Digital transformation is so last year. CEOs and their boardroom colleagues have heard about the potential power of generative artificial intelligence (Gen AI), and they want their CIOs to deliver a new type of data-led change program: AI transformation.
Gabriela Vogel, a senior director analyst in the Executive Leadership of Digital Business (ELDB) practice at tech analyst Gartner, told ZDNET that her firm's 2024 CEO Survey suggests many bosses are responding to the hype about Gen AI by demanding AI rather than digital transformations.
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The survey shows how CEOs' use of the term "digital" increased for a decade but has declined over the last two years, just as their use of "AI" has started to rise. AI is mentioned much more in CEOs' top two strategic priorities for 2024 (24%) than in the 2023 survey (4%). At the same time, mentions of "digitalization" have declined significantly (down from 20% to 13%).
"My take is the names are shifting," says Vogel, referring to the survey results. "We see in the report that CEOs are displacing the word digital with AI."
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She recognizes some people might think AI is just the latest in a long sequence of hyped-up technologies, such as mobile, social, cloud computing, the Internet of Things, and blockchain.
However, Gartner believes a new distinctive phase has begun with the rise of Gen AI, which it refers to as the autonomous business era. Vogel says IT professionals selling project ideas in this era must focus on AI and data.
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"If you go to the board and say you're here to talk about digital or even business transformation, that's not necessarily what they're interested in. What they're interested in is AI transformation."
The survey shows more than half of CEOs (59%) believe AI is the technology that will most significantly impact their industry over the next three years. Digitalization is second — with just 5%.
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The belief in AI is so high that Gartner says it has never seen such a strong technology trend in the 15-year history of its CEO report. So, what does this huge interest in AI transformation mean for businesses and the IT departments that will deliver this data-enabled change?
Vogel says this fascination creates a big opportunity for CIOs. The CEO's usual go-to person for business transformation is the CFO or COO. But not this time. "With the entry of Gen AI and AI as a whole, it's a more technical topic, and CEOs are moving more towards the CIO, the CTO, or the CDO to try and unlock value."
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Gartner's research suggests half of CEOs say the executive they rely on to make the most of Gen AI is the CIO or their digital leadership equivalent. That's potentially great news for ambitious IT professionals.
"I find it a fascinating moment to be a CIO right now because you have so many options," says Vogel.
"You can pretty much go where your ambition takes you, which is a part of the conversation that didn't exist before. Now, CEOs are listening. They're saying to CIOs, 'You know how to bring value? Well, I'm all ears now. Tell me how I can do that.'"
Facing the challenge
So far, bosses are fascinated by AI and want IT leaders to help them embrace technology. In short, AI transformation sounds like the kind of opportunity CIOs have wanted for quite some time.
However, it's not all good news. Interest in AI brings heightened expectations — and Gartner's research suggests some of these hopes are unreasonably optimistic.
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Almost two-thirds (64%) of CEOs believed 2023 was a breakthrough year for the power of AI. That was the year when many CIOs were busy telling me Gen AI remained at the exploratory stage and nowhere near production. It's a similar story now. Gen AI production stories are the rarity, not the rule.
When I speak to CIOs about exploring emerging technology, I hear a consistent tale of ethical concerns, security issues, and hallucination risks. Yes, they'd like to explore generative AI, but their priority is data foundations, strategies, and frameworks.
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Unfortunately, that cautious approach is unlikely to resonate with bosses. Gartner's research suggests CEOs believe tech sector hype around Gen AI is justified. As many as 87% of CEOs believe the benefits of AI outweigh the risks.
Those sentiments will ring alarm bells for CIOs who will be asked to lead Gen AI explorations. Vogel recognizes the scale of the challenge for IT professionals.
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"It's a frustrating position for CIOs, and it's become a very, very political position for digital leaders because they have a lot of knowledge. So, when do they turn to CEOs and say, 'No, that's not what's happening. That's not what the technology does,'" she says.
"Do they have the leverage to do that? Do they have the power to do that? Do they have the influence? And in some cases, CIOs might not, and they're in a very difficult political situation."
Building on your foundations
However, digital leaders must respond to the demands for AI transformation. Rahul Todkar, head of data and AI at travel specialist Tripadvisor, told ZDNET the right approach is clear: don't panic.
Like Vogel, he says AI is the latest in a long line of technology-driven digital transformations.
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"At some point, CRM was all the rage or automation software," he says. "The focus of transformation can be replaced by whatever technology is in vogue. I remember when big data was going to transform everything. Now, the hype suggests generative AI and large language models will do everything for us."
Rather than getting carried away with the hyperbole, Todkar says everyone must get some perspective on the scale of the change."AI transformation is true, but it's not replacing digital transformation. It's an enhancement of digital transformation," he says.
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As a first step, Todkar encourages his peers to focus on use cases and think about how the foundations they've built can support the next wave of change. "After all, you may or may not need AI to drive certain transformations. If you take call centers, certain operational areas, and sales and marketing, there are a lot of areas where AI can certainly help," he says.
"But you don't have to necessarily undermine what you've done in digital transformation and start a brand-new exercise. You can build on top of that earlier work. It's just a natural progression of any transformation agenda. So, AI is just an extension of that effort."