BCG AIreport Webinar 2018

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Copyright © 2018 by The Boston Consulting Group, Inc. All rights reserved.
Presenters of
today's Webinar
Philipp Gerbert Julia Kirby
Senior Partner, leads BCG's Senior Editor at Harvard
Digital Strategy and AI Initiative University Press
3
AI research collaboration between BCG and MIT SMR
2017: Reshaping Business with AI 2018: AI in Business Gets Real
Closing the Gap Between Ambition and Action Pioneering Companies Aim for AI at Scale
4
New BCG/MIT report: AI in Business Gets Real
BCG/MIT AI Report Sep 2018: Interview partners
Pioneering companies aim for AI at Scale
• >3,000 companies surveyed globally airbnb Google UK NN Group
• >300 addt'l Chinese respondents Allianz Horizon Robotics Nordic AI Institute
• >35 interviews with executives OPTEL
amadeus HSBC
Anheuser-Busch InBev IBM Pfizer
babcock Int. Group ING PHILIPS
BOSCH jetBlue Santander
Bupa John Lewis plc SWISSCOGNITIVE
Chevron MAERSK UBS
Clariant MAYO CLINIC United Airlines
DAIMLER Microsoft Virgin Pulse
German Federal Ministry mundipharma YITU Technology
of the Interior
Source: S. Ransbotham, P. Gerbert, M. Reeves, D. Kiron, and M. Spira, “Artificial Intelligence in Business Get Real,” MIT
Sloan Management Review and The Boston Consulting Group, September 2018 5
Poll: How would you describe the level of AI adoption
in your organization?
My organization…
1 has not adopted AI and has no plans to do so
2 has not adopted AI but has plans to do so in the near future
3 has one or more AI pilot projects
4 has incorporated AI into some of its processes and offerings
5 has incorporated AI extensively and is aiming to scale AI
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We categorize organizations in four maturity clusters
based on AI adoption and understanding
High Investigators Pioneers

AI understanding
33% 18%
Passives Experimenters
Low
34% 16%
Low High
AI adoption
Source: S. Ransbotham, P. Gerbert, M. Reeves, D. Kiron, and M. Spira, “Artificial Intelligence in Business Gets Real,” MIT
Study dispels major myths about AI
Myth Reality
The key benefits of AI mainly accrue to AI is already providing real value for
tech players organizations applying AI in business
Companies can scale AI successfully by AI leaders take AI solutions to industrial scale
increasing the number of AI pilots and have an AI strategy
Main benefit of AI is to achieve cost saving Most Pioneers expect AI to deliver mainly
via automation revenue increase
Widely available, sophisticated AI tools will Pioneers increase AI investments, widening
level the playing field the gap to laggards
Senior leaders expect AI to reduce the size CEOs less likely to expect
of their workforce workforce reduction due to AI
US firms will win the AI competition because of Chinese AI Pioneers are ahead of their peers
their superior data abilities in other regions in managing data
Source: S. Ransbotham, P. Gerbert, M. Reeves, D. Kiron, and M. Spira, “Artificial Intelligence in Business Get Real,” MIT
% of 80%
respondents Consumer Insurance
Transp. / Logistics
HC Equip. / Travel IT & Tech.
Large effect of AI on Processes

Serv. Retail
Chemicals Banking
Utilities
60% Energy Pharma /
Ent. / Media
Biotech
Construction
Across industries, Cap. Prof. Serv.

Public Sector
Manufacturing Markets Telco
Agriculture
AI is expected to
Automotive
40%
In 5 years
have a strong Pharma / HC Equip. /
Today
Biotech Serv.
Retail
impact
Logistics Consumer
Chemicals
Constr. IT & Tech.
20%
Prof. Serv. Cap. Markets
Manufact. Telco Transp. / Travel
Banking Ent. / Media
~15% Automotive
Energy
of global companies Agriculture Insurance
Utilities Public Sector % of
experience a large 0% respondents
impact of AI already 0% 20% 40% 60% 80%
in 2017
Large effect of AI on Offerings
Average
Note: Percentage of respondents who expect a large ('a lot' and 'great') effect on a five-point scale
Source: S. Ransbotham, D. Kiron, P. Gerbert, and M. Reeves, “Reshaping Business With Artificial Intelligence,”
MIT Sloan Management Review and The Boston Consulting Group, September 2017 9
Organizations are aware of the
potential and have high expectations
Additional business value from AI1 "It's springtime

100% In the next
five years
for AI, and we're
anticipating a
long summer."
50%
Bill Braun, CIO, Chevron
In the past
three years
0%
Pioneers Investigators Experimenters Passives
1. Percentage of respondents expecting an additional business value from the implementation of AI

Source: S. Ransbotham, P. Gerbert, M. Reeves, D. Kiron, and M. Spira, “Artificial Intelligence in Business Gets Real,”
MIT Sloan Management Review and The Boston Consulting Group, September 2018 10
After first successes, AI adopters aim for AI at scale
Selected quotes
AI taken to scale means the enterprise has

AI at scale is the next step of an AI-oriented architecture capable of
digital transformation. constantly running AI experiments reliably.
Ibrahim Gökcen Joseph Sirosh
Chief Digital Officer CTO of AI,
WW Commercial Business
MAERSK Microsoft
Yet, moving toward AI at scale is …operating model
difficult because it requires.. adjustments
Machine
Understand Apply Scale architecture
AI AI AI
Organizational
structure
THE AI PARADOX
It is deceptively easy to launch AI pilots and
achieve powerful results. But it is fiendishly People
hard to move toward AI at scale. management
Detailed discussion in “The Big Leap Toward AI at Scale”
Source: AI@BCG 12
AI at scale transformation requires an iterative approach
that links the strategy with operating model adjustments
Driving value from AI scale
Develop strategy for AI at scale era
Ideate & prioritize Build & deploy
AI use cases AI use cases
Transform operating model for AI scale
Source: AI@BCG 13
Aiming for AI at Scale, Pioneers are increasing their AI
investments and widening the gap to less mature players
Good money after good The smart get smarter
Increased AI investment Year-on-Year1 Change in AI understanding Year-on-Year2
100% 100%
80 80%
60 60%
40 40%
20 20%
0% 0%
Pioneers Investigators Experimenters Passives Pioneers Investigators Experimenters Passives
1. Percentage of respondents with an increased investment into AI in past year 2. Percentage of respondents whose
understanding of AI has changed a lot in past year
Pioneers focus on
revenues
The team has to touch what they
consider to have the highest
Source of addt'l business value1 yield…
… any NPV of an external

Cost
reduction
28%
41%
business by far outperforms any
45%
52% internal one…
Revenue … If you were late with a new

72%
increase 59% 55%
business model, somebody else
48%
will have driven it and you will
have lost your chance forever
1. Percentage of respondents indicating revenue increases or cost reductions in the

Britta Fuenfstueck
next five years Member Executive Committee, Clariant
S. Ransbotham, P. Gerbert, M. Reeves, D. Kiron, and M. Spira, “Artificial Intelligence
in Business Gets Real,” MIT Sloan Management Review and The Boston Consulting
Group, September 2018 15
Pioneers also recognize the value of
data and discuss it in the board room
Data is…1
100%
"I wish we would
have looked at
data quality
50% much earlier"
Tassilo Festetics, Global VP
Solutions, Anheuser-Busch
0% InBev
Accessible Located in On agenda Centrally Seen as Sufficiently
to many centralized for senior owned and corporate used
organization data lakes(s) management managed asset
1. Percentage of respondents that agree with the following statements on data usage
Source: S. Ransbotham, P. Gerbert, M. Reeves, D. Kiron, and M. Spira, “Artificial Intelligence in Business Gets
Real,” MIT Sloan Management Review and The Boston Consulting Group, September 2018 16
Poll: What is the biggest barrier to adoption of AI in
your business?
1 Attracting, acquiring, and developing the right AI talent
2 Lack of leadership support for AI initiatives
3 Limited or no technology capabilities (e.g., analytics, data, IT)
4 Competing investment priorities
5 Unclear or no business case for AI applications
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Pioneers worry about AI talent and investment
Pioneers limited by AI talent

Top 3 barriers and investment priorities
to AI adoption
70%
2017
60%
50%
40%
30%
20%
10%
0%
Attracting, acquiring Competing investment priorities Security concerns Cultural resistance to AI approaches
and developing the right AI talent resulting from AI adoption

Note: Percentage of respondents ranking the selection as one of the top three barriers
Sloan Management Review and The Boston Consulting Group, September 2018; S. Ransbotham, D. Kiron, P. Gerbert, and M.
Reeves, “Reshaping Business With Artificial Intelligence,” MIT Sloan Management Review and The Boston Consulting Group,
September 2017 18
Passives see capabilities, leadership and business cases
as the main limiting factors
Passives limited by lacking
Top 3 barriers tech. capabilities, leadership 2017
to AI adoption support and business cases
70%
60%
50%
40%
30%
20%
10%
0%
Limited or no general Lack of leadership Unclear or no business
technology capabilities support for AI initiatives case for AI applications

Note: Percentage of respondents ranking the selection as one of the top three barriers
Sloan Management Review and The Boston Consulting Group, September 2018; S. Ransbotham, D. Kiron, P. Gerbert, and M.
Reeves, “Reshaping Business With Artificial Intelligence,” MIT Sloan Management Review and The Boston Consulting Group,
September 2017 19
No large-scale job loss expected, but reskilling required
How do you expect AI will affect the workforce in the next five years?1
86%
Lower organizational levels
are most concerned that
47%
layoffs are imminent – only
of respondents believe that
38% of CEOs existing workers will need to
of respondents expect workforce change their skill set
believe their reductions due to AI
organization’s
workforce
will be reduced
1. Percentage of respondents who somewhat or strongly agree with each statement

Global Competition
With AI in Business: Chinese Pioneers push
How China differs
July 2018
aggressively into AI
Pioneers only
Higher investment levels in China Business models modified in China
High AI investments1 Business model modification2
past 3 years next 5 years
China 91% China 60% 12% 72%
USA 74% USA 53% 20% 74%
Survey of 300 Chinese executives

EU 74% EU 47% 31% 78%
Compared with 3,000 survey
respondents from 126 countries
RoW 65% RoW 48% 26% 74%
Chinese Pioneers differ markedly in
AI adoption
China challenges US dominance 1. Percentage of Pioneers respondents with significant or extensive AI investment 2. Percentage of Pioneers respondents with
business model change instead of changes within existing model (in past 3 years and over next five years)
Source: P. Gerbert, M. Reeves, S. Ransbotham, D. Kiron, and M. Spira, “Global Competition With AI in Business: How China
Differs,” MIT Sloan Management Review, July 24, 2018, www.sloanreview.mit.edu 21
Chinese Pioneers lead in data
pooling and governance
Pioneers only
Data is…1 Companies should

100%
pool data
80% management,
60%
expertise and
governance –
40%
Chinese pioneers
20% do this
0%
particularly well
Accessible to Located in On agenda Centrally Seen as a Insufficiently
many centralized for senior owned and corporate asset used
organizsations data lake(s) management managed
RoW
1. Percentage of Pioneers respondents agreeing with the statement

Source: P. Gerbert, M. Reeves, S. Ransbotham, D. Kiron, and M. Spira, “Global Competition With AI in Business: How China
Differs,” MIT Sloan Management Review, July 24, 2018, www.sloanreview.mit.edu 22
organization?
What can you do
to scale AI at your
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5 steps to guide your way towards launching an AI at
scale transformation
AI ambition and Gap analysis AI at scale Launch
maturity and initiative transformation AI at scale
assessment prioritization program outline transformation
Top-down 1 3 4 !
Bottom-up 2 5
Transparency on Detailed AI at scale
AI initiatives and transformation
operating model program
Source: AI@BCG 24
Where to learn more? Joint BCG-MIT SMR research on AI
AI in Business Competition with AI: AI and the 'Augment- Reshaping

Gets Real How China differs ation' Fallacy Business with AI
September 2018 [Link] July 2018 [Link] May 2018 [Link] September 2017 [Link]
How pioneering How China's How AI will move Expectations and
companies aim momentum and beyond augment- adoption of AI in
for AI at scale and challenges in AI yield ation toward hyper- various industries,
widen the gap to lessons for world- learning – Lessons key differences for
laggards wide observers from chess leaders and laggards
For further reading refer to the BCG publication 'The Big Leap Toward AI at Scale'
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2017: Reshaping Business with AI 2018: AI in Business Gets Real

1 has not adopted AI and has no plans to do so

3 has one or more AI pilot projects

4 has incorporated AI into some of its processes and offerings

5 has incorporated AI extensively and is aiming to scale AI

High Investigators Pioneers

Large effect of AI on Processes

Across industries, Cap. Prof. Serv.

Additional business value from AI1 "It's springtime

1. Percentage of respondents expecting an additional business value from the implementation of AI

AI taken to scale means the enterprise has

Develop strategy for AI at scale era

Ideate & prioritize Build & deploy

Transform operating model for AI scale

… any NPV of an external

Revenue … If you were late with a new

1. Percentage of respondents indicating revenue increases or cost reductions in the

Pioneers Investigators Experimenters Passives

1 Attracting, acquiring, and developing the right AI talent

2 Lack of leadership support for AI initiatives

4 Competing investment priorities

5 Unclear or no business case for AI applications

Pioneers limited by AI talent

Pioneers Investigators Experimenters Passives

Pioneers Investigators Experimenters Passives

1. Percentage of respondents who somewhat or strongly agree with each statement

Higher investment levels in China Business models modified in China

High AI investments1 Business model modification2

past 3 years next 5 years

USA 74% USA 53% 20% 74%

Survey of 300 Chinese executives

Data is…1 Companies should

1. Percentage of Pioneers respondents agreeing with the statement

AI in Business Competition with AI: AI and the 'Augment- Reshaping

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