25% more profit through AI?

Summary of the 2020 ZEW study

The German Manager Magazin reported on an interesting study by ZEW, which was published last December. According to the study, only a fraction of German companies would rely on AI, but they would earn 25% higher profits on average. Here in a nutshell what the study says.

The study:

First of all, the study is likely to be more accurate than other publications. For example, at the end of last year there were various publications stating that the majority or even a large proportion of SMEs were already using AI. It was clear to all experts that this had to be a flawed survey. ZEW comes up with a factor of 6% - and that seems to be much more in line with our observations and experiences in the market. After all, 300,000 companies were surveyed, which makes this study representative in contrast to others.

The study, which was commissioned by the German Federal Ministry of Economics and can be read in detail here, also revealed that German companies were able to generate around 25% more revenue thanks to AI. One interesting key figure is the return on sales. This is 1.3% higher for companies with AI - a remarkable figure given an overall return of 6.4%.

The innovation curve increases by 4% due to AI compared to the global market. It can be deduced that AI brings a technological pull effect and an additional learning curve for the company. At this point, we list the application areas that can generate a sales effect of the order of magnitude mentioned. (Study, page 7)

Possible areas of application

In production and logistics, AI enables intelligent automation of processes, such as learning systems, predictive maintenance of equipment, or new forms of human-machine interaction in manufacturing.

In the area of business processes, the comprehensive analysis of existing data together with the systematic development of data sources can enable a wide range of innovations, from more effective marketing to increased efficiency of internal administrative processes.

Opportunities for process innovation through AI also arise in the area of research and development (R&D) and the bringing forth of innovations. For example, the use of AI methods can significantly accelerate R&D processes (Cockburn et al. 2018).

In the area of product innovation, AI enables the development of smart products and services that, for example, promise additional performance features and additional customer benefits through the analysis of real-time usage data (e.g., individualized offers), but also enable completely new product features (e.g., driving assistants and autonomous driving).

Finally, AI applications can also generate completely new business models (cf. Lee et al. 2019), especially in the area of platform markets.

It is also interesting to ask which industries would give preference to AI. And not surprisingly, it is still more the large companies, but significantly more SMEs have jumped on the bandwagon than in previous comparative studies. (Study see above, page 12)

Source: ZEW - Mannheim Innovation Panel, survey 2009

Looking at the factor "Anteil am gesamten Umsatz which is share of total sales", SMEs with >100 employees in particular have already exceeded the 10% mark. For companies with 1000+ employees, the 60% mark has been exceeded. Financial service providers, software companies, and vehicle manufacturers have led the way so far, but the media, advertising, electronics, mechanical engineering, and metals industries also follow closely behind and have recognized the benefits of AI in use. In 2018, nearly 50,000 new jobs were created in Germany that can be attributed to the use of AI.

What is surprising about the study is the nearly even distribution when asked which AI methods are used overall. (Ibid.)

Share of all companies using AI in %.
Source: ZEW - Mannheim Innovation Panel, survey 2019
Fields of application
AI process Products,
Speech comprehension 15 15 8 7 5 30
Image recognition 24 24 5 11 3 49
Machine learning 32 32 9 17 4 55
Knowledge-based systems 25 25 10 16 4 46
Total 60 56 22 34 11 100

Conclusion of the study

AI is undergoing a huge upswing, but the starting point in companies is significantly lower than previous publications suggested. The survey, which indicates that AI is not only a complex and costly technology, but also a significant contributor to revenue, averaging 25%, confirms the view that AI should be deployed in as many SMEs as possible.

The company Circly is working on a no-code AI concept so that the technology loses complexity and investment effort. Through this, a broad use for companies, especially SME's, only the will to implement it should stand in the way.

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This article is based on a contribution from the Federal Ministry of Economics and Digitalization.

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