January 18, 2024, Switzerland, Davos: “The future is AI” is written on a banner in Davos. The directory … [+]
Beyond the confines of the World Economic Forum’s AI House, all the conversations in Davos recently seemed to revolve around “GenAI,” amplified by Sam Altman, CEO of Open AI, who participated in more than two dozen sessions on new technology.
But beyond the media frenzy, where are the companies?
As in Davos, the enthusiasm is palpable. According to a recent BCG survey, 85% of executives at large companies plan to increase their AI budget in 2024. Almost all companies are finally allowing some use of generative AI – only half did so six years ago month. This enthusiasm is reminiscent of the dot-com boom of the late 1990s, but it is accelerating today.
Yet despite the enthusiasm generated, implementation remains uncertain. The business world is divided into two camps: the “champions” and the “spectators”.
Only 10% of companies are champions, setting ambitious targets for productivity gains of $1 billion or more, which they plan to reinvest in growth. These companies allocate budgets commensurate with their ambitions, typically at least $50 million per year dedicated to AI initiatives.
Many of these champions have already trained more than 25% of their teams in the use of AI and have begun to transform functions such as marketing, customer relations, maintenance, engineering and compliance. Yet most executives have limited confidence in the generative AI skills of their leaders. CEOs took the lead on generative AI strategy at 27% of companies investing more than $50 million in AI this year.
Meanwhile, 90% of companies that fall into the bystander camp believe in AI, but not wholeheartedly. Faced with talent shortages, cybersecurity issues and regulatory uncertainties, they hesitate and settle for small experiments. Although the leaders of these companies estimate that they will eventually need to train almost half of their teams in AI, most have barely started.
The challenges are certainly real, but they are reasons to move forward rather than hesitate. To remain competitive in the coming era, companies will need to continually evolve their technological infrastructure, their organizations, their processes and, above all, the skills of their teams. Most have not yet managed to develop this muscle.
Hesitant business owners shouldn’t wait too long. The gap is widening between champions and spectators. In the short term, unlocking basic efficiencies through automation of routine workflows provides the quickest and clearest return on investment.
BCG estimates that targeted automation could reduce costs by 20% and increase productivity by 30-50% in customer service, operations and IT. But in the long term, we expect even bolder GenAI-related disruptions, from reimagined business models to revolutionary products and services.
Only 19% of companies surveyed by BCG ranked cost as their primary GenAI selection criterion. This suggests that the promise of tools like ChatGPT often outweighs a sober assessment of their value. Businesses should prioritize solutions designed specifically for their specific use cases rather than settling for the latest viral sensation.
Collaboration is also often overlooked, with only 3% of companies prioritizing pre-existing partnerships when purchasing GenAI. Companies must actively organize ecosystems of internal developers, external vendors, researchers, and consultants to successfully navigate the uncertainties of GenAI.
Yet most companies remain stuck between GenAI’s promises and reality. Those who recognize the permanence of GenAI and actively develop their employees, track costs, forge partnerships, and develop practical strategies are well-positioned to lead the way through the hype.