been involved in creating and implementing organizational strategy for about 20 years, so let’s look at AI through that lens.

The headlines that I’ve been reading lately are very much about businesses looking to maximize AI adoption to reduce labor costs. I predict that this approach will be a losing strategy because the balance sheet is too complex when you also include knowledge, context, and judgment as organizational assets. There is real value in the people who make the organization, so the winners will be the organizations that account for the value of their people. Let’s be clear: AI is a game changer, but it will be a losing game without humans and humanity.

Replacing people with AI on a one-to-one basis is a FAFO situation. Organizations looking to slash costs by replacing people with chatbots are already losing. In 2023, Klarna (you’ve seen their advertising for buy now, pay later) stopped hiring for non-engineering roles (Fortune Magazine). At peak, they were handling two-thirds of customer service requests with chatbots, the equivalent of about 700 people. Surprise! Here’s the “find out” part of the Klarna story: service quality suffered, and they’re back to hiring humans so that customers have the option to talk to actual people. This was a costly miscalculation. Their new strategy is AI enhancement instead of replacement. Klarna found that replacing people with AI doesn’t improve business.

Rather than lay off their customer service employees following AI deployment, IKEA reframed the customer service reps' role and added a new business capability (CX Today). Here's a great short video by Deepali Vyas from "Elite Recruiter" telling the story. IKEA's chatbot, Billie, picked up about 47 percent of incoming queries in its first two years, all the routine traffic: order status, store hours, returns. That put roughly 8,500 call center jobs in question. Instead of asking how many of those 8,500 they could cut, IKEA looked hard at the other 53 percent, the questions Billie kept failing. Those customers wanted help figuring out whether a room would actually work. That’s human knowledge, context, and judgment that AI could not match. IKEA recognized that its people were too valuable to let go because they knew the products incredibly well. IKEA reskilled all 8,500 into remote interior design advisors. AI, as it turned out, created an entirely new business opportunity, because IKEA could redeploy knowledgeable workers into a new revenue stream, now worth more than a billion euros a year and targeted to reach 10 percent of total sales by 2028.

Now, it’s not lost on me that Klarna found that they could not replace their customer service workers while IKEA redeployed theirs. I’ll be interested to see how IKEA’s new business approach works out. AI adoption right now is still in a chaotic phase, so there’s a lot of learning going on. As in all things business (and biology), adaptation benefits survival.

Here’s how organizations might evaluate an AI business case. Ask four basic questions:

1. What is the dollar value in knowledge, context, and judgment of a given role?

2. What would it cost to rebuild the workforce if they had to be rehired?

3. What could we build on that knowledge to create a new or expand opportunity?

4. What’s the value of the new opportunity?

Build a people strategy that leverages AI, not an AI strategy that replaces people.