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Why AI Champions Gain Lasting Strategic Advantages

Courageous leadership is most valuable when others fail to act, due to fear and uncertainty. As an example, when a pandemic disrupts the Global Networked Economy, there's still an opportunity for bold and brave executives to lead an investment in platforms that enable sustainable digital growth.

Global spending on artificial intelligence (AI) is forecast to double over the next four years, growing from $50.1 billion in 2020 to more than $110 billion in 2024. Investments in AI systems will accelerate as more organizations deploy new platforms for digital transformation projects, according to the latest worldwide market study by International Data Corporation (IDC).

The compound annual growth rate (CAGR) for AI technologies and associated platforms will reach 20.1 percent during the 2019-2024 forecast period.

Artificial Intelligence Market Development

"Companies will adopt AI -- not just because they can, but because they must," said Ritu Jyoti, vice president at IDC. "AI is the technology that will help businesses to be agile, innovate, and scale."

The companies that become 'AI powered' will focus on proven use cases. They'll use AI to convert data into information and then into knowledge; use AI to understand relationships between knowledge and apply the learning to business problems; plus use AI to support business decisions and increase business process automation.

Two of the leading drivers for AI adoption are delivering a better customer experience and helping employees to improve their performance. The leading use cases for AI include automated customer service agents, sales process recommendation and automation, automated security threat intelligence and prevention, plus IT operations automation.

Combined, these four use cases will represent nearly a third of all AI platform investments this year. Some of the fastest growing use cases are automated human resources (HR), enterprise IT applications automation, and pharmaceutical research and discovery.

The two industries that will invest the most in AI solutions throughout the forecast period are Retail and Banking. The Retail industry will largely focus its AI investments on improving the customer experience via chatbots and recommendation engines, while Banking will include spending on fraud analysis and investigation and program advisors and recommendation systems.

Discrete Manufacturing, Process Manufacturing, and Healthcare will round out the top 5 industries for AI spending in 2020. The industries that will see the fastest growth in AI investment over the 2020-2024 forecast are Media, Federal or Central Government, and Professional Services.

That said, according to the IDC assessment, the COVID-19 pandemic has caused a slowdown in AI investments across the Transportation industry, as well as the Personal and Consumer Services industry, which includes leisure and hospitality businesses.

IDC analysts believe that these industries will be cautious with their AI investments in 2020 as their focus will be on cost containment and revenue generation rather than innovation or digital experiences.

In the short term, the global pandemic caused supply chain disruptions and retail store closures with continued impact expected to linger into 2021 and beyond. For the most impacted industries, this has caused some delays in AI deployments.

Elsewhere, leaders capitalized on the opportunity to become more resilient and agile. For those forward-looking executives, AI will be a key technology in the road to their recovery. Adopting AI platforms will enable them to rebuild or enhance future revenue streams and commercial operations.

Software and services will each account for a little more than one third of all AI spending this year with hardware delivering the remainder. The largest share of software investment will go to AI applications ($14.1 billion) while the largest category of services spending will be IT services ($14.5 billion). 

Computer Servers ($11.2 billion) will dominate AI hardware investment. AI Software will see the fastest growth in spending over the forecast period with a five-year CAGR of 22.5 percent.

Outlook for AI Platform Investment Growth

On a geographic basis, the United States will deliver more than half of all AI spending throughout the forecast, led by the Retail and Banking industries. Western Europe will be the second-largest geographic region, led by Banking, Retail, and Discrete Manufacturing.

China will be the third-largest region for AI investment with State or Local Government, Banking, and Professional Services as the leading industries. The strongest spending growth over the five-year forecast will be in Japan (32.1 percent CAGR) and Latin America (25.1 percent CAGR).

I believe that there are unprecedented opportunities to execute progressive digital transformation projects in some sectors of the economy -- such as international travel and hospitality -- because many of the competitors are somewhat incapacitated and unable to deliver their planned innovations.

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