g-f(2)2447 The Rise of Generative AI: Insights from McKinsey’s 2024 Survey

 

genioux Fact post by Fernando Machuca and Copilot

Introduction

The McKinsey survey "The state of AI in early 2024: Gen AI adoption spikes and starts to generate value" provides a comprehensive overview of the current state of generative AI (gen AI) adoption across various industries and its impact on business value and industry transformation.

genioux GK Nugget

"Generative AI is rapidly being adopted, with 65% of organizations using it regularly, leading to significant changes in industries and generating substantial business value." —  Fernando Machuca and Copilot, May 31, 2024

genioux Foundational Fact

The McKinsey survey reveals that the adoption of gen AI has nearly doubled in just ten months, with 65% of respondents reporting regular use in their organizations. This rapid adoption is leading to significant or disruptive changes in industries, with three-quarters of respondents predicting such impact. Moreover, organizations are already witnessing material benefits from gen AI use, including cost decreases and revenue jumps in the business units deploying the technology.

The 10 Most Relevant genioux Facts

1. 65% of organizations are regularly using gen AI, nearly double the percentage from the previous survey just ten months ago.
2. Three-quarters of respondents predict that gen AI will lead to significant or disruptive change in their industries.
3. Organizations are already seeing material benefits from gen AI use, reporting both cost decreases and revenue jumps in the business units deploying the technology.
4. The risks presented by gen AI—most notably, inaccuracy—are being mitigated by emerging practices of top performers.
5. More than two-thirds of respondents in nearly every region say their organizations are using AI.
6. The biggest increase in adoption can be found in professional services.
7. Gen AI adoption is most common in the functions where it can create the most value, most often in marketing and sales and in product and service development.
8. The interest in AI is truly global in scope.
9. The survey underscores the growing importance of gen AI in driving business value and industry transformation.
10. It highlights the need for organizations to effectively manage the risks associated with gen AI and to develop strategies for capturing the value it offers.

Conclusion

The McKinsey survey "The state of AI in early 2024: Gen AI adoption spikes and starts to generate value" underscores the transformative power of gen AI. As adoption rates soar, gen AI is poised to drive significant changes across industries, generate substantial business value, and necessitate new strategies for risk management. The future of AI is here, and it's generative.

REFERENCES

The g-f GK Context

Alex Singla, Alexander Sukharevsky, Lareina Yee, Michael Chui, and Bryce Hall, The state of AI in early 2024: Gen AI adoption spikes and starts to generate value, Survey, McKinsey, QuantumBlack, AI by McKinsey, May 30, 2024.

ABOUT THE AUTHOR(S)

Alex Singla and Alexander Sukharevsky are global coleaders of QuantumBlack, AI by McKinsey, and senior partners in McKinsey’s Chicago and London offices, respectively; Lareina Yee is a senior partner in the Bay Area office, where Michael Chui, a McKinsey Global Institute partner, is a partner; and Bryce Hall is an associate partner in the Washington, DC, office.

They wish to thank Kaitlin Noe, Larry Kanter, Mallika Jhamb, and Shinjini Srivastava for their contributions to this work.

This article was edited by Heather Hanselman, a senior editor in McKinsey’s Atlanta office.

About the research

The online survey was in the field from February 22 to March 5, 2024, and garnered responses from 1,363 participants representing the full range of regions, industries, company sizes, functional specialties, and tenures. Of those respondents, 981 said their organizations had adopted AI in at least one business function, and 878 said their organizations were regularly using gen AI in at least one function. To adjust for differences in response rates, the data are weighted by the contribution of each respondent’s nation to global GDP.

Classical Summary

The McKinsey survey titled "The state of AI in early 2024: Gen AI adoption spikes and starts to generate value" provides valuable insights into the rapid adoption and impact of generative AI (gen AI) in various industries¹:

• Adoption: The survey reveals that 65% of respondents report their organizations are regularly using gen AI, nearly double the percentage from the previous survey just ten months ago¹.
• Impact: Respondents’ expectations for gen AI’s impact remain high, with three-quarters predicting that gen AI will lead to significant or disruptive change in their industries¹.
• Benefits: Organizations are already seeing material benefits from gen AI use, reporting both cost decreases and revenue jumps in the business units deploying the technology¹.
• Risks: The survey also provides insights into the kinds of risks presented by gen AI—most notably, inaccuracy—as well as the emerging practices of top performers to mitigate those challenges and capture value¹.
• Global Interest: The interest in AI is truly global in scope. More than two-thirds of respondents in nearly every region say their organizations are using AI¹.
• Industry Adoption: The biggest increase in adoption can be found in professional services¹.
• Functional Adoption: Gen AI adoption is most common in the functions where it can create the most value, most often in marketing and sales and in product and service development¹.

This survey underscores the growing importance of gen AI in driving business value and industry transformation¹. It also highlights the need for organizations to effectively manage the risks associated with gen AI and to develop strategies for capturing the value it offers¹.

Source: Conversation with Copilot, 5/31/2024

(1) The state of AI in early 2024: Gen AI adoption spikes and starts to .... https://www.mckinsey.com/capabilities/quantumblack/our-insights/the-state-of-ai.

(2) The state of AI in 2023: Generative AI’s breakout year | McKinsey. https://www.mckinsey.com/capabilities/quantumblack/our-insights/the-state-of-ai-in-2023-generative-AIs-breakout-year.

(3) The competitive advantage of generative AI | McKinsey. https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/a-generative-ai-reset-rewiring-to-turn-potential-into-value-in-2024.

(4) What is the future of Generative AI? | McKinsey. https://www.mckinsey.com/featured-insights/mckinsey-explainers/whats-the-future-of-generative-ai-an-early-view-in-15-charts.

McKinsey commentaries

Summary of McKinsey Commentaries by Alex Singla

Senior partner and global coleader of QuantumBlack, AI by McKinsey

In 2024, generative AI (gen AI) has become a common tool in the business world, with nearly two-thirds of organizations using it regularly, a significant increase from just ten months prior. Moreover, four in ten organizations are using gen AI in more than two business functions.

The potential of gen AI is widely recognized, and while most organizations are still in the early stages of their gen AI journey, patterns of successful implementation and value generation are emerging. One key insight is that the business goal must always be the primary focus. Organizations are encouraged to identify their most promising business opportunities and strategies first, and then explore how gen AI can support these goals.

Avoiding the trap of pursuing technology for its own sake is crucial. The most successful companies are those that are not afraid to think big, focusing on reimagining entire workflows with gen AI and analytical AI, rather than simply seeking to embed these tools into their current ways of working.

Effective implementation of gen AI requires constant change management. Enterprises need to design a gen AI stack that is robust, cost-efficient, and scalable for years to come. Achieving profit-and-loss impact from gen AI requires close partnership with HR, finance, legal, and risk departments to constantly readjust resourcing strategies and productivity expectations. This highlights the importance of a holistic approach to gen AI implementation, involving leaders from throughout the organization.

Summary of McKinsey Commentaries by Lareina Yee

Senior partner, McKinsey; chair, McKinsey Technology Council

Lareina Yee, a senior partner at McKinsey and chair of the McKinsey Technology Council, emphasizes the importance of responsible AI, which should be a priority from day one. This begins with a company’s values, with organizations needing to establish clear principles for how they apply generative AI (gen AI) and set up safeguards to ensure its safe implementation.

Recognizing the importance of data security is crucial, meaning that company-level data and prompts must remain within the enterprise. This requires secure contracts with large language model and application providers, as well as robust training to ensure employees understand the difference between enterprise tools and public tools, preventing inadvertent sharing of code or proprietary data in public models.

Responsible AI also starts upstream of compliance and monitoring. Leading companies incorporate risk practices in the development of their AI applications, ensuring that technical teams understand risk and mitigation practices. Given that gen AI solutions are probabilistic models that can make mistakes or inadvertently amplify biases in training data, testing models before deployment is essential.

Finally, companies must develop a clear governance model to ensure that gen AI applications conform to governing principles. Despite a growing awareness of responsible AI and an urgency to get it right, less than a quarter of the respondents in the survey report having a clear process to embed risk mitigation in their solutions. Moving from awareness to action is critical in the journey towards responsible AI.

Summary of McKinsey Commentaries by Alexander Sukharevsky

Senior partner and global coleader of QuantumBlack, AI by McKinsey

Alexander Sukharevsky, a senior partner and global coleader of QuantumBlack, AI by McKinsey, highlights that despite the spike in adoption of generative AI (gen AI), we are still in the experimentation phase. Many organizations are seeking relatively simple, one-step solutions and using readily available, off-the-shelf gen AI models rather than custom-designed solutions. However, as gen AI becomes more widely adopted, customization will likely become the key differentiator.

The enterprise of the future will rely on a well-orchestrated mix of multiple foundational models—both off-the-shelf solutions and tools finely tuned to the enterprise’s specific needs. We are moving from a binary world of “build versus buy” to one characterized as “buy, build, and partner,” where successful organizations construct ecosystems blending proprietary, off-the-shelf, and open-source models.

Leaders must understand that gen AI models generally comprise just 15 percent of any given solution. To create value, organizations must have all the elements in place—domain reimagining abilities; relevant skill sets (including the upskilling of nontechnical colleagues); a robust operating model; proprietary data. Only when these factors are in place can organizations unlock impact and move from experimentation to scale.

Summary of McKinsey Commentaries by Michael Chui

Partner, McKinsey Global Institute

Michael Chui, a partner at the McKinsey Global Institute, highlights the rapid pace of adoption of generative AI (gen AI) and the investments companies are making in these technologies. According to the survey, similar percentages of respondents are spending at least 5 percent of their digital budgets on gen AI and analytical AI. However, given the longer track record in analytical AI, larger shares of respondents are spending more than 20 percent of their budgets on analytical AI than on gen AI.

Organizations are able to deploy gen AI quickly, with the most common project length being less than four months. This reflects the ease of using natural language as an interface. However, organizations that are doing more customization or building their own models take longer to bring these systems online. This underscores the balance organizations must strike between customization and speed in their gen AI deployments.

Summary of McKinsey Commentaries by Bryce Hall

Associate partner

Bryce Hall, an associate partner at McKinsey, discusses the remarkable pace of innovation and investment in AI and generative AI (gen AI) capabilities. He notes that leading companies are capturing business value from these technologies, with high performers often using highly customized or bespoke solutions, referred to as “shaper” or “maker” archetypes of gen AI solutions.

While many companies find value from off-the-shelf gen AI solutions (or the “taker” archetype), capturing the full value of this technology often requires significant customization, such as training models on proprietary company and customer data or tuning models to improve performance within a specific industry or business context.

The survey also highlights the practices of high performers, who are more likely to embed testing and validation in the release process for models and develop clear processes to iteratively improve model outputs. Over time, these practices will become increasingly important, as highly customized and bespoke solutions will be the ones that truly differentiate companies. Off-the-shelf solutions, by contrast, are likely to become table stakes.

Hall’s commentary aligns with ongoing research on digital and AI transformations, which shows that competitive advantage comes from building organizational and technological capabilities to broadly innovate, deploy, and improve solutions at scale, effectively rewiring the business for distributed digital and AI innovation.

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REFERENCES

“genioux facts”: The online program on "MASTERING THE BIG PICTURE OF THE DIGITAL AGE”, g-f(2)2447, Fernando Machuca and Copilot, May 31, 2024, Genioux.com Corporation.

The genioux facts program has established a robust foundation of over 2446 Big Picture of the Digital Age posts [g-f(2)1 - g-f(2)2446].

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