What’s ROAI?
ROAI is the Return on Artificial Intelligence. It’s the ROI (Return on Investment) of AI (Artificial Intelligence). Here’s what the studies say about the return on investment (ROI) of AI.
- $3.50 for every $1 invested, according to a Microsoft Study on the high side.
- Even $8 for every $1 invested among 5% of the companies in the study. However, these companies are who you might expect. They are the leading tech companies and large organizations, such as Atrium Health, that utilize AI to automate routine tasks, like processing claims, physician reports, and billing.
- On the low side, it’s 59 cents for every $1 invested, according to an IBM study. This includes a broader range of companies and is likely more representative.
- For 73% of companies that invest at least $1 million annually in generative AI technology, only 33% achieve a positive return on investment (ROI), according to Workplace Intelligence.
- Unfortunately, this means that many, if not most, of the 68% of companies that will adopt AI this year won’t see a return.
Businesses jump on the bandwagon with any significant innovation. That’s because they see everybody is doing it, their competitors are doing it, and no one wants to be left behind.
But AI is no ordinary innovation. It is a game-changer. Moreover, many believe it will transform the way businesses do business. But is it worth the investment without seeing a return?
6 steps to a successful ROAI
Measuring ROAI is how to avoid being thrown off the bandwagon. That’s because it shows how and when success is achieved. It’s the roadmap to the desired destination. Here are the steps to get there:
#1. Set targets and goals
Begin by envisioning what success with AI looks like. Quantify the level of improvement within a specific timeframe. Here are examples.
- Increase revenue by 25% in a year.
- Generate 35% more qualified leads within 6 months.
- Decrease operating costs by 60% in 2 years.
- Process more claims to see 30% greater profits in 6 months.
- Summarize clinical studies more accurately to achieve 20% better health outcomes within 1 year.
- Analyze purchase behavior more efficiently to predict future behavior, resulting in a 30% increase in revenue per customer within 15 months.
- Increase transaction speed for customers at the drive-thru by 40% within 6 months to generate a 20% increase in income.
Visioning what success looks like is the first step toward achieving it.
#2. Define key tasks
Tasks AI performs are how you hit your target. What will AI do? Here are some considerations.
- Generate content, images, and videos.
- Create an AI agent or sales agent to handle inquiries and answer questions and requests.
- Automate business processes like resume screening, email writing, and consumer onboarding.
- Automate accounting processes like data entry, invoicing, and payment.
- Personalize customer service and improve experiences.
- Generate code to help development teams.
- Analyze large datasets to identify patterns and predict trends.
- Categorize data, identify insights, and create action strategies.
- Predict demand and optimize inventory levels.
- Conduct financial analysis for risk assessment and fraud detection.
Results by tasks probably will vary. Expect some to do better than others and have someone who monitors and makes adjustments.
#3. Assign an AI taskmaster
The human importance of ROAI is crucial. That’s because AI can perform these tasks, but someone or a team has to be at the helm, managing progress and monitoring results. Here is what they do.
- Evaluate AI tools for the task and select the most suitable ones. A variety is likely to be required.
- Allow for mistakes or “hallucinations” that AI makes. Trust me, they will occur. However, it can likely be corrected with an improved prompt, a broader perspective, or targeted to a specific audience.
- Make improvements, provide assessments, and even switch AI tools when necessary.
- Establish a measurement plan with a timeframe.
- Adhere to and uphold ethical standards.
The following steps give more explanation. The ideal candidate is someone who has familiarity with AI, strong analytical skills, good managerial oversight, and sound business values. It could be a project manager, account executive, internal team, or consultant. Regardless of who holds the position, it is crucial.
#4. Assemble the AI toolbox
The selection of AI tools sets everything in motion. Of course, tools vary depending on the task. However, here are some to know about.
- Content Generation: The LLM (Large Language Model) is the foundation. GPT-4o from OpenAI, Gemini models from Google, and Llama 3 from Meta are leading contenders. Moreover, most have additional capabilities for image, video, and code generation, as well as many other features. Since LLM learns and improves over time, it is best to rely on one.
- AI Agents: A type of AI system that understands and responds to customer inquiries without human intervention. They can aid a sales force, generate more leads, create presentations, or be a personal assistant. Claude and Copilot are popular considerations for AI agents.
- AI Automation: Use artificial intelligence and machine learning to simplify business processes, improve decision-making, and reduce manual workloads. Moveworks, Power Automate, and UiPath are among the most widely used AI automation tools.
- AI Analysis Tools: Assist with data analysis, offering features such as data visualization, automated insight generation, and simplified data transformation, making them valuable for both novice and experienced data analysts. Tools in this area include Sana, Julius AI, and Microsoft Power BI.
This is a partial list. The players, categories, and upgrades are constantly expanding almost daily. Costs range from free, freemium, subscription, and custom solutions. Investments are made at this step. However, having the right tools for the task is essential, as is working with them to achieve the desired results at the optimal cost.
#5. Create a measurement plan with a timetable
AI is periodically measured against two types of metrics: usability and impact. The first measures how AI is performing at its task; the second shows how it is progressing toward the target. Here are some examples of each.
Usability of AI
Metrics like these measure the effectiveness of the AI tool
- Completion Rate: The percentage of people who complete a desired action based on the total number who had the opportunity.
- Success Rate: The percentage of success among several attempts to perform a procedure or task.
- Task Time: The time it takes to complete a desired task.
- Error Rate: The percentage of processing errors for a specific task or action.
- Satisfaction Score: A metric from a satisfaction survey that measures how happy a customer is with a specific product.
Impact of AI
These measure the effect on key business metrics.
- Conversion Rate: The percentage of users who completed a desired action.
- Retention Rate: The percentage of customers who continue paying for a product over a given time frame.
- Customer Lifetime Value (CLV): A prediction of the net profit attributed to the future relationship with a customer.
- Churn Rate: (Lost Customers ÷ Total Customers at the Start of period) x 100.
- Net Promoter Score (NPS): On a scale from 0 to 10, how likely are you to recommend this product/company to a friend or colleague? Net Promoter Score helps measure customer loyalty based on their responses.
Determine a frequency for measurement. If you want to hit your target in a year, then picking measurements that you review quarterly helps keep your strategy on track.
#6. Achieve your target ROAI
ROAI is calculated using the formula above over the established timeframe. Keep a close eye on how your tasks are progressing and how the tools are performing by regularly examining the usability and impact metrics you have chosen. It has a significant impact on achieving the desired results.
Based on available studies and our experience with ROI, a norm of at least 200% or $2 for every $1 invested is a realistic expectation for a company committed to a successful ROAI.
Does the Return on AI Investment (ROAI) make sense for your business? Is it a motivation to consider these steps? Do you need an AI taskmaster?
