Pivot to an AI-Platform Model for Business Success, Even if a Legacy Company
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Pivot to an AI-Platform Model for Business Success, Even if a Legacy Company
Platform models generate data from all participants, leading to new opportunities. And research is showing companies successfully executing on AI are seeing higher employee morale.
By John P. Desmond, Editor, AI in Business
Companies that have managed to build a “multi-sided” AI platform are in leadership positions with enormous valuations – Google, Amazon, Facebook and Apple for example – but one pundit is suggesting that legacy companies with established brand names may also be able to build AI platforms that can extend the business.
“Platform business models typically generate large volumes of data from all participants in the ecosystem, and AI is required to make sense of it all,” stated Tom Davenport, author and academic who concentrates on innovation, writing in a recent issue of Harvard Business Review. He adds, “It’s not surprising that the leading platform firms listed above are also world leaders in the application of AI to their businesses.”
Some traditional businesses are organizing a multi-sided platform, using data and AI models to help orchestrate services for customers. While it requires new strategies, technologies and business relationships, companies that make the transition successfully can achieve rapid growth.
The Deloitte 2021 State of AI in the Enterprise survey showed that companies with more diverse ecosystems were 1.4 times as likely to use AI in a way that differentiates them from competitors.
Davenport cited as an example Ping An in China, which began as an insurance company in 1988 and is now in financial services, health care, smart cities, automobiles and real estate, “each of which constitutes a platform,” he states. In healthcare, for example, the Ping An platform connects government, patients, medical service providers, health insurers and technology. The Ping An Good Doctor system uses AI to issue medical advice to its members with mobile devices.
The Ping An healthcare system provides diagnosis and treatment advice for more than 3,000 common diseases, has nearly 350 million users, more than 1,800 medical and nursing practitioners and nearly 10,000 health care experts across China. It also partners with more than 110,000 pharmacies, 49,000 clinics and more than 2,000 medical examination centers. In 2020, the company performed more than 830,000 medical transactions per day. “These numbers illustrate … the rapid scaling possible with a platform-based business model,” Davenport states.
AI Transformation at CCC Intelligent Solutions of Chicago
As an example of a mid-sized company that can compete using an AI-enabled platform model, he cited CCC Intelligent Solutions, founded in 1980 in Chicago. Its platform is focused on digitizing the “automotive insurance economy, and easing claims and damage repair friction for millions of drivers every year.” The company has relationships with more than 300 insurers, more than 27,000 repair sites, more than 4,000 parts suppliers, and all the major auto manufacturers and partners.
The company has assembled more than $1 trillion of historical claims data, billions of historical images and data on auto parts, collision injuries, regulations and telematics. “Each new member provides more value to the network and more data, leading to better AI models,” the author states.
All the company’s transactions happen in the cloud. The firm’s total revenue for the fourth quarter of 2021 was $187.1 million, at a gross margin of 75 percent, according to the company’s financial statements. Total revenue for 2021 was $688.3 million, net growth of 15 percent over the previous year. Its claims offering is used by USAA and other leading insurers.
BT Group Pursuing an AI Transformation via Google Cloud
Another strategy is to partner with a major service provider to achieve an AI transformation. BT Group, the British multinational telecom company, recently decided to make Google Cloud a strategic partner. The two announced a five-year effort to accelerate BT’s company-wide digital transformation. BT will use a suite of Google Cloud products and services, including cloud infrastructure, machine learning and AI, data analytics, security and API management. The hope is to improve customer experiences, reduce costs and risks, and find new revenue streams.
The initiative includes an effort to create a “group-wide data and AI fabric as part of its cloud first and AI-first strategy,” according to a press release issued by Google Cloud. The two companies seek to “unlock hundreds of new business use-cases.”
"Our partnership with Google is one of a series of strategic moves that BT Digital is taking to help accelerate BT's growth and digital transformation. This is a partnership that is deeper than just at the technology level. It will help Digital as a whole supercharge BT and drive its return to growth," stated Harmeen Mehta, Chief Digital and Innovation Officer, BT, in the release.
The core migration of data is expected to be completed by 2023. "We're proud to collaborate with one of the world's leading providers of communications services and play an integral part in its digital transformation journey," stated Thomas Kurian, CEO at Google Cloud.
Transformation to an AI Platform Helps Company Culture as Well, Says MIT Study
Companies that execute this transformation to an AI platform experience cultural benefits as well, suggests a recent report from the MIT Sloan Management Review working with the Boston Consulting Group. The report is based on a global survey of 2,197 managers and interviews with 18 executives.
Among respondents that reported AI implementations that improved efficiency and decision-making, more than 75 percent also saw improvements in team morale, collaboration and collective learning. “Culture change from using AI transcends the legitimate, but myopic, promise that AI will liberate workers from drudgery,” the authors stated.
Examples cited by the authors included McDonald’s, the fast food multinational, which is using advanced analytics to elevate the customer experience. “This data allows us to better understand customer needs and expectations, enabling us to deliver the most relevant experience,” stated Amy Adams, Global Head of Personalization at McDonald’s. “We’ve also developed a global test-and-learn practice that allows us to better anticipate what will resonate with customers by testing various hypotheses. We’ve been building this new way of working and muscle over the last few years, and this capability has really motivated and influenced the organization to work cross-functionally differently than we had ever done previously.”
In another example, the global exchange operator Nasdaq has used AI to help its analysts work more productively.
“Historically, it would take an analyst anywhere between 40 and 90 minutes to grab a document, read through it, figure out if it contained certain types of information that the clients would find interesting, assess where that information was, and get it into the system,” stated Douglas Hamilton, Nasdaq’s associate VP of AI, describing the work involved in scanning a prospectus for information that can benefit clients.
With the help of AI, Nasdaq now processes 6,000 documents every three minutes, which has substantially improved morale. The analysts who were previously devoting hours to scanning reports “were quite pleased, because now they get to do new and exciting and interesting things on a daily basis instead of the same old thing every day,” Hamilton stated.
Read the source articles and information in the Harvard Business Review, in a press release issued by Google Cloud, and in the MIT Sloan Management Review.
(Write to the editor here.)