Sylvain Duranton is a senior partner and managing director at The Boston Consulting Group and the Global Leader of BCG GAMMA, a business unit dedicated to Data Science and Advanced Analytics applied to business. He manages a team of 900 data scientists, who master all data analysis techniques (data science, data engineers, optimization, machine learning) and provide support to businesses in the field of AI. Duranton graduated from French engineering schools Polytechnique (1991) and Mines Paris (1993) and additionally holds an MBA degree from INSEAD (1996). Duranton recently spoke to the Innovator about the rise of the AI-powered company in a post crisis world, the title of an April paper he co-authored.
Q: Why do you believe AI will play a more important role going forward?
SD: During a downturn there are companies that win and companies that lose. BCG has been analyzing downturns since the mid-1980s. During the four previous global economic downturns, 14% of companies were actually able to increase both sales growth and profit margins. AI will play a critical role in determining the winners post-COVID19. Why is that? Everything has become extremely volatile and uncertain. Companies must anticipate how the virus is going to develop, the political decisions that will be taken to manage the infection, how customers will react and how it will impact their market. This requires, building scenarios rather than forecasts and making real-time decisions. Companies that already have AI tools in place will be able to move much faster and better than others to manage their channels, their products, their supply chain and their procurement process. AI engines can play a major role in the short run when companies need to react quickly during the crisis. We don’t know what the world will look like when the crisis is over but we know there will be a lot of uncertainty and a need for resilient organizations so some of the trends from the past, such as digital transformation and the adoption of AI by business, will be accelerated.
Q: There has been a lot of talk during the pandemic about the need to make the supply chain more redundant and more resilient. How can AI help?
SD: There is a need to build a new supply chain and to manage it in an optimal dynamic way. Before the crisis, optimizing cost and time was the main objective in the design of global manufacturing operations, supply chains, and logistical support. Often, that meant concentrating production in high-volume factories in one or two low-cost nations. But recently rising economic nationalism and trade barriers began forcing companies to rethink their supply chain strategies and rediscover the merits of redundancy. The COVID-19 crisis, which has disrupted global supply chains, has moved redundancy higher up on companies’ agendas as a means of reducing risk and weathering the next global shock. The automotive industry is a case in point. European output was stopped because some components are only manufactured in China, including Wuhan. Other industries, such as beauty care and food are also looking to decrease dependencies on single suppliers or countries. But redundancy and duplication entail significant cost. AI offers the potential for companies to build resilience into manufacturing operations and supply chains, while at the same time minimizing cost and damage to margins. AI enables manufacturers to optimize cost in each factory through predictive maintenance and better planning. It also allows them to operate a larger number of small, efficient facilities nearer to customers rather than a few massive factories in low-wage nations by deploying advanced manufacturing technologies such as 3D printing and autonomous robots that require few workers. A supply chain supported by AI can change the flows depending on the context, be more efficient and resilient. If you automate more of your supply chain you will have fewer incidents due to predictive maintenance, be less dependent on particular suppliers and therefore less vulnerable.
Q: We are hearing a lot about how the pandemic is changing consumer consumption habits worldwide. Does AI have a role to play in helping companies readjust their product lines?
SD: Thanks to its ability to analyze data from myriad sources, AI has unparalleled potential to discover emerging trends and identify changes in consumer preferences. Even in a human-centered industry like fashion, some companies are augmenting their business intelligence capabilities with AI to amplify weak signals and detect trends early on, such as which colors are likely to be popular in the coming season. AI will be at the core of personalized products that can help to improve customer engagement and sales during the emergency and acceleration of the remote economy.
Q: Will surviving post crisis mean that some companies may have to adjust not just their products but their business models?
SD: The current crisis and its aftermath should motivate companies to adjust their business models to the new reality. Winners will reinvent themselves by putting software, data, and AI at the core of their organizations. Such a transformation requires that AI be regarded as central to a business model that differentiates a company and defines how it creates value as well as its operating model.
Q: Lots of companies are testing AI but few have scaled the technology across their operations. Is that an issue?
SD: BCG surveys more than 2000 companies every year with MIT. Some 85% of companies say they believe AI will impact their sector but only 20% of companies have AI capabilities and systems at scale. That is why we believe that two-thirds of corporate AI programs have yet to create impact. Too often people don’t anticipate what it will take to scale those solutions. Some 10% of the effort is needed for creating algorithms , 20% of the effort is to integrate the AI with the legacy system and 70% of the work is getting the decision makers to integrate the AI into the business processes so they can make the most of the technology. Companies that are too focused on the technical side and don’t transform the running of the company will not be successful with their AI implementation. The CIO can’t do this on their own. You can have the best tech team and biggest budget but you can’t achieve success without a strong commitment from senior business leaders. To succeed, companies should put people on the project full-time and deploy it worldwide with the proper support of both data scientists and senior business people. Many companies do too little with too many initiatives. They should instead bet really big on two or three things.
Q: What should companies be doing now?
SD: Make sure that you adjust the whole IT and data management infrastructure. A proper modular architecture to manage data is a must. Bring digital and AI capabilities in-house, populate the databases and make good use of the data. We see companies over invest in producing data and populating databases and under investing in how to use the data. Define two or three things your company wants to do now and focus on the cultural elements that will need to change to make it work. Changing a siloed organization takes time. Being nimble and agile is very important at all times but even more important in periods of high volatility and change. Those companies that invest in AI today will become the winners tomorrow. Investing in AI infrastructure and solutions is the safest bet companies can make during this pandemic, in order to help them manage this crisis and rebound when the whole thing is over.
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