The GenAI Challenge: 30% of Projects Expected to Collapse by 2025
Out of all the projects currently undertaken in Generative Artificial Intelligence (GenAI), around 30% are expected to be discontinued by the end of 2025 due to poor data quality, inadequate risk controls, escalating costs, or unclear business value. A major challenge for organizations is justifying the substantial investment in GenAI for productivity enhancement, which can be difficult to translate directly into financial benefits.
Despite many organizations leveraging GenAI to transform their business models and create new business opportunities, these deployment approaches come with significant costs, ranging from $5 million to $20 million. Unfortunately, there is no one-size-fits-all approach with GenAI, and costs aren’t as predictable as other technologies. The amount spent, the use cases invested in, and the deployment approaches taken all determine the costs. Whether you’re a market disruptor aiming to infuse AI everywhere, have a more conservative focus on productivity gains, or extend existing processes, each approach has different levels of cost, risk, variability, and strategic impact.
Regardless of AI ambition, Gartner research indicates that GenAI requires a higher tolerance for indirect, future financial investment criteria versus immediate return on investment (ROI). Historically, many chief financial officers (CFOs) have not been comfortable investing today for indirect value in the future. This reluctance can skew investment allocation towards tactical rather than strategic outcomes. Early adopters of GenAI across industries and business processes report varying degrees of business improvements depending on the use case, job type, and skill level of the worker.
According to a recent survey, organizations implementing GenAI have reported an average revenue increase of 15.8%, cost savings of 15.2%, and productivity improvements of 22.6%. Additionally, these organizations have seen a 12.3% improvement in customer satisfaction and a 17.4% reduction in time-to-market for new products and services. This data serves as a valuable reference point for assessing the business value derived from GenAI's business model innovation.
However, it’s important to acknowledge the challenges in estimating that value, as benefits are highly specific to the company, use case, role, and workforce. Often, the impact may not be immediately evident and may materialize over time. For instance, a study found that 65% of businesses saw significant improvements only after the first year of GenAI implementation. Despite this delay, the potential benefits remain substantial, and organizations must be prepared for the long-term commitment required to fully realize the advantages of GenAI.
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