Q&A | March 4, 2022 | 1 min read
Author Tom Davenport explains how top AI practitioners are generating bigger returns
In 2019, seven in 10 large companies that had launched AI initiatives to improve business operations said they had produced little or no value, according to an MIT Sloan Management Review study.
That tide appears to have turned: 92% of companies using AI today say their initiatives are producing significant business value, according to a 2022 survey by NewVantage Partners, a strategic advisory and management consulting firm.
Not all companies are reaping the same rewards. The most advanced practitioners of AI—28% of companies surveyed—are getting a bigger return on investment, a recent study by Deloitte found.
What accounts for the higher yields? We asked author Tom Davenport, a professor of management and information technology at Babson College and co-author of the NewVantage Partners report, for his insights. The following interview has been edited for space and clarity.
For one thing, they are fully deploying AI in more systems than their competitors. More deployment means they’re getting more value out of them.
The quantity is significant. In recent years, a lot of companies have been doing prototypes and proofs of concept that, for various reasons, don’t ever get deployed. It could be due to cost, functionality, scalability, or even organizational resistance to change.
Those experiments don’t provide any economic value if you don’t deploy them. The most successful companies are not only designing and testing more AI systems, they’re implementing more fully deployed solutions that drive results.
The high achievers also use a different set of objectives for their systems.
They’re not just using AI to cut costs of existing processes, they’re more likely to be pursuing changes in their business model, new products and services, or new customer relationships. They are more ambitious with their projects than other organizations, and it ends up helping to create more value.
One is the insurance company Ping An, the largest private-sector company in China. They went from being a straightforward property and car insurance company in the 1980s to now having five different ecosystems, all powered by AI: insurance, banking, healthcare, smart cities, and automotive.
In healthcare, for example, they have over 350 million customers who are using AI tools to do virtual consultations on their smartphones. In an initial consultation, the tools can triage whether you need to see a doctor. They can also issue prescriptions. In the US, many companies offer different forms of telemedicine, but Ping An is deploying AI in a comprehensive way.
Another example is CCC Intelligent Solutions, a SaaS platform provider in auto insurance. Their focus is friction-free customer care after you get into an accident. They have relationships with insurance companies, thousands of repair shops, original equipment manufacturers, and even medical facilities.
They’re using AI to figure out which repair shop has the best record of repairing a car that’s been in a collision like yours and which is likely to give the best price. Now they’ve even developed an AI-based touch-free estimate based on photos that their app guides you in taking.
If your company is data-driven and your people care a lot about data-driven decision-making, you’re going to be more willing to invest in AI and likely more successful at it. But we know from the NewVantage Partners survey that the percentage of companies who now say they’re getting value from AI is substantially higher (92%) than the number of companies that say they’re data-driven organizations (only 26%).
It’s possible to get value from particular applications of AI without changing your entire culture. Eventually you’d like to see more companies develop data-driven cultures, but progress in that area has been slower, judging from surveys.