Artificial Intelligence and Business Strategy
In collaboration withBCG
Fueled by the buzz around powerful applications of artificial intelligence (AI), many business leaders are contemplating whether to introduce AI into their organizations. While practitioners and academics have outlined some of the strategic challenges of implementing AI, many executives are still seeking good models for how to generate competitive advantage from its application.
To find out more about what contributes to successful AI adoption, we helped lead a survey by the McKinsey Global Institute of 3,000 C-level executives across 10 countries and 14 sectors. From that research, we identified five fundamental strategies for how to get the most out of AI’s potential.
1. Plan to Grow, Not Just Cut
Executives should approach AI as an instrument to expand their businesses — creating new products or services, increasing productivity, or winning more market share — as much as a tool to cut costs. Companies with less experience in AI tend to focus on its ability to help cut costs, but the more that companies use and become familiar with AI, the more potential for growth they see in it.
Retailing executives in our survey, for example, mentioned cost cutting as often as increasing market share or market growth as their main objectives for implementing AI. But the subset of retailers who have adopted AI at scale — meaning, they deploy AI across technology groups, use AI in the most core parts of their value chains, and have the full support of their executive leadership — cited AI’s potential for business growth twice as often as its potential for cutting costs.
This same subset of retailers, the early AI adopters, reported that insight-based selling — using AI to review shoppers’ habits and suggest personalized promotions and tailored displays — increased sales by 1% to 5% in traditional stores. And they reported that personalization and AI-enabled dynamic pricing lifted online sales as much as 30%.
2. Invest in Both Technical and Managerial Talent Capabilities
In our survey, executives gave several reasons for not adopting AI. The largest share (30%) said they were uncertain of its business case. Another 21% cited the scarcity of AI-related human capabilities — and these same executives were 50% more likely to also say that AI presented an uncertain business case, suggesting that human capabilities are critically important to capture the returns from AI in new organizations.