1. Artificial Intelligence in the corporate Sector
Let’s first take a look at the current state of the usage of artificial intelligence in the corporate sector. In the following, I refer myself to the results of the survey conducted by the technology research company Vanson Bourne.
The company was commissioned by software company Teradata to ask executive decision-makers on the topic of artificial intelligence for the enterprise. Senior VP and C-Level executives at 260 organizations globally — 50% of which are organizations with annual revenue of $1B or more — responded to the survey, resulting in some very interesting insights.g
At the highest level, “State of Artificial Intelligence for Enterprises” survey found the following:
- Business are all in on AI — 80% of enterprises already have some form of AI (machine learning, deep learning, etc.) in production today
- And, they have high hopes for business impact — for every dollar invested today, they expect to double the return in 5 years, and triple in 10 years
- But, 91% see big barriers ahead — lack of IT infrastructure (40%) and lack of talent (34%) are the biggest ones
- Only 28 percent of respondents recognize that their organization has enough trained people internally to buy, build and deploy AI.
- To set the strategy, a new role is emerging — 62% expect to hire a Chief AI Officer in the future
In short, the survey concludes that artificial intelligence is a widely used technology in the corporate sector and has great future potential in terms of ROI.
2. Investments in Artificial Intelligence are growing
The findings of the Vanson Bourne survey are underpinned by McKinsey Global Institute research and presented in the paper “Artificial Intelligence: The Next Digital Frontier?”.
In terms of investment, the McKinsey Global Institute comes to the conclusion that in the year 2016 between 20 and 30 Billion $ were invested in AI worldwide.
Approx. 90% of the investment went into R&D and deployment. And the rest 10% was spent on the acquisition of AI. These investments have been dominated by tech giants such as Google or Baidu. In comparison, Venture capital and private equity financing, grants, and seed investments sum up to a total of 6 to 9$ Billion worldwide.
The investment numbers of 2016 tripled since 2013 according to the discussion paper.
3. Artificial Intelligence Market: Future Projections
The belief of the executives and venture capitals in the potential of AI and their willingness to invest large sums in it aren’t just pure speculations. The artificial intelligence market is big and according to statista.com will grow exponentially over the next few years:
The statistic shows the size of the artificial intelligence market worldwide, from 2016 to 2025. In 2019, the global AI market is expected to be worth approximately 11,283 billion U.S. dollars.
Some major uses of artificial intelligence that were included in this projection were predictive analytics, image recognition, object identification, detection, and classification, as well as automated geophysical feature detection.
4. Potential monetary Value of Artificial Intelligence Solutions
The potential value that would result from the incorporation of artificial intelligence and deep learning into business processes of various industries was also a topic of the McKinsey Global Institute discussion paper. The paper comes to the conclusion that the emergence of AI is a huge opportunity for a broad range of industries and business fields and that they can make use of this technology in order to create more value.
The potential value that could result from including AI solutions in the business processes of 19 different industries is illustrated in the following chart from the discussion paper:
The y-axis represents the impact of AI on a particular industry, measured in billions of dollars. The x-axis represents the effect of the AI as a percentage of the total impact derived from analytical techniques, such as more traditional statistical algorithms and machine learning algorithms.
I think this graphic speaks for itself. On the one hand, a wide range of different industries can expect a massive growth of value. Some of this value will be captured in a variety of ways, for example, it may result in more valued products and services, revenue growth, cost savings, or indeed consumer surplus.
On the other hand, the graphic shows Deep Learning’s ability to enhance well-established business processes, such as analysis techniques, that add value to the industry or organization in question.
In summary, the discussion paper of the McKinsey Global Institute comes to the following findings:
- McKinsey estimates AI techniques have the potential to create between $3.5T and $5.8T in value annually across nine business functions in 19 industries.
- AI will generate up to $2.6T additional value in Marketing and Sales and up to $2T in Supply Chain Management and Manufacturing.
- AI will add $200B in value to Pricing & Promotion and $100B to Customer Service Management and Retail.
- McKinsey predicts AI will have up to an 11.6% impact on Travel industry revenues and up to 10.2% on High Tech.
- The greatest potential for AI is to create value in use cases in which more established analytical techniques such as regression and classification techniques can already be used, but where neural network techniques could provide higher performance or generate additional insights and applications. This is true for 69 percent of the AI use cases identified in the study.