By Alan Murray and David Meyer
April 23, 2019

Good morning.

I had a good conversation with Genpact CEO Tiger Tyagarajan yesterday on the topic of A.I. and society, as part of Fortune’s CEO Initiative. This wasn’t one of those futuristic tech terminator talks. Rather, it focused very much on the here and now. A key question: Given the enormous potential of A.I. to transform business, why is its adoption moving so relatively slowly?

Tyagarajan, who works across a variety of industries, says a key reason is resistance from customers and workers. The workers’ fear of losing jobs is well known, and actually has declined somewhat in the last 18 months, according to Genpact’s research. Customer resistance, however, is unabated. Taking call centers as an example, Tyagarajan said, “less than 15% of consumers want to be served by an A.I.-powered chat box” rather than a human.

But here was my key takeaway from Tyagarajan’s talk: He says that in his estimation, “80% of business leaders are still approaching A.I. primarily as a cost-cutting tool.” Only 20% are focusing on its ability to create new value for customers. Yet it’s likely the greatest value, in the long run, will come from new value creation for customers. Until that 80-20 ratio flips, it’s little wonder that both consumers and workers are wary.

I had a conversation later in the day with Accenture’s Omar Abbosh, co-author of a new book, Pivot to the Future, and he made a similar point. Cost-cutting may be necessary, but it is not sufficient. “If you think you are going to cost cut your way to success, you won’t succeed.”

Speaking of cost-cutting: slasher king Kraft Heinz got a new CEO yesterday. His name is Miguel Patricio, he’s a native of Portugal who formerly worked at Anheuser-Busch InBev, and thus shares both language and business history with the folks at Brazilian private equity fund 3G, which owns a large stake in the company. But his background is in marketing—he was AB Inbev’s global chief marketing officer—which suggests more of a focus on the top line. (You can read Fortune’s classic stories on cost cutting at Kraft Heinz and 3G here and here.)

Patricio made clear he takes a somewhat different approach. “Great companies are the ones that have the costs in control, that grow the top line and grow the bottom line—it’s not one or the other,” he said in an interview. “I have very good experience on that—on being more efficient every year, which doesn’t mean cutting costs. It means to be more efficient.” Sounds like he could bring a welcome new balance to the food company.

More news below. And save some time to read Polina Marinova’s brilliant deep dive into how the Kleiner Perkins empire fell.

Alan Murray


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