Improper AI strategy could cost companies nearly 30% of shareholder value

A new report by L.E.K. Consulting indicates that a company’s success in developing and executing an artificial intelligence (AI) strategy is becoming increasingly critical to its enterprise value. The report, titled The AI Delta: How Artificial Intelligence Is Rewriting the Rules of Modern Business, suggests a significant potential impact on shareholder value based on a company’s approach to AI transformation.

L.E.K. Consulting’s analysis, based on S&P 500 data and an executive survey, estimates that a successful AI transformation could lead to a valuation gain of up to 19%. Conversely, a poorly executed or inadequate AI strategy could result in a 9% loss of value. This 28% difference represents the average “AI Delta,” the gap between potential growth from successful AI adoption and value erosion from poor strategy or execution. The report emphasizes that this delta could be even larger for some companies.

Key factors determining a successful AI strategy, according to the report, include the acceleration of:

• Revenue growth: Through the development of new products and services based on the company’s unique data.
• Enhanced customer engagement: Via personalized experiences, including pricing and marketing.
• Productivity gains: Through automation and streamlined workflows.

L.E.K. emphasizes that investors and boards are increasingly expecting companies to have a robust AI strategy, and the absence of one can negatively impact valuation. The report advocates for a proactive approach, with clear communication of AI initiatives, their expected impact, and concrete implementation plans.

Qualcomm bets big on AI with Edge Impulse acquisition

The report highlights successful examples, with Duolingo reducing content development time using AI, thus boosint subscription. Shopify using AI to increase their sales. Also, Adobe posted good numbers after implementig AI.

The consulting firm argues that a holistic approach to AI is crucial, encompassing performance, competition, and unique opportunities. Companies should leverage AI to improve operational efficiency, enhance competitive differentiators, and identify new revenue streams by unlocking the value of their data. The report stresses that AI should be treated as a central element of overall strategy, integrating data and analytics into core business functions.

Featured image credit: Charles Forerunner/Unsplash