Good morning. Many CFOs are exploring use cases for generative AI. But some companies have decided to create a new senior management position with enterprise-wide oversight of AI activities—a chief AI officer (CAIO). Is that necessary?
“Do You Really Need a Chief AI Officer?” is the title of an interesting new report in MIT Sloan Management Review that delves into this topic. The authors have experience in analyzing the potential value of CAIOs, and four have been chief digital officers across a variety of industries. Some of the pros of having a CAIO is to steer the AI focus and prioritization companywide, which can centralize management of AI risks, and reduce internal deficiencies.
But there are cons as well. For example, adding the position of CAIO can create tension in the existing C-suite with the CIO, CTO, chief operating officer, or the chief digital or chief data officer, according to the report. Another obstacle: “CAIOs could be tempted to pursue AI for the sake of AI rather than in the service of business objectives,” the authors write. And the additional costs of adding a CAIO position may outweigh the benefits.
I asked a coauthor of the report, Michael Wade, TONOMUS Professor of Strategy and Digital at the International Institute for Management Development, how a company can effectively assess the need to create this C-suite role. There are a number of factors, like current AI competence, he said. However, there is one particularly important factor.
“In organizations where AI can have a major impact on competitiveness, the scales may be tipped in favor of appointing a CAIO,” Wade said. For example, companies in the tech or financial services sectors, “where data management and insights are key sources of differentiation, may see significant benefits from coordinating AI initiatives centrally,” he said.
How does he think a CAIO could work in tandem with a CFO to implement AI strategy across the organization? Wade referred to the importance of not getting “caught up in the hype and jumping on AI for the sake of AI.” In terms of ROI expectations, the CAIO should be held to the same standards as other parts of the organization, he said. “CFOs can work with CAIOs to set financial goals for AI projects, and where necessary, hold them accountable,” Wade said.
Regarding the use of artificial intelligence in the finance function, Wade said that legacy AI is already being used to improve outcomes and streamline operations, and should become more embedded to support automation, reduce risk, and lower costs.
“Generative AI is a somewhat different beast,” he said. “For purposes of official automation work, generative AI can be used to improve finance productivity. It can also be used for scenario planning and some creative tasks. However, in its use for core finance operations, it should be approached with caution.”
The place of AI in the C-Suite was the subject of a survey released in August 2023 by Foundry, and based on a poll of 965 global IT decision-makers at organizations of all sizes. It found that, overall, just 21% of respondents were actively seeking to fill the position of CIAO. And, 15% of enterprise companies surveyed have a chief AI officer and 24% are seeking candidates.
But Wade doesn’t think the CAIO role will eventually become a mainstay in the C-suite. When appointing a CAIO is advisable, the role should not become a permanent position, the authors state in the report. They advise for it to be a fixed-term appointment building a set of enterprise AI capabilities that will ultimately be handed over to the business or technology organizations.
To find out which stage of a company’s AI journey could benefit from a CAIO’s expertise, you can read the complete report here.
Sheryl Estrada
sheryl.estrada@fortune.com
The following sections of CFO Daily were curated by Greg McKenna.
