What's the ROI of Generative AI Projects?

Andy Walters
April 19, 2024

Generative Artificial Intelligence (AI) has emerged as a transformative force, especially in the knowledge economy. As organizations strive to maintain a competitive edge, the integration of AI into their operations has become not just advantageous but, in many cases, essential. But how should business owners and executives think of the Return on Investment (ROI) of Generative AI projects?

In the simplest terms, ROI equals the percentage difference between the gains accrued from AI implementation and the total cost of its implementation. Mathematically, that looks like:

ROI = (Gains from AI − Cost of AI Implementation) / Cost of AI Implementation * 100%

  • Gains from AI encompass increased revenue through faster service delivery, market share gains, and the value of innovation and enhanced employee capacity.
  • Cost of AI Implementation includes the direct costs of technology, as well as indirect costs such as training, change management, and potential workforce restructuring.

Still, this can be a little opaque when considering whether and how to invest in retooling your business with AI. Where do most of the gains come from? In our experience, gains usually come in two forms: accelerating workflows or creating new workflows.

Most Generative AI projects and products accelerate existing workflows. In the knowledge economy, where information processing and creative problem-solving are key, Generative AI can significantly streamline operations by cutting out white collar grunt work. Examples go from the relatively straightforward--no longer having to fill out forms; automatic calendaring--to full end to end automation of internal processes.

In some cases, Generative AI may unlock entirely new workflows, such as AI-driven lead generation or marketing campaigns which were previously out of reach.

In this article I'll detail some key factors that are sometimes overlooked when calculating the gains from AI.

Factor 1: Speed as a Competitive Advantage

Speed is a critical differentiator. Many existing businesses and entire ecosystems have yet to incorporate AI, which means companies who can deliver products or services faster can significantly disrupt markets. This speed enables companies to respond swiftly to customer needs, adapt to market changes, and deliver innovations at a pace that outstrips competitors.

Factor 2: Workforce Optimization and Cost Reduction

By automating repetitive, low-value tasks, your team can get more done in less time. Where that is most impactful is when you have an existing team of multiple people performing the same function -- when generative AI is deployed properly, that can reduce headcount on the team. Where it's less impactful is if you have a "team" of one person -- because you'll likely want to keep a human in the loop for job functions, you likely can't eliminate those positions entirely.

Factor 3: Unleashing Innovation through Increased Capacity

When mundane tasks are automated, employees have more time to engage in creative and strategic thinking. This shift can lead to a surge in innovation, as workers redirect their focus towards developing new products, improving processes, and solving complex problems. In software development, for instance, AI tools can handle aspects of coding and testing, allowing developers to concentrate on design and innovation. This increased capacity can lead to the development of more sophisticated and user-friendly software solutions, driving industry advancements.

Factor 4: Enhancing Customer Experience and Engagement

AI technologies, especially those in natural language processing and machine learning, can significantly improve customer experience. By analyzing customer data and interactions, AI can provide personalized experiences, recommendations, and support. In retail, AI-driven chatbots and recommendation engines have revolutionized customer engagement, leading to increased customer satisfaction and loyalty. This enhanced engagement can translate into higher sales and brand value.

The ROI of AI

The ROI of Generative AI is multifaceted and extends beyond mere cost savings. Its real value lies in its ability to transform businesses through speed and innovation. By strategically integrating AI into your business, you can unlock new opportunities, stay ahead of the competition, and drive meaningful growth and value creation.

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