AI Winters and hype

This is not the first time AI has been all the rage in the business world. In particular, AI was big in the eighties with solutions called expert systems. Will AI be a passing fad now?

Expert systems reflected human knowledge into solutions that could use rules to mimic the expert. Of course, solutions that include rules need to be well-defined and have full coverage of possible situations. The reality of business is that we're always expanding our customer base and rolling out new functionality - a rule-based system requires a lot of human capital to keep expanding.

As a result, leaders were less than satisfied with total cost of ownership (TCO) that made the promised Return on Investment (ROI) far lower than anticipated.

Unless you were one of the few companies who were happy with their expert system, you quietly swept the failed project under the rug. The hype and enthusiasm turned to pessimism, projects stopped happening, and companies went bust.

So the question, now that we have AI massively hyped once more, is:

Will we get another AI winter?

This overall question is predicated on whether AI can now deliver better ROI, and also whether people will trigger a run on AI through pessimism once more.

According to the MIT SMR Winning with AI - link no longer works annual report, 45% of businesses who have been pioneers in adopting AI, still believe AI will have large impact on their business, but they are more likely to expect a medium to long term time horizon for benefit. This long term perspective is also associated with a greater risk appetite for projects.

The risk, or ambition, of the project also translates into gains with half of the more transformative projects showing value; compared to only a quarter of low risk projects. 61% of current Experiments characterise their projects as low risk - so we can see that soon there'll be reporting of low ROI for these projects.

I'm a big advocate of quick wins - link no longer works to gain some traction and comfort across the organisation with "AI". However, these aren't intended to be the core of an AI strategy, merely a teaser to generate appetite. Longer term ROI comes from aligning AI with your strategy and, in particular, 88% of those reporting value gained from AI have it connected or tightly integrated with their digital strategy.

A short term perspective of AI will result in undersized returns and, therefore, pessimism from these companies.

Companies that also focused on cost reduction, as opposed to revenue generation, are more pessimistic about future achievable ROI. Reducing overheads is a finite process but increasing revenues is infinite.

So we're seeing strong gains from companies that:

• Take a long term perspective
• Align AI to core company strategy components like digitisation
• Take on riskier projects that deliver revenue generation

The ROI is real, but not achieved by something as simple as buying a piece of software. With the gains there, but inconsistent, however, we may still see a sense of pessimism pervade.

45% of businesses now perceive AI as both a strategic opportunity and a risk to their business from AI; but investment is continuing apace. There is a widespread worry that technology is out of control amongst the populous, according the Edelman Trust in their latest Trust Barometer report.

There is pessimism, and the concerns about the implications of AI in society are real. However, unlike in the past, AI has already been integrated into many consumer experiences; making it highly unlikely that AI is going to go away.

We're not going to see an AI Winter in the next few years, but I think we're definitely going to see an increasingly different operating environment for businesses deploying AI.

If you'd like to discuss integrating AI into your business and structure projects for high ROI, you can book a call with me using my meeting link.