CEO Survey October 2023: Focus on GenAI strategy to accelerate growth

Why GenAI is a top agenda for Indian CEOs: CEO outlook survey 2023

EY
EY India

Multidisciplinary professional services organization

5 minute read 21 Dec 2023
Related topics
CEO agenda
Consulting
Technology
Digital
Strategy by EY-Parthenon

CEOs in India recognize the GenAI imperative, as they look to accelerate their capabilities.

In brief

  • 100% of CEOs in India have a commitment to invest in AI, specifically GenAI.
  • The fact that 50% organizations are exploring or optimizing their AI investments signals that there still is some distance to go for the market to mature.
  • 84% of CEOs see the need to act quickly on generative AI (GenAI) to avoid giving their competitors a strategic advantage.

EY’s recent survey among CEOs of Indian companies on their outlook on AI, reveals that Generative AI (GenAI) is a central investment theme. While it reflects a dynamic shift in strategic priorities of businesses, CEOs struggle to formulate and operationalize AI strategies, especially in the dynamic space of GenAI.

Despite its hype, CEOs are struggling to navigate the AI landscape as they find it difficult sifting through potential use cases. A major observation is that CEOs find it difficult to identify specific opportunities within their sectors.

Conscious of its potential to disrupt their own business models, a remarkable 100% of CEOs are making or planning significant investments in GenAI. To fund these investments, 84 % are raising new capital or re-allocating it from other investment projects or technology budgets.

As an outcome of these challenges, many organizations are yet to realize the full potential of AI. Implementation is mostly located in pockets and large-scale implementations across organizational processes are missing. It has, thus, become imperative for CEOs to quickly understand the implications of AI and GenAI to align with the pace of competition. CEOs need to work closely with CTOs to assess and ensure that their AI plans are feasible and realistic.

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Chapter 1

Gen AI: Organizational changes and challenges

In September and October 2023, a survey of 50 CEOs in India across five industries revealed intriguing realities for businesses. Despite the enthusiasm around GenAI, challenges and concerns loom on the horizon.

CEOs are grappling with the intricacies of navigating the AI landscape, facing difficulties in sifting through potential use cases and formulating a comprehensive strategy. The complexity of deciding where to invest and establishing partnerships adds to their challenges as they seek to identify specific opportunities within their sectors.

In the face of rapid developments, CEOs must swiftly comprehend the implications of AI on their business, operations, industry, and end markets to stay competitive. The survey unequivocally demonstrates that CEOs feel a sense of urgency when it comes to AI, with 84% recognizing the imperative for their organizations to act promptly on GenAI to prevent competitors from gaining a strategic edge. However, a comparable 80% acknowledge the uncertainties surrounding GenAI, creating obstacles to swiftly developing and implementing an AI strategy.

Additionally, almost 80% of CEOs concede that GenAI will compel them to disrupt their own business models to sustain a competitive advantage. Furthermore, 52% feel that the combination of rapid technological changes and the regulatory environment constrains capital allocation to GenAI.

Challenges in allocating capital for GenAI initiatives

A significant challenge faced by organizations in allocating capital towards GenAI initiatives is the rapid pace of technological change. According to 20% of CEOs, staying abreast of these developments poses a considerable hurdle.

Another obstacle highlighted by 20% of respondents is the dynamic nature of the regulatory environment. Navigating and adapting to regulatory changes associated with GenAI initiatives ups the difficulty in making capital allocation decisions.

For 12% of CEOs, a key concern revolves around the substantial upfront investment required for AI. However, they also express the expectation that substantial returns may take an extended period to materialize.

Surprisingly, 10% of respondents perceive a lack of alignment within the leadership team regarding how GenAI should be integrated into the organizational strategy. An additional concern, as noted by 12% of CEOs, revolves around risks associated with deploying AI within their organizations.

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Anticipated impact of GenAI on business

There is no debate on whether GenAI will make an impact on businesses. However, the question   remains when can the organizations witness this impact?

About 10% of CEOs assert that GenAI is already redefining their business and operating models, showcasing the immediate impact on organizations. While a significant number of CEOs, constituting 38%, anticipates witnessing the impact of GenAI on their businesses within the relatively short timeframe of 1-2 years, extending to areas such as revenue growth and overall business operations.

About 38% of respondents foresee the impact of GenAI on internal functions, research and development, and innovation becoming visible within a slightly longer horizon of 3-5 years. This medium-term perspective underscores the multifaceted transformation expected within organizations.

In terms of GenAI contributing to revenue growth, 38% of CEOs express the expectation of witnessing tangible results within the next 1-2 years. This validates the widespread anticipation of GenAI playing a pivotal role in driving financial success for organizations in the near future.

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Conclusion

The survey has unveiled that CEOs are confronting intricate challenges in understanding, strategizing, and implementing GenAI within their organizations. Balancing the urgency with the need for comprehensive understanding and strategic alignment remains the paramount task for organizations aiming to leverage the transformative power of GenAI in the evolving business landscape.

AI Strategy
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Chapter 2

CEOs struggle to build a robust AI strategy

The fast-evolving pace of AI and GenAI has posed challenges for CEOs to formulate robust strategies. Although many acknowledge that AI is crucial to competitive advantage for their organizations while also making them more effective leaders

Many organizations lag in AI maturity

The survey indicates that many organizations are yet to realize the full potential of AI. While AI is present in many organizations, they are not yet getting utilized for realizing significant value. A large number of CEOs state that the implementation is mostly located in pockets, and they are yet to see large-scale implementation across organizational processes. The survey also reveals that many CEOs feel that they do not have a strong AI leadership to enable them to realize its full potential. In fact, 50% of CEOs in the survey state that they are either experimenting or optimizing AI, which indicate that they have some distance to go when it comes to their maturity journey.

A higher state of maturity is indicated by those who are either utilizing AI to gain competitive advantage or have a clear AI roadmap driven by the leadership.

CEOs recognize the importance of GenAI

82% of CEOs either strongly agree or agree that that GenAI would help them become better business leaders and 84% state GenAI could potentially provide them competitive advantage.

Graphic

Globally, 70% of CEOs acknowledge that GenAI will challenge them to disrupt their own business model to maintain competitive advantage.

While uncertainty is a challenge, CEO’s feel confident to lead the GenAI charge

80% of the respondents state that the current uncertainties around AI makes it hard to implement a robust strategy. At the same time, CEOs demonstrate confidence about the technical understanding of GenAI. In fact, 88% believe that they have sufficient technical understanding of GenAI to effectively guide their AI strategy.

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While uncertainties may loom, it has become imperative for CEOs to quickly understand the implications of GenAI for their business, operations, industry and end-markets. This is necessary for them to keep their organizations aligned and in pace with their competition.

GenAI funding is an active agenda for CEOs

While building a strategy has been a challenge for many, it is also notable that GenAI is part of every CEO’s agenda. CEO’s report three areas which are the most impactful in driving their progress in GenAI capabilities. First of all, customer demand and uptake of GenAI solutions is a major driver, with 94% CEOs believing that it impacts their GenAI progress. This is followed by their ability to identify and prioritize test cases (92%) and access to AI talent (90%).

Our survey reveals that all respondents are looking at different ways to fund GenAI in their organizations. In fact, raising capital specifically for GenAI is the most popular channel by which CEOs are looking to fund their GenAI investments. This indicates that GenAI is not viewed as just a part of an organization’s technology strategy but as an entirely new stream of business productivity and business process. 

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While GenAI may be unfamiliar territory for many, CEOs need to work closely with CTOs to assess and ensure that their AI plans are feasible and realistic. It is possible to become over optimistic with early successes, but CEOs need to gain deeper insight into the technology. This will enable them to make their perspectives more grounded. That, in turn, will enable investors and other stakeholders to align with their long-term vision and strategy. 

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Chapter 3

The Generative AI investment landscape: Insights from Indian CEOs

In a recent survey conducted among CEOs of Indian companies on their outlook on Generative AI, the landscape of Generative AI (Gen AI) investment emerged as one of the central themes, reflecting a dynamic shift in the strategic priorities of businesses.

The survey captured the plans of Indian companies shedding light on investment plans, capital raising strategies, and acquisition trends with respect to Generative AI.

The survey highlights a resounding commitment to Generative AI, with a vast majority of CEOs either investing or planning to significantly invest in this transformative technology. A significant trend is the financial commitment to Generative AI, with 84% of CEOs indicating that they are either raising new capital or reallocating investments from other budgets or technology investments toward Gen AI initiatives. This reflects a strategic recognition of the importance of adequately funding AI endeavors. 16% are engaging in a dual strategy of reallocating and raising new capital, emphasizing the urgency and significance of Gen AI investments.

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As companies embrace Gen AI, 78% of CEOs express the challenge of identifying credible partners or acquisition targets amidst a sharp increase in companies claiming expertise in AI. This underscores the need for a discerning approach to partnerships and acquisitions, emphasizing the importance of due diligence in navigating the crowded AI landscape.

Revenue growth expectations

Almost half of the CEOs surveyed (48%) believe that AI will have a significant impact on their revenue growth in the next two years. This optimism signifies a strategic alignment between Generative AI investments and anticipated business growth. It also suggests that CEOs view AI not merely as a technological upgrade but as a catalyst for revenue generation and market expansion.

A staggering 92% of companies have either already invested or are in the process of investing in the capability to augment third-party AI with their proprietary data. This points to a strategic focus on enhancing the value proposition of AI technologies through the integration of proprietary knowledge, reflecting a commitment to creating unique and differentiated AI solutions.

 A notable 82% of CEOs acknowledge that their current access to investment capital is accelerating progress in Gen AI. This underscores the crucial role of financial resources in driving innovation and technological advancement. It also suggests that companies with robust financial backing are better positioned to navigate the challenges and complexities of the evolving AI landscape.

Investment Priorities

Looking ahead to 2024, the survey reveals that CEOs are strategically prioritizing investments in Research and Development (R&D), acquisitions, Capex and Corporate Venture Capital (CVC). The substantial 30% planning "Significantly higher" R&D investments and 30% Capex allocation highlights a dedication to innovation, while the anticipation of "Higher" acquisitions (46%) and CVC investments (42%) underscores a multifaceted approach to growth.

The Generative AI podcast series aims to explore the fascinating world of Generative AI Unplugged, its applications, and its impact on various industries. 

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Challenges for Investment and future outlook

 

Despite the positive outlook, CEOs acknowledge challenges in the Gen AI investment landscape. 32%   of companies identify the need to keep pace with fast-moving technological developments as a significant challenge. Additionally, 30% express concerns about the rapidly changing regulatory environment, while 24% cite return on investment timing and skill set limitations as hurdles.

 

 From unanimous enthusiasm for Gen AI to strategic capital raising and acquisition considerations, the findings underscore a transformative shift in the business scenario. As companies navigate the challenges of technological advancements, regulatory changes, and skill set requirements, the strategic focus on Generative AI positions Indian businesses at the forefront of innovation and sustainable growth.

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Summary

CEOs believe that GenAI will empower them to enhance their capabilities as effective leaders. This resounding belief reflects a widespread recognition of the transformative potential that GenAI holds for business leadership. 

About this article

EY
EY India
Multidisciplinary professional services organization
Related topics
CEO agenda
Consulting
Technology
Digital
Strategy by EY-Parthenon

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