Will AI Mostly Produce "Faster and Cheaper" or "Better?"

Despite all the hype, artificial intelligence is going to produce benefits and outcomes that are primarily quantitative--faster or cheaper--rather than qualitative, where “better” can include the ability to create whole new products and industries, plus revenue and business models, that didn't exist before. 

Enterprises justify information technology investments primarily because they deliver quantitative outcomes in terms of productivity, revenue, cost savings, risk reduction or higher productivity. These outcomes are important because they can be measured in some way, and are tangible outcomes. 

In that sense, IT investments might be evaluated--if with great difficulty--the same way all other investments get evaluated: using standard accounting metrics such as net present value, return on investment, payback period, internal rate of return, total cost of production or economic value added. 

Net Present Value (NPV)	NPV is one of the foremost financial key performance indicators (KPIs) used to evaluate large, capital-intensive IT projects. NPV relies on accurate cash flow projections extending over the life of the project, alongside a discount rate which is used to account for the time value of money. Project approval depends on obtaining a positive NPV. IT projects can also be compared with one another using NPV whenever firms need to ration scarce IT capital.
Return on Investment (ROI)	ROI is an accounting-based ratio that compares total project income to the level of project investment. ROI does not take account of the time value of money, meaning that projects with a longer-term return window would be treated on par with projects that generate equal returns over a shorter time period. Similar to NPV, the accuracy of ROI calculations depends on being able to identify the scale of future cash flows arising from an investment.
Payback period	The payback period is a simplistic method that calculates the time needed for a project to breakeven (recover its investment costs). In a risk averse firm, managers may gravitate towards IT projects with a shorter payback period. In practice, payback should not be used in isolation but rather alongside other metrics that take account of project risk and that consider the flow of benefits beyond the end of the payback period.
Internal Rate of Return (IRR)	Given all future cash flows and an upfront investment for an IT project, IRR is the discount rate that would return a value of zero for NPV. IRR can be considered the true rate of return in that it takes account of the time value of money and the flow of value over time. IRR can be benchmarked against desired or minimum rates of return, including the weighted cost of capital.
Economic Value Added (EVA)	EVA —also called economic profit—is a measure of residual value generated by a project after deducting the cost of invested capital. Since all capital can be allocated to different ends, EVA argues that projects should be assessed an investment cost. This allows for a more equitable comparison if managers are in a position to pick from different IT projects with unique rates of return.
Total Cost of Ownership (TCO)	TCO captures a multitude of different cost items in a single metric such as the cost of hardware, software, and services, allocated per application, user, department, etc. TCO can also be represented as a cost per period of time. TCO does not take into account the benefit or value to the organization of using the underlying resource and is, as such, a questionable metric unless accompanied by other metrics such as ROI, NPV or payback period.

source: Springer 

Whether the inputs to be measured are the application of mainframe, minicomputer or PC-based computing, use of client-server architectures, world processing, spreadsheets, business software, video streaming or digital transformation, the measured outcomes always seem to focus on quantitative improvements: faster or cheaper. 

Less tangible outcomes are cited, but are hard to quantify, such as brand enhancement or competitive advantage in core markets. Perhaps least-cited of all is the application of information technology to create entirely new products and industries. Such qualitative outcomes fall under the framework of “better.” 

source: ISSA

The use of mainframe computers in the 1960s and 1970s led to average  productivity gains in businesses of about 30 percent, according to Datamation. 

A study by the Aberdeen Group found that companies that invested in information technology had an average cost savings of 12 percent. A study by IDC found that companies that invested in IT had an average production rate increase of 15 percent.

A study by the Gartner Group found that companies that invested in IT had an average error rate reduction of 20 percent. A study by McKinsey found that companies that invested in IT had an average innovation cycle time reduction of 30 percent. 

A study by the Aberdeen Group found that businesses that invest in IT achieve an average ROI of 22 percent. A study by Gartner found that businesses that invest in IT can improve their customer satisfaction by an average of 15 percent.

A study by McKinsey found that businesses that invest in IT can reduce their costs by an average of 10 percent.

That is not to say “qualitative” outcomes are not cited. They simply are hard to quantify. Most would likely agree that the introduction of personal computers in the 1980s led to qualitative benefits for businesses that include improved decision-making, increased collaboration, and better customer service.

Smartphones, digital cameras, personal computers before them, perhaps tablets, videogame consoles, social media and the web are easy-to-understand applications of technology that created new products and industries, or, at the very least, transformed existing industries. 

Many similar claims could be made for the benefits of the internet, cloud computing and will be made for AI as well. In the end, perhaps most of the claimed benefits will be quantitative in nature. “Faster and cheaper” will be the advantages cited. 

Still, in some cases, “better” will be the outcome: whole new products, industries and revenue models will also be created. But that should not be the “main” outcome. Process improvements are likely to dominate, as they have in the past.