Expanding AI’s Impact With Organizational Learning

by: Sam Ransbotham, Shervin Khodabandeh, David Kiron, François Candelon, Michael Chu, and Burt LaFountain


Only 10% of companies obtain significant financial benefits from artificial intelligence technologies. Why so few?

Our research shows that these companies intentionally change processes, broadly and deeply, to facilitate organizational learning with AI. Better organizational learning enables them to act precisely when sensing opportunity and to adapt quickly when conditions change. Their strategic focus is organizational learning, not just machine learning.

Organizational learning with AI is demanding. It requires humans and machines to not only work together but also learn from each other — over time, in the right way, and in the appropriate contexts. This cycle of mutual learning makes humans and machines smarter, more relevant, and more effective. Mutual learning between human and machine is essential to success with AI. But it’s difficult to achieve at scale.

Our research — based on a global survey of more than 3,000 managers, as well as interviews with executives and scholars — confirms that a majority of companies are developing AI capabilities but have yet to gain significant financial benefits from their efforts. More than half of all respondents affirm that their companies are piloting or deploying AI (57%), have an AI strategy (59%), and understand how AI can generate business value (70%). These numbers reflect statistically significant increases in adoption, strategy development, and understanding from four years ago. What’s more, a growing number of companies recognize a business imperative to improve their AI competencies. Despite these trends, just 1 in 10 companies generates significant financial benefits with AI.

We analyzed responses to over 100 survey questions to better understand what really enables companies to generate significant financial benefits with AI. We found that getting the basics right — like having the right data, technology, and talent, organized around a corporate strategy — is far from sufficient. Only 20% of companies achieve significant financial benefits with these fundamentals alone. Getting the basics right and building AI solutions that the business wants and can use improve the odds of obtaining significant financial benefits, but to just 39%.

Our key finding: Only when organizations add the ability to learn with AI do significant benefits become likely.

About the Authors

Sam Ransbotham (@ransbotham) is a professor in the information systems department at the Carroll School of Management at Boston College, as well as guest editor for MIT Sloan Management Review’s Artificial Intelligence and Business Strategy Big Ideas initiative.

Shervin Khodabandeh is a senior partner and managing director at BCG, and the co-leader of BCG GAMMA (BCG’s AI practice) in North America. He can be contacted at shervin@bcg.com.

David Kiron is the editorial director of MIT Sloan Management Review, where he directs the publication’s Big Ideas program. He can be contacted at dkiron@mit.edu.

François Candelon is a senior partner and managing director at BCG, and the global director of the BCG Henderson Institute. He can be contacted at candelon.francois@bcg.com.

Michael Chu is a partner and associate director at BCG, and a core member of BCG GAMMA. He can be reached at chu.michael@bcg.com.

Burt LaFountain is a partner and managing director at BCG, and a core member of BCG GAMMA. He can be reached at lafountain.burt@bcg.com.

Special Contributors

Rodolphe Charme di Carlo and Allison Ryder

Contributors

Sylvain Duranton, Connie Gao, Carolyn Ann Geason, Tam Harbert, Michele Lee DiFilippo, Martin Reeves, Lauren Rosano, Leonor Saitkoulov, and Yunke Xiang

Acknowledgments

Gina Chung, vice president of innovation and head of Americas Innovation Center, DHL

Gail Evans, global chief digital officer, Mercer

Kartik Hosanagar, John C. Hower Professor of Technology and Digital Business, the Wharton School, University of Pennsylvania

Marco Iansiti, David Sarnoff Professor of Business Administration, Harvard Business School

Yanjun Ma, director, deep learning platform, Baidu

Carl March, director of analytics, Industry 4.0, Stanley Black & Decker

Valero Marín, CIO and chief digital officer, Repsol

Prakhar Mehrotra, vice president of machine learning, Walmart

Harmeen Mehta, CIO and head of cloud and security business, Bharti Airtel

Kate Mulroney, senior director, advanced analytics and AI, Novo Nordisk

Arun Narayanan, chief data officer, Anglo American

Elizabeth Stone, former vice president of science, Lyft

Mattias Ulbrich, CIO, Porsche, and CEO, Porsche Digital

Manuela Veloso, managing director, head of AI research, J.P. Morgan

Alice Xiang, head of fairness, transparency, and accountability research, Partnership on AI

To cite this report, please use: S. Ransbotham, S. Khodabandeh, D. Kiron, F. Candelon, M. Chu, and B. LaFountain, “Expanding AI’s Impact With Organizational Learning,” MIT Sloan Management Review and Boston Consulting Group, October 2020.

Collaborating Organizations
MIT Sloan Management Review

At MIT Sloan Management Review (MIT SMR), we share with our readers an excitement and curiosity about how the practice of management is transforming in the digital age. Our expert contributors help leaders explore the trends that are shaping how organizations operate, compete, and create value in a technology-fueled world. We deliver the kind of evidence-based analysis and practical insight that will inspire readers to do great work.

MIT Sloan Management Review Big Ideas

MIT Sloan Management Review’s Big Ideas Initiatives develop innovative, original research on the issues transforming our fast-changing business environment. We conduct global surveys and in-depth interviews with front-line leaders working at a range of companies, from Silicon Valley startups to multinational organizations, to deepen our understanding of changing paradigms and their influence on how people work and lead. Working with collaborative organizations, we publish our findings in annual research reports, case studies, videos, articles, and interactive data visualizations. For over a decade, MIT SMR’s Big Ideas Initiatives have explored topics such as artificial intelligence, digital leadership, sustainability, data and analytics, the internet of things, and performance management.

Boston Consulting Group

Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we help clients with total transformation — inspiring complex change, enabling organizations to grow, building competitive advantage, and driving bottom-line impact.

To succeed, organizations must blend digital and human capabilities. Our diverse, global teams bring deep industry and functional expertise and a range of perspectives to spark change. BCG delivers solutions through leading-edge management consulting along with technology and design, corporate and digital ventures — and business purpose. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, generating results that allow our clients to thrive.

BCG Henderson Institute

The BCG Henderson Institute is Boston Consulting Group’s strategy think tank, dedicated to exploring and developing valuable new insights from business, technology, science, and economics by embracing the powerful technology of ideas. The Institute engages leaders in provocative discussion and experimentation to expand the boundaries of business theory and practice and to translate innovative ideas from within and beyond business. For more ideas and inspiration from the Institute, please visit bcghendersoninstitute.com.

BCG GAMMA

BCG GAMMA is BCG’s global team dedicated to applying artificial intelligence and advanced analytics to critical business problems at leading companies and organizations. The team includes 900-plus data scientists and engineers who utilize AI and advanced analytics expertise (e.g., machine learning, deep learning, optimization, simulation, text and image analytics, etc.) to build solutions that transform business performance. BCG GAMMA’s approach builds value and competitive advantage at the intersection of data science, technology, people, business processes, and ways of working. For more information, please visit our webpage.

References

1. Our interpretation of “significant financial benefits” necessarily varies based on company revenue. See “About the Research” for details.

2. S. Ransbotham, S. Khodabandeh, R. Fehling, et al., “Winning With AI,” MIT Sloan Management Review and Boston Consulting Group, Oct. 15, 2019, https://sloanreview.mit.edu.

3. S. Ransbotham, D. Kiron, P. Gerbert, et al., “Reshaping Business With Artificial Intelligence,” MIT Sloan Management Review and Boston Consulting Group, Sept. 6, 2017, https://sloanreview.mit.edu.

4. S. Ransbotham, P. Gerbert, M. Reeves, et al., “Artificial Intelligence in Business Gets Real,” MIT Sloan Management Review and Boston Consulting Group, Sept. 17, 2018, https://sloanreview.mit.edu.

5. Ransbotham et al., “Winning With AI.”

6. Ransbotham et al., “Winning With AI.”

7. Our survey results indicate that smaller businesses — in contrast with larger organizations — capture most of their AI-related benefits from learning with the most autonomous mode (AI decides and implements). One reason may be that smaller companies typically have less organizational complexity, which can make it easier to realize significant financial benefits from automation than at larger companies.

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