MARCH 16, 2023

Why Do Artificial Intelligence Implementations Fail?

By Marianne D’Aquila

Keywords
Artificial Intelligence, AI, Analytics, Digital Transformation, Industrial
Manufacturing

Overview
Artificial intelligence (AI) has the potential to transform the manufacturing
industry by enabling greater efficiency, higher quality, and reduced costs.
One of the key benefits of AI is its ability to analyze large amounts of data
generated by sensors, machines, and other sources to identify patterns,
anomalies, and insights that can be used to optimize processes and improve
performance. For instance, AI can be used to pre-
Advances in Artificial Intelligence (AI) hold dict equipment failures, detect defects in
the promise of transforming manufacturers manufacturing lines, and optimize supply chain
to be more competitive and resilient to logistics.
global threats. Why then are so many AI
projects collapsing, leading to a perception Advances in AI could not have come at a better
of wasted investment? time. Industrial manufacturing companies are con-
stantly faced with a multitude of challenges, both
current and future. These challenges come from a variety of sources, ranging
from geopolitical, economics, climate, energy, etc. As a result, manufacturers
are increasingly focused on improving their business operations to ensure
their short and long term viability.

However, implementing AI in manufacturing can be challenging, if not

daunting, as it requires an understanding of business objectives and the in-
tegration of AI with existing processes and systems. Implementing AI
requires the collaboration and coordination of multiple stakeholders with di-
verse perspectives, expertise, and objectives. Ingesting and interpretating
vast amounts of the data correctly can become opaque. Hence it’s not sur-
prising that many AI projects fail.

VISION, EXPERIENCE, ANSWERS FOR INDUSTRY

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Artificial Intelligence: Impactful but High Rate of Failure

ARC recently conducted an extensive survey of manufacturers, and 546 re-
spondents expect that artificial intelligence and cloud will be the most
impactful technologies in the next five years. If that is the case, then why do
so many manufacturers also share stories of the collapse of their AI projects?
For most companies, even the innovators, it is typically overwhelming to de-
termine an effective starting point for any digital transformation project,
including implementing AI. Without clear ideas on how to develop strong
analytical digital competencies, which is what ARC refers to as “digital wis-
dom,” companies often experience the collapse of their AI pilots and projects,
leading to the internal perception that these projects are a wasted investment.

Need for Intelligent Solutions to Thwart Global Challenges

Industrial manufacturing companies face many challenges and will continue
to do so in the future. Whether it is political unrest, climate disruption, pan-
demics, or global macroeconomic uncertainty, manufacturers are concerned
about their operational resilience, agility, and efficiencies. At the same time,
manufacturers face pain points and cost drivers, such as energy costs, supply
chain disruptions, materials shortages, order backlogs, rising prices, work-
force dynamics, sustainability requirements, and more.

Factories around the world have been digitizing their operations since the
emergence of the internet. Nowadays, terabytes of data are being processed
by almost every device on the factory floor, providing organizations with

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more information than they can handle. However, a lack of resources pre-
vents many companies from utilizing this data to decrease expenses and
enhance productivity. Artificial intelligence is required to accomplish this
goal.

Artificial Intelligence Can Revolutionize Manufacturing

Artificial intelligence is revolutionizing industrial manufacturing in many
ways. Today, many assembly lines have little to no systems or technologies
in place to identify defects and those that do may be very limited. With AI
infused with self-learning, increased quality requiring less time is achievable.
AI is critical for the detection of defects throughout the production process,
so corrective actions can be taken quickly, saving substantial time and costs.

Another significant advantage of AI is the ability to deploy predictive

maintenance. The use of sensors, real-time data, and analytics enables ma-
chines to self-monitor and identify potential maintenance issues. In addition,
AI enables “Smart” factories that can respond to real-time changes in de-
mand across the supply chain by analyzing data from suppliers, logistics
providers, and customers. This capability enables manufacturers to adapt to
changes quickly, ensuring that they can meet demand without delays.

The number of AI use cases ranging from R&D to engineering, to operations,

to support, and to service, are growing every day as more manufacturers are
embracing them.

Why Do AI Implementations Fail?

If artificial intelligence is so transformative, then why is there a lot of skepti-
cism about introducing AI in manufacturing and whether the investment is
justified? ARC has observed many commonalities among those who struggle
and lists a few possible causes here:

Lack of Corporate Support

Without corporate support, many AI projects are prone to failure. One of the
main reasons for this is the lack of appropriate level of resources and fund-
ing. Implementing AI requires a significant investment in software,
personnel and, sometimes, hardware. AI projects implemented at large com-
panies require support at all the appropriate levels. Smaller organizations
may have support but may also struggle to acquire the necessary resources

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and funding to execute AI projects successfully. This can lead to project de-
lays and a lack of progress, making it difficult to meet goals and stay
competitive.

Moreover, without corporate support, AI projects are also likely to face chal-
lenges in terms of expertise and technical know-how. Implementing AI can
be complex, requiring both an understanding of the technology and how it
relates to specific business processes. Without access to the correct people
within an organization, projects are at risk of becoming isolated and discon-
nected from the wider business operations, reducing their impact and value.

Lack of Collaboration Across Multiple Disciplines

Collaboration across multiple disciplines helps to ensure that AI projects are
aligned with the overall goals and strategies of the company. It allows the
project team to consider the long-term implications of AI on the business and
to develop solutions that meet the company’s evolving needs and challenges.
For example, collaboration between IT, OT and engineering can help to en-
sure that the solutions are designed with manufacturability and scalability
in mind, while collaboration with operations can help to ensure integration
into existing processes and systems in a way that is efficient and effective.

Mismatch Between the Project Scope and Budget

Many digital transformation initiatives, including AI projects, are often ham-
pered by a mismatch between the project scope and the budget. This occurs
when resources allocated for the project are not sufficient to meet its require-
ments, leading to a lack of progress, delays, and project failure. Additionally,
when the budget is limited, the project team may be forced to cut corners and
make sacrifices, compromising the quality and functionality of the solution.

Boil the Ocean (Take on Too Much)

Taking on too much of an AI project at once, or trying to get everything done
at once, can have significant consequences. Firstly, attempting to take on too
much too soon can result in project delays and cost overruns. Large AI pro-
jects can be complex and require significant resources, and trying to do too
much at once can result in a lack of focus, inadequate resources, and mis-
management. Secondly, taking on too much too soon can result in a lack of
adoption. If the project is too large or too complex, employees may be un-
willing or unable to adopt the solution. This can also result in a lack of buy-
in from stakeholders, as the solution may not deliver the expected benefits.
Ultimately, this may be the key reason why so many projects get shut down.

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Take on an AI Science Project (Not a Business Project)

Aligning AI projects with business process outcomes is critical to ensuring
the success of AI initiatives. AI projects should be aligned with the business
objectives they are meant to support and should be designed to optimize the
flow of information and materials within the organization. This requires a
deep understanding of the manufacturing processes, as well as a thorough
analysis of the existing business processes and their weaknesses.

Wait for the “Right” Data

Data is a critical component of AI projects, and companies need to have a
solid data management strategy in place to ensure the accuracy and reliabil-
ity of their data. This includes data collection, storage and analysis, as well
as the development of algorithms and models to support decision making.
But the “right” data may be difficult to envision from the start, and waiting
for it can result in delayed implementation and missed opportunities. By
waiting, companies may miss opportunities to solve business problems and
improve operations. For example, if the data is not fully available to support
an AI project, the company may miss an opportunity to automate a manual
process or improve supply chain efficiency. This is not to say jump in with
bad data, but finding the data to start with can sometimes be more of an art-
form than a science at the start.

Be Afraid to Fail
Being afraid to fail a digital transformation project, such as AI, can have dan-
gerous consequences for a company. Avoidance can lead to missed
opportunities. As technology continues to advance and disrupt industries,
companies that do not embrace change risk falling behind their competitors
who are investing in new technologies and processes. This can lead to a loss
of market share and competitiveness, making it more difficult for the com-
pany to grow and succeed in the long term.

Additionally, avoiding projects utilizing AI can impact employee morale. In

today’s fast paced business environment, employees expect to work with the
latest technologies and processes, and may become frustrated and disen-
gaged if they are not given the opportunity to do so. This can result in high
turnover, low morale and a lack of engagement among employees, which
can negatively impact the company’s bottom line.

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Try to Define ROI Right from the Beginning

Attempting to define the return on investment (ROI) of a large AI project,
right from the start, can be risky. One of the risks is that it may limit the scope
of the project. If the team is solely focused on ROI from the outset, they may
only consider initiatives that can offer quick returns, which could result in a
narrow focus. This approach may also prevent the team from exploring more
innovative solutions that could provide long-term benefits.

Another danger is that the team may not fully understand the technology as
it evolves. AI is rapidly evolving, and it can be challenging to predict all the
potential benefits and costs of an AI project at the beginning. By focusing
solely on ROI upfront, the team may overlook opportunities to leverage the
full potential of the technology.

Don’t Start
The number one way to guarantee failure is to not even start an AI journey.
Avoiding artificial intelligence as part of a larger digital transformation jour-
ney can result in a lack of innovation. Companies that do not take risks and
embrace change may become stagnant and may struggle to keep up with the
rapidly evolving technology landscape. This can lead to a lack of new ideas,
products and processes, which can impact the company’s ability to innovate
and remain relevant.

Recommendations
Implementing artificial intelligence as part of a broader digital strategy can
be a daunting task, but with the right strategies and approaches, manufac-
turers can successfully integrate AI into their operations. Based on ARC
research and analysis, here are some recommendations for manufacturers to
succeed:

• Identify clear business goals that AI will help achieve: This will help de-
termine what type of products and technologies will need to be
implemented and how it will fit into existing processes.

• Start small but keep a large vision: AI projects can be complex and time-
consuming. Starting with small, manageable projects helps to gain expe-
rience and build confidence in the technology.

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• Foster a cross collaborative culture: Successful companies who integrate

AI throughout the manufacturing process involve multiple constituents
within an organization. Leverage the relationships between people in-
side the organization to ensure efficient and effective integration into
existing processes.

For further information or to provide feedback on this Insight, please contact your
account manager or the author at mdaquila@arcweb.com. ARC Insights are pub-
lished and copyrighted by ARC Advisory Group. The information is proprietary to
ARC and no part may be reproduced without prior permission from ARC.

©2023 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • arcweb.com