by Dave Wright

Intelligent automation points the way to future economic growth

Mar 13, 2017
Data CenterIT LeadershipIT Skills

Intelligent automation makes us more human—not less

automation ts
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As someone deeply involved in technology strategy, I’m often asked about the impact of automation. Will automation—specifically, intelligent automation—create prosperity and growth, or will it create a dystopian future where workers are increasingly replaced by software robots?

I always answer—and believe—that intelligent automation is a vast opportunity, not a threat. By working hand in hand with intelligent technology, we can achieve greater things. It frees us from mundane, repetitive activities—unleashing creativity and letting us build stronger, more productive working relationships. Intelligent automation makes us more human, not less.

Unprecedented productivity gains

That’s why McKinsey’s recent report, A Future That Works, is so fascinating. It predicts that automation will increase productivity by up to 1.4 percent per year over the next 50 years. By comparison, the steam engine only drove 0.3 percent annual increases, and the IT revolution only raised productivity growth by 0.4 percent.

Let’s be clear. Technology adoption is critical for productivity. It’s not just McKinsey saying this. For instance, a 2016 OECD study found that productivity growth in “frontier” firms was three times higher than in productivity laggards—and that gap is growing. One key reason is that technological innovations take too long to penetrate the market—giving first-mover advantage to frontier firms.

Another 2015 study reinforces this point. It found that digital B2B leaders—those that aggressively adopt digital technology—show vastly better financial performance. For example, their annual revenue growth averaged 4.3 percent, compared to 0.8 percent for their peers. And their operating profits grew even faster—13.5 percent versus -1.8 percent—compelling evidence of accelerating productivity.

Why should we care?

This is important because productivity is key to our economic future. The world’s advanced economies are facing a long-term employment crisis—and it’s not about a lack of jobs. As population growth slows and we live longer, we’re running out of workers. The latest McKinsey report echoes this, saying, “The size of the workforce over the next 50 years is too small to maintain current per capita GDP growth without accelerating productivity growth.”

That repeats the stark picture painted by an earlier 2015 McKinsey report, which forecast that “unless we can dramatically improve productivity, … the rapid expansion of the past five decades will be seen as an aberration of history, and the world economy will slide back toward its relatively sluggish long-term growth rate.”

What about job losses?

Intelligent automation will have a massive positive economic impact, but many people remain seriously concerned about job losses. However, A Future That Works offers a more optimistic view—and one that I agree with. Intelligent automation replaces individual activities, not entire occupations. Only 5 percent of today’s occupations are candidates for full automation. On the other hand, nearly every occupation could be partially automated. In other words, this is about enhancing productivity, not eliminating occupations. That’s exactly what we need to drive economic growth and increase employment.

And automation doesn’t just substitute for labor—it complements it. For example, banks introduced ATMs in the 1970s—a clear substitution for the labor of bank tellers. And yet the number of bank tellers in the U.S. actually rose by 10 percent between 1980 and 2010 as bank branches refocused to provide customers with relationship-based services such as loans and investments.

We need to act now to implement intelligent automation

Given our macroeconomic environment and demographic trends, intelligent automation isn’t a choice—it’s a necessity. As a matter of policy, we need to focus our resources on driving intelligent automation throughout our labor force, laying the groundwork for future economic growth, prosperity and—yes—increased employment.

At the same time, we must identify and focus on skills needed for this new “automated economy.” That takes a fundamental shift in our education system. And we mustn’t leave behind the 5 percent. Retraining affected workers and easing their transition into new types of employment is both an economic imperative and a social responsibility.

The good news is we have time. According to McKinsey, it will likely take until 2055 to achieve the full potential of automation. But we need to start now—successful change requires concerted and sustained effort, not a patchwork of disconnected responses after the fact.