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McKinsey Claims 80% Companies Fail to Generate AI ROI. They’re Wrong.

McKinsey Claims 80% Companies Fail to Generate AI ROI. They’re Wrong.

by | Aug 20, 2025 | AI, Metrics

Sometimes, you see a headline and just have to shake your head.  Sometimes, you see a bunch of headlines and need to scream into a pillow.  This week’s headlines on AI ROI were the latter:

  • Companies are Pouring Billions Into A.I. It Has Yet to Pay Off – NYT
  • MIT report: 95% of generative AI pilots at companies are failing – Forbes
  • Nearly 8 in 10 companies report using gen AI – yet just as many report no significant bottom-line impact – McKinsey

AI has slipped into what Gartner calls the Trough of Disillusionment. But, for people working on pilots,  it might as well be the Pit of Despair because executives are beginning to declare AI a fad and deny ever having fallen victim to its siren song.

Because they’re listening to the NYT, Forbes, and McKinsey.

And they’re wrong.

 

ROI Reality Check

In 20205, private investment in generative AI is expected to increase 94% to an estimated $62 billion.  When you’re throwing that kind of money around, it’s natural to expect ROI ASAP.

But is it realistic?

Let’s assume Gen AI “started” (became sufficiently available to set buyer expectations and warrant allocating resources to) in late 2022/early 2023.  That means that we’re expecting ROI within 2 years.

That’s not realistic.  It’s delusional. 

ERP systems “started” in the early 1990s, yet providers like SAP still recommend five-year ROI timeframes.  Cloud Computing“started” in the early 2000s, and yet, in 2025, “48% of CEOs lack confidence in their ability to measure cloud ROI.” CRM systems’ claims of 1-3 years to ROI must be considered in the context of their 50-70% implementation failure rate.

That’s not to say we shouldn’t expect rapid results.  We just need to set realistic expectations around results and timing.

Measure ROI by Speed and Magnitude of Learning

In the early days of any new technology or initiative, we don’t know what we don’t know.  It takes time to experiment and learn our way to meaningful and sustainable financial ROI. And the learnings are coming fast and furious:

Trust, not tech, is your biggest challenge: MIT research across 9,000+ workers shows automation success depends more on whether your team feels valued and believes you’re invested in their growth than which AI platform you choose.

Workers who experience AI’s benefits first-hand are more likely to champion automation than those told, “trust us, you’ll love it.” Job satisfaction emerged as the second strongest indicator of technology acceptance, followed by feeling valued.  If you don’t invest in earning your people’s trust, don’t invest in shiny new tech.

More users don’t lead to more impact: Companies assume that making AI available to everyone guarantees ROI.  Yet of the 70% of Fortune 500 companies deploying Microsoft 365 Copilot and similar “horizontal” tools (enterprise-wide copilots and chatbots), none have seen any financial impact.

The opposite approach of deploying “vertical” function-specific tools doesn’t fare much better.  In fact, less than 10% make it past the pilot stage, despite having higher potential for economic impact.

Better results require reinvention, not optimization:  McKinsey found that call centers that gave agents access to passive AI tools for finding articles, summarizing tickets, and drafting emails resulted in only a 5-10% call time reduction.  Centers using AI tools to automate tasks without agent initiation reduced call time by 20-40%.

Centers reinventing processes around AI agents? 60-90% reduction in call time, with 80% automatically resolved.

 

How to Climb Out of the Pit

Make no mistake, despite these learnings, we are in the pit of AI despair.  42% of companies are abandoning their AI initiatives.  That’s up from 17% just a year ago.

But we can escape if we set the right expectations and measure ROI on learning speed and quality.

Because the real concern isn’t AI’s lack of ROI today.  It’s whether you’re willing to invest in the learning process long enough to be successful tomorrow.

“The Call is Coming From Inside the House” – 3 Real Business Threats (and How to Solve Them)

“The Call is Coming From Inside the House” – 3 Real Business Threats (and How to Solve Them)

by | Apr 15, 2025 | Innovation, Leadership

“The call is coming from inside the house” is one of those classic quotes that crossed over from urban legend and horror movies to become a common pop-culture phrase.  While originally a warning to teenage babysitters, recent research indicates that it’s also a warning to corporate execs that murderous business threats are closer than they think.

In the early weeks of 2025, Box of Crayons, a Toronto-based learning and development company, partnered with The Harris Poll to survey over 1500 business leaders and knowledge workers to diagnose and understand the greatest challenges facing organizations.

They found that “while there is a tendency to focus on external pressures like economic uncertainty, technological disruptions, and labor market issues, our research shows the most critical challenges are unfolding within the workplace itself.”

The threat is coming from inside your house.

Here’s what they found and what you can do about it

Nearly 1 day each workweek “is lost to the fear of making mistakes.”

Fear is at the core of all the issues making headlines – burnout, disengagement, lost productivity. It  “breeds doubt, prompting individuals to question themselves and others, instigating anxiety, hindering productivity, and promoting blame instead of teamwork.”

Fear is also a virus, spreading rapidly from one person to their team members and on and on until it infects the entire organization, embedding itself in the culture.

Executives and managers are key to breaking the cycle of fear that kills innovation, initiative, and growth.  By reframing mistakes and learnings, rewarding smart risks even if they result in unexpected outcomes, and role-modeling behaviors that encourage trust and psychological safety, their daily and consistent actions can encourage bravery and remaking the culture.

70% of people don’t see value in listening to people they disagree with.

Unless you’re employed by Lumon Industries, it’s impossible to be a completely different person at work compared to who you are outside of work. So, it should come as no surprise that most people no longer listen to opinions, perspectives, or evidence with which they disagree.

The problem is that different perspectives and experiences are essential to elements of the problem-solving process.  Without them, we cannot learn, develop new solutions, and innovate.

Again, executives and managers play a critical role in helping to surface diverse points of view and helping employees to engage in “productive conflict.”  Rather than rushing to “consensus” or rapidly making a decision, by expressing curiosity and asking questions, people-leaders create space for new points of view and role model how to encourage and use it.

87% of leaders lack the skills needed to adapt.  64% say funding to build those skills has been cut.

Business leaders are fully aware of the changes happening within their teams, organizations, and the broader world.  They recognize the need to constantly adapt, learn, and develop the skills required to respond to these changes.  They can even articulate what they need help with, why, and how it will benefit the team or organization.

But leadership training is often one of the first items to be cut, leaving new and experienced people-leaders “ill-equipped to manage the increasing complexity of today’s workplace, stifling their ability to inspire, guide, and support their teams effectively.”

The solution is simple – invest in people.  Given the acute need for support and training, forget big programs, multi-day offsites, and centralized learning agendas.  Talk to the people asking for help to understand what they want and need and how they learn best.  Share what you can do right now with the resources you have and engage them in creating a plan that helps them within the constraints of the current context.

Answer the phone

Just like that terrifying movie moment, the call threatening your business isn’t coming from mysterious outside forces—it’s echoing through your own hallways. The good news? Unlike those helpless babysitters in horror films, you can change the ending by confronting these internal threats head-on.

What internal “call” is your organization ignoring that deserves immediate attention?

How to Go from Dinosaur to Disruptor in 3 Quotes

How to Go from Dinosaur to Disruptor in 3 Quotes

by | Apr 1, 2025 | Leadership, Stories & Examples, Strategy

If you’re leading a legacy business through uncertainty, pay attention. When The Cut asked, “Can Simon & Schuster Become the A24 of Books?” I expected puff-piece PR. What I read was a quiet masterclass in business transformation—delivered in three deceptively casual quotes from Sean Manning, Simon & Schuster’s new CEO. He’s trying to transform a dinosaur into a disruptor and lays out a leadership playbook worth stealing.

Seventy-four percent of corporate transformations fail, according to BCG. So why should we believe this one might be different? Because every now and then, someone in a legacy industry goes beyond memorable soundbites and actually makes moves. Manning’s early actions—and the thinking behind them—hint that this is a transformation worth paying attention to.

 

“A lot of what the publishing industry does is just speaking to the converted.”

When Manning says this, he’s not just throwing shade—he’s naming a common and systemic failure. While publishing execs bemoan declining readership, they keep targeting the same demographic that’s been buying hardcovers for decades.

Sound familiar?

Every legacy industry does this. It’s easier—and more immediately profitable—to sell to those who already believe. The ROI is better. The risk is lower. And that’s precisely how disruption takes root.

As Clayton Christensen warned in The Innovator’s Dilemma, established players obsess over their best customers and ignore emerging ones—until it’s too late. They fear that reaching the unconverted dilutes focus or stretches resources. But that thinking is wrong.  Even in a world of finite resources, you can’t afford to pick one or the other.  Transformation, heck, even survival, requires both.

 

“We’re essentially an entertainment company with books at the center.”

Be still my heart. A CEO who defines his company by the Job(to be Done) it performs in people’s lives? Swoon.

This is another key to avoiding disruption – don’t define yourself by your product or industry. Define yourself by the value you create for customers.

Executives love repeating that “railroads went out of business because they thought their business was railroads.” But ask those same executives what business they’re in, and they’ll immediately box themselves into a list of products or industry classifications or some vague platitude about being in the “people business” that gets conveniently shelved when business gets bumpy.

When you define yourself by the Job you do for your customers, you quickly discover more growth opportunities you could pursue. New channels. New products. New partnerships. You’re out of the box —and ready to grow.

 

“The worry is that we can’t afford to fail. But if we don’t try to do something, we’re really screwed.”

It’s easy to calculate the cost of trying and failing. You have the literal receipts. It’s nearly impossible to calculate the cost of not trying. That’s why large organizations sit on the sidelines and let startups take the risks.

But there IS a cost to waiting. You see it in the market share lost to new entrants and the skyrocketing valuations of successful startups. The problem? That information comes too late to do anything about it.

Transformation isn’t just about ideas. It’s about choosing action over analysis. Or, as Manning put it, “Let’s try this and see what happens.”

Walking the Talk

Quotable leadership is cute. Transformation leadership is concrete. Manning’s doing more than talking—he’s breaking industry norms.

Less than six months into his tenure as CEO, he announced that Simon & Schuster would no longer require blurbs—those back-of-jacket endorsements that favor the well-connected. He greenlit a web series, Bookstore Blitz, and showed up at tapings. And he’s reframing what publishing can be, not just what it’s always been.

The journey from dinosaur to disruptor is long, messy, and uncertain. But less than a year into the job, Manning is walking in the right direction.

Are you?

The 5 Gifts of Uncertainty

The 5 Gifts of Uncertainty

by | Sep 30, 2020 | Innovation, Leadership, Stories & Examples

“How are you doing?  How are you handling all this?”

It seems like 90% of conversations these days start with those two sentences.  We ask out of genuine concern and also out of a need to commiserate, to share our experiences, and to find someone that understands.

The connection these questions create is just one of the Gifts of Uncertainty that have been given to us by the pandemic.

Yes, I know that the idea of uncertainty, especially in big things like our lives and businesses, being a gift is bizarre.  When one of my friends first suggested the idea, I rolled my eyes pretty hard and then checked to make sure I was talk to my smart sarcastic fellow business owner and not the Dali Lama.

But as I thought about it more, started looking for “gifts” in the news and listening for them in conversations with friends and clients, I realized how wise my friend truly was.

Faced with levels of uncertainty we’ve never before experienced, people and businesses are doing things they’ve never imagined having to do and, as a result, are discovering skills and abilities they never knew they had.  These are the Gifts of Uncertainty

  1. Necessity of offering a vision – When we’re facing or doing something new, we don’t have all the answers. But we don’t need all the answers to take action.  The people emerging as leaders, in both the political and business realms, are the ones acknowledging this reality by sharing what they do know, offering a vision for the future, laying out a process to achieve it, and admitting the unknowns and the variables that will affect both the plan and the outcome.
  2. Freedom to experiment – As governments ordered businesses like restaurants to close and social distancing made it nearly impossible for other businesses to continue operating, business owners were suddenly faced with a tough choice – stop operations completely or find new ways to continue to serve. Restaurants began to offer carry out and delivery.  Bookstores, like Powell’s in Portland OR and Northshire Bookstore in Manchester VT, also got into curbside pick-up and delivery game.  Even dentists and orthodontists began to offer virtual visits through services like Wally Health and Orthodontic Screening Kit, respectively.
  3. Ability to change – Businesses are discovering that they can move quickly, change rapidly, and use existing capabilities to produce entirely new products. Nike and HP are producing face shields. Zara and Prada are producing face masks. Fanatics, makers of MLB uniforms, and Ford are producing gowns.  GM and Dyson are gearing up to produce ventilators. And seemingly every alcohol company is making hand sanitizer.  Months ago, all of these companies were in very different businesses and likely never imagined that they could or would pivot to producing products for the healthcare sector.  But they did pivot.
  4. Power of Relationships – Social distancing and self-isolation are bringing into sharp relief the importance of human connection and the power of relationships. The shift to virtual meetups like happy hours, coffees, and lunches is causing us to be thoughtful about who we spend time with rather than defaulting to whoever is nearby.  We are shifting to seeking connection with others rather than simply racking up as many LinkedIn Connections, Facebook friends, or Instagram followers as possible.  Even companies are realizing the powerful difference between relationships and subscribers as people unsubscribed en mass to the “How we’re dealing with COVID-19 emails” they received from every company with which they had ever provided their information.
  5. Business benefit of doing the right thing – In a perfect world, businesses that consistently operate ethically, fairly, and with the best interests of ALL their stakeholders (not just shareholders) in mind, would be rewarded. We are certainly not in a perfect world, but some businesses are doing the “right thing” and rea being rewarded.  Companies like Target are offering high-risk employees like seniors pregnant women, and those with compromised immune systems 30-days of paid leave.  CVS and Comcast are paying store employees extra in the form of one-time bonuses or percent increases on hourly wages.  Sweetgreen and AllBirds are donating food and shoes, respectively, to healthcare workers.  On the other hand, businesses that try to leverage the pandemic to boost their bottom lines are being taken to task.  Rothy’s, the popular shoe brand, announced on April 13 that they would shift one-third of their production capacity to making “disposable, non-medical masks to workers on the front line” and would donate five face masks for every item purchased.  Less than 12 hours later, they issued an apology for their “mis-step,” withdrew their purchase-to-donate program, and announced a bulk donation of 100,000 non-medical masks.

Before the pandemic, many of these things seemed impossibly hard, even theoretical.  In the midst of uncertainty, though, these each of these things became practical, even necessary.  As a result, in a few short weeks, we’ve proven to ourselves that we can do what we spent years saying we could not.

These are gifts to be cherished, remembered and used when the uncertainty, inevitably, fades.

Originally published on Mat 19, 2020 on Forbes.com

The Innovator has No Clothes: Innovation’s 3 Great Lies

The Innovator has No Clothes: Innovation’s 3 Great Lies

by | Aug 26, 2020 | Innovation

I love stories.  When I was a kid, my parents would literally give me a book and leave me places while they ran errands.  They knew that, as long as I was reading, I wouldn’t be moved.

But there was one story I hated – The Emperor’s New Clothes

I hated it because it made absolutely no sense.  It was a story of adults being stupid and a kid being smart, and, to a (reasonably) well-behaved kid, it was absolutely unbelievable.

No adult would try to sell something that doesn’t exist, like the clothiers did with the cloth.  No adult would say they could see something they couldn’t, like the Emperor and the townspeople did.  Adults, after all, don’t play at imagination.

As a kid, this story seemed completely wild and unrealistic.

As an adult, this story is so true that it hurts.

The truth of this story touches so many things and innovation is at the top of the list.

I’ve spent my career working in innovation working within large companies and as an advisor to them.  I know what executives, like the emperor, request. I’ve said what the consultants say to sell their wares.  I believed all of it.

Now I need to be the kid and point out some of the lies, as I see them.

 

Lie #1: Companies can disrupt themselves
Truth #1: Companies can but they won’t

There are lots of reasons why companies won’t and don’t disrupt themselves but, in my experience, there is one reason that trumps them all: It’s not in anyone’s interest.

In most companies, there is not one single person, including the CEO, who has a vested interest (i.e. is incentivized) in taking the time and allocating the resources required to disrupt the current busines.

In most companies, however, there are lots of people who have a vested interest (i.e. make lots of money) in delivering on quarterly or annual KPIs.

Disruption takes time.  It took more than 20 years for the hard disk drive industry, the focus of Clayton Christensen’s doctoral research and the basis of the theory of Disruptive Innovation, to be disrupted.  Even in today’s faster-paced world, it’s hard to find an industry that, in a span of 5-10 years, ceased to exist as a result of disruptive innovation.

Companies have the resources to disrupt themselves.  But executives don’t have the incentive.

 

Lie #2: If companies act like VCs, they’ll successfully innovate
Truth #2: If companies act like VCs, they’ll go bankrupt

OK, this one is more false than true.

Companies need to engage in multiple types of innovation:

  • Improving their core
  • Moving into adjacent markets by serving new customers or offering something new or making money in new ways or using new process, resources, and activities
  • Creating something breakthrough that changes the basis of competition

Companies should only “act like VCs” when dealing with breakthrough innovations.

VCs are purpose-built to be financially successful in environments where there are more unknowns than knowns.  This is why the central tenant of acting like a VC is adopting a portfolio approach and making little bets in lots of companies.  When large companies who take this approach to breakthrough innovations, they, like VCs, invest in lots of initiatives thus increasing the odds of investing in a winner.

However, companies that “act like VCs” when it comes to their entire innovation portfolio simply dilute their resources, investing too little in too many things and ultimately decreasing their already low odds of innovation success.

This is because when engaging in core and adjacent innovation, the bulk of innovation pursued by large companies, the knowns typically equal or outweigh the unknowns.  As a result, it makes more sense to NOT act like a VC and make medium to large bets in a few initiatives, enabling companies to rapidly launch and scale their core and adjacent innovation initiatives.

 

Lie #3: We can pivot our way to success
Truth #3: If you’re not solving a problem, no amount of pivoting will bring success

The fact that the emperor and all the townspeople believed the emperor was wearing clothes didn’t make it true.

And no amount of “pivoting” – it’s not silk, it’s wool!  It’s not green, it’s blue! – was going to make it true.

The same can be said for innovation.

If the innovation isn’t solving a problem, there is no market.  Shifting from a product to a service, won’t change that.  Nor will changing from a transaction-based model to a subscription model.

Pivoting is how you fit a square peg into a round hole.  It’s not how you create a hole for your square peg.

 

Of course, it’s easy to come up with one, or two, or maybe even three examples of the lie being true.  It is those one, or two, or even three examples that are trotted out in every speech, book, article, and consulting pitch to convince us to believe.  But the reality is that the exceptions, in this case, prove the rule.

After all, the emperor wasn’t completely naked.  He was wearing a crown. 

But that doesn’t make the lack of clothes any less embarrassing.