The state of AI in 2023: Generative AI’s breakout year (2024)

You have reached a page with older survey data. Please see our 2024 survey results here.

(24 pages)

The latest annual McKinsey Global Surveyon the current state of AI confirms the explosive growth of generative AI (gen AI) tools. Less than a year after many of these tools debuted, one-third of our survey respondents say their organizations are using gen AI regularly in at least one business function. Amid recent advances, AI has risen from a topic relegated to tech employees to a focus of company leaders: nearly one-quarter of surveyed C-suite executives say they are personally usinggen AI tools for work, and more than one-quarter of respondents from companies using AI say gen AI is already on their boards’ agendas. What’s more, 40 percent of respondents say their organizations will increase their investment in AI overall because of advances in gen AI. The findings show that these are still early days for managing gen AI–related risks, with less than half of respondents saying their organizations are mitigating even the risk they consider most relevant: inaccuracy.

The organizations that have already embedded AI capabilities have been the first to explore gen AI’s potential, and those seeing the most value from more traditional AI capabilities—a group we call AI high performers—are already outpacing others in their adoption of gen AI tools.1We define AI high performers as organizations that, according to respondents, attribute at least 20 percent of their EBIT to AI adoption.

The expected business disruption from gen AI is significant, and respondents predict meaningful changes to their workforces. They anticipate workforce cuts in certain areas and large reskilling efforts to address shifting talent needs. Yet while the use of gen AI might spur the adoption of other AI tools, we see few meaningful increases in organizations’ adoption of these technologies. The percent of organizations adopting any AI tools has held steady since 2022, and adoption remains concentrated within a small number of business functions.

Table of Contents

  1. It’s early days still, but use of gen AI is already widespread
  2. Leading companies are already ahead with gen AI
  3. AI-related talent needs shift, and AI’s workforce effects are expected to be substantial
  4. With all eyes on gen AI, AI adoption and impact remain steady
  5. About the research

1. It’s early days still, but use of gen AI is already widespread

The findings from the survey—which was in the field in mid-April 2023—show that, despite gen AI’s nascent public availability, experimentation with the toolsis already relatively common, and respondents expect the new capabilities to transform their industries. Gen AI has captured interest across the business population: individuals across regions, industries, and seniority levels are using gen AI for work and outside of work. Seventy-nine percent of all respondents say they’ve had at least some exposure to gen AI, either for work or outside of work, and 22percent say they are regularly using it in their own work. While reported use is quite similar across seniority levels, it is highest among respondents working in the technology sector and those in North America.

Interactive

Organizations, too, are now commonly using gen AI. One-third of all respondents say their organizations are already regularly using generative AI in at least one function—meaning that 60percent of organizations with reported AI adoption are using gen AI. What’s more, 40 percent of those reporting AI adoption at their organizations say their companies expect to invest more in AI overall thanks to generative AI, and 28 percent say generative AI use is already on their board’s agenda. The most commonly reported business functions using these newer tools are the same as those in which AI use is most common overall: marketing and sales, product and service development, and service operations, such as customer care and back-office support. This suggests that organizations are pursuing these new tools where the most value is. In our previous research, these three areas, along with software engineering, showed the potential to deliver about 75 percent of the total annual value from generative AI use cases.

The state of AI in 2023: Generative AI’s breakout year (1)

In these early days, expectations for gen AI’s impact are high: three-quarters of all respondents expect gen AI to cause significant or disruptive change in the nature of their industry’s competition in the next three years. Survey respondents working in the technology and financial-services industries are the most likely to expect disruptive change from gen AI. Our previous research showsthat, while all industries are indeed likely to see some degree of disruption, the level of impact is likely to vary.2“The economic potential of generative AI: The next productivity frontier,” McKinsey, June 14, 2023. Industries relying most heavily on knowledge work are likely to see more disruption—and potentially reap more value. While our estimates suggest that tech companies, unsurprisingly, are poised to see the highest impact from gen AI—adding value equivalent to as much as 9 percent of global industry revenue—knowledge-based industries such as banking (up to 5 percent), pharmaceuticals and medical products (also up to 5 percent), and education (up to 4 percent) could experience significant effects as well. By contrast, manufacturing-based industries, such as aerospace, automotives, and advanced electronics, could experience less disruptive effects. This stands in contrast to the impact of previous technology waves that affected manufacturing the most and is due to gen AI’s strengths in language-based activities, as opposed to those requiring physical labor.

Responses show many organizations not yet addressing potential risks from gen AI

According to the survey, few companies seem fully prepared for the widespread use of gen AI—or the business risks these tools may bring. Just 21 percent of respondents reporting AI adoption say their organizations have established policies governing employees’ use of gen AI technologies in their work. And when we asked specifically about the risks of adopting gen AI, few respondents say their companies are mitigating the most commonly cited risk with gen AI: inaccuracy. Respondents cite inaccuracy more frequently than both cybersecurity and regulatory compliance, which were the most common risks from AI overall in previous surveys. Just 32 percent say they’re mitigating inaccuracy, a smaller percentage than the 38percent who say they mitigate cybersecurity risks. Interestingly, this figure is significantly lower than the percentage of respondents who reported mitigating AI-related cybersecurity last year (51 percent). Overall, much as we’ve seen in previous years, most respondents say their organizations are not addressing AI-related risks.

2. Leading companies are already ahead with gen AI

The survey results show that AI high performers—that is, organizations where respondents say at least 20 percent of EBIT in 2022 was attributable to AI use—are going all in on artificial intelligence, both with gen AI and more traditional AI capabilities. These organizations that achieve significant value from AI are already using gen AI in more business functions than other organizations do, especially in product and service development and risk and supply chain management. When looking at all AI capabilities—including more traditional machine learning capabilities, robotic process automation, and chatbots—AI high performers also are much more likely than others to use AI in product and service development, for uses such as product-development-cycle optimization, adding new features to existing products, and creating new AI-based products. These organizations also are using AI more often than other organizations in risk modeling and for uses within HR such as performance management and organization design and workforce deployment optimization.

AI high performers are much more likely than others to use AI in product and service development.

Another difference from their peers: high performers’ gen AI efforts are less oriented toward cost reduction, which is a top priority at other organizations. Respondents from AI high performers are twice as likely as others to say their organizations’ top objective for gen AI is to create entirely new businesses or sources of revenue—and they’re most likely to cite the increase in the value of existing offerings through new AI-based features.

The state of AI in 2023: Generative AI’s breakout year (3)

As we’ve seen in previous years, these high-performing organizations invest much more than others in AI: respondents from AI high performers are more than five times more likely than others to say they spend more than 20 percent of their digital budgets on AI. They also use AI capabilities more broadly throughout the organization. Respondents from high performers are much more likely than others to say that their organizations have adopted AI in four or more business functions and that they have embedded a higher number of AI capabilities. For example, respondents from high performers more often report embedding knowledge graphs in at least one product or business function process, in addition to gen AI and related natural-language capabilities.

While AI high performers are not immune to the challenges of capturing value from AI, the results suggest that the difficulties they face reflect their relative AI maturity, while others struggle with the more foundational, strategic elements of AI adoption. Respondents at AI high performers most often point to models and tools, such as monitoring model performance in production and retraining models as needed over time, as their top challenge. By comparison, other respondents cite strategy issues, such as setting a clearly defined AI vision that is linked with business value or finding sufficient resources.

The state of AI in 2023: Generative AI’s breakout year (4)

The findings offer further evidence that even high performers haven’t mastered best practices regarding AI adoption, such as machine-learning-operations (MLOps) approaches, though they are much more likely than others to do so. For example, just 35 percent of respondents at AI high performers report that where possible, their organizations assemble existing components, rather than reinvent them, but that’s a much larger share than the 19 percent of respondents from other organizations who report that practice.

Many specialized MLOps technologies and practicesmay be needed to adopt some of the more transformative uses cases that gen AI applications can deliver—and do so as safely as possible. Live-model operations is one such area, where monitoring systems and setting up instant alerts to enable rapid issue resolution can keep gen AI systems in check. High performers stand out in this respect but have room to grow: one-quarter of respondents from these organizations say their entire system is monitored and equipped with instant alerts, compared with just 12 percent of other respondents.

3. AI-related talent needs shift, and AI’s workforce effects are expected to be substantial

Our latest survey results show changes in the roles that organizations are filling to support their AI ambitions. In the past year, organizations using AI most often hired data engineers, machine learning engineers, and Al data scientists—all roles that respondents commonly reported hiring in the previous survey. But a much smaller share of respondents report hiring AI-related-software engineers—the most-hired role last year—than in the previous survey (28 percent in the latest survey, down from 39 percent). Roles in prompt engineering have recently emerged, as the need for that skill set rises alongside gen AI adoption, with 7 percent of respondents whose organizations have adopted AI reporting those hires in the past year.

The findings suggest that hiring for AI-related roles remains a challenge but has become somewhat easier over the past year, which could reflect the spate of layoffs at technology companies from late 2022 through the first half of 2023. Smaller shares of respondents than in the previous survey report difficulty hiring for roles such as AI data scientists, data engineers, and data-visualization specialists, though responses suggest that hiring machine learning engineers and AI product owners remains as much of a challenge as in the previous year.

The state of AI in 2023: Generative AI’s breakout year (5)

Looking ahead to the next three years, respondents predict that the adoption of AI will reshape many roles in the workforce. Generally, they expect more employees to be reskilled than to be separated. Nearly four in ten respondents reporting AI adoption expect more than 20 percent of their companies’ workforces will be reskilled, whereas 8 percent of respondents say the size of their workforces will decrease by more than 20 percent.

The state of AI in 2023: Generative AI’s breakout year (6)

Looking specifically at gen AI’s predicted impact, service operations is the only function in which most respondents expect to see a decrease in workforce size at their organizations. This finding generally aligns with what our recent researchsuggests: while the emergence of gen AI increased our estimate of the percentage of worker activities that could be automated (60 to 70percent, up from 50 percent), this doesn’t necessarily translate into the automation of an entire role.

The state of AI in 2023: Generative AI’s breakout year (7)

AI high performers are expected to conduct much higher levels of reskilling than other companies are. Respondents at these organizations are over three times more likely than others to say their organizations will reskill more than 30 percent of their workforces over the next three years as a result of AI adoption.

The state of AI in 2023: Generative AI’s breakout year (8)

4. With all eyes on gen AI, AI adoption and impact remain steady

While the use of gen AI tools is spreading rapidly, the survey data doesn’t show that these newer tools are propelling organizations’ overall AI adoption. The share of organizations that have adopted AI overall remains steady, at least for the moment, with 55 percent of respondents reporting that their organizations have adopted AI. Less than a third of respondents continue to say that their organizations have adopted AI in more than one business function, suggesting that AI use remains limited in scope. Product and service development and service operations continue to be the two business functions in which respondents most often report AI adoption, as was true in the previous four surveys. And overall, just 23 percent of respondents say at least 5 percent of their organizations’ EBIT last year was attributable to their use of AI—essentially flat with the previous survey—suggesting there is much more room to capture value.

The state of AI in 2023: Generative AI’s breakout year (9)

Organizations continue to see returns in the business areas in which they are using AI, andthey plan to increase investment in the years ahead. We see a majority of respondents reporting AI-related revenue increases within each business function using AI. And looking ahead, more than two-thirds expect their organizations to increase their AI investment over the next three years.

The state of AI in 2023: Generative AI’s breakout year (10)

About the research

The online survey was in the field April 11 to 21, 2023, and garnered responses from 1,684 participants representing the full range of regions, industries, company sizes, functional specialties, and tenures. Of those respondents, 913 said their organizations had adopted AI in at least one function and were asked questions about their organizations’ AI use. To adjust for differences in response rates, the data are weighted by the contribution of each respondent’s nation to global GDP.

The survey content and analysis were developed by Michael Chui, a partner at the McKinsey Global Institute and a partner in McKinsey’s Bay Area office, where Lareina Yee is a senior partner; Bryce Hall, an associate partner in the Washington, DC, office; and senior partners Alex Singla and Alexander Sukharevsky, global leaders of QuantumBlack, AI by McKinsey, based in the Chicago and London offices, respectively.

They wish to thank Shivani Gupta, Abhisek Jena, Begum Ortaoglu, Barr Seitz, and Li Zhang for their contributions to this work.

This article was edited by Heather Hanselman, an editor in the Atlanta office.

Explore a career with us

Search Openings

The state of AI in 2023: Generative AI’s breakout year (2024)

FAQs

What is the current status of artificial intelligence in 2023? ›

Generative AI will become commercialized

Generative AI is having a moment, and we'll start to see many more products and services come to market in 2023. This area is exciting because many largely untapped but valuable use cases exist. One particularly bright spot is generative AI-powered language applications.

How big is the generative AI market in 2023? ›

Generative AI is driving economic growth

On the low end, Statista Market Insights estimates the size for the generative AI market at $44.89 billion in 2023 increasing to $207 billion in 2030.

What are the key takeaways from this survey: the state of AI in 2023, generative AI's breakout year? ›

The findings from the survey—which was in the field in mid-April 2023—show that, despite gen AI's nascent public availability, experimentation with the tools is already relatively common, and respondents expect the new capabilities to transform their industries.

How fast is AI growing 2023? ›

The AI market is set to grow by 26% in 2025 (Tractica)
YearYear-Over-Year Growth
202054%
202154%
202247%
202338%
3 more rows
Jun 4, 2024

How did AI impact 2023? ›

Generative models dominated the year, as calls for policy and transparency heated up. In 2023, the field of artificial intelligence witnessed a significant transformation — generative AI emerged as the most prominent and impactful story of the year.

What is the rise of generative AI? ›

Generative AI was introduced in the 1960s in chatbots. But it was not until 2014, with the introduction of generative adversarial networks, or GANs -- a type of machine learning algorithm -- that generative AI could create convincingly authentic images, videos and audio of real people.

What is generative AI vs AI? ›

Traditional AI: Its scope of operations is limited. The model uses data analysis to identify patterns, make predictions, and perform specific tasks. It's a highly efficient problem solver. Generative AI: It creates original data based on human input and data analysis.

What are generative AI examples? ›

Generative AI or generative artificial intelligence refers to the use of AI to create new content, like text, images, music, audio, and videos. Generative AI is powered by foundation models (large AI models) that can multi-task and perform out-of-the-box tasks, including summarization, Q&A, classification, and more.

How will generative AI impact our lives? ›

Generative AI can simulate different scenarios and generate possible solutions, aiding in decision-making processes. It can be applied in areas such as finance, operations research, or healthcare to optimize processes, recommend actions, or diagnose problems.

What is the state of AI right now? ›

Summary of the State of AI

AI-enhanced technologies and solutions are now more widely available than before across industries, though they are not necessarily cheap to implement. Voice-based assistants are at the forefront of the AI adoption process in industries as diverse as IT, automotive, and retail.

Is ChatGPT generative AI? ›

ChatGPT represents an exciting advancement in generative AI, with several features that could help accelerate certain tasks when used thoughtfully. It also comes with limitations. Understanding both the features and limitations is key to leveraging this technology for the greatest impact.

What year will AI be smarter than humans? ›

"By 2029, AI is probably smarter than all humans combined." Musk has been outspoken about his concerns regarding AI and the dangers associated with it, often calling for more regulation of the powerful technology.

What is the current status of AI? ›

The Current State of Artificial Intelligence

AI technologies have progressed significantly and have been implemented in various industries, ranging from healthcare to finance. Machine learning, natural language processing, and computer vision are the most common AI technologies today.

What is the current state in AI? ›

The latest annual McKinsey Global Survey on the current state of AI confirms the explosive growth of generative AI (gen AI) tools. Less than a year after many of these tools debuted, one-third of our survey respondents say their organizations are using gen AI regularly in at least one business function.

What are the advancements in AI 2023? ›

In 2023, the entertainment industry saw a notable AI advancement with the release of "Now and Then", a new Beatles song. This achievement was made possible by advanced audio-processing techniques similar to those used in Disney's 2021 "Get Back" documentary.

How long until AI replaces us? ›

The World Economic Forum has estimated that artificial intelligence will replace some 85 million jobs by 2025.

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Lilliana Bartoletti

Last Updated:

Views: 6451

Rating: 4.2 / 5 (53 voted)

Reviews: 84% of readers found this page helpful

Author information

Name: Lilliana Bartoletti

Birthday: 1999-11-18

Address: 58866 Tricia Spurs, North Melvinberg, HI 91346-3774

Phone: +50616620367928

Job: Real-Estate Liaison

Hobby: Graffiti, Astronomy, Handball, Magic, Origami, Fashion, Foreign language learning

Introduction: My name is Lilliana Bartoletti, I am a adventurous, pleasant, shiny, beautiful, handsome, zealous, tasty person who loves writing and wants to share my knowledge and understanding with you.