Digital transformation and artificial intelligence (AI) are two of the most prominent buzz words to hit the last decade's technology scene. Gartner's CIO Survey shows that in the previous four years, AI implementation grew by 270%. Similarly, worldwide spending on tools to enable digital transformation is likely to reach $1.97 trillion, according to IDC.
However, digital transformation and AI are often two separate business ventures, rather than working hand-in-hand. Organizations do not realize the benefits AI can bring in accelerating and elevating digital transformation strategies. There are many advantages to taking a connected approach.
The problem with digital transformation in isolation is that enterprises run the risk of automating inefficient processes. As Bill Gates says, "the first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency."
AI can help digital transformation projects put the focus on the most efficient processes, achieving higher results.
This post will cover some ways that AI can help expedite the benefits of digital transformation.
What is digital transformation?
According to Salesforce, digital transformation uses digital technologies to create new or modify existing business processes, culture, and customer experiences to meet changing business and marketing requirements.
Companies will evaluate everything they do, including the systems they use and the processes they follow. The aim is to utilize technology for better decision-making in the context of internal efficiencies and how they interact with customers.
Digital transformation is not just a technical construct but a strategy to attract new customers and retain existing ones. The Covid-19 pandemic at the start of 2020 makes digital transformation even more critical as consumer behavior changes, with even higher demand for seamless online experiences.
What is artificial intelligence (AI)?
The state of AI today makes it possible for machines to learn from experience. The modern-world solutions rely heavily on data,analyze patterns in behavior, and create applicable insights. A computer can go through training to accomplish specific tasks than a human assigns it.
AI analyses information in real-time, allowing speed to market, with incredible accuracy that continues to gain knowledge over time.
To debunk the myth, AI is not here to replace human workers, but rather to augment what they do. The ability to see and respond to patterns at an advanced level means AI is the perfect assistant for people and other technologies.
Why does digital transformation need AI?
Current applications of AI use machine learning to ingest data and provide insight that can augment decision making. According to Deloitte, the significant advantages of AI adoption in the enterprise include:
- Creating new products and improving existing ones
- Making internal processes more efficient
- Allowing a platform for informed decision-making
- Optimizing external operations
- Better productivity through effective resource allocation
The reason organizations fail to invest in AI is due to a lack of use cases. However, for digital transformation, solving problems with processes and customer experiences needs to be data-driven. Digital transformation is the perfect use case for deploying AI, and AI accelerates digital transformation through automation.
AI Automation as a driver for digital transformation
Automation and digital transformation are different strategies and not interchangeable ways of saying the same thing. While AI is integral to efficient digital transformation, it is one initiative that serves to change an organization.
George Westerman, author of Leading Digital: Turning Technology into Business Transformation, says, "digital transformation involves a radical rethinking of how a business uses technology, people and process to change performance fundamentally."
A real digital transformation strategy will leverage all digital tools at your disposal to positively disrupt how your business operates. Companies like Uber are leaders in digital transformation where they solve a problem customers were not even aware exists.
A digital transformation strategy will have crucial elements that AI can influence that impact the customer, technology, and internal processes.
Customer focus and personalization
Digital transformation must focus on the end customer. It is not about technology; it is about the experience. Machine learning can help to discover ways of better segmenting customers or reducing cart abandonment.
AI augments digital transformation by defining customer needs through data. Machine learning algorithms can analyze millions of data points in real, without the need for human intervention. Specific solutions include chatbots and recommendation engines. Consider how a retail giant like Amazon operates without any physical stores. Up to 35% of Amazon sales come from recommendations using machine learning algorithms that optimize what every digital customer sees. In this example, AI finds value in the data that aides digital transformation in providing an exceptional customer experience.
The fast-food chain McDonald's is using AI to boost its digital transformation strategy. The company announced in 2020 that it would acquire Dynamic Yield, an Israeli AI-powered startup, to provide retailers with decision logic technology. Digital Drive-thru menus now display food based on the time of day, weather, and the current restaurant traffic. Steve Easterbrook, President and CEO of the McDonald's Corporation, says, "technology is a critical element of our Velocity Growth Plan, enhancing the experience for our customers and by providing greater convenience on their terms."
The approach of McDonald's shows exactly how digital transformation is reliant on AI.
AI can help organizations understand their processes and provide insight into solutions that can make them more efficient. For example, Skan uses computer vision to drive an understanding of business processes. The algorithms can uncover methods that are time-consuming and repetitive and have the potential for being digitalized. For example, an employee may be spending time on administrative work that a robotic process automation (RPA) solution can resolve. Or demonstrate unnecessary steps in a process which the enterprise may be able to optimize.
The use of AI to understand processes helps digital transformation projects realize the critical problems before making decisions.
Midea Group, the Chinese electrical appliance manufacturer, is implementing digital tools and robotics to transform production processes. Working with Intel, Midea has an AI-based cloud platform that increases product inspection processes' accuracy and efficiency. AI is helping Midea launch edge computing systems while reducing operating costs.
Driving experience and creating knowledge workers
One of the most popular use cases for improving processes is conversational chatbots. Virtual agents, using natural language processing (NLP), can provide answers to customer queries. For example, NLP can analyze phone calls to understand why customers are calling. There may be common reasons why a customer wants to speak to a human agent within the calls. Any repetitive questions can go into a digital chatbot and free up the human to respond to more complex tasks.
AI should drive the creation of digital technology to ensure it provides the customer with what they need.
Due to high profile cases such as Cambridge Analytica, consumers are wary about sharing personal data via digital channels. AI tools can identify signs of tampering, fraud, and breaches by analyzing behavior patterns. A human observer cannot filter millions of transactions in real-time as a machine can, making AI a necessity for improving digital security.
Organizations are aware of the need to innovate digitally. Typically, enterprises have many manual and inefficient processes that can transform internal and customer experiences. AI holds the key to accelerating digital transformation strategies through real-time data that influences decisions.
Corporate strategies should include digital transformation and AI across all areas and not isolate them in individual projects
Shailesh Kaul is the Vice President of Customer Success at Skan.ai.