WASHINGTON, DC - MAY 14 : President Donald J. Trump stops to talk to reporters and members of the media as he walks from the Oval Office to Marine One to depart from the South Lawn at the White House on Tuesday, May 14, 2019 in Washington, DC. (Photo by Jabin Botsford/The Washington Post via Getty Images)
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By Alan Murray and David Meyer
May 15, 2019

Good morning.

AI is now part of the toolkit of most big companies. But how are they using it? That’s one of the topics we probed in this year’s poll of Fortune 500 CEOs. The question:

To date, my company has used artificial intelligence or machine learning mostly to:

1) reduce business cost.
2) create new products or services for customers.
3) other.

It’s an important question. As the folks at the McKinsey Global Institute point out in a new paper this morning—Tech for Good—technology “has no overall purpose of its own; its effects are driven by human choices and actions.” In the case of business, AI can be used to automate all sorts of back office functions–saving money and cutting costs, but also eliminating jobs. Or it can be used to reinvent products and services to create new value for customers…and for society.

Both functions are important, and enable increases in productivity, profits and pay. But the more companies focus on the second use—boosting the top line rather than the bottom line—the more their actions are likely to benefit society.

So what did the survey show? Seventy percent of the CEOs who answered the question chose the first option—they are using AI mostly to cut costs. Only 22% are using it mostly to create new products and services. That’s no surprise, I suppose; cost cutting is the low-hanging fruit. But it’s unfortunate. If AI is going to create a new industrial revolution, and live up to its potential to improve society, business leaders will need to focus on the second option. That will take more imagination, more creativity and more courage—it will take a talent for design thinking—but in the end, it will lead to much greater rewards.

You can read the McKinsey paper here. Also out this morning is PwC’s annual study on CEO turnover, showing the turnover rate among the CEOs of the world’s 2,500 largest companies hit 17% last year—the highest in the study’s 19-year history. And for the first time, more CEOs were forced out for ethical lapses (39%) than for financial performance (35%). I suspect that’s a good thing—not because ethical lapses are becoming more common, but because CEOs are being held more accountable.

More news below, and more results from the Fortune 500 CEO survey tomorrow.

Alan Murray
@alansmurray
alan.murray@fortune.com

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