How Companies Are Already Using AI – Harvard Business Review

Executive Summary

A survey by Tata Consultancy Services reveals that while some jobs have been lost to machine intelligence, thats not the major waycompanies are using AI today. Companies are more likely to be using AI to improvecomputer-to-computer tasks while employing the same number of people. The 170-year-old news service Associated Press offers a case in point. In 2013, demand for quarterly earnings stories was insatiable, andstaff reporters could barely keep up. So that year, AP began working with an AI firm to train software to automatically write short earnings news stories. By 2015, APs AI system was writing 3,700 quarterly earnings stories 12 times the number written by its business reporters. No AP business journalist lost a job. In fact, AI has freed up the staff to write more in-depth stories on business trends. Thats the next trend in AI, and one more businesses should try to emulate.

Every few months it seems another study warns that a big slice of the workforce is about to lose their jobs because of artificial intelligence. Four years ago, an Oxford University study predicted 47% of jobs could be automated by 2033. Even the near-term outlook has been quite negative: A 2016 report by the Organization for Economic Cooperation and Development (OECD) said 9% of jobs in the 21 countries that make up its membership could be automated. And in January 2017, McKinseys research arm estimated AI-driven job losses at 5%. My own firm released a survey recently of 835 large companies (with an average revenue of $20 billion) that predicts a net job loss of between 4% and 7% in key business functions by the year 2020 due to AI.

Yet our research also found that, in the shorter term, these fears may be overblown. The companies we surveyed in 13 manufacturing and service industries in North America, Europe, Asia-Pacific, and Latin America are using AI much more frequently in computer-to-computer activities and much less often to automate human activities. Machine-to-machine transactions are the low-hanging fruit of AI, not people-displacement.

For example, our survey, which asked managers of 13 functions, from sales and marketing to procurement and finance, to indicate whether their departments were using AI in 63 core areas, found AI was used most frequently in detecting and fending off computer security intrusions in the IT department. This task was mentioned by 44% of our respondents. Yet even in this case, we doubt AI is automating the jobs of IT security people out of existence. In fact, we find its helping such often severely overloaded IT professionals deal with geometrically increasing hacking attempts. AI is making IT security professionals more valuable to their employers, not less.

How it will impact business, industry, and society.

In fact, although we saw examples of companies using AI in computer-to-computer transactions such as in recommendation engines that suggest what a customer should buy next or when conducting online securities trading and media buying, we saw that IT was one of the largest adopters of AI. And it wasnt just to detect a hackers moves in the data center. IT was using AI to resolve employees tech support problems, automate the work of putting new systems or enhancements into production, and make sure employees used technology from approved vendors. Between 34% and 44% of global companies surveyed are using AI in in their IT departments in these four ways, monitoring huge volumes of machine-to-machine activities.

In stark contrast, very few of the companies we surveyed were using AI to eliminate jobs altogether. For example, only 2% are using artificial intelligence to monitor internal legal compliance, and only 3% to detect procurement fraud (e.g., bribes and kickbacks).

What about the automation of the production line? Whether assembling automobiles or insurance policies, only 7% of manufacturing and service companies are using AI to automate production activities. Similarly, only 8% are using AI to allocate budgets across the company. Just 6% are using AI in pricing.

So where should your company look to find such low-hanging fruit applications of AI that wont kill jobs yet could bestow big benefits? From our survey and best-practice research on companies that have already generated significant returns on their AI investments, we identified three patterns that separate the best from the rest when it comes to AI. All three are about using AI first to improve computer-to-computer (or machine-to-machine) activities before using it to eliminate jobs:

Put AI to work on activities that have an immediate impact on revenue and cost. When Joseph Sirosh joined Amazon.com in 2004, he began seeing the value of AI to reduce fraud, bad debt, and the number of customers who didnt get their goods and suppliers who didnt get their money. By the time he left Amazon in 2013, his group had grown from 35 to more than 1,000 people who used machine learning to make Amazon more operationally efficient and effective. Over the same time period, the company saw a 10-fold increase in revenue.

After joining Microsoft Corporation in 2013 as corporate vice president of the Data Group, Sirosh led the charge in using AI in the companys database, big data, and machine learning offerings. AI wasnt new at Microsoft. For example, the company had brought in a data scientist in 2008 to develop machine learning tools that would improve its search engine, Bing, in a market dominated by Google. Since then, AI has helped Bing more than double its share of the search engine market (to 20%); as of 2015, Bing generated more than a $1 billion in revenue every quarter. (That was the year Bing became a profitable business for Microsoft.) Microsofts use of AI now extends far beyond that, including to its Azure cloud computing service, which puts the companys AI tools in the hands of Azure customers. (Disclosure: Microsoft is a TCS client.)

Look for opportunities in which AI could help you produce more products with the same number of people you have today. The AI experience of the 170-year-old news service Associated Press is a great case in point. AP found in 2013 a literally insatiable demand for quarterly earnings stories, but their staff of 65 business reporters could write only 6% of the earnings stories possible, given Americas 5,300 publicly held companies. The earnings news of many small companies thus went unreported on APs wire services (other than the automatically published tabular data). So that year, AP began working with an AI firm to train software to automatically write short earnings news stories. By 2015, APs AI system was writing 3,700 quarterly earnings stories 12 times the number written by its business reporters. This is a machine-to-machine application of AI. The AI software is one machine; the other is the digital data feed that AP gets from a financial information provider (Zacks Investment Research). No AP business journalist lost a job. In fact, AI has freed up the staff to write more in-depth stories on business trends.

Start in the back office, not the front office. You might think companies will get the greatest returns on AI in business functions that touch customers every day (like marketing, sales, and service) or by embedding it in the products they sell to customers (e.g., the self-driving car, the self-cleaning barbeque grill, the self-replenishing refrigerator, etc.). Our research says otherwise. We asked survey participants to estimate their returns on AI in revenue and cost improvements, and then we compared the survey answers of the companies with the greatest improvements (call them AI leaders) to the answers of companies with the smallest improvements (AI followers). Some 51% of our AI leaders predicted that by 2020 AI will have its biggest internal impact on their back-office functions of IT and finance/accounting; only 34% of AI followers said the same thing. Conversely, 43% of AI followers said AIs impact would be greatest in the front-office areas of marketing, sales, and services, yet only 26% of the AI leaders felt it would be there. We believe the leaders have the right idea: Focus your AI initiatives in the back-office, particularly where there are lots of computer-to-computer interactions in IT and finance/accounting.

Computers today are far better at managing other computers and, in general, inanimate objects or digital information than they are at managing human interactions. When companies use AI in this sphere, they dont have to eliminate jobs. Yet the job-destroying applications of AI are what command the headlines: driverless cars and trucks, robotic restaurant order-takers and food preparers, and more.

Make no mistake: Automation and artificial intelligence will eliminate some jobs. Chatbots for customer service have proliferated; robots on the factory floor are real. But we believe companies would be wise to use AI first where their computers already interact. Theres plenty of low-hanging fruit there to keep them busy for years.

The rest is here:

How Companies Are Already Using AI - Harvard Business Review