(This article is part of a series on Artificial Intelligence for CEOs, Board Members and Senior Executives.)
You’ve heard the hype. Artificial Intelligence promises to revolutionize business, but you’re hesitant. As a CEO, you’re right to be cautious. AI implementation comes with significant challenges that demand careful consideration. Let’s review the key ones.
The Cost Conundrum
First, there’s the cost. AI projects require substantial upfront investment in technology, infrastructure, and talent. You might wonder if the returns justify this expenditure. The price tag for comprehensive AI integration can run into a significant percentage of your costs, potentially straining your financial resources.
According to a recent Gartner survey, demonstrating ROI is the biggest obstacle to generative AI adoption. Forty-nine percent of those surveyed said estimating and demonstrating AI value is their biggest obstacle, 42% said it was a lack of talent, and 40% said it was a lack of confidence in AI technology.
The Talent Tug-of-War
Then there’s the talent gap. The market for AI specialists is fiercely competitive, and their salaries can be eye-watering. The shortage of skilled AI professionals is a global issue, with demand far outstripping supply. While 81% of IT professionals feel they can take on AI, only 12% have AI experience, and 70% of employees need to upgrade their skills (see “Ensuring You Have the Right People for Success: Assessing Your Team”).
Data Privacy
Lastly, concerns about data privacy and security concerns are paramount. AI runs on data, and you’re responsible for protecting sensitive information. The reputational and financial risks from a data breach are substantial, and navigating the landscape of AI ethics and regulations adds another layer of complexity.
Overcoming the Hurdles: Strategies for Success
These concerns are valid, but they’re not insurmountable. Forward-thinking companies are finding ways to overcome these hurdles and reap the benefits of an AI investment. How are these forward-thinking companies overcoming these challenges?
Think Big, Start Small,
Implement a phased approach to AI adoption. Begin with focused, high-impact projects that address specific business problems. This strategy allows you to demonstrate quick wins, build internal capabilities, and gain valuable insights without committing to a massive upfront AI investment. Once these smaller projects prove successful, you can scale AI solutions and minimize risk while providing tangible evidence of AI’s value.
For example, UPS adopted ORION (On-Road Integrated Optimization and Navigation), optimize delivery routes by analyzing routes, traffic, weather, and other factors. ORION saved UPS an average of 6 to 8 miles per day per route, which cut 100 million miles per year off delivery miles, resulting in $300 to $400 million saved annually. It also eliminated 100,000 metric tonnes of CO2 emissions. The initial AI project has proven so successful that UPS has continued to invest in AI by introducing UPSNav, with turn-by-turn directions, and UPS MyChoice and personalized customer services for delivery routing and notifications.
Winning the Talent War
Tackle the talent challenge head-on—partner with universities and AI research institutions to create a pipeline of skilled professionals. Whether or not you can do that, you must invest in upskilling your existing workforce. This dual approach will help you build a team that understands both AI and your business context.
Consider creating internal AI academies or sponsoring employees for specialized training programs. In a Skillsoft survey, IT professionals report that training improves work quality (62%), engagement (47%), and job performance (47%), and 82% of IT professionals say a lack of training is the primary reason they change jobs. By developing talent in-house, you’ll not only fill skill gaps but foster loyalty and retention.
Crafting a Clear AI Roadmap
Develop a clear AI roadmap that aligns with your business goals. Identify specific use cases where AI can drive immediate impact. Set realistic timelines and ROI expectations. This strategic approach will help you prioritize AI investments and measure success effectively.
Your roadmap should include short-term wins, medium-term goals, and a long-term vision. Consider high-impact, low-effort initiatives that yield immediate returns, such as adopting AI chatbots, using AI for demand forecasting, or AI-powered process automation. Comprehensive planning will help you maintain momentum and secure ongoing support for AI initiatives.
Wayfair has been embracing AI in a strategic way. The company started with AI-supported support, giving customer service reps AI-crafted responses for customer chat and emails to reduce response time and increase customer satisfaction. More recently, Wayfair has developed a tool that leverages AI and augmented reality to help customers visualize Wayfair products in their home.
Building Trust Through Data Governance
Proactively address data concerns. Implement robust data governance frameworks and strong security measures. Ensure ethical AI use and regulatory compliance. By taking these steps, you’ll build trust with customers, employees, and stakeholders, creating a solid foundation for AI future initiatives.
Consider appointing a chief AI ethics officer or establishing an AI ethics board to oversee your AI projects. This demonstrates your commitment to responsible AI use and can help alleviate concerns from both internal and external stakeholders.
IBM has been careful in building data governance into its AI practices. For example, as part of its large language model training, IBM has been careful to identify sensitive data, consider data privacy, monitor data for security risks, watch for copyright infringement, and ensure consent when using customer data.
The Competitive Edge: Why Early AI Investment Pays Off
The benefits of early AI investment are too significant to ignore. Companies that embrace AI gain a powerful competitive edge by enhancing operational efficiency, slashing costs, and delivering personalized customer experiences that drive loyalty and revenue.
Data-Driven Decision Making
AI-driven insights will empower you to make data-backed decisions faster and more accurately. You’ll uncover new opportunities, optimize processes, and stay ahead of market trends, which is essential in fast-moving industries where quick, informed decisions are crucial.
For example, Amazon uses AI decision-making to optimize costs and expedite shipping. Amazon uses AI-powered robots to pack and ship orders and to check delivery routes and traffic for faster delivery.
Operational Excellence
AI can streamline operations across your entire organization. From supply-chain optimization to predictive maintenance, AI-powered solutions can significantly reduce costs and improve efficiency. For instance, an AI system might predict equipment failures before they occur, minimizing downtime and maintenance costs.
For example, companies like Apollo Energy Analytics are using AI-powered predictive analytics to detect anomalies in the performance of solar systems, telling solar installers when service is needed. Any type of equipment can benefit from machine learning models that can predict failure and explain why.
Customer-Centric Innovation
With AI, you can offer hyper-personalized experiences that delight customers and promote loyalty. AI-powered chatbots can provide 24/7 customer service, while recommendation engines can boost sales by suggesting products tailored to individual preferences. These innovations can set you apart in crowded markets.
According to the Porch Group, 69% of companies rated personalized customer experience as a top priority. Research also shows that 81% of customers prefer companies that offer personalized service, and 70% want customer service where the companies know about past interactions.
Sephora has embraced AI to give customers a new kind of shopping experience and promote customer loyalty. The Sephora Virtual Artist app uses AI to recommend cosmetics based on customer skin tone and preferences. The Virtual Artist app has increased Sephora’s online sales by 35%.
Future-Proofing Your Business
Committing to AI now will future proof your business against industry disruption. As AI capabilities advance, early adopters can leverage new technologies and maintain market leadership. You’ll be ready to capitalize on emerging opportunities while competitors struggle to catch up (see “CEO’s Guide to Generative AI: Advice for 2024”).
The Call to Action: Embrace AI Leadership
The time to act is now. Start by assessing your company’s AI readiness. Identify key areas where AI can generate immediate value. Develop a tailored AI strategy that addresses your specific business challenges and opportunities.
Allocate resources for AI initiatives but do so strategically. Remember, successful AI adoption is as much about nurturing a culture of innovation as it is about technology. Foster an environment that embraces continuous learning and adaptation.
Create an AI task force comprising leaders from different departments to ensure a holistic approach to implementation. This cross-functional team can help identify opportunities, address challenges, and champion AI adoption across the organization.
AI is not just another IT project. It’s a fundamental shift in how business operates. By overcoming your reluctance and investing in AI today, you’re not just keeping up with the competition – you’re positioning your company to lead in the AI-driven future.
The question is no longer whether you should invest in AI but how quickly you can start. Your competitors are already moving. Will you lead, or will you follow?