(Gen)AI will revolutionize Finance - just not overnight

Start, but don't panic!

Dear Finance executive,

(Gen)AI is evolving fast, but finance leaders shouldn’t panic.

The implementation of (Gen)AI in practice is slow and cumbersome.

Ultimately, potential does not equal impact in the next three years.

Technology owners like OpenAI or Microsoft or Venture Capitalists understandably emphasize the disruptive potential of (Gen)AI. It’s in their interest to fuel the hype.

And yes, the technology continues to make leaps, as demonstrated by regular improvements across different performance benchmarks.

But the speed of technology development does by equal the speed of technology implementation.

1. Technology is not the bottleneck.

   AI has been around for many years. GenAI is making significant advances every month. But solving real business problems and driving efficiency with this technology is challenging. The “10-20-70 principle” applies: 10% of the change effort lies in algorithms, 20% in the data, and 70% in people and processes. (In some finance functions I’ve seen, data might account for closer to 40%.) Today, the real bottlenecks are the latter two categories.

2. The actual rate change has not accelerated.
   In finance, typical cost out programs still create savings in the 10-30% range over a 3-year period - achieved through multiple levers, not just digital and (Gen)AI. To date, few companies have achieved transformational P&L impact. It will probably take many years before the technology shows an impact at the level our economy. This large scientific study of 25 000 workers by the Humlum and Vestergaard, for example, find minimal effects of GenAI - 3% impact on individual productivity without any impact on worked hours or wages.

3. The speed of transformation remains uncertain.
   

In the end, there is still considerable uncertainty around how quickly this transformation will occur. While many forecasts tout massive future potential, they rarely define when that future begins.

Practical take away: Finance executives should actively explore and apply (Gen)AI where it creates value. But there’s no reason to panic.

Are you seeing ROI from (Gen)AI in your finance team yet?
Sebastian