Canadian businesses adopting AI, but few are seeing ROI

While a majority of Canadian business leaders say their organizations are using generative artificial intelligence, few have integrated it fully across their operations and only a small fraction are seeing a return on their investments, new KPMG Canada research reveals.

In a survey of 753 business leaders across Canada, most (93 per cent) said their organizations are using AI in some form – up from 61 per cent last year. However, only three in 10 (31 per cent) have fully integrated generative AI solutions across their core operations and workflows. Another 32 per cent have partially adopted generative AI by integrating it across some workflows and operations, while 20 per cent are still experimenting or piloting projects.

Despite growing adoption, only two per cent of respondents said their organizations are seeing a return on their generative AI investments, most (63 per cent) of which were large companies with at least $1 billion in annual revenue. More than half (57 per cent) described their ROI as between five and 20 per cent, while nearly one third (31 per cent) were unable to quantify it.

Three in 10 respondents expect their AI investments to start generating a return within the year, while six in 10 (61 per cent) said between one to five years.

“Only a small sliver of Canadian businesses are generating growth from their AI investments today, and that’s understandable – new technologies take time to be adopted and demonstrate identifiable return on investment,” says Stephanie Terrill, Canadian Managing Partner of Digital and Transformation at KPMG Canada.

“However, Canada is facing near-term threats to its economic competitiveness and grappling with declining productivity and prosperity, so waiting years for AI investments to create value isn’t realistic in this environment – in fact, it’s downright risky. Canadian organizations need to accelerate AI implementation into core operations to start achieving near- to medium-term productivity gains if we hope to become more economically competitive as a country,” she says.

Ms. Terrill says many organizations are still in the experimentation phase and have not yet deployed AI at scale or into production. Some organizations lack consistent methods to track and report AI-driven outcomes, while others are using outdated or irrelevant methodology that doesn’t account for the full value AI brings. This is where businesses need to get innovative in their approach to capturing and measuring their ROI on AI, she notes.

“To realize the full value of AI, organizations need clear ROI frameworks that measure not just financial impact, but strategic and capacity gains. Paired with strong governance and accountability, that’s how businesses will turn AI ambition into measurable results."

Ms. Terrill recommends a holistic approach that combines hard financial metrics such as cost savings, revenue growth and operational efficiency with softer strategic metrics such as improved decision-making, improved employee experience, customer loyalty, and successful and sustained adoption to measure AI’s ROI.

How long will it take to achieve a return on your generative AI investment?

• 31 per cent are in an “advanced” stage of generative AI adoption (i.e. they have fully integrated AI solutions across core operations and workflows)
  • 32 per cent have achieved “partial adoption” by moving beyond experimentation and integrating it across some workflows and operations, with plans for further integration
  • 20 per cent are in an “early adoption” stage (i.e. experimenting or piloting projects but have integrated generative AI across some workflows)
  • 17 per cent are still in an “experimentation” or pilot project phase of AI adoption
• Only 2 per cent of respondents are already seeing a return on investment from their Gen AI investments
  • 37 per cent expect to see ROI in 1-3 years
  • 24 per cent expect ROI in 3-5 years
  • 8 per cent expect ROI in the next 6 months
  • 22 per cent expect ROI in 6-12 months
    
• Among organizations reporting a return on generative AI investments, 31 per cent aren’t sure what that ROI is :
  • 31 per cent reported a ROI of 5-10 per cent
  • 6 per cent reported a ROI of 10-20 per cent
  • 6 per cent reported a ROI of more than 20 per cent

If your business is seeing a financial return on AI, please describe the ROI:

While most respondents to KPMG Canada’s survey have not yet achieved a ROI from AI, many are already using performance metrics such as increased productivity and scale of adoption to assess the return on their AI investments.

Yet even with such benchmarks in place, more than half (57 per cent) said one of their biggest challenges in implementing AI is understanding how to capture value from the technology - up from 40 per cent last year. Less than four in 10 (38 per cent) said their organization has a clear plan on how to extract value from generative AI.

“Organizations are using AI to improve productivity, but very few know how to capture productivity gains and turn them into growth. Key performance indicators are essential for achieving success, but they must be underpinned by a clear strategy that bolsters and measures growth – and that needs to be established at the outset of their AI journey,” Ms. Terrill adds.

Recent research from KPMG international showed 73 per cent of Canadian CEOs said they are planning to invest between 10 and 20 per cent of their budgets to AI over the next 12 months, with AI implementation as their top operational priority over the next three years.

Nearly half (46 per cent) of respondents to KPMG Canada’s survey are focusing their AI investments on hiring new tech talent like developers, while four in 10 (41 per cent) are focusing on purchasing generative AI tools and solutions and one third (33 per cent) on change management and adoption.

“Business leaders are no longer thinking about whether they should invest in AI—they’re focusing on how to scale it responsibly and effectively. That’s why organizations need to make the investments not just in technology, but in the people and processes that make AI work—including a strong focus on AI literacy to ensure teams are empowered to use these tools with confidence and clarity,” Ms. Terrill adds.

• 35 per cent strongly agree that their employees have the right skills to fully leverage the benefits of generative AI (48 per cent agree somewhat)
• 37 per cent strongly agree their organization provides mandatory generative AI skills training for leaders and employees to increase their expertise (45 per cent agree somewhat)
• 37 per cent strongly agree their organization has considered how to restructure the work, workforce and organization to gain value from AI (51 per cent agree somewhat)
• 34 per cent strongly agree their organization plans to or is already redesigning or restructuring jobs, roles and activities to realize the value of generative AI (48 per cent agree somewhat)
• 36 per cent said their organization has a policy mandating employees to use AI in their role (39 per cent agree somewhat)