For most people, becoming a business owner would be daunting, even for those with the correct disposition. “There are fewer entrepreneurs than there should be,” a World Economic Forum post noted. Ever-present risks include potentially selling unprofitable products or services, dealing with government bureaucracies, hiring and managing employees across technical and administrative functions, and forecasting the market.
Artificial intelligence (AI), which ChatGPT commercialized in 2022, could tackle most of those “risks” for reluctant entrepreneurs. “The omnipresence of AI in contemporary entrepreneurial practices has redefined the essence of business operations, strategy formulation, and decision-making,” Imtiaz Mostafiz, an associate professor of strategy and international business at the University of Leicester, said in a paper.
That has led “a lot of techies, as well as budding entrepreneurs [to the question]: ‘Can AI replace entrepreneurship?’” Siddharth Jain, chief strategy officer at Global Ed Group, a think tank, said on LinkedIn in June 2023. For him, that is unlikely. “While AI has made significant advancements,” he said, “There are still certain aspects of human experience and capabilities that AI cannot fully replace.”
However, John Mullins, associate professor of management practice in marketing and entrepreneurship at London Business School (LBS), argued in a Forbes article that AI systems may ultimately develop enough to “push human entrepreneurial flair and skill to the canvas floor,” replacing it with its data-only decision-making abilities.
That shift is already starting. “We’re in a moment of transformation where [AI has become] a tool that can do many things around the world and many things in almost any industry,” Ethan Mollick, an associate professor at the University of Pennsylvania, said in an MIT Sloan School of Management article in January.
Entrepreneur 2.0?
Jain said one of AI’s top benefits is automating repetitive tasks and processes. That allows for streamlined operations, increased efficiency, and lower costs.
AI can also “analyze vast amounts of data and extract valuable insights, identify trends, understand customer behavior [but not the reasons behind it] and optimize business strategy,” Jain said. The technology “can support entrepreneurs in developing innovative products and services.”
AI’s data analytics can also “assist in identifying new business opportunities … connect entrepreneurs with potential partners, mentors, and investors,” Jain said. It can also “enhance customer experience by enabling personalized recommendations.”
Additionally, they can produce “risk assessment [reports] and [develop] decision-making processes … by analyzing historical data and patterns,” Jain said. “This can be particularly valuable in financial analysis, investment decisions, and risk management.”
Mullins of LBS said those abilities “suggest that AI can facilitate innovation [by being] practical and shrewd,” complementing the entrepreneur’s intuition and risk-seeking approach.
Emotion advantage
Jain identified clear advantages humans have over AI. The first is human creativity and vision. “Entrepreneurship often requires creative thinking, vision, and the ability to identify and seize opportunities [by] thinking outside the box,” which is something AI’s data-only decision-making is still incapable of doing.
Human entrepreneurs also “like to innovate even within sleepy corners of industries and build value in places that others don’t see or can’t figure out how to execute correctly.” According to Mullins, “No backward-looking [AI] algorithm would be able to match [humans’] forward-looking skills.”
Another limitation is that AI systems struggle to forecast outcomes during uncertain times without sufficient and unbiased data. Human entrepreneurs in such circumstances usually make decisions despite a lack of adequate data and information. They “have developed a certain comfort level with uncertainty because they have confidence in their ability to figure out things,” Alicia Miller, a member of the Forbes Business Council, wrote on Forbes. “There’s a certain amount of muscle memory around how to navigate risk to create value” without sufficient data.
The second advantage human entrepreneurs have over AI is emotional intelligence, which they use to build strong relations with human customers, partners and stakeholders. Those connections are “on a deeper level [than what AI can achieve] and build trust,” Jain said.
Ethical conundrums are another issue, as they may shift a corporation’s objectives and priorities on a case-by-case basis. For example, a human entrepreneur may relegate profit-making to favor a human or societal consideration in specific scenarios. Mostafiz of the University of Leicester noted those decisions stem from a human entrepreneur’s moral compass, not data analytics.
Business partners?
Startups will likely perform better when merging entrepreneurs’ skills and AI’s abilities. “The combination of AI technologies with human entrepreneurship skills can create powerful synergies and drive innovation in various industries,” noted Jain.
That is particularly true when using generative AI (Gen AI), which searches the internet or databases to generate bespoke results or replies to human prompts. The MIT article said generative AI should be perceived “as a co-founder” in modern startups. It “can assist with researching ideas, coming up with logos and names … and more.”
Gen AI could also become the “startup team” tasked with launching the startup in a short time, the MIT article said. Once fully operational, the same AI-powered system can scale operations beyond the home country.
AI can also become the administrative team for the startup, performing “a wide range of time-consuming tasks, from writing emails and answering phone calls to orchestrating product demonstrations and coding a website,” the MIT article said. “AI [already] does all of those things well.”
The technology also could be used in a startup’s marketing and sales department. “AI can help you reach the right audience with the right message at the right time,” said Mullins of LBS. “[The technology] can be used to personalize letters, [and] target advertising campaigns, [while] chatbots are becoming critical for today’s customer service platforms.”
However, Mollick cautioned that current AI systems could behave like a “kind of intern:” prone to mistakes, called hallucinations in AI, and “kind of naive.”
Accordingly, AI-dominated startups need a department with human employees to oversee AI implementation. Their work focuses on “AI validation and verification, building businesses around facilitating AI integration, and addressing new roles in the evolving AI landscape,” noted a research paper from the Penn State Social Science Research Institute published in March.
Due diligence
Entrepreneurs increasingly need to understand how various AI tools would change a business before making them an integral part of the startup — working on everything from idea formulation to performing front-line workers’ tasks. For one, “the speed of AI’s commercialization far outpaces our conceptual and theoretical development and empirical understanding,” said Mostafiz, adding that it has “enormous ramifications.”
To avoid unpleasant surprises, entrepreneurs need to “investigate how technology can facilitate, identify and evaluate novel entrepreneurial opportunities,” said Mostafiz.
Entrepreneurs also need to study the impact of large-scale reliance on AI in influencing the “formation, structure and dynamics of entrepreneurial ecosystems and networks, including the role of AI in fostering collaboration and cooperation,” Mostafiz said. That includes team formation, communication, and collective decision-making.
Additionally, entrepreneurs need to “examine the development, implementation, and effectiveness of AI-driven support systems in various entrepreneurial tasks, such as resource allocation and deployment,” he said.
Entrepreneurs also need to investigate “the ethical implications of AI,” Mostafiz said, especially if the technology violates real-world laws. “Questions about navigating ethical dilemmas, such as data privacy and algorithmic bias [are still] largely unanswered.”
Ultimately, Mostafiz stressed the need for entrepreneurs to prioritize finding “the balance between reliance on AI-driven decision-making tools and preserving human intuition, creativity and judgment in recognizing and creating wealth from new and novel opportunities.”
This article first appeared in February’s print edition of Business Monthly.
