The evolution of artificial intelligence (AI) has rarely been far from the headlines in recent years. Its influence now reaches into nearly every sector and geography and holds economic and political ramifications that many experts say are on par with the start of the Industrial Revolution in the 18th Century. In a new publication, Artificial Intelligence: Real Opportunity, our research analysts examine the growing influence of AI across sectors. In this extract, they explain how they evaluate investment potential for AI capabilities.

Artificial Intelligence (AI) is attracting growing amounts of corporate investment. As the technologies develop and start to make a broader impact, we think the potential value that can be unlocked is likely to grow.

Our ambition when seeking out AI opportunities is to find companies with access to proprietary, domain-specific datasets that can be used to solve real business problems, and unlock easily quantifiable value.

Further, we would look for cases where this could lead to network effects whereby a solution for one customer can be used to improve the offering and more easily win future business.

In assessing an opportunity, we focus on three areas: value creation, value realization and defensibility.

Value creation. What is the customer’s specific problem? How much value does solving it unlock and how many similar customers are there to build up a total available market (TAM)? In other words, the total market demand for the product or service?

Value Realization. How does the company think about the return on investment? How easy is it to adopt the technology internally with employees and externally with customers? Does the company have the right data to solve the problem? Does the solution require additional infrastructure (such as the addition of sensors to collect data)? Does it require a change in business flow?