AI ROI Is About Human Capital – Making All Employees More Valuable
Traditional metrics miss some of AI’s biggest payoffs, including faster learning and better processes.
At a recent Zero100 executive event, one CSCO flatly dismissed the idea of calculating ROI on AI use. The heated discussion that followed boiled down to a realization that, used effectively, AI makes almost everyone better at their job. Maybe just as Microsoft Office is never really subjected to rigorous business case analysis, AI may soon become so essential to employee productivity that we stop trying to quantify its functional ROI and instead start measuring its impact on human capital development.
Could faster learning and better processes beat headcount reduction as AI’s killer app for operations leaders?
Yes – if leaders build for orchestration skills alongside AI fluency.
Better Tools, Better Work
A new article in The New Yorker disputes whether AI is a bubble, but not from the Wall Street angle. Instead, it points out that millions of individuals are already paying for AI because it “makes them more capable and productive. It is, from their perspective, a multiplier of human capital.” Share prices might plunge, but people are already sold that AI makes them better at their work.
For business and operations leaders, then, the question is how to measure the acceleration in human capital development within our teams, and the speed with which managers deploy these supercharged teams to orchestrate new processes for creating customer or shareholder value. A fair analogy for AI might be the rollout of electrification a century ago when electric lights, motors, and heat sources radically changed the processes of manufacturing, distribution and even consumption by displacing muscle and fire in much of the world economy.
In both cases, the revolution is a matter of new tools creating new work so that everyone from frontline operators to middle managers and business leaders can set their sights higher. Completely new industries arose (electrical supplies, consumer appliances, power tools), supporting the development of higher human-capital careers (electricians, engineers, service repair technicians).
The same phenomenon applies to other transformational labor-saving technologies including the moving assembly line (Ford Motor Company and Detroit), motion-picture cameras and film (the Hollywood studio system), and semiconductor fabrication of integrated circuits (Fairchild Semiconductor and Silicon Valley). In these examples, breakthrough productivity drove business investment to target higher-leverage employees, launching a virtuous circle of human capital accretion driving financial returns, which sustained still more investment in human capital.
In another conversation last week with leaders of several mid-market logistics service providers, the same story unfolded. One 3PL president talked about AI as the key to better chargeback management with shippers. This example could not have been more practical, and yet the same takeaway about human capital stood out.
The president had no intention of eliminating the position of the person handling chargebacks. Their experience, now augmented with AI, made them even more effective in the job of not only disputing chargebacks, but also doing root cause analysis on why they were happening in the first place, improving the whole process.
The Quintiles Opportunity
Of course, not all workers are equal. Top quintile people (20%) are often so good that they’ll embrace, use, and even improve the tools AI makes possible. The second quintile who are, by definition, above average will see the writing on the wall and learn from the top 20%. The bottom quintile will probably self-select out, while the middle 40% is a management challenge – possibly trainable, but not necessarily able to ride the virtuous circle upward.
For COOs looking to make good on AI investments, it is critical to measure teams’ speed and the quality of applied learning in terms of impact on overall process performance. Orchestrators who connect workflows are the ones who see how task-level improvements can add up to transformative productivity gains. They are your top quintile.
Zero100 data shows that AI orchestration leaders significantly outperform laggards on financial metrics. Investments in people and change management are key, but AI is the secret sauce.
Invest in Your Best
AI will give your top quintile a massive boost. Your job as a leader is building programs that harness their learning energy to the rest of your organization.