Despite big budgets and bold plans, most large companies are struggling to adopt AI in a meaningful way and are falling behind, according to a new survey conducted by PYMNTS Intelligence. behind Join the race to use artificial intelligence to transform your business.
“How GenAI influences COO prioritiesThis is the third edition of PYMNTS Intelligence’s 2024 CAIO Project.“ It highlights a harsh reality for the AI revolution: The report, which surveyed chief operating officers from companies with annual revenues of more than $1 billion, reveals a significant gap between the potential of generative AI and its current application in enterprises.
“70% of COOs from companies surveyed (all with revenues over $1 billion) agree that GenAI is a key part of their strategic plans.“ “However, there remains a large gap between aspirations and reality,” the report states.
The gap between vision and execution is especially stark given the prominence of AI in today’s business environment: With tech giants and startups alike touting the transformative power of AI, many expected to see faster and more widespread adoption of advanced AI applications across large enterprises.
Routine tasks trump strategic applications
Rather than using AI for advanced decision-making or innovative product development, many companies are deploying the technology for more mundane tasks. The survey found that “nearly six in 10 (58%) COOs say their companies use GenAI to access information, and half of executives say they use it in conjunction with chatbots for customer service.”“
The focus on less complex applications is spreading to other areas as well: The report noted that 53% of COOs are using AI technology to create data visualizations, though the effectiveness of these applications varies, with 22% of respondents saying GenAI is not very effective for this purpose.
This tendency to prioritize routine tasks over more strategic applications is especially evident in certain key business areas: “COOs don’t really see a need for GenAI for production purposes, such as managing inventory or running logistics.“ “Only 35% of COOs said GenAI is very important to human resources management and logistics,” the report states.
This cautious approach to AI implementation may stem from a need to better understand the technology’s full capabilities: The survey revealed that 38% of COOs believe that becoming familiar with the full range of AI’s possibilities is a drawback to implementation.
Strategic use of AI leads to higher profits
While many companies play it safe with their AI adoption, the report suggests that this conservative approach may limit the potential return on investment. The report finds a clear correlation between strategic AI use and positive financial outcomes.
The report states that “29% of companies using the technology in a very effective and strategic way report a very positive ROI.”“ However, in contrast, “only 8.8% of companies using GenAI for more routine, lower-impact tasks reported a positive ROI.”
This difference in results highlights the potential benefits of a more ambitious approach. AI StrategyCompanies that are willing to outsource more complex and critical tasks to AI will see greater benefits.
One example of a gap between potential and actual use is code generation, which the report classifies as having a “moderate impact.”“ Regarding strategic uses of AI, they noted that “using the technology for code generation was highly effective according to all who used it, but only 18% of COOs reported using GenAI to generate code.”
AI is changing workforce needs
The adoption of AI will have a profound impact not only on business processes and financial outcomes, but also on workforce composition and skills requirements. Contrary to fears of widespread job losses due to automation, research suggests that AI is driving changes in labor needs rather than simply eliminating jobs.
According to the report, “88% of respondents reported an increased need for workers with analytical skills in their organizations.”“ While the demand for analytical talent is soaring, “42% of COOs agree that the use of GenAI has reduced their company’s need for low-skilled workers.”
This shift in workforce requirements poses challenges and opportunities for businesses and employees. Businesses may need to invest heavily in retraining and upskilling programs to enable their employees to effectively leverage AI technologies. Meanwhile, workers with strong analytical skills are likely to be in high demand.
The emphasis on analytical skills aligns with the broader trend of data-driven decision-making in modern business: As AI systems generate more insights and predictions, companies need employees who can interpret this information and translate it into actionable strategies.
Measuring the impact of AI
Despite implementation challenges, COOs are optimistic about AI’s potential to increase efficiency and reduce costs, with the report showing that executives are primarily focused on efficiency-related metrics when evaluating AI investments.
“Nearly all COOs surveyed, 92 percent, report using at least one return on investment metric that focuses on cost reduction, such as operational costs, capital expenditures or headcount reductions.“ The report states: A focus on cost-saving metrics outweighs profit-increase and market expansion measures, with only 70% of COOs citing profit-related metrics as an indicator of AI success.
With the focus on improving efficiency, there may currently be a preference to use AI for more routine tasks where the cost impact is more immediately apparent and easier to quantify.
Future outlook
As businesses continue to navigate the AI landscape, those that can effectively leverage the technology for strategic purposes could gain a significant competitive advantage. To realize this potential, however, they will need to overcome implementation hurdles, rethink traditional workforce management approaches, and take calculated risks with more ambitious AI deployments.
“The opportunity is ripe for large companies to focus their use of AI in highly effective ways and hire more analytically skilled workers to fill current gaps,” the report concluded.
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