Is AI Really as Significant as It’s Made Out to Be?
A multitude of technologies, including robotics and artificial intelligence (AI), are powering today’s businesses.
They offer enormous potential, however whilst nine out of ten executives agree that AI represents a business opportunity for their company, just three in ten are seeing its impact.
So why are these numbers so low? Below Sukand Ramachandran, Managing Director & Senior Partner in the Technology Advantage practice at Boston Consulting Group, explains for CEO Today.
A recent study by MIT Sloan Management Review and Boston Consulting Group (BCG) surveyed more than 2,500 executives to find out which organizations are succeeding with AI– and how. Understand this, and you stand in better stead to avoid the common pitfalls.
The first that many fall for is treating AI as a solely technology issue, regarding it purely as an issue for the CIO and the IT function. The most successful companies apply a full business CEO-lens to realise AI potential, looking at everything from customers and delivery to talent acquisition and data and process changes. Our research tells us that 34% of firms taking this cross-cutting approach derive value from AI investment vs the 17% that keep it as a technology or CIO-led initiative.
34% of firms taking this cross-cutting approach derive value from AI investment vs the 17% that keep it as a technology or CIO-led initiative.
These results do not imply that CIOs are worse at running these initiatives than other leaders, however companies that view AI through a narrow technology lens tend not to consider the transformational approaches required to obtain the potential value.
Viewing AI as a tool to simply reduce costs is another common pitfall that can limit opportunities for success. AI can do more than cut labour costs, its true value lies in revenue generation, however this requires a fundamental rethink of the business model, greater investment, and the right level of change management baked in.
I highlight change management because we know that the barriers to revenue generation often show up as organisational rather than technological problems. This goes part of the way to explaining why whilst 90% of companies have made some investment in AI, less than 40% who have invested have failed to see any returns in the past three years. Experience would suggest many investments failed to account for the behavioural and cultural shift necessary to fully embed new ways of working with this new technology.
Whilst leaders look at the areas where AI offers untapped potential, there is also a strategic risk that must be considered. Organisations and policy makers are rightly concerned by the risks that AI poses to processes, liability, discrimination and responsibility for harm. CEOs must be able to protect the organisation against this. Microsoft’s AI bot, Tay, was a case in point. Released for all of 24 hours in 2016 it had an inherent ability to chat, mainly with online millennial users, and was designed as an experiment in ‘conversation understanding’. However, it quickly fell prey to a co-ordinated effort to have it respond in inappropriate ways. A rapid reaction saved the situation there, but it is a good reminder of the broad ranging strategic risks associated with the technology.
Concerns are compounded by the belief that unencumbered start-ups and entrepreneurs will ‘figure out’ AI first and leap-frog them. And it’s not just smaller businesses that are challenging the status quo. Europe and parts of the US risk falling behind China, with 79% of Chinese business using AI reporting seeing its impact and value.
AI is not a silver bullet, but I would argue that the pockets of success we have seen in some organisations and around the Pacific coasts (China and the West Coast of the US) is proof that it can be effectively implemented and scaled by many. And that the US and UK should be seeing better results in spite of the challenges.
As we start a new decade, these results should prompt business leaders to take stock and ensure AI investment is structured in a way that will circumvent common pitfalls and reap rewards.