Generative Artificial Intelligence (AI) has the potential to add up to 4.4 trillion USD of GDP uplift to the global economy through productivity gains. Sounds good, right? But as the pessimists or sceptics will inevitably say, where is the financial impact being seen? Indeed, it seems most of the economic value is currently accruing to the hardware and infrastructure providers of AI.
Early studies measure the average increase in labour productivity from AI within businesses at around 25%, and case studies of companies that have implemented AI indicate positive noises from productivity gains. Despite this, Goldman Sachs finds that only 5% of companies report regularly using generative AI in their operations. The flipside of this slow pace is that for the early adopters and visionaries, there may be market share gains to go after as a result of improved productivity.
Generative AI is expected to have the largest technological impact on internal business operations versus external customer-facing applications. As such, owners are becoming increasingly interested in harnessing its potential to enhance the customer journey, boost efficiency and grow revenue. But where do you start? This article reflects on some of our experiences working with clients on AI projects with best practices for starting a journey to adopt generative AI.
1. Take a Bottom-Up Approach
As with many new technologies, translating the potential into tangible value can be complex and challenging. There is also the context shift of transposing inspiration seen in the news and other companies into seemingly esoteric situations in your own business. To make the process more bite-sized, start by breaking down the types of tasks undertaken within your business into "blocks", such as search, customer support, note-taking and code generation. Approaching your operations at this task level allows you to identify specific areas that can benefit from an AI augmentation or substitution.
Many off-the-shelf legacy software solutions are already incorporating AI into their offerings, such as Salesforce and Hubspot. These platforms provide an excellent starting point to familiarise the business with AI. For those workers using this software day-to-day, it allows them the chance to socialise themselves with new practices and, for management, take positive signals if adoption starts to pick up pace.
When searching for suitable AI solutions, business owners should evaluate which of the four commercial themes the solution provides uplift to. Altogether, this helps define more of a macro viewpoint on what goals the business will be working towards over the coming years. For example, if AI can enhance the originality of the product/service offered, it's likely to lead to a premiumisation effect on the brand that will lead to different marketing and business development behaviours.
2. Understand the Strategic Pathways
- Cost: AI helps businesses compete on cost by enabling more efficient operations. Through automation and optimisation, AI reduces the time taken for tasks and minimises errors, leading to significant cost savings. For example, AI-driven predictive maintenance can reduce downtime and maintenance costs, while AI customer service chatbots can handle inquiries at a much lower cost.
- Scale: AI enables businesses to operate at a larger scale without requiring a proportional increase in resources. By automating manual and repetitive tasks, AI allows companies to handle more volume and complexity with the same resources.
- Speed: AI provides a time advantage by speeding up processes. Current AI technology has the potential to automate up to half of the employee's time spent on routine tasks. This automation frees up employees to focus on more impactful and strategic work.
- Originality: While AI provides valuable insights to businesses, those that develop unique AI models tailored to their specific needs will gain differentiated and more nuanced perspectives. This customisation will allow those businesses to derive unique insights and competitive advantage.
3. Key Internal Teams to Focus On
Many common tasks in these roles are manual and repetitive, and KPMG indicates that AI is used to increase productivity through automating mundane tasks (31%) and language generation (24%). The value of AI in these areas reduces time spent on routine tasks and frees up employees' time to focus on higher-skill, value-add work.
4. Avoid the Common Pitfalls
At Palladium, we have worked with numerous investors and portfolio companies to devise AI strategies and implement technological solutions incorporating AI. This has given us perspective over a wide swathe of industries and business profiles and, whilst every situation is different, a number of common themes have emerged. Here are some of the main areas firms need to consider when starting their journey to embed generative AI into operations.
Understanding where AI can be most effective can help business owners build momentum by tackling the quick wins first. Starting your efforts on implementing AI within roles heavy on manual tasks will likely boost productivity and ensure a smooth initial integration. Functions that rank the highest in AI adoption are Office and Administrative support (46%) and Legal (46%), based on an MSCI report. Similarly, KPMG reported that IT/Tech and operations are the top functions currently experimenting with AI.
- Set Rules of Engagement: Many executives see the potential of AI but report a lack of knowledge and are concerned about security and privacy. They naturally want to ensure staff use technology safely and ethically, so establishing clear guidelines and governance, with requisite training, will alleviate the concerns, develop literacy and ensure safe practices.
- Consider Vendor Lock-in: Explore multiple options before committing to any AI platform. Being the first mover does not equate to prevailing as the successful format. While most of the popular LLM models are likely to converge in terms of their effectiveness, committing to a long period of encumbrance with a third-party solution now may see an opportunity lost if a new leading proposition emerges.
- Actions Speak Louder Than Words: The AI hype cycle is in full swing, with companies at pains to signal their evangelism of it to the market. Yet lip service and PR will only go so far and may provide a false sense of security. We encourage firms to embrace the uncertainty of AI and support staff experimentation, but it's also vital that momentum builds and carries through to more substantial strategies for harnessing AI.
- Simplify and Focus: Start small and simple by focusing on a specific area within your value chain and a straightforward use case. Explore how AI can add value without overcomplicating the process. In initial stages when scepticism may be high, the "hearts and minds" aspect of winning over the doubters is vitally important, which can be achieved with simple MVP or off-the-shelf solutions, versus elaborate long-term projects.
Case Studies
Our thoughts and processes with generative AI have been formed by our experiences with clients, here are some examples of how we have deployed solutions across two distinct industries.
- Palladium was engaged to help the Canadian arm of a global pharmaceutical company deploy a safe and private AI solution to enhance productivity. The primary challenge was to improve the efficiency of staff in their analysis, planning and customer service tasks, whilst adhering to strict security and privacy requirements. Palladium implemented its Prism solution, with bespoke automation for the company's specific needs, empowering staff with a bespoke AI assistant, trained to suit their needs, improving efficiency and effectiveness in daily operations.
- A law firm sought to enhance operational efficiency and scale without increasing headcount and recognised the potential for AI to assist. The company aspired to incorporate an innovative solution to transition to a technology-led legal firm. Palladium defined a clear implementation roadmap with AI-driven solutions aligned to the company's strategic objectives. Palladium also developed the future-state technology and data architecture, integrating new AI capabilities with existing systems to facilitate improved data flow and process automation.
Parting Remarks
The FOMO of AI is apparent and may present a burning platform situation, but avoid the temptation to rush into AI adoption without gaining fuller context. While generative AI is increasingly becoming seen as one of the big tectonic shifts in technology that occur every couple of decades, it is important to approach its integration incrementally. Take the time to conduct thorough research and understand holistically how AI can impact your business. Be sure to have all the necessary information before making decisions.
Contact our Value Creation team at alex.graham@palladiumdigital.co.uk to learn how Palladium Digital can help you leverage AI for your needs.
Sources
Factset.com
