What Does Artificial Intelligence Mean for Businesses?

- Co-authored by David Salehi, Intern at Blue Chip Partners

In 2023, chatbots such as OpenAI’s ChatGPT have seen a surge in popularity, demonstrating the power of artificial intelligence (AI) in enhancing communication and interaction. However, this is just the tip of the iceberg. The potential applications of AI are vast, lying well beyond the realms of popular media discussion. Applying AI in different industries could boost profits by reducing operational costs and improving efficiency. In this post, I will dive into what I believe are some of the “lesser known” applications of AI that may be transformative for industries in the future.

AI in Industrial Machinery 
Deere & Co. (DE) is a US industrial company primarily known for manufacturing agricultural equipment. Less commonly known is that Deere has become a leader in AI & Machine learning by equipping their heavy machinery with advanced technological capabilities. For example, Deere launched a product that uses AI & machine learning to identify and distinguish weeds from crops. The implementation allows machines to spray/kill unwanted weeds without harming crops, which benefits farmers by reducing waste. Machine learning is also used to analyze real-time crop data, providing yield projections and crop health data. Deere Chief Technology Officer Jahmy Hindman said, “It’s easy to underestimate the amount of technology in the industries we serve, agriculture in particular…Modern farms are very different from the farms of 10 years ago, 20 years ago, and 30 years ago. There are farms that are readily adopting technology that makes agriculture more efficient, more sustainable, and more profitable for growers.”

This brings to attention how AI will affect an industry like industrials. Deere sets a precedent that AI can significantly improve efficiency, enhance performance, and reduce costs. It will raise the bar for what heavy machinery is capable of, and an industry-wide transformation could result from the effective integration of AI in industrial machinery. Previously labor-intensive tasks may be automated, and previously inefficient processes have potential for improvement. Customers may be willing to pay top dollar for efficient machinery, and may start to demand AI-based capabilities from other machinery/equipment across the industry.

AI in Pharmaceuticals
Pharmaceutical companies pour billions of dollars into research and development every year to search for their next blockbuster drug. What if Artificial Intelligence invents the next blockbuster drug? Integrating AI into drug discovery involves employing algorithms to sift through giant data pools, including chemical compounds, animal research, and patient information. This process aids in determining what in the body is being targeted by the drug. AI used for drug research would significantly reduce development time and costs, allowing pharma companies to produce innovative drugs at a pace never seen before.

Johnson & Johnson (JNJ) and Eli Lilly (LLY) are both putting significant resources towards AI. JNJ, for example, is investing in AI to expand its robotic surgical capabilities. AI is used to analyze data to guide surgeons and reduce human error. Also, JNJ has partnered with Winterlight Labs to develop an AI platform that analyzes speech platforms to offer enhanced diagnostic capabilities for diseases such as dementia and Alzheimer’s. On May 30^th, LLY partnered with AI-focused pharma tech company XtalPi to develop new drugs. The $250M collaboration will be focused on implementing XtalPi’s AI & robotics platform to conduct research. XtalPi has claimed its autonomous robotics stations can conduct chemical synthesis and assays 24 hours per day.

For the Pharma industry, the decreased costs associated with R&D could drive significant operating margin expansion. Of course, it remains to be seen when AI medicines will be effective, safe, and readily available. Still, it is interesting to speculate on the opportunities AI expansion could bring to research in Pharma.

AI in Fast Food
AI can enhance fast-food operations, including managing drive-through orders. Wendy’s (WEN) recently announced a partnership with Google Cloud to use generative AI to bring an automated ordering experience to the drive-through. It would help reduce the friction caused by miscommunication in the ordering experiences. The goal of this generative AI is to have the ability to answer customer questions, understand special requests, and have conversations with customers. Del Taco (JACK) plans to use voice AI in its drive-throughs nationwide. The recent rise in labor costs combined with breakthroughs in artificial intelligence has accelerated the integration of AI across the fast-food industry. Continued integration of AI in fast-food could lead to secular growth in operating margins since labor costs would be drawn down over time.

AI in Customer Service
AI already plays a role in customer service but is poised to become significantly more valuable and advanced. Customer service has become increasingly automated, but much of the current automation needs legitimate conversational capabilities. New AI chatbots will likely dominate previous service bots, as they can more effectively answer questions and provide recommendations (Think ChatGPT).

In the coming years, areas of hospitality (such as hotel operations) may actively seek AI integration. For example, AI chatbots could help guests book reservations and optimize their experience through various room service features. In addition, since AI can parse vast amounts of data quickly, it can effectively analyze customer feedback and suggests areas for improvement – which, of course, is broadly applicable across any consumer-facing business. Companies with a significant online presence, including Alphabet, Amazon, and Facebook, could benefit meaningfully. In the future, customer service may be fully automated by AI, saving businesses money with regard to labor costs.

AI in Wealth Management
AI has potential to enhance the value that Financial Planners provide to clients. Artificial intelligence could be used in financial planning to automate time-consuming tasks (such as data entry), which would free up advisors to spend more time building relationships and strategies with their clients. AI also could be used to map client spending patterns relative to long-term goals, which may help advisors build even more specialized plans for clients. Overall, AI has the potential to stoke efficiency and specialization among advisors, thus improving the client experience. 

On the investment management front, AI can process complex data sets to help investment managers make more informed market forecasts and decisions. Also, the trading execution process could become more automated through AI, helping managers save time and reduce errors. Implementing AI in the wealth management industry would help advisors unlock additional value for clients, potentially boosting the attractiveness of hiring an advisor.

Risks of AI
With all of this said, businesses are sure to deal with ethical implications related to AI. As AI becomes more sophisticated, specific jobs may be displaced. Businesses will be tasked with re-skilling workers or creating new jobs that leverage human skills. McKinsey Global Institute suggested that automation could affect up to 800 million jobs by 2030. However, McKinsey also anticipated AI leading to the creation of new job opportunities.

Privacy issues may also arise from increased adoption of AI applications. Artificial intelligence systems require a substantial amount of data to function effectively, and legal trouble may surface if higher implementation leads to the collection and misuse of sensitive personal information. Therefore, companies must actively raise awareness of privacy regulations and embrace transparent data collection practices. For example, if Meta Platforms were to integrate AI into Facebook Marketplace, it would require significant data on the user for their system to function effectively. Also imperative is the maintenance of strong security systems surrounding a business’s AI applications, as they hold the capacity for misuse.

Conclusion
In conclusion, the expanding influence of artificial intelligence across various industries is undeniable, promising enhancements in productivity, cost reduction, and customer experience. The transformative impact of AI is vast, and the journey is only in its infancy. As businesses continue to harness AI’s potential, we expect significant shifts in operational practices. Clearly, this technology is no longer just a future consideration, but a present-day game changer.