Thanks to the launch of ChatGPT, generative AI (gen AI) went mainstream in 2023. Suddenly, AI-powered tools became practical and accessible for many more businesses and consumers.

In their State of AI in 2023 report, McKinsey notes that a third of business users surveyed use gen AI tools in at least one business function. Executive leaders are also embracing generative AI. Nearly 25% of C-suite executives personally utilize these tools and 40% of companies are planning greater AI investments because of gen AI advancements.

As leaders look to leverage generative AI’s potential, they’ll need to fully understand how it differs from the broad category of artificial intelligence. Grasping this distinction lays the foundation for seeing—and preparing for—the different ways AI can transform business and work.

Generative AI uses machine learning, algorithms, and training data to generate new, plausibly human-passing content.

Unlike other types of AI that are focused on analysis or classification, gen AI models create original content by identifying patterns and structures from their training data (existing datasets that are “fed” into the model.) They use that understanding to produce original, realistic outputs in the same style.

The outputs from generative models are getting remarkably realistic and difficult to distinguish from content created by humans. They can augment human creativity by quickly producing abundant content variations from very little prompting.