CEOs struggle to tell if AI is paying off

While AI investment is booming and many big companies are embracing the productivity benefits of the technology, many CEOs are struggling to determine whether the gains are worth the cost.

In a recent EY-Parthenon survey of 1,200 CEOs from large companies around the world, just 16% of respondents said they had detailed, real-time visibility into their AI costs and high confidence in assessing their return on investment.

While just over half said they had reasonable confidence, 24% of CEOs said while they were able to track some of their businesses AI costs, their ability to assess their ROI on their AI spend was limited. An additional 2% said they could not reliably assess ROI, and 2% said they were unable to assess their spend or ROI at all.

While respondents said that they were seeing some productivity gains from AI, it remains difficult for many to determine whether these gains are worth the increased spend on tokens.

“The pace of adoption will depend not only on what the technology can do, but whether the value created by each token exceeds its cost,” said EY-Parthenon Chief Economist Gregory Daco.

He added that without changes to the operating model, many benefits of AI are likely to be lost to complexity and wasteful friction in adoption.

The question of how CEOs measure the productivity benefits of AI is clear: if their business delivers higher output without increasing headcount, AI adoption is delivering productivity benefits.

More than a third of CEO said this was the clearest evidence of productivity improvements creating value in their organisation.

However, according to the survey, four in five CEOs believe that AI will have a greater effect on roles, skills, and how work is organised than on workforce size in the next three years.

CEOs believe that more than questions over available capital, the real blocker to AI-enabled growth will be skills shortages. 47% said their business was not developing skills quickly enough to keep pace with AI innovation, and 72% said skills shortages would become a greater barrier to growth than access to capital within three years.

“People need to understand specifically what automation will mean for them, and we have not always been good enough at explaining that,” the CEO of a European company in the mobility sector told EY-Parthenon.

“When you announce automation to a workforce in this industry, people do not hear ‘productivity.’ Instead, they hear ‘job losses.’ We need to be clear much earlier about which roles will change and how, and pair those changes with a genuine training pathway and a job at the end of it.”

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