Last week, McKinsey & Company published a 68-page report - “The Economic Potential of Generative AI: the Next Productivity Frontier” (link).

The report’s goal is to contribute “to a better understanding of generative AI’s capacity to add value to company operations and fuel economic growth and prosperity as well as its potential to dramatically transform how we work and our purpose in society.”  

I think it did a great job at doing just that.

Yes, the words “could”, “can”, “might” etc are littered throughout the report. 

Yes, their predictions might be wrong…but they also might be right. 

Even more interesting, they might be wrong because they’re too conservative…and the impact of Generative AI is going to be even bigger.

A lot has happened since OpenAI created ChatGPT + it burst onto the scene on 11.30.22 including a whole lot of hype / noise.

But at this point, I think it’s safe to say we’re moving past the noise and moving into the signal phase - the application of Generative AI to create tangible value within the Enterprise.

As the report says, “The time to act is now.”

Let’s do this.

Key Takeaway #1: Why is Generative AI driving such a blistering pace of innovation, excitement and fear? 

Occam’s Razor.

Occam’s Razor is a mental model that suggests that unnecessary or complex assumptions should be avoided when simpler explanations can account for the observed evidence or data. It’s often used as a heuristic or guiding principle for developing theories or explanations.

Think about how much of the work you do everyday that requires an understanding of human language and you start to realize how significant Generative AI is…

“Generative AI’s ability to understand and use natural language for a variety of activities and tasks largely explains why automation potential has risen so steeply. Some 40 percent of the activities that workers perform in the economy require at least a median level of human understanding of natural language.”

“The acceleration in the potential for technical automation is largely due to generative AI’s increased ability to understand natural language, which is required for work activities that account for 25 percent of total work time.”

“ChatGPT and its competitors have captured the imagination of people around the world in a way AlphaGo did not, thanks to their broad utility—almost anyone can use them to communicate and create—and preternatural ability to have a conversation with a user.”

 

“The latest generative AI applications can perform a range of routine tasks, such as the reorganization and classification of data. But it is their ability to write text, compose music, and create digital art that has garnered headlines and persuaded consumers and households to experiment on their own. 

As a result, a broader set of stakeholders are grappling with generative AI’s impact on business and society but without much context to help them make sense of it.”

Key Takeaway #2: If Knowledge Workers spend “about a fifth of their time or one day each work week, searching for and gathering information” and Generative AI can take over that tedious work for them, imagine the productivity gains and innovation that will be unleashed by giving people 1 of their 5 workdays back?

It’s not just taking over the work but enabling people to protect their cognitive load from tedious (but important) work so that it can be applied to the kind of work “we would all like to get to…if only we had more time and energy”...

Keeping in mind the “Lump of Labour Fallacy” brought up by Marc Andreessen in his recent essay, “Why AI Will Save The World” (link).

“In 2012, the McKinsey Global Institute (MGI) estimated that knowledge workers spent about a fifth of their time, or one day each work week, searching for and gathering information. If generative AI could take on such tasks, increasing the efficiency and effectiveness of the workers doing them, the benefits would be huge. 

Such virtual expertise could rapidly “read” vast libraries of corporate information stored in natural language and quickly scan source material in dialogue with a human who helps fine-tune and tailor its research, a more scalable solution than hiring a team of human experts for the task.” 

“Technology has been changing the anatomy of work for decades. Over the years, machines have given human workers various “superpowers”; for instance, industrial-age machines enabled workers to accomplish physical tasks beyond the capabilities of their own bodies. 

More recently, computers have enabled knowledge workers to perform calculations that would have taken years to do manually.” 

Key Takeaway #3: Pareto’s principle aka 80/20 rule seems to hold when it comes to McKinsey’s analysis of projected value generated by the top use cases across 16 business functions…

This should be helpful for Generative AI Centers of Excellence that are having difficulty stack ranking their Use Cases to sort out what to do first.

“Our analysis of 16 business functions identified just four—customer operations, marketing and sales, software engineering, and research and development—that could account for approximately 75 percent of the total annual value from generative AI use cases.” 

Key Takeaway #4: How conservative or aggressive are these predictions of the economic potential of Generative AI?

“Our estimates are based on the structure of the global economy in 2022 and do not consider the value generative AI could create if it produced entirely new product or service categories.”

“This analysis considers the potential for automation only of current work activities and occupations. It does not account for how those work activities may shift over time or forecast new activities and occupations.” 

“However, as generative AI continues to develop and mature, it has the potential to open wholly new frontiers in creativity and innovation. It has already expanded the possibilities of what AI overall can achieve.”

“One study found that software developers using Microsoft’s GitHub Copilot completed tasks 56 percent faster than those not using the tool.”

“That said, while these models account for the time it may take for technology to be adopted across an economy, technologies could be adopted much more rapidly in an individual organization. Other research may reach different conclusions.” 

Key Takeaway #5: A hero use case focused on Customer Experience meets Sales + Marketing is something else. 

Given #1, #2 and #3 above, the hero use case that sits at the intersection of Customer Experience meets Sales + Marketing makes a ton of sense. While technology driven innovation is always a people, process + technology thing…keep in mind, the technology is all here.

“Generative AI has the potential to revolutionize the entire customer operations function, improving the customer experience and agent productivity through digital self-service and enhancing and augmenting agent skills.” 

“Crucially, productivity and quality of service improved most among less-experienced agents…This is because AI assistance helped less-experienced agents communicate using techniques similar to those of their higher-skilled counterparts.”

“Generative AI can instantly retrieve data a company has on a specific customer, which can help a human customer service representative more successfully answer questions and resolve issues during an initial interaction.”

“Generative AI can cut the time a human sales representative spends responding to a customer by providing assistance in real time and recommending next steps.”

“We estimate that applying generative AI to customer care functions could increase productivity at a value ranging from 30 to 45 percent of current function costs.” 

“Our analysis captures only the direct impact generative AI might have on the productivity of customer operations. It does not account for potential knock-on effects the technology may have on customer satisfaction and retention arising from an improved experience, including better understanding of the customer’s context that can assist human agents in providing more personalized help and recommendations.”

“Enhanced use of data. Generative AI could help marketing functions overcome the challenges of unstructured, inconsistent, and disconnected data…”

“It can help marketers better use data such as territory performance, synthesized customer feedback, and customer behavior to generate data-informed marketing strategies such as targeted customer profiles and channel recommendations. Such tools could identify and synthesize trends, key drivers, and market and product opportunities from unstructured data such as social media, news, academic research, and customer feedback.” 

“Generative AI–enabled synthesis could provide higher-quality data insights, leading to new ideas for marketing campaigns and better-targeted customer segments. Marketing functions could shift resources to producing higher-quality content for owned channels…”

“Generative AI could identify and prioritize sales leads by creating comprehensive consumer profiles from structured and unstructured data and suggesting actions to staff to improve client engagement at every point of contact. For example, generative AI could provide better information about client preferences, potentially improving close rates.” 

“Generative AI’s ability to identify leads and follow-up capabilities could uncover new leads and facilitate more effective outreach that would bring in additional revenue. Also, the time saved by sales representatives due to generative AI’s capabilities could be invested in higher-quality customer interactions, resulting in increased sales success.”

“There is also a big opportunity to enhance customer value management by delivering personalized marketing campaigns through a chatbot. Such applications can have human-like conversations about products in ways that can increase customer satisfaction, traffic, and brand loyalty.”

“Generative AI can aggregate market data to test concepts, ideas, and models.”

Clearly IKEA got the memo (link)...

"We're committed to strengthening co-workers' employability in Ingka, through lifelong learning and development and reskilling, and to accelerate the creation of new jobs," said Ulrika Biesèrt, global people and culture manager at Ingka Group.”

That’s it for today. 

Hope this contributes to your content diet and talk to you all next week.

Alec