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Dr. Tathagat Varma, profile picture
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GenAI Value Spectrum - delivering the "true value" from GenAI initiatives

The document discusses the projected economic impact of generative AI (genai), highlighting a potential growth of trillions and significant venture capital funding, but warns of current limitations in adoption and technology readiness among businesses. Despite the rapid increase in user adoption, many companies lack the foundational elements for successful AI integration, leading to high failure rates in AI projects. The text emphasizes that for genai to deliver true value, it needs to be strategically integrated into enterprise processes, transforming both internal capabilities and business models.

Technology◦
Related topics:
Generative AI• Return on Investment•
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GenAI Value Spectrum Tathagat Varma, PhD (GenAI)
Disclaimer: My personal views!
GenAI: A New Shiny Penny? • Several Trillion $$$s of economic impact projected. • 30% growth expected in 2024: Over $20bn VC funding in the first three quarters. • Capex of $1tn+ expected in the coming years!
GenAI Hype • Has GenAI hype hit the peak? • Now entering the “trough of disillusionment”, nothing in the “slope of enlightenment” and the “plateau of productivity”! • 30-40% innovations at least 2-5 years out, and another 30-40% in the 5-10 years! • AGI is (still!) more than 10 years away! Source: Gartner, https://www.gartner.com/en/articles/hype-cycle-for-genai
Bubble? “It may be the biggest gamble in business history…most companies are still not sure what the technology can or cannot do, or how best to use it. Across the economy, only 5% of American businesses say they are using AI in their products and services. Few AI startups are turning a profit…The disparity between investor enthusiasm and business reality looks untenable—which means 2025 is shaping up to be a crunch year. The race to make AI more efficient and more useful, before investors lose their enthusiasm, is on.” https://www.economist.com/the-world-ahead/2024/11/18/will-the-bubble-burst-for-ai-in-2025-or-will-it-start-to-deliver
Reality check! “The Infosys research highlights that while executives envision AI as the next industrial revolution, transforming business models and shaping the new economy, many companies lack the foundational building blocks for successful enterprise AI adoption. According to the research, enterprises expect an average increase of 15% in productivity from their current AI projects, with some anticipating up to 40% gains, yet only 2% of organizations are ready across all five key dimensions: talent, strategy, governance, data, and technology. The biggest gaps lie in technology readiness, with only 9% of companies possessing the necessary AI capabilities like machine learning frameworks, prebuilt algorithms, and dynamic compute. Additionally, data accuracy, processes, and accessibility are significant challenges, with only about 10% of respondents reporting ease of data location and access for AI projects…A strong AI strategy aligns with business objectives, enhances revenue growth, and ensures desirable, feasible, and viable use cases. Only 23% of our respondents show readiness in this area.” The Infosys Enterprise AI Readiness report includes insights from over 1,500 respondents across Australia, New Zealand, France, Germany, the United Kingdom, and the United States, backed up with in-depth interviews with 40 senior executives in the US and UK. Source: https://www.infosys.com/newsroom/press-releases/2024/enterprise-ai-readiness.html
So, what’s the reality?
Adoption? • ChatGPT 3.5 hit 100mn users in just 64 days • 92% of Fortune 500 firms have adopted GenAI • GenAI adoption at workplaces has gone up from 22% (2023) to 75% (2024) • By 2026, more than 80% of enterprises will have used generative AI APIs or models, and/or deployed GenAI-enabled applications in production environments, up from less than 5% in 2023. (Gartner) • Growth seen plateauing? • ChatGPT: 200mn+ users, 11mn paying customers (75% revenues), 1mn paid business users (25% revenue) • AI projects failure rates: 80% (HBR), 80% RAND), 85%(Gartner), 90% (VentureBeat) • AI Startup Failure Rates: 85% will be out of business in 3 years (YC); 92% (AI4SP) – 38% had no market need and 54% operational challenges
Productivity? • Wild projections around how GenAI will transform work and dramatically boost productivity. • McKinsey claims $4.4tn in global profits. • Nielsen claimed a 66% increase in employee productivity. • IDC estimates marketing productivity boost of 40%+ by 2029. Sam Altman says it could be closer to 95%! • Goldman Sachs forecasts a 9% productivity gain, largely due to new tasks and business models that AI can enable, aligning with historical trends seen with other disruptive technologies. • “Recent research by MIT professor Daron Acemoglu suggests that total productivity gains of AI could be as little as 0.53% over 10 years. He describes these gains as “nontrivial, but modest.” • “One reason to take a slower approach is that assessments of productivity typically focus on the task level — summarizing a document, completing a slide deck, or answering a customer call, for example — and how individuals might use and benefit from LLMs. Using such findings to draw broad conclusions about firm-level performance could prove costly.”
ROI? • Most impact expected in marketing and sales, followed by software engineering, and customer operations (McKinsey) • 70-85% of deployments fail to meet the desired ROI (NTT Data) • Only 15% companies have ROI metrics for GenAI (KPMG)
Society? • Economic growth, personalized experiences, accessibility and inclusion, innovation and creativity, healthcare, education, …social good. • Automate 60-70% of jobs (McKinsey), • Fill jobs that are short staffed (e.g., healthcare) or routine (e.g., customer care) or unsafe (e.g., security), etc. • GenAI will fail. Prepare for it. (BCG) • Predictive tools made no impact to Covid-19! (Turing Institute) • Air Canada Chatbot incident • NYC chatbot encourages entrepreneurs to break the law • Hallucinations in court cases • Teen suicide blamed on chatbot • Jobs, society, electricity, …planet?
So, the big questions are… What is “adoption”? What is “success”? What is the “value”?
Adoption? Is using a GenAI tool the adoption? Is providing labor the adoption? Is doing outsourced projects the adoption? Is deploying GenAI solution to one narrow area the adoption? Is implementing GenAI to a peripheral function the adoption?
Success? Is filing patents the success? Is writing papers the success? Is creating new models the success? Is VC funding the success? Is doing pilots the success?
Value? Is achieving task productivity at individual level the value? Is improving process efficiency the value? Is delivering firm-level capabilities the value? Is disrupting the markets the value? Is preserving the planet the value?
Technology Adoption “The strategic integration of technology into the core value creation processes to deliver superior business value not possible without it.” – Theory of Cognitive Chasms
Value Spectrum Optimize (“10%”) • Task-level adoption and process-level “vertical scaling” lead to individual productivity hacks that might make no real impact for the firm, while process efficiency could improve the bottomline. Innovate (“1X+”) • Firm-level “horizontal scaling” across the entire value chain leads to business value realization and superior customer experiences that improve the topline better than the normal growth. Transform (“10X”) • Harness the power of data-informed algorithmically- supported “cognitive decision-making” to transform the business model and deliver exceptional human experiences that are order of magnitude superior. Evolve (“∞”) • Industrial and societal adoption lead to market disruptions and planet-scale solutions for social good when applied judiciously with appropriate human controls, but might wreak havoc when applied indiscriminately without adequate forethought and safeguards.
Theory of Cognitive Chasms©
Theory - of - Cognitive Chasms© Coming in 2025… Follow updates at: https://www.linkedin.com/company/cognitivechasm
Recap Enterprise-wide Adoption: GenAI is a “general purpose technology”. To realize its full value, it must be seen as a “horizontal technology”, i.e., enterprise-wide adoption. Strategic Value Creation: Successful adoption must strategically integrate GenAI to a firm’s value chain and deliver tangible value to the firm. True value of GenAI lies in transforming the internal capabilities and business model of the firm. Transformation Roadmap: GenAI value spectrum provides a roadmap for firms looking at systematic change management while mitigating risks and delivering value