Gen AI in Modern Businesses
Today on April 23, 2024, businesses spanning various industries are turning to generative AI (gen AI) to combat their productivity crisis. With productivity increment becoming a rare asset, the situation is aggravated by economic factors including increased inflation, geopolitical instabilities, and disruptions in supply chain.
Recent evidence drawn from McKinsey’s client engagements reveals that close to 80 percent of all activities occurring within the operational sphere could potentially benefit from automation through gen AI.
Latent Productivity Gains
In the decade between 2012 and 2022, the growth rate of productivity plummeted to below 1 percent annually, a decline from an average of 2.2 percent per year in the five years leading up to 2002, and 1.6 percent per annum from 2002 to 2007. However, the potential gains from gen AI could help counterbalance this slowing trend of productivity growth seen in developed economies.
A recent survey conducted by McKinsey on 150 executives from large European and North American companies, each generating over $1 billion in revenue, suggests that multiple organizations have yet to embrace gen AI at an operational level. Only a small number of respondents (3 percent) stated that their companies had successfully scaled at least one use case involving operation-related gen AI.
Challenges in Adopting Gen AI
Many organizations struggle with determining the potential value to be reaped from AI. Over two-thirds of surveyed organizations (68 percent) admitted that they hadn’t quantified the potential impact of gen AI for their businesses. Only 23 percent claimed to have estimated the potential for their entire organizations, while just 9 percent had analyzed potential gains for specific functions.
The survey results illustrate the emergence of distinct groups: frontrunners who actively piloting and quantifying the benefits of gen AI, and laggards who are still focusing on research and preliminary exploration.
Crucially, companies lagging in their gen AI adoption risk missing out on significant benefits. Firms advanced in their gen AI journey demonstrated an average 5 to 10 percent decrease in costs, elevated worker productivity and sparked innovation.
In order to fully realize the benefits of Gen AI -from productivity gains to operational efficiency- companies can embody the strategies used by frontrunner businesses in five pivotal areas: business case, technology, talent, data architecture, and change management.
Getting a Jump on Gen AI
Across sectors, organizations are exploring the potential of gen AI to surmount productivity challenges. However, the majority remain in the exploratory phase, restrained by uncertainties around risk, reward, and organizational readiness.
For those businesses lagging in Gen AI adoption, they must summon courage and instill confidence in stakeholders to fully exploit this powerful technology to boost productivity. In seeking inspiration for successful gen AI implementation, these firms can look towards the frontrunners in gen AI adoption to understand the critical factors spelling the difference between success and failure.
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