3 Things Every Business Must Know About AI — Before It Is Too Late
Everyone is talking about AI, but not everyone understands what it is. Artificial Intelligence refers to technology that enables machines to perform tasks that traditionally required human thinking—such as reading, writing, analyzing information, and making decisions.
A particularly powerful form of AI today is the large language model (LLM), which is trained on vast amounts of text to understand and generate human language. This technology powers popular tools like chatbots and AI writing assistants, including ChatGPT and Google Gemini.
Despite its sophistication, a large language model is fundamentally a powerful next-word prediction engine. When a user types a question into an AI chatbot, the model predicts the next word based on patterns it learned from extensive text data. This functionality can be likened to an advanced version of the autocomplete feature on smartphones, operating at a scale that yields remarkably human-like responses.
What Does This Mean for Your Business?
For any business owner or executive, the critical question becomes: what implications does AI have for my organization? Here are three essential takeaways:
1. Establish a Clear and Realistic Internal AI Policy
If your company lacks an AI policy, the effective stance becomes “Use it however you want.” Ignoring AI does not mitigate risks; it merely makes them invisible. A better approach is to establish a clear internal AI policy that defines:
- Approved AI tools and platforms.
- Types of data allowed for input into AI tools.
- Accountability for AI-generated outputs.
- Reporting procedures for errors or concerns.
- Training resources for responsible AI usage.
- Monitoring compliance with the policy.
- Consequences for policy violations.
A well-crafted AI policy does not stifle productivity but instead unlocks it, empowering employees while safeguarding the company from legal and security risks.
2. Choose Your AI Vendors Carefully
While having a strong internal policy is vital, understanding how employees utilize AI in their daily work is equally crucial—especially regarding public, off-the-shelf tools. Free AI tools may seem attractive but can pose hidden costs regarding data security.
When confidential business information is entered into public AI models, that data may be used for further training, potentially exposing it to other users. This could jeopardize trade secrets and intellectual property. For instance, a federal court ruled that conversations with publicly available AI platforms are not protected by attorney-client privilege, equating sharing privileged information with third-party disclosure.
When evaluating an AI vendor, consider:
- Data usage for training models.
- Ownership of AI-generated outputs.
- Data handling upon termination of the relationship.
Key Issues to Address in AI Vendor Contracts
Ensure contracts address:
- Training Data Usage: Specify how your data may be used for training.
- Output Ownership: Clarify ownership of AI-generated outputs.
- Performance Standards: Set expectations for accuracy and reliability.
- Liability and Risk: Define responsibility for failures or harm.
- Data Rights: Avoid broad definitions that grant vendors excessive rights.
3. Human Oversight is Essential for AI Liability
The legal landscape regarding AI liability is evolving, but one principle is clear: companies cannot simply absolve themselves of responsibility by pointing to AI. If AI deployment leads to harm, the onus lies with the company.
To mitigate risk, companies should consider:
- Implementing human checkpoints for high-stakes decisions.
- Establishing clear rules on who can use AI and for what tasks.
- Creating escalation pathways for unexpected AI outputs.
- Maintaining proper records of AI usage.
- Developing an incident response plan for failures.
Conclusion
As artificial intelligence reshapes the business landscape, its benefits come with significant responsibilities. By establishing clear policies, choosing vendors wisely, and ensuring robust human oversight, organizations can harness AI’s potential while minimizing associated risks. Proactive management—not avoidance—will position businesses for success in this new era.
