Global Competition With AI in Business: How China Differs

China’s momentum and challenges in artificial intelligence investments yield telling lessons for its worldwide observers.

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Artificial Intelligence and Business Strategy

The Artificial Intelligence and Business Strategy initiative explores the growing use of artificial intelligence in the business landscape. The exploration looks specifically at how AI is affecting the development and execution of strategy in organizations.

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BCG
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China’s ambition in artificial intelligence is often framed as a tech rivalry between two important centers for digital innovation — the east coast of China and the U.S. West Coast. But this rivalry is an undercard for the main event: AI’s largest and most enduring contributions will be in non-technology sectors, as traditional companies unlock value in regions far away from Silicon Valley and the string of coastal cities that constitute China’s innovation corridor.

For non-tech sectors, our research indicates that Chinese companies’ approach to adopting AI differs from those in other regions, raising important questions. Buoyed by the country’s latest five-year plan and enabled by centralized data, these companies are investing aggressively in AI and adapting their business models to accommodate for AI’s potential. However, AI adoption in China is experiencing noteworthy challenges in the form of unclear business cases and bottlenecks due to a lack of technical capabilities. In addition, Chinese companies’ current focus on AI’s potential to aid cost reductions could be partly to blame for expectations of job losses. Regardless of any setbacks in Chinese companies’ momentum, the determination they’re using toward AI adoption could stimulate other governments and companies to ensure their stakes in this competition.

Our findings stem from a survey of 300 executives in China in the spring of 2018 that we compared with a concurrent wider survey of more than 3,000 executives in 126 countries (about a third of the respondents were from the United States and about one-fifth were from Europe). For this article, we were particularly interested in the profiles of the companies most advanced in understanding and adopting AI. These so-called Pioneers make up about one-fifth of the respondents in our global survey. (The full research report, including an in-depth analysis of the wider implications for organizations, will be published in September 2018 by MIT Sloan Management Review.)

Chinese Pioneers Move Aggressively Into AI

Compared with the rest of the world, Chinese Pioneers have higher investment levels across the board in AI-related technology, data, processes, and talent. Not surprisingly, Chinese Pioneer companies are then also the most likely to have modified their business model in the past year to take advantage of AI. (See “Pioneers’ Investment and Business Model Modification.”)

Topics

Artificial Intelligence and Business Strategy

The Artificial Intelligence and Business Strategy initiative explores the growing use of artificial intelligence in the business landscape. The exploration looks specifically at how AI is affecting the development and execution of strategy in organizations.

In collaboration with

BCG
See All Articles in This Section

Acknowledgments

The authors thank Allison Ryder, Sukand Ramachandran, Massimo Portincaso, Roger Premo, Jan-Hinnerk Mohr, Johannes Knebel, and Christian Barz for support in compiling this report. They also thank François Candelon and Thierry Chassaing for their invaluable comments and contributions. The authors also are grateful to Mark Voorhees for writing assistance.

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Comments (2)
Jorge Mejia
I don't see how Chinese companies can only be thinking in using AI exclusively to reduce cost, or European companies trying to focus on revenue. It seems that from a strategic viewpoint the aim has to be increasing the robustness of their business model, even moving to a new one.  

Then it would make sense cost reduction and revenue increases. Such amount of investment would not be poured with short-term goals
Nouman Habib
I wonder how mobile companies like Samsung and Apple will integrate AI into latest samsung phones and people will be able to use VR on their mobile phones.