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Driving Impact at Scale from Automation and AI

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Driving Impact at Scale from Automation and AI Driving impact at scale from automation and AI February 2019 Contents Introduction 2 Part 1: Why automation and AI? Harnessing automation for a future that works 6 Notes from the AI frontier: Applications and value of deep learning 10 Artificial intelligence is getting ready for business, but are businesses ready for AI? 26 Part 2: How to make transformation successful Burned by the bots: Why robotic automation is stumbling 44 Ten red flags signaling your analytics program will fail 48 The automation imperative 56 How to avoid the three common execution pitfalls that derail automation programs 64 The new frontier: Agile automation at scale 72 Part 3: Understanding functional nuances How bots, algorithms, and artificial intelligence are reshaping the future of corporate 78 support functions A CIO plan for becoming a leader in intelligent process automation 86 Introduction Automation, leveraging artificial intelligence (AI) and other technologies, has opened up new possibilities. The pace of adoption has been rapid. Institutions of all sizes globally are leveraging automation to drive value. According to the McKinsey Automation Survey in 2018, 57 percent of 1,300 institutions have already started on this journey, with another 18 percent planning to kick off something within the next year. When done right, automation has proven to deliver real benefits, including the following: • Distinctive insights: Hundreds of new factors to predict and improve drivers of performance • Faster service: Processing time reduced from days to minutes • Increased flexibility and scalability: Ability to operate 24/7 and scale up or down with demand • Improved quality: From spot-checking to 100 percent quality control through greater traceability • Increased savings and productivity: Labor savings of 20 percent or more However, success is far from guaranteed. According to our Automation Survey, only 55 percent of institutions believe their automation program has been successful to date. Moreover, a little over half of respondents also say that the program has been much harder to implement than they expected. In this collection of articles, we explore why automation and AI are so important, how to transform, and what the functional nuances are that can be the difference between success and failure. At a high level, these articles delve into the four most important practices that are strongly correlated with success in automation: • Understand the opportunity and move early: Start taking advantage of automation and AI by assessing the opportunity, identifying the high-impact use cases, and laying out the capability and governance groundwork. • Balance quick tactical wins with long-term vision: Identify quick wins to automate activities with the highest automation potential and radiate out, freeing up capital; in parallel, have a long- term vision for comprehensive transformation, with automation at the core. • Redefine processes and manage organizational change: Since 60 percent of all jobs have at least 30 percent technically automatable activities, redefining jobs and taking an end-to-end process view are necessary to capture the value. • Integrate technology into core business functions: Build AI and other advanced technologies into the operating model to create transformative impact and lasting value, support a culture of collecting and analyzing data to inform decisions, and build the muscle for continuous improvement. We hope this curated collection will be helpful to you in realizing the full value potential from your own automation transformation. Alex Edlich Greg Phalin Rahil Jogani Sanjay Kaniyar Senior partner, New York Senior partner, New York Partner, Chicago Partner, Boston We wish to thank Keith Gilson, Vishal Koul, and Christina Yum for their contributions to this collection. Introduction 3 Part 01 Why automation and AI? 4 Making a secure transition to cloud PhotoOli Scarff/Getty credit/Getty Images Images News Harnessing automation for a future that works Jacques Bughin, Michael Chui, Martin Dewhurst, Katy George, James Manyika, Mehdi Miremadi, and Paul Willmott Automation is happening, and it will bring substantial benefits to businesses and economies worldwide, but it won’t arrive overnight. A new McKinsey Global Institute report finds realizing automation’s full potential requires people and technology to work hand in hand. Recent developments in robotics, artificial and CEOs. But how quickly will these automation intelligence, and machine learning have put us technologies become a reality in the workplace? on the cusp of a new automation age. Robots and And what will their impact be on employment and computers can not only perform a range of routine productivity in the global economy? physical work activities better and more cheaply than humans, but they are also increasingly The McKinsey Global Institute has been conducting capable of accomplishing activities that include an ongoing research program on automation cognitive capabilities once considered too difficult technologies and their potential effects. A new MGI to automate successfully, such as making tacit report, A future that works: Automation, employment, judgments, sensing emotion, or even driving. and productivity, highlights several key findings. Automation will change the daily work activities The automation of activities can enable businesses of everyone, from miners and landscapers to to improve performance by reducing errors commercial bankers, fashion designers, welders, 6 Digital/McKinsey and improving quality and speed, and in some Still, automation will not happen overnight. Even cases achieving outcomes that go beyond human when the technical potential exists, we estimate it capabilities. Automation also contributes to will take years for automation’s effect on current productivity, as it has done historically. At a time work activities to play out fully. The pace of of lackluster productivity growth, this would give automation, and thus its impact on workers, will a needed boost to economic growth and prosperity. vary across different activities, occupations, and It would also help offset the impact of a declining wage and skill levels. Factors that will determine share of the working-age population in many the pace and extent of automation include the countries. Based on our scenario modeling, we ongoing development of technological capabilities, estimate automation could raise productivity the cost of technology, competition with labor growth globally by 0.8 to 1.4 percent annually. including skills and supply and demand dynamics, performance benefits including and beyond labor The right level of detail at which to analyze the cost savings, and social and regulatory acceptance. potential impact of automation is that of individual Our scenarios suggest that half of today’s work activities rather than entire occupations. Every activities could be automated by 2055, but this occupation includes multiple types of activity, each could happen up to 20 years earlier or later of which has different requirements for automation. depending on various factors, in addition to other Given currently demonstrated technologies, economic conditions. very few occupations—less than 5 percent—are candidates for full automation. However, almost The effects of automation might be slow at a macro every occupation has partial automation potential, level, within entire sectors or economies, for as a proportion of its activities could be automated. example, but they could be quite fast at a micro We estimate that about half of all the activities level, for individual workers whose activities are people are paid to do in the world’s workforce could automated or for companies whose industries are potentially be automated by adapting currently disrupted by competitors using automation. demonstrated technologies. That amounts to almost $15 trillion in wages. While much of the current debate about automation has focused on the potential for mass The activities most susceptible to automation are unemployment, people will need to continue physical ones in highly structured and predictable working alongside machines to produce the growth environments, as well as data collection and in per capita GDP to which countries around the processing. In the United States, these activities world aspire. Thus, our productivity estimates make up 51 percent of activities in the economy, assume that people displaced by automation will accounting for almost $2.7 trillion in wages. find other employment. Many workers will have They are most prevalent in manufacturing, to change, and we expect business processes to be accommodation and food service, and retail trade. transformed. However, the scale of shifts in the And it’s not just low-skill, low-wage work that could labor force over many decades that automation be automated; middle-skill and high-paying, high- technologies can unleash is not without precedent. skill occupations, too, have a degree of automation It is of a similar order of magnitude to the long- potential. As processes are transformed by the term technology-enabled shifts away from automation of individual activities, people will agriculture in developed countries’ workforces perform activities that complement the work that in the 20th century. Those shifts did not result machines do, and vice versa. in long-term mass unemployment, because they Harnessing automation for a future that works 7 were accompanied by the creation of new types of come about if people work alongside machines.
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