AI is Coming for Cannabis
Few emerging technologies generate as much discussion (and confusion) as Artificial Intelligence. AI will revolutionize business and create (and destroy) vast amounts of shareholder value. Like all disruptions, however, there is a gap between the promise and the reality on the corporate ground.
Today, a few operators are using AI to make product decisions, as outlined in a fine MJBizDaily article by Omar Sacirbey. I’ve also seen AI help cultivators optimize their mix of inputs and manage their grow environments.
AI has the potential to address a myriad of cannabis business challenges. It helps to consider what other industries are doing with AI, and with what results.
A recent McKinsey survey sheds some light on these questions. A proviso: McKinsey targets governments and Fortune 500 firms - not the cannabis space. Consider their findings directional.
> Organizational penetration
As of Q1 2024, 72% of respondents reported deploying AI in at least one function. This is up from 55% a mere 10 months earlier.
Of the adopters, 50% of organizations use AI in two functions, while 27% have deployed it in 3 functions.
> Top 3 AI Department Adopters and Use Cases:
1. Sales & marketing (34% of adopters)
- Content support (ChatGPT etc.), personalized marketing, sales lead identification & prioritization
2. Product and service development (23% of AI adopters)
- Design development, research review, early simulation & testing
3. IT (17% of AI adopters)
-Help desk (chat bots, administrative assistant), data management
> Spend by Sector
The survey reported AI adoption across ALL sectors. On average, AI initiatives now make up 5% of total IT spend, and growing.
In these cannabis-relevant industries, the percentage of companies that hit a minimum 5% AI spend threshold:
Consumer goods and retail: 64%
Business and professional services: 63%
Pharma and healthcare: 61%
AI Value
When properly deployed, AI adoption can reduce costs and drive revenues. The biggest cost declines (>5%) have been in HR and customer service. The largest revenue increases (> 5%) were found in inventory management, sales & marketing and supply chain optimization.
Some advice
I’ve had a front row seat to the rise of new technologies. Firms should not dive into uncharted waters without understanding how transformational AI tools can enable their corporate strategy, solve burning problems, and comfortably fit with their organizational structure & culture.
Undertake a suitable operational, finance and IT assessment as well as consider applicable cases studies. Prudent CIOs will start with a pilot project led by an experienced vendor. Your objective is about gathering learnings and proving out the business case.
Lets chat about how I can help you leverage AI
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