The AI ​​Financial Performance Paradox

There is now widespread agreement that generative AI will significantly transform business, and that corporations and individuals who select to not embrace it’s going to quickly be consigned to the dustbin of history.

At the identical time, as corporations delve deeper into the technology, they need evidence, real business metrics that show how AI actually improves business results and revenue.

They can’t and shouldn’t rely solely on vendor guarantees. But it’s tough to make a direct correlation between something like, say, Microsoft Copilot and overall business performance.

Should CIOs Just Take It On Faith? This Week Clouded Judgment Newsletterinvestor Jamin Ball suggests that the majority corporations may not have a alternative. He believes they might not see results for a while, leaving them with a really difficult buying decision.

Here’s Ball’s opinion:

“The world is evolving right now—AI is a huge platform change. And by NOT adopting it/spending money on it, you risk losing market share and slowly becoming irrelevant. As your competitors invest in AI-related activities, you need to invest in AI-related activities as well. Ultimately, those investments may not immediately result in better business outcomes (i.e., more revenue), but they certainly lead to better end-user experiences. And they very well may lead to better “other” metrics like retention or churn. If your competitors are constructing higher end-user experiences and also you will not be, you might be in trouble within the short/medium term,” Ball wrote.

But CIOs need to have more certainty before blindly jumping into expensive latest technology, irrespective of how game-changing it might be. They and the corporate’s CFOs must cope with the truth of the here and now relating to justifying the expense, and in the event that they are spending big, when can they reasonably expect a return on their investment?

At the identical time, those that use the electricity-AI analogy might imagine that that is AI’s electricity moment—that moment within the late 18th century when factories began switching from steam to electricity. You could ignore it and proceed with steam, but sooner or later you are going to get swept away by a steamboat (pun intended).

Perhaps the reply lies with a clever startup, or more likely, corporations of a certain size will turn to the standard suspects—Deloitte, McKinsey, and Accenture—and pay them a hefty fee to assist them figure this out. Ironically, it will only increase the associated fee and time it takes to get a quote.

As Jerry Garcia of the Grateful Dead once sang in “Wheel”, “You can’t go back and you can’t stand still. If the thunder doesn’t get you, the lightning will.” CIOs attempting to work out how you can proceed must determine whether or not they are leading their corporations steadily into the longer term or throwing good money after bad.