The window for AI competitive advantage is narrowing How can AI adopters keep their edge?
3 minute read
11 September 2020
Companies can no longer gain advantage simply by adopting AI technologies. Increasingly, they need to apply AI creatively and responsibly.
A year ago, we concluded that the window for AI competitive advantage might be closing.1 We based this assessment on data from the second edition of Deloitte’s State of AI in the Enterprise survey: 57 percent of executives at AI-adopting firms believed that AI would substantially transform their businesses within three years, and 38 percent believed the technologies would do the same for their industry during that time frame (see figure).2 The 19-point gap suggested that AI adopters had a fairly small window before industry competitors cut into their lead.
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Fast-forward to 2020. We’ve released the results of the third edition of the Deloitte State of AI study,3 and adopters continue to be bullish: More than eight in 10 report that AI will be “very” or “critically” important to their business success in the next two years, and the portion who regard it as critically important is poised to grow from 23% today to 41% in two years. And they’re continuing to grow their investments: 71% of adopters expect to increase their AI spending in the next fiscal year.
The new data reinforces our earlier speculation that the window for competitive advantage is narrowing. Adopters who see AI transforming their business within three years grew to 75%, while the portion believing that it will transform their industry within three years rose even more steeply, to 61%. Notably, the 19-point advantage we saw last time has shrunk to 14: Industry transformation appears to be nipping at the heels of the early adopters’ AI-powered transformation.
Implications for executives
Why is early-adopter advantage fading? With AI capabilities increasingly embedded in enterprise software, and an abundance of cloud-based offerings and tools that accelerate AI development, a company no longer needs as many heavy-duty specialists to get started. Indeed, three-quarters of adopters believe AI will be integrated into all enterprise applications within three years. The real competitive advantage may depend on organizations applying AI more creatively and responsibly.
“It’s like competing in Formula 1, you’ve got to buy a car, learn the car, train in the car, to race the car safely to be competitive or win,” said Paul Silverglate, vice chairman and US Technology sector leader for Deloitte.
AI adopters may be able to keep their competitive momentum going by paying attention to three broad recommendations:
Move from efficiency to growth plays. The top objective for AI adopters continues to be improving efficiency.4 One way to differentiate can be to expand the focus beyond cost and efficiency and imagine how AI technologies can be used to create new products, services, or even business models.
Manage risk proactively. The majority of adopters reported major-to-extreme concern about potential AI risks, including cybersecurity, misuse of personal data, regulatory uncertainty, and ethical issues, but fewer than four in 10 said they’re “fully prepared” for each.5 Adopting a set of risk management practices can be a real differentiator.
Build smart technology partnerships. Adopters report that having first-rate AI technologies is one of the most important initiatives to boost competitive advantage. Strikingly, only 47% of adopters say they are highly skilled in selecting AI technologies and suppliers, and only a third ensure their vendors provide unbiased systems.6 Organizations should become more savvy about selecting vendors that not only provide the best technologies but also guarantee they aren’t exposing them to unnecessary risks.
Explore each in greater depth in our State of AI report.7
Technology, Media & Telecommunications
Deloitte’s Technology, Media & Telecommunications (TMT) industry practice brings together one of the world’s largest group of specialists respected for helping shape many of the world’s most recognized TMT brands—and helping those brands thrive in a digital world.
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Get in touch
- Paul Silverglate
- US Technology, Media & Telecom Industry Sector Leader
- Deloitte Risk and Financial Advisory
- psilverglate@deloitte.com
- +1 408 704 2475
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