AI has been shown to help augment our skills in a wide range of disciplines, from writing code to writing papers. What might it be able to do in terms of helping business leaders improve their organizations?
A recent study from Harvard Business School explores whether AI can help entrepreneurs be better. It examined how AI can support entrepreneurs in Kenya and found that an AI mentor was able to help some entrepreneurs improve their businesses, but sent others down a host of blind alleys that made their businesses less successful.
The Peter Principle
The results seemed to follow the Peter Principle, in which the best tend to get better and the worst lag even further behind. This has been seen with previous technologies, where those who already utilize tech in their lives capitalize on the new tools, thus pulling further away from those who lagged behind with the previous generation of tools. The ability for laggards to use new technology to catch up seems hard to achieve.
This is precisely what the Harvard researchers found, with entrepreneurs who were already running financially stable businesses able to tap into AI-generated advice to make their businesses even better. This wasn’t the case for entrepreneurs of struggling businesses, who tended to run into further difficulties after consulting AI.
Despite this seeming inability to help struggling entrepreneurs, the researchers are bullish that their findings demonstrate that AI can be an effective mentor. They’re especially confident that these tools can be useful in parts of the world where access to advice and mentorship is especially lacking.
Reliable advice
The researchers recruited over 600 entrepreneurs across multiple sectors in Kenya, before dividing them into groups that received support from an AI mentor and those who received a training guide designed to act as a placebo.
When they analyzed the performance of the participants after the intervention, they found that entrepreneurs who were performing poorly beforehand experienced a 10% fall in the revenue and profits of their business after the help from the chatbot.
By contrast, higher performing entrepreneurs saw a 15% improvement in the fortunes of their business after getting support from the chatbot. The researchers have various hypotheses to explain this phenomenon. For instance, some entrepreneurs may have insufficient knowledge to ask the right questions of the AI mentor. Similarly, they may also struggle to interpret the answers or personalize them to their own circumstances. Lower-performing businesses may have more challenging demands that proved beyond the capabilities of the chatbot to answer.
Getting support
Entrepreneurs asked the specialized AI chatbot thousands of questions, but the results were mixed. This may be because those in tougher situations asked more complicated questions, which the AI mentor struggled to answer fully.
“We think entrepreneurs in really difficult spots ask harder questions, and while the AI gives advice that seems useful, it often isn’t enough to solve the problem,” the researchers explain.
The mixed results might also come from the AI giving “overconfident” or “flawed” advice that leads to bad outcomes. Still, the fact that the AI helped some entrepreneurs shows its potential to boost business growth worldwide.
Not the only game in town
Of course, AI isn’t the only way for entrepreneurs to get support. For instance, research from the University of Notre Dame, Texas A&M, University of Chicago, and London School of Economics highlights how beneficial female mentors are to female entrepreneurs.
The study involved 930 entrepreneurs in Kampala, Uganda. About 40% of them were women, and they were randomly matched with a female mentor, a male mentor, or no mentor at all. The mentors, recruited by Grow Movement from around the world, worked with the entrepreneurs remotely for several months using video calls, phone calls, texts, and shared documents.
Two years later, a follow-up survey showed that female entrepreneurs in developing markets benefitted a lot more when they had a female mentor instead of a male one. Female mentors turned out to be more positive and social in their interactions with female entrepreneurs, showing they were more engaged.
The study revealed that women with female mentors learned to build better relationships with customers. For example, they started checking in after a purchase to ask about their customers’ experiences and how things could be improved.
Of course, getting such human support isn’t always easy, whether for male or female entrepreneurs.
“Unfortunately, getting advice is hard for many entrepreneurs,” the Harvard researchers explain. “It’s especially hard if you run a car wash outside Nairobi. And now, here’s a technology that allows us to put a phenomenal business adviser in the pockets of billions of people.”
In such instances, being able to rely on a chatbot-based mentor might help entrepreneurs grow their business.
