The ROI of AI: Tangible Benefits Within a Year

Technology investment no longer takes years before a positive return is recognised. Implementing AI-powered solutions can quickly change business processes and outcomes, so it’s possible to realise a return on investment (ROI) in AI within a year. 

Incorporating AI into workflows as part of a digital transformation strategy and managing the change on the ground will still, however, take careful planning, implementation, and monitoring in order to maximise the benefits. It’s also critical to remember that some of the benefits of AI will be less immediately tangible or are realised over a longer time frame. 

The Predicted Bottom Line Benefits of AI

Global spending on AI-driven solutions in 2023 is expected to be around $154 billion, up 27% in 2022. McKinsey expects AI to create between $2.6 and $4.4 trillion in value for the global industry annually. In a report focusing on the benefits of AI-powered marketing and sales, the consultancy firm says:

‍“AI promises to disrupt the way B2B and B2C players think about customer experience, productivity, and growth.”

McKinsey research “indicates that players that invest in AI” see a revenue uplift of 3 to 15% and a sales ROI uplift of 10 to 20%.

Microsoft commissioned an IDC study of 2,000 business leaders responsible for AI transformation to assess the potential ROI and tangible benefits of AI. IDC’s research discovered that for every $1 spent on this nascent technology, companies are realising $3.50 in return. “Leading adopters” of AI are realising an average of $8 in return for the same investment. Of all the respondents, 92% say their AI deployments are taking 12 months or less. 

Alysa Taylor, corporate VP for Azure and Industry at Microsoft, gave a recent case study where Atrium Health deployed a tool built by Microsoft-owned Nuance. Atrium’s primary care physicians report saving 40 minutes per day using AI-generated clinical summaries, with 68 saying the care experience has improved. 

A survey by ESI ThoughtLab sponsored by Deloitte found most companies are already realising positive ROI from AI investments, including 74% of customer service and 69% of IT operations and infrastructure use cases. Leading companies reported typical ROI paybacks occurring within 1.2 years. 

Assessing ROI - The Tangible and Less Tangible Benefits

PwC defines the ROI for AI as “hard ROI,” the financial benefits, and “soft ROI,” which “looks at a broader set of benefits, including employee satisfaction and retention, skills acquisition, brand enhancement, and a higher valuation of the company.”

Hard or more tangible ROI can include:

• Time savings
• Productivity increases, and efficiency gains 
• Customer satisfaction and retention
• Cost savings
• Revenue increases

The soft returns of AI which are more difficult to quantify, especially in the short term, include:

• Employee engagement
• Customer and employee experience
• Upskilling and skills retention
• Technological agility and digital transformation
• Enhanced/data-driven decision-making

Creating an Effective AI Strategy 

From the ESI Thoughtlab/Deloitte study, respondents who reported high ROI for AI projects at over 5% had paid particular attention to their foundation and preparation for success and had implemented key practices in data management, tracking results, privacy, and ethics. 

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Scaling is also a consideration. Deloitte says successful AI experiments should be implemented quickly to justify large investments, and leveraging cloud platforms and services is one solution to scale and accelerate efforts. 

No matter the size of an AI deployment, it’s wise to develop a strategy similar to any digital transformation project and to factor in the following elements as appropriate:

• Identify the problem or opportunity
• Align adoption with business goals
• Set KPIs
• Plan the investment and calculate the potential ROI
• Consider a pilot project or phased approach
• Build a deployment team
• Manage the organisational change
• Train employees
• Monitor, review, and refine

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Metrics to Calculate the ROI of AI

Again, from Deloitte, calculating ROI for AI can be more “art than science,” so it’s important to try to fully account for costs and quantify strategic and nonfinancial benefits where possible. The “soft” benefits described by PwC can be incredibly difficult to quantify and measure, but some effort can be made.

PwC suggests, when computing ROI for AI, that companies should measure AI performance on a continuing basis and budget for maintenance to preserve AI’s long-term potential. The last recommendation is not to consider each AI deployment on its own but rather the ROI of all AI projects. If AI is part of wider digital transformation, an even more holistic view may be required. 

Potential Pitfalls and Further Considerations

Though the potential and promised benefits are substantial, AI deployment carries risks that need to be investigated at length. Unlike conventional software adoption, AI cannot simply be set up and left unmonitored. Here are just some potential considerations. 

• Risks of AI include inaccuracies, bias, data privacy, and ethical considerations
• The financial impact of AI error
• The pace of AI development
• Potential decay of AI models without maintenance
• Requirement for human oversight
• Choosing between proprietary and off-the-shelf solutions
• Direct and indirect costs and benefits
• Competitor and market activity and adoption 

One approach for effective AI deployment and digital transformation that takes a holistic view and enables leaders to visualise every causation and impact is that of systems thinking. 

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Read next:  Systems Thinking for Effective AI Adoption and Digital Transformation