AI: CEOs Need to Have a Portfolio Approach

What do you think: how is the development of generative AI changing business? Where are we now?

Generative AI is undeniably transforming the business landscape. When the technology first emerged, there were debates about whether it was just another passing hype or a truly revolutionary innovation. Comparisons were drawn to smaller-scale technologies like blockchain or virtual reality, but it has become increasingly clear that generative AI is on the same transformative level as the invention of the internet or the smartphone.

The impact on organisations is significant. On the revenue side, AI can enhance customer engagement and communication, ultimately driving sales. It supports sales teams across industries such as retail, banking and insurance by improving efficiency and personalisation. On the cost side, AI has the potential to automate certain functions, reducing the need for manual labour in specific areas.

However, this transformation also brings challenges, particularly in the job market. We are seeing substantial changes in roles that involve generating customer communications, such as copywriting, as well as in IT, where up to 30–50 percent of coding tasks can now be automated. These shifts will require businesses and individuals to adapt to new realities.

In financial services, where the implications are particularly significant, AI is already improving efficiency in credit risk assessment, operational processes and customer interactions. Tools like chatbots and voicebots are replacing a larger and larger amount of client communication volumes in some cases. While there is occasional scepticism about the quality of these interactions, the pace of advancement is remarkable.

At the same time, rapid adoption of AI introduces new risks, such as opportunities for AI-generated fraud. Companies need to prioritise safeguarding their systems and data against these emerging threats.

Overall, AI represents not just a tool for optimisation but also an entirely new revenue stream. To fully leverage its potential, businesses must invest in talent and ensure their teams understand and can effectively utilise AI. The scale of change is global and transformative, requiring companies to stay ahead of the curve.

At the end of 2024, BCG experts published a report on “How CEOs can navigate the new geopolitics of genAI”. What are main conclusions?

Firstly, the scale of investment in AI is extraordinary. In the US, private investments in generative AI startups have totalled USD 65 billion since 2019, and AI-directed capital expenditures by major tech firms are expected to exceed USD 200 billion, with similarly significant investments in China and other countries. Such levels of funding are unprecedented.

Secondly, while the US has traditionally dominated AI development, China has made remarkable progress. At the start of 2024, China’s capabilities in large language models lagged significantly behind, but by mid-year, they had achieved 90 percent of the performance of Open AI model. This rapid advancement is driven by companies like Alibaba, startups such as 01.AI and other firms including Zhipu AI, Baichuan AI and Moonshot.

Despite discussions about how the chip war might limit China, the country’s companies, such as Huawei, continue to invest heavily in AI. Notably, NVIDIA, a global leader in AI chip development, created a custom chip for China to circumvent sanctions, and Chinese companies acquired USD 5 billion worth of these chips in 2023. This highlights the paradox of American firms profiting from China’s growth, despite geopolitical tensions.

Importantly, AI innovation isn’t confined to the US and China. The European Union, India, the Middle East, Japan and Korea are all making significant strides. Europe stands out for its talented workforce and successful AI startups creating advanced models tailored to various industries. France-based Mistral has developed seven of the world’s top LLMs and secured USD 1.2 billion in funding, while Germany’s Aleph Alpha has created two leading foundation models and shifted its focus to industry applications. Smaller startups like Kyutai, Poolside and Black Forest Labs are also attracting significant investments, reinforcing the trend toward more focused AI models that excel in specific areas like speech, code generation and text-to-image.

The EU faces unique challenges as each member state operates at a smaller scale individually. However, by working together, the EU’s combined GDP of USD 19.5 trillion surpasses that of China. Collaboration across borders is crucial for competitiveness. For example, Mistral develops AI models in France, trains them on Italian supercomputers and deploys them from Swedish data centres where energy costs are lowest. These systems are powered by chips made using extreme ultraviolet lithography, exclusively manufactured in the Netherlands by ASML.

This cohesive, cross-border approach demonstrates the importance of collaboration in driving AI innovation across the region.

It is really impressive.

In Poland we have some important AI companies like ElevenLabs with valuation of USD 1.1 billion at the beginning of 2024. Or PhotoAiD, which was on the list of 1,000 FT fastest growing-companies in 2023 and 2024. Or Tooploox, or EffectiveSoft, or Coherent Solutions. There are lots of companies in Poland, much smaller, but also developing fast and taking some niche areas in AI.

Poland can also participate in this growth. We have lots of good engineers and lots of good talent compared to the world.

Let’s take CEOs’ needs into consideration. What should they do?

As for sourcing AI solutions, I would recommend looking beyond the most obvious providers. There is a wide variety of companies globally that offer innovative and specialised solutions. To reap business effects you need to employ smart engineering teams which weave impactful solutions on top of LLMs and Foundation Models obtained from leading vendors. Also beware of creating science-like departments that relish in endless research while not focusing on pragmatically extracting business value.

The companies which want to expand into other geographies, have to take into account local models. The availability is huge. I would say it also helps with the geopolitical shocks. CEOs need to have a portfolio approach rather than to have one company.

Talking about Poland, national institutions should support development because this sovereignty may become critical for the national security.

We have to make sure that in Poland we have local data centres, we have local talent, we are secure from this perspective.

Is this a recommendation for governments and for international communities like the EU as well?

This is a recommendation for the governments, also for the European Commission. The Polish presidency of the EU is an excellent opportunity for Poland to prioritise this topic on the agenda. Of course, the biggest thing is the security and the investments into European security. But this is part of this, isn’t it? Security is also software and AI. So that’s why I think that it’s the role of the European governments, and Europe must work together on this. And the role of CEOs of big companies is to be open to local companies, AI companies, and just have a bigger picture.

JPO

PARTNER: the boston consulting group