Companies Are Making Serious Money With AI – MIT Sloan

Topics AI in Action

This column series looks at the biggest data and analytics challenges facing modern companies and dives deep into successful use cases that can help other organizations accelerate their AI progress.

With the start of each year come predictions, plans, and surveys from consulting firms. When it comes to artificial intelligence, multiple recent surveys indicate that companies arent just planning on spending serious money on AI in 2022 they are already making good money from the technology.

A bit of context might be helpful. Despite some AI successes, one of the challenges in recent years has been that projects involving the technology have frequently lacked sufficient economic returns. In a 2019 MIT Sloan Management Review and Boston Consulting Group AI survey, for example, 7 out of 10 companies reported minimal or no value from their AI investments. One of the reasons for poor returns was that relatively few projects were deployed into production; they were too often research exercises. Production deployments admittedly can be difficult, since they usually require integration with existing systems and processes, worker reskilling, and the ability to scale AI technology.

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Just a few years later, things are beginning to change. In the 2022 survey of senior data and technology executives by NewVantage Partners (where Randy Bean is CEO and cofounder, and Tom Davenport is a fellow), 92% of large companies reported that they are achieving returns on their data and AI investments. Thats up markedly from 48% in 2017. The same percentage (92%) said that they are increasing investments in data and AI, equaling last years percentage. Twenty-six percent of companies have AI systems in widespread production more than double the 12% in last years survey. The survey also asked respondents whether their organizations were data driven, and only 26% said they are. However, that doesnt seem to be preventing them from making progress on AI.

The NewVantage survey respondents largely represent North American companies. But other surveys suggest that companies around the globe are also registering more value with AI. The State of AI in the Enterprise survey by Deloitte (where Tom is a senior adviser to the AI practice), fielded in mid-2021, found that two types of companies are getting value from their investments. Twenty-eight percent of survey respondents were classified as transformers companies reporting high business outcomes and a relatively high number of production AI deployments (six on average). This group has identified and largely adopted leading practices associated with the strongest AI outcomes, including having an AI strategy, building an ecosystem around AI, and putting organizational structures and processes in place (such as machine learning operations, or MLOps) to keep AI on track.

The other group getting value, accounting for 26% of respondents, was labeled pathseekers. They reported high outcomes but a lower number of deployments. They have also adopted capabilities and behaviors that have led to success with AI, but on fewer projects. They have not scaled to the same degree as transformers.

Still, thats more than half of the global respondents reporting positive business outcomes from AI. As weve noted, its difficult or impossible to benefit from AI without deploying it, but these results suggest that you dont need a lot of deployments to get value.

A 2021 McKinsey global survey on AI also found that AI adoption and value are increasing. McKinsey found that the number of companies reporting AI adoption in at least one function had increased to 56%, up from 50% in 2020. More importantly, the survey also indicates that AIs economic return is growing. The share of respondents reporting at least 5% of earnings (EBIT) that are attributable to AI has increased to 27%, up from 22% in the previous survey. Were not sure how survey respondents would calculate the percentage of earnings attributable to AI, but their responses do suggest high value.

Respondents to the McKinsey survey also reported significantly greater cost savings from AI than they did previously in every function, with the greatest improvements coming in product and service development, marketing and sales, and strategy and corporate finance.

And echoing the Deloitte survey, McKinsey found that progressive AI practices are being rewarded. Companies seeing the biggest earnings increases from AI were not only following practices that lead to success, including MLOps, but also spending more efficiently on AI and taking advantage of cloud technologies to a greater extent.

A survey by IBM offers some insight into the impact of the COVID-19 pandemic on AI adoption, with a particular focus on automation-oriented technologies. It found that 80% of companies are already using some form of automation technology or plan to do so over the next year. Just over a third of the organizations surveyed said that the pandemic influenced their decision to adopt and use automation as a means of improving productivity. The respondents to the IBM survey were IT professionals, which may have influenced the results; IT process automation (known as AI for IT operations, or AIOps) is a popular use case for the technology.

We should also mention an interesting 2021 survey conducted by MIT Sloan Management Review and Boston Consulting Group that set out to assess not the monetary benefits of AI but its cultural enhancements. Because no one (to our knowledge) has asked these types of questions before, we cant make comparisons to the past.

In that global survey, 58% of all respondents who had participated in an AI implementation agreed that their AI solutions improved efficiency and decision-making among teams. A majority of that group (78%) also reported improved collaboration within teams. Are improved decision-making and collaboration indicators of cultural benefit? Were not sure, but they could certainly translate into economic value.

The survey also found that AI yields strategic benefits, but they mostly accrued to companies that use AI to explore new ways of creating value rather than cutting costs. Those that used AI primarily to create new value were 2.5 times more likely to feel that AI is helping their company competitively compared with those that said they are using AI primarily to improve existing processes; they were also 2.7 times more likely to agree that AI helps capture opportunities in adjacent industries. Its easy to see how these traits could turn into economic value.

For those who want the current AI spring to bloom forever, this is all great news. There is still substantial room for improvement in the economic returns from AI, of course, and these surveys tap only subjective perceptions. The biggest remaining stumbling block, according to a recent small survey of data scientists, is that the majority of machine learning models are still not deployed in production environments within organizations. Companies and AI leaders still need to work on this issue.

However, the fact that so many business leaders responding to so many surveys on the topic feel that their organizations are capturing substantial value from AI is a definite improvement over the recent past, and a strong sign that AI is here to stay in the business landscape.

This column series looks at the biggest data and analytics challenges facing modern companies and dives deep into successful use cases that can help other organizations accelerate their AI progress.

Thomas H. Davenport (@tdav) is the Presidents Distinguished Professor of Information Technology and Management at Babson College, a visiting professor at Oxfords Sad Business School, and a fellow of the MIT Initiative on the Digital Economy. Randy Bean (@randybeannvp) is an industry thought leader, author, and CEO of NewVantage Partners, a strategic advisory company that is now a division of Wavestone, a global consultancy based in Paris. He is the author of Fail Fast, Learn Faster: Lessons in Data-Driven Leadership in an Age of Disruption, Big Data, and AI (Wiley, 2021).

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Companies Are Making Serious Money With AI - MIT Sloan