Pulse Survey

ARTIFICIAL
INTELLIGENCE
The End of the Beginning

Sponsored by
SPONSOR PERSPECTIVE

As we progress further into the Fourth Industrial Revolution, everything is becoming

connected. The challenge is that as more diverse data sources and platforms come
online, spotting failures and opportunities that can drive business forward has
become harder than ever. Technologies like artificial intelligence (AI) and machine
learning (ML) have the potential to drive increased value and efficiency in any
organization.

We’re in the early days of seeing how AI and ML can be applied, but we know they’ll DOUG MERRITT
be key to making meaningful things happen. The enclosed survey found that nearly PRESIDENT & CEO
one-third of respondents have already begun to use AI and ML, and early adopters SPLUNK
are already seeing a range of benefits, ranging from a better customer experience to
improved revenues.

If you don’t have access and visibility into your data, then you’re losing your ability
to be an effective leader and to transform your organization for the digital future.
Forty-one percent of survey respondents said incomplete or inaccurate data remain
one of the principal challenges to adopting these technologies. Solutions like Splunk
effectively gather and query data from disparate sources—from apps to CPUs
to firewalls to IoT devices and beyond—and help you turn that chaotic data into
meaningful answers.

T-Mobile is just one example of a company unlocking the power of data and machine
learning by activating multiple teams to deliver a satisfying customer experience.

“T-Mobile is always looking for new and better ways to improve the customer
experience, and Splunk has played a key part in that,” said Jonathan Silberlicht,
senior director, network service management and customer solutions, T-Mobile.
“With the improvements in machine learning and performance capabilities in Splunk
Enterprise, T-Mobile can deliver an even better experience for our customers by
helping our care and retail teams have real-time visibility into how their systems and
services are performing so they can manage everything from activating new phones
to helping pay bills to ensuring a fantastic experience on our network.”

Machine data contains a definitive record of the activity and behavior of your
customers, users, transactions, applications, servers, networks, and mobile devices.
By applying AI and ML to this data and unleashing human curiosity, you can answer
your toughest questions and uncover additional insights on questions you didn’t
even know you should be asking—ultimately providing the ability to excel in the
Fourth Industrial Revolution.

Learn more about Splunk and harnessing the power of machines and humans with AI and machine learning.
www.splunk.com/en_us/explore/machine-learning-artificial-intelligence.html
ARTIFICIAL
INTELLIGENCE
The End of the Beginning

Business use of artificial intelligence and machine learning is burgeoning. HIGHLIGHTS

Organizations that have already invested are seeing real benefits to both
their top and bottom lines, across the value chain and across industries.

Enterprise use of artificial intelligence (AI) and one of its offshoots, machine
75%
OF LARGE ORGANIZATIONS ARE
learning (ML), is about to make the jump from early-adopter to fast-follower CURRENTLY USING AI/ML.
status, according to a recent survey of 283 executives conducted by Harvard
Business Review Analytic Services. The majority of respondents (61%) are actively
evaluating the technology and exploring use cases, while the remainder have
already begun to use AI/ML in one form or another, with nearly one-third of all
70%
OF RESPONDENTS SAID PREDICTIVE
respondents in the production or pilot stages. FIGURE 1 ANALYTICS WAS THE TOP AI/ ML
APPLICATION AREA OF INTEREST.
Large organizations (those with 10,000 or more employees) were much more
likely than smaller businesses to be currently using AI/ML; 75% of large
organizations in the survey were currently using AI/ML, versus 39% of companies
with 1,000 to 4,999 employees. 61%
OF RESPONDENTS ARE ACTIVELY
Early-adopter organizations that have investigated, piloted, or deployed the EVALUATING AI/ML TECHNOLOGIES
AND EXPLORING USE CASES.
technologies are expecting to realize or have already realized a diverse array of
AI/ML benefits, according to the survey, from a better customer experience to
improved revenues. These wide-ranging benefits are heightening interest in AI/ML
within the C-suite, the survey revealed. 51%
OF RESPONDENTS CITED STAFFING AS
Companies that have deployed AI/ML “are happy with the benefits they see,” A TOP AI/ML CHALLENGE.
especially the increased profits that come from better serving customers, says
Philipp Gerbert, senior partner and managing director for Boston Consulting Group
and fellow of the Henderson Institute for AI in Business. “Everyone’s appetite has
been whetted.” Organizations that are less mature in their use and understanding
of AI/ML have a high expectation of leveraging these technologies to create positive
business value over the next five years, according to Gerbert.

Pulse Survey | Artificial Intelligence: The End of the Beginning Harvard Business Review Analytic Services 1
FIGURE 1 research officer, Dresner Advisory.
NO LONGER ON THE SIDELINES OF AI “Although only maybe a third of
organizations are currently building
Nearly one-third of respondents are using AI/ML in pilot or production mode.
predictive models, a lot of people are
We are exploring use cases for the technology interested and are watching.”
40% Predictive analytics enables a wide
variety of use cases, according to
We are currently in pilot or production with the technology
Maribel Lopez, principal analyst at
27%
Lopez Research. “Let’s say you’re an
We are actively evaluating the technology IT security engineer, and you’re trying
21% to discover cybersecurity breaches or
minimize network outages. These are
We are currently testing the technology situations where you have a lot of your
12% own data that you can use along with
outside data to begin to predict issues
We have no need for AI/ML before a problem happens.”
0%
In the survey, anomaly detection (cited
by 34%) and text classification/event
SOURCE: HARVARD BUSINESS REVIEW ANALYTIC SERVICES SURVEY, SEPTEMBER 2018
correlation (34%) are also high on the
ML priority list, with IoT applications
(34%) and sentiment analysis (28%)
rounding out the roster.
AI/ML: Finally Getting Real
AI/ML has been in development for
many years; the difference now is
Top- and Bottom-Line Benefits
The widespread interest in predictive
that concrete uses for and benefits
analytics, anomaly detection, and
of the technology are coming into
event correlation is helping expand
focus. Because AI/ML can quickly
the expected benefits of using AI/ML
sift through vast volumes of data, these
technologies from the bottom line to
systems can enable
top-line interests. Survey respondents
organizations to more quickly and
are, for example, are expecting AI/
accurately do the following:
ML use to improve the customer
• Predictive analytics. ML systems experience, speed decision making,

BECAUSE AI/ML CAN can quickly analyze historic and

current data and behaviors, and
and boost customer service. FIGURE 2

QUICKLY SIFT THROUGH predict events and trends to inform

a proactive response, such as
Historically, the outcomes most
often associated with AI/ML have

VAST VOLUMES OF DATA, anticipating customer intent.

been increased efficiencies and a
corresponding drop in costs due to
THESE SYSTEMS CAN • Anomaly detection. ML systems
can detect deviations from past or
eliminating repetitive manual work
currently done by humans. But as
ENABLE ORGANIZATIONS. forecasted behaviors, and send alerts
or proactively respond.
executives consider use cases beyond
cutting costs to drive revenue/profit
growth, AI’s potential grows even
• Event correlation. ML systems can
more enticing.
correlate events and segment data
to identify situations that present For example, personalizing the
opportunities or issues. customer experience is a top
application for machine learning.
Among survey respondents, predictive
Without adding to manual overhead,
analytics was far and away the top AI/
ML can quickly churn through data to
ML application area of interest (cited
predict what would be of most value
by a full 70%), both currently and in
to customers and when, and deliver
the next three years. “We are seeing
tailored interactions and attractive
a tremendous amount of interest and
special offers. Gerbert’s group worked
enthusiasm in cognitive techniques
with a retail chain that used to send
and technologies,” including predictive
three marketing messages per month,
analytics, says Howard Dresner, chief
with predictably low results. But by

2 Harvard Business Review Analytic Services Pulse Survey | Artificial Intelligence: The End of the Beginning
 FIGURE 2
running data from 12 million mobile
app interactions through an ML
algorithm, the retailer now knows
BENEFITS BEYOND REDUCED COSTS
Beyond increased efficiency and productivity, survey respondents see AI/ML as a way to
exactly what customers have bought improve the customer experience and speed decision making.
and what they might want to buy
next. Now, the retailer is sending a few More efficient work processes
hundred thousand personalized offers 48%
per week, and the resulting revenue
increases have been impressive. Improved productivity
“Personalization is an enormous driver 48%
of value,” says Gerbert.
Improved customer experience
AI/ML works especially well on 43%
so-called optimization problems, such
as making pricing adjustments in spare Reduced costs
parts or extras/variants to yield huge 42%
gains, adds Gerbert, or aligning aircraft
operations pricing based on improved Faster decision making
predictive maintenance. 40%

Another case in point is supply chain Improved customer service

management. Tweaking one small 36%
piece of the puzzle—particularly in
the case of a global supply chain—can More efficient IT operations
drive dramatic cost savings while also 26%
allowing for resources to be diverted Increased revenues
to where they can move the revenue 25%
needle. So, manufacturers can divert
production from one area where there Improved risk-management
is an expected part shortage, avoiding 23%
the cost of unplanned downtime
while shifting resources to areas that Faster time to market with new products or services
are predicted to surge in demand and 18%
pocketing more sales. And because
Improved employee well being
ML-powered systems can produce
8%
these insights in near real time, the
time to benefit is quicker. Improved enterprise security
Gerbert has worked with clients on a 7%
host of other ML industrial use cases,
Other
including manufacturing production
5%
optimization, end-to-end supply
chain optimization, and predictive Don’t know
equipment maintenance, all of which 3%
can generate big returns.
None
These returns would not have been
2%
possible without three developments
that made conditions ripe for AI/
ML, according to Lopez. First came SOURCE: HARVARD BUSINESS REVIEW ANALYTIC SERVICES SURVEY, SEPTEMBER 2018
the explosion of data to be leveraged
from sources such as mobile devices,
internet of things (IoT) sensors,
and social sites. Next, the advent of
inexpensive processing and storage
in the cloud made it practical and
affordable to handle massive amounts
of data for AI and ML applications.
The final piece, according to Lopez,
was the appearance of open-source

Pulse Survey | Artificial Intelligence: The End of the Beginning Harvard Business Review Analytic Services 3
 frameworks for ML, deep learning, and
other AI variants.
Whereas once a company would need a
staff of high-caliber data scientists even
to experiment with AI, leading industry
players now offer services to handle
discrete functions such as speech
recognition or sentiment analysis—
with minimal staff and infrastructure
needed. And most software vendors
are infusing their applications with AI
capabilities wherever possible.
Garnering Top Executive
Support
With both top- and bottom-line
benefits expected, it’s not surprising
that AI/ML has come to the attention
of senior executives, with more than
half of survey respondents saying
their business leaders understand the
technology and its benefits. FIGURE 3 At
the same time, almost four in 10 senior
leaders do not understand AI/ML,
according to the survey, indicating a
wide gap between the “haves” and the
“have nots.”
FIGURE 3
STEPPING UP THE SENIOR MANAGEMENT ROLE
Executive-level understanding of AI/ML varies widely. But even where managers understand
the technologies’ benefits, they’re often not effectively communicating their vision throughout
the organization.
• STRONGLY OR SOMEWHAT AGREE
• STRONGLY OR SOMEWHAT DISAGREE
Our senior management has a strong understanding of AI and machine learning and the benefits it can provide
the organization
51%
38%
Our senior management has communicated well how the opportunity for AI and machine learning will benefit
the organization
43%
44%
Our senior management has indicated a timetable for testing and launching AI and machine learning
29%
49%
SOURCE: HARVARD BUSINESS REVIEW ANALYTIC SERVICES SURVEY, SEPTEMBER 2018
4 Harvard Business Review Analytic Services
Even among those senior leaders who
grasp the importance of AI/ML to
their future success, they’ll need to go
beyond keeping themselves informed,
the results suggest, as less than half
have articulated the opportunity for
AI/ML within their organizations, and
even fewer have developed a timetable
for its use.
The highly technical nature of AI/
ML can be an impediment to getting
adequate support from the top of
the organization. “There is a huge
disconnect between the people who
understand AI and the people who
would fund the initiatives,” says Lopez.
The gap is difficult to bridge because
it requires an explanation of fairly
complicated mathematical concepts.
Challenges to Overcome
As AI/ML takes hold as a competitive
differentiator, organizations will find
it more difficult to hire and retain
talent with highly sought-after skills,
particularly with the scarcity of
highly trained data scientists and data
engineers needed for a major in-house
initiative. In the survey, respondents
named inadequate staffing and skills as
the number one challenge for adopting
AI/ML. FIGURE 4 Particularly with digital
giants such as Google and Amazon
enticing available talent, salaries are
elevating far above many organizations’
means. This is expected to remain a
challenge in the near term.
Hiring skilled experts for a full-
fledged internal AI/ML team will
mainly remain the purview of the
large enterprise, says Dresner. These
teams consist of a data engineer, who
prepares the data to be put in the
model, as well as a data scientist (often
a Ph.D.), who looks at the intersection
of what the company is trying to
learn and the available data, and then
selects appropriate techniques or
algorithms. Domain experts also play
a critical role. “It’s not so hard to get
people who are trained in the basic AI
algorithms. It’s hard to find someone
who is good in AI who has domain
expertise” in marketing, for example,
says Gerbert. That’s where cross-
functional teams are needed.
Pulse Survey | Artificial Intelligence: The End of the Beginning
ALMOST FOUR IN 10 SENIOR
LEADERS DO NOT UNDERSTAND
AI/ML, INDICATING A WIDE GAP
BETWEEN THE “HAVES” AND THE
“HAVE NOTS.”
FIGURE 4
TALENT AND DATA ARE TOP CHALLENGES
The biggest challenges of AI/ML adoption revolve around finding people with the right skills
and preparing the data for meaningful insights.
Inadequate staffing/skills
51%
Incomplete or incorrect data
41%
Expense of infrastructure upgrades
31%
Not sure where to begin or where to focus
29%
Not applicable/we do not use AI/ML
20%
Lack of C-suite buy-in
13%
Other
4%
Don’t know
2%
SOURCE: HARVARD BUSINESS REVIEW ANALYTIC SERVICES SURVEY, SEPTEMBER 2018
“It’s not ‘My Ph.D. can beat up your
Ph.D.,’” says Cesar Brea, partner in
Bain & Company’s Advanced Analytics
group. “Blended teams are the key.”
Software vendors are beginning to
respond to the talent challenge by
embedding AI/ML functions that
enable use by ordinary business users
with a modicum of training—the
so-called citizen data scientist. It is
worth noting that the need for training
cannot be eliminated—which many
organizations might be tempted to do
in order to speed things up.
Another key challenge, according to
respondents, is data quality. “The data
cleaning challenge is significant,” Lopez
says. She offers the example of training
an ML system to recognize a certain
breed of dog. “I have all these images,
but I might just upload unrelated
garbage. Someone has to clean them,
someone has to tag them, someone has
to plot something. Magical insights are
not going to just pop out.”
6 Harvard Business Review Analytic Services Pulse Survey | Artificial Intelligence: The End of the Beginning
Another example is an insurance
company that wants to use a set
of images taken by adjusters after
automobile crashes. You can easily
upload all the images to a database,
but the key challenge is creating the
taxonomy or naming convention, says
Lopez. “What do you want to call this:
scraped bumper, dented bumper, good
bumper?” she asks. Once you create the
taxonomy and feed the images into the
model, a new image can be uploaded
from the field, recognized, and then
tagged as a certain type of problem.
“You don’t have to be super-skilled to
feed in the images. But knowing what
to call them is important,” she says.
Also, someone needs to be responsible
for checking the output of the ML
models: Did we get the answer we
expected? “If not, you’ll have to review
your process to see how the error may
have been introduced,” Lopez says.
Where some enterprises are building
their own teams and data sets in-house,
others are accessing data and tools
from startups and smaller providers,
says Brea. “In particular, it’s all about
access to the data,” he says. There are
a variety of ways to gain that crucial
access—build your own data set or
leverage public-domain information
(such as certain health records, weather
data, or geographic information
systems data). Many organizations are
partnering with research organizations
and universities, as well.
The Hidden Opportunity:
AI/ML in IT Operations
While survey respondents were
well-versed in the use of AI/ML to
perform predictive analytics, anomaly
detection, and event correlation, very
few were aware of how these AI/ML
functions could be used to proactively
monitor security threats and systems
and network operations. More than
40% of respondents (most of whom
do not sit in IT) were unaware of these
IT-related uses of AI/ML, and only a
tiny minority were currently using AI/
ML in this way.
At the same time, most respondents
realized that a more robust and secure
IT infrastructure is crucial for AI/ML
success. FIGURE 5 No wonder, then, that
FIGURE 5

A HIDDEN OPPORTUNITY FOR ML IN IT OPERATIONS

Respondents were in nearly unanimous agreement that a robust, reliable, and secure IT
infrastructure was crucial for AI/ML success.

Very important
78%

Important
15%

Moderately important
5%

Slightly important
0%

Not important
1%

SOURCE: HARVARD BUSINESS REVIEW ANALYTIC SERVICES SURVEY, SEPTEMBER 2018

about one-quarter of respondents on the end results you are trying to

planned to evaluate AI/ML for proactive achieve, advises Brea. “Don’t talk about
threat detection and enterprise the solution; talk about the results.
security, and over one-third planned to That’s how you get a payoff for AI. The
evaluate the technology for proactive question is not ‘Are you investing in AI?’
network/systems monitoring in the but ‘What are you using it for, and how
next 12 months. This is yet another area much improvement are you seeing?’”
where senior management recognition
That’s a question easily answered
of AI/ML capabilities can play a key role
in separating leaders and laggards in
by organizations that have already EARLY ADOPTERS
the future competitive landscape.
moved to the leading edge of AI and
ML adoption. These early adopters ARE REAPING
The use of AI/ML in IT operations
can also provide organizations with
are reaping tangible benefits and
continuing to experiment, ensuring TANGIBLE BENEFITS
their first foray into the technology,
and familiarize them with the
competitive differentiation along the
way. “The ones that deployed first have
AND CONTINUING
knowledge needed for future use
cases. A large university, for example,
invested more,” says Gerbert. TO EXPERIMENT,
embarked on an ML and analytics
initiative to troubleshoot and manage
These are still early days. But
organizations that come off the ENSURING COMPETITIVE
the operational efficiency of its IT
networks. With the success of that
sidelines are achieving real value.
“Now, you can do something you
DIFFERENTIATION.
couldn’t do before, and it’s exciting to
project, the university expanded its use
see its potential,” says Lopez.
of ML to identify at-risk students, using
data from its learning management
system (LMS). It can now provide
personalized feedback and earlier
intervention to struggling students to
rapidly improve their performance.
The opportunities associated with AI
and ML are vast. As the technologies
begin to take hold in the enterprise
arena, the corresponding hype level
increases. To wade through, focus

Pulse Survey | Artificial Intelligence: The End of the Beginning Harvard Business Review Analytic Services 7
METHODOLOGY AND PARTICIPANT PROFILE
A total of 283 respondents drawn from the HBR audience of readers (magazine/
newsletter readers, customers, HBR.org users) completed the survey.

ANNUAL REVENUES
20% 9% 9% 12% 12% 28%
$10 BILLION $5 BILLION TO $2 BILLION TO $1 BILLION TO $500 MILLION TO LESS THAN
OR HIGHER $9.9 BILLION $4.9 BILLION $1.9 BILLION $999.9 MILLION $500 MILLION

SENIORITY
21% 18% 14% 10% 9%
MANAGER/ SENIOR DIRECTOR VICE PRESIDENT EXECUTIVE
SUPERVISOR MANAGEMENT/ MANAGEMENT/
DEPARTMENT HEAD BOARD MEMBERS

KEY INDUSTRY SECTORS

16% 11% 10% 9% 8% 7% 6% 5%
TECHNOLOGY FINANCIAL MANUFACTURING BUSINESS/ EDUCATION HEALTH CARE GOVERNMENT/ ENERGY/UTILITIES
SERVICES PROFESSIONAL NOT-FOR-PROFIT
SERVICES

REGIONS
42% 31% 16% 6% 3%
NORTH AMERICA EUROPE ASIA/PACIFIC LATIN AMERICA MIDDLE EAST/AFRICA

Figures may not add up to 100% due to rounding.

8 Harvard Business Review Analytic Services Pulse Survey | Artificial Intelligence: The End of the Beginning
 hbr.org/hbr-analytic-services

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