HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION

2020-02-27 539浏览

1.HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION By Mark Purdy and Paul Daugherty
2.AI RESEARCH CONTENTS 2 REINVIGORATING PROFIT POTENTIAL 04 THE VALUE OF AI TO INDUSTRY 08 BOOSTING INDUSTRY PROFITS WITH AI 12 CROSS-INDUSTRY STRATEGIES FOR SUCCESS 20 APPENDIX 24 AI RESEARCH HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION
3.AI RESEARCH The steady decline in business profitability across multiple industries threatens to erode future investment, innovation and shareholder value. Fortunately, a new factor of production—artificial intelligence (AI)—is emerging that can help kick-start profitability. AI consists of multiple technologies that can be combined in different ways to sense, comprehend, act and learn. Accenture research shows that AI has the potential to boost rates of profitability by an average of 38 percent by 2035 and lead to an economic boost of US$14 trillion across 16 industries in 12 economies by 2035. But this will only happen if organizations adopt a people-first mindset and take bold and responsible steps to apply AI technologies to their business. Our research has identified eight cross-industry strategies to help seize the AI opportunity. 3 AI RESEARCH HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION
4.AI RESEARCH REINVIGORATING PROFIT POTENTIAL Corporate profits are now in decline. In the United States, after reaching their highest share of national income in the post-war era, the growth of profits dropped from 25 percent in 2010 to -3 percent in 2015 (Figure 1). Furthermore, this phenomenon is evident across most industries, from Manufacturing to Utilities to Financial Services. Declining profits are a cause of concern in themselves. Even more worrying, however, is the effect of decreasing investment, innovation and long-term shareholder value. Why? Dialing back investments not only erodes a company’s ability to grow, but also freezes resources to innovate in an increasingly disruptive environment. Together, low investment and innovation efforts can drag on shareholder value as investors question a company’s ability to meet market expectations. Indeed, the current data do not suggest an environment conducive to growth. Business investment is already close to stalling. For instance, in Manufacturing business investment growth has declined from 14.8 percent in 2012 to -5.2 percent in 2016 in the United States and from 5.9 percent in 2012 to -6.6 percent in 2016 in the United Kingdom1. And growth in R&D spending, a key indicator for an industry’s capacity to innovate, has equally been sluggish. For instance, Manufacturing’s figures fell from 6.6 percent in 2008 to -2.6 percent in 2013 in Germany and 7.4 percent to -0.9 percent respectively in Italy2. 4 AI RESEARCH HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION While prospects may appear dismal, help is at hand in the form of a new factor of production—AI—that can transform opportunities not only for economic growth, but also for corporate profitability. Accenture defines AI as a constellation of technologies that allow smart machines to extend human capabilities by sensing, comprehending, acting and learning—thereby allowing people to achieve much more. Driven by a massive increase in data, soaring computational power at decreasing costs and breakthroughs in technology, AI is becoming a commercial reality. More than a productivity enhancer, we view AI as an entirely new factor of production that can reverse the trend of falling profit growth in threeways:by optimizing processes with intelligent automation systems, by augmenting human labor and physical capital, and by propelling new innovations. (For more information, see sidebar as well as Accenture’s related report, “Why Artificial Intelligence is the Future of Growth.”
5.AI RESEARCH But to capitalize on this tremendous opportunity, businesses in every industry will need to synthesize AI into their strategies and develop responsible AI systems that are aligned to society’s moral and ethical values and provide better outcomes for all people. AI’s unique characteristics as a capital–labor hybrid—such as the ability to augment human labor at scale and speed, self-learn and continuously improve over time—will require new approaches and models in areas such as investment, innovation and human capital development. Figure 1. Corporate profits United States corporate profits reached their highest level as share of gross domestic product (GDP) in the post-war period but are now in decline. United States corporate profits* 25% 25.0 2.5 13% 20% 12% 1.0 9% US$ trillions 11% 10% 15% 10.0 10% 5.9 8% 5% 4.0 7% 1.7 6% Corporate profits as a share of nominal GDP Corporate profits *Before tax with inventory valuation and capital consumption adjustmentsSource:Bureau of Economic Analysis, Accenture analysis 5 AI RESEARCH HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION 2014 2013 2012 2011 Corporate profit growth 2015 -3.0 -5% 2010 1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 0.0
6.AI RESEARCH WHY ARTIFICIAL INTELLIGENCE IS THE FUTURE OF GROWTH— MACROECONOMIC VIEW In the first phase of this research, Accenture Research, in collaboration with Frontier Economics, modeled the impact of AI on 12 developed countries that together generate more than 50 percent of the world’s economic output. Our research reveals that AI could double annual economic growth rates by 2035 by changing the nature of work and creating a new relationship between people and machines, in which people are firmly in control and technology increasingly adapts to our wants and needs. The impact of AI technologies on business is projected to increase labor productivity by up to 40 percent—and enable people to make more efficient use of their time. For further insights please refer to our report, “Why Artificial Intelligence is the Future of Growth.” Figure 2. The economic impact of AI oncountries:Our modeling shows that AI has the potential to double growth rates in the 12 countries that we analyzed. Annual growth rates by 2035 of gross value added (a close approximation of GDP) 4.6 4.1 3.9 3.6 3.2 3.0 3.0 2.9 2.7 2.7 2.5 Baseline 1.7 Austria France AI steady stateSource:Accenture and Frontier Economics 6 AI RESEARCH HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION Japan 0.8 1.6 1.7 1.0 Italy 1.4 Spain 1.4 Belgium 1.6 Germany 1.7 Sweden 2.5 UK 2.1 Finland US 2.6 Netherlands 1.8
7.AI RESEARCH Figure 3. Labor productivity in an AIworld:AI promises to significantly boost the productivity of labor in developed economies. Percentage difference between the baseline in 2035 and AI steady state in 2035. 37% 36% 35% 34% Sweden Finland US Japan 30% 29% 27% 25% Austria Germany Netherlands UK 20% 17% 12% 11% France Belgium Italy SpainSource:Accenture and Frontier Economics 7 AI RESEARCH HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION
8.AI RESEARCH THE VALUE OF AI TO INDUSTRY Our second phase of research shows AI holds vast potential for avoiding the low-profit spiral and for ushering in a new era of growth for businesses across industries. The economic potential of AI Accenture, in association with Frontier Economics, modeled the potential economic impact of AI for 16 industries covering a diverse field, from Manufacturing to Utilities to Healthcare. As our yardstick, we used growth in gross value added (GVA), a close approximation of GDP. GVA is an output measure that accounts for the value of goods and services produced in a certain sector. It can be thought of as the contribution of different sectors to economic growth. We compared two scenarios for each industry to assess AI’s future impact. First, the baseline case shows the expected economic growth for industries under current assumptions. Second, the AI steady state shows expected growth with AI integrated into economic processes. As it takes time for the impact of a new technology to feed through, we used 2035 as the year of comparison (for further details see “Appendix:Modeling the GVA impact of AI”). 8 AI RESEARCH HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION Our research shows that Information and Communication, Manufacturing and Financial Services are the three sectors that will see the highest annual GVA growth rates in an AI scenario, with 4.8 percent, 4.4 percent and 4.3 percent respectively by 2035 (Figure 4). In the Information and Communication industry, with its heavy reliance on technologies, AI capabilities can coalesce with existing systems to generate US$4.7 trillion in gross value added in 2035 (Figure 5). For instance, providers can develop new AI platforms for offering cyber-attack protection services to their customers.
9.AI RESEARCH In Manufacturing, precursors like the Internet of Things (IoT) create favorable conditions for the seamless integration of intelligent systems. Today’s IoT technologies enable physical devices such as assembly lines to connect and communicate with digital systems. Moreover, AI can bridge the gap between current forms of automation and learning with more advanced forms. Our research shows that AI could add an additional US$3.8 trillion GVA in 2035 to this sector—an increase of almost 45 percent compared with business-as-usual. Financial Services can capitalize on AI technologies to relieve knowledge workers from mundane, repetitive tasks such as generic customer queries, mortgage reviews and market research. Overall, this sector will benefit from US$1.2 trillion in additional GVA in 2035. Even labor-intensive sectors—where productivity growth is notoriously slow— will experience significant increases in GVA growth rates. Education will see a boost from 0.9 percent to 1.6 percent by 2035 and Social Services from 1.6 percent to 2.8 percent, yielding substantial increases in economic output (an additional US$109 billion and US$216 billion in GVA respectively). 9 AI RESEARCH HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION
10.AI RESEARCH Figure 4. The impact of AI on industry growth AI has the potential to increase economic growth rates by a weighted average of 1.7 percentage points by 2035 across 16 industries. Real annual GVA growth by 2035 (%) 4.8 4.4 4.3 4.0 4.0 3.4 2.4 2.1 Information & Communication 3.4 Manufacturing 3.2 2.0 Financial Services Wholesale & Retail 3.1 3.1 2.1 Transportation & Storage 3.8 3.4 3.4 2.2 2.3 Healthcare Construction 1.7 1.6 0.9 0.7 0.9 Public Services Other Services Education 2.3 Professional Services 2.8 2.3 1.3 1.4 1.4 Agriculture, Forestry & Fishing Accommodation & Food Services Utilities Baseline 1.9 Arts, Entertainment & Recreation AI steady stateSource:Accenture and Frontier Economics 10 AI RESEARCH HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION 1.6 Social Services
11.AI RESEARCH Figure 5: The impact of AI on industry output AI can substantially raise economic output for industries. For Manufacturing alone, AI can boost GVA by almost US$4 trillion in 2035. Real GVA in 2035 (US$ trillions) 12.2 9.3 8.4 4.9 8.4 7.5 2.7 2.3 Healthcare Baseline 3.3 Professional Services 2.0 Wholesale & Retail 2.9 3.7 3.4 2.8 Public Services Information & Communication Financial Services Construction Transportation & Storage 0.8 0.6 0.6 0.5 0.54 0.45 Agriculture, Forestry & Fishing Other Services Arts, Entertainment & Recreation 1.3 1.3 1.5 1.2 1.1 1.0 1.1 Accommodation & Food Services Social Services Utilities Education AI steady stateSource:Accenture and Frontier Economics 11 4.6 6.2 4.0 Manufacturing 4.7 AI RESEARCH HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION 2.1
12.AI RESEARCH BOOSTING INDUSTRY PROFITS WITH AI What could the increases in economic output generated by AI mean for corporate profitability spanning multiple industries? Significant improvements to the bottom line, according to our research—AI has the potential to boost rates of profitability by an average of 38 percent by 2035 across 16 industries. Accenture has identified three channels through which AI can reverse the cycle of low profitability acrossindustries:intelligent automation, labor and capital augmentation, and innovation diffusion. 12 AI RESEARCH HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION
13.AI RESEARCH Intelligent automation AI offers huge advantages over traditional automation. Take supply chain management, where time means money. For example, for the average Fortune 100 company, a supply chain shortened by just one day frees up anywhere from US$50 million to US$100 million in cash-flow3. Companies that rely on a globally integrated network, such as Tesla and Johnson & Johnson, are turning to Elementum, an AI start-up, to streamline their supply chains4. Elementum monitors one-off incidents, tracks transportation and records manufacturing outputs to provide real-time supply chain visibility.5 By analyzing more than 10 million incidents per day and US$25 trillion worth of products in real time, Elementum can provide early warning of potential problems and propose alternative solutions6. For instance, in 2014 a fire in a Chinese DRAM chip factory put a considerable squeeze (25 percent) on world supply. Whereas most equipment manufacturers were only made aware days later, Elementum’s customers knew about the incident within minutes and secured their supply of DRAMs before prices reacted to the shortage.7 But it is not just the production chain that can benefit from intelligent automation. With valuable time and resources spent chasing sales leads, sales activities are also poised to change dramatically with AI. Lattice Engines is focusing its AI capabilities on streamlining the sales process. By learning companies’ buying patterns, it can sort the “hot” leads from the “cold” ones. Using Lattice’s AI platform, Dell’s European marketing department cut its sales leads by 50 percent, resulting in a doubling in sales productivity, efficiency and revenue.8 Labor and capital augmentation AI is set to augment labor productivity by enabling workers to delegate low value-added tasks to AI and be more productive in their main tasks. The application of AI is spreading to areas where intellect and critical thinking have long dominated. For instance, consider business research, traditionally a highly time-consuming task. Conatix’s semi-automated business intelligence system, based on recent advances in machine learning, enables companies to discover, source, structure and share previously unstructured data and information from outside their organizations. By working in close collaboration with researchers, the Conatix algorithm can adjust its course based on human feedback, creating and updating high-quality insights. AI can also help businesses maximize their asset utilization rates. Heavy industries, such as Energy and Manufacturing, require large 13 AI RESEARCH HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION up-front investments, making them particularly vulnerable to the lost revenues associated with asset downtime. Consider wind turbines, forexample:Unexpected downtime requires a coordinated effort to source equipment, maintenance staff and spare parts, all the while cutting into revenue. In the case of gearbox failure, which can result in as much as two weeks of asset downtime per failure, the benefit of increased asset utilization is significant.9 AI start-up NEM, using an algorithm based on the human immune system, is targeting wind farm productivity by predicting and preventing failures.10 The platform first analyzes instances of wind turbine failure to learn what the symptoms are, then monitors the turbines in real time to detect symptoms and flag any potential problems.11
14.AI RESEARCH “As the new factor of production, AI can drive growth in at least three important ways. First, it can create a new virtual workforce—what we call intelligent automation. Second, AI can complement and enhance the skills and ability of existing workforces and physical capital. Third, like other previous technologies, AI can drive innovations in the economy. Over time, this becomes a catalyst for broad structural transformation as economies using AI not only do things differently, they will also do different things.” Mark Purdy, Managing Director Accenture Research 14 AI RESEARCH HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION
15.AI RESEARCH Innovation diffusion AI is poised to drive innovation by accelerating the development of new products. This increase in innovation eliminates redundant costs and generates new revenue streams, thereby increasing profitability. AI is also helping companies to create new products based on design goals and constraints. Autodesk is pioneering this new approach with its computer-aided design system, Dreamcatcher.14 Using AI algorithms, Dreamcatcher draws on the power of the The development of new drugs is an instructive cloud to create thousands of virtual prototype example. Currently, drug development is iterations and compare their function, cost dominated by a hypothesis-driven discovery and material along their specified criteria. method, with less than 10 percent of new drugs Dreamcatcher starts off with a solid mass obtaining final approval. Using AI, Berg Health that fits a desired shape, then begins to chisel monitors the progress of cancers by following away material. Removing a piece of material trillions of data points from both cancerous that worsens or improves performance is and non-cancerous cells.12 So far, the effort “remembered,” enabling the algorithm to comprehend how each bit of material has yielded a new cancer-fighting drug that contributes to performance. is currently undergoing clinical trials. This AI approach to new drug discovery is estimated In the Healthcare industry, Dreamcatcher to halve the development cost of a single has been used to design a facial implant that drug from US$2.6 billion to US$1.3 billion.13 accelerates recovery and tissue regrowth. In the Automobile industry, the AI-powered product has helped to develop a new roadster.15 15 AI RESEARCH HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION
16.AI RESEARCH Profit potential by industry Through these channels, AI offers unprecedented profitability opportunities. Case inpoint:With labor-intensive sectors, such as Wholesale and Retail, Arts, Entertainment and Recreation, and Healthcare, AI augments the human workforce, enabling people to become more productive over time and redirecting their focus on critical tasks. For the Wholesale and Retail sector, this can lead to a profit increase of almost 60 percent—from US$17 to US$27 for every US$100 of revenue (Figure 6). For traditionally capital-intensive industries, the AI impact on profitability can be equally dramatic. In Manufacturing, for example, faulty machines and idle equipment will become a thing of the past as AI-powered systems deliver constantly rising rates of return due to their ability to learn, adapt and evolve over time. Things like rapid prototyping or dynamic resource allocation can significantly reduce time-to-market and cut costs in the process. The net result for the sector? A share-of-profit increase of 39 percent. 16 AI RESEARCH HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION
17.AI RESEARCH Figure 6. The impact of AI on profits by industry Share-of-profit increase per industry between baseline in 2035 and AI steady state in 2035 (%) 84% 74% 71% 59% Education Accommodation & Food Services Construction Wholesale & Retail 55% 53% 46% 44% Healthcare Agriculture, Forestry & Fishing Social Services Transportation & Storage 39% 36% 31% 27% Manufacturing Other Services Financial Services Public Services 26% 24% 17% 9% Arts, Entertainment & Recreation Professional Services Information & Communication UtilitiesSource:Accenture and Frontier Economics 17 AI RESEARCH HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION
18.INDUSTRY SPOTLIGHTS AI RESEARCH 18 Manufacturing Manufacturing’s dependence on heavy machinery primes the industry for the application of AI technologies. Our research shows that with AI, Manufacturing can generate an additional US$3.8 trillion in GVA by 2035. The augmentation channel is expected to drive the majority of the benefits for this sector. Not only will human labor become more productive, but AI will also lead to the realization of the full potential of existing machinery on the factory floor. Figure 7. Manufacturing GVA in 2035 (US$ billion) Total GVA AI steadystate:US$ 12,173 billion 307 + US$ 3,776 billion 2,071 1,398 Intelligent automation 8,397 8,397 Baseline AI steady state AugmentationSource:Accenture and Frontier Economics AI RESEARCH HOW AI BOOSTS INDUSTRY PROFITS AND INNOVATION Total factor productivity (TFP)
19.AI RESEARCH Wholesale and Retail Healthcare AI can yield more than US$2 trillion in additional GVA in 2035 for the Wholesale and Retail sector—an increase of 36 percent compared with the baseline case. Retailers can draw on AI’s intelligent automation capabilities to streamline inventory and warehouse management, while augmented reality technologies can enable immersive shopping experiences with customers. Among the sectors that Accenture studied, this industry is expected to benefit considerably from additional innovation effects spurred by AI—for instance, helping to uncover pockets of latent demand. In our model, AI will accelerate growth in the Healthcare industry from 2.2 percent to 3.4 percent by 2035, generating US$461 billion of additional GVA. The intelligent automation channel accounts for more than 60 percent of the benefits. AI-powered systems can analyze massive amounts of unstructured data and produce predictive diagnoses that can detect issues before they become a serious health risk. The innovation channel also adds more than US$100 billion to the industry in 2035. Just one example of AI’s enormous potential inHealthcare:The industry has collaborated with previously unrelated fields, such as manufacturing and design, to create cutting-edge 3D printing techniques for organ transplants. Figure 8. Wholesale and Retail GVA in 2035 (US$ billion) Figure 9. Healthcare GVA in 2035 (US$ billion) Total GVA AI steadystate:'>state: