Robotic process automation is sweeping into every aspect of corporate life. While the cost benefits are attractive, executives also face a deep set of strategic challenges.
The future is now
In 2015, advertising agency McCann Japan pitted a human creative director against an algorithm in a challenge to develop an advert for Clorets Mint Tab. The resulting creative work from both parties was put to a nation-wide poll, which the human creative director won – but with only 54% of the vote.
This is just one in a string of recent developments that provide context for Bill Gates’ recent call for a tax on robots as they replace humans in the workplace. According to Gates and Elon Musk, such revenue could potentially mitigate the global unemployment that automation threatens to create, by reskilling and upskilling redundant humans.
Long viewed as something belonging to a distant time and space (especially in inherently creative sectors such as advertising), the automated future has arrived. Decision makers are offered immediate and alluring cost savings, but along with the opportunities come a string of profound strategic threats. As the McCann Japan advertising exercise makes clear, robots have moved beyond eyeing out simple, repeatable tasks. In 2015, McKinsey & Company estimated that 45% of all work activities can be automated. According to its analysis:
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.
No profit without a market
Automation is an established force in manufacturing, and today most corporate executives are already assessing the costs and benefits of automating the back-office processes that underpin the service economy. At this level, the equation is simple and undeniable. Automation slashes operating costs. However, decision making Artificial Intelligence (AI) is fast entering the picture. Imagine an algorithm in a legal firm assessing if a case file has been adequately completed or requires further input. Or an algorithm responding to an insurance customer’s email on the fly and requesting further documentation – as opposed to simply dishing out generic automatic responses.
In this context, the strategic challenge for C-Suite executives is not simply improving returns to shareholders. Business leaders must also ensure their consumer markets remain stable over the long term. Widespread unemployment resulting from the automation of decision making work—which used to be the sole domain of humans—threatens this stability. Unlike previous eras of epoch shaking technological change, such as the industrial revolution, robotic process automation is not only happening at breath-taking speed but also across all business sectors simultaneously. Its impact threatens to be significant enough to truly shake the foundation of global business. Simply put, the global economy relies on consumers, and consumers need employment to be able to consume.
There is thus a compelling rationale for executives to work actively to protect employment levels as they harness the revenue benefits of automation.
Preserving the consumer market could require private & public sector coordination
In an automated business, which areas of specialist human expertise should a company explore and develop, and according to what time frames? How should the business go about sourcing new human skills? What portion of the profits achieved via automation should the business reinvest into training staff on new skills?
Each business must answer these questions in its own right, but to deal with the threat of mass unemployment, coordination between private and public sectors may be required – and not just in the realm of Gates’ proposed robot tax. Private companies and national education systems, for example, may need to work together to first explore new areas of human endeavour, and then to figure out how to deliver the education (at the workplace, as well as in schools and universities) that will allow people to pivot away from redundant skill sets.
Fast moving targets that keep getting faster
The recent victory by AI over human players at the highly complex GO board game illustrates just how challenging the issue of pace of change is likely to be. GO is an ancient Chinese game that is significantly more complex than chess. The surprise wasn’t that an algorithm got the upper hand over master GO players – it was that it triumphed a full decade faster than the pundits predicted. Even those deeply invested in a specialized environment were stunningly off their mark in their forecasts of how quickly technology would turn it upside down.
Corporate decision makers will thus need to adapt to a world where shocking advances in capability are a weekly norm, and where most of the players in a market hover around the same leading edge. Achieving differentiation in markets characterized by price and product parity is already a key business challenge, but as AI becomes a ubiquitous business force the magnitude of this contest is likely to spiral. A war of the business robots is possible, and this could easily turn into a fast-paced war of attrition, where achieving meaningful competitive advantage is a rarity.
Opportunity knocks, and threatens
The AI landscape is littered with threats and opportunities, across all segments of society. Quick thinkers with a willingness to embrace big picture challenges are set to steal a significant march on business rivals. At the social level, however, AI’s impact on life as we know it remains a worryingly open question.
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Adam W. Silver is the Managing Director of the Performance Acceleration practice at Farber. The Performance Acceleration practice helps executives and boards overcome operational and strategic challenges to uncover potential and unleash performance. Adam can be reached at 416.496.3734 and firstname.lastname@example.org.