I built and led data & AI teams in pharma for 6 years, one of the most highly regulated industries. Prior to that, I led teams and developed data & AI capabilities in tech for 21 years. It was a big change when I moved from tech to pharma. This experience was “enhanced” by the parallel move from the more progressive USA and to the more risk-averse Germany.

Are there differences in AI adoption across industries?

Yes, but not for the reasons most people think.

Aside from tech and pharma, I have seen it also in other industries. It’s believed that different laws and regulations across industries impact AI adoption. More regulated industries are supposedly limited in their use of data and AI. 

It’s not that. It’s the mindset of the people and organizations in those industries. 

When I joined the pharma company I was surprised about two things. First, I was surprised how much more data a pharma company in Germany had than I expected, especially in the commercial setting. And second, how little of that was being used to drive business decisions. 

That was driven partly by the data mindset in the organization and partly due to the strong data privacy regulations in Germany. Although this was years before the General Data Protection Regulation (GDPR) was implemented in the European Union, Germany had strong data privacy rules already before then. 

The more I tried to understand the supposedly data-protection-driven limitations, the more I realized how much more data use was possible than internally allowed. I also realized how a mutually respectful cooperation with data privacy (and legal) teams can benefit an organization to be more data- and AI-driven. More on that in a second. 

Let’s keep in mind what the role of the data privacy and legal teams is. Their job is to minimize risk to the company. And what is the best way to minimize risk associated with using data and AI? Yes, the best way to achieve that is to not use any data or AI at all. Can you blame them? That’s their job. 

Let that sink in. 

Grab a coffee or tea and then come back to read this again: The ideal solution from a data privacy perspective would be to NOT use any data at all. 

The mindset of what is risky differs across industries. It’s true that the more regulations an industry needs to follow, the more things could go wrong. That leads to higher risk aversion. But it’s seldom true regulations that limit data and AI use, it’s mainly the mindset in the industry. 

How to be successful with AI in highly regulated industries? 

Successful data- and AI-driven companies find the right balance, in any industry. They find the right balance between using as much data as financially beneficial for the company. And as little as possible to avoid potential fines and reputation damages. 

In Europe, GDPR even has a clause allowing for the use of personally identifiable information: legitimate reason for specific business purposes, including vital interests. Financially successful companies leverage data for business decisions, so using data, including personally identifiable information, is of vital interest.

This is how I approached it too. 

My team and I started small with developing customer profiles. Initially, this was considered illegal by data privacy. But I was able to find a precedent of a customer profile established decades ago and commonly used across the pharma industry. That led to the next step of uncovering other internally imposed restrictions on data use. 

Whenever possible, I have discussed the benefits of using data and AI for the company with the data privacy and legal colleagues. At the end, the collaboration with data privacy became mutually respectful. My data science team has involved data privacy and legal right from the start whenever we had a new idea for a data implementation or an AI solution. 

This collaboration exceeded even my own expectations. It got to the point where our data privacy and legal partners were proactively recommending suggestions to address data privacy concerns once they understood the business objectives. Instead of giving up on AI solutions that would have been considered not doable just a few years before, many times we together found a feasible approach.

In whatever industry you are, if your company wants to implement data and AI solutions, don’t fall into the trap of believing that you are restricted due to GDPR or the EU AI Act. Or similar regulations in the US, UK, and other countries. 

If it works for pharma, it will work in your industry.

Successful AI adoption depends on people and their mindset. And that’s not only the end users, but also all relevant stakeholders. Make sure to involve them – like in this case, data privacy and legal – right from the start. 

And if they are tainted by the historic risk aversion in the industry, start explaining the business benefits and potential trade-offs of using more data and AI. You may be surprised how far you get.

Why should companies look beyond Generative AI for meaningful AI adoption?

Mark Twain is attributed saying "To a man with a hammer, everything looks like a nail." If your tool kit has only hammers, you may end up treating every problem as a nail. And it doesn’t matter how many hammers you have, how fast they are, how cheap they are, how many parameters they have, and how the Chinese ones supposedly outperform US ones. It’s still a hammer.

Yes, I’m talking about AI chatbots.

This is how many companies treat these AI chatbots today. Because they have first encountered AI through ChatGPT, one of the GenAI chatbots, they treat AI chatbots as the only AI solution available. The constant product releases and updates from tech vendors also lead to high (social) media attention and the perception that GenAI is the only solution. GenAI is that hammer today.

At the same time, the expected business value from Generative AI is overhyped. There are only a FEW of industries with heavy content creation that financially benefit from Generative AI, such as the film and the advertising industries. Analytical AI solutions, on the other hand, have been implemented and proven to work in ALL industries and business functions. Analytical AI are solutions based on machine learning and deep learning that innovative companies have been using for decades.

McKinsey expects Generative AI to deliver only 20% of the overall value that AI can deliver for companies. 80% of the business value that AI delivers comes from Analytical AI.

https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/the-economic-potential-of-generative-ai-the-next-productivity-frontier 

AI is the machine's ability to perform cognitive functions we associate with humans. One of these cognitive functions is natural language processing. OpenAI, the company beyond ChatGPT, and other AI vendors have almost perfected replicating this human cognitive function in chatbots. But that’s chatbots’ main focus.

Another cognitive function is problem solving. Problem solving has been tackled by machines through machine learning, a subset of Analytical AI.

Which activity do you think is the most common business task? Natural language processing, so analysis and generation of text, or problem solving? This partly explains why 80% of the AI value comes from Analytical AI.

Despite all of this, chatbot vendors mainly ignore Analytical AI.

Why do chatbot vendors ignore Analytical AI?

At least three explanations come to my mind.

First, billions of US dollars have been invested in chatbot vendors with the focus on Generative AI. Their investors expect high returns. It would be detrimental to admit that chatbots are only adding a small business value. This is true especially now since some of these companies, e.g., Open AI and Anthropic, are planning IPOs. So, they stick to chatbots as the only AI.

Second, while being stuck on the path of making chatbots bigger, faster, and cheaper, AI vendors pursue the holy grail of Artificial General Intelligence (AGI). They chase what is technically possible, instead of what is practical for business.

And third, Analytical AI solutions are decentralized. They are developed in-house by internal data teams, based on the company’s private data. Chatbots, on the other hand, are centralized since only a few companies have the capacity to train these models. And, these chatbots are trained on public data. The business model of AI vendors relies on this centralized approach. Hence, they keep focusing on chatbots as the only way to use AI.

All of that leads to the ongoing propaganda that AI chatbots are the universal AI to solve all business problems and everybody with a chatbot can do it.

I experience how successful that propaganda is on a regular basis. Recently, I talked about AI with a business consultant who recommends GenAI for his clients. I talked about the different forms of AI and how many businesses are still unaware of the financial benefits that Analytical AI delivers. What surprised me was the suggestion from the consultant to use a chatbot to create Analytical AI solutions for companies.

Apparently now business consultants have been primed by OpenAI & Co to ignore the fact that data is the key driver of AI. They believe that you can use AI chatbots trained on public data to address a company-specific business problem, which requires private company data.

They don’t understand that there is only limited value companies can gain from GenAI, which is built on publicly available information. An AI chatbot trained only on public data cannot magically deliver SPECIFIC recommendations for increasing revenues or reducing expenses for YOUR company.

What are the differences between Analytical AI and Generative AI?

Here is a summary of the different aspects relevant to understanding and using Analytical AI and Generative AI.

What are the business benefits?
Analytical AI: Forecasting, segmentation, optimization, anomalies detection, recommendations
Generative AI: Text summaries, content creation (text, images, videos, music), chatbots

Which data is used?
Analytical AI: Mostly company private data
Generative AI: Mostly public data

Who develops it?
Analytical AI: (In-house) data scientists supported by data engineers & machine learning engineers
Generative AI: AI vendors, e.g., OpenAI, Anthropic

Who can extract information?
Analytical AI: Data scientists, data & AI analysts, data translators
Generative AI: Anyone with sufficient prompting skills

Since when is it available?
Analytical AI: First machine learning models implemented at scale in 1990s
Generative AI: First usable LLM (ChatGPT) launched in 2022

Let’s come back to the hammer. Would you hire a plumber to fix your leaking bathroom fixtures if his only tool were a hammer? How about a hammer with a magnifying glass? Or with a folding knife on the side?

No matter how enhanced the hammer is, I wouldn’t.

I would look for an expert that understands the problem, knows the tool options, and applies the proper tool for that particular problem.

Why should that be different with AI?

Since AI is much more than chatbots, companies need to look beyond Generative AI for successful AI adoption.

Fifteen years ago, I had an epiphany. I know, that’s a big word, but it describes very well how I realized the importance of the human factor, the importance of people, for success with AI.

What is a bad approach to start with AI?

Back then, at a large tech company in the US, we developed a marketing mix model to optimize marketing investments. We estimated that the company could reduce advertising expenses by 22% while maintaining the same revenues. This could have been $1 million savings, per year. As a data team we were excited about this and were ready to share it with the marketing director responsible for marketing investment decisions.

But his reaction?

“Ha ... what am I supposed to do with this AI? We've been doing very well with our marketing mix decisions for years. How do I even know that this black box will deliver anything useful? And then I'm supposed to change how I make investment decisions?”

That was heartbreaking after we devoted months and many weekends to develop this model. And disappointing, especially at a tech company where you would expect decisions to always be data-driven. The marketing director's reaction was actually not rational, he reacted emotionally to potential changes in his area.

And we? We focused on data, algorithms, and technology, not on people. Even at a tech company, people need to be brought along. You have to convince employees of the benefits of using new technology. And you need to be honest about what will change with AI.

AI almost always leads to changes, for both top managers and individual contributors, and everyone else in between. It doesn't matter whether it's the new Generative AI or the Analytical AI solutions, such as machine learning or deep learning, that companies have been using for years or sometimes decades. All AI leads to changes in employees’ workflows.

However, it’s interesting to see how people use AI in private lives. AI solutions that have been available for decades are part of our daily activities. We use AI in Google Maps, autocomplete, recommendations from Amazon, Netflix, or Spotify without even thinking about it. And why? Because we have known and used them for a long time. And more importantly, because we see their value. We know exactly ... what's in it for me.

How to bring people along?

In my more recent role at a pharma company in Germany, my team and I introduced an AI recommendation system, similar to Amazon's product recommendations. These recommendations were for sales reps: which customers to contact this week, through which channels, and with which content.

To ensure success this time, we did three things.

First, we involved two sales reps in the development process. Our developers learned what sales reps really need.

Second, we implemented a marketing campaign for this recommender system with short videos describing the tool, lunch & learn sessions, and informal data office hours. We even launched it at a big bang kick-off event with presentations, talk shows, and a splashy video reel. This felt almost like an iPhone launch.

And third, we started a data literacy program so that every employee understands the value of using data and AI.

This AI introduction was a success. We involved people right from the start. The employees felt engaged. They understood, “ah, that’s what’s in it for me”. AI wasn’t an enemy anymore. It was a new colleague who never takes vacation and never complains about the cafeteria food.

Is it possible to succeed with AI?

Yes, it is. Companies can succeed with AI. They just need to remember that it's not data or technology that are critical to success with AI. It's the people.

The better people understand how something works, the more willing they are to use it. And, if they see the benefit of using AI, they will embrace it.

For a successful AI adoption, answer for your employees the question: “What's in it for me?”