Unlocking AI's Potential: Strategies for Maximising Value in Business

Artificial intelligence (AI) has become a buzzword in the business world, often hailed as a transformative tool. However, it's essential to remember that AI is just that—a tool. Its value lies in proper implementation and strategic use, which require a solid understanding of data and the right capabilities.

Barbara H. Wixom, a principal research scientist at the MIT Center for Information Systems Research (CISR), emphasises that AI is an advanced form of data science. To effectively leverage AI, organisations need robust data management capabilities and a clear strategy for data monetisation.

Building the Right Capabilities

Implementing AI successfully hinges on developing advanced data science, data management, and data platform capabilities. Many organisations make the mistake of assuming that purchasing off-the-shelf AI tools or having custom-built solutions negates the need for these foundational capabilities. However, as Wixom points out, understanding and trusting the technology is crucial. Organisations must be knowledgeable enough to validate AI models and recognise their limitations.

Case in Point: CarMax's Use of AI

CarMax provides an excellent example of effective AI implementation. Using ChatGPT to analyse customer reviews and generate summaries for 50,000 used cars, CarMax significantly expedited a process that would have otherwise taken years and required hundreds of content writers. This illustrates the potential of AI to streamline operations and enhance productivity when properly integrated with the right capabilities.

Engaging Stakeholders

For AI to truly benefit an organisation, it must involve stakeholders from various departments. This inclusive approach ensures that those using AI tools, developing products, or offering solutions understand the technology's capabilities, costs, and timeframes.

Australian Taxation Office's Collaborative Approach

The Australian Taxation Office (ATO) showcases the benefits of stakeholder involvement. By incorporating regular feedback from business users, ATO's data scientists could refine AI models to better predict tax-filing behaviours. This collaborative effort led to more effective models and significant financial benefits, including AU$113 million in adjusted claim amounts.

Focusing on Value Realization

The ultimate goal of AI projects should be to generate tangible value. In their book, "Data is Everybody's Business," Wixom and her co-authors outline a five-step value creation cycle: Data, Insight, Action, Value Creation, and Value Monetisation.

Example: Preventing Falls in Hospitals

Consider a hospital that strives to reduce patient falls. Data from electronic health records and bedside devices feeds into AI models to predict fall risk. This insight informs actions such as updating protocols and alerting nurses. The result is fewer falls, higher patient satisfaction, and shorter hospital stays. The final step, value monetisation, might involve reduced care costs, especially under performance-based contracts.

Challenges in Monetisation

Monetisation remains the toughest step. Many organisations achieve value creation but struggle to translate that into financial returns. In healthcare, for example, improved outcomes might not always lead to immediate financial benefits.

Wixom advises planning the five steps of value creation before starting any AI project. This foresight helps executives understand what it takes to achieve returns on investment. Without a clear path to monetisation, AI risks becoming an underutilised tool. Therefore, it's vital to align AI initiatives with specific, compelling organisational outcomes.

Strategic AI Implementation

AI holds tremendous potential, but unlocking this potential requires strategic implementation, robust data capabilities, and a clear focus on value creation and monetisation. Organisations must involve all stakeholders and plan meticulously to ensure AI projects deliver meaningful and financially beneficial outcomes. By doing so, AI can move beyond being a buzzword to becoming a powerful driver of business success.