Algorithm, AI and the Firm

Artificial intelligence (AI) and algorithms are beginning to take over many functions in the firm including content creation, data generation, contract design, pricing, recruitment, talent promotion, advertising, loan issuance, default risk prediction, supply chain and inventory management and demand prediction. Algorithms have already shaped many industries including advertising, insurance and banking. How will the rise of AI–based algorithms and, in particular, generative AI reshape corporations and industries? Your task in this essay: a) Select an industry of your choice (e.g., education, banking sector, insurance, health- care, retail etc.,). Explain how advances in machine learning algorithms, AI, and generative AI may enable firms in the sector to create value and competitive advan- tage. The analysis must refer to distinct channels through which these technologies enhance performance like data-driven decision making, error-reduction, behavioural targeting in the advertising market, revenue management in the airline industry, Robo-advising in the banking sector and recommender systems in retail. b) Focusing on the sector, explore how the rise of AI algorithms (particularly, genera- tive AI) may affect a firm’s business model and shape its growth and competition strategies. How will algorithmic firms in the sector grow and compete with each other? c) Reflect on how the management of AI-driven firms differs from the management of traditional firms. Will AI algorithms (including generative AI) substitute or complement managers? How do leading AI-driven firms differ from leading tradi- tional organisations? Richly draw on relevant peer-reviewed academic literature on management and leadership. d) What will it take for an AI-driven firm to outcompete its rivals? Could AI or ML algorithms be a source of lasting competitive advantage?