The impact of artificial intelligence on business models in developing countries

Artificial intelligence is no longer just a hot topic in academia; business leaders, strategists, pioneers, entrepreneurs, and researchers are now utilizing artificial intelligence to develop new strategies and generate new sources of business value. However, there are some challenges presented in the implementation of artificial intelligence in developing countries. The study, which will be the subject of this blog post, aims to investigate how businesses in developing countries use AI to create new strategies and the impact on their business. The study is based on two types of in-depth interviews, the first with two experts and the second with eight Peruvian companies that use or are implementing AI. And analyze the impact on their business model through a thematic analysis based on the nine building blocks of the canvas model.

Artificial intelligence and business model

Artificial intelligence (AI) and blockchain are examples of emerging technologies that are transforming how people work, live, and play. In specific, AI facilitates the human-machine interactions, alters the logic of business models, and changes the human lifestyle and living standards. As mentioned before, in the practice AI plays an important role in the development of new strategies and new sources of business value, and this has intensified the academic interest in how business models changed with the introduction of AI. Alexander Osterwalder developed the Business Model Canvas (BMC), which is presented by 9-block. It starts with the middle centerpiece “value proposition”, then the left side presents the backstage, focused on the value creation through internal and external processes. And the right side presents the frontstage, focused on the value creation to the customer. BMC is popular because it improves the innovation strategy, the communication with their stakeholders and the visualization of the components for better decision making.

Business Model Canvas (BMC)
Business Model Canvas (BMC) by Alexander Osterwalder

Experts interview

Two expert interviews were conducted. The first expert interview was with the director of the innovation and technology transfer office at Peru’s National University of Engineers. The second expert interview was with an ex-Associate Partner from IBM and now Business Development Director, an expert in technology transformation solutions for big industries in Peru. The expert interviews revealed some interesting insights, like the uses of artificial intelligence in the country, ranging from customer service and sales, via chatbot and customer segmentation, to internal service with computer repair, and image recognition. Moreover, they mentioned the challenges that companies in Peru face during the developing of AI, such as political instability, reduced development budget, low creativity, no confidence in AI national companies, little education, and escape of talents.

Companies interviews

This study uses eight Peruvian companies that implemented AI, and it will work on the challenges and the impact of it over the BMC. All interviewees were from different industries, such as retail, insurance, telecommunication, banking, call centers, IT, startups and legal services. Moreover, to have a more heterogeneous base all interviewees presented different roles in the company, like CEOs, Technology VP, Head Leaders, Managers, Startup Partners and AI Project Owners.

The interviews were processed conducting a thematic analysis based on the BMC 9-block, and the results were coded using MAXQDA2020 in order to find the frequency of key words to present some insights. The BMC depicts “value proposition” as the center of the business canvas model, the same thing happened in this investigation. The results revealed that the use of AI helped businesses to reach a need of their customers. Some companies were founded based the identified need, and the others incorporated services or products to solve the problem their clients were presenting.

From the center of our canvas, we have on the left side the backstage building blocks. These four blocks assist businesses in modeling their cost structure, acquiring resources, forming partnerships, and performing actions in order to increase their value proposition to their customer segment. Based on the country disadvantages already stated by experts, the results revealed that most businesses address these disadvantages in this side of the canvas model. As an example, there is a scarcity of high-skill labor in the country for specific development activities. In this case, companies perceive the workers as key resources, the activities they performed as key activities, the outsourcing of these workers with other companies as key partnerships, and the outsourcing cost structure must be considered to generate a value.

The other side of the canvas, the right side, is related to the business model’s frontstage. These building blocks help businesses identify the customer segment they want to serve, the channels of communication, distribution, and sales, the customer relationship they have established with their customer segment, and the revenue streams. The results revealed that this right side of the canvas model perceived a very strong impact when applying artificial intelligence in businesses. Some companies use this technology to understand their clients better, segment them correctly, and begin new strategies of differentiation of promotion and approach to their segments to increase their revenues. Other businesses used artificial intelligence to provide their customers with greater accessibility for communication via chatbots, opening their communication channels to a 24/7 model for inquiries in their customer service.

So what is the impact of artificial intelligence on business models in developing countries?

The use of AI in businesses in developing countries is a difficult task for development and implementation due to technological disadvantages and a scarcity of skilled labor. Despite these drawbacks, businesses of various sizes and industries are introducing themselves into this technological world, developing new ways of adding value to their customers. The introduction of artificial intelligence alters companies’ business models in developing countries. Companies are changing their structures, increasing their costs in technology development, dealing with adversity in their revenue streams, partnering with providers of skills they don’t have, and transforming the way they work.

Artificial intelligence, digital transformation, new digital business models. These topics are becoming increasingly important in business. In industrialized countries and as the study indicates also in developing countries. Fischer offers extensive expertis due to its many years of experience in these sectors. With the information platform Sherlock we also provide a tool with which these approaches can be quickly and easily translated into reality. Send us an inquiry to learn more.

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