Featured faculty: Prasanna Karhade
Written by Putro Harnowo

Earlier this year, an X post from a Meta engineer went viral after her artificial intelligence (AI) bot ran amok, deleted emails, and wouldn’t stop, even after being ordered to do so. The engineer was testing the agentic AI that can execute tasks on its own. This AI agent promises autonomous decision-making to solve complex problems without human supervision, but the accident may prove it’s not entirely safe.

While businesses ponder the pros and cons of agentic AI, a safer choice called intelligent process automation (IPA) has been around for years. IPA bots combine AI technologies with robotic process automation to create AI bots. Their strength lies in low-code/no-code (LCNC) toolkits that enable users without coding skills to automate specific tasks, making them more secure and reliable in corporate environments.

Microsoft Power Automate is an example. It can perform repetitive tasks like sending emails or generating reports seamlessly within the Microsoft ecosystem. Software maker SAP also offers Build Process Automation to automate tasks integrated with other SAP products, and IBM’s Cloud Pak for Business Automation caters to larger enterprises seeking cloud-based automation. Many other tech firms provide independent IPA bots for specific needs.

However, despite hefty investments in AI solutions, many companies still struggle to deploy IPA bots widely across their workplaces. Prasanna Karhade, Associate Professor in the Department of Decisions, Operations and Technology at the Chinese University of Hong Kong (CUHK) Business School, argues that companies are still in the dark about how to implement AI solutions effectively.

“AI technologies are rapidly growing, but companies are sometimes stuck with the traditional ways of governing technology solely in the hands of the IT team,” he says. “Employees without coding skills can now leverage IPA bots to create and refine their own automated workflows, bolstering the democratisation of technology development. However, this innovation must also align with company IT policies.”

Professor Karhade notes that this new dynamic has forced businesses to revisit whether centralised technology management remains relevant and, if not, what the best strategies are for adopting AI in Business tools that can be widely accepted and effectively used across the organisation.

When AI tools are failing, and why

In a study titled, AI governance and the decentralisation of technology production: An investigation of AI-based IPA bots, Professor Karhade and his co-authors examine 176 IPA projects at a Fortune 200 US multinational IT services firm, particularly in the banking, financial services, and insurance domains, to identify the critical factors in AI tool adoption.

“Companies naturally want all employees to use the AI tools, so they demand high utilisation. Apart from that, the AI solutions must be repeatable to ensure broader application within the company beyond the initial use,” says Professor Karhade. “Therefore, utilisation and repeatability are the two key factors in AI governance.”

Having investigated 24 highly underutilised and 54 highly unrepeatable IPA projects, Professor Karhade and the team find that more than 83 per cent of these failed projects are imposed by top management without employee input. Conversely, among the 46 and 35 IPA projects classified as highly utilised and repeatable, respectively, employees are responsible for over 91 per cent of them. These successful projects have low coding intensity, meaning employees apply their own knowledge to deploy AI bots using the LCNC toolkits.

A bottom-up approach turns out to significantly improve the utilisation and repeatability of IPA projects, while a top-down approach results in the opposite. This finding provides a robust starting point for computational experiments to further identify other influential factors in determining the success of AI solutions.

“AI users will be more empowered as they can do many things on their own, but a centralised IT team still plays a crucial role in enabling and overseeing AI infrastructure.”

Professor Prasanna Karhade

The elements of success

The key to the success of an AI solution lies in how it starts, or what the researchers call the “genesis”. IPA projects initiated by employees yield successful adoption, but further analyses find that how the project is deployed, the amount of coding skills required, and the complexity of the tools also contribute significantly.

IPA bots are highly used when deployed by users using the LCNC toolkits, so they require very little coding. Process intricacy, or how many steps an IPA bot has to do to complete a task, is also crucial. Intricate processes are harder to automate, but when users leverage their knowledge to create bots with the LCNC toolkits, the bots are highly likely to be used.

Deployment, or how AI tools work and interact with users, can be divided into three types: attended, where users trigger the process; unattended or fully automated; and hybrid, where AI works alone but sometimes needs human help. Users are still likely to use attended bots in a top-down manner, but they’re not widely accepted.

AI bots may solve the problem at hand, but they are not necessarily repurposed widely. This is where repeatability matters. To create highly accepted bots for a wider user base, unattended AI bots are particularly preferable as they can handle processes autonomously.

Although an AI solution is all about democratising technology, when users implement an AI bot primarily for their own specific needs, the bot becomes too specialised to be reused by others. This contradicts the idea of decentralised technology, or, as Professor Karhade calls it, the limits of democratisation. When this happens, IT support is needed to ensure that the AI tools are reliable and flexible enough to be used across the company.

The evolving roles of the IT team

For AI in Business to deliver lasting value, companies need to give employees the freedom to develop practical solutions while allowing IT teams to maintain security, consistency, and oversight. AI may have democratised technology adoption, but Professor Karhade underlines that the IT team is irreplaceable. “AI users will be more empowered as they can do many things on their own, but a centralised IT team still plays a crucial role in enabling and overseeing AI infrastructure.”

For companies, management should remain receptive to user-initiated AI projects and provide guardrails to enable seamless collaboration between employees and IT teams. This balanced approach will enable businesses to harness the benefits of decentralised technology while safeguarding operational integrity. Otherwise, an accident similar to what happened with Meta’s engineer could happen.

Professor Karhade believes the findings apply to broader contexts and industries dealing with large volumes of documents, such as retail, logistics, healthcare, and human resources. The core ideas revolve around how companies should rethink their technology management in the AI era and build a sustainable ecosystem that enables diverse employees to contribute to AI solutions.

The post Should you let employees build their own AI bot? first appeared on China Business Knowledge.

By Lisa Kennedy

The top spot in the 2022 Fortune Global 500 list of the world’s largest companies is held by Walmart, the vast American discount retail chain that was started by entrepreneur Sam Walton in 1962. After more than 60 years, Walmart is still owned by the Walton family, who also ranked as the world’s richest family in 2022, with a combined wealth of US$224.5 billion.

Walmart is one of the scores of family-owned businesses that play a major role in the global economy and outperform competitors across diverse sectors in global rankings thanks to their resilience, prudence and long-term perspective. Another example of a prominent family business can be Tata Family Group, which plays a vital role in the industrial development of India. Tata Consultancy Services, is flourishing as an IT services company in 100 locations across 40 countries.

“Even in an unfavourable business environment, family businesses extract more value from their IT investments due to family owners’ deeper understanding of and stronger influence over the extended enterprise.”

Prof. Prasanna Karhade

Previous studies have shown that family businesses perform better than other companies across multiple sectors and regions, have lower debt costs, and generate greater shareholder value. However, when it comes to investment in information technology (IT), family owners face a thorny dilemma.

Cautious in Attitude and Careful in Actions

Family businesses see investment in IT as imperative for growth yet are deterred by the risks involved. In one large-scale industry survey, 80 percent of family-owned businesses stated that IT was strategically important to them, yet the majority of respondents also said they were not prepared to make the investment at the present time.

To address this theoretical tension, Prasanna Karhade, Associate Professor in the Department of Decision Sciences and Managerial Economics at the Chinese University of Hong Kong (CUHK) Business School, and his collaborators, conducted a study that investigated the relationships between IT investment, business environment and control in family businesses.

The Study, Blood and Water: IT Investment and Control in Family-owned Businesses, was conducted by Prof. Karhade, in collaboration with his long-term collaborators: Prof. Abhishek Kathuria of the Indian School of Business and Prof. Benn R. Konsynski of Emory University. The study draws on prior research into the motivations of family owners, which shows that “socioemotional” factors such as family reputation influence their decision-making. As a result, decisions are not always based on economic considerations and family businesses avoid risky strategies such as aggressive internationalisation and research-intensive innovation.

A Theory for Digital Transformation in Family Businesses

“Family owners safeguard their wealth by exerting control through concentration of ownership and participation in management because blood is thicker than water,” says Prof. Karhade. However, they also seek to improve performance by appointing career professionals, thereby diluting the family’s control.

Researchers propose that, to compensate for the loss of control, family members exert control indirectly through digital means. For example, India’s Muthoot Group, an 800-year-old family business, now being managed by the 20th generation, “has invested in an IT system for live monitoring of its 5,300 branches to ensure loyalty and adherence to company processes”, says Prof. Karhade.

While the beneficial impact of IT is established, research shows that it is hard to achieve performance in a hostile environment. Prof. Karhade and his co-authors, propose that family firms may have an advantage because they incur lower dynamic adjustment costs and maintain alignment between their IT and business strategies.

These theories give rise to an intriguing implication. “Even in an unfavourable business environment, family businesses extract more value from their IT investments due to family owners’ deeper understanding of and stronger influence over the extended enterprise,” says Prof. Karhade.

The researchers proposed three hypotheses as they built their theory for digital transformation in family businesses. First, firms with family owners invest less in IT. Second, the negative influence of family ownership on IT investment is weakened when a career professional is appointed to senior executive positions. Third, family ownership assuages the negative influence of hostility on the relationship between IT investment and company performance.

Growing, Rural, Eastern, Aspirational and Transitional (GREAT) Economies

India, a GREAT economy, is an appropriate context for testing this theory. First, India has the world’s second-largest number of family businesses, which constitute a large percentage of publicly listed firms. Second, Indian families have been increasing their reliance on professional managers to cope with the complexity of the environment. Third, India has a hostile business environment due to intense competition. Indian firms thus offer a good understanding of the dynamics underlying digital investment in family businesses.

The team tested their theory on 3,277 publicly listed Indian companies from 2006 to 2018 and corroborated all hypotheses at a statistically significant level. “Family businesses which have a professional executive can make greater performance gains from IT investment in a hostile environment,” says Prof. Karhade. “This has key implications for family businesses and breaks new ground in our understanding of how family businesses invest in digital transformation.”

Key Lessons for Business Leaders

Findings relating to the negative influence of family ownership on IT investment provide “a note of caution for family owners”, researchers note. “Judicious investment in IT helps family owners to maintain control, but they also need to keep in mind the relative weakness of family firms compared to other companies,” says Prof. Karhade. “They need to make an effort to ensure that they don’t fall behind its competitors due to lack of investment in IT.”

Family owners seeking to upgrade their IT face the twin hazards of “path dependency” sticking with a product for too long because it works – and “time-compression diseconomies” – creating inefficiencies by making changes too quickly. “Instead, they should make judicious investments in foundational technologies such as cloud computing, which can incrementally serve as the basis for next-generation IT applications,” says Prof. Karhade.

Meanwhile, the study’s findings on the complex interrelationships between family ownership, environmental hostility, IT investment, and firm performance offer lessons for businesses with other forms of ownership.

“We suggest that managers of non-family businesses should consider additional means by which to extract value from IT investments,” says Prof. Karhade. “If they are operating in a hostile environment, it may be wise for managers to eschew frivolous investments in IT and follow a prudent investment approach to reduce dynamic adjustment costs to align their IT with their business strategies.”

The study also lays out a roadmap for future research at the frontiers of information systems and family business research. It proposes three main pathways: examining drivers and consequences of the differences between family-owned firms especially in terms of digital resources, capabilities and strategies; exploring “how” and “why” questions instead of “what” questions; and introducing new methodologies and perspectives that apply to both fields.

“Given the global importance of family businesses and the primacy of IT, it is imperative that we investigate digital transformation in family businesses,” says Prof. Karhade.

Editor’s Note:

GREAT economies of India & China are fertile testing grounds for building new theories. GREAT economies deserve more attention. In the spirit of engaged scholarship, Prof. Karhade is working closely with Aerem, a “FinTech for CleanTech” platform, to bring about a digital transformation in the Indian solar industry (https://www.aerem.co/). “Moving forward, by collaborating with start-ups like Aerem, I plan to address sustainable development goals (SDGs) of clean energy to support prosperity in this Asian Century,” says Prof. Karhade.

(The illustration is produced by Prof. Karhade.)

The post Blood & Water: Digital Transformation and Control of Family Businesses first appeared on China Business Knowledge.