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How to calculate the effect of AI implementation: a simple and correct economic approach

How to calculate the effect of AI implementation: a simple and correct economic approach

Artificial intelligence sells beautifully today: "revenue growth," "process optimization," "automation of everything." But the owner or director always has the right question - what is the real economic effect of the introduction of AI and how to calculate it correctly?

Let's figure it out in simple terms, without complicated formulas and marketing promises.


The main mistake in evaluating AI

The most common mistake is to consider the effect of AI implementation in isolation from the overall business economy.

For example:

  • "We have reduced 3 employees"
  • "We started processing 20% more applications"
  • "AI accelerated the process by 2 times"

All these indicators are not in themselves an economic effect. These are just operational changes.

The economic effect exists only when we see:


The basic principle of evaluating the effect of AI implementation

Any activity related to making money should be evaluated by comparing the economics of the business BEFORE and AFTER its implementation.

This rule always works.:

  • when launching a new product
  • when automating processes
  • when implementing AI in business processes

AI is no exception.


What exactly can AI give to a business

From an economic point of view, AI has an effect in only two cases:

1. Cost reduction

Examples:

  • automation of support → less personnel costs
  • AI in logistics - fewer mistakes and penalties
  • forecasting demand and reducing inventory balances

2. Revenue growth

Examples:

  • AI in sales has a higher conversion rate
  • personalization growth of the average receipt
  • Faster processes more customers in the same time

Ultimately, both affect the company's profits, which means its sustainability and value.


Why is it impossible to calculate the effect of AI without a business model

And here we come to the key idea.

Without a built-in business model of the company, it is impossible to correctly assess the economic efficiency of AI implementation.

Why?

Because AI:

  • affects more than one indicator
  • and several items of income and expenses at once
  • changes the balance sheet structure
  • affects cash flows in subsequent periods

What should the business model include

A full-fledged model should reflect:

  • revenue and its structure
  • operating expenses
  • investment costs
  • company assets
  • debt obligations
  • cash balances

That is, the actual economics of the business, rather than a separate process.


How to correctly calculate the effect of AI implementation (step by step)

Step 1. Fix the base model "as it is"

Making a plan:

  • profit and loss
  • cash flow
  • balance sheet

by month or year - without AI.

This is the scenario "if nothing changes".


Step 2. Adding AI implementation as an investment project

Now the model is being added:

  • the cost of implementing AI
  • support and maintenance costs
  • personnel changes
  • impact on revenue and costs

It is important to take into account not only the direct effect, but also indirect changes in other indicators.


Step 3. Building the model "after AI implementation"

We get the second model:

  • the same company
  • same assets and liabilities
  • but taking into account AI

Step 4. Compare dynamics

The economic effect is:

  • difference in profit
  • changes in cash balances
  • impact on balance
  • increase or decrease in capitalization

It is the difference between the scenarios that is the real effect of the introduction of AI.


A simple example

The company earns 10 million ₽ per month, with a net profit of 1 million ₽.

AI in customer support:

  • implementation cost: 3 million ₽
  • Photo savings: 300 thousand ₽ per month

Payback:

  • annual savings: 3.6 million ₽
  • the project pays off in less than 1 year

But a professional calculation will show more:

  • liquidity growth
  • changing the cost structure
  • capital release

And this is integral economic effect, and not just "reduced people".


Payback, NPV and integral indicators

When the models are built, we can correctly assume:

  • payback period
  • ROI from the introduction of AI
  • NPV and IRR of the project

But it is important to understand: these indicators are the result of a well-constructed model, and not its replacement.

It is especially important to focus on the balance sheet approach, and not just on P&L. It is the balance that shows:

  • the real financial condition of the company
  • changing stability
  • impact on capitalization

In practice, 80% of errors in the implementation of AI are related precisely to the fact that they consider "savings" or "revenue growth", but do not consider the business as a whole.

AI is not a magic button. This is a factor that is changing the company's economy, and it needs to be assessed as part of the overall system, and not in isolation.

The result

The effect of AI implementation is not an implementation report, but the difference between two economic futures of a company.

If there is no model, there is no effect. If there is no balance, there is no understanding. If there is no dynamics, there is no economy.

It is this approach that allows us to make informed decisions and implement AI not "for show", but for the sake of increasing the real value of the business.

автор - Михаленко Р.
M R. Автор - kaktotak.by Specialization: financial and economic design - modeling of business, investment projects of the real sector, analysis and evaluation of efficiency, optimization of the management decision system.

A wide range of web-based competencies for solving business problems.
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