AI is rapidly becoming part of the business conversation.
But adopting AI because everyone else is doing it isn’t a strategy.
For me, the more useful question is:
What will AI actually change in the economics of the business?
Before committing capital, I would ask five questions.
1. WHAT PROBLEM ARE WE SOLVING?
Start with the business problem — not the technology.
Is it:
→ Too much administration?
→ Slow quoting?
→ Poor management information?
→ Repetitive processing?
→ Customer response times?
→ Forecasting?
→ Sales capacity?
If we can’t clearly define the problem, it’s difficult to measure the return.
2. WHAT WILL ACTUALLY CHANGE?
Saving 10 minutes on a task doesn’t automatically create value.
Ask what changes operationally.
Can the same team process more transactions?
Can salespeople spend more time selling?
Can management make decisions faster?
Can errors or rework be reduced?
Can a growing business increase capacity without increasing headcount at the same rate?
That is where productivity becomes economically meaningful.
3. WHAT IS THE FULL COST?
The cost isn’t just the software subscription.
Consider:
Technology + Implementation + Integration + Training + Change Management + Ongoing Support
Then compare that investment with the expected economic benefit.
4. WHAT DOES IT DO TO EBITDA AND CASH FLOW?
This is where the conversation becomes interesting.
If an AI investment costs $100,000 but sustainably generates $300,000 of annual benefit, that deserves attention.
But we should understand where that $300,000 comes from.
Is it:
Lower cost?
Additional capacity?
Higher revenue?
Better margins?
Reduced working capital?
Better utilisation of existing assets?
Not every productivity gain appears immediately in the P&L.
5. DOES IT CREATE LONG-TERM VALUE?
Ultimately, I would bring the decision back to the same framework I use for other capital investments:
What capital are we investing?
↓
What incremental cash flow will it generate?
↓
What return will we earn on that capital?
↓
Does that return exceed our cost of capital?
↓
Does it create economic value?
AI shouldn’t be treated differently simply because the technology is new.
A $500,000 AI project should have to compete for capital against a $500,000 piece of equipment, a new branch, an acquisition or paying down debt.
The question isn’t:
“Should we be using AI?”
The better question is:
“Where can AI materially improve the economics of our business — and is that the best use of our capital?”
That’s a much more interesting conversation.
#ArtificialIntelligence #BusinessStrategy #Productivity #CapitalAllocation #EBITDA #ValueCreation #CorporateAdvisory
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