Why Is Data Science High on Corporate Agenda?
This article explores why AI is and should be an area of increased corporate focus
What drives the corporate agenda? The simplest answer is share price, which is largely driven by earnings per share which in turn is driven by revenues and costs. Data Science is increasingly proving to be highly effective at both uplifting revenues and managing costs. Hence the significant focus on data science at the corporate level. The proof is in the pudding:
Twenty-two percent of McKinsey’s The State of AI in 2020 survey respondents say that more than 5 percent of their organizations’ enterprise-wide earnings in 2019 was attributable to their use of AI
Analyzing corporate pivots — Internet, Mobile, Cloud, and AI
The Internet brought down transaction costs, enabled companies to sell more (through additional channels), and reduced costs through tech interventions.
Mobile was a similar pivot that unlocked new revenue streams fuelled by customer intelligence and accelerated the growth of e-commerce further.
Cloud was largely a cost-out play. It helped reduce capital (upfront) investments in IT that became redundant too soon, enabled companies to move these costs to opex (recurring expenses), and at the same time become more agile.
Artificial Intelligence is another pivot in the same vein — the key impact is a drop in cost of predictions as explained by economists Agarwal, Gans and Goldfarb. A lot of activities in enterprises are based on predictions — many of them could be turbocharged using AI to increase revenues and reduce costs. For example, improved predictions could help B2B companies identify and nurture promising deals upfront and increase revenues. Predictive maintenance could help reduce customer issues for industrial goods companies and hence optimize associated costs.
What is different with AI?
When done right, AI creates a moat that gives a company a strong competitive advantage against competitors. A unique combination of people, process, technology, and data helps the winners make their resources act faster and better to result in better ROI.
AI’s key differentiator as a technology is its “learnability”. Competitive advantage arising from AI increases and the moat keeps growing as the algorithms learn better. And consequently, it becomes very hard to play catch-up with a leader.
AI is a technology that can enable you to surpass your competitor and eventually take an insurmountable lead according to Forbes
The corporate AI imperative
AI’s unique value proposition makes it imperative for corporates to act now and act fast. Its an all-in game requiring a centralized push for data gathering, collaboration between erstwhile silos, AI tooling, and rewiring the firm to act based on AI-enabled insights. It is hard work but rewards are high enough.
Big Tech companies and consumer internet companies have already demonstrated the power of AI. However, AI’s potential is not limited to Big Tech, although its enablement will be based on frameworks from Big Tech. I have written about the potential of data in enterprises here. There is a clear case for vertical AI, at least in the near future, to power enterprises. That’s where, powered by tooling from Big-tech, the enterprises of today have to fight a high stake battle.
In a nutshell…
Proven ability to generate revenue uplift and manage costs make investment in AI a non-negotiable for enterprises. It is an intangible asset diffused in the organization across people, process, technology, and data; hard to acquire and replicate, and offers a clear competitive advantage for winners that grow with time. Winning in AI is less like running a sprint and more like running a marathon. And if you are not embarrassed by your first AI MVP, you are too late.