AI Transformation: The New Digital Evolution - Why This Shift is Crucial

It's no secret that digital transformation has been the buzzword du jour for the past few years, but the winds of change are blowing in a new direction. CEOs and their boardroom counterparts are now setting their sights on a different kind of transformation: AI transformation. This shift is driven by the tantalizing potential of generative artificial intelligence (Gen AI), and they're turning to their CIOs to make it happen.

Gabriela Vogel, a senior director analyst in the Executive Leadership of Digital Business (ELDB) practice at Gartner, shared insights from her firm's 2024 CEO Survey with ZDNET. The survey reveals a fascinating trend: CEOs are responding to the buzz around Gen AI by demanding AI-focused transformations instead of the traditional digital ones. Over the last decade, the use of the term "digital" in CEO discussions has seen a steady rise, but it's been on a downward trajectory over the past two years. In contrast, "AI" is gaining traction, appearing in 24% of CEOs' top strategic priorities for 2024, a significant jump from just 4% in 2023. Meanwhile, "digitalization" has taken a backseat, dropping from 20% to 13%.

"We're seeing a shift in terminology," Vogel explains, reflecting on the survey results. "CEOs are increasingly using AI in place of digital." While some might dismiss AI as just another hyped-up tech trend following in the footsteps of mobile, social media, cloud computing, IoT, and blockchain, Gartner believes we're entering a new era: the autonomous business era, driven by Gen AI. In this context, IT professionals need to pivot their focus to AI and data when pitching project ideas to the board.

"If you're presenting to the board about digital or business transformation, you might not capture their interest," Vogel notes. "They're more intrigued by AI transformation." The survey underscores this shift, with 59% of CEOs believing AI will have the most significant impact on their industry over the next three years, far outpacing digitalization at just 5%.

The fervor for AI transformation is unprecedented, according to Gartner, marking the strongest technology trend in the 15-year history of their CEO report. This enthusiasm presents a golden opportunity for CIOs, who are now seen as the go-to experts for unlocking AI's potential. Traditionally, CEOs might look to the CFO or COO for business transformation guidance, but with AI's technical complexity, they're turning to CIOs, CTOs, or CDOs.

Gartner's research shows that half of CEOs consider the CIO or their digital leadership equivalent crucial for leveraging Gen AI. This is a thrilling time for ambitious IT professionals, as Vogel points out: "It's an exciting moment to be a CIO because the possibilities are endless. CEOs are now eager to listen and understand how to harness AI's value."

Facing the Challenge

CEOs are captivated by AI, and they're looking to IT leaders to steer them through this new technological frontier. It's the kind of opportunity CIOs have been dreaming of. However, the heightened interest in AI also brings lofty expectations, some of which might be overly optimistic.

According to Gartner's research, 64% of CEOs believed 2023 marked a breakthrough year for AI's power. Yet, many CIOs I've spoken to describe Gen AI as still being in the exploratory phase, far from widespread production use. The narrative remains similar today, with production-level Gen AI stories being the exception rather than the norm.

When discussing emerging technologies with CIOs, I often hear about ethical concerns, security issues, and the risks of AI-generated inaccuracies. While they're keen to explore Gen AI, their priority lies in establishing solid data foundations, strategies, and frameworks. Unfortunately, this cautious stance might not align well with the CEO's enthusiasm, as 87% of them believe the benefits of AI outweigh the risks.

Vogel acknowledges the challenging position CIOs find themselves in: "It's frustrating for CIOs, and it's become a highly political role for digital leaders. They possess a wealth of knowledge, but when should they confront CEOs with the reality that the technology isn't quite there yet? Do they have the influence and power to do so? In some cases, they might not, placing them in a tricky political spot."

Building on Your Foundations

Despite these challenges, digital leaders must respond to the call for AI transformation. Rahul Todkar, head of data and AI at Tripadvisor, offers a pragmatic approach: don't panic. He echoes Vogel's sentiment that AI is just the latest in a series of technology-driven transformations.

"Remember when CRM and automation software were all the rage?" Todkar remarks. "The focus of transformation shifts with whatever technology is trending. Big data was once the savior of everything, and now generative AI and large language models are touted as the next big thing."

Instead of getting swept up in the hype, Todkar advises maintaining perspective on the scale of change. "AI transformation is real, but it's not a replacement for digital transformation. It's an enhancement," he explains.

His advice to peers is to focus on specific use cases and consider how existing digital foundations can support the next wave of change. "You don't necessarily need AI for every transformation," he says. "Take call centers, operational areas, and sales and marketing—AI can certainly enhance these areas. But there's no need to discard your digital transformation efforts and start from scratch. You can build upon what you've already achieved. AI is simply an extension of that journey."