Category Archives: KPI

Transformation AI Blues

May 25, 2024 Aysco Consulting Leave a comment

Despite the wave of use cases and significant investment in Gen AI, current success rates remain low.

Back in 2021 Gartner reported that 85% of AI projects fail to deliver, and only 53% of projects made it from prototype to production. A more recent study by Infosys Study Dec 2023 indicates that only 6% of European Gen AI use cases have created value.

The hype around AI has led to a explosion of exploration activities across many organizations. In one example, in the rush to join the bandwagon, a bank bought tens of thousands of GitHub Copilot licenses without a clear sense of how to apply the technology. As a result most of those projects will fail to generate competitive advantage.

7 out of 10 digital transformation initiatives are considered failures using value measures such as user adoption and overall ROI profitability metrics. There are many parallels between AI and digital transformation project causes of failure. Spending big money on AI does not guarantee transformational results — its implementation execution that realizes the value.

Data

Part of the failure can be attributed to bad data: too little, poor quality, not in the right place, in the wrong format, missing key data points and often unintelligible across disparate systems. It’s insufficiency limits the the transformation and without a plan to transform the data in a way that creates value, AI initiatives struggle to tame the beast.

AI Magazine March 2022

Often organizations complete a one-off data cleanse to initiate the digital transformation, however this is short-lived given the unaddressed constant generation of bad data. A deliberate focus is required to build better quality data from the start, linked across organizational systems, to create a ‘single source of truth’. AI use cases operating without these data build considerations never achieve ‘lift-off’ .

Oliver Wyman 400 C-level executives in Europe and the Americas survey suggests that Data privacy (25%) and security concerns (22%) are the top factors preventing AI adoption.

Success Strategies

Accordingly to the Gartner AI Hype Cycle, we have now reached the peak of inflated expectations, and during 2024 will be moving into the trough of disillusionment. The big question is how to begin creating measurable value.

Gartner Predictions

By 2025, growth in 90% of enterprise deployments of GenAI will slow as costs exceed value.

World Economic Forum Agenda May 2024 Implementation Recommendations

Pick the right composition of leaders for the AI transformation
Embrace complexity and novel approaches
Incorporate design principles in human-to- machine interactions.
Bring workers along on the AI transformation with upskilling
Score quick wins via efficiency gains.

My thoughts echo these recommendations. Transformational AI is a cross-functional effort, however many organizational departments operate in silo’s and there is a need to appoint senior business managers with sufficient granular view across the organization to help articulate and determine the journey steps. Organizations tend to delegate to IT as a default which is a mistake given the business success measures.

As with any digital transformation, human-centric design principles are essential to ensure that the AI output is structured and formatted in a way that is clearly understood by the human, for human decision validation.

By 2028, more than 50% of enterprises that have built large AI models from scratch will abandon their efforts due to costs, complexity and technical debt in their deployments.

If you don’t measure it, you don’t get it

KPI’s are critical in objectively measuring value and assessing AI success:

# Business Goal alignment

# Delivering data-driven insights

# User adoption

# Performance

# ROI

Paradigm Shift

GenAI is not just a tool; it’s a paradigm shift.

In conclusion, AI deployment complexities mirror the same challenges associated with organizational digital transformation initiatives. Transformational AI disillusionment will start with the realization that a strong business case, energy and resilience are required to stay the journey. There are no short cuts.

Should we be more cautious or is the risk worth the reward?

Collaboration, KPI, Strategy, Talent

10x Impact

Image November 1, 2022 Aysco Consulting 2 Comments

I was asked the other day to articulate the secret recipe to become a successful procurement individual. A great question!

My on-the-spot response was that procurement offered a service and by placing the customer (our stakeholders) at the center, engaging to understand needs, and collaborating with the customer to develop solutions, procurement would deliver value add that the customer actually values.

Together with this positional change, and to ensure procurement understands the business, procurement needs to act as a ‘business manager’ to appreciate the cost, quality and time factor interlock. Too often functions operate in silos and lack appreciation of what happens upstream and downstream.

A win in one function which leads to a failure in another part of the organization is not a success for the business. The challenge is finding a way forward that respects each contribution and gives individuals the opportunity to play their part within the time constraints. Moving from a reactive to proactive way of working pulls effort forward and essentially delivers more time for collaboration, but needs a level of business maturity.

Unfortunately many organizational success measures are not consistent; they can conflict and sometimes force a short sighted and short term approach within the respective function. Establishing common goals will enable individuals to work together as a team, and focus on a shared objective. The sum of the whole is greater than the parts!

My favored recipe:

Customer centric mindset
Business acumen and value creation skills
Team work
Focus

Successful procurement individuals that enact and advocate these attributes will deliver 10x impact compared to their counter parts.

Have a better and or improved recipe ? Alternatives welcome. Please share and comment.

KPI, Strategy

How do you calculate Procurement’s value add?

October 9, 2022 Aysco Consulting Leave a comment

The procurement discipline has been around since ancient times; the earliest recordings dating back to the Greeks, Chinese and Egyptians. As a profession, modern day procurement and the so called ‘materials man’ was first termed by Charles Babbage, considered by some as the ‘father of the computer’ in his book, ‘On the Economy of Machinery and Manufactures’ (1832).

Despite these early beginnings, procurement has only been recognized as a management function since the 1960’s becoming more prominent as organizations understood a need for a more strategic approach to supply chain management. This begs the question, how is procurement valued?

The traditional and main key performance metric ingrained into Procurement is savings measurement. Throughout my career there seems no hard and fast standard; each organization measures savings differently (‘hard’ cost reduction, ‘soft’ cost avoidance inclusion or exclusion, as well as different definitional permutations and combinations in an attempt to establish a measure that the senior leadership of the respective organization understood and value).

Sales and procurement are two sides of the same table, but mathematically, providing you have the sales, sustained procurement effort gets the bigger ‘bang for buck’. For example:

Assume a $10 million organizational revenue, whose cost of sales of 65%, returning 20% profit. To grow the operating profit by an extra $1 million, sales would need to increase by 50% ($5 million). That’s a lot of sales effort!
In contrast, for the procurement organization, to deliver an extra $1 million operating profit for that same organization, procurement would need to reduce costs by 15.4%. That’s not easy either, but it’s less effort.

The challenge is that the above is a simplistic view and ignores the interlink between sales and procurement. Without the supply assurance of materials or resources, the organization has no sales. Without sales, the organization does not need to consume. The better way is to capture and align supply side value measures that link and support sales. The metrics need not only to capture the effectiveness, but also efficiency of the related processes. Additionally, with ever increasing complexities of supporting organizational brand reputation, supply initiatives around ESG integrity, sustainability, anti-slavery etc., dictate a need for a set of broader value measures.

Technology advancements are playing a major part in enabling organizations to generate and collect data, connect the dots, and support the ability to seamlessly integrate and grow the business. Intrinsic, automated reporting should be incorporated at the start of any digital journey, allowing the function to implement new value measures to track and visualize contribution. Define your measurable goals and start calculating your value add!

AYSCO CONSULTING