How To Make An AI Transformation In Your Business

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In the last few years, public companies focused on three goals: profits through the economic slowdown, transitioning to new technologies—especially generative AI—and meeting ambitious growth targets. But what about private companies? A recent report from Deloitte found that many of them have the same priorities, though the absence of shareholder scrutiny allows private companies to focus more on issues like sustainability that might not be as much of a priority—or as popular.

Increasing the use of AI across the organization and investing in technology are the two top priorities for the next 12 months for private C-suite execs, the report found. Nearly half (43%) want to see more AI use, and 37% are prioritizing tech investments—while financial goals including improving margins (31%), increasing productivity (27%) and revenue growth (22%) are far behind. In fact, the lowest-ranked priorities are acquiring capital investment (17%) and managing liquidity (12%).

And climate, which isn’t necessarily a big talking point for most publicly traded companies today, is the top macro-risk identified by private company execs. Two-thirds ranked climate as a top macro-risk, far more than the 52% who felt that way about market competition, the second-place risk.

Nearly four in five private company execs are either actively using AI or piloting potential solutions. And AI and emerging technology knowledge are the most important competencies that execs want to strengthen on their boards. AI training and education for board members is one of their top leadership priorities for the technology, tied with reskilling and upskilling their workforce, and just behind determining uses for AI in their organizations.

Transforming your company to best use AI is a challenge, regardless of if it’s private or publicly listed. I talked to Nigel Vaz, CEO of consulting firm Publicis Sapient, about how to make those changes successfully. An excerpt from our conversation is later in this newsletter.

We’re taking a vacation next week. Forbes CEO will be back in your inbox on Monday, August 26.

ECONOMIC INDICATORS

What a week it was on Wall Street. After the previous week’s sharp declines and lost valuations, last week charted a usually less frenzied path that generally trended upwards. The three major indexes aren’t back at their midsummer peaks just yet, but last Thursday was the best day for the S&P 500 since November 2022, with a gain of 2.3%. Thursday’s rally extended to the Nasdaq Composite—up 2.9%—and the Dow Jones Industrial Average—up 1.8%. And when markets closed on Friday, they had completely recovered from the wild week, only a fraction of a percent below where they had closed a week prior.

Investor panic, sparked by the recent worse-than-expected jobless report, seemed to calm down. Last week’s first-time unemployment numbers also reflected a settling economy. There were 233,000 initial jobless claims filed the week ending August 3, far lower than the previous week’s 250,000 claims, and below consensus estimates of 240,000 new claims. Chris Larkin, head of trading and investing at E*Trade from Morgan Stanley, told Forbes’ Derek Saul that “it’s unclear how much this will move the sentiment needle.”

However, tech stocks—especially those for companies with larger presences in AI—are starting to see their market dominance fade. AI chipmaker Nvidia, which saw a meteoric rise in 2024, had a stock price fall of more than 20% in the last month. Microsoft’s stock is down more than 11.5% in the past month, and Amazon has seen its share price drop more than 16% in the same time frame. Many of these stocks are dropping, analysts say, because investors are moving their funds to more traditional companies seen as “safer options.” The companies in more traditional industries may have the most upside in the near future, as the chances of a large interest rate cut at the Federal Reserve Board’s September meeting are climbing.

NOTABLE NEWS

As the economy has gotten more difficult for consumers, Disney’s magic has taken a beating. Even though the company reported nearly $23.2 billion in revenues in the last quarter—a 4% increase over last year—its stock price fell to its lowest point of the year, dropping almost 4%. Disney’s earnings release warned of coming softness in its Experiences unit, which includes its theme parks and made up more than half of the company’s global operating profit in the last quarter. CEO Bob Iger told analysts Disney has seen evidence that “the lower-income consumer is feeling a little bit of stress.”

Forbes senior contributor Caroline Reid dives deep into the malaise in Disney’s business, largely driven by poor timing for expensive exclusive content on the Disney+ streaming service, Marvel movies that flopped at the box office, and theme park price hikes that continued as people stopped spending as much on travel. Disney reiterated in its earnings report that it expects to turn its first streaming profit in the coming quarter, but that won’t be enough to make up for the slowing profits at its parks.

Regardless, the parks are getting heavy investments. Disney announced last year that it plans to invest $60 billion in its experience division over the next decade. The master plan for that money was announced over the weekend at the bi-annual D23 fan conference. Walt Disney World will not be getting a fifth theme park that has been rumored, but Forbes contributor Megan DuBois writes that it will see new lands devoted to Disney villains, the Cars and Monsters, Inc. movie franchises and Encanto. Disney’s other parks worldwide will be seeing new rides, experiences and upgrades. And the Disney Cruise Line—which currently has five ships with another four in production—will be getting four more boats, bringing its total to 13.

POLICY + REGULATIONS

Google violated antitrust laws to maintain a monopoly for its search engine, a federal judge ruled last week. The U.S. Justice Department and 11 states sued the company, saying it illegally built its dominance by paying billions of dollars to companies, including Apple and Samsung, to feature Google as the default search engine on their devices. The tech giant currently handles about 90% of all internet searches, and its name is officially a verb: “Googling.” The judge ruled that Google’s exclusive distribution agreements with devices have anticompetitive effects, allowing the company to earn monopoly-level profits.

The 286-page ruling doesn’t go into remedies, which will be decided later. Google has vowed to appeal, while federal government officials have praised it for opening the door to more competition for consumers.

Many see this as the most significant tech antitrust decision since the 1999 ruling against Microsoft, which said the tech giant had illegally used the dominance of its Windows operating system to block competitor web browsers.

TOMORROW’S TRENDS

Publicis Sapient CEO Lays Out The Path To AI Transformation

It seems like all businesses today want to make the transformation to use more technology—like generative AI functions—to improve their business. I talked to Nigel Vaz, CEO of tech transformation consultant Publicis Sapient, about the right way to shift gears. This conversation has been edited for length, continuity and clarity. A longer version is available here.

What is the biggest roadblock between a business making a tech transformation plan and actually making that transformation?

Vaz: The first step is where you start. Even framing it as a tech transformation, in and of itself, is part of the challenge. So many businesses need to go under a much broader business transformation, where technology will play a very central role.

So many businesses started this journey from the place of an IT transformation. This is, first and foremost, a business transformation. It is transforming a business to be more digital, and technology has a huge role to play. But first, you’ve got to reimagine it: Not taking the existing, legacy business model, legacy processes, legacy approaches, and simply porting them onto new technology. I’m often reminded of the early days of the internet, where companies used to say, ‘We’re doing online orders.’ The order would spit out of a fax machine in the warehouse, and people would run with the fax, trying to gather stuff up. That’s just taking a legacy environment to a digital context.

Finally, I think the most important thing is most executives may have understood this idea of being digital historically, but AI has made it so their customers and the CEO are learning about it at the same time. You’ve got this huge amount of pressure from customers wanting to interact in different ways, people in your organization wanting to test things. The C-suite is really excited about this, but it needs capital investment in a macroeconomic environment that’s extraordinarily tough. You’ve got this really big dichotomy playing out, also financially, where you’ve got a real challenge in terms of how the world is.

It’s been about a year and a half since ChatGPT hit the news and excited everyone about generative AI. Where would you say most companies are now in terms of coming up with strategy, figuring out good use cases and thoughtfully getting some applications of AI to make a difference in their business?

It depends very much on where they were before the last year and a half. While AI became interesting to the average person in November 2022, the reality is we’ve been using AI for clients for going on 10 years. We’ve been using machine learning models in financial services risk and in credit. We’ve been moving to predictive AI models, which basically started to analyze existing data and make predictions on where you were. And then this last wave of generative AI. If you were already on that journey as an organization, you are probably further ahead in being able to deploy actual scale AI.

What should companies be doing in terms of hiring people who know how to use AI or training their existing employees in these skills? When should they be doing that?

You can’t start soon enough. I would say yesterday is when you should have started. The rate of change, and the scale of change that is in front of us, is exponential.

Much of what this journey requires is a commitment to learning, unlearning and relearning. You’re constantly going to learn new things. Then you’re going to have to unlearn them, because things have changed again, and you’re going to have to relearn new things. It’s a constant commitment to this idea of becoming a learning organization in the way you do things.

We did some experiments internally where we took software developers straight out of university and taught them how to work with AI the very first day they started with the organization. Then we looked at more seasoned developers who’ve been around for a while, who wrote much better code on a standalone basis, but may not necessarily have adopted these tools and ways of working. We measured the outputs of both groups, and what you realize is that change is not just for people entering the workforce. The biggest part of that change is for people who are in the workforce, and now need to do something fundamentally different.

FACTS + COMMENTS

Last week, a federal court ordered collapsed crypto exchange FTX and its sister trading firm Alameda Research to pay a financial settlement to resolve a fraud lawsuit filed by the Commodity Futures Trading Commission.

$12.7 billion: Total payment, which will go to victims of FTX’s fraud

7: Total criminal charges FTX founder Sam Bankman-Fried was convicted on. He was sentenced to 25 years in prison and ordered to forfeit $11 billion

‘What many thought was impossible at the time of the collapse’: How CTFC Division of Enforcement Director Ian McGinley characterized being able to compensate victims for their losses

STRATEGIES + ADVICE

Business travel is vital for CEOs, especially now that pandemic lockdowns are just a memory. JP Morgan Chase CEO Jamie Dimon offered advice on how to get the most out of business travel and use it to strengthen their companies.

Vice President Kamala Harris announced last week that Minnesota Gov. Tim Walz would be her running mate for the November election. Her process shows what’s important to all leaders when selecting their No. 2.

VIDEO

QUIZ

Which storied magazine announced last week that it would be relaunching its print product?

A. Life

B. Playboy

C. U.S. News & World Report

D. Rolling Stone

See if you got the answer right here.