Integrating AI into business strategy

When it comes to using artificial intelligence (AI), this report suggests companies are scraping the surface of its potential. Should businesses be implementing it, and how quickly?

Accenture surveyed more than 1600 C-suite executives and data-science leaders from the world’s largest organisations. While 75 per cent of companies had already integrated some AI into their business strategies, only 12 per cent reached “AI achievers” status in The Art of AI Maturity: Advancing from practice to performance report. AI achievers could attribute nearly 30 per cent of their total revenue to AI, on average, and they also outperformed peers in customer experience and sustainability.

The Accenture report suggests that with early success building confidence in artificial intelligence as a value driver, there is incentive to move quickly. Opportunities are apparent for every industry, organisation and leader, the report finds, despite technology leaders, including Elon Musk, recently calling for a six- month pause on the development of AI.

Key findings

In 2021, among executives of the world’s 2000 largest companies (by market capitalisation) those who discussed AI on their earnings calls were 40 per cent more likely to see their companies’ share prices increase (up from 23 per cent in 2018).

Achievers are consciously applying “responsible” AI with greater urgency than their peers, designing, developing and deploying AI with good intention to empower employees and businesses, and to fairly impact customers and society — allowing companies to engender trust.

Rocky recovery for global economy

Financial sector turmoil, high inflation, the ongoing effects of Russia’s invasion of Ukraine and three years of COVID-19 will continue to hit economic growth around the world, the International Monetary Fund (IMF) forecasts.

Baseline growth is expected to drop from 3.4 per cent in 2022 to 2.8 per cent this year, before settling at 3.0 per cent in 2024, the IMF World Economic Outlook says in its April 2023 report. Advanced economies will be hit hardest, seeing the most pronounced slowdown in growth from 2.7 per cent in 2022 to 1.3 per cent this year.

Global headline inflation in the baseline will fall from 8.7 per cent in 2022 to seven per cent this year on the back of lower commodity prices, but underlying inflation is likely to decline more slowly, with a return to target unlikely before 2025 in most cases.

“Inflation is slowly says, adding that the global economy’s recovery from pandemic and the effects of the Russia-Ukraine war remains on track, while China’s reopened economy is rebounding strongly.

“Supply chain disruptions are unwinding, while dislocations to energy and food markets caused by the war are receding.,” the report says. “Simultaneously, the massive and synchronised tightening of monetary policy by most central banks should start to bear fruit, with inflation moving back towards targets.”

No turning back on gender diversity

Women are increasing their representation on boards, but not so much in one area.

The latest AICD Gender Diversity Report found women’s representation on boards was at 36 per cent in the ASX 200 and 35.5 per cent in the ASX 300 at the end of February 2023.

The quarterly progress report showed 40.2 per cent of non-executive director roles in the ASX 300 were held by women. However, at the executive director level, more progress needs to be made to address gender imbalance, with the AICD analysis showing that 88.9 per cent of ASX 300 executive directors — those who also hold the position of CEO or other executive management post — are men.

Tough enough?

Would your company survive a major operational crisis and how can leaders build the resilience necessary to adapt to constant disruption?

Cybercrime, supply chain challenges and climate crises are testing business leaders, and organisations will need to embrace and invest in resilience to transform the way they operate, The Resilience Revolution: PwC’s Global Crisis and Resilience Survey 2023 finds.

In a survey of 1812 business leaders, 96 per cent of organisations said they have experienced disruption in the past two years. Of those, 76 per cent said their most serious disruption had a medium to high impact on operations.

While there’s action being taken — with almost two-thirds of organisations moving towards an integrated resilience program — only one in five is fully integrated, the study finds.

Focusing on protecting what matters most, and prioritising investment based on what is critical to their organisations and stakeholders, is a key takeaway, while identifying what makes a successful resilience strategy and program is another essential.

Building a team with the right skills was identified as a major challenge, while 57 per cent of organisations said upskilling future leaders is one of their three most important elements of future- proofing resilience.

Over the next two years, businesses are prioritising investment in cyber resilience, crisis management and emergency management, the study finds. Despite market conditions, organisations are not reducing the amount being invested in building resilience — “testament to business leaders’ recognition that it is critically important”.

Motivation to act is coming strongly as strategy, rather than from compliance needs or fear.

Jobs market in good health

The latest jobs numbers for Australia showed the labour market remains tight. Employment rose by 53,000 jobs in March while the unemployment rate remained unchanged at 3.5 per cent, a near five-decade low.

For the Reserve Bank of Australia (RBA), the key is what the jobs market means for wages growth, says Paul Bloxham, HSBC chief economist for Australia/New Zealand. “Importantly, so far, despite the unemployment rate being at a multi-decade low of 3.5 per cent for almost a year, it has not yet been enough to generate excessive wage growth,” says Bloxham, who forecasts the RBA’s hiking phase to remain paused in coming months.

Commonwealth Bank economist Stephen Wu says the data shows labour demand has been strong enough to absorb the recent large increase to labour supply. “The working age population has grown by 2.3 per cent over the past 12 months — its fastest pace since 2008 — and comes after it troughed at near zero per cent growth during the pandemic,” says Wu, adding that the strength reflects the rapid rebound in net overseas migration, which is driven largely by international students.

Construction collapse

Economic and regulatory factors throughout 2023 are forecast to bring more insolvencies in the building sector, with no buffer of government support this year.

The construction industry is bleeding insolvencies, with ASIC data revealing 1236 companies in the sector have gone into liquidation, receivership or administration so far in 2022–23. For 2021–22, the total was 1284.

The industry bore the brunt, topping ASIC’s insolvency statistics in 2022, says McGrathNicol in its Forecast 2023 report, saying “much of this increase has been driven by businesses that were likely insolvent for a long time”.

In 2023, businesses in distress will have less support from available stakeholders to successfully effect a turnaround. “The key question is whether the broader macro-economic slowdown and challenging environment will result in an increase in corporate failures to pre-pandemic levels, or whether the floodgates will open because of a real decline in liquidity coupled with the most challenging business conditions experienced in over a decade?”

This article first appeared under the headline 'AI Capability' in the May 2023 issue of Company Director magazine.