AI Mentorship: Boosting Success for Some Entrepreneurs, But Hurting Others

AI’s Mixed Impact on Business Growth

Artificial Intelligence (AI) has the potential to revolutionize various business operations, but when it comes to providing business advice, the results are mixed.

Recent studies reveal that AI-powered business advisers can both help and hinder entrepreneurs, depending on the initial state of the business.

This variation in outcomes raises important questions about the effectiveness of AI in providing business guidance.

Study on AI Mentors and Kenyan Entrepreneurs

A Harvard Business School study, led by Rembrand Koning and colleagues, investigated the impact of AI mentors on 640 Kenyan entrepreneurs across industries such as food, transportation, construction, and retail.

The researchers divided participants into two groups: one receiving AI advice and the other a traditional business guide. The study showed that high-performing businesses experienced a 15% increase in revenues and profits when using AI advice. However, businesses that were already struggling saw a 10% decline.

The Role of Business Context

The researchers believe that this disparity may be linked to the types of questions asked. Businesses in better shape likely asked AI about refining strategies or marketing efforts, leading to positive results.

On the other hand, struggling businesses asked more complex questions that AI could not effectively solve.

For example, a small food stall might need advice on a fundamental issue, like poor-quality service or an unpopular location, but AI may suggest more superficial changes, such as a marketing campaign.

This type of advice, although well-intended, may worsen the situation by wasting resources.

Challenges AI Faces in Advising Struggling Businesses

AI’s ability to provide tailored advice is highly dependent on how well it understands the specific context of a business. Entrepreneurs facing difficult situations often need deeper insights that AI cannot yet fully grasp.

According to the study’s findings, the AI mentor sometimes offered recommendations that seemed useful but were inadequate for more serious challenges.

AI’s Potential for Empowering Entrepreneurs

Despite these limitations, the research shows AI’s potential in business advising, particularly for entrepreneurs who already have a solid foundation.

Koning emphasizes that AI can democratize access to business mentorship, placing valuable guidance in the hands of entrepreneurs worldwide, especially those who have limited access to traditional resources.

Balancing AI and Human Expertise

Additional research supports these findings. Experts note that while AI excels in pattern recognition and data analysis, it lacks the nuanced understanding that human consultants bring to the table.

Human advisers can dive deep into the essence of a problem, factoring in external knowledge and engaging with multiple stakeholders. AI, on the other hand, requires precise prompts from users to deliver effective advice.

The Future of AI in Business Advising

For small and medium-sized enterprises, AI can be a valuable tool for handling peripheral tasks like data collection and analysis. It enables businesses to streamline operations, reduce costs, and improve customer experiences.

However, when it comes to crafting specialized strategies or tackling core business challenges, human expertise remains essential.

As AI technology advances, its role in business advising will likely evolve. Experts predict that as AI’s ability to understand business contexts improves, it will complement human advisers more effectively and may eventually surpass them in many areas.

However, for now, the best results come from a balanced approach that combines AI-driven insights with human judgment.