BCG: Responsible Use of Artificial Intelligence Creates Opportunities for Company Growth, but Regulation is Necessary

Globally, efforts to regulate artificial intelligence are gaining momentum, with over 60 countries, including EU member states, considering more than 800 different regulatory measures. It is no surprise, as artificial intelligence is a powerful tool that can bring significant benefits to individuals and societies, but it can also be a ‘black box’, states a press release from The Boston Consulting Group.

The ways in which artificial intelligence functions, as well as the results it produces, are often difficult to fully understand. It is clear that it is in the interest of governments to protect society from the pitfalls of artificial intelligence, such as bias in algorithms or inaccurate results from queries and commands to artificial intelligence. A good example of this is incorrect medical diagnoses. Due to the potential for business growth driven by the use of artificial intelligence, it is evident that companies also have a strong interest in it, but there is a significant danger of business failures due to the erroneous outcomes that artificial intelligence can produce.

For this reason, the surprising results of a large global survey by BCG, presented through the Digital Acceleration Index (DAI), showed that only 28 percent of the 2,700 surveyed companies are ready for new artificial intelligence regulation.

– Croatia has more companies that are regional leaders in digital transformation, particularly in the telecommunications and technology sectors. These are precisely the companies that will be the most prepared for the introduction of regulation on the use of artificial intelligence when it comes into effect in the European Union and is then transposed into Croatia. It is important for Croatian companies to realize that artificial intelligence is coming and that they need to launch their own initiatives for the responsible use of artificial intelligence right now to avoid falling behind in economic development, which is likely to accelerate precisely due to artificial intelligence – emphasized Tomislav Čorak, Croatian partner at BCG.

Responsible Use of Artificial Intelligence

Čorak also added that it is necessary to regulate the ways in which artificial intelligence is applied to prevent adverse outcomes that could arise from negligent and irresponsible use, but also that responsible use of artificial intelligence creates enormous opportunities for accelerated growth for companies.

At BCG, they decided to explore ways in which companies can already prepare for the upcoming regulation, which will likely look different in various parts of the world.

The best way to prepare within a company is to launch the so-called Responsible Artificial Intelligence Initiative (Responsible Artificial Intelligence – RAI). At the core of each such initiative should be principles that emphasize responsibility, transparency, privacy protection, and security, as well as fairness and inclusivity in the development and application of algorithms. This is a framework that those who develop, as well as those who apply artificial intelligence, should adhere to. By applying these principles, both parties will be ready for any form of artificial intelligence regulation that will be in effect.

Even now, many companies see initiatives for responsible artificial intelligence as a matter of corporate compliance, what we colloquially call compliance, interpret in Boston Consulting Group, but it is something much more powerful – a mechanism that enables innovation – improving the performance of artificial intelligence and accelerating feedback cycles.

Companies that understand this and see the upcoming regulation as an opportunity rather than a burden will satisfy both legislators and their shareholders. Initiatives for responsible artificial intelligence are particularly important due to the fact that the new regulation will make the use of artificial intelligence in business more complex: for example, when companies will have to explain how the artificial intelligence they use made a certain decision.

Growing Pressure on Companies

Along with the survey that BCG conducted for the DAI index, in collaboration with MIT’s Sloan Management Review, they also conducted a survey on the application of RAI initiatives in companies.

One of the main pieces of information they discovered was that companies need about three years to make progress in the responsible use of artificial intelligence. Although the EU’s artificial intelligence regulation (EU Artificial Intelligence Act) is still in the proposal stage, companies must not wait for its implementation to start applying their own initiatives for the responsible use of artificial intelligence.

Due to competition and potential missed opportunities, pressure on companies is increasing. Responsible use of artificial intelligence helps companies design and manage systems that align with corporate values and accepted understandings of right and wrong. However, RAI also helps stimulate transformative processes within companies, as it helps them scale the use of artificial intelligence, enables them to identify and resolve issues early, and ultimately facilitates the acceptance of artificial intelligence use by employees, customers, and other stakeholders. By adhering to RAI principles, companies minimize the negative consequences of using artificial intelligence while simultaneously creating benefits for themselves and society as a whole. However, some companies have already advanced further in this than others.

Digital Maturity as an Indicator

BCG highlights an interesting fact that preparedness for the responsible use of artificial intelligence corresponds with digital maturity, or how far companies have progressed in the digital transformation of their business. Companies that ranked in the top quartile of the DAI index results are even six times better prepared for the responsible use of artificial intelligence than those in the bottom quartile.

It is no surprise that companies from the telecommunications sector, technology companies, and consumer goods companies are the best prepared, while energy companies and the public sector lag the most. This should serve as a serious warning to legislators, as failures in the use of artificial intelligence can damage trust in government, which is precisely the opposite of what any responsible government desires.

Furthermore, preparedness for the responsible use of artificial intelligence also varies among regions. Companies from the Asia-Pacific region are more likely to have employees responsible for the ethical use of artificial intelligence than European companies or those from the US and Canada. It is interesting that European managers consider their companies to be the most prepared for the introduction of artificial intelligence regulation in business. It is possible, BCG believes, that this is a result of the EU’s strong ambition to create what is known as the Brussels effect. This is a process in which the EU unilaterally regulates a certain area and then exports that regulation beyond its borders through market mechanisms, as it is doing in the direction of regulating artificial intelligence, similar to how it succeeded with GDPR.

The application of regulation is full of uncertainties, and as many as 82 percent of respondents in the BCG survey stated that the policies and tools of regulation are unclear to them. This is where initiatives for the responsible use of artificial intelligence come in, but company leaders must be actively involved in their implementation. This way, they can show legislators, regulatory bodies, and other stakeholders how they behave responsibly. At the same time, if they responsibly apply artificial intelligence in their companies, they create companies that responsibly apply artificial intelligence in their environment.