Chapter 31 Quiz: AI Strategy for the C-Suite

Multiple Choice

Question 1. In the opening scenario, Professor Okonkwo evaluates three companies' AI strategies. Company B states: "Use AI to reduce costs by 15% over 3 years." Why does Okonkwo reject this as a strategy?

a) It does not mention specific AI technologies b) The cost reduction target is too modest c) It is a financial target, not a strategy -- it specifies neither where to compete nor how to win d) It does not include a governance framework

Question 2. According to the Strategy Pyramid framework, AI strategy is best described as:

a) A sub-component of IT strategy b) A replacement for digital strategy c) A cross-cutting layer that intersects corporate, business unit, and functional strategy d) A standalone strategy that operates independently from corporate strategy

Question 3. In the Three Horizons model applied to AI, which horizon represents AI applications that optimize existing business processes with proven techniques?

a) Horizon 1 b) Horizon 2 c) Horizon 3 d) All three horizons equally

Question 4. A company's recommendation engine improves as more customers use it, which attracts more customers, which generates more data, which further improves the recommendation engine. This dynamic is best described as:

a) First-mover advantage b) A data network effect c) Economies of scale d) A platform business model

Question 5. Which of the following AI capabilities is most likely to be a competitive moat rather than a commodity?

a) Email spam filtering b) Document OCR c) A personalization engine trained on 10 years of proprietary customer interaction data d) Sentiment analysis of product reviews

Question 6. According to the chapter, fast-follower advantage in AI is strongest when:

a) Data network effects are strong and customer behavior is malleable b) The technology is immature and evolving rapidly, and regulatory uncertainty is high c) Talent is scarce and standard-setting opportunities exist d) The AI capability creates significant switching costs

Question 7. McKinsey's AI Value Framework identifies four archetypes. Which archetype uses AI to fundamentally redesign the business model?

a) Optimizer b) Differentiator c) Innovator d) Transformer

Question 8. In the AI operating model comparison, the "hub-and-spoke" model is characterized by:

a) All AI talent in a single centralized team b) AI talent distributed entirely into business units with no central function c) A central hub providing shared infrastructure and standards, with spoke teams embedded in business units d) A small advisory team with no delivery responsibilities

Question 9. Which of the following is NOT identified as a CEO responsibility in AI strategy?

a) Setting the strategic direction for AI b) Selecting the specific machine learning algorithms for each project c) Allocating resources for AI investment d) Ensuring governance structures have teeth

Question 10. The "pilot purgatory" problem refers to:

a) Organizations that refuse to run AI pilots b) Organizations that have launched many AI pilots but have scaled none to production c) Organizations that scale AI too quickly without adequate testing d) Organizations that invest too heavily in AI infrastructure before identifying use cases

Question 11. A 2024 NACD survey found that only what percentage of board members felt "confident" in their ability to oversee AI-related risks?

a) 12% b) 29% c) 51% d) 73%

Question 12. In the recommended resource allocation model, what percentage should be allocated to Horizon 1 (optimize the core) AI projects?

a) 20-30% b) 40-50% c) 60-70% d) 80-90%

Question 13. Which of the following is the most dangerous communication failure in AI strategy?

a) Using too much technical jargon in board presentations b) Overpromising AI results, creating expectations that reality cannot meet c) Being too conservative in AI timelines d) Not mentioning AI in earnings calls

Question 14. In Athena's board presentation, Grace Chen argues that Athena occupies a "strategic sweet spot." What is the basis of this argument?

a) Athena has more revenue than Amazon in the retail segment b) Athena's combination of physical stores, omnichannel presence, and moderate scale creates data advantages that neither small competitors nor Amazon can replicate c) Athena has more data scientists than its competitors d) Athena's AI technology is more advanced than Amazon's

Question 15. The AI strategy document should be formally reviewed on which cadences?

a) Monthly for both operational and strategic reviews b) Quarterly for operational reviews and annually for strategic reviews c) Semi-annually for both types of reviews d) Annually for operational reviews and every three years for strategic reviews

Short Answer

Question 16. Explain the difference between AI as a competitive moat and AI as a commodity. Provide one example of each from a single industry (e.g., both examples from retail, or both from financial services).

Question 17. Describe three reasons why the "AI Moonshot" approach to strategy tends to fail. For one of these reasons, explain how a portfolio approach would mitigate the risk.

Question 18. The chapter identifies four dimensions of AI risk that should be integrated into enterprise risk management. Name three of these dimensions and, for each, provide a specific example of how the risk could materialize at a retail company.

Question 19. Professor Okonkwo states: "The most dangerous AI strategy is 'We need an AI strategy.'" Explain what she means. In your answer, describe the alternative starting point she advocates.

Question 20. Compare the centralized and hub-and-spoke AI operating models. Under what organizational conditions is each most appropriate? What are the primary risks of each?

Scenario-Based Questions

Question 21. A mid-size insurance company ($5B in premiums) is developing its first AI strategy. The CEO wants to start with a Horizon 3 "moonshot" project: using AI to fully automate claims adjudication with no human involvement.

a) Using the Three Horizons framework, explain why this is strategically premature. b) Propose three Horizon 1 projects the company should pursue first, with brief justifications. c) What foundational capabilities would these Horizon 1 projects build that would eventually enable the moonshot?

Question 22. You are advising a board AI committee that has received the following AI strategy proposal from management:

"Our AI strategy has three pillars: (1) Deploy AI chatbots across all customer touchpoints, (2) Use AI to automate back-office processes, (3) Explore generative AI for content creation. Total investment: $15M over 2 years."

Write three specific questions the board committee should ask to evaluate whether this constitutes a genuine strategy or a collection of technology projects. For each question, explain what the answer would reveal.

Question 23. Two companies in the same industry are considering AI investments. Company X moves first, investing $20M in an AI-powered customer analytics platform in 2024. Company Y waits until 2026 and invests $15M using more mature technology.

a) Under what conditions would Company X's first-mover approach create a lasting advantage? b) Under what conditions would Company Y's fast-follower approach produce a better outcome? c) What information would you need to determine which approach is superior in this specific case?

Question 24. The Athena board has approved the AI strategy with a requirement for quarterly reviews and annual third-party audits. Design the dashboard for the first quarterly review. Include:

a) Three leading indicators (inputs/activities that predict future success) b) Three lagging indicators (outcomes that measure actual impact) c) One risk metric for each of the four strategic pillars d) A brief explanation of how this dashboard helps the board fulfill its oversight responsibility

Question 25. NK Adeyemi observes: "AI strategy isn't about technology choices. It's about where to compete and how to win, with AI as an enabler." Explain how this perspective would change the approach of a CEO who has asked the CTO to "figure out where we should use AI." What process would NK recommend instead?

Answer key for selected questions is available in the appendix (Answers to Selected Exercises).