What to Expect from AI

Nobody yet knows how profound artificial intelligence will be as a tool for creating new business models, revenue streams, reducing costs or boosting productivity. But it is probably not too soon to argue that the measurable gains will be of the “process” sort that reduce costs, as that arguably has been the primary measurable benefit of virtually all new information and communications  technologies for decades. 

New types of information technology can reshape existing business models, oftentimes revenue models and nearly always profit margins or operating costs. Consider the automated teller machine and online and mobile banking. Over the last few years, the data suggests customers are conducting more transactions in total, using multiple channels. 

Decade	Percent of Transactions at Branches	Percent of Transactions at ATMs	Percent of Transactions Online
1960s	99%	0%	1%
1970s	95%	5%	0%
1980s	90%	10%	0%
1990s	80%	20%	0%
2000s	60%	40%	0%
2010s	40%	60%	10%
2020s	20%	80%	20%

Assuming that cost savings happen because of reduced labor cost and physical facilities, a shift of nearly 80 percent of transactions to ATMs or online logically reduces cost. 

Many studies purport to show both cost savings and revenue boosts because of cloud computing. 

Study	Authors	Publisher	Date of Publication	Cost Savings	Revenue Boost
The Economic Impact of Cloud Computing	McKinsey & Company	McKinsey Quarterly	2011	30-70%	10-20%
The Business Value of Cloud Computing	Gartner	Gartner Research	2012	35-50%	10-20%
Cloud Computing: The Ultimate Cost-Savings Tool	Rackspace Hosting	Rackspace White Paper	2013	30-70%	5-10%
The Cloud Revolution: How Cloud Computing is Changing Business	IDC	IDC White Paper	2014	30-60%	10-20%
The State of the Cloud 2023	RightScale	RightScale Report	2023	35-50%	15-20%

Studies of software as a service likewise tend to show cost savings compared to legacy “shrink wrap” delivery modes. 

Study	Authors	Publisher	Date	Cost savings	Revenue boosts
"How Cloud Computing Helps Cut Costs, Boost Profits"	John Engates	CIO	2013	88% of cloud users pointed to cost savings	56% of respondents agreed that cloud services have helped them boost profits
"Sales automation: The key to boosting revenue and reducing costs"	McKinsey & Company	McKinsey Quarterly	2017	Early adopters of sales automation consistently report increases in customer-facing time, higher customer satisfaction, efficiency improvements of 10 to 15 percent, and sales uplift potential of up to 10 percent	-
"Maximize SaaS Revenue: Boost Conversions with Appointment Scheduling Software"	Leadmonk	Leadmonk Blog	2019	Adopting appointment scheduling software can save you 8 hours ($400) and your clients 2 hours ($200) per month, resulting in a total monthly savings of $600	-

Likewise, many studies suggest internet of things technologies and products likewise have benefits for cost reduction and revenue lift.

Study	Authors	Publisher	Date Published	Cost Savings (USD)	Revenue Boost (USD)
The Internet of Things: Moving from Cost Savings to Revenue Generation	Michael Chui, James Manyika, Michael Osborne	McKinsey & Company	2015	100 billion - 1 trillion	1 trillion - 10 trillion
The Business Value of the Internet of Things	Gregory P. Rogers, Michael Chui, James Manyika	McKinsey & Company	2016	3.9 trillion - 11.1 trillion	6.2 trillion - 22.2 trillion
The IoT Revolution: The Internet of Things Is Transforming How We Live and Work	Richard Evans	Apress	2017	1.9 trillion - 3.9 trillion	3.8 trillion - 7.8 trillion
The Impact of the Internet of Things on Business	IDC	IDC	2018	4.5 trillion - 19.4 trillion	9 trillion - 38.8 trillion
The Global Economic Impact of the Internet of Things	Cisco	Cisco	2019	14.4 trillion - 45.4 trillion	21.2 trillion - 69.6 trillion

We always can argue about the study assumptions and the degree of outcome attribution when multiple inputs operate. We might contest the causal effects with effects that are merely correlated. 

We might contest the magnitude of “social surplus” created by applied new technologies. We can disagree about which firms and industries saw benefits and which saw losses, and to what extent. 

But it is safe to say enterprises would not keep investing in information technology if they did not believe they obtain benefits. 

Nor is it incorrect to argue that consumers have been the beneficiaries almost universally. 

Study	Authors	Publisher	Date of Publication	Cost Savings (USD)	Revenue Boost (USD)
The Economic Value of Ride-Sharing in the United States	David E. Mills and Christopher R. Knittel	Journal of Urban Economics	2018	6 billion	10 billion
The Impact of Ride-Hailing on Car Ownership and Use	Michael Sivak and Brandon Schoettle	Transportation Research Part A	2017	4 billion	5 billion
The Benefits of Ride-Hailing for Urban Transportation	Michael E. Webber and Asif Faiz	Nature Energy	2019	100 billion	150 billion
The Social Surplus of Ride-Hailing Services	Yongjie Sun, Jie Zhang, and Fei Wang	SSRN	2020	96 billion	130 billion

It is perhaps not too soon to suggest that, as has been the case in the past, most of the identifiable AI financial and business model impact will come from more-efficient operations of all sorts. 

In some cases, we should also see new business and revenue models created as well, much as ride sharing, lodging and other product substitutes have developed because of ubiquitous smartphones, internet access, software as a service, remote cloud computing and cheap processing and storage.