Introduction
Generative AI ROI helps businesses determine whether investments in AI tools deliver measurable financial and operational benefits, including improved productivity, reduced costs and better business performance.
Generative AI is a technology that can help the businesses to automate routine tasks such as writing emails, analyzing the data and interpreting the results. It can save time and help employees to focus on other important tasks .
For example, a marketing team can use ChatGPT to draft a product advertisement in minutes instead of creating it from scratch.
Generative AI ROI: 7 Essential Metrics Every CFO Should Track
Increased Productivity –
AI tools can help the employees to complete their tasks more efficiently, this saves time and allows them to focus on other important responsibility and improving overall productivity.
Reduced Operating Costs-
AI tools can automate repetitive tasks, which helps to save the time and also reduces the need for additional staff.
As. Per Deloitte study 93% of businesses using AI driven technology have reported significant cost savings.
improved Creativity-
AI tools can help to generate ideas and can create social media posts, images and videos for marketing campaigns. This gives business more promotional ideas for their products.
Improved Data Analysis –
AI tools can help to identify patterns and trends in data, this helps business to understand data better and make more informed decisions.
What is the role of CFO in Gen AI ?
CFO (Chief Financial Officer) plays an important role in ensuring that Investment in Generative AI aligns with the company’s goals and overall strategy.
This requires the a close collaborate between CFO , CTO who focuses on technology developmen) and CIO who focuses integrating technology with workflows . Thus enabling to understand technical and financial aspects of Gen AI
Key Responsibilities of the CFO
Evaluating investment costs:
CFO compares the cost of purchasing an existing AI tool with the cost of developing one in-house so as to identify a more suitable option.
Assessing benefits:
CFO determines whether AI can save time, reduce operating costs or improve employee productivity.
Measuring ROI:
CFO determines whether benefits generated by AI justify the cost of investment.
Evaluating risks:
Focuses on Considering challenges such as inaccurate AI generated results, data security concerns and lack of employee training to use AI tools .
Sometimes, companies invest in Generative AI to maintain their competitive advantage without properly assessing their actual needs..
This can lead to a unnecessary spending if the if AI benefits do not justify the cost.
Example: A mid-sized company plans to invest in an AI tool to automate repetitive tasks, even though it’s employee already manages the workload efficiently. In this situation the investment may not solve the actual problem and could result in unnecessary expenditure.
Key considerations
Before investing in Generative AI, a CFO should consider the following questions:
1.What problem will the AI tool solve?
Identify the actual business problem that AI is expected to address.
2.What are the total costs?
Consider the subscription costs , development cost , employee training costs and maintenance costs of Gen AI.
3.What benefits will it provide?
Estimate the expected time savings, cost reductions and improvement in employee productivity using AI.
4.What are the challenges of AI ? How success of AI will be. Measured?
Set clear performance matrices to evaluate whether AI is delivering expected results.
Key indicators of ROI
Return on Investment (ROI): ROI measures the profit earned by comparing the costs with benefits earned
Formula:
ROI = (benefits – cost of investment÷ Cost of Investment) × 100
CFO can evaluate the performance of Gen AI using following indicators :
1.Operational efficiency – measures improvement in productivity including no of working hours saved through automation.
2. Revenue growth – measures the changes in sales, revenue growth rates and customer conversion rates after implementing in AI .
3. Customer satisfaction – evaluate whether AI improves customer experience , customer loyalty and customer retention.
4. Costs savings – measure reduction in operational costs and labor costs through automation and better resource utilization.
Businesses planning AI investments should also understand how an AI operating model for mid-size companies can align technology adoption with business goals, operational efficiency and measurable outcomes.
References
How to asses gen AI readiness?
CFO role in age of gen AI
https://www.ibm.com/think/topics/cfo-generative-ai
Why business should invest in Gen AI or the risk of getting left behind
https://www.talentdesk.io/blog/why-businesses-should-invest-in-ai?hs_amp=true
Gen AI and ROI how can business benefit from Gen AI
Measuring ROI of Gen AI
