Management Review...3 Randy Bean is an industry thought leader and author, and CEO of NewVantage...

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RandyBeanisanindustrythoughtleaderandauthor,andCEOofNewVantagePartners,astrategicadvisoryandmanagementconsul2ngfirmthathefoundedin2001.

DavidKironistheexecu2veeditorofMITSloanManagementReview.

Boston | New York | San Francisco | Austin | Charlotte

MIT Sloan Management Review Webinar

How Big Data and AI are Driving Business Innovation in 2018

June 27, 2018 www.newvantage.com

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How Big Data and AI are Driving Business Innovation

RandyBeanIntroduc2on|Background§  Founder|CEO|NewVantagePartnersLLC§  MonthlyBigDatacolumnist:WallStreetJournal(2014-2015)§  Monthlycolumnist:Forbes(2016-Present)§  Frequentcontributor:MITSloanManagementReview|HarvardBusinessReview§  Execu2veThought-LeadershipRoundtables|Boston|NewYork|SanFrancisco§  Focus->BigData/AIInnova2on|C-Execu2veSurvey

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NewVantagePartnersfirstconductedasurveyonthestateofBigDatawithinFortune1000companiesin2012.

Thesurveyhasbeenuniquein

providingatop-downperspec2vesonc-execu2vespriori2es.

2018Theme:

“HowBigDataandAIareDrivingBusinessInnova:on”

Nearly60Fortune1000sizefirms

par2cipated,represen2ngabellwetherselec2onofblue-chipfirms.

Par2cipantsincludedAmericanExpress,CapitalOne,FordMotors,GoldmanSachs,MetLife,MorganStanley,and

Verizon,amongothers.

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Surveypar2cipantscomprisedexecu2vesrepresen2ngdata-intensiveindustries.

Anoverwhelmingmajorityofexecu2vepar2cipants(93.1%)iden2fiedthemselvesasC-levelexecu2vedecision-makers.

IndustryParticipation

FinancialServices|Insurance 77.2%Pharmaceuticals|Medical 8.8%OtherIndustries 14.0%

RespondentRole ChiefDataOfficer 55.6%ChiefAnaly5csOfficer|ChiefDataScien5st 15.3%ChiefInforma5onOfficer 13.9%CEO|President 5.6%ChiefMarke5ngOfficer 2.8%Other 6.9%

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FinancialServices|Insurance

Aetna FannieMae PutnamInvestmentsAIG FarmersInsurance RegionsBank

AllyFinancial FidelityInvestments Standard&PoorsAmericanExpress FirstRepublicBank StateStreetBankofAmerica FreddieMac SunLifeFinancialBankofChina GoldmanSachs SwissReGroup

BankofMontreal TheHarYord TDBankBloomberg JPMorgan TIAACapitalOne LincolnFinancial Travelers

CharlesSchwab M&TBank UBSCigna MetLife USAA

Ci5Group MFSInvestments VISACi5zensBank Moody's WellsFargoCrawford MorganStanley ZionsBank

CreditSuisse Nasdaq

2018Par2cipa2ngFirms

Pharma|Medical Addi5onalIndustriesAstellas EsteeLauder LinkedIn

GlaxoSmithKline FordMotors MotorolaH3Biomedicine GlobalEnergy VerizonOptumLabs IBM

PartnersHealthCare Li&Fung

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WhyBigDataandAIareCloselyLinked1.  AIneedsBigDatatobuilditsintelligence–par2cularlymachinelearning

2.  BigDataprovidesthedataneededtotrainAIlearningalgorithms

3.  AIdoesn’tdeduceconclusions–itlearnsthroughtrialanderror,whichrequiresmassiveamountstodatatoteachtheAI

4.  It’ssafetosaythereisnoAIwithoutBigData.

Source:BigDatavs.Ar2ficialIntelligence.Datama2on.May30,2018.

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KeyThemesandFindings1.  Fearofdisrup2onisfuelinginvestmentinBigDataandAI

2.  BigDataisdirectlyempoweringAIinvestmentandini2a2ves

3.  Firmsarerepor2ngmeasurableresultsfromBigDataandAIinvestments

4.  ChiefDataOfficersareemergingchampionsofBigDataandAI

5.  Businessadop2onofBigDataandAIini2a2vesremainsachallenge.

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Theme1:Fearofdisrup2onisfuelinginvestmentinBigDataandAI

Amajority(79.4%)ofexecu2vessaythattheyfeardisrup2onandpoten2aldisplacementfromdata-drivencompe2torswithhighlyagiledatacultures--upsharplyfrom2017.

Fearofdisruption/displacement 2018 2017

Yes 79.4% 46.6%No 20.6% 53.4%

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CompaniesareincreasingtheirinvestmentsinBigDataandAI/MachineLearningini2a2vesinresponsetothreatsofdisrup2onanddisplacement.

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Ar2ficialIntelligence/MachineLearning

CloudCompu2ng Blockchain

2018

2017

Nearly3/4ofexecu2ves(71.8%)believeinvestmentsinAI/MachineLearningwillhaveatransforma2onalanddisrup2veimpactontheirbusiness–upfrom44.3%in2017.

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Firms(93%)havesignificantlyincreasedtheirinvestmentinAI/MachineLearningini2a2ves.

Execu2vesseebiggestthreatsfromdata-drivencompe2tors,withhighlyagiledatacultures.

ThisincludestheTechGiants–Amazon,Google,Apple,andFacebook.

Execu2vesalsofearcompe2torswithintheirownindustry.

Amajority(54.4%)ofexecu2vesreportthataninabilitytobenimbleandcompeteondataisthebiggestcompe22vethreatthattheyfacetoday.

Disruptivetechnologywithgreatestimpact 2018 2017 Investing

ArtificialIntelligence/MachineLearning 71.8% 44.3% 93.0%CloudComputing 12.7% 8.2% 83.1%Blockchain 7.0% 4.9% 54.9%

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Theme2:BigDataisdirectlyempoweringAIinvestmentandini2a2ves

InvestinginBigDataorAIinitiatives

Yes 97.2%No 2.8%

Anoverwhelming97%ofexecu2vesreportthattheircompaniesareac2velyinves2nginbuildingorlaunchingBigDataandAIini2a2ves.

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ThereisagrowingconsensusthatAIandBigDataini2a2vesgohand-in-hand.

Execu2ves(76.5%)indicatethattheprolifera2onandgreateravailabilityofdataisdirectlyempoweringAIandcogni2veini2a2ves.

ProliferationofdataempoweringAI/cognitivelearning Yes 76.5%No 23.5%

AIini2a2vesdirectlybenefitfromaccesstoricher,moregranular,morecomplete,moreextensivedata--invastlygreatervolumes,varie2es,anddatasources.

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InvestmentinBigDataandAIini2a2vesisgrowing,butmostBigDataandAIinvestmentremainssmallandexperimental,focusingoninnova2onaroundtheedge.

Financialservicesfirmshavetradi2onallybeenamongthelargestinvestorsindataandanaly2cs,andarenowattheforefrontofinvestmentinBigDataandAIini2a2ves.

Firmsneednolongerrelyonsubsetsofdata,andarecombiningBigData,AI,machinelearning

algorithms,andcompu2ngpowertocompe22veadvantage.

TotalinvestmentinBigDataandAI

Greaterthan$500M 12.7%$50M--$500M 27.0%Under$50M 60.3%

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Theme3:Firmsarerepor2ngmeasurableresultsfromBigDataandAIinvestments

Yes73%

No27%

MeasurableResultsfromBigDataandAIInvestments

MeasurableresultsfromBigDataandAIinvestments Yes 73.2%No 26.8%

Nearly3/4oftheexecu2vessurveyed(73.2%)reporttheirorganiza2onsareachievingmeasurableresultsfromtheirBigDataandAIinvestments--upfrom48.4%in2017.

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Execu2ves(84.1%)areac2velyinves2nginBigDataandAIini2a2vestoenablebeoerdecisionsusingadvancedanaly2cs.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

TopObjec5veofBigDataandAIInvestments

#1Goal

Started

Success

Rate

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Successratesarehighestinenablingbeoerdecisions(69%),decreasingexpenses(60.9%),andaccelera2ngspeedtomarket(54.1%).

Innova2onini2a2vesareunderwayatnearlyhalf(46.4%)offirms.

Mone2za2onini2a2veshavebeenlaunchedatagrowingset(31.9%)offirms.

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Theme4:ChiefDataOfficersareemergingchampionsofBigDataandAI

Amajorityoffirms(63.4%)reporthavingnamedaChiefDataOfficer–upfrom12%in2012.

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Organiza2onsarestrugglingtodefinetheChiefDataOfficerrole.

34.0%32.1%

15.1%11.3%

7.5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Externalchangeagent|outsider

Companyveteran|insider

Lineexecu2vewhohasbeenaccountableforresults

Datascien2st|analy2csbackground

Techexecu2ve|technologybackground

BackgroundforaSuccessfulChiefDataOfficer

BackgroundforasuccessfulChiefDataOfficer

Externalchangeagent|outsider 34.0%Companyveteran|insider 32.1%Datascientist|analyticsbackground 15.1%Lineexecutivewhohasbeenaccountableforresults 11.3%Techexecutive|technologybackground 7.5%

TheChiefDataOfficermaybethetoughestposi2oninindustrytoday.

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Primaryresponsibilityfordatastrategyandresults

ChiefDataOfficer 39.4%NoSinglePointofAccountability 23.9%ChiefInformationOfficer 15.5%OtherC-Executive 12.7%ChiefAnalyticsOfficer|ChiefDataScientist 8.5%

FewChiefDataOfficers(13%)haverevenueresponsibility.

ResponsibilityforBigDataandAIini2a2vesremainsscaoered.

Asignificantnumberofexecu2ves(23.9%)pointtonosinglepointofaccountability.

Yes13%

No87%

ChiefDataOfficerwithRevenueResponsibility

ManagingBigDataandAIini2a2vesremainsachallengeformostfirms.

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LongtermroleoftheChiefDataOfficer

Sitsontheexecu5vecommidee 50.0%

Reportstotheexecu5vecommidee 37.1%

CDOroleisinterimroletobephasedout|unnecessary 12.9%

ThefutureroleoftheChiefDataOfficerremainsuncertain.

Halfoffirms(50%)donotseetheChiefDataOfficerasatoprolewithintheirfirm.

Aminorityofexecu2ves(12.9%)believetheChiefDataOfficerroleisunnecessary.

FirmsarenowcombiningtheChiefDataandChiefAnaly2csrolesintoanevennewer“ChiefDataandAnaly2csOfficer”role.

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Theme5:Businessadop2onofBigDataandAIini2a2vesremainsachallenge.

Businessadoptionofdatainitiativesremainachallenge Yes 64.7%No 35.3%

CulturalissuesrepresentthegreatestobstacletoBigDataandAIadop2on.

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Fewexecu2ves(19.1%)believethattechnologyobstaclesarethebiggestproblem.

Creatingadata-drivenculture 2018 Success 2017 Success

Yes|InProcess 98.6% 32.4% 85.5% 37.1%No|NotaPriority 1.4% 14.5%

Firmsarestrivingtocreatedata-drivencultures,butwithlimitedsuccess.

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10TakeAways

1.  BePa2ent–thinkofBigDataandAIadop2onasajourney,notasprint2.  Developalong-termplan–it’sdifficulttogettoades2na2onwithoutaroadmap3.  Priori2zeini2a2vesbasedonmeasurablebusinessvalue–knowwhat’simportant4.  Undertakeasuccessionofstepstoestablishcredibilityandbuildmomentum5.  Focuson“quickwins”thatwilldemonstrateimmediatebusinessvalue6.  Innovate“aroundtheedges”–createavant-gardeteamsthatbecometomorrows

mainstreamorganiza2on7.  EstablishCentersofExcellence,BigData/AILabs,andAnaly2cSandboxes8.  Migrateini2a2vesfromtestenvironmentstoproduc2oninasystema2cfashion9.  Celebratesuccesses–resultsspeaklouderthanwords10.  Don’tunderes2matetheculturalobstacles–focusonpeopleandprocess.

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Thosecompaniesthatprovethemselvestobeadeptatdevelopingandexecu2ng

ini2a2vesusingBigDataandAIcapabili2eswilllikelybethecompaniesbest

posi2onedtodeflectthreatsofagile,data-drivencompe2torsinthedecadeahead.

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How ‘Big Data’ is Different

FALL 2012 VOL.54 NO.1

REPRINT NUMBER 54104

Thomas H. Davenport, Paul Barth and Randy Bean

Please note that gray areas reflect artwork that has been intentionally removed. The substantive content of the ar-ticle appears as originally published.

Brought to you by

“HowBigDataandAIareDrivingBusinessInnova5on”–MITSloanReview“HowBigDataIsEmpoweringAIandMachineLearningatScale”–MITSloanReview“CompaniesBraceforDecadeofDisrup5onFromAI”–MITSloanReview“Variety,NotVolume,IsDrivingBigDataIni5a5ves”–MITSloanReview“Organiza5onalAlignmentisKeytoBigDataSuccess”–MITSloanReview

“TheChiefDataOfficerDilemma”--Forbes“SelngTheTableForDataScienceAndAIAtBankOfMontreal”–Forbes“HowVerizonisBuildingaBigDataandAICulture”--Forbes“Revolu5onizingRadiologywithDeepLearningatPartnersHealthcare--Forbes“HowAIandMachineLearningAreHelpingDrivetheGEDigitalTransforma5on--Forbes“WhyCulturalChangeisNecessaryforBigDataAdop5on”--Forbes

“BigCompaniesAreEmbracingAnaly5cs,ButMostS5llDon’tHaveaData-DrivenCulture”–HarvardBusinessReview“HowMachineLearningIsHelpingMorganStanleyBederUnderstandClientNeeds”–HarvardBusinessReview

“BigDataInnova5on:FailFaster,ExecuteSmarter”–TheWallStreetJournal“MakingTheCasefortheLong-TailofBigData”–TheWallStreetJournal

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