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Diversified Industrials: Horizons

Digitalization. Complex supply chains. Growing regulation and compliance. Conglomerates and industrials operate in an increasingly dynamic environment – one which requires creative solutions and forward thinking.

The untapped potential of AI for conglomerates

By Mark Brennan and Tobias Faber

It’s no surprise that of the 20 biggest AI companies in the world, no conglomerates are listed. Burdened by legacy business lines, technologies, and organizational structures as well as silos, these companies have struggled to stay abreast of the fast-evolving AI landscape.

Yet there is massive potential for conglomerates that can seize the AI opportunity lying before them. After all, the size and diversity of their potential data sources, as well as their current financial strength, gives them a natural competitive advantage – not only do they typically own this data, but they can implement it in ways that drive insights across their various business lines.

For that to happen, however, conglomerates will need to break down such organizational silos that prevent the fluid flow, sharing, and use of such information. A well-known engineering conglomerate, for instance, has different AI applications in their healthcare unit, but could do more to capitalize on that know-how to create opportunities elsewhere within other business units.

From a cultural standpoint, conglomerates too often view AI as a mere cost-efficiency play. Staying ahead of the curve will require more proactive thinking; large tech companies, with their immense long-term investments in innovation, are doing more with AI than simple back office streamlining.

As AI projects plod ahead, conglomerates must balance agile decision-making with ample cautionary measures – be they around IP, data privacy, or issues of fairness and bias. The European Commission recently announced a pilot-phase project to ensure that ethical guidelines regarding AI are actually being implemented. Unfortunately, most in-house counsel operate in silos and follow the corporate structures which have created such silos. Being prepared in these early days of AI – where few solidified regulatory frameworks exist – requires working with cross-business units legal teams who can be as collaborative, nimble, and diversified as AI initiatives themselves.

For contrary to what some may say, conglomerates in today's digital age are evolving, not dissolving. AI, if implemented successfully, can and should play a critical role in that evolution.

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