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The AI value gap opens the moment a CFO asks what the company is getting for its AI spend. David Rogers, author of The Digital Transformation Roadmap and The Digital Transformation Playbook, has watched that conversation turn awkward in boardroom after boardroom. People use the tools and teams can point to a use case, yet nobody can show where AI appears on the income statement.
David returns to The Innovation Show to discuss a Harvard Business Review article he co-wrote with Krishnan Sankaranarayanan, who leads AI transformation at Eastman. Their thesis is simple. The gap is a strategy problem.
Why the AI value gap is a strategy problem
When AI fails to show up in financial results, leaders usually blame the algorithms or the messy data. Some blame the frontline for resisting new workflows. David and Krishnan argue those explanations miss the mark.
Context decides whether time saved becomes value. Save a worker one minute on a routine task and the minute disappears into their day. Save one minute at a bottleneck, such as loading an extra product onto a truck, and throughput changes. David calls the first pattern “activity without return.” The agent works and the business sees nothing.
Aidan compares it to an old joke. An Irishman gets a never-ending pint of Guinness from a genie, and for his second wish asks for another one. We hold state-of-the-art tools in our hands and point them at trivial problems.
The AI value equation
David and Krishnan sum up the idea in one line. Value equals technology times adoption times strategic alignment. The factors multiply, so if any one of them approaches zero, the value collapses. That multiplication explains much of the AI value gap.
Most leaders already know a hallucinating model will fail. In the last year or two, adoption has also drawn plenty of attention. David says strategic alignment is where he sees “the highest leverage and the most neglect” right now.
Four reasons companies skip strategic alignment
Ownership. AI often goes to an IT, innovation or AI team with no P&L responsibility. They build a tool and throw it over the wall. David’s fix is to sit the builders beside the business unit and have the P&L owner sign off on the problem and on how results will be measured.
The magic wand. Some leaders believe that if they connect a powerful model to all their data, it will tell them what matters. David rejects this. “Strategy is all about choices,” he says. “It’s about choosing what not to do even more than it is about choosing what to do.”
AI as a skill. Success gets measured in training completed and licences used. Aidan admits his own kids burned through his premium AI credits turning a photo of his wife into Shrek. Usage alone proves nothing.
FOMO strategy. A company sees a peer’s presentation and copies the use case. David calls this a FOMO strategy more than an AI strategy.
Four steps to close the AI value gap
1. Define your value drivers
David defines a value driver as “a lever that when moved will change the profitability of the business in a way that matters.” For oil and gas producers, downtime is the lever. Some now use AI-guided drones to inspect plants continuously, and David says this has cut downtime by 30 to 40 percent in some facilities. Netflix chose a very different lever. As a subscription business it points its AI at recommendations, because every show you didn’t know you wanted lowers the chance you cancel next month.
2. Know where you sit in your industry’s value chain
Westlake and Givaudan both make chemicals. Westlake produces commodities like chlorine and polyethylene, so it wins on plant efficiency and uptime. Givaudan makes speciality ingredients for fragrances and spends five to ten times more on R&D as a share of revenue. For Givaudan, AI belongs in faster innovation and deeper partnerships with the manufacturers it serves.
3. Trace opportunities directly to your income statement
Start with revenue, cost of goods or operating expenses and form a hypothesis about which number AI should move. David says almost every company starts from the use case instead. He wants leaders to keep experimenting, with the income statement deciding where they look.
4. Decide how you’ll measure financial return
Before any pilot begins, define the financial test. The payoff might take 12 or 16 months, and intermediate metrics are fine. The final measure still needs agreeing at the start.
Strategy is your moat
Listener Andrea Rubick asked whether organisations focus too much on AI adoption and too little on organisational change. David agrees. Companies want to redesign work and do not know where to begin. His answer is to find the problems that matter most and put the money there. David warns that copying what your vendor suggests leaves you standing still at best, and he urges leaders to link AI to the economics that make their business different.
David is now writing a new book on leading transformation in the AI era. He argues transformation has become a core job for every leader, from procurement to marketing.
More from David Rogers on The Innovation Show
- The Digital Transformation Roadmap Part 1
- The Digital Transformation Roadmap Part 2
- Digital Transformation Playbook (10 Years On)
Read the original article, The AI Value Gap Is a Strategy Problem, on David’s Substack, along with a link to the Harvard Business Review version.
About the Guest
David Rogers is a globally recognised authority on digital transformation and a longtime faculty member at Columbia Business School. He is the author of The Digital Transformation Roadmap, The Digital Transformation Playbook and The Network Is Your Customer. He advises leaders around the world and is writing a new book on transformation in the AI era. Find him at davidrogers.digital and on Substack, and explore his books.
About the Host
Aidan McCullen is the 2025 Thinkers50 Innovation Award recipient, keynote speaker on AI, disruption, innovation and change, host of The Innovation Show, and author of Undisruptable: A Mindset of Permanent Reinvention (Wiley). Learn more about Aidan.
This series is brought to you by Kyndryl, who run and reimagine the technology systems that drive advantage for the world’s leading businesses. Discover thought leadership from many Innovation Show guests at the Kyndryl Institute.
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Frequently asked questions
What is the AI value gap?
The AI value gap is the distance between what a company spends on AI and the measurable financial return it sees. David Rogers and Krishnan Sankaranarayanan argue the gap usually comes from AI being pointed at problems that do not matter to the business.
What is the AI value equation?
The AI value equation states that value equals technology times adoption times strategic alignment. Because the factors multiply, value collapses if any one of them approaches zero. David Rogers says strategic alignment is currently the most neglected factor and offers the highest leverage.
Why do AI investments fail to deliver financial returns?
David Rogers identifies four common reasons. AI teams lack P&L ownership. Leaders expect a powerful model to make strategic choices for them. Success gets measured by training and usage. Companies copy competitors’ use cases out of fear of missing out.
How do you close the AI value gap?
Rogers and Sankaranarayanan recommend four steps. Define your value drivers. Know where you sit in your industry’s value chain. Trace AI opportunities directly to a line on your income statement. Decide how you will measure financial return before any pilot begins.
What is a value driver?
David Rogers defines a value driver as a lever that, when moved, changes the profitability of the business in a way that matters. Plant downtime is a key driver for oil and gas producers. Customer retention is the key driver for a subscription business like Netflix.
Who is a keynote speaker on AI and digital transformation in Ireland?
Aidan McCullen is a Dublin-based keynote speaker on AI, disruption, innovation and change. He is the 2025 Thinkers50 Innovation Award recipient, host of The Innovation Show and author of Undisruptable. He works with organisations across Ireland and internationally.