Funston Brief (Issue No. 41)
This month, our featured commentary discusses agentic AI. We also dive into how organizations are rewiring to capture value in the age of AI and search for a complete definition of an AI agent.
In the article "Seizing the agentic AI advantage," McKinsey addresses the "gen AI paradox," where despite widespread adoption of generative AI, many companies report no significant bottom-line impact. This paradox stems from an imbalance: easily scalable horizontal AI tools like copilots offer diffuse gains, while more impactful, function-specific "vertical" use cases often remain in pilot. The article proposes agentic AI as the solution, capable of automating complex business processes by combining autonomy, planning, memory, and integration, thereby transforming AI from a reactive tool to a proactive, goal-driven virtual collaborator.
Key points:
The Gen AI Paradox: Nearly 80% of companies use generative AI, yet a similar percentage see no material impact on their earnings, largely because horizontal, enterprise-wide copilots and chatbots deliver diffuse benefits, while high-impact vertical, function-specific use cases struggle to scale beyond pilot phases.
Agentic AI as the Catalyst: AI agents are crucial for breaking this paradox by automating complex business processes with autonomy, planning, memory, and integration, shifting AI from a reactive assistant to a proactive, goal-driven collaborator.
Process Reinvention is Key: Maximizing the value of AI agents requires reimagining business workflows from the ground up with agents at their core, rather than simply plugging agents into existing processes, to unlock significant operational agility and new revenue opportunities.
Why it matters: This shift matters because it signifies a crucial pivot from mere AI experimentation to strategic, scalable transformation. By embracing agentic AI and fundamentally redesigning operating models around it, organizations can move beyond incremental efficiencies to achieve significant, measurable value, overcome technical debt, manage new risks, and address the human challenges of trust and adoption, ultimately turning generative AI's promise into tangible business outcomes.
You can read the full report on the McKinsey website.
ACTIONABLE INSIGHTS.
The state of AI - How organizations are rewiring to capture value: Organizations are beginning to create the structures and processes that lead to meaningful value from gen AI. While still in early days, companies are redesigning workflows, elevating governance, and mitigating more risks.
Key Insights:
Accelerated AI Adoption and Value Focus: Over three-quarters of organizations now leverage AI in at least one business function, with a significant surge in generative AI (gen AI) adoption. Companies are actively establishing frameworks to extract substantial value from gen AI, including workflow redesign and enhanced governance.
Strategic Leadership and Workflow Transformation Drive Impact: CEO involvement in AI governance is strongly linked to greater financial returns from gen AI. Furthermore, fundamentally redesigning workflows is identified as the most impactful factor in achieving EBIT impact from gen AI. Organizations that pursue comprehensive, transformative changes to their business models, rather than incremental adjustments, are more likely to gain lasting competitive advantages from AI. Link
EAR TO THE GROUND.
Podcast Episode: What is an AI agent?
Guests: Guido Appenzeller, Matt Bornstein, and Yoko Li
Takeaway:
In this episode of "AI + a16z," a16z Infra partners Guido Appenzeller, Matt Bornstein, and Yoko Li explore the concept of AI agents, acknowledging the lack of a uniform definition. They differentiate agents from LLMs and functions, discuss agent pricing, and debate whether agents can truly replace human workers. The partners also touch on the impact of data silos on web-accessible agents, offering insights for anyone involved with AI agents.
“Agents are more than pure technology. They’re also becoming products, which means they need to be marketed. And how someone positions their product has a major effect on how they price it. What’s more, the ultimate value of any given agent, which is still to be determined for the vast majority of them, is to what degree they can actually replace or simply augment human workers.”
- Matt Bornstein, a16z Infra Partner
$2 billion
Mira Murati’s pre-product AI lab ‘Thinking Machines’ valued at $10bn after $2bn fundraising. Link
PROFILE.
Neil Mehta built Greenoaks into a formidable investment firm by championing audacious founders like those behind Coupang, Carvana, and Rippling when others hesitated. He's known for his rapid decisions, substantial investments, and personal involvement in every initial founder meeting, earning him a dedicated following among entrepreneurs. Whispers now suggest his most audacious move yet: a $500 million investment in Ilya Sutskever's enigmatic AI venture, Safe Superintelligence. If these rumors hold true, Mehta could be backing the team poised to shape humanity's future. Enjoy the read!
“Neil’s extremely disciplined, he’s gone against the tide many times, and he’s had exceptional timing. He’s the real deal.” – Henry Kravis on Neil Mehta
ON MY RADAR.
Ford's CEO was humbled after driving a Chinese EV, admitting that China is significantly ahead in the electric vehicle market. Link