AI Revolution: 84% of GCC firms tap Generative AI for innovation

By Gloria Methri

Companies in the Gulf Cooperation Council (GCC) prioritize innovation more than ever, with 84% of firms starting to use cutting-edge technology such as Generative AI (GenAI) to drive innovation. However, as with global trends, most organizations are still in the early stages of GenAI adoption.

A new report released by Boston Consulting Group (BCG) highlights this positive trend while noting opportunities for GCC firms to enhance their innovation readiness.

For its annual innovation study, Innovation Systems Need a Reboot, BCG assessed companies’ innovation maturity and surveyed senior innovation executives worldwide, including those in the GCC region.

“GenAI presents a significant opportunity for GCC innovators to boost efficiency and bring fresh perspectives to their organizations,” said Managing Director and Partner Faisal Hamady. “As the region continues to invest in digital transformation and AI capabilities, we expect to see more widespread and sophisticated use of GenAI in innovation processes.”

‘Readiness challenge’ among GCC firms

While innovation continues to demonstrate value, the study shows that innovation systems globally need a reboot. Innovation priority remains at an all-time high, with 83% of global companies ranking it as a top three priority. However, innovation readiness has sharply declined worldwide, from 20% two years ago to 9% last year and just 3% this year globally. This global trend is even more pronounced in the GCC, where firms exhibit even lower innovation readiness than the global average.

The study reveals that while GCC organizations prioritize innovation at a higher level than their global counterparts, they face greater challenges in translating that ambition into readiness. This aligns with global patterns where companies across various regions are struggling to match their innovation priorities with practical readiness, though the gap appears more significant in the GCC.

“We are seeing GCC organizations prioritize innovation, with 85% of executives ranking it highly. However, converting this ambition into readiness remains a challenge,” said Faisal Hamady, Managing Director and Partner at BCG. “To close this gap, it is crucial to strengthen the link between innovation and business strategy. Organizations must benchmark processes, align them with strategic goals, and leverage Generative AI while addressing talent constraints and rising capital costs.”

Six Key Recommendations for Linking Innovation with Business Strategy

Practical foresight in strategy is crucial for GCC companies to succeed. Companies can position themselves at the forefront of their industries by being proactive, anticipating future trends, and aligning innovation efforts with strategic goals. To improve innovation readiness and link innovation with business strategy, BCG recommends focusing on six key elements.:

• Executive ownership: Ensure innovation is championed by the CEO or other prominent members of the C-suite.
• Clear sense of purpose: Develop a shared story on the purpose of innovation and how it supports the company’s strategy.
• Focus on competitive advantage: Explicitly focus on opportunities where the organization has an explicit right to win.
• Specified domains: Center the innovation portfolio on areas that support the overall strategy.
• Target portfolio structure: Create a vision for how resources should be deployed across the innovation portfolio.
• Quantified objectives: Establish a fact-based perspective on how innovation contributes to financial goals.

Looking Ahead

As GCC economies diversify towards knowledge-based sectors, strategic innovation becomes crucial. By addressing current challenges and aligning innovation with business strategy, GCC companies can compete globally and drive regional economic growth. Leveraging emerging technologies like Generative AI while maintaining a clear strategic vision will be instrumental.

To close the readiness gap, leaders in the GCC need to sharpen the link between innovation and strategy while leveraging AI. Additionally, putting in an outsized effort to address talent constraints and funding challenges, especially considering raising capital costs, will be critical. This approach will improve innovation readiness, enhance talent attraction, and accelerate technological advancement, positioning the GCC as a global innovation hub.