The Business of AI: Scaling AI — Strategy Concepts
The capacity to pivot as a business and foster innovation is crucial to long-term success. Innovative companies generally lead their industry’s market share, attract top talent and create cutting-edge products and services. So, what processes do we need in order to start fueling innovation?
Firstly, a culture of meaningful innovation needs to be fostered throughout the organization. This may involve setting up a group or committee for that purpose. Then, involve all employees in strategically solving business problems by applying innovation. Disruptive solutions should be encouraged, with the success being measured by the impact in your organization. While fostering this new culture, be sure to maintain a responsible approach to your technology solutions.
Evaluating and Investing in AI Solutions
The economics of investing in ‘traditional’ technology initiatives are understood. Typically, an organization compares the cost of a project with the net present value (NPV) of the benefits. If the NPV is greater than zero and it fits within the budget constraints, the project receives a green light.
Artificial Intelligence (AI) requires a different perspective. It’s true that if you leverage AI to improve or automate an existing process, then it’s possible to measure ROI in the straightforward, traditional way. But there are a few characteristics of AI initiatives that make it difficult to estimate their costs and benefits.
With AI initiatives, you need to think like a venture capitalist. That means being willing to invest and take risks without being blocked by uncertainties. But you don’t have to shoot in the dark — you’ll need a framework to help prioritize AI investments. In the following sections, we’ll describe how to:
- Leverage a horizon-based framework for evaluating initiatives.
- Map scenarios and use cases to the framework.
- Prioritize investments in phases.
- Define clear value drivers and KPIs.
Leverage A Horizon Based Framework
When considering horizons, the term represents the scope at which you want to implement your AI solution. Knowing where your AI solutions fall into these scopes can better allow prioritization of those solutions.
Horizon 1: Running (operate and optimize the core business)
Horizon 2: Growing (improve market position)
Horizon 3: Transforming (change market position)
From the visual, you can see how moving from one horizon to the next can increase the disruptive nature of the solution as well as the risk and uncertainty of its success.
Map Scenarios and Use Cases to the Framework
Using this framework, you can then map AI scenarios into quadrants. The “tactical” spectrum represents initiatives that are confined to a single team or use case. The “strategic” side represents larger business initiatives that might impact the entire organization.
Scenarios that fall below the middle line help the organization survive more than thrive. They might address competitive and disruptive threats, improve operations, or empower employees in the organization. Scenarios above the middle line help companies create new value propositions, revenue streams, or business models.
Prioritize initiatives in phases: start with foundational initiatives in the bottom left and move towards transformational initiatives in the top right.
This approach is recommended because it’s helpful to grow capabilities and get buy-in before you move to more complex projects.
Define Clear Value Drivers and KPI
Once you’ve chosen AI initiatives, it’s important to identify value drivers and KPIs for each project. The framework shown provides a useful way to think about any investment — including AI initiatives.
As you invest in initiatives, it’s important to develop market and financial models to help balance potential risk and return. Consider factors such as the total addressable market (TAM), net present value (NPV), and internal rate of return (IRR). Work with the CFO office and other key stakeholders to ensure the financial models make sense within the context of the business. This is helpful to get their buy-in and ensure support throughout the process as well.
The approaches shown in this article are extremely high-level overviews of the process. To get in-depth information try some of Fast Lane’s AI for business courses, where we explore in detail the benefits that AI can bring to your business. Learn more at https://www.fastlaneus.com/ai-training.