McKinsey Wonders How To Sell AI Apps With No Measurable Benefits (theregister.com) 38
Software vendors keen to monetize AI should tread cautiously, since they risk inflating costs for their customers without delivering any promised benefits such as reducing employee head count. From a report: The latest report from McKinsey & Company mulls what software-as-a-service (SaaS) vendors need to do to navigate the minefield of hype that surrounds AI and successfully fold such capabilities into their offerings. According to the consultancy, there are three main challenges it identifies as holding back broader growth in AI software monetization in the report.
One of these is simply the inability to show any savings that can be expected. Many software firms trumpet potential use cases for AI, but only 30 percent have published quantifiable return on investment from real customer deployments. Meanwhile, many customers see AI hiking IT costs without being able to offset these by slashing labor costs. The billions poured into developing AI models mean they don't come cheap, and AI-enabling the entire customer service stack of a typical business could lead to a 60 to 80 percent price increase, McKinsey says, while quoting an HR executive at a Fortune 100 company griping: "All of these copilots are supposed to make work more efficient with fewer people, but my business leaders are also saying they can't reduce head count yet."
Another challenge is scaling up adoption after introduction, which the report blames on underinvestment in change management. It says that for every $1 spent on model development, firms should expect to have to spend $3 on change management, which means user training and performance monitoring. The third issue is a lack of predictable pricing, which means that customers find it hard to forecast how their AI costs will scale with usage because the pricing models are often complex and opaque.
One of these is simply the inability to show any savings that can be expected. Many software firms trumpet potential use cases for AI, but only 30 percent have published quantifiable return on investment from real customer deployments. Meanwhile, many customers see AI hiking IT costs without being able to offset these by slashing labor costs. The billions poured into developing AI models mean they don't come cheap, and AI-enabling the entire customer service stack of a typical business could lead to a 60 to 80 percent price increase, McKinsey says, while quoting an HR executive at a Fortune 100 company griping: "All of these copilots are supposed to make work more efficient with fewer people, but my business leaders are also saying they can't reduce head count yet."
Another challenge is scaling up adoption after introduction, which the report blames on underinvestment in change management. It says that for every $1 spent on model development, firms should expect to have to spend $3 on change management, which means user training and performance monitoring. The third issue is a lack of predictable pricing, which means that customers find it hard to forecast how their AI costs will scale with usage because the pricing models are often complex and opaque.
Why would you wonder that? (Score:2, Interesting)
The answer is obvious, you don't. Selling something of no benefit is called "scamming"
Why is headcount reduction important? (Score:3)
Seems like the lamentations are about how people aren't being laid off. Shouldn't the goal be getting the same people to be more efficient and do more work in the same amount of time or at least with less mundane effort? AI that summarizes emails or reports saves time for a worker, but it wouldn't make any sense to let go of someone because of that time savings. Similarly for things like code generation. No, AI won't write a complex piece of software by itself, but it can reduce typing and creating the simple, straightforward parts and allow for time and effort to be concentrated on the more complicated parts.
Re: (Score:3)
Because McKinsey is in the business of reducing headcount. If they can't help customers do that, then their own revenues take a hit. Follow the money.
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Re: Why is headcount reduction important? (Score:1)
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Much of upper management has a deep-seated dislike of the people they rule over. Getting rid of them is a goal in and of itself. They don't like being told what they can't or shouldn't do, they don't like sharing, and they don't like being responsible for people. An organization comprised of only a leader is their Platonic ideal.
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I guess it wouldn't be an "organization" at that point, just a very rich and unencumbered individual who doesn't answer to anyone. Whether he produces anything is irrelevant. Other people and organizations exist to serve him.
And now you see why our society is going the way it is, people with this thinking control everything.
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It is a mindless fetish. It goes from "we need to grow" to "we need to reduce headcount" and back again. It is not rational in any way and is probably all about giving the appearance of "doing something".
Just tell the to sell consulting... (Score:4, Interesting)
Not sure why McKinsey is wondering how to sell something with "No Measurable Benefits," that has been a key consulting skill for years before AI.
...the report blames on underinvestment in change management. It says that for every $1 spent on model development, firms should expect to have to spend $3 on change management, which means user training and performance monitoring...
That has been true before AI as well. Companies seem to think "people will just learn it" or "it's the same as before with a few changes;" and as a result training and all the other stuff never gets done right. Companies then wonder why they have problems and the promised benefits never happen.
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Not sure why McKinsey is wondering how to sell something with "No Measurable Benefits," that has been a key consulting skill for years before AI.
And if they're still not sure, they can go and ask the pharma companies selling vitamin supplements that don't work (they're designed not to, expressly to avoid being classed as medications and that means they might be regulated).
Just create a fictional problem that your product is meant to fix. The entire "disease" of halitosis was invented by Lambert Pharmaceutical Company to sell Listerine.
"No Measurable Benefits" (Score:2)
Tacit Admission For The Reason Behind AI Investme (Score:2)
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I love the honesty.
No measurable benefit? (Score:1)
If
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snake oil (Score:3)
Wait a minute, you mean to tell me that Interns with amnesia can't replace everyone?
I remember a time when... (Score:3, Insightful)
...the same thing was said about computers.
Supporters saw the potential, critics pointed out that they didn't increase profit or reduce headcount. Workers experimented with them, found some uses for them and improved the quality of their work.
A good example is CAD systems. They were sold to managers with the promise that they would speed up the drafting process. What happened instead is that engineers found that they could come up with multiple versions of a design in the same amount of time that they used to produce just one. CAD didn't make designs faster, but it allowed engineers to make designs better.
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WWrong focus. Headcount is not the issue (Score:3)
AI should not be telling everyone "You can fire all those morons and use our software."
Instead, they should be saying "You will provide a much better, personalized product by having your wonderful employees use our software."
Any businessman that thinks reducing headcount is the thing to do is just an undertaker helping you dispose of your failing business.
Good business expand, not shrink, no matter what happens.
Isn't "no measurable benefit" their usual MO? (Score:2)
Why are the wondering to transfer that to the "AI App" space?
Talk to health insurance companies (Score:2)
\o/ (Score:1)
Look, the idea is to move all revenue-collection to the AI companies. Not sure how the users are relevant.
Dear AI Bubble, (Score:1)
...please pop already and get this painful journey over with!
Thank You
- Annoyed Human
At least ... (Score:3)
This tracks (Score:2)
McKinsey's default consulting methodology is "let's start firing people. " So this is not surprising.
First: Avoid bad marketing (Score:2)
Calling it "Snake Oil" is probably out.
This is very simple (Score:2)
The latest report from McKinsey & Company mulls what software-as-a-service (SaaS) vendors need to do to navigate the minefield of hype that surrounds AI...
First, AI isn't just surrounded by a hype minefield, a good part of it IS the hype minefield. So the solution is very straightforward. The minefield is very clearly delineated and marked, so just stay the fuck away from it!
Note that I said it's simple. I didn't say that it's necessarily easy.
You don't need to change anything (Score:2)
Just sell it the same way you sell human created software that has no benefits (e.g. every phone game ever made).
AI Bubble Burst (Score:1)
It’s not just Sam Altman warning about an AI bubble. Now Mark Zuckerberg says a ‘collapse’ is ‘definitely a possibility’ https://fortune.com/2025/09/19... [fortune.com]
OpenAI’s Sam Altman sees AI bubble forming as industry spending surges https://www.cnbc.com/2025/08/1... [cnbc.com].
Alibaba chairman Joe Tsai: See signs of AI bubble forming in the U.S. https://www.youtube.com/wat [youtube.com]
personal productivity (Score:2)
There are some really smart people on slashdot, and many of them work from home on a keyboard
If they are not using AI to personally hold down three or four jobs then I'm going to assume that most businesses could not get that kind of productivity boost
Lol (Score:2)
So Mckinsey is wondering how to sell snake oil of firing all the employees and employers are eagerly buying it up, to fire all the employees.
I wonder what the employees think of that, or are doing about it?
So uhh (Score:2)
"No Measurable Benefits" (Score:2)
That tracks. (Score:2)