How to Increase Profits with Business Software and Technology

Note: This article is a rewritten version of an article originally published in Fast Company.

Introduction

In today’s rapidly evolving business landscape, the role of technology in driving productivity and increasing profits cannot be overstated. One area of technology that holds immense potential is generative AI. According to our latest research from the McKinsey Global Institute, generative AI has the power to generate value equivalent to $2.6 trillion to $4.4 trillion in global corporate profits annually. This article explores how businesses can harness generative AI to increase their profits, with a specific focus on industries such as banking, high tech, and life sciences.

The Potential of Generative AI

Generative AI has the ability to significantly enhance productivity across various industries. Through our research, we have identified 63 use cases where generative AI can drive productivity improvements. These use cases range from providing support interactions with customers to generating creative content for marketing and sales, and even drafting software code based on natural-language prompts. By implementing generative AI in these areas, the value of productivity from artificial intelligence and analytics can increase by 15% to 40%, compared to previous generations of technology.

Industry-Specific Impact

While generative AI can benefit businesses across all industries, certain sectors stand to gain the most. Banking, high tech, and life sciences are likely to experience the biggest impact as a percentage of overall industry revenue. For example, in the banking sector, generative AI could create an additional value of $200 to $340 billion annually if all use cases were implemented. Similarly, retail and consumer packaged goods companies have the potential to see an additional $400 billion to $660 billion in operating profits each year through the use of generative AI.

Key Areas of Impact

Across all industries, around three-quarters of the value generated by generative AI will come from four key areas of business: customer operations, marketing and sales, software engineering, and research and development. In these use cases, generative AI can operate as a virtual expert, providing information and suggestions to customers or assisting in the development of creative marketing content. It can also act as a virtual collaborator, aiding teams in tasks such as creating candidate molecules for drug development or suggesting and tidying code for software engineers.

Productivity Growth and Work Automation

The value of generative AI lies not only in its ability to increase productivity but also in its potential to automate work activities. The current capabilities of generative AI, combined with other technologies, have the theoretical potential to automate work activities that currently occupy 60% to 70% of employees’ time. This is a significant increase compared to previous estimates in 2017, which suggested that technologies available at that time could only automate activities that occupied half of employees’ time.

The reason for this increase in automation potential is generative AI’s proficiency in natural language processing, a skill required for work activities that account for about one quarter of total work time. Previous generations of artificial intelligence lacked this capability, limiting their impact on knowledge-based work. As a result, generative AI has a greater potential to automate tasks in occupations with higher wages and educational requirements.

Accelerating Workforce Transformation

The pace of workforce transformation is expected to accelerate due to the higher potential for technical automation offered by generative AI. Our scenarios estimate that between 2030 and 2060, approximately half of today’s work activities could be automated. This midpoint falls in 2045, about a decade earlier than our previous estimates. While the adoption of generative AI may take decades across the global workforce, individual companies can leverage this technology more quickly to gain a competitive advantage.

Supporting Employees in the Transition

As businesses embrace generative AI, it is crucial to provide support to employees in adapting to the changing work landscape. This includes learning new skills that enable them to work effectively alongside generative AI and, in some cases, transitioning into new roles. Corporate leaders should reexamine core business processes to identify areas where generative AI can be applied and how employees can collaborate with it. They should also assess the need for new skills and capabilities within their workforce. By actively managing the transition to generative AI and evaluating associated risks, businesses can fully realize the significant economic promise it holds.

Conclusion

Generative AI has the potential to revolutionize business operations and drive significant increases in profits. With its ability to enhance productivity, automate work activities, and accelerate workforce transformation, generative AI offers a multitude of opportunities across industries. By embracing this technology and providing the necessary support to employees, businesses can unlock its full potential and gain a competitive edge in the ever-evolving global marketplace.

This article was originally published in Fast Company.