Riding Artificial Intelligence to a Brighter Business Future

Stephen DeAngelis

November 21, 2019

Artificial Intelligence (AI) has become a science fiction bogeyman and, for some people, it generates a sense of unease about the future. Most of that unease is about artificial general intelligence platforms — which don’t yet exist. The most common form of AI today is incapable of taking over the world; however, it can make your business future brighter. We are still in the early years of the Digital Age and companies are still wrestling with how they must transform to thrive. Prajakta Patil (@toolboxeditor) notes, “The current wave of digital transformation is being led by artificial intelligence.”[1] It’s no coincidence that AI is maturing as the availability of data grows. The Digital Age is characterized by big data, which, by some accounts, has become the most valuable resource in the world.  Big data and AI have a symbiotic relationship.

Sam Ransbotham (@ransbotham), a professor at the Carroll School of Business at Boston College, and David Kiron, executive editor of MIT Sloan Management Review, along with Boston Consulting Group (BCG) analysts, Shervin Khodabandeh, Ronny Fehling, and Burt LaFountain, assert, “After several decades of progress, AI technology is now poised to become a significant source of value for a wide range of businesses.”[2] In fact, Bernhard Warner (@BernhardWarner) insists, “AI is changing virtually every business. … Airlines are using artificial intelligence to improve punctuality. Credit card companies are relying on it to root out fraud. Consumer brands are using it to shore up their supply chain, and to ward off risk in the volatile commodities market where a single corner-the-market trade by a hedge fund or a Trump tweet could send raw materials prices spiraling.”[3]

Getting on the winning road

Ransbotham and his colleagues note, “AI promises rewards but also comes with risks ― namely, that competitors figure out how to successfully use it before you do.” Figuring out how to leverage AI successfully is not a simple task. They note, “Many AI initiatives fail. Seven out of 10 companies surveyed report minimal or no impact from AI so far. Among the 90% of companies that have made some investment in AI, fewer than 2 out of 5 report business gains from AI in the past three years. This number improves to 3 out of 5 when we include companies that have made significant investments in AI. Even so, this means 40% of organizations making significant investments in AI do not report business gains from AI. The crux is that while some companies have clearly figured out how to be successful, most companies have a hard time generating value with AI.” When they looked at companies successfully leveraging AI, they found they shared five strategies, specifically they:

  • Integrate their AI strategies with their overall business strategy.
  • Take on large, often risky, AI efforts that prioritize revenue growth over cost reduction.
  • Align the production of AI with the consumption of AI, through thoughtful alignment of business owners, process owners, and AI expertise to ensure that they adopt AI solutions effectively and pervasively.
  • Unify their AI initiatives with their larger business transformation efforts.
  • Invest in AI talent, data, and process change in addition to (and often more so than) AI technology. They recognize AI is not all about technology.

Integrating AI with overall business strategy

In a separate article, the BCG analysts, along with a few additional colleagues, discuss the importance of integrating AI and business strategies. They write, “At many companies, AI efforts have an IT-centric focus. But as it turns out, this is the wrong approach. The companies that derive value from AI view it as a core pillar of their business strategy and tightly integrate their AI strategy into their overall business strategy.”[4] They suggest business leaders ask themselves, “What are our business objectives — and how can AI help us meet them?” They go on to note, “Companies that approach AI in this way are more likely to take it beyond automation and cost savings — and take the impact of AI further, as well.” Like any good business decision, investing in AI requires a solid business case be made. It makes sense that business alignment and business objectives become more attainable if everyone is working from a single source of truth. Cognitive platforms can integrate data and make that goal a reality.

Prioritizing revenue growth over cost reduction

Supply chain professionals have been pressured for years to reduce costs and cognitive systems can help optimize operations to that end. When I talk with clients, however, I stress the revenue growth opportunities AI can provide. The BCG analysts write, “Cost-cutting and productivity benefits are important, and companies that pursue them can realize some early wins with AI — success stories that can spark enthusiasm and more green lights for further AI initiatives. But revenue gains can be a particularly powerful catalyst for taking AI deeper and broader into the business. And for taking the gains further, too.”

Aligning AI production and consumption

Business leaders don’t want to invest in a system nobody will use; therefore, system usability should have a high priority. The BCG analysts explain, “A good rule of thumb is to consider AI to be 10% about algorithms, 20% about technology, and 70% about business process transformation. Companies that focus solely on the production of AI — leveraging data, technology, and tools to build solutions — are less likely to derive value than companies that enable the consumption, or usage, of AI.” In other words, cognitive platforms must be user friendly.

Unifying AI initiatives with other business transformation efforts

The definition of transformation is “a thorough or dramatic change in form or appearance.” The Digital Age demands companies think about digital transformation and how AI can help. The BCG analysts observe, “Companies that generate value from AI treat it as a major business transformation initiative that requires different parts of the company to come together and work as one. For AI to work well, companies need to integrate it into their fabric and into the individual processes that power the core of the business.”

Investing in AI talent, data, and process change

Successful businesses always balance and invest in people, processes, and technology. The BCG analysts note, “The best approach is a combination of hiring new talent, cultivating AI skills in the existing workforce, and looking to outside experts. Nearly two thirds — 65% — of the organizations investing in all three routes have seen business impact from AI. In addition, companies that invest in multiple talent initiatives (such as recruiting, reskilling, and training) are three times more likely to see impact than those that have no AI talent initiatives in place.”

Ransbotham and his colleagues label the most advanced companies Pioneers. They write, “Pioneers focus on projects with the potential for transformative impact — and they accept that doing so entails greater uncertainty than less transformative projects.” Concerning the strategies they outlined, they caution, “These principles do not constitute a formula or a step-by-step guide to extracting value from AI. Business leaders who seek value from AI still need to make choices and trade-offs as they navigate the path from their current state to where they aspire to be.” Nevertheless, they conclude, “One thing is certain: If AI initiatives are not core to a company’s business strategy, they are unlikely to create meaningful value and scale. Finally, if a company’s current business strategy ignores AI as a risk or as an opportunity, it probably needs revisiting.”

Footnotes
[1] Prajakta Patil, “The True Potential of Artificial Intelligence,” Toolbox, 18 October 2019.
[2] Sam Ransbotham, Shervin Khodabandeh, Ronny Fehling, Burt LaFountain, and David Kiron, “Winning with AI,” MIT Sloan Management Review, 15 October 2019.
[3] Bernhard Warner, “How A.I. Is Changing Virtually Every Business, from Commodities to Cosmetics,” Fortune, 9 October 2019.
[4] Shervin Khodabandeh, Ronny Fehling, Burt LaFountain, Sylvain Duranton, Philipp Gerbert, Annais Paetsch, and Martin Reeves, “How to Win with Artificial Intelligence,” BCG Henderson Institute, 15 October 2019.