AI and the Nature of Organizations

Abstract

Artificial intelligence requires large and continuing commitments of capital, compute, infrastructure and physical resources. At the firm level, those costs eventually must be matched by sufficient increases in revenue, productivity or both. The optimization achieved by layering AI onto legacy organizational structures is unlikely to offset that burden, and it leaves largely unexplored the economic opportunities available through fundamental organizational redesign. If labor, managerial and coordination structures remain broadly unchanged, the firm carries the cost of the new machine layer alongside much of the existing cost base meant to be transformed. Therefore, redesign must address the organizational itself: the number of layers, the division of functions, the positioning of human judgment and the coordination architecture when machine cognition can absorb a growing share of analysis and execution.