August 04, 2017
Artificial Intelligence (AI) - Challenges and Opportunities
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Artificial Intelligence (AI) has been implemented and is delivering on its promise at least at large companies including Facebook, Google, and Netflix. Retailers are using AI-powered robots in their warehouses, Utilities use AI to forecast electricity demand, Automakers are using AI for autonomous cars, and Financial Services companies are using AI to better understand their customers, look for potential fraud, and to identify new products/services customers will want. But as we look beyond the technology segment and these specific examples, AI adoption is still at a very early level.
The typical company who has successfully adopted AI is larger than their industry peers, have already embraced the digital transition and well on the path to implementation, employ AI in the core of their value chain, adopt AI to increase revenue, and have the full support of executive leadership.
The good news (according to the McKinsey Global Institute) is companies who are leading AI adopters have profit margins from 3 to 15 percentage point higher than industry averages in their market segments. So why isn’t everyone jumping into AI?
A number of companies have implemented AI programs and understand that a full implementation touches all aspects of the business. The insights gained have led to transformational changes that have fundamentally changed their business.
From implementing Predictive and Prescriptive Analytics solutions we have found the challenges fall into 4 major areas:
While these challenges must be addressed, it is important to keep the team focused on the long-term goal and the benefits AI will deliver. As with all transformative changes, clear and open communications will keep the team engaged and maintain management support. In addition, companies should understand that a re-training program will be valuable for those personnel affected by the business process changes.
As stated earlier, the profit margins for companies who adopt AI is much higher than their industry peers. For example, McKinsey predicts that a retail company could generate profit margins 9 percentage points higher than industry average. In Health care and Financial services, the margins will be even higher.
Also, the additional benefits of higher customer engagement/satisfaction, smarter more efficient R&D, optimized production and maintenance, and more efficient and effective sales/marketing campaigns will begin to create a sustainable competitive advantage. And competitors who delay adoption may find themselves in a very difficult position.
Because of the attention and far reaching impact of AI implementation programs it is advisable to start with: a small project, that can be implemented quickly, and provides value to the company.
The criteria for an initial project are:
AI offers the ability to transform your organization, improve operational efficiencies, generate higher profit margins, and provide the insights to create positive customer relationships. The journey to implementation can be complicated and frustrating but, in the end it can be highly profitable. Those that successfully complete the journey can create a sustainable competitive advantage founded on a highly profitable business model with a very loyal customer base.
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