AI to have profound impact on SG&A costs and staffing

Generative artificial intelligence (AI) technologies will have a profound potential impact on selling, general and administrative (SG&A) costs and staffing, enabling reductions of up to 40% over the next five to seven years, according to new research from The Hackett Group.

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The detailed analysis of current SG&A costs engaged proprietary performance benchmarks from The Hackett Group® to quantify for the first time the potential impact Generative AI will have on SG&A, including finance, procurement, human resources, information technology, marketing, sales and other functions.

For a typical $10 billion company, Generative AI has the potential to reduce SG&A costs by more than $180 million annually, the research found. The cost estimates were derived from an analysis of actual performance data for hundreds of components and subcomponents in 17 major end-to-end processes across the SG&A spectrum. The analysis considered: the elimination of structured work through hyper-automation; the ability to enable unstructured work by adopting digital assistants; and enhancing interactive work through personalization at scale. The total value potential impact was then calculated by accumulating process components across all SG&A functions.

The Hackett Group also announced the availability of two new solutions offerings designed to help clients understand the impact of Generative AI on SG&A, develop their own implementation plans, and keep up with the rapidly evolving technology landscape. A new Generative AI Executive Advisory Program has been launched, and The Hackett Group is completing development of its AI Explorer assessment tool to help clients understand the impact of AI on their operations.

A complimentary version of The Hackett Group’s research note, “Generative AI Will Yield 40% SG&A Cost Reduction,” is available with registration at https://go.poweredbyhackett.com/gai2308sm. More information on The Hackett Group’s digital transformation services is available here: https://www.thehackettgroup.com/digital-transformation/.

According to The Hackett Group Principal Vin Kumar, “There’s a tremendous amount of hype in the market around Generative AI, and a lot of confusion over its potential impact on cost and staffing. But for the first time, we’ve taken a fact-based approach to validating the eye-popping

headlines and quantified the potential benefit based on an analysis of data from our extensive benchmarking of Global 1000 companies across the various SG&A functions. We’ve concluded that Generative AI plays a critical role in the intelligent automation framework, which includes robotic process automation, intelligent data capture, cognitive tools and more. It has a multiplier effect in terms of enabling dramatic efficiency and effectiveness improvements in structured, unstructured and interactive work. Without Generative AI, companies will see only incremental reductions in cost and staffing from these other intelligent automation technologies.”

Chief of Research John Van Decker said, “Now is the time to educate management on the capabilities, limitations of the technology, relevant policies and potential impact on staffing; assess how generative AI can be adopted in your organization; and partner with technology and/or digital automation teams to take full advantage of generative AI’s capabilities. In the SG&A area, domain-specialized Generative AI is particularly relevant. By providing Generative AI with the necessary process knowledge and integrating it with other intelligent automation solutions, companies can begin utilizing it quickly for transactional SG&A tasks and mature over time to autonomous operations.”

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