Home / Economy, Employment and Growth / Digitization & Growth: The potential of artificial intelligence | McKinsey

Digitization & Growth: The potential of artificial intelligence | McKinsey

Robotics have reached their tipping point, according to International Data Corp. In a newly-released research report, the firm forecasts a near doubling of the worldwide robotics market over the next 4 years — from $71 billion in 2015 to $135.4 billion in 2019. Almost simultaneously, President Obama sent The Annual Report of the Council of Economic Advisors to Congress.

It says advances in robotics technology are “presaging the rise of a potentially paradigm-shifting innovation in the productivity process.”

Such assertions generate fears that robots may eventually replace most employees – as argued by Mark Ford in his award-winning book, Rise of the Robots.

As the automation of physical and knowledge work advances, many jobs will be redefined rather than eliminated—at least in the short term.

The potential of artificial intelligence and advanced robotics to perform tasks once reserved for humans is no longer reserved for spectacular demonstrations by the likes of IBM’s Watson, Rethink Robotics’ Baxter, DeepMind, or Google’s driverless car. Just head to an airport: automated check-in kiosks now dominate many airlines’ ticketing areas. Pilots actively steer aircraft for just three to seven minutes of many flights, with autopilot guiding the rest of the journey. Passport-control processes at some airports can place more emphasis on scanning document bar codes than on observing incoming passengers.

What will be the impact of automation efforts like these, multiplied many times across different sectors of the economy?1 Can we look forward to vast improvements in productivity, freedom from boring work, and improved quality of life? Should we fear threats to jobs, disruptions to organizations, and strains on the social fabric?2

Michael Chui, James Manyika, and Mehdi Miremadi of McKinsey, explore these questions and investigate the potential that automation technologies hold for jobs, organizations, and the future of work.3

Results to date suggest, that very few occupations will be automated in their entirety in the near or medium term. Rather, certain activities are more likely to be automated, requiring entire business processes to be transformed, and jobs performed by people to be redefined, much like the bank teller’s job was redefined with the advent of ATMs.

As many as 45 percent of the activities individuals are paid to perform can be automated by adapting currently demonstrated technologies.4  Automation is primarily affecting low-skill, low-wage roles, but even the highest-paid occupations in the economy, such as financial managers, physicians, and senior executives, including CEOs, have a significant amount of activity that can be automated.

The organizational and leadership implications are enormous: leaders from the C-suite to the front line will need to redefine jobs and processes so that their organizations can take advantage of the automation potential that is distributed across them.

And the opportunities extend far beyond labor savings- (ranging from increased output to higher quality and improved reliability, as well as the potential to perform some tasks at superhuman levels) typically are between three and ten times the cost. The magnitude of those benefits suggests that the ability to staff, manage, and lead increasingly automated organizations will become an important competitive differentiator.

What follows here are four interim findings elaborating on the core insight that the road ahead is less about automating individual jobs wholesale, than it is about automating the activities within occupations and redefining roles and processes.

1. The automation of activities

We structured our analysis around roughly 2,000 individual work activities,5 and assessed the requirements for each of these activities against 18 different capabilities that potentially could be automated (Exhibit 1). Those capabilities range from fine motor skills and navigating in the physical world, to sensing human emotion and producing natural language. We then assessed the “automatability” of those capabilities through the use of current, leading-edge technology, adjusting the level of capability required for occupations where work occurs in unpredictable settings.

The bottom line is that 45 percent of work activities could be automated using already demonstrated technology. The magnitude of automation potential reflects the speed with which advances in artificial intelligence and its variants, such as machine learning, are challenging our assumptions about what is automatable.

In many cases, automation technology can already match, or even exceed, the median level of human performance required. For instance, Narrative Science’s artificial-intelligence system, Quill, analyzes raw data and generates natural language, writing reports in seconds that readers would assume were written by a human author. Amazon’s fleet of Kiva robots is equipped with automation technologies that plan, navigate, and coordinate among individual robots to fulfill warehouse orders roughly four times faster than the company’s previous system. IBM’s Watson can suggest available treatments for specific ailments, drawing on the body of medical research for those diseases.

2. The redefinition of jobs and business processes

According to our analysis, fewer than 5 percent of occupations can be entirely automated using current technology. However, about 60 percent of occupations could have 30 percent or more of their constituent activities automated. In other words, automation is likely to change the vast majority of occupations—at least to some degree—which will necessitate significant job redefinition and a transformation of business processes.

Mortgage-loan officers, for instance, will spend much less time inspecting and processing rote paperwork and more time reviewing exceptions, which will allow them to process more loans and spend more time advising clients. Similarly, in a world where the diagnosis of many health issues could be effectively automated, an emergency room could combine triage and diagnosis and leave doctors to focus on the most acute or unusual cases while improving accuracy for the most common issues.

As roles and processes get redefined, the economic benefits of automation will extend far beyond labor savings. Particularly in the highest-paid occupations, machines can augment human capabilities to a high degree, and amplify the value of expertise by increasing an individual’s work capacity and freeing the employee to focus on work of higher value. Lawyers are already using text-mining techniques to read through the thousands of documents collected during discovery, and to identify the most relevant ones for deeper review by legal staff. Similarly, sales organizations could use automation to generate leads and identify more likely opportunities for cross-selling and upselling, increasing the time frontline salespeople have for interacting with customers and improving the quality of offers.

3. The impact on high-wage occupations

Our work to date suggests that a significant percentage of the activities performed by even those in the highest-paid occupations (for example, financial planners, physicians, and senior executives) can be automated by adapting current technology.7 For example, we estimate that activities consuming more than 20 percent of a CEO’s working time could be automated using current technologies. These include analyzing reports and data to inform operational decisions, preparing staff assignments, and reviewing status reports. Conversely, there are many lower-wage occupations such as home health aides, landscapers, and maintenance workers, where only a very small percentage of activities could be automated with technology available today (Exhibit 2).

4. The future of creativity and meaning

Capabilities such as creativity and sensing emotions are core to the human experience and also difficult to automate. The amount of time that workers spend on activities requiring these capabilities, though, appears to be surprisingly low. Just 4 percent of the work activities across the US economy require creativity at a median human level of performance. Similarly, only 29 percent of work activities require a median human level of performance in sensing emotion.

Automation replaces more routine or repetitive tasks, allowing employees to focus more on tasks that utilize creativity and emotion.

Financial advisors, for example, might spend less time analyzing clients’ financial situations, and more time understanding their needs and explaining creative options. Interior designers could spend less time taking measurements, developing illustrations, and ordering materials, and more time developing innovative design concepts based on clients’ desires.

The pace of transformation brought by workplace automation

Critical factors include the speed with which automation technologies are developed, adopted, and adapted, as well as the speed with which organization leaders grapple with the tricky business of redefining processes and roles. These factors may play out differently across industries. Those where automation is mostly software based can expect to capture value much faster and at a far lower cost. (The financial-services sector, where technology can readily manage straight-through transactions and trade processing, is a prime example.) On the other hand, businesses that are capital or hardware intensive, or constrained by heavy safety regulation, will likely see longer lags between initial investment and eventual benefits, and their pace of automation may be slower as a result.

All this points to new top-management imperatives: keep an eye on the speed and direction of automation, for starters, and then determine where, when, and how much to invest in automation. Making such determinations will require executives to build their understanding of the economics of automation, the trade-offs between augmenting versus replacing different types of activities with intelligent machines, and the implications for human skill development in their organizations. The degree to which executives embrace these priorities will influence not only the pace of change within their companies, but also to what extent those organizations sharpen or lose their competitive edge.

But how should your company use robotics between now and then?

One answer, highlighted in two recent stories, is to hire robots for supporting, rather than primary, roles.

Mercedes-Benz came to this conclusion in a backward sort of way. As the company expanded the number of models and options it offers, it discovered that its existing assembly-line robots could not be adapted quickly and economically enough. So it’s hiring people to replace some of its robots, report Elisabeth Behrmann and Christoph Rauwald in BloombergBusiness, and equipping them “with an array of little machines,” a solution that the car maker calls “robot farming.”

Mark Rolston, the co-founder and chief creative officer of argodesign, sees the design industry following a similar strategy.

“It’s easy to see how an AI-infused computer algorithm such as the future Netflix — after a human has completed the initial design and programming — could do the hard work of improving and evolving to accommodate user preferences largely on its own,” he writes in Fast Company’s Co.Design. “Moreover, 90% of product design today happens in the ‘fat middle ground’ between purely aesthetic and purely technical — incrementally tweaking designs, optimizing column widths, and experimenting with color schemes. These tasks are bread and butter for much of the design industry, and they are progressively being automated.”

Whether or not you buy the thesis that Millennials require a new kind of management, their lifelong exposure to video games certainly makes them prime fodder for the gamification of the workplace. Emily Matchar, surveying the state of games at work for Smithsonian.com, and concludes that on-the-job gaming is likely to become even more commonplace in coming years.

Steve Bates, who reports on the maturation of workplace games on the website of the Society of Human Resource Management, concurs. He sees gamification being applied to training and other learning activities, to team-building and boosting employee collaboration and engagement, and to employee motivation and productivity, particularly in areas like sales and customer service.

But both writers suggest that you may want to wait a while longer before you leap into gamification. Matchar reminds us that poorly-designed games can do more harm than good — even at companies like Disney that you might think would have it down pat.

And Bates warns, “How well [gamification] works is difficult to prove. Gamification vendors and consultants tout the successes they see in companies. Academics raise caution flags, noting that rigorous investigation into the effectiveness of gamification is lacking.”

Digitization & Growth

If your company’s revenues are between $10 million and $1 billion, take a look at a new study from the National Center for the Middle Market and Magento Commerce. It reveals a correlation between digitization and growth: Forty-nine percent of fast-growing U.S. middle market companies define themselves as “digitally advanced” versus 36% of all middle-market firms surveyed.

If you find that your company ranks among the less digitally advanced, you can take some consolation in the fact that there is time to catch up.

Middle-market companies as a whole grade themselves “about a C-plus” in terms of digitization, says NCMM executive director Tom Stewart. “Even the companies that say they are digitizing rapidly give themselves an average GPA of 3.1, a B-minus. Either they’re tough graders, or they realize they have a long way to go.”

The NCMM-Magento study also found that most current digitization spending (44%) is aimed at operations, such as business management, back-office functions, and logistics. Only 19% is allocated for innovation and strategic initiatives — targets that can have the greatest impact on growth.

Michael Chui is a principal at the McKinsey Global Institute, where James Manyika is a director; Mehdi Miremadi is a principal in McKinsey’s Chicago office. The authors wish to thank McKinsey’s Rick Cavolo, Martin Dewhurst, Katy George, Andrew Grant, Sean Kane, Bill Schaninger, Stefan Spang, and Paul Willmott for their contributions to this article.
Theodore Kinni is a business journalist, author, and ghostwriter. He blogs at Reading, Writing re: Management and tweets @tedkinni.

About Dr. Ev D'aMigo; PhD

Check Also

New research reveals conflicting views of HR priorities and processes | IDC | Cornerstone OnDemand

 IDC research sponsored by talent management software provider Cornerstone OnDemand  looked into the new world …