The Boston Consulting Group (BCG) recently released a comprehensive report titled “Where’s the Value in AI?”, shedding light on the current state of AI adoption and its value realization across various industries. The report, based on a survey of 1,000 Chief Experience Officers (CxOs) and senior executives from over 20 sectors across 59 countries, provides valuable insights into how companies are leveraging AI to drive growth and innovation.
INTRODUCTION
The October 2024 BCG report, highlights that after all the hype over artificial intelligence (AI), it is hard to find value out of AI deployment. CEOs have authorized investments, hired talent, and launched pilots—but only 26% of companies have advanced beyond the proof-of concept stage to generate value. This report yields important insights into what AI leaders are doing to drive real value from the technology, where others fall short, where the value is coming from, how individual sectors are performing, and how companies can change their own AI trajectories.
GLOBAL CONTEXT AND SECTORAL INVESTMENTS
Leaders’ expectations for revenue growth from AI by 2027 are 60% higher than those of other companies, and they expect to reduce costs by almost 50% more. Data on AI adoption shows that leaders pursue, on average, only about half as many opportunities as their less advanced peers. Leaders focus on the most promising initiatives, and they expect more than twice the RoI in 2024 that other companies do. In addition, leaders successfully scale more than twice as many AI products and services across their organizations.
Almost 45% of leaders integrate AI in their cost transformation efforts across functions (compared with only 10% of nonleaders). And more than a third of leaders focus on revenue generation from AI, compared with only a quarter of other companies.
Globally, AI adoption stands at 26%, with the software, fintech, and banking sectors being the most enthusiastic adopters of AI-based applications in their daily operations. These sectors are leading the way in integrating AI to enhance their efficiency, productivity, and innovation capabilities. Leading companies follow a strategic rule for resource allocation: investing 10% into algorithms, 20% into technology and data, and a significant 70% into people and processes. This balanced approach ensures that AI initiatives are well-supported by robust infrastructure, quality data, and skilled personnel. Overall, as per the report the companies in survey derive 62% of the value they obtain from AI and generative AI in core business functions, including operations (23%), sales and marketing (20%), and R&D (13%). Support functions generate 38% of the value, with customer service (12%), IT (7%,) and procurement (7%) leading the way. Software, media, fintech, insurance, telecommunications, and biopharma generate 70% to 90% of their AI-related value in core business processes. Sales and marketing, for example, is fast emerging as a major source of AI value in such sectors as software (31% of AI value generated), travel and tourism (31%), media (26%), and telecommunications (25%).
LEADER STRATEGY AND CHARACTERISTICS
- Core Business and Support Functions: Contrary to the common belief that AI’s value lies mainly in streamlining operations and reducing costs in support functions, the greatest value actually lies in core business processes. The BCG report reveals that leaders generate 62% of their AI value from these core processes. Leveraging AI in both core business and support functions gives these companies a significant competitive edge.
- Ambitious Goals: Leaders are notably more ambitious with their AI strategies. They expect a 60% higher revenue growth from AI by 2027 compared to other companies and anticipate nearly 50% greater cost reductions. Leaders focus on company-level innovation central to their business, whereas only 10% of other companies do so, and mainly use AI for productivity enhancements.
- Strategic Investments: AI leaders invest strategically in high-priority opportunities, scaling and maximizing AI’s value. The report shows that leaders pursue about half as many opportunities as their less advanced peers, focusing on the most promising initiatives. They expect more than twice the return on investment (RoI) in 2024 compared to other companies and successfully scale more than twice as many AI products and services across their organizations.
- Integration for Cost and Revenue: Nearly 45% of leaders integrate AI in their cost transformation efforts, compared to only 10% of non-leaders. Moreover, more than a third of leaders focus on revenue generation through AI, as opposed to just a quarter of other companies.
- Workforce Enablement: Leaders double their investment in digital infrastructure, people allocation, and the number of AI solutions scaled. This significant investment in AI and workforce enablement underscores their commitment to harnessing AI’s full potential.
Leaders in AI adoption are utilizing both predictive AI and Generative AI (GenAI). The organizations are faster in adopting GenAI, which offers opportunities in content creation, qualitative reasoning, and integrating with other tools and platforms. Their advanced capabilities facilitate the implementation of prerequisites like large language models, enhancing their overall AI strategy.
CHALLENGES IDENTIFIED UNDER THE REPORT
The report highlights the most difficult challenges that companies face in implementing AI initiatives. They fall into four following groups:
- Difficulties in defining clear priority use cases with compelling returns for the anticipated investments
- A host of issues related to moving from plans to action and delivering value, such as prioritizing investments, scaling solutions across functions and businesses, overcoming resistance to adoption, and realizing the benefits
- People and skills issues, including building specific AI skills and broader AI literacy • Integrating AI solutions with existing IT systems, and enabling access to high-quality data
The survey confirms that when companies undertake digital or AI transformations, they need to focus 70% of their effort and resources on people-related capabilities, 20% on technology, and 10% on algorithms. Too often, companies make the mistake of prioritizing the technical issues over the human ones—which helps explain why many of them do not achieve the results they are looking for
LEVERAGING AI: KEY STEPS FROM THE BCG REPORT
- Set a Bold Strategic Commitment: Leadership must establish a strong, strategic vision for AI and be prepared to support this commitment over multiple years. This top-down approach ensures that AI initiatives receive the necessary backing and resources to succeed.
- Maximize AI’s Potential Value: Develop a balanced portfolio of AI initiatives. This includes streamlining everyday business processes, transforming entire business functions, and creating AI-native offerings that unlock new business models. This balanced approach ensures that AI investments cover both immediate improvements and long-term innovations.
- Focus on High-Impact Programs: Prioritize fewer, high-impact lighthouse programs. Start with implementing one to three high-ROI, easy-to-execute initiatives to fund the journey. This focused approach helps build momentum and demonstrates AI’s value quickly, paving the way for more complex projects.
- Ensure Minimal Viable Infrastructure: Make sure the basic infrastructure needed for AI initiatives is in place. This includes integration with IT systems and access to high-quality data, which are crucial for the success of AI projects.
- Identify Capability Gaps: Assess your company’s capability gaps compared to leaders in the field and invest in building these capabilities. While initial focus may be on technology and data, long-term success requires attention to people and processes.
- Focus on Implementation Governance: Ensure that governance emphasizes end-to-end transformation and involves redesigning work processes, cultivating talent, reimagining processes, strengthening decision-making, and overcoming resistance to new solutions.
- Set Up Guardrails for Responsible AI Deployment: Implement measures to ensure AI is used responsibly. This includes establishing transparency, control, and accountability to ensure ethical and legal compliance and to manage business risks effectively.
By following these steps, companies can harness the full potential of AI, driving significant value and staying ahead in the competitive landscape.
Access the report here: https://media-publications.bcg.com/BCG-Wheres-the-Value-in-AI.pdf