Exploring the tangible benefits of AI for business innovation

Artificial Intelligence (AI) has long been seen as a potential game-changer across industries, but questions still linger about its tangible benefits. Consultancy.uk engaged with Sergio Fregoni, executive director at IDEO, to explore the material advantages AI can offer and guide CEOs on leveraging AI for optimal business outcomes.

Despite the ongoing buzz surrounding AI and generative AI (GenAI), expectations have yet to meet reality, with many industry insiders pointing out significant shortcomings. AI’s presence is deeply rooted across various sectors, influencing everything from home entertainment to workplace operations and transportation. Originating as early as 1961 with the ELIZA chatbot, AI has rapidly evolved, incorporating sophisticated models like Generative Adversarial Networks (GANs), which aid in medical imaging diagnostics and enhance smartphone camera capabilities.

Fregoni highlights a critical misconception about AI—it is often seen as a magical “black box” capable of extraordinary feats, yet its workings remain opaque to many. Once an application becomes well-defined, terminologies shift, leading to concepts like Computer Vision or self-driving cars, rather than simply AI. Current AI models face limitations, notably hallucinations, where systems deliver incorrect outputs confidently. These models function by statistically predicting sequences without true comprehension of content, an aspect that complicates trust in AI’s outputs. However, when employed effectively, AI can yield remarkable results.

The emphasis, according to Fregoni, should not be on the limitations but on maximising AI’s potential as a supportive tool for human creativity and problem-solving. By embedding AI as a complement to human expertise, businesses can unlock transformative applications beyond mere automation.

Today’s CEOs are integrating AI to revamp business processes, but many focus solely on marginal improvements and cost reduction. The real challenge lies in employing AI to fuel innovation, enabling executives to expand their understanding of customer needs and broader market opportunities, a move critical for significant business growth.

Research reaffirms this, revealing that UK businesses utilising AI experience a 2.4% growth increase and a 0.24% cost reduction. Notably, businesses applying AI for true innovation report 38% greater growth impact than those employing AI in any other capacity.

Case studies underscore AI’s material benefits, such as IDEO’s collaboration with H&M Group to address inventory challenges. By employing AI-driven demand forecasting, H&M enhanced specific line sales by a third while cutting stock levels by 20%, highlighting the power of AI-facilitated human insights. Another instance involved an educational technology startup where IDEO developed an AI platform for improved writing skills, allowing educators to give personalised student feedback, resulting in boosted writing competency.

Central to AI’s effectiveness is the diversity of its training datasets. Comprehensive data allowing AI to encompass varied perspectives ensures inclusivity of marginalised voices, crucial for equitable future outcomes, especially regarding climate initiatives. AI can now tackle sustainable transitions by influencing behavioural changes needed for net zero goals, integrating broad human factors across supply chains for greater sustainability uptake.

However, AI comes with environmental challenges, notably its substantial energy and water consumption and consequential carbon footprint. Balancing this with investments in renewable energy becomes necessary. Despite these challenges, AI remains indispensable in steering towards circular economies and melding commercial with environmental objectives. IDEO’s research suggests AI collaborations can bolster innovative solutions for sustainable products and services by 56%, a potential too significant to ignore in the fight against climate change.

Source: Noah Wire Services