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Can AI Help Your Company Innovate? It Depends

Companies need new ways to innovate quickly, cheaply, and productively. Many, quite reasonably, wonder how deploying AI might help. To investigate, we researched how companies are using AI for innovation and found that tools are just tools — success depends on how organizations use these new tools now at their disposal. To investigate what kinds of innovation AI worked with, the authors performed two studies: first, a survey of 331 firms for practices on process improvement and new technology development, and second, an archival analysis of patent data on new technology development for a broader sample of more than 2,000 publicly traded firms. The results of these studies suggest that firms that have historically focused on specific types of innovation — process innovation and innovation by diverse recombination, in which companies combine a wide variety of technology elements in new ways — may benefit most from using advanced data capabilities of machine learning and AI. Firms that use AI analytics to generate wide recombinations are 3 to 7% more productive than firms that do not. Furthermore, when a firm’s existing knowledge is spread throughout the firm, advanced AI capabilities can further boost firm innovation by about three more new patents a year. Conversely, using AI is less helpful for incremental innovation and making small improvements to existing products, and is almost no help at all for radical innovation.