The AI financial results paradox

There is a general consensus today that generative AI is going to transform business in a profound way, and companies and individuals who don’t get on board will be quickly left in the dustbin of history.

At the same time, as companies delve more deeply into this technology, they want proof, actual business metrics, that show how AI is actually improving business performance and revenue.

They can’t and shouldn’t trust vendor promises alone. Yet it’s not easy to make a direct correlation between something like, say, Microsoft Copilot, and overall business performance.

Should CIOs simply take it on faith then? In this week’s Clouded Judgement newsletter, investor Jamin Ball suggests that most businesses might not have a choice. In his view, they might not see the results for some time, leaving them to make a very tough buying decision.

Here’s Ball’s take:

“Right now the world is evolving — AI is a massive platform shift. And by NOT adopting / spending on it, you risk losing market share and slowly becoming irrelevant. Because your competitors are investing in AI efforts, you also have to invest in AI efforts. At the end of the day these investments might not immediately result in better business outcomes (i.e., more revenue), but they certainly lead to better end user experiences. And very well may lead to better “other” metrics like retention or churn. If your competitors are building better end user experiences and you’re not, then you may find yourself in trouble in the short / medium term,” Ball wrote.

Yet CIOs want more certainty than that before they go blindly into an expensive new technology, no matter how game changing it could be. They and the company CFO have to deal with the reality of the here and now when it comes to justifying expenses, and if they are spending big money, when can they reasonably expect to get a return on their investment?

At the same time, those who use the electricity analogy for AI, may believe that this is AI’s electricity moment — that moment in the late 18th century when factories began switching over from steam to electricity. You could ignore it and continue along with steam, but at some point you were going to get steamrolled (pun intended).

Perhaps the answer could lie with some savvy startup, or more likely enterprises of a certain size will turn to the usual suspects — Deloitte, McKinsey and Accenture — and pay them a hefty fee to help them figure it out. Ironically, that will just increase the cost and the time to value.

As the Grateful Dead’s Jerry Garcia once sang in “The Wheel,” “You can’t go back and you can’t stand still. If the thunder won’t get you, then the lightning will.” CIOs trying to figure out how to proceed are left to decide whether they are marching their companies steadily toward the future, or throwing good money after bad.