As the business impact of artificial intelligence continues to expand, definitions abound to explain exactly what it entails. For IESE Prof. Sampsa Samila, AI can be boiled down to six words – “data-driven predictions based on past patterns” – but with a caveat.
“We commonly use the word ‘prediction’ for a lot of different scenarios. We predict the weather, we predict where we’ll get the best price, we predict which products customers will like, we predict diagnoses based on X-ray images… We can even predict the English translation of a sentence in Chinese. The unique strength of AI, specifically neural networks, is its unmatched ability to learn patterns compared to earlier methods. This capacity leads to applications that were simply not feasible before and potentially opens the floodgate to disruption across global industries.”
Strategic benefits of artificial intelligence for businesses
Artificial intelligence (AI) systems deliver numerous strategic benefits for global firms, from higher productivity and operational efficiencies to better customer insights and quality sales leads. As the availability of data and computational power expand, its importance will only increase.
While most people associate AI with manufacturing and smart factories, it benefits numerous other industries, such as FMCG, financial services, healthcare and retail. American Express, for instance, uses machine learning to detect fraud in real time, while Burberry leverages big data to combat counterfeits. We can also thank AI for spam filters, smart e-mail categorizations, speedier Waze routes and faster shopping on Amazon, not to mention the personal assistance of Alexa and Echo!
But is AI cost-effective?
According to a study by Mindtree, some companies have struggled to obtain a positive ROI on their AI investments. Of the 650 British and American business leaders surveyed, only 31 percent reported major value from their AI efforts and 51 percent claimed a lack of understanding on the data infrastructure required to roll out AI at scale.
Against this backdrop, C-suite leaders without technical backgrounds may be tempted to delegate AI decisions to IT systems, but doing so would be a mistake, says Prof. Samila.
“AI has the power to transform global firms by leading to new sources of advantage and business models, as well as disruptive changes that will determine which players capture value in different industries. While no one expects senior executives to learn how to construct algorithms, they should have a solid grasp of AI in order to build their organizational capabilities. Armed with this knowledge, they’ll be able to address and leverage the opportunities it provides.”
IESE’s Artificial Intelligence for Executives is a program designed for strategic decision makers who seek a deeper understanding of AI and its impact on their work, organization and competitive landscape.