Published on the 21/01/2025 | Written by Heather Wright

Economics, and the AI PoC graveyard…

Kiwi business leaders are focusing in on workplace productivity and growth for 2025 as concern about economic uncertainty bites deep, while for Australian businesses it’s extracting organisational value from digital transformation that is a leading challenge for the year ahead.

That’s according to two new surveys – New Zealand’s offering comes via Datacom, with its Business Outlook Survey of organisations with 100 or more employees, while the Australian pulse check is via KPMG and its annual Keeping Us Up At Night survey.

“2025 is likely to be the year of ROI and scalability.”

Australia isn’t immune to economic concerns, with controlling costs in an inflationary environment a key challenge and concern over the slowing economy and cost of living – but it’s New Zealand where the economic woes appear to be really keeping senior leaders up at night. Economic uncertainty has become the dominant concern for businesses surveyed, with 77 percent saying it’s a threat to their business over the next 12 months. That’s up from just 13 percent in 2024, and well ahead of second placed cybersecurity, at just 29 percent.

Justin Gray, Datacom New Zealand managing director, notes that the results reflect a prolonged period of economic challenges for Kiwi businesses.

“The Business Outlook Survey findings show that while economic uncertainty remains a key concern, New Zealand businesses are demonstrating resilience by focusing on productivity and growth, which, if we can get it right, will set the stage for long-term success,” Gray says.

That search for a productivity boost includes investment in emerging technologies, including AI and automation, and extracting more value from existing technology.

The majority (68 percent) said they expect to invest more in technology this year, with 28 percent saying they believe data-driven insights will provide the greatest opportunities for their organisation this year. Generative AI (27 percent) and workforce enablement 21 percent) were also identified as top opportunities. AI ranked as the biggest technology opportunity (46 percent) followed by automation (41 percent) and data optimisation (40 percent).

But for five percent of Kiwi businesses surveyed, that focus on AI comes with a downside, with AI uncertainty ranking ninth biggest threat to organisations over the next 12 months.

The challenge of new technologies is also in focus in Australia, with 39 percent of the 320 businesses surveyed for Keeping Us Up At Night saying new technologies, including AI, and the use cases and ethics that arise when implementing them were a key challenge for the year ahead.

However, following a year where the key issues dominating the zeitgeist were the rise of AI and the cost-of-living crisis, it is digital transformation which has jumped to front of mind for Australian CEOs. Fifty-three percent saw digital transformation and optimisation and extracting organisational value from it as the number one challenge, both as they plan for 2025 and as they look ahead towards the next three to five years.

Protecting and dealing with cyber risks (42 percent) and cost controls in an inflationary environment (39 percent) were also weighing heavily for 2025. Dealing with evolving regulatory processes, reporting changes and impacts (38 percent) rounded out the top five.

Andrew Yates, KPMG Australia CEO, says he wasn’t surprised that controlling costs in an inflationary environment still ranked in the top three issues.

“The high core inflation is also making any immediate interest rate cuts less likely which will be a frustration for many business leaders. Having said that, survey respondents did not indicate rate cuts would see a significant increase in their business investment in 2025,” Yates says.

He says technology, AI and cyber were the issues of most relevance to business leaders, who are increasingly joining the three together as a single critical and interconnected issue.

“Leaders are also concerned about meeting associated demands into the future, with preparing for a future skills gap in areas such as technology and data science joint top of the wider societal challenges impacting business.”

In both countries the issue of talent has fallen down the list of concerns. In Australia, it fell to eighth place, down from joint top last year and a clear first place in 2023. In New Zealand the issue of staff retention and recruitment was fifth equal with digital transformation in business priorities, down from 24 percent in 2024.

While 2024 was ‘the year of the proof of concepts’ for AI in Australia, KPMG says 2025 will see AI evolve from a conceptual challenge to a practical one.

“2025 is likely to be the year of ROI and scalability. The challenge will shift to how to effectively bring AI initiatives out of the laboratory of smaller pilot projects and into production, and embed AI into an organisation’s operating model.

The professional services firm warns that companies will need to tread carefully to avoid the ‘AI PoC graveyard’ – the gap between investing heavily in AI experimentation and delivering actual benefits to a business.

Among the pitfalls in the graveyard are trialling an AI tool and finding it saves an hour a day of work, but that productivity gain is not driving an equivalent cost reduction, and ensuring productivity gains are redeployed effectively.

Ensuring accuracy delivered during PoCs translate to full production is also a pitfall companies will need to be wary of.

“The key to rolling out AI is to start with use cases that clearly align with business objectives and thinking about the impact of AI in a business’s operating model – how will it actually change the way that teams work.”