As a fact, big corporations often have better and deeper AI adoption than SMEs – but does that equals more profits and more value? In contrast to what you may think, McKinsey Global Survey‘s report about the State of AI in the 2020s indicates that high-performing companies with more AI capabilities adopted than others are witnessing more mid-performance than companies seeing less value from AI. Specifically, these high-performing organizations’ models were particularly vulnerable within marketing and sales, product development, and service operations the areas where AI adoption and impact are most commonly reported.
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AI Adoption and Impact
According to the study, 50% of respondents report that their companies have adopted AI in at least one business function. Even though the number shows no increase in AI adoption, it is shows that companies are capturing value from AI at the enterprise level, and many are generating revenue and cost reductions at least at the function level.
Let’s break this report down a little more:
- Respondents working for companies in Latin American areas or other developing countries are much less likely than those elsewhere to report that their companies have embedded AI into a process or product in at least one function or business unit.
- By industry, respondents in the high-tech and telecom sectors are (again!) the most likely to report AI adoption, with the automotive and assembly sector falling just behind them
Overall, the business functions that most companies choose to adopt AI remain largely unchanged from the 2019 survey. The top spots are occupied by service operations, product or service development, and marketing and sales.
AI Adoption is Highest Within the Product/Service Development and Service/Operations functions
Among these functions, the largest shares of respondents report revenue increases for:
- Inventory and parts optimization
- Pricing and promotion
- Customer-service analytics
- Sales and demand forecasting.
More than 2/3 of respondents report an increase in revenue after adopting each of those use cases.
Meanwhile, the use cases that most commonly led to cost decreases are:
- Optimization of talent management
- Contact-center automation
- Warehouse automation
The use of AI in those areas reduced costsOver half of respondents who report adopting each of those functions
The survey findings show that some companies using AI are seeing that value accrues to the enterprise level.
22% of respondents say that more than 5% of their organizations’ enterprise-wide EBIT in 2019 was attributable to their use of AI, while the other 48% reported less than 5%.
Additionally, in half of the business functions, a larger share of respondents report revenue increases from AI use than in the previous survey, while revenue in most other functions remained stable. At the same time, cost decreases have become less common in most functions
Revenue Increases from AI Adoption
This year are more commonly reported in half of the business functions, but cost decreases are less common
Cost Decreases from AI Adoption
Conclusion on AI Impact
We can all see that at the industry level, companies all around the world are continuing to use AI in areas that are most fundamental to where value is generated in each sector. Overall, many companies focused on growth in 2019, so we likely saw more companies driving revenues with AI rather than decreasing their costs – not because AI can’t effectively reduce costs.
We do think AI is worth the investment, but it requires effective execution to generate significant value, particularly at enterprise scale
It is clear that we’re still in the early days of AI adoption and its impact on business, with less than a quarter of respondents seeing the significant bottom-line impact. This isn’t surprising, as achieving impact at scale is still elusive for many companies, not only because of the technical challenges but also because of the organizational changes required. However, those seeing AI contribute more than 20% to earnings before interest and taxes are not just from the tech sector. So any company can get a good amount of value from AI if it is applied effectively in a repeatable way.
Most companies seem to agree, with the results showing an appetite to continue investing in the technology. However, there was a bit of a decrease in bullishness this year, perhaps reflecting the passing of AI’s hype phase. We do think AI is worth the investment, but it requires effective execution to generate significant value, particularly at the enterprise scale.