The original sin

Senior management decides that they need to enter the race to build applications that contain artificial intelligence (whatever that means to them).

They decide that since most of the discussion that they observe in the management journals, technology press, and the media in general has a flavor of technology or comes from a geographic region known for technology, they will put the advanced analytics team under the technology function managed by the Chief Information Officer (CIO), Chief Technology Officer (CTO), or worse, under the Chief Financial Officer (CFO). Senior management has taken the first step to failing.

Let's take the case of placing the advanced analytics team in the technology department, or under the CIO, first. It may take a year or 18 months, but the advanced analytics and artificial intelligence team will fall prey to the information technology mindset.

Advanced analytics projects are not the same as information technology projects. Installing an instance of Salesforce is relatively easy and a well-known and generally linear process.

Advanced analytics projects are not, for the most part, linear. They are iterative, marked by exhilarating successes, and punctuated by dead ends, missteps, and disproved theories. Most information technology professionals, while intelligent and mildly curious, do not have the interest or fortitude for the iterative or recursive nature of advanced analytics projects.

Also, information technology professionals typically do not have the skillset to develop artificial intelligence applications. Staff members in information technology functions have evolved over the past 30 to 40 years, from developing bespoke systems to installing systems, managing customizations, and configurations. Information technology professionals are more oriented to vendor and project management than they are to core development. There is no judgment in that statement; it is a proven fact.

The information technology function is a support function—a cost center, not a creative function—that lives by project plans and has a reticence or visceral fear of failure or being late or over budget. Information technology teams have been treated like a support function for the last 30 to 40 years, and the teams that work in the information technology department act accordingly.

Advanced analytics teams, at least high-performing analytics teams, are seeking to solve one or a series of challenging problems. The pursuit of the solution is the goal, not adherence to a budget number or delivery according to a preset date. The optimal solution, the source of competitive advantage, is the objective.

Placing the advanced analytics team under the accountability of the CTO is better than under the CIO if the CTO has an innovation charter within their remit. As an example, the CTO's remit may include finding ways to productize unique data generated by operations.

This would likely be an area that the CTO would have an interest in driving, while also having the connections and political capital to enact it successfully. One of the downsides would be getting the CTO team to engage with the functional areas that the CTO is unfamiliar with, like IT operations, sales, marketing, HR, finance, facilities, and so on. The CTO will typically be tasked with creating new approaches to existing challenges. If this is the case, then it is possible that the AI team will have a fruitful run as part of this functional organization, but success is not guaranteed.

Drawing the reporting lines of the advanced analytics team under the organization of the CFO is worse than putting the team under the CIO. At least under the CIO there is a distant history of technologists building and deploying solutions. Under the CFO, the entire mindset is process orientation and cost containment. Not exactly the wide-ranging, creative mindset needed to develop novel solutions to drive competitive step change in an organization and industry.

Again, it may take a year or 18 months, but the advanced analytics and artificial intelligence team will fall prey to the finance organization mindset. The finance team is a very focused group, and they should be. They need to manage the financial flow, systems, and reporting that make the company operate efficiently and effectively. As the finance team gets squeezed to do more with the same staffing or less, they will look for relief. They will look to cut heads in the advanced analytics team to hire more people to run the day-to-day processes of finance and accounting.

The objective and goals of the advanced analytics team and group will rarely, if ever, align with the corporate goals and objectives of the finance team. And you know what happens when there is a misalignment of goals and objectives with the management above any team: that team gets their headcount and budget cut or held at a level that does not enable expansion.

We have discussed where not to put the analytics leader and the advanced analytics team, so now, let's outline the optimal place in the organization for the analytics function.