Artificial Intelligence for the Real World
A survey of 250 executives who are familiar with their companies’ use of cognitive technology shows that three-quarters of them believe that AI will substantially transform their companies within three years.
Three Types of AI
It is useful for companies to look at AI through the lens of business capabilities rather than technologies. Broadly speaking, AI can support three important business needs: automating business processes, gaining insight through data analysis, and engaging with customers and employees.
Cognitive Projects by Type
Process automation.
The most common type was the automation of digital and physical tasks—typically back-office administrative and financial activities—using robotic process automation technologies. RPA is more advanced than earlier business-process automation tools, because the “robots” (that is, code on a server) act like a human inputting and consuming information from multiple IT systems. Tasks include:
- transferring data from e-mail and call center systems into systems of record—for example, updating customer files with address changes or service additions;
- replacing lost credit or ATM cards, reaching into multiple systems to update records and handle customer communications;
- reconciling failures to charge for services across billing systems by extracting information from multiple document types; and
- “reading” legal and contractual documents to extract provisions using natural language processing.
RPA is the least expensive and easiest to implement of the cognitive technologies we’ll discuss here, and typically brings a quick and high return on investment. (It’s also the least “smart” in the sense that these applications aren’t programmed to learn and improve, though developers are slowly adding more intelligence and learning capability.) It is particularly well suited to working across multiple back-end systems.
Cognitive insight.
The second most common type of project used algorithms to detect patterns in vast volumes of data and interpret their meaning. Think of it as “analytics on steroids.” These machine-learning applications are being used to:
- predict what a particular customer is likely to buy;
- identify credit fraud in real time and detect insurance claims fraud;
- analyze warranty data to identify safety or quality problems in automobiles and other manufactured products;
- automate personalized targeting of digital ads; and
- provide insurers with more-accurate and detailed actuarial modeling.
Cognitive insights provided by machine learning differ from those available from traditional analytics in three ways: They are usually much more data-intensive and detailed, the models typically are trained on some part of the data set, and the models get better—that is, their ability to use new data to make predictions or put things into categories improves over time.
Versions of machine learning (deep learning, in particular, which attempts to mimic the activity in the human brain in order to recognize patterns) can perform feats such as recognizing images and speech. Machine learning can also make available new data for better analytics. While the activity of data curation has historically been quite labor-intensive, now machine learning can identify probabilistic matches—data that is likely to be associated with the same person or company but that appears in slightly different formats—across databases. e.g. a large bank used this technology to extract data on terms from supplier contracts and match it with invoice numbers, identifying tens of millions of dollars in products and services not supplied. Deloitte’s audit practice is using cognitive insight to extract terms from contracts, which enables an audit to address a much higher proportion of documents, often 100%, without human auditors’ having to painstakingly read through them.
Cognitive insight applications are typically used to improve performance on jobs only machines can do—tasks such as programmatic ad buying that involve such high-speed data crunching and automation that they’ve long been beyond human ability—so they’re not generally a threat to human jobs.
Cognitive engagement.
Projects that engage employees and customers using natural language processing chatbots, intelligent agents, and machine learning are the least common This category includes:
- intelligent agents that offer 24/7 customer service addressing a broad and growing array of issues from password requests to technical support questions—all in the customer’s natural language;
- internal sites for answering employee questions on topics including IT, employee benefits, and HR policy;
- product and service recommendation systems for retailers that increase personalization, engagement, and sales—typically including rich language or images; and
- health treatment recommendation systems that help providers create customized care plans that take into account individual patients’ health status and previous treatments.
As companies become more familiar with cognitive tools, they are experimenting with projects that combine elements from all three categories to reap the benefits of AI. E.g. a “cognitive help desk” . The system engages with employees using deep-learning technology (part of the cognitive insights category) to search frequently asked questions and answers, previously resolved cases, and documentation to come up with solutions to employees’ problems. It uses a smart-routing capability (business process automation) to forward the most complex problems to human representatives, and it uses natural language processing to support user requests in Italian.
1. Understanding The Technologies
Before embarking on an AI initiative, companies must understand which technologies perform what types of tasks, and the strengths and limitations of each. Rule-based expert systems and robotic process automation, for example, are transparent in how they do their work, but neither is capable of learning and improving. Deep learning, on the other hand, is great at learning from large volumes of labeled data, but it’s almost impossible to understand how it creates the models it does. This “black box” issue can be problematic in highly regulated industries such as financial services, in which regulators insist on knowing why decisions are made in a certain way.
We encountered several organizations that wasted time and money pursuing the wrong technology for the job at hand. But if they’re armed with a good understanding of the different technologies, companies are better positioned to determine which might best address specific needs, which vendors to work with, and how quickly a system can be implemented. Acquiring this understanding requires ongoing research and education, usually within IT or an innovation group.
In particular, companies will need to leverage the capabilities of key employees, such as data scientists, who have the statistical and big-data skills necessary to learn the nuts and bolts of these technologies.
If you don’t have data science or analytics capabilities in-house, you’ll probably have to build an ecosystem of external service providers in the near term. If you expect to be implementing longer-term AI projects, you will want to recruit expert in-house talent. Either way, having the right capabilities is essential to progress.
2. Creating a Portfolio of Projects
The next step in launching an AI program is to systematically evaluate needs and capabilities and then develop a prioritized portfolio of projects. This is usually done in workshops or through small consulting engagements. We recommend that organizations conduct assessments in three broad areas.
Identifying the opportunities.
The first assessment determines which areas of the business could benefit most from cognitive applications. Typically, they are parts of the company where “knowledge”—insight derived from data analysis or a collection of texts—is at a premium but for some reason is not available.
- Bottlenecks. In some cases, the lack of cognitive insights is caused by a bottleneck in the flow of information; knowledge exists in the organization, but it is not optimally distributed. That’s often the case in health care, for example, where knowledge tends to be siloed within practices, departments, or academic medical centers.
- Scaling challenges. In other cases, knowledge exists, but the process for using it takes too long or is expensive to scale. Such is often the case with knowledge developed by financial advisers. That’s why many investment and wealth management firms now offer AI-supported “robo-advice” capabilities that provide clients with cost-effective guidance for routine financial issues.
- Inadequate firepower. Finally, a company may collect more data than its existing human or computer firepower can adequately analyze and apply. For example, a company may have massive amounts of data on consumers’ digital behavior but lack insight about what it means or how it can be strategically applied. To address this, companies are using machine learning to support tasks such as programmatic buying of personalized digital ads.
Determining the use cases.
The second area of assessment evaluates the use cases in which cognitive applications would generate substantial value and contribute to business success. Start by asking key questions such as: How critical to your overall strategy is addressing the targeted problem? How difficult would it be to implement the proposed AI solution—both technically and organizationally? Would the benefits from launching the application be worth the effort? Next, prioritize the use cases according to which offer the most short- and long-term value, and which might ultimately be integrated into a broader platform or suite of cognitive capabilities to create competitive advantage.
Selecting the technology.
The third area to assess examines whether the AI tools being considered for each use case are truly up to the task. Chatbots and intelligent agents, for example, may frustrate some companies because most of them can’t yet match human problem solving beyond simple scripted cases (though they are improving rapidly). Other technologies, like robotic process automation that can streamline simple processes such as invoicing, may in fact slow down more-complex production systems. And while deep learning visual recognition systems can recognize images in photos and videos, they require lots of labeled data and may be unable to make sense of a complex visual field.
In time, cognitive technologies will transform how companies do business. Today, however, it’s wiser to take incremental steps with the currently available technology while planning for transformational change in the not-too-distant future. You may ultimately want to turn customer interactions over to bots, for example, but for now it’s probably more feasible—and sensible—to automate your internal IT help desk as a step toward the ultimate goal.
3. Launching Pilots
Because the gap between current and desired AI capabilities is not always obvious, companies should create pilot projects for cognitive applications before rolling them out across the entire enterprise.
Proof-of-concept pilots are particularly suited to initiatives that have high potential business value or allow the organization to test different technologies at the same time. Take special care to avoid “injections” of projects by senior executives who have been influenced by technology vendors. Just because executives and boards of directors may feel pressure to “do something cognitive” doesn’t mean you should bypass the rigorous piloting process. Injected projects often fail, which can significantly set back the organization’s AI program.
If your firm plans to launch several pilots, consider creating a cognitive center of excellence or similar structure to manage them. This approach helps build the needed technology skills and capabilities within the organization, while also helping to move small pilots into broader applications that will have a greater impact.
Business-process redesign.
As cognitive technology projects are developed, think through how workflows might be redesigned, focusing specifically on the division of labor between humans and the AI. In some cognitive projects, 80% of decisions will be made by machines and 20% will be made by humans; others will have the opposite ratio. Systematic redesign of workflows is necessary to ensure that humans and machines augment each other’s strengths and compensate for weaknesses.
Cognitive work redesign efforts often benefit from applying design-thinking principles: understanding customer or end-user needs, involving employees whose work will be restructured, treating designs as experimental “first drafts,” considering multiple alternatives, and explicitly considering cognitive technology capabilities in the design process. Most cognitive projects are also suited to iterative, agile approaches to development.
4. Scaling Up
Many organizations have successfully launched cognitive pilots, but they haven’t had as much success rolling them out organization-wide. To achieve their goals, companies need detailed plans for scaling up, which requires collaboration between technology experts and owners of the business process being automated. Because cognitive technologies typically support individual tasks rather than entire processes, scale-up almost always requires integration with existing systems and processes. Indeed, in our survey, executives reported that such integration was the greatest challenge they faced in AI initiatives.
Companies should begin the scaling-up process by considering whether the required integration is even possible or feasible. If the application depends on special technology that is difficult to source, for example, that will limit scale-up. Make sure your business process owners discuss scaling considerations with the IT organization before or during the pilot phase: An end run around IT is unlikely to be successful, even for relatively simple technologies like RPA.
The health insurer Anthem, for example, is taking on the development of cognitive technologies as part of a major modernization of its existing systems. Rather than bolting new cognitive apps onto legacy technology, Anthem is using a holistic approach that maximizes the value being generated by the cognitive applications, reduces the overall cost of development and integration, and creates a halo effect on legacy systems. The company is also redesigning processes at the same time to, as CIO Tom Miller puts it, “use cognitive to move us to the next level.”
In scaling up, companies may face substantial change-management challenges. At one U.S. apparel retail chain, for example, the pilot project at a small subset of stores used machine learning for online product recommendations, predictions for optimal inventory and rapid replenishment models, and—most difficult of all—merchandising. Buyers, used to ordering product on the basis of their intuition, felt threatened and made comments like “If you’re going to trust this, what do you need me for?” After the pilot, the buyers went as a group to the chief merchandising officer and requested that the program be killed. The executive pointed out that the results were positive and warranted expanding the project. He assured the buyers that, freed of certain merchandising tasks, they could take on more high-value work that humans can still do better than machines, such as understanding younger customers’ desires and determining apparel manufacturers’ future plans. At the same time, he acknowledged that the merchandisers needed to be educated about a new way of working.
If Scale-up is to achieve the desired results, firms must also focus on improving productivity. Many, for example, plan to grow their way into productivity—adding customers and transactions without adding staff. Companies that cite head count reduction as the primary justification for the AI investment should ideally plan to realize that goal over time through attrition or from the elimination of outsourcing.