New research shows the next generation of profitable growth will be driven by AI-enabled operating models
The Hackett Group, Inc. , an ROI-led AI transformation firm, announced findings from both its North America and European 2026 SG&A Cost Study and Scorecard, revealing that the next generation of profitable growth will be driven less by economic conditions and more by AI-enabled operating models. The average costs of selling, general and administrative (SG&A) functions climbed to their highest levels in five years across both regions, exposing a widening gap between organizations that are improving productivity through artificial intelligence (AI) and those relying on traditional cost-management approaches. This was against a background of stronger revenue growth and moderating inflation.
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“Economic recovery improved financial results, but it didn’t fundamentally change how organizations operate. The next generation of profitable growth will come from AI-enabled operating models that increase productivity and strengthen operating leverage.”
Among the 1,000 largest publicly traded companies analyzed in each region, median SG&A costs rose to 16.2% of revenue in North America and 13.4% in Europe. Revenue growth accelerated to 4.4% in North America and 6.5% in Europe during 2025, yet many organizations continued to struggle to translate growth into sustainable operating leverage.
While fewer organizations experienced worsening SG&A performance than the previous year, much of the improvement reflected stronger revenue growth rather than fundamental gains in productivity. In North America, the share of companies whose SG&A costs grew faster than revenue declined from 62.0% to 51.6%, while in Europe it fell from 62.5% to 53.6%. The findings show that relatively few organizations have fundamentally improved the productivity and scalability of their operating models.
“Economic recovery improved financial results, but it didn’t fundamentally change how organizations operate,” said Thomas Kellaway, principal at The Hackett Group®. “The next generation of profitable growth will come from AI-enabled operating models that increase productivity, scale more efficiently and strengthen operating leverage.”
A widening operational leverage gap
The gap between leading organizations and median companies continued to widen across both regions. In North America, first-quartile companies operated with SG&A costs equal to 7.8% of revenue, compared to 16.2% for the median – an 8.4-percentage-point advantage between first-quartile and median companies. In Europe, first-quartile companies reported SG&A costs of 6.1% of revenue versus 13.4% for the median – a 7.3-percentage-point advantage.
The research also highlights a growing scalability challenge. Many companies generated only a narrow margin between revenue growth and SG&A cost growth, leaving them increasingly vulnerable if market conditions weaken. The widening gap between leading and median performance suggests that relatively few organizations have built the productivity and scalability needed to create sustainable operating leverage through AI-enabled operating models.
AI is reshaping SG&A economics
When embedded into core business processes, AI is helping organizations improve productivity, scale more efficiently, and create structural SG&A cost advantages. For a typical $10 billion company, achieving Digital World Class® performance across SG&A functions represents approximately $286 million in annual cost advantage. Across finance, human resources, information technology and procurement alone, the potential annual cost advantage approaches $85 million.
Leading organizations are investing accordingly. Digital World Class® technology organizations allocate three times more of their technology spending to AI, intelligent automation and other emerging technologies than their peers, creating the productivity and scalability advantages that drive long-term operating leverage.
The Hackett Group® expects the performance gap between AI World Class organizations and typical companies to widen by up to 75% in the near term as leaders embed AI into core business processes.
How AI is transforming SG&A performance
The research highlights several examples of how AI, Gen AI and agentic AI are already transforming critical SG&A processes, including:
- Contract intelligence: 30%-50% faster milestone payment processing and 30%-40% faster change-order cycles
- Autonomous financial close: close cycles accelerated by 2-3 days with 40%-60% better commentary quality and consistency
- AI-powered compliance: 70%-80% faster policy lookup, 50%-60% fewer policy interpretation errors and always-on compliance guidance
Collectively, these examples demonstrate AI’s potential to reduce costs, improve productivity and free employees to focus on higher-value work.
Priorities for building AI-enabled SG&A performance
Based on the findings, The Hackett Group® identified six priorities for organizations seeking to improve SG&A performance, including:
- Map end-to-end processes
- Simplify and standardize work
- Embed AI into core operations
- Measure return on AI investments
- Develop AI-ready talent
- Strengthen strategic sourcing
“The next competitive advantage will not be determined by rates of AI adoption,” said Murray Shevlin, principal at The Hackett Group®. “It will come from redesigning end-to-end processes, so AI delivers measurable gains in productivity, operating leverage and profitable growth.
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