Organisations are deploying AI rapidly, aiming to improve productivity and keep up with competitors, with global spending on digital transformation projected to reach $235 billion this year.
With such significant investment, leadership teams are under pressure to demonstrate returns on AI quickly. Recent research by BCG shows that more than half of the C-suite view cost savings as an important measure of AI’s impact within the first 18 months of implementation.
BCG’s survey of 770 CEOs, CFOs and COOs reveals that organisations with successful cost optimisation programmes view AI as essential. These leaders report that, when implemented correctly, AI has been a critical factor in delivering sustainable cost benefits.
Leveraging AI for strategic cost efficiency
AI can support cost optimisation in two primary ways. First, it can quickly analyse large amounts of spending data to identify cost-saving opportunities. BCG’s research shows that companies seeing the most success in cost excellence are those that are able to seamlessly combine AI-based levers with traditional cost levers into their transformation programmes. Around half (49 per cent) expect AI to contribute significantly to their cost optimisation goals within the next 18 months. Left to human workforces alone, this process would take much longer.
Second, AI can enhance productivity, processes and purchase decisions. While this requires long-term structural changes, these improvements lead to sustained business growth and competitive advantage. For example, AI can help to identify commercial strategies with different suppliers. Major suppliers may warrant a partnership approach, but there could be opportunities to increase competition between smaller suppliers to drive costs down. AI can spot these opportunities and make recommendations.
Beyond routine automation, AI is also reducing outsourcing costs. For example, generating product descriptions using AI is much cheaper than content written by humans. Once the issue of capacity and time is removed, AI can also take this further and create bespoke descriptions for different audiences. This targeted approach will improve customer experience and could increase sales.
Cost structures are another area that AI is transforming. It enables organisations to identify, in real time, where they are spending the most money and where there are spikes in demand. Access to real-time insights enables leaders to make data-driven decisions faster, but also regularly. By making improvements as and when they are needed, organisations are positioned for continuous cost improvements that deliver deeper and longer-lasting impacts.
AI is a catalyst for long-term cost efficiency
AI can also continuously transform an organisation’s costs. The more data it processes, the better its suggestions become, leading to wave after wave of productivity and cost improvements. BCG’s research shows that the most successful companies understand this: they take a long-term view of how AI can help them to achieve their cost optimisation goals.
Seventy per cent of top-performing organisations say that AI will be integral to achieving their cost optimisation goals in the next three to five years — more than double the rate of organisations that are seeing less cost optimisation success (27 per cent). This suggests that recognising AI’s longer-term, strategic potential in cost optimisation programmes could accelerate cost savings.
But the most successful organisations are also using AI in a more advanced way in the shorter term. While 49 per cent say that AI will contribute significantly to cost efficiency in the next 18 months, a further 7 per cent say it is integral. This is in stark contrast to the organisations that are least successful at managing costs: 70 per cent of them do not see AI as a major driver of change.
Companies seeing the most success take a proactive, strategic approach to AI within their cost optimisation programmes. They are investing early, integrating AI tools across operations and are subsequently seeing both short- and long-term cost efficiencies. In contrast, organisations that are struggling with their cost optimisation programmes often view AI as optional, or fail to align AI initiatives with their broader strategic goals.
Adapt and reinvest: the key to AI-driven savings
Despite AI’s vast potential, not every investment will pay off. Leaders must be ready to adapt, taking calculated risks to drive success. When an AI initiative underperforms, they should act swiftly to cut losses and reinvest in higher-impact opportunities.
As AI productivity gains and other initiatives free up resources, organisations should act decisively to redeploy these in areas that could generate further savings. This is a continuous process that puts AI at the centre of long-term cost optimisation strategies.
BCG’s findings are clear: AI is not just a future aspiration for cost excellence —it is a present-day imperative. Leaders must take decisive action now to embed AI at the core of their strategies, or risk falling behind.
Upfront investments can be financed through initial cost savings elsewhere. From there, the technology could create and sustain that cost optimisation for longer. The organisations that understand this, and approach AI proactively and strategically are better equipped to navigate a competitive landscape.