Unleashing

the Power of AI
for Enterprise
Automation
Dispelling the myths surrounding machine
learning’s ability to automate and augment
business processes reveals a wealth of potential
on the not-too-distant horizon.

Unleashing the Power of AI for Enterprise Automation 1

Artificial intelligence (AI) and machine learning are making rapid progress with consumers,
gaining a nearly ubiquitous presence in our daily lives. In the past three years alone, Amazon
has sold 10 million Echo smart speakers, and Apple’s new iPhone X has an AI chip dedicated
to handling tasks such as facial recognition and understanding voice commands.

And yet, AI is not nearly as pervasive for automating and enhancing business processes.
Although an Oxford study says AI could automate more than 50 percent of all jobs over the
next two decades, many executives—perhaps with perspectives clouded by media hype and
misinformation—doubt the potential impact of this burgeoning technology.

In this paper, we provide a practical fact-based view of the AI trends and implications for enter-
prise automation over the next five to seven years. Based on our work with a wide range of
companies and discussions with academia, start-ups, and enterprise users, we highlight four
important AI facts, discuss the implications, and offer strategies on how to get started.

Fact 1: The AI Boom Is Sustainable and Should

Not Be Ignored
For the first time, machine-learning algorithms are beating humans in tasks such as image
recognition and voice-to-text translation, and complex games such as Go. This AI boom is fueled
by a convergence of three factors: a breakthrough in deep-learning algorithms, the proliferation
of big data (structured data) to train these algorithms, and an exponential speedup in processing
power for machine-learning hardware, such as the graphics processing unit (GPU) chipsets that
cut down a machine’s training time from months to days and hours (see figure 1).

Figure 1
Three trends are fueling the artificial intelligence boom

Proliferation of big data Faster processing power Advanced learning algorithms

Global data center IP traffic Deep learning chipset market Number of annual patent
(zettabytes per year) revenue ($ million) applications for machine learning
3,000
+26.6% +42.2%

15.3 12,200
12.9 2,500
10.8 513
8.6
6.5
4.7 2016 2025f
2,000

Processor trends
2015 2016 2017e 2018f 2019f 2020f 107 1,500
GPU computing performance
• By 2020, 92% of workloads will 106
be processed by cloud-based 1,000
105
data centers
• By 2020, 68% of workloads 104
processed by cloud-based data 103 500
centers will be processed by
public cloud data centers and 102
32% by private cloud data centers Single-threaded performance
0
(2016e: 56% vs. 44%) 1980 1990 2000 2010 2020f 2000 2004 2008 2012 2016e

Notes: GPU is graphics processing unit. Patents are those filed with the US Patent and Trademark Office.
Sources: Cisco, Tractica, Nextbigfuture, Teqmine Analytics; A.T. Kearney analysis

Unleashing the Power of AI for Enterprise Automation 1

All three factors are expected to keep accelerating. In fact, by 2020, almost 70 percent of all
enterprise data will be stored and processed in cloud-based data centers—providing unprec-
edented big data infrastructure to train machine-learning algorithms. Similarly, hardware chips
that can speed up algorithm training are rapidly advancing. Google, NVIDIA, and Intel have
announced next-generation GPU chip hardware that will accelerate training by 10 to 100 times.
And based on the growing number of patent applications, advances in the underlying machine-
learning algorithms will continue to pick up pace.

These trends offer strong evidence that AI will continue to improve. For business leaders, this
means that ignoring AI is no longer an option.

Fact 2: AI Is Being Used across Organizations

but with a Limited Scope
So what will AI be able to do for enterprise automation in the next five to seven years? Most
experts say companies will adopt narrow AI, or supervised machine learning that is focused
on one task. AI algorithms will be able to use training data to learn how to automate a task, but
once the task is mastered, the solution will be narrow, and in most cases, the machine will not be
able to generalize that learning to perform other tasks (see figure 2). Widespread use of broad,
human-like general intelligence—in other words, unsupervised and context aware—could be
decades away.

Figure 2
The use of artificial intelligence will be narrow in scope in the near term

Rule-based RPA Narrow AI Broad human-like AI

Cognitive Rule-based Supervised Unsupervised Unsupervised Self-aware

modes inference learning narrow context-aware unsupervised
learning learning learning

Natural • Spelling and • Voice-to-text • Personal assistant • Real-time • Idiom, sarcasm,

language grammar check dictation apps with basic dialogue and and nuance
processing voice Q&A translation articulation

Computer • Scanning typed • Facial recognition • Complex • Vision systems in • Autonomous

vision characters in • Scanning classification (for complex settings exploration
format forms handwriting example, video (for example, agents
segment search) vehicles)

Pattern • Loans risk • Fraud detection • Product recommen- • Real-time clinical • Mimicking
recognition inference based (based on known dation based on diagnosis intuition and
on rules patterns) hidden customer • Anticipate creative connect-
preference cyberattacks ing of dots

Reasoning and • History-based • Forecasting using • Identifying hidden • Beating • Beating best-in-
optimization predictive demand-sensing biases from best-in-class class human
forecasting input with learned forecasting data human forecaster forecaster in
segmentation and input in specific domain several domains

Five years ago 2017–2025 2025 and beyond

Notes: RPA is robotic process automation. AI is artificial intelligence.

Sources: World Economic Forum expert panel interviews, press releases, company websites; A.T. Kearney analysis

Unleashing the Power of AI for Enterprise Automation 2

For example, consider a company that wants an AI algorithm that can scan PDFs and hand-
written invoices, validate field formatting, and then automatically trigger the accounts payable
process. With more advanced algorithms, or unsupervised learning, the solution could also
work with unlabeled data, such as collecting past invoices without having fields that are labeled
as valid or invalid. However, the AI solution this company adopted is limited to automating the
task of text-field recognition and formatting. To use AI to do more advanced invoicing tasks,
such as detecting fraud, the company would need to design and train a completely new
solution by focusing on other underlying features and patterns.

In the foreseeable future, AI applications will fit a narrow paradigm of using training data for
supervised machine learning. This has two strategic implications: acquiring labeled data for
training becomes a strategic capability and a source of differentiation, and AI solutions require
deep functional and domain-specific human co-creation and process redesign.

Fact 3: AI Is Ready for Deployment on Select

Activities
The Japanese insurer Fukoko plans to use AI to replace more than two dozen human agents who
process claims, and Goldman Sachs used machine learning to transform its 600-person trader
unit into a much leaner 200-person team between 2000 and 2016. However, not all organiza-
tional activities are suitable for AI automation under today’s narrow paradigm.

One way to characterize machine-learnable tasks is what computer scientist Andrew Ng calls
A→B activities: processes that take a set of unambiguous inputs and produce a response
(see figure 3). For example, retail demand forecasting is an A→B activity. By taking an array of

Figure 3
Narrow AI is best used when basic data can generate a clear response

Examples of A→B activities suitable Examples of complex tasks not suitable

for narrow AI for narrow AI

Input A Response B Example

Personality Exhibit human-like emotions
and quirks
Picture Are there Photo
human faces? tagging
(0 or 1)
Episodic Perform tasks based on output
memory from past activity
Loan Will they repay Loan
application the loan? approvals
(0 or 1)
Social Interpret and communicate
Ad plus user Will the user Targeted learning via tacit cues and signals
information click on the ad? online
(0 or 1) marketing

Perform complex inference

English French Language
Context based on context rather than
sentence sentence translation
direct training data

Note: AI is artificial intelligence.

Sources: “What Artificial Intelligence Can and Can’t Do Right Now,” Harvard Business Review, 9 November 2016; A.T. Kearney analysis

Unleashing the Power of AI for Enterprise Automation 3

information such as seasonality, regional sales history, point of sale trends, social media signals,
and data about pricing sensitivity, an algorithm can predict demand as well as a human can.
Financial trading is another good example. An algorithm can use historic prices, macro trend
drivers, and arbitrage rules compiled from past traders and determine whether the best option
is to buy or sell. Although making the right decision based only on these inputs may be a
challenge given the unpredictability of the market, an AI solution is still attractive if it can
outperform humans over a large number of trades.

Mapping enterprise processes and activities into A→B versus non-A→B categories can help
managers pinpoint opportunities to use AI automation and augmentation strategies.

The AI boom is fueled by a convergence of three

factors: faster processing power, the proliferation of
big data, and advanced deep-learning algorithms.

Fact 4: Adopting AI Is about More Than

Technical Feasibility
Some AI applications will be adopted faster than others, even though the technical require-
ments are comparable. Broader solutions can ensure that a company’s portfolio of AI initiatives
can unlock value in the near term while also paving the way for long-term aspirations.

Consider the following when deciding where to use AI for enterprise automation:

• One-time costs. Assess the initial capital outlay for a new AI solution, such as developing an
algorithm and acquiring training data. Open-source access to algorithms and pay-as-you-go
“AI as a service” platforms can lower the fixed-cost hurdles, but access to training data can
be either an expensive bottleneck or a powerful source of differentiation.

• Switching costs. Evaluate the costs associated with displacing the existing solution with an
AI solution, including technical hurdles such as the ability to open the AI algorithm’s black box
to trace and explain decisions and human obstacles such as political and cultural resistance
to change.

• Ecosystem requirements. Determine if an integrated solution will require any comple-

mentary technologies. For example, an AI solution that must be integrated with innovative
IoT sensors and emerging robotics technology will be more complex to adopt.

• System externality hurdles. Consider the extent to which the AI solution could negatively
affect third parties that did not choose to use the new technology, bearing in mind that the
value of the solution will increase as more users adopt it.

Companies face a variety of challenges when adopting AI solutions, along with different
potential timelines for achieving a broad impact. For example, a call center we worked with
was assessing one solution that would convert handwritten forms into structured database

Unleashing the Power of AI for Enterprise Automation 4

Figure 4
Companies face four major challenges when looking for AI solutions

Challenges of technology adoption

One-time Switching Ecosystem System externality

Examples costs costs requirements hurdles

Use case 1.
Extracting data from a
structured context and
recognizing letter shapes

Use case 2.
Extracting data from a
semi-structured context
with keyword extraction

Use case 3.
Behavioral profiling and sentiment
analysis for customer contact
engagements

Low High

Notes: AI is artificial intelligence. BPO is business process outsourcing.

Source: A.T. Kearney analysis

records (see figure 4). The software development and switching costs were modest because
the solution could be launched by using off-the-shelf machine-learning modules. In addition,
the company already had a large amount of labeled data to use for training, optical character
recognition scanners to process the information, and extensive databases. The solution faced
relatively low externality barriers, and proof-of-concept solutions in certain functions and
geographic units could serve as training data and points of reference for other units. The
company expects to have broad use of the solution by 2021.

Another solution would enhance the call center’s agent interactions by automating sentiment
analysis from consumers’ voice calls or chats. This solution has much higher switching costs in
terms of cultural and risk barriers. The company opted to start small to minimize any negative
impact on its customers. If the solution works, the company will need to redesign its end-to-end
training process to allow the AI engine to push suggested responses to agents. This solution has
relatively high network externalities, where higher adoption will generate more training data to
improve performance but collecting the initial critical mass of training data will take time and
require company leaders to take a leap of faith. Given such complexities, an AI sentiment analysis
bot will likely take seven to 10 years rather than the first solution’s two- to three-year adoption.

Charting the Way with an AI Road Map

AI and machine learning will continue to enjoy a boom phase, powered by more sophisticated
algorithms, greater availability of data, and more advanced hardware. However, forward-
thinking companies take a disciplined approach in evaluating the opportunities. Based on the
above trends and their implications, four steps can help organizations embark on a compre-
hensive AI automation strategy:

Unleashing the Power of AI for Enterprise Automation 5

Map the A→B activities
Rather than using one-off AI solutions, systematically identify and map all A→B activities across
the value chain for potential machine-learning automation. This ensures a broad view for
downstream considerations such as value potential, time to impact, development costs, and
alignment with the overall business strategy.

Prioritize where AI will be used

Because AI solutions are not generalizable and require specific data resources and training,
prioritize the A→B activities to be automated based on the potential business impact along with
the complexity of adoption to ensure smart resource allocation.

Adopt a portfolio approach

Manage the AI automation pipeline like a product innovation portfolio to optimize both near-term
and long-term value creation while mitigating the risks. Segment the initiatives based on
available data and adoption risks.

Consider the full spectrum of options to make, buy, or partner

Using AI often requires multidisciplinary capabilities and insights. Capitalize on internal experts,
consultants, and corporate partners as well as AI technology start-ups to adopt best-of-breed
solutions and develop nimble proofs of concepts that can be launched in weeks instead of years.
For sectors where AI has disrupting potential, have a clear overarching acquisition strategy to
avoid expensive rushed bets or late entries in a landscape of record-high valuations.

AI automation is rapidly becoming a reality across organizations and value chains. Now is the
time for forward-thinking business leaders to adopt a disciplined, portfolio-based approach to
develop machine-learning capabilities, data, and partnerships to remain relevant.

Author

Michael Hu, partner, Chicago

[email protected]

The author would like to thank Eric Gervet, Florian Dickgreber, Sean Monahan, Denis Bassler,
and Joseph Edwar for their valuable contributions to this paper.

Unleashing the Power of AI for Enterprise Automation 6

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