Applied Artificial Intelligence: An Introduction For Business Leaders by Jia Marlene & Zhou Adelyn & Yao Mariya

Author:Jia, Marlene & Zhou, Adelyn & Yao, Mariya [Jia, Marlene]
Language: eng
Format: epub
Publisher: TOPBOTS
Published: 2018-06-01T16:00:00+00:00

Cal culate ROI and Allocate Budget

Impressive ROI on successful projects whets our appetites for AI. Through better search algorithms, Netflix reduced cancelled subscriptions that would have dropped revenue by one billion dollars annually. (70) Peloton, a popular indoor cycling company, cut customer support tickets by 25 percent with intelligent self-service. (71) Harley-Davidson used AI to target potential customers and to adjust their sales copy, increasing sales leads in New York by 2,930 percent. (72)

However, a 2017 McKinsey report found that 41 percent of businesses reported that the uncertain return on investments was one of the biggest barriers preventing them from adopting AI. Because the scope, ongoing maintenance costs, and maturity level of AI technologies vary widely, it is difficult to produce a generalized methodology to quantify ROI for AI.

An alternate measure may be to examine how AI technology unlocks business value. Typical metrics center around tangibles such as increased revenue and decreased costs, as well as intangibles such as culture, brand value, and work-life balance.

Increasing Revenue

First, you can assess its revenue creation ability, most notably in external-facing departments such as sales, marketing, and customer service. AI can identify new potential customers for the sales team, facilitate personalization to improve conversion rates and decrease churn, and power customer service bots to provide higher quality service and generate repeat business. Read Chapters 17, 18, and 19 for more detailed analysis on popular AI applications for these business functions.

AI may also allow you to offer new products or services that weren’t previously possible. Historically, customers engaged Deloitte to review procurement contracts in order to calculate precise merger and acquisition synergies after closing a deal. It was an expensive process that required a dozen people and four to five months to complete. Using natural language classification techniques, Deloitte slashed the time needed for review down to a week. The company now offers this as a service to companies for evaluating potential acquisition targets. (73)

To calculate revenue gains, make predictions on price changes and the volume of sales. Will the quality of your service increase substantially, and will that allow you to adjust your prices? The opportunity may not be large enough for the multiplier effect to be worth it. If you’re operating off of a miniscule customer base, then even a 200 percent increase in a key metric may not lead to meaningful boosts to revenue. If the problem is worth pursuing, then how much can better conversion rates and longer lifetime values improve sales volume?

If you’re partnering with a vendor, ask them for performance metrics. What results have other clients seen? What is the upper and lower limit of improvements? When did they begin to see results?

Decreasing Costs

Measuring the ability to reduce costs is another popular way to assess returns on AI investments. AI promises greater operational efficiencies, predominantly in middle and back office functions, such as in legal, finance and accounting, operations, and human resources. However, efficiency alone is not valuable. Focus instead on the increased output or decreased human capital costs that are made possible by efficiency gains.

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