DUBAI - Over 60 percent of companies in the Gulf Cooperation Council (GCC) region are adopting artificial intelligence (AI) or integrating it into their operations, according to a new report by McKinsey.
While the report suggests that AI uptake remains low in the Gulf, it found that it was still higher than other regions when compared to North America (59 percent), Europe (48 percent) and Asia-Pacific (55 percent).
However, only 23 percent of organisations have adopted the technology across multiple business functions, a practice which is critical to unlocking the full potential of AI, Vinay Chandran, Partner at McKinsey & Company told Arabian Business.
“With the rapid pace of technological innovation, AI has emerged as a transformative force, reshaping industries and societies, and we believe it has the potential to deliver huge value in the Middle East’s GCC countries —as much as $150 billion,” he said.
This is equivalent to 9 percent of their combined GDP. This figure is expected to be higher in reality as more new AI technologies are being adopted more widely.
High adoption sectors
Different sectors across the Gulf are adopting artificial intelligence at varying speeds. According to the McKinsey survey, retail companies have made the most progress, accounting for 75 percent adoption in at least one business function.
Retail companies have copious amounts of data that they have used as insight into consumer behaviour and to inform their pricing decisions. Respondents suggested that retail companies are now using that same data to kickstart AI deployment. On the other hand though, companies in the construction sector are lagging behind other industries because they either cannot collect the necessary data required to train AI models yet or they do not have the capabilities to stitch what data they have together.
Following the retail sector was the energy and materials industry. Driven by global competitiveness, it has emerged as a leader in early AI investment, employing the technology to enhance maintenance efficiency, production and distribution.
In the financial services sector, regulatory hurdles impede widespread AI deployment, with data storage restrictions and a lack of established risk frameworks inhibiting regulatory approval for AI models.
While marketing and sales lead in AI application, with approximately one-third of respondents utilising artificial intelligence, its implementation in other business functions remains limited.
Manufacturing companies primarily employ linear, regression-based analytics, whereas machine learning models are sparingly used to optimise processes.
Unclear AI strategies
Chandran said that McKinsey’s work over the past five years suggests that what differentiates high performing companies from others is that they “derive 20 percent or more of their earnings from AI.”
“Companies in the GCC can take measures to build their AI capabilities in four key areas – strategy, organisation and talent, data and technology, and adoption and scaling.”
When survey respondents were asked to identify the greatest challenges in developing artificial intelligence capabilities, organisation and talent emerged as the top concern, with 37 percent expressing this area as their primary challenge.
Data and technology followed at 26 percent, adoption and scaling at 21 percent, and strategy at 15 percent.
The report suggested that companies need to start thinking about how they could align their artificial intelligence strategy with their enterprise goals, securing senior leadership buy-in, and creating a business-led use case roadmap.
It also identified that building AI talent was a major challenge for many. To solve this, McKinsey said that companies need to develop an attractive value proposition, explore the prospect of offshore services, and invest in capability building.
To address data and technology challenges, organisations can manage data as a product, build a flexible technological architecture, and prioritise building a high-quality data pipeline.
Overcoming resistance to artificial intelligence adoption and scaling can be achieved through user-friendly analytics, fostering collaboration between IT and business teams, and implementing change management programmes, the report suggested.
