High performing companies that have adopted the use of AI and machine learning are beginning to see a return on their investment.
According to the latest global survey on the state of AI by McKinsey, those firms using AI as a tool for generating value, attribute 20 per cent or more of their organisations’ earnings before interest and taxes (EBIT) to AI.
These companies also plan to invest even more in AI in response to the COVID-19 pandemic and its acceleration of all things digital.
Interviews with executives and a survey of business respondents found a potential widening of the gap between businesses that apply AI and those that do not.
The survey reports that AI adoption is more common in tech and telecommunications than in other industries, followed by automotive and manufacturing.
More than two-thirds of respondents with such use cases say adoption increased revenue, but fewer than 25 per cent saw a significant bottom-line impact.
High-performing companies were also more likely to have a strategic vision and AI initiative road map, use frameworks for AI model deployment, or use synthetic data when they encountered an insufficient amount of real-world data.
Michael Chui, partner, McKinsey Global Institute, San Francisco, said:
“What we’ve said in the past about “following the money” to find where AI adds value in organisations still holds true.
“At the industry level, companies continue to use AI in areas that are most fundamental to where value is generated in each sector.
“And, overall, many companies focused on growth in 2019 (we asked about last year’s revenue and cost effects from AI); for that reason, it’s likely that we saw more companies driving revenues with AI rather than decreasing their costs—not because AI can’t effectively reduce costs.
“It’s also clear that we’re still in the early days of AI use in business, with less than a quarter of respondents seeing the significant bottom-line impact.
“This isn’t surprising—achieving impact at scale is still elusive for many companies, not only because of the technical challenges but also because of the organisational changes required.
“However, those seeing AI contribute more than 20 percent to earnings before interest and taxes are not just from the tech sector. So, it is possible for any company to get a good amount of value from AI if it’s applied effectively in a repeatable way.”
The survey findings also suggest that a minority of companies recognize many of the risks of AI use, and fewer are working to reduce the risks.
Cybersecurity remains the only risk that the majority of respondents say their organisations consider relevant.
Overall, the share of respondents citing each risk as relevant has remained flat or has decreased, except for national security and physical safety which are more commonly addressed now than in 2019.
AI high performers remain more likely than others to recognise and mitigate most risks. For example, respondents at high performers are 2.6 times more likely than others to say their organisations are managing equity and fairness risks such as unwanted bias in AI-driven decisions.
Finally, the companies seeing significant value from AI are continuing to invest in it during the pandemic.
Most respondents at high performers say their organisations have increased investment in AI in each major business function in response to the pandemic, while less than 30 per cent of other respondents say the same.
By industry, respondents in automotive and assembly as well as in healthcare services and pharmaceuticals and medical products are the most likely to say their companies have increased investment.
Nicolaus Henke, the senior partner at McKinsey, London, said:
“Throughout the pandemic, we’ve seen organisations across sectors adopting and scaling AI and analytics much more rapidly than they previously thought possible.
“Many organisations have worked with their analytics teams to update demand patterns, reconsider supply chains, build scenario plans around resource needs, and enable automation in factories and other industry settings where workers may need to distance and have fewer people on-site.
“For example, a global pharmaceutical company linked multiple COVID-19 scenarios to develop a view of supply-and-demand issues for each of their products by country and integrated that view into their regular finance- and operations-planning processes.”
“Many companies are now turning to longer-term opportunities. With more data from digital channels available, improved recommender systems, for example, can enable better customer experience, more personalised content, and automated digital customer service.”
The McKinsey State of AI in 2020 global survey was conducted online between June 9 to June 19 and garnered nearly 2,400 responses, with 48 per cent reporting that their companies use some form of AI.
The full report can be found here (https://www.mckinsey.com/business-functions/mckinsey-analytics/our-insights/global-survey-the-state-of-ai-in-2020?cid=other-soc-lkn-mip-mck-oth—&sid=4255306818&linkId=105722332#)