The march of the machines: An opportunity for small and micro businesses in the South West to access global markets?

Date: 
20 Jul 2017
Details: 

DCBC Chairman’s Newsletter

Tim Jones

10th July 2017

The march of the machines: An opportunity for small and micro businesses in the South West to access global markets?

It cannot have escaped your attention that an urgent debate is under way about how our way of life and doing business is set to be fundamentally changed by the rise of Artificial Intelligence.

With echoes of the Industrial Revolution, many fear the increasing automation of jobs currently done by humans will inevitably lead to mass unemployment, with profound social consequences.

In tackling this huge subject and considering what it means for businesses in Devon and Cornwall, it is important to recognise that AI already impacts on our daily lives and is key to the success of some of the world’s biggest and fastest growing businesses.

Google is the undisputed king of the search engines, while Apple has a $246bn cash pile - big enough to buy Tesco with loose change.

Facebook now has two billion active users and its quarterly advertising revenues are up 53% year-on-year to $8.6bn.

Amazon has fast become the big beast of retailing. Its global workforce is 341,000 strong, with 110,000 hired in the past year alone. The Amazon Echo artificial intelligence chatbot now sits in 8 million homes. And the company is pushing ahead with drone deliveries, robot-automated warehouses and concept stores where you just walk out with the goods.

How have these companies achieved their dominant position and how do they sustain it? Automation and robotics.

But this is not just a phenomenon embraced by giant corporations in the US. Businesses closer to home are already facing up to the automated future.

Aviva, the insurance giant and one of the UK's biggest companies, has asked its 16,000-strong workforce whether their jobs could be done better by a robot and, if so, are they willing to be retrained for another job. Staff who work in call centres, assess credit risk and calculate premiums are at greatest risk of being replaced by machines.

Habito in London is a digital mortgage advisor.  Its AI systems can scan every product out of 15,000 in 20 minutes and find the cheapest. Customers have the option to use a personal advisor, but this is hardly ever taken up.

Babylon Health, also based in London, offers virtual medical check-ups via smartphone. For every 1,000 users, 800 used only the AI triage system, 120 wanted to ask a doctor a question and only 80 wanted an actual consultation.

Medical operations are being extended globally using 5G communications and AI. The Royal Devon and Exeter NHS Foundation Trust has been pioneering research in robotic surgery for several years now, in partnership with academics at the University of Exeter.

The rise of AI also has implications for the commercial property market. The latest statistics are that 31,000 administrative and secretarial jobs have already been lost to AI, with a prediction that a further 114,000 will disappear in the next five years. To take just one example of the challenge, Luminance is an artificial intelligence platform for the legal industry which can understand language at speeds impossible for humans to compete with. The fact is that AI is cheaper, more predictable and more efficient than even off-shore staff members. As a result, many office buildings could become redundant.

Meanwhile in the world of journalism, a robot reporting project being developed by the Press Association and funded by Google will see computers writing 30,000 stories a month for local media. You may be disappointed to learn that DCBC currently has no plans to use robots to write this newsletter.

What does all this mean for the labour market?

The Bank of England has warned that up to 15 million jobs in the UK are under threat from increasingly sophisticated machines doing work that was previously the preserve of humans.

An analysis of which jobs with a salary of over £40,000 were at greatest risk concluded that accountants, auditors, technical writers, train and tram operators and power plant operators should be most worried.  Only just behind come judges, magistrates, economists, computer programmers, commercial pilots and financial advisors.

The public sector will not be immune. A report by the Reform thinktank earlier this year claimed nearly 250,000 administrators and health service workers could be replaced by machines within 15 years.

All of this is likely to result in the hollowing out of the labour market and a widening of the gap between rich and poor.

What is the likely effect of this?

Some commentators have suggested the Luddites might now be proved right, two centuries after they set about smashing machines. Why? Because 21st century machines can perform not just manual human tasks but cognitive ones too.

The question we cannot answer is whether this will result in a re-run of the 19th century Industrial Revolution, with productivity gains boosting wages, or a permanent reshaping of the labour market. What is, however, certain is that the gap between the skilled and unskilled will grow at an increasingly fast pace.

What happens when the option for upskilling is no longer available? An emerging problem is that many less skilled, less rewarding and lower paid roles may be the only alternative, particularly those that cannot be automated.

The good news

  • For the 800,000 jobs lost in UK manufacturing, 3.5m new jobs have been created in the creative, knowledge, business and care service sectors.

  • Current employment levels in the UK stand at a record level of 74.6%.

  • In the US, 65% of today's jobs did not exist 25 years ago.

  • Fears about unemployment resulting from AI do not play out in countries with the highest levels of automation and use of robots, such as Germany, Japan and South Korea, who have the lowest unemployment rates.

How do South West businesses benefit from this and use the opportunity to access new global markets in a post-Brexit world?

If we were to adopt an Amazon-style approach, we would automate all our back of house functions (administration; search capacity; digital marketing; payments and delivery) and respond to increasingly demanding customers by setting new standards of service and using skilled staff to develop new and exciting products, backed up by almost immediate delivery.

Taking well paid staff away from simple manual tasks such as checking orders and topping up inventories and redirecting them to talk directly to customers in order to deliver a better more personal service would achieve immediate results.

Management skills need to adjust to a world of increased speed, efficiency and accuracy. Businesses must also adapt to find where unique human skills can still be used, such as critical thinking, personal services, comprehension and expression, and embrace the flexible working practices expected by today’s jobseekers.

Amid this technological revolution, the need to make employees feel valued will be more important than ever. This includes sound corporate values and a mission which all can sign up to.

Is there a downside to all of this?

Current threats to businesses in the South West include:

  • Job hopping and reduced workforce loyalty;

  • Brexit uncertainty, which could take a decade to resolve and create problems with tariffs, as well as affecting investor and consumer confidence;

  • Cyber crime - a major challenge for all companies large and small, which few are getting a grip on;

  • Digital payments - cash is now under threat from contactless payments and digital currencies. Are businesses ready for this?

Against this backdrop, there are encouraging signs that companies in Devon and Cornwall are alive to the threats and opportunities created by the rise of AI. As a recent report on the future of work by DevonLive.com highlighted, Plymouth manufacturer Applied Automation (UK) Ltd is working towards a future of “smart factories”, where robots work alongside people to increase productivity and efficiency.

Some of the region’s major employers, such as BT, are already using AI and expect the technology to have a huge impact in the coming years, eliminating some jobs while creating others in roles such as programming and software engineering.

Devon Air Ambulance is among those looking to a future where even complex tasks such as medical diagnosis are transformed by artificial intelligence, leaving employees to focus on creative and strategic work. Other firms featured, including Exeter-based Pennon Group, anticipate continued growth in flexible and remote working, enabled by technology. Adapting to these trends will be crucial if businesses in Devon and Cornwall are to attract and retain the best talent and improve their efficiency and productivity to be globally competitive.

One thing we can say with certainty is that the rise of the machines is only just beginning. This could be the greatest opportunity the South West has in uncertain times.  We need, however, to rise to this new challenge.



T M Jones

Chairman

Devon & Cornwall Business Council

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