AI may finally make a difference.
Despite the hype, skepticism persists as to whether AI is actually delivering economic benefits. Companies have employed all sorts of creative metrics to measure, or at least approximate, the potential benefits of AI adoption. Some track the number of users of a particular AI tool or the amount of time workers save using AI.
But for most companies, it’s the bottom line that matters most, and McKinsey & Company says the numbers are starting to look promising.
The company found that among a group of top-performing companies, AI delivers returns of approximately $3 for every $1 invested in technology.
“In the grand scheme of the returns, it’s not that shabby,” McKinsey senior partner Kate Smaje said on a recent episode of the firm’s podcast.
The consultancy analyzed 20 companies that have fully implemented the ‘Rewired’ framework to understand the factors driving AI adoption and revenue success.
Smadje, along with McKinsey colleagues Rob Levine, Eric Lamarre, Alex Singla and Alexander Skalevsky, outlined the framework in the latest edition of Rewired, published in April. The book focuses on AI-driven transformation, based on the 2023 edition, which analyzed 200 large-scale digital and AI transformations and client initiatives over the years.
After about one to two years, the majority of companies will be generating cash from AI implementation, Smadje said. After a few years (usually another 2-4 years), real gains started to appear, with core profits increasing by about 20% on average.
If there’s a lesson to be learned, she said, it’s that AI adoption is about quality, not quantity. Smaje said about two-thirds of the cohort focused on incorporating AI in three or fewer domains.
“They’re not papering over AI everywhere throughout the organization,” she says. “They are incredibly focused on where they direct their resources.”