• Study reveals leaders’ increasing anxiety about AI risks, successful talent strategy, and the five organizational behaviors that companies that capture value from AI (Artificial Intelligence) demonstrate
After several decades of progress, AI technology is now poised to become a significant source of value for a wide range of businesses. However, companies are not yet realizing the value from AI, according to a major new study released today by MIT Sloan Management Review (MIT SMR) and Boston Consulting Group’s BCG GAMMA and BCG Henderson Institute. The study reveals that although executives consider AI to be a critical business opportunity, many leaders are increasingly worried about the strategic risks associated with AI.
The study, as reported in “Winning With AI: Pioneers Combine Strategy, Organizational Behavior, and Technology,” is based on a survey of more than 2,500 executives and several in-depth interviews with leading experts. The data reveals:
- Nine out of ten agree that AI represents a business opportunity for their company.
- Seven out of ten companies report minimal or no impact from AI so far. Among the 90% of companies that have made investments in AI, fewer than two out of five report obtaining any business gains from AI in the past three years.
- In 2019, 45% perceived some risk from AI—an increase from 37% in 2017.
“Our study reinforces that AI is an urgent issue for executives across all industries. While some companies have clearly figured out how to be successful, most companies have a hard time generating value with AI,” said report coauthor David Kiron. “How can executives exploit the opportunities, manage the risks, and minimize the difficulties associated with AI? These are pressing questions that need answers in order to pave a path forward.”
The report shows that companies that capture value from their AI activities exhibit a distinct set of five organizational behaviors.
- They integrate their AI strategies with their overall business strategy. 88% of respondents reporting business impact from AI integrate their AI initiatives with their digital strategy.
- They unify their AI initiatives with their larger business transformation efforts. To generate business value with AI, managers must source and integrate AI-dependent data across organizational silos and establish cross-functional collaboration.
- They take on large, often risky, AI efforts that prioritize revenue growth over cost reduction. Respondents who report only cost reductions as a result of AI are less optimistic about achieving further savings with AI than those who have seen revenue gains. Only 44% of those who have had cost reductions expect the same results in the coming five years, while 72% of respondents who have seen revenue growth tend to expect that success to continue in the same period.
- They align the production of AI with the consumption of AI. Beyond setting up the tools, systems, and processes to deploy AI, they ensure that business users can use AI solutions and measure value.
- They avoid the “tech trap” and invest in talent. Companies that report a value gain from AI recognize that AI is not only a technology opportunity but a strategic initiative that calls for investment in AI talent, data, and process change. Companies with AI initiatives housed under the CIO, however (where technology-related initiatives usually live), are nearly 50% less likely to have seen value.
“As business leaders develop strategy with AI, talent is a complex problem without simple answers. The skill sets of the workforce of tomorrow must differ markedly from the skill sets today—not only for the relatively smaller number of workers developing AI solutions but more importantly for the far greater number of workers who will be using AI solutions either directly or indirectly,” said coauthor Sam Ransbotham.
The report’s analysis on cultivating talent reveals that 65% of respondents report obtaining business value from AI when using a multipronged talent approach: they build internal teams and rely less on outside vendors; they selectively import experienced AI talent for technical leadership roles; and they upskill their existing workforce to enable AI literacy and understanding of how to manage with AI.
“AI is a significant strategic opportunity and a major strategic risk if companies don’t act thoughtfully. There is already a gap between winners and losers, and this gap will only get larger in the years to come. But to get value, technology and algorithms are not enough. Companies have to seriously integrate AI into their core business strategy and their core business processes. This is often much harder than the AI tech itself, and getting it right requires a new way of working that is different than typical tech programs,” said coauthor Shervin Khodabandeh.
• To read the full report, visit here : MIT Sloan Management Review.
