Dear Tera, for those who don’t know you, could you introduce yourself for the conference audience?
I’m a Senior Fellow at McKinsey Global Institute (MGI), McKinsey’s business and economics think tank. I originally trained as an engineer in Finland, and am surrounded by other engineers in my family, so have an affinity for new technology. However, I have spent most of my career as an economist, applying the economics tool kit to real-life problems, whether at McKinsey working with multinational corporations, or as chief economist in UK government departments devising policy, or at MGI analyzing big societal trends and challenges. I’m actively involved in the UK’s innovation ecosystem through initiatives such as the Scale-Up Institute, Patient Capital Review, Innovate UK and Be the Business, and co-led McKinsey Global Institute’s discussion paper on artificial intelligence last year. I have also recently spent time researching the innovation diffusion process and its implications for productivity, growth and inequality.
Automation is a beautifully dualistic theme. One side it’s promising big opportunities for companies and societies in general, on the other side it is a scary trend threatening jobs and life security for a lot of people. In that regard, are you an automation optimist, realist, or pessimist?
With my background, I don’t think I have a choice but to be an optimist overall! I’m very excited about the potential for technology to solve some of the world’s toughest problems, at lower cost than before. And I do not believe for one second the world has run out of, or will ever run out of, ideas. If anything, the global hyper-connectivity we are witnessing — with, for example, data flows have increased by a factor of 45 since 2005 — means more people can collaborate to come up with smart solutions. This doesn’t mean that adoption of new technology won’t face barriers. And it is the adoption process, rather than the initial inspiration, that really matters at the whole-economy level: less than 30% of innovation is about new-to-market products, services and processes. This dynamic creates the possibility of a real competitive advantage for the fast adopters.
If we take a closer look, if you could describe in a few words, what could be the best and worst outcomes of this total automation trend for businesses in general?
Let’s start with the worst, and this may be controversial. A scenario in which a very small number of advanced digital natives capture all the opportunities would probably lead to both lower investment by the bulk of smaller businesses — who after all employ the vast majority of workers — and lower wages for individuals not working for the top firms. And maybe poor management of transitions by governments could also lead to persistently high unemployment and ‘scarring’ of human capital. This could result in a vicious cycle of low demand for goods and services, which would ultimately also hurt those digital natives.
The best scenario is one where technology is deployed swiftly, in a competitive and dynamic environment, to benefit consumers and society globally, and where those businesses who are truly customer-focused win the day. Those same businesses will recognize the value that well-trained, motivated and creative humans bring to their operations, and provide them with rich and meaningful roles. Research already shows that machines on their own can perform some tasks, such as predicting cancer from radiograms, better than humans, but that a machine and human together beat the performance of the machine alone. Creating optimal man-machine interfaces will be key.
How can a company prepare itself to become a winner or at least a survivor in what’s coming? What is the key questions a management should ask themselves?
It starts with becoming technology literate; going well beyond the buzzwords. For example, the Chairman of Nokia, Risto Siilasmaa, and a friend of mine from university, has taken the time to actually complete courses in machine learning and deep learning. Now, not everyone needs to go to that level of effort, but how else are you going to figure out where you can truly deploy these technologies? I’m a firm believer that every business needs ‘translators’: people who understand both the technology and the business and can bring together the best brains from both domains to work out how to use technology for competitive advantage. Beyond that, one could write a whole book about the topic. However, our research finds that the winners tend to be bold, externally oriented and agile, and utterly focused on the bottom line. Technology for technology’s sake is important in R&D, but as I said earlier: unless it leaves the lab and becomes a reality that either reduces your costs or that customers are willing to pay for, it’s not much use.
What are the industries, that will be me mostly affected by the automation trend?
In our research, we analyse the occupations and industries that will be most affected. Top of the list are sectors where the majority of work is either about gathering and handling information, or consists of predictable physical tasks. These are particularly prevalent in the hospitality sector, manufacturing, agriculture and logistics. But our analysis also shows that no sectors will be immune: even in education, a fundamentally human endeavor, almost 30% of the hours worked in the US could be automated with today’s technology.
Do you have any remarks in regard of Hungary, where a big proportion of the jobs can and will be the subject of automation? What can a country do, if it is positioned in the global economy mostly as a low(er) wage country, attracting work that can be automated?
Many economies around the world face this challenge. The first thing is to recognize that the transition will take time, and make the most of this by starting now. At a national level, there are four over-arching priorities we see: maintaining robust economic growth to support job creation, upskilling the workforce, ensuring labour market fluidity, and providing income and transition support to workers. But of course it is also key to work on international competitiveness — which in addition to a focus on human capital and a skilled workforce means encouraging innovation, investment and integration into global value chains.
SMART 2018 konferencia
Április 4. Budapest Akvárium
A SMART 2018 konferencia évetne 1000 látogatóval azon az úton jár, hogy a vezető beszélgetési fórummá váljon a Fintech, Mobil, 5G, IOT, Automotive, VR/AR, cybersecurity és automatizáció új trendjeinek feltérképezésében és ezek társadalmi hatásának egyeztetésében.