The second Artificial Intelligence and Business Strategy report of 2024, from MIT Sloan Management Review and Boston Consulting Group, looks at how organizations that combine organizational learning and AI learning are better prepared to manage uncertainty. It examines how the emergence of generative AI is changing workers’ and organizations’ attitude toward the technology and the opportunities and risks that it poses.

Uncertainty Abounds

Uncertainty is all about the unknown. The less an organization knows, the greater its uncertainty and the less able it is to manage resources effectively. Managing uncertainty, therefore, requires learning. Companies need to learn more, and more quickly, to manage uncertainty.

Addressing uncertainty constitutes a pressing challenge for leadership, especially today, when geopolitical tensions, fast-moving consumer preferences, talent disruptions, shifting regulations, and rapidly evolving technologies complicate the business environment. Companies need better tools and perspectives for learning to manage uncertainty arising from these and other business disruptions. Our research finds that a major source of uncertainty, artificial intelligence, is also critical to meeting this challenge. Specifically:

Companies that boost their learning capabilities with AI are significantly better equipped to handle uncertainty from technological, regulatory, and talent-related disruptions compared with companies that have limited learning capabilities.

The Estée Lauder Companies (ELC) offers a case in point. The cosmetics company has a strategic need to anticipate consumer trends ahead of its competitors. In earlier times, consumer preferences might have shifted seasonally. Now, preferences are less certain; shifts happen more quickly due to social media and digital influencers. Fashion trends can change by the week. If the color peach suddenly captures the public’s interest, the company needs to discern that trend as quickly as possible. It uses AI to detect and rapidly respond to consumer trends. Sowmya Gottipati, vice president of global supply chain technology at ELC, reports that the company, which carries products across more than 20 brands and “hundreds of different shades,” uses fuzzy matching to figure out which products can meet the demand and delight consumers. “We are looking to AI to discover consumer trends and then match up our existing products to the trends so that we can repackage them and position them in the market for that trend,” Gottipati explains. ELC uses AI to detect sudden changes and have a market response ready so it can redeploy inventory and supply chain processes to meet demand efficiently. Companies can’t control the changes but can use AI to manage their responses.

ELC is not alone: The company is among the 15% of organizations that integrate AI into their learning capabilities. These organizations — what we refer to as Augmented Learners — are 1.6 times more likely than those with limited learning capabilities to manage various environmental and company-specific uncertainties, including unexpected technological, regulatory, and workforce changes. These companies are twice as likely to be prepared to manage talent-related disruptions compared with organizations that have limited learning capabilities. What’s more, these organizations are 60%-80% more likely to be effective at managing uncertainties in their external environments than Limited Learners — companies with limited learning capabilities. By doing so, they reap advantages with AI well beyond direct financial benefits.

Based on a global survey of 3,467 respondents and interviews with nine executives, our research quantitatively and qualitatively establishes a relationship between organizational learning, learning with AI, and the ability to manage rapidly changing business environments. Organizational learning itself has long been associated with improved performance. Integrating AI with an organization’s learning capabilities significantly improves corporate responses to uncertainties from talent mobility, new technology, and related regulations. This report defines an AI-enhanced organizational learning capability (augmented learning), explains its use in reducing the considerable uncertainty managers face today, and offers key takeaways for exploiting these new abilities.