Businesses with an AI focus generate higher profits: Deakin University

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Businesses with an AI focus generate higher profits: Deakin University

New research from Deakin University backs the ROI of artificial intelligence (AI), proving that businesses with an AI focus see an improved performance and bottom line.

The study published in the Journal of the Academy of Marketing Science investigates interest in AI based on 400 US company’s 10-K reports.

The report reveals that businesses, regardless of size or sector that have a greater focus on AI generate higher profits per employee, higher net profits, reduced advertising spend and experience greater efficiency.

“While AI might be a significant investment for some companies, we can now be more confident in saying it’s an investment that will pay off,” said lead researcher Dr Sagarika Mishra.

In order to determine an “AI focus”, the researchers used an appendix of 122 AI-related key words, and searched for the frequency of those words in the annual 10-K reports. The university recognised the limitations of the research in that despite having a large sample, it did not consider firms who have not explicitly mentioned AI or have mentioned terms that were not in the appendix.

“We demonstrate how AI focus can reduce costs by reducing adspend and increasing cost by increasing headcount/ wage growth. This is because there are two broad aspects to AI: one focused on automation and the other on new jobs,” the report said. 

“Although cost has increased in terms of salaries and wages, AI focus has a positive correlation with net efficiency measures such as return on sales (net income per $ of sales), return on marketing investment (net income per $ of marketing investment) and net profit per employee. This suggests costs are reduced in other areas of the production process.”

The research also reveals that companies with a strong AI focus have seen increased employee numbers and job creation.

“People are becoming more demanding; they want better service from the companies they interact with. AI shows that can be achieved by humans working with machines to increase their capabilities,” said Mishra.

According to Professor Ewing, Executive Dean of Deakin’s Faculty of Business and Law, “Progressive organisations can’t escape AI – disruption will be ubiquitous. The time for a ‘wait and see’ approach is over. The question is are they going to lead or are they going to follow?”

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