Organizations that use AI to improve existing KPIs or create new ones realize more business benefits than organizations that adjust their KPIs without AI.
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.
Improving key performance indicators is a clear mandate for most organizations. According to our seventh annual global executive AI survey, 7 out of 10 respondents agree that enhancing KPIs — not just improving performance — is critical to their business success. As one executive notes, “We need to evolve our KPIs all the time so we don’t run our business on legacy metrics.”
A growing number of companies now use AI — in a variety of ways — to accelerate that evolution. “I’m very excited about what machine learning can do in terms of having our senior leaders move away from metrics that look backward to metrics that can look forward,” says Avinash Kaushik, chief strategy officer at digital marketing agency Croud and a former senior director of global strategic analytics at Google.
Early on at Lyft, engineers designed an algorithm to maximize revenue by matching driver supply and customer demand. “It looked at all the possible combinations of riders and drivers and picked the combination that — based on the ride being requested, where the driver was located, all of the system dynamics — would maximize revenue,” says Elizabeth Stone, former vice president of science at Lyft. Then, as data scientists began testing other objectives, something interesting emerged. One AI solution discovered that optimizing conversion rates — how often a user ordered a ride after opening the app — would, in turn, deliver more ride requests in the future. More ride requests ultimately mean more revenue.
About the Authors
Michael Schrage is a research fellow with the MIT Sloan School of Management’s Initiative on the Digital Economy. His research, writing, and advisory work focuses on the behavioral economics of digital media, models, and metrics as strategic resources for managing innovation opportunity and risk.
David Kiron is the editorial director, research, of MIT Sloan Management Review and program lead for its Big Ideas research initiatives.
François Candelon is a senior partner and managing director at Boston Consulting Group and the global director of the BCG Henderson Institute, where his research focuses on the impact of technologies on business and society. He can be contacted at candelon.francois@bcg.com.
Shervin Khodabandeh is a senior partner and managing director at BCG and the coleader of BCG’s AI business in North America. He is a leader in BCG X and has over 20 years of experience driving business impact from AI and digital. He can be contacted at shervin@bcg.com.
Michael Chu is a partner and associate director at BCG who focuses on applying AI and machine learning to business problems in commercial functions, including optimizing pricing, promotions, sales, and marketing. He can be reached at chu.michael@bcg.com.
References
1. S. Ransbotham, S. Khodabandeh, D. Kiron, et al., “Expanding AI’s Impact With Organizational Learning,” MIT Sloan Management Review and Boston Consulting Group, Oct. 20, 2020, https://sloanreview.mit.edu.
