Over the next two to three years, American businesses are expected to make a mad rush toward tapping the multi-trillion-dollar potential of artificial intelligence (AI), but they’re likely to stumble and misfire unless they take a strategic approach to its integration.
AI is the area of computer science that enables machines to work and react like humans, equipping them with the ability to communicate in common speech and even learn, plan, and analyze data to find creative solutions to problems. As such, AI initiatives are typically inspired and managed by companies’ Information Technology departments.
But AI has many potential applications that extend way beyond information technology management to all aspects of business. AI projects can also absorb major chunks of financial and human capital, draining them from other vital programs. That’s why CEOs need to take charge of the creation of the strategy that clearly defines the business purposes of AI projects, prioritizes them, sets reasonable goals and timetables, and assures that the company has the right foundation and resources to pursue those projects, use them effectively, and measure their results.
Among the potential benefits of AI applications are improved forecasting and sourcing, the reduction of manufacturing defects, greater and faster detection of consumer fraud, and improved customer experience. AI is also expected to have applications in recruiting personnel, identifying buyer behavior trends, optimizing pricing and promotions, identifying business risks, and creating new products. It’s the backbone, for example, of the concept of the self-driving vehicle, and the means by which the workplace will be further automated, with robots that make things, review and analyze documents, improve their own algorithms via collective machine learning, administer x-rays and CT scans, and plan routes for delivery and service vehicles.
Today, according to Judson Althoff, an executive vice president at Microsoft, only 10 percent of companies around the world are using AI. But he believes that by as soon as 2020, that number will explode to 85 percent. And that explosion is expected not only among high-tech companies, but in virtually every sector of the global economy, from financial services, energy, utilities and manufacturing, to retailing, healthcare, construction, education, professional services, and travel and tourism.
Huge savings and profits are at stake. In 2016, McKinsey, the global consulting firm, estimated that AI has the potential to:
• Create $3.5 to $5.8 trillion in worldwide value per year across nine different business functions in 19 industries.
• Generate up to $2.6 trillion in additional sales revenue and up to $2 trillion in manufacturing and supply chain management.
• Add $200 billion in value in pricing and product promotion, and $100 billion in retail customer service management.
What’s surprising, though, is how little engagement the C-suite currently has with AI. In a survey of 122 business leaders, EY, a European business consulting and research firm, found this year that only one in five have secured C-suite-supported strategy for rolling out AI capabilities throughout the firm. Nearly 30 percent said their firms have little to no capability to undertake AI because the technology isn’t regarded as a strategic priority.
Just as there are many ways that AI can help companies improve their top and bottom lines, there are also many ways that an uncoordinated and poorly planned approach to AI can backfire and fail. Here are some of them, and how they can be avoided:
• Building on a weak digital foundation. You’re not going to succeed in adopting AI if your firm isn’t digitally mature. AI should be the latest stage of investment in a company’s journey in adopting core and advanced digital technologies.
• Not enough talent. AI is a specialized field within IT, and demand is rising faster than the skilled talent pool is growing. Before you launch into AI, be sure you have the right number of people with the right skills.
• Taking on too many projects at one time. For companies just getting into AI, the advice I find everywhere I look is to start with a single project. Problems will inevitably arise, and when they happen across multiple projects they can strain your teams and management to the breaking point.
• No clear business case. Each AI project needs to have a clearly defined purpose, measurable goals, and an on-going process for evaluating its operational success. The business case is best created by a team of stakeholders that determines what success will look like, where the data comes from, what decisions it will support, and how the information it generates will be integrated into business operations.
• No overriding organization strategy. Adopting AI isn’t a strategy – it’s a means of advancing your existing strategy, increasing your efficiency and making you more competitive. An effective AI strategy sets out where AI can be applied, determines how much will be invested, what returns are expected, and how to prioritize the desired projects.
The possibilities for AI in the industries I have been or am actively involved with – fleet and insurance – might very well be game changers. Could we use AI’s naturalistic speech capabilities coupled with machine learning to take over parts of the claims process, freeing up time for customer service representatives to follow up on repairs, assist drivers with unique issues, and speed up the repair process?
AI someday may become smart enough to inform repair decisions as well as a certified appraiser. But we can be sure that sooner, rather than later, new technology will be vetted and taken to market by astute businesses.
Becoming one of those companies means that a CEO must not leave AI strategy to be devised by Information Technology managers alone. Instead, a leader needs to direct the creation of that strategy and be sure to involve all stakeholders.
I’ll close with this telling quote from Amit Aswhini, vice president of marketing at Zibtek, a high-tech web development company:
“Every business will soon be an intelligent business in the same way every enterprise is a digital enterprise. If they don’t become intelligent, they will simply cease to exist. Artificial intelligence, a revolutionary cluster of technologies, is a game changer and has the potential to make fundamental changes in how we function. However, an AI strategy, if it’s just an AI strategy, won’t take you very far. An AI strategy that’s just an AI strategy is an odd managerial notion that by sprinkling this magical AI sauce over everything will turn everything more magical and awesome.”