The AI revolution will affect working life and business much more broadly than we can currently estimate. Yet decisions to invest in AI projects are still too often driven by rough, high-level assumptions about potential cost and time savings from deployment.
Ezra Eeman, Director of Strategy at the Dutch Broadcasting Corporation, highlighted in his Wayfinder trend report that the benefits of AI deployment are not as straightforward as traditional ROI (return on investment) calculations suggest.
I thought I'd open up, interpret and expand a bit on what he meant.
ROI, or Return on Investment, is a financial metric used to calculate how profitable an investment is relative to the amount of money spent on it. In other words, how much profit can be expected in relation to the capital invested.
However, a straightforward ROI calculation does not always help to assess the actual value generated by a development activity. Although time and money are relatively easy to measure, in reality, tangible savings can be difficult to verify. In addition, savings estimates are often subject to a high degree of uncertainty and can be seriously misleading.
This is also a very narrow view. For example, productivity gains are not always directly reflected in results. The effects are more complex and widely dispersed.
Eeman says that for AI projects, it is not enough to add up the time and cost savings and the productivity and revenue gains, and then divide by the sum of resources and licences. Investment calculations should also cover spending on data, hardware, storage, specialist expertise and training.
At the same time, revenue should take into account improved customer and employee experience, retention of skills in the organisation, and increased agility and adaptability. Assigning an economic value for these is far from straightforward.
A significant proportion of the real benefits of AI projects come from indirect gains, which are more difficult to calculate, but the impact of which is more sustainable in business terms.
Eeman also pointed out that, in terms of benefits, the mere introduction of AI is usually not enough. Companies seeking revenue growth through AI projects will be required to adopt AI strategically. In this case, the benefits are related to business development, not savings.
For example, AI projects can be used to improve customer and employee experience, which will be critical value drivers in the near future. AI projects will also increase the knowledge base within the organisation, thus strengthening its capacity for change. In addition, the early adoption of an agile culture of experimentation will strengthen a company's capacity and capabilities.
The benefits of AI investments should therefore not be limited to cost and time savings alone, but the real long-term benefits will come through the development of the organisation itself, through increased knowledge and agility. So the next time you evaluate AI's return on investment, put efficiency calculations aside and focus on more sustainable value creation.
If organisational development is a strategic goal, AI is a good way to do it. Not necessarily an easy project, but a worthwhile one with multiple impacts.
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