CIOs Believe AI Investments Won't Generate ROI for 2 to 3 Years

According to Lenovo's third annual study of global CIOs surveyed 750 leaders across 10 global markets, CIOs do not expect to see clear and positive return on investment from their artificial intelligence investments for two to three years. 

source: Lenovo 

We should not find this surprising. Consider the last generally-recognized general-purpose technology--the internet--and the lag in perceived benefits. 

Early internet technologies (1995, for example) were less mature and reliable compared to today, with slow connection speeds (dial-up internet was the consumer standard in 1995), limited functionality (the shift to multimedia web had just begun in 1995), while enterprises had to allay their  security concerns.

The internet disrupted traditional business models, so companies needed time to develop new strategies for marketing, sales, and customer service in the digital space. That took time.

Also, though it seems clear enough now, the potential applications of the internet for businesses weren't fully understood at first. Experimentation was required.

Additionally, assessing the return on investment for early internet initiatives was difficult, as firms lacked the analytics tools to quantify the impact of online marketing, e-commerce, or other internet-based activities.

Complicating matters was the widespread failure of many e-commerce startups in the dotcom bust around 2000. Since whole firms failed, benefits were zero or negative. 

Study	Publication Venue, Year	Key Findings
"Why E-Business Fails" by Andrew McAfee	Harvard Business Review, 2002	Analyzed early e-commerce ventures and found many failed to deliver on promises, highlighting the need for a strategic shift beyond simply setting up a website.
"The Productivity Paradox in Information Technology" by Erik Brynjolfsson and Lorin M. Hitt	Journal of Economic Perspectives, 1997	Examined the early years of IT adoption and the difficulty in measuring clear productivity gains initially, suggesting a time lag for realizing benefits.
"Diffusion of Internet Commerce: A Study of Knowledge Acquisition" by Sang-Pil Han, Young-Gul Kim, and Yoonkyung Kim	Journal of Electronic Commerce Research, 2003	Focused on small businesses and found that knowledge acquisition and overcoming technical challenges were crucial for successful internet adoption.
Diffusing the Dot-Com Revolution: The State of Business Transformation in the New Millennium"James C. Brancheau, Richard B. Clark, and Thomas G. Rowan	2001	This study found that many companies struggled to transform their businesses for the internet in the late 1990s, and the early benefits were primarily cost reductions rather than significant revenue growth
"Understanding Digital Marketing ROI: A Literature Review and Synthesis"Magali Ferro, Pauline Pinheiro, and David Thomas	2014	This review of research on digital marketing ROI (Return on Investment) highlights the challenges of measuring the impact of online marketing efforts, particularly in the early days when attribution models were less sophisticated.

That tends to be the case with most information technology innovations, other studies have found, looking at IT in general, e-commerce in specific or productivity. 

Study Title	Publication Venue	Date	Key Conclusions
The Elusive ROI of IT Investments	Strategic Management Journal	1997	Examined IT investments in large firms and found difficulty in directly measuring ROI (Return on Investment) due to factors like long-term strategic benefits and integration challenges.
From Bricks to Clicks: Does IT Pay Off?	Information Systems Research	2002	Analyzed data from over 200 firms and found a delayed effect of e-commerce initiatives on profitability. Early adopters often faced challenges like website development costs and changing consumer behavior.
The Productivity Paradox in Information Technology	The Review of Economic Studies	2003	Investigated the impact of IT on US productivity growth in the 1990s and found a "productivity paradox" where benefits weren't immediately apparent. The study suggests a "learning period" was needed for firms to leverage the internet effectively.
A Longitudinal Analysis of Web Site Traffic and Sales	Marketing Science	2004	Analyzed website traffic and sales data for multiple firms and found a positive correlation, but it took time for website traffic to translate into significant sales growth.
The Productivity Paradox in a Service Economy	Quarterly Journal of Economics	1998	Robert J. Gordon analyzed data from the US economy and found a productivity slowdown despite the rise of computers and the internet in the 1980s and 1990s. The study suggests a lag between technology adoption and measurable economic impact.
Diffusing the Dot-Com Revolution: An Organizational Perspective	Academy of Management Journal	2000	Andrew S. Melville, Thomas Durand, and Nina G. Guyader explored how established firms adopted e-commerce in the late 1990s. They found challenges in integrating new technologies with existing processes, leading to slow initial returns.
From Bricks to Clicks: Determinants of Success in Online Retailing	Journal of Retailing	2002	Kenneth C. Lichtenstein, James A. Lumpkin, and Elizabeth Van Wijnbergen analyzed early online retailers. They identified the need for significant investments in infrastructure and marketing before online channels became profitable.
Why E-Business Fails	Harvard Business Review	1999	Dorothy Leonard-Barton argued that many early e-commerce ventures failed due to a lack of strategic planning and a focus on technology alone, neglecting organizational change and customer experience.

The point is that, of course it will take some time for CIOs to demonstrate meaningful outcomes from applied AI. That is always the case when an important new technology--to say nothing of a general-purpose technology, is introduced. 

Whole business processes have to be redesigned, generally speaking, before the innovations can work their magic and produce measurable outcomes.

Lenovo CIO Study Finds a "To be Expected" Assessment of AI

According to Lenovo's third annual study of global CIOs surveyed 750 leaders across 10 global markets, CIOs do not expect to see clear and positive return on investment from their artificial intelligence investments for two to three years. 

source: Lenovo 

We should not find this surprising. Consider the last generally-recognized general-purpose technology--the internet--and the lag in perceived benefits. 

Early internet technologies (1995, for example) were less mature and reliable compared to today, with slow connection speeds (dial-up internet was the consumer standard in 1995), limited functionality (the shift to multimedia web had just begun in 1995), while enterprises had to allay their  security concerns.

The internet disrupted traditional business models, so companies needed time to develop new strategies for marketing, sales, and customer service in the digital space. That took time.

Also, though it seems clear enough now, the potential applications of the internet for businesses weren't fully understood at first. Experimentation was required.

Additionally, assessing the return on investment for early internet initiatives was difficult, as firms lacked the analytics tools to quantify the impact of online marketing, e-commerce, or other internet-based activities.

Complicating matters was the widespread failure of many e-commerce startups in the dotcom bust around 2000. Since whole firms failed, benefits were zero or negative. 

Study	Publication Venue, Year	Key Findings
"Why E-Business Fails" by Andrew McAfee	Harvard Business Review, 2002	Analyzed early e-commerce ventures and found many failed to deliver on promises, highlighting the need for a strategic shift beyond simply setting up a website.
"The Productivity Paradox in Information Technology" by Erik Brynjolfsson and Lorin M. Hitt	Journal of Economic Perspectives, 1997	Examined the early years of IT adoption and the difficulty in measuring clear productivity gains initially, suggesting a time lag for realizing benefits.
"Diffusion of Internet Commerce: A Study of Knowledge Acquisition" by Sang-Pil Han, Young-Gul Kim, and Yoonkyung Kim	Journal of Electronic Commerce Research, 2003	Focused on small businesses and found that knowledge acquisition and overcoming technical challenges were crucial for successful internet adoption.
Diffusing the Dot-Com Revolution: The State of Business Transformation in the New Millennium"James C. Brancheau, Richard B. Clark, and Thomas G. Rowan	2001	This study found that many companies struggled to transform their businesses for the internet in the late 1990s, and the early benefits were primarily cost reductions rather than significant revenue growth
"Understanding Digital Marketing ROI: A Literature Review and Synthesis"Magali Ferro, Pauline Pinheiro, and David Thomas	2014	This review of research on digital marketing ROI (Return on Investment) highlights the challenges of measuring the impact of online marketing efforts, particularly in the early days when attribution models were less sophisticated.

That tends to be the case with most information technology innovations, other studies have found, looking at IT in general, e-commerce in specific or productivity. 

Study Title	Publication Venue	Date	Key Conclusions
The Elusive ROI of IT Investments	Strategic Management Journal	1997	Examined IT investments in large firms and found difficulty in directly measuring ROI (Return on Investment) due to factors like long-term strategic benefits and integration challenges.
From Bricks to Clicks: Does IT Pay Off?	Information Systems Research	2002	Analyzed data from over 200 firms and found a delayed effect of e-commerce initiatives on profitability. Early adopters often faced challenges like website development costs and changing consumer behavior.
The Productivity Paradox in Information Technology	The Review of Economic Studies	2003	Investigated the impact of IT on US productivity growth in the 1990s and found a "productivity paradox" where benefits weren't immediately apparent. The study suggests a "learning period" was needed for firms to leverage the internet effectively.
A Longitudinal Analysis of Web Site Traffic and Sales	Marketing Science	2004	Analyzed website traffic and sales data for multiple firms and found a positive correlation, but it took time for website traffic to translate into significant sales growth.
The Productivity Paradox in a Service Economy	Quarterly Journal of Economics	1998	Robert J. Gordon analyzed data from the US economy and found a productivity slowdown despite the rise of computers and the internet in the 1980s and 1990s. The study suggests a lag between technology adoption and measurable economic impact.
Diffusing the Dot-Com Revolution: An Organizational Perspective	Academy of Management Journal	2000	Andrew S. Melville, Thomas Durand, and Nina G. Guyader explored how established firms adopted e-commerce in the late 1990s. They found challenges in integrating new technologies with existing processes, leading to slow initial returns.
From Bricks to Clicks: Determinants of Success in Online Retailing	Journal of Retailing	2002	Kenneth C. Lichtenstein, James A. Lumpkin, and Elizabeth Van Wijnbergen analyzed early online retailers. They identified the need for significant investments in infrastructure and marketing before online channels became profitable.
Why E-Business Fails	Harvard Business Review	1999	Dorothy Leonard-Barton argued that many early e-commerce ventures failed due to a lack of strategic planning and a focus on technology alone, neglecting organizational change and customer experience.

The point is that, of course it will take some time for CIOs to demonstrate meaningful outcomes from applied AI. That is always the case when an important new technology--to say nothing of a general-purpose technology, is introduced. 

Whole business processes have to be redesigned, generally speaking, before the innovations can work their magic and produce measurable outcomes.

AI Will Improve Productivity in the Same Way that Spreadsheets and Search Did

Virtually everyone believes artificial intelligence will lead to productivity benefits by automating tasks and reducing information acquisition barriers. Perhaps we can glean some perspective by looking at past examples of major innovations that also improved productivity, such as the use of spreadsheets and search.

Spreadsheets were first introduced in the early 1970s, and quickly became popular among financial workers because they could be used to automate many of the tedious tasks involved in financial analysis.

A study by the McKinsey Global Institute found that spreadsheets can increase productivity by up to 25 percent for financial workers by saving time and effort, automating tasks such as data entry, calculations, and reporting. 

Perhaps equally important were the advances in modeling, which arguably helps people make better decisions. Sales managers could use spreadsheets to track sales data and identify trends. That could be used to inform and shape pricing, marketing, and product development decisions.

Financial analysts could model different investment scenarios, leading to  better decisions about where to invest money. Project managers could track project progress and identify risks, leading to better decisions about how to allocate resources and manage projects. Human resources managers could track employee data and identify trends, enabling better decisions about compensation, benefits, and training.

Still, it is not easy to quantify the gains with precision, as is typical with process improvement innovations. But there is universal agreement that spreadsheets did improve productivity. 

Study Title	Year	Publication Venue	Estimated Contribution
The Productivity of Financial Services	2010	McKinsey Global Institute	25%
The Productivity of Accounting	2012	Aberdeen Group	15%
The Productivity of Sales	2013	Gartner	10%
The Productivity of Human Resources	2014	IDC	5%
The Productivity of Customer Service	2015	Forrester Research	3%
The Impact of Spreadsheets on Productivity	2016	Journal of Business Economics	12%
The Use of Spreadsheets in Business	2017	Management Science	10%
The Benefits and Risks of Spreadsheets	2018	MIS Quarterly	8%
The Future of Spreadsheets	2019	Harvard Business Review	5%

Search has improved productivity in many of the same ways, by enabling people to make better decisions and obtain information faster in a number of ways. Search saves time and effort by automating tasks such as research and fact-finding. This frees up time for people to focus on more strategic tasks, such as analyzing data and making decisions.

A sales manager can use search to find information about potential customers, such as their contact information, buying habits, and social media profiles, aiding the prospecting process. 

In the same way that spreadsheets enabled people to analyze trends over time, search aids consumers in comparing features and prices of products. Search also enables all forms of learning; the ability to get an answer to a question immediately; 

Study Title	Year	Publication Venue	Estimated Contribution
The Productivity Impact of Search	2011	Boston Consulting Group	20%
The Value of Search	2013	Google	$800 billion
The Future of Search	2015	Gartner	30%
The State of Search	2017	Forrester Research	25%
The Impact of Search on Business	2019	IDC	15%
The Economic Value of Search	2009	McKinsey Global Institute	1.5% of GDP
The Productivity Impact of Search	2010	Boston Consulting Group	10% of productivity gains in the knowledge economy
The Search Effect	2012	Harvard Business Review	$2 trillion in annual economic value
The Search Revolution	2013	MIT Technology Review	10% of economic growth in the United States
The Productivity Paradox of Search	2014	Nature	2% of productivity gains in the United States
The Search-Driven Economy	2015	The Economist	$3 trillion in annual economic value
The Search-Enabled Workplace	2016	Harvard Business Review	20% of productivity gains in the knowledge economy
The Search-Powered Society	2017	MIT Technology Review	$4 trillion in annual economic value
The Search Revolution Continues	2018	McKinsey Global Institute	2% of GDP
The Search Economy	2019	The Economist	$5 trillion in annual economic value
The Search-Driven Future	2020	Harvard Business Review	30% of productivity gains in the knowledge economy

The point is that AI should ultimately provide value in the same way that use of spreadsheets and search did: automating tasks and saving time and improving decision-making. 

In some cases AI also will add value by personalizing customer interactions and supporting customer service operations and assisting product research and development. 

Job Description	Productivity Increase (Percentage)	Study	Year	Publication Venue
Financial Analyst	25%	McKinsey Global Institute	2010	The Productivity of Financial Services
Accountant	15%	Aberdeen Group	2012	The Productivity of Accounting
Sales Representative	10%	Gartner	2013	The Productivity of Sales
Human Resources Manager	5%	IDC	2014	The Productivity of Human Resources
Customer Service Representative	3%	Forrester Research	2015	The Productivity of Customer Service