Are Chief Operating Officers Missing GenAI’s Strategic Value?

• 70% of COOs agree that implementing AI is critical to their firm’s strategic planning.
• Firms using AI strategically are three times more likely to report positive ROI than firms not doing so.
• 88% of COOs say AI has ushered in a need for more analytically skilled workers.

Most chief operating officers (COOs) surveyed from firms with at least $1 billion in revenue report that implementing GenAI is a critical part of their firm’s strategic planning. Yet, most firms end up using it for more mundane purposes. These include routine monitoring or compiling information tasks.

The data reveals, however, that firms implementing AI in the most strategic ways are more likely to benefit. Nearly 3 in 10 firms using AI in highly strategic ways report very positive ROI. Just 8.8% of firms report positive ROI when they use AI for more routine and less impactful tasks.

• The Full Story
• Conclusion
• Methodology

While COOs are aware of AI’s potential, they may be slow to implement it in actual strategic ways. Instead, they may focus on improving efficiencies with more routine tasks.

These are just some of the findings detailed in “The Impact Of GenAI on a COO’s Priorities,” the third edition of PYMNTS Intelligence’s “2024 CAIO Project.” This series offers a monthly recap of the players and innovators using AI to revolutionize how they manage key parts of their businesses. This edition examines GenAI’s potential and use for COOs and draws on insights from 60 COOs representing U.S. firms that generated at least $1 billion in revenue last year. The survey was conducted from May 7 to May 16.

The Full Story

Seven in 10 surveyed COOs say GenAI is important for strategic planning, but implementation is limited.

Seventy percent of COOs from firms surveyed — all with at least $1 billion in revenue — agree that GenAI is a critical part of strategic planning. Nonetheless, there is a gulf between aspiration and reality. Implementing GenAI is still limited to routine or less complex tasks, such as compiling information or data visualization. Nearly 6 in 10 COOs (58%) say their firms use GenAI for accessing information, while half of the executives say they use it with chatbots for customer service.

COOs are less likely to credit GenAI as necessary for production purposes, such as managing inventory or running logistics. Just 35% of COOs say GenAI is highly important for HR management and logistics. This data suggests that enterprises are not yet ready to trust GenAI to make decisions that affect production. That leaves human oversight in logistics and production to remain significant.

Firms using GenAI strategically are three times more likely to report positive ROI than those using it less strategically.

The strategic or “high-impact” use of GenAI — for example, generating feedback on a production process or innovating products and services — is linked to a more favorable return on investment (ROI). Data shows that 29% of the firms using the technology in highly impactful and strategic ways report very positive ROI. Just 8.8% of firms using GenAI for more routine and less impactful tasks reported positive ROI. (Less impactful tasks include accessing information or creating summaries.)

The tasks most commonly accomplished by GenAI are not necessarily the most effective ones. For example, generating code is what we classify as a “medium impact” strategic use of GenAI. Although using the technology for code generation was highly effective according to all those who used it, just 18% of COOs reported generating code with GenAI. Conversely, 53% of COOs use the technology to create data visualizations, another medium-impact use. However, 22% did not find GenAI highly effective in creating data visualizations.

Enterprises expect their GenAI investment to drive efficiencies and cost reduction.

All executives surveyed so far have implemented GenAI in some form, but how do they see the returns? Executives are most likely to assess their investments in GenAI by looking at its impact on efficiencies. COOs at the 180 enterprise firms we analyzed stated that they used cost-cutting ROI metrics more commonly than measures based on revenue generation or market expansion. Nearly all COOs surveyed, 92%, report using at least one measure of investment return that focuses on cost reduction, such as reduced operational costs, capital expenditures or headcount. On the other hand, 70% of COOs cited at least one measure of increased profits, such as improved profit margins, increased customer base or revenue per customer.

More than seven in 10 COOs agree that the use of GenAI has ushered in a need for more analytical skills rather than reducing the need for lower skills among the workforce.

While COOs view GenAI as a driver of efficiencies, they also reported certain drawbacks to implementing GenAI. The executives’ chief concern is data security and privacy, which more than 41% of COOs noted as a drawback. The COOs’ perceptions reflect a world of increased cybersecurity threats and consumer awareness of data privacy. Their abilities to assess GenAI also come into play: 38% of COOs report an unfamiliarity with the full capabilities of the technology as a drawback.

While the adoption of GenAI aims to streamline operations and reduce overhead costs, the reality tells another story. Instead of diminishing the need for human workers, GenAI has catalyzed a shift in workforce requirements, favoring analytical skills over reducing lower-skilled labor. We asked COOs their views of the shift in workforce needs, and 88% reported that their organization’s need for analytically skilled workers has increased. Conversely, 42% of COOs agree that using GenAI has decreased the company’s need for lower-skilled workers.

Conclusion

Most COOs surveyed agreed that implementing GenAI is critical to their firm’s strategic planning. What’s more, firms that use GenAI in strategic ways are three times more likely to report very positive ROI than those that do not. While this is true, many COOs still use AI for more routine purposes. The opportunity is ripe for larger firms to focus their AI use in highly impactful ways and employ more analytically skilled workers to fill the gaps they are currently experiencing.

Methodology

“The Impact of GenAI on a COO’s Priorities” is based on a survey of U.S. COOs conducted from May 7 to May 17. The report explores how GenAI implementation is affecting COO’s firms. Our sample included interviews with 60 COOs from U.S. firms that generated at least $1 billion in revenue last year.

Read the previous edition of the 2024 CAIO Report Series “How Simple, Routine GenAI Use Can Remake Enterprise Marketing,” for more.