Why AI Saves Millions but Struggles to Create New Revenue Stream

As I wrote in my year-end summary for 2024, this year truly redefined AI for business, showcasing its profound impact on operational efficiency and innovation. Yet, amidst its successes, a curious observation stands out: while AI excels at cutting costs and driving return on investment (ROI), it has not yet unlocked its full potential to generate substantial new revenue. This gap provides an essential perspective on where AI stands today and what lies ahead.

AI’s Cost-Saving Power

AI’s primary strength is its ability to automate repetitive tasks, reduce errors, and enable teams to focus on higher-value work. This makes it a powerful tool for cutting operational costs and increasing efficiency in areas where labour is expensive or scarce.

For instance, Klarna reduced its workforce by two-thirds by leveraging AI-powered tools, while Microsoft and ServiceNow reported a 50 to 75 per cent boost in engineering productivity. These examples demonstrate how AI is transforming cost structures without compromising output. By reducing reliance on manual processes, businesses are realising immediate financial benefits.

The Revenue Generation Problem

Generating revenue is more complex than saving costs. AI must go beyond automating processes to create new opportunities, products, or markets. Many AI-driven tools, such as recommendation systems or customer engagement platforms, show promise but often fail to produce consistent and meaningful results.

While AI can help businesses generate leads and identify potential customers, it often struggles with converting these opportunities into reliable revenue. The challenge lies in AI’s inability to fully understand nuanced customer needs or build the trust required to close deals effectively.

Why Cost Reduction Comes First

AI thrives in scenarios involving repetitive tasks, large volumes of data, or operational bottlenecks. These areas provide clear opportunities for automation and cost savings. Businesses facing tight labour markets, rising operational expenses, or needing to scale quickly are especially well-positioned to benefit from AI’s capabilities.

For example, EvenUp, a legal company, uses AI to generate demand letters for transactional cases. This allows the business to handle routine work efficiently while freeing up human experts to focus on more complex tasks. Such specialised applications illustrate AI’s potential to reduce costs in particular domains.

Unlocking AI’s Revenue Potential

To move beyond cost savings, AI must evolve to support creativity, innovation, and strategic decision-making. Businesses can unlock AI’s potential to drive revenue by developing unique offerings or exploring untapped markets. However, this requires a thoughtful approach that combines AI’s strengths with human expertise.

One promising path is to focus on areas where AI complements human capabilities rather than replacing them. For example, AI can enhance customer experiences by providing personalised recommendations or assist in product development by analysing market trends. These strategies can help businesses create value that goes beyond simple cost-cutting.

The Way Forward

AI delivers substantial returns by helping businesses save money and operate more efficiently. However, its ability to generate significant new revenue remains a work in progress. As the technology matures, organisations must experiment with innovative applications and integrate AI into their strategies to unlock its full potential.

AI’s role in driving ROI is clear now, but its journey toward becoming a revenue powerhouse is just beginning. The next phase of AI adoption will require technical advancements, creative thinking, and a willingness to explore new possibilities.

AI is brilliant at saving time and money, but the future belongs to those who can use its intelligence to inspire growth.