Businesses Suffer ‘Data Paralysis’ as AI Hype Cycle Speeds Up

There’s no AI without data, a reality which many business leaders have yet to grasp in its entirety as they ride the AI hype train towards an unknown but very promising destination.

A recent study by consulting firm Carruthers+Jackson put a spotlight on the lack of data literacy –the ability to “read, write and communicate data in context”– among business organizations even as they embark, or have already embarked, in their AI journey.

C+J’s survey results point to a siloing of data knowledge within most organizations: 61% of companies consulted said the majority of their employees –outside their data teams– are not data literate; 41% said they have little or no data governance frameworks in place; 27% said they have no data strategy; 61% stated only a small portion of their workforce actually use data; and 56% described their own data policies as “clunky” or “non-existent”.

Poor literacy isn’t limited to data only. Nearly 90% of the organizations surveyed said that AI is being used by very few of their employees, or by none.

According to our recent DMI report…41% of data leaders have little or no governance framework.

Our expert panel will be discussing this, and the true state of data maturity globally in our upcoming Coffee & Cake session on January 30th, 4pm.
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— Carruthers & Jackson (@CarruthersJacks) January 23, 2024

Contrary to what the high levels of hype might suggest, business leaders have yet to go all-out on AI implementation. Organizations are truly interested in the promises of generative AI in particular, but most AI-related projects remain in the piloting phase or have been just recently deployed, working at a small scale. Few businesses have had the chance or willingness to scale such projects, and even less have achieved full-on incorporation into their organizations.

The opposite spells true for big data projects. Data has proven itself a solid investment for most companies, and many have successfully deployed it across their business operations. 

Nevertheless, the cautious consolidation of AI projects and strategies in business seems to be shaping the data strategies of many organizations. In C+J’s view, the high levels of noise and regulatory threats that came with the latest wave of AI hype have given business leaders a cause to pause.

“This lack of progress suggests a pause from data leaders as they work to make sense of a new, AI-focussed data landscape,” the report states. “It is so far unclear what the ethical and regulatory implications of AI will be for the data world, and data leaders seem to have concerns about creating and implementing a governance strategy without knowing the whole picture.”

Last year, in the midst of GenAI hype, there were reports of companies as big as Apple banning the use of ChatGPT among their workers. Some still do. Previous interviewees of ours have mentioned that customers still feel unsure about having third-party partners using GenAI to code.

Of all the compliance frameworks and acronyms, data seems to be the one that weighs heavier on the minds of business leaders in tech and beyond. And as technology is incorporated into more of the “core” aspects of business operations, data literacy will inevitably become a necessity across whole organizations, not only among a small pool of experts.

That seems to be the path that’s being built. According to C+J’s survey, 38% of companies have used the recent focus on AI to spark conversations about “data ethics”. 

‘Governance paralysis’

C+J’s report identifies a “governance paralysis” created among data leaders by the renewed interest in AI. A paralysis which has “stalled” data maturity in business organizations.

“These organizations are actively considering the regulatory landscape, legal considerations and the need for governance frameworks to guide the responsible use of AI within their operations,” the report states. “But, in doing so, are suffering from a paralysis in implementing effective governance frameworks as they wait to see what these regulations may look like.”

We’ve reported on this so-called “governance paralysis” within the CX industry in particular. CX leaders are almost entirely sold on GenAI, but many remain uncommitted to full-on deployment because they’re still unsure about GenAI’s actual ROI potential and, perhaps most importantly, because they fear data leaks and other compliance snafus.

There are relatively few places in the world with a clear and comprehensive AI compliance framework. The European Union recently approved what looks like the first actual “AI law” in the world. US federal authorities have been slowly building functional guardrails for the use of AI in government and its development and deployment by private entities.

Offshore and nearshore vendors will have to keep an eye out for the development of regulatory frameworks in Europe and the US, and on how those frameworks affect the “governance paralysis” and the approach to AI and data projects of potential customers.

The latest wave of AI has been heralded as a golden opportunity for tech exporters in developing economies, many of which have been dealing with an uncomfortably prolonged cooldown in demand. Concerns over compliance could be making that cooldown worse. 

In that context, perhaps the best move for service providers would be to increase data literacy in their organizations, not only for the sake of their own operations, but to ease the concerns of their customers and become truly trusted partners for transformation.