Be it smartphones, automobiles, computers, laptops, smartwatches or white goods connected to the internet, artificial intelligence (AI) is all around. “AI touches almost every aspect of our lives,” said a 2017 PwC report titled Sizing the prize: What’s the real value of AI for your business and how can you capitalize. “And it’s only just getting started.”
Companies should increasingly rely on it to improve their operations if they want to compete against established names at home and abroad. “While some markets, sectors and individual businesses are more advanced than others, AI is still at a very early stage of development,” according to a McKinsey study in December 2022. “There are … opportunities for emerging markets to leapfrog more developed counterparts.”
The Egyptian market has two ingredients vital for successfully implementing AI solutions. The country has a population of over 100 million, the second-largest in Africa. And the adoption of technology is rising fast, fueled by government policies. The Ministry of Communication and Information Technology estimated in October that mobile penetration had reached 94% of the population. Internet penetration in the fiscal year 2021/2022 hit 72.2%.
That gives companies with the correct AI systems, expert employees, culture, and policies the ability to accurately “understand and forecast” how the market might behave. That helps managers make better decisions.
What is AI?
The PwC report defined AI as a “collective term for computer systems that can sense their environment, think, learn and take action in response to what they are sensing and their objectives.”
Globally, digital assistants such as Android’s Google Assistant, iOS’s Siri and Amazon’s Alexa are some of the most common interactive applications that use AI extensively. Those systems use past requests and instructions to calculate probable future results.
AI-powered conversation starters (Chatbots) are present on many portals. SWVL, Careem and Elves are a few examples in Egypt that rely on that technology to assist and direct customers.
The third popular application of AI is “machine learning,” where AI-powered equipment can change how they behave and react to volatile environments without explicit instructions.
AI systems can automate factory tasks or deal with customers directly. They also can provide “assisted intelligence,” said the PwC report, that helps “people to perform tasks faster and better.” The third level of AI is “automated intelligence, [which] helps people … make better decisions.” Then there is “autonomous intelligence,” where the AI system can make some decisions while collaborating with humans on others.
AI in 2022
In its December review of AI, McKinsey found that half of the survey respondents said they had adopted AI, compared with 20% in 2017.
The most popular application is natural language generation, where the AI system converses with users in real-time. The other is computer vision, where an AI system identifies images using an attached camera or sensors, acting or presenting recommendations based on its findings. The McKinsey report said the adoption rate of these two technologies doubled from 1.9% to 3.8% between 2008 and 2022.
The functions that relied the most on AI in 2022 were “service operations optimization, creation of new AI-based products, customer service analytics, and customer segmentation,” the report noted. In the survey, 24% of respondents said they adopted AI to optimize their service operations (the most popular use). The 10th most popular use — predictive service and intervention — saw 14% of respondents say they benefited from it in 2022.
That adoption pace means a growing number of companies have increased their AI investments. “Five years ago, 40% of respondents at organizations using AI reported more than 5% of their digital budgets went to AI, while more than half of respondents report that level of investment today.”
Adopting correct and effective AI systems can reduce costs and increase revenues. Nearly 32% of those surveyed across all sectors said they saw a cost drop thanks to AI, while 63% reported more revenue.
McKinsey noted that by the end of 2022, service providers saw the most gains — 45% of respondents said their costs dropped, while 57% reported a jump in profits. Manufacturers reported similar progress, with 42% saying their costs declined, while revenues went up by 61% when integrating AI. Supply chain management saw 52% reporting lower costs, while 59% saw greater revenue. Other functions that benefited include human resources, marketing and sales, risk assessment and management, product and service development, and strategy and corporate finance.
The PwC report said AI affects everyone. “No sector or business is in any way immune from the impact of AI,” it noted. “The potential for innovation and differentiation could be all the greater because fewer market players are currently focusing on AI.”
One of the biggest challenges facing organizations is AI’s ultimate purpose: “Doing things that have never been done before, rather than simply automating or accelerating existing capabilities. Some … strategic options that emerge won’t match past experience or gut feelings. As a business leader, you may therefore have to take a leap of faith.”
The PwC report recommends leaders “work out what AI means” for their businesses. They need to start by scanning technological developments, forecasting competitive pressures within their sector and target market, and determining how quickly AI solutions will arrive and how to respond. Next, “identify the operational pain points that automation and other AI techniques could address.”
The second question is to determine which course would be best. “Do you want to be an early adopter, a fast follower or a follower?” said the PwC report. The objective of implementing such systems is also vital: Is it to “transform [the] business or to disrupt [the] sector?”
The next step is to determine whether sufficient data is collected and categorized from the company and sector to make the system effective, as well as planning to deal with potential challenges.
Managers need to “map the key process flows to be automated, and decision flows to be augmented,” noted PwC. That would be based on which “functions contain high potential processes that could drive near-term savings.” Ultimately that feeds into how much investment must go into assembling the AI system and how to design it to collect more data and use it more effectively.
To manage such profound changes, business leaders need to “secure the talent, technology, and access to data to make the most” of AI. That could prove challenging, as the PwC report says employees who can operate and interpret results from AI systems are “in short supply, especially in less developed markets … long-term training and development” is essential. Having the right corporate culture is vital. The ideal culture would be “data-driven that blends intuition and analytical insights with a focus on practical and actionable decisions.”
The report said companies that want to integrate AI must also “build … governance and control … Trust and transparency are critical.” The higher a company’s profile and the more extensively it uses AI, the more “a malfunction … is headline news,” PwC said. “This reputational risk applies to all forms of AI.” Another challenge is to ensure the AI system treats everyone equally. “Customer engagement robots have been known to acquire biases through training or even manipulation,” noted the report.
To avoid getting things wrong with AI systems, the PwC report says business leaders need to consider the system’s societal and ethical implications. They also need to “build stakeholder trust.” In addition, companies need to develop new communication plans to explain those advanced “thinking” solutions to customers. Lastly, companies should use consistent monitoring and reprogramming to ensure the AI system is not biased. “Transparency is not only important in guarding against biases within the AI but also helps to increase human understanding of what the AI can do and how to use it more effectively,” the PwC report said.
Despite the potential implementation risks, AI is critical for a company’s long-term success. “It’s easy to dismiss a lot of what’s said about AI as hype,” said the PwC report. “Yet, our analysis underlines that without decisive response, many well-established enterprises and even whole business models are at risk of being rendered obsolete.”
AI systems could benefit companies in dire straits. Egypt faces rising inflation rates (over 20%, up from around 7% in January 2022), strict import controls and delayed cargo at ports. Meanwhile, consumption patterns are affected by a mix of sentiment and the Central Bank’s monetary tightening, evident in rising interest rates and restrictions on foreign currency spending abroad. Those factors make increasing productivity and efficiency while reducing costs vital in the short term.
In the long term, operating an AI-powered organization will be necessary to survive and thrive. Fast adoption can “capitalize on openings and ensure [the] business doesn’t lose out to faster-moving and more cost-efficient competitors.” Accelerated adoption by existing companies could suppress the impact of new types of companies in the same target market. Tech companies are moving powerfully into mass transport companies (SWVL), non-bank financial services (Fawry) and retail (e-commerce portals).
The report said business leaders need to ask: Can the company move ahead of the competition? What are the openings for manufacturers, technology companies and others to make inroads in the market? Could the business be at risk of becoming obsolete if it doesn’t move quickly enough?
The PwC report said getting the correct answers would result in a company that is far more capable in a far more appropriate way than would be without the infinite possibilities of AI.