Good morning. As CFOs determine the business case for generative AI to help drive change and create value, boards and investors are looking to finance chiefs to help measure the potential return on investment (ROI) for various AI strategies.
During a recent Fortune Brainstorm AI virtual discussion held in partnership with Accenture, experts weighed in on ways to make AI investments pay off. “I think by all the measures, we have traversed a large part of the AI hype cycle, and there’s a lot of discussion around ’Show me the money,’” Muqsit Ashraf, group chief executive of strategy at Accenture said. And that’s evident in some earnings calls over the past couple of quarters, he added.
According to Accenture’s estimates, 90% of companies are exploring AI or generative AI capabilities. However, Ashraf says fewer than a third of those firms are taking proper steps to set themselves up for success, such as establishing an AI center of excellence or developing use cases in a structured way. He also said that fewer than 20% of companies are getting close to the goals established for AI investments.
To maximize a business’s chances of seeing ROI when it comes to AI, Ashraf suggested incorporating these five steps:
–Leading with value. Make decisions on the basis of the “must win” business challenges and strategic imperatives. Ask the question, how can AI address those challenges? For example, a pharma company may use AI to compress drug discovery time. Or, an energy or utility company may be looking for a more efficient way to manage assets or drive capital programs.
—You can start small, but create a clear path to scale generative AI in a big way, and to do so quickly. Accenture finds the companies that are consistently delivering higher ROI are those that scale their AI cases across the organization. Some examples are knowledge management, content generation, and customer experience.
—Unlocking real value happens when you’re investing in AI to reimagine or reinvent processes or ways of working. “The technology cost is about 30%, while the 70% resides in things like building the right capabilities, training, and change management,” Ashraf said.
—Invest in enhancing trust and responsibility. There is enhanced risk in using generative AI in particular, and regulation will only increase. However, Accenture has found that fewer than 2% of the companies are investing in a holistic, fully operationalized, responsible AI program, Ashraf said.
—Executive sponsorship. Having leadership on board for what you’re going to invest in and how you’re going to run the program is important. In looking at the companies Accenture has worked with in implementing AI, at those with CEO-level sponsorship, the ROI has been about two and a half times greater than those without it, Ashraf said.
During the discussion, Ken Washington, SVP and chief technology and innovation officer at medical device-maker Medtronic said that each department is tasked to come up with AI use cases to increase productivity or improve patient outcomes. They’ve gathered over 200 ideas so far, with some receiving a first round of internal funding.
“The responsible application of this technology is critically important, and so is clarity around what this technology really is and what it means to your business,” Washington said.
Sheryl Estrada
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The following sections of CFO Daily were curated by Greg McKenna
Leaderboard
Doug Ostermann was promoted to CFO of Dutch auto giant Stellantis (NYSE: STLA), the parent of American brands Jeep, Chrysler, and Dodge, effective immediately. He succeeds Natalie Knight, who is leaving the company after just over a year on the job. Ostermann most recently served as the chief operating officer of Stellantis China, where he previously held the role of CFO.
Steven Bailey was promoted to CFO of Match Group (Nasdaq: MTCH), the parent of online dating platforms like Tinder and Hinge, effective Mar. 1. He will succeed Gary Swidler, who will transition out of the CFO role on that date and continue in his position as president, the company said. Bailey, currently the company’s SVP of financial planning and business operations, joined Match in 2012.
Big Deal
A difficult market for venture capital hasn’t picked up much steam. Global VC rounds decreased in both deal value and volume for the third quarter, according to a new report from S&P Market Intelligence.
Deal value from July to September totaled $61.32 billion, dropping almost 8% from $66.54 billion during the same period last year. VC rounds raised just $20.04 billion in September, down nearly 25% year-over-year. The technology, media, and telecommunications sector, or TMT, remained the biggest receipt of VC funds, accounting for roughly 33% of the global deal total for the quarter.
Going deeper
Selling Your Business? Why You May Get More Selling to a Corporate Buyer Rather than a PE Firm, is a new article from the business journal of the University of Pennsylvania’s Wharton School. Recent research from Wharton management professor Paul Nary finds that shareholders of publicly held firms fare better on average when divestitures are sold to corporate buyers rather than private equity firms.
Nary said the study highlights how PE firms approach prospective acquisitions differently than corporate buyers. While private equity firms typically look to turn a relatively quick profit on undervalued assets, corporations more often buy businesses to achieve synergies like economies of scale and hold the acquired assets for the long run.
Overheard
“We have been closely monitoring the geopolitical situation for some time, and recent events show that conditions are treacherous and getting worse. There is significant human suffering, and the outcome of these situations could have far-reaching effects on both short-term economic outcomes and more importantly on the course of history.”
— Jamie Dimon, chairman and CEO of JPMorgan Chase, said in the bank’s Q3 earnings release on Friday, Fortune reported.
