Artificial intelligence is when a machine does cognitive functions that are more associated with humans, such as thinking, learning, problem solving, and reasoning. As such, artificial intelligence can do human-like things such as driving, manufacturing, and other physical tasks.
AI has been on the top of everybody’s minds these days. The Wall Street Journal reports that 30 percent of organizations are piloting AI projects. Around 47 percent have used AI in their business processes.
And yet, the spending on AI has been quite small. Around six out of 10 firms have said that only a tenth of their digital budgets goes to AI.
WSJ was reporting on the results of a global McKinsey and Company survey. Executives from organizations that have piloted AI programs stated an increase in revenues in the areas where the technology was introduced. Moreover, 44 percent of these executives confirm that the use of AI has resulted in reduced costs.
The survey also uncovered that early adopters of AI are getting a lot of advantages over others. A small percentage of firms have shown that they are reaping more than their share of rewards from AI. The companies come from different industries and they are seeing greater than expected revenue increases and more cost savings than other companies in the survey who are also using AI.
The thing with new technology, say Jacques Bughin and Nicolas van Zeebroeck, is that early adopters who do it right often pull away from the rest. They gamble successfully on new technology and reap the rewards. Other firms see their results and rush into AI. But by then, there are fewer opportunities to succeed and the slowest laggards will eventually find that adopting the technology did them more harm than good.
With AI, you would need a strong foundation that you can get by having solid digital technologies. This means that you cannot just use AI for the sake of using the technology. You will need expertise in the cloud, mobile computing, and the Web, as well as big data and advanced analytics, among other technologies. If you don’t, your AI strategies will fail.
AI Replacing People? Not Yet.
The McKinsey survey also reveals that the use of artificial intelligence has not resulted in people losing their jobs. At least not yet. The report found that there was a small overall effect in the workforce, but they also account that about one in every three respondents believe that AI will cut their workforce significantly in the next three years.
There is also one in every five who think that the opposite will hold true for them: that AI will require more employees.
What does this mean? Companies who are doing AI projects right now will need to retrain their people. The thing is, a company will probably not subject their current employees to a mass layoff because of AI, but they will need to make sure that they have the skills for an AI-enabled workforce.
Companies would need to identify skills that are needed in an AI-enabled workplace. If you need your employees to be more computer-savvy, then come up with a training program that will teach them the needed skills to use a computer. Most of the time, companies will want to retain their current employees because it’s more efficient and corporate-responsible.
These employees are already comfortable with your company’s culture, and they are a perfect fit. They also know your working dynamics, customers, and other small details about the company. So, all you need to do is give them the new skills they will need to do their work.
AI: Results are encouraging
The McKinsey survey enumerates close to three dozen AI use cases for eight different business functions. They then asked respondents how these use cases affected both their revenues and cost.
Around 63 percent of the businesses surveyed said that their revenues increased due to the AI technologies they adopted. Notably, those who succeed with their AI efforts early are thrice as likely to report revenue gains.
As for business functions, AI seems to be very beneficial to:
- Sales and marketing
- Service and product development
- Supply chain management
When it comes to cost, around 44 percent of all respondents said that AI helped them cut costs by an average of at least 10 percent. AI is most beneficial to supply chain management and manufacturing as far as cost savings are concerned.
It’s a Global Phenomenon
It’s not surprising that businesses use AI for a particular use case and for a specific business function. For example, manufacturing firms tend to use physical robots, while those in customer service will use virtual agents and chatbots.
The only difference, however, is that the high performing companies that use AI for a variety of areas and thus enabling AI to create value more broadly.
AI is also getting headway in practically all regions, particularly in Asia Pacific, Latin America, North America, and Europe.
In AI space, businesses that have core practices and right set of technologies will perform better than other companies that have implemented AI. According to McKinsey, high performers aligned business, IT, and analytics leaders on the value and benefits of AI across all business domains.
They’ve also invested in finding and keeping the right talent while ensuring that both the technical team and staff have the skills needed to scale the AI projects.
AI: The risks are there but most ignore them, don’t know them
AI is not perfect and it has some risks if you use it wrong. For instance, there are highly publicized occurrences of unintended bias and privacy violations. However, even as adoption is rising, very few business and IT leaders seem to know the negative outcomes that can happen when you use AI.
Only a little more than four out of ten respondents reveal that they have identified their AI risks. Most of the respondents cite cybersecurity and regulatory compliance as pressures. However, there are other more that they don’t seem to know. Also, fewer companies are actively mitigating the various risks involved with artificial intelligence.
What this means is that very few people seem to be aware of the potential dangers of using AI and fewer people take the necessary steps to address these risks.
Photo courtesy of Steve Jurvetson.