Whether AI Transformation Is Executed Well or Not Can Spell the Difference Between Significant Valuation Gain or Loss, According to L.E.K. Consulting Research
BOSTON, March 11, 2025 /PRNewswire/ — Investor expectations have reached a point where companies’ enterprise value increasingly depends on how well they develop and execute their artificial intelligence (AI) strategies for growth, according to a new L.E.K. Consulting report.
If a company hits most of the right notes in its AI transformation, it can expect a valuation gain of up to 19%. But a poor, or poorly executed, AI transformation can lead to a 9% loss of value, according to an L.E.K. analysis based on S&P 500 profit and loss data and results of an L.E.K. survey of executives. This 28% swing is the average delta in shareholder value based on a company’s AI implementation — for some companies it could be far more.
“The old ways of delivering on strategy and innovation will no longer satisfy investor expectations because AI advancements have raised the bar on what’s possible. AI strategies require targeted investment and careful implementation. Doing it right will lead to growth. But if a company swings and misses with AI, fails to swing enough or swings too much — or not at all — the value destruction could be significant,” said L.E.K. Managing Director and Head of the Digital Transformation practice Darren Perry, co-author of The AI Delta: How Artificial Intelligence Is Rewriting the Rules of Modern Business.
“The biggest strategic challenge going forward for all sectors and business functions is what we call the ‘AI Delta’ — the gap between growth from successful AI adoption and shareholder value erosion from poor AI strategy or execution — and how to maneuver that gap,” said report co-author and L.E.K. Managing Director Chuck Reynolds.
“Companies are effectively being forced to consider how AI will transform their business strategy and operating model. Will these tools accelerate their value growth or undermine it? And how do they ensure successful execution? These are critical questions every CEO and CFO needs to ask about their business to ensure they’re on the right side of the AI value delta,” said L.E.K. Global Managing Partner Clay Heskett.
The variable that determines a successful AI strategy and execution, according to the report, is whether the effort accelerates each of three key performance factors: revenue growth, by developing new products and services based on the company’s unique data; enhanced customer engagement, via truly personalized experiences, including pricing and marketing messages; and productivity gains, through automation and streamlined workflows.
“Shareholders and boards increasingly expect a company to have a robust AI strategy; without it, the business has a lower valuation. Meeting these expectations requires a proactive approach, with clear communication of AI initiatives, their expected business impact and practical plans and actions allowing delivery,” said L.E.K. U.K. Partner and report co-author Rob Wild.
The report outlines a framework with which companies can bridge the AI gap toward success — i.e., create and implement an AI transformation strategy that builds rather than destroys value.
“Winning companies will strategically deploy AI across all potential value-creation levers. In our experience, too many companies are just focusing on AI’s potential related to productivity gains. To maximize upside potential — and ultimately avoid value erosion — leaders must plan and execute AI holistically so the strategy encompasses performance, competition and unique opportunities,” said Perry.
When it comes to performance, companies often grapple with problems like high operational costs, slow processes and inefficient supply chains. Applying AI to the most critical of those issues can drive significant improvements. The language learning company Duolingo deployed generative AI and as a result reduced content development time from five years to as little as three months, thus boosting subscription growth.
To address competitive standing, a business must identify what its true differentiators are and use AI to augment them further, according to the report. Shopify used AI-powered features to enhance the product exploration experience for merchants and customers and as a result realized a 15% jump in sales.
To surface new opportunities, companies must meet the challenge of finding new revenue streams by unlocking value in the company’s data. AI can advance this process by synthesizing data to create new insights, develop new business models to monetize data and pinpoint unique opportunities. Adobe posted solid growth after introducing AI-based image maker Firefly and adding AI capabilities to its Creative Cloud product suite.
“When companies succeed going forward, it means they treated data and AI as a central element of strategy rather than just a technology to implement,” said Reynolds. “AI must be approached as a nervous system that interconnects every part of the organization, applying data and analytics to the heart of strategy: how the company goes to market, how it manages talent and how it responds to threats and opportunities.”
About L.E.K. Consulting
We’re L.E.K. Consulting, a global strategy consultancy working with business leaders to seize competitive advantage and amplify growth. Our insights are catalysts that reshape the trajectory of our clients’ businesses, uncovering opportunities and empowering them to master their moments of truth. Since 1983, our worldwide practice — spanning the Americas, Europe, Middle East and Asia-Pacific — has guided leaders across all industries, from global corporations to emerging entrepreneurial businesses and private equity investors. Looking for more? Visit www.lek.com.
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SOURCE L.E.K. Consulting