The power of intelligent technologies
Intelligent technologies will not replace businesses, but businesses that use intelligent technologies will replace those that do not.
Intelligent technologies such as artificial intelligence (AI) and intelligent automation (IA) are currently on everyone's lips. There are good reasons for that. We see the revolutionary effects of technology in just about every industry:
- In health care, where it is used to track pandemics and develop vaccines or analyze images (e.g., mammography)
- In banking and finance, where it detects money laundering and enables more accurate assessments of lending risk or suggests investment alternatives
- In security, where it prevents cyber-attacks and data breaches or identifies people
- In biotechnology, where it reinforces advances made in fields such as genetic modification and can help eradicate diseases and put an end to food shortages.
- In retail, where it recommends or predicts what customers are going to buy and puts the products in front of them when they are ready to buy.
Expectations are high - and rightly so. AI is what is called a «general purpose technology». This means that it is as fundamental to innovation and societal development as the internal combustion engine, electricity, computers, and smartphones. But could it be with intelligent technologies, as economist and Nobel laureate Robert Solow said of computers in 1987: "You can see the computer age everywhere, except in productivity statistics!"
The "Solow paradox" has been criticized by many economists, including Stanford professor Erik Brynjolfsson. He believes that greater consideration must be given to the time and costs associated with companies innovating their old business models to take out the effects of being digital and driven by data and AI. Things take time.
I believe that intelligent technologies (as opposed to 1987 computers, which should primarily make input-production and administrative routines - more efficient) are technologies where the effect of it lies primarily in the output part of productivity. This means that it is the consumers who benefit more from what the companies produce when they use this technology. Let me elaborate.
The basic elements of AI and IA are large amounts of data and three technologies: advanced modeling, voice recognition, and object recognition. This has, among other things, given us chatbots and autonomous driving. A side effect of autonomous driving is that the extent of damage and strain on the health sector will decrease. Insurance companies, lawyers, and hospitals will notice this. With autonomous cars, older people, who for various reasons cannot drive a car, will be more mobile and can stay at home longer. With AI, autonomous cars become a service. But it does not stop there.
If we connect AI with sensors, the Internet, and Things (IoT), and 5G, we get what many call "the perfect storm" - a storm that provides unprecedented opportunities for innovation by analog products becoming digital and "smart". Think of smart homes with built-in learning functions for households' everyday routines. Think of voice-controlled e-commerce with the delivery of autonomous robots. All at a great value to customers.
Finally, we have that in a modern digital service economy it is also about customers’ and inhabitants’ productivity since they are important input factors in service production. Here, AI and IA can increase customers' productivity because they can do more with less effort. Think of Alexa or Siri search versus a visit to the library.
I'm not worried about the Solow paradox. What worries me more is Roy Amara's law "People tend to overestimate the impact of a new technology in the short term, while underestimating the impact of it in the long term".
In this sense, intelligent technologies are "hyped" with expectations they cannot deliver on today. Once the technology has matured and can deliver, we are not able to exploit the potential. In other words: Our path-dependence on innovative thinking has locked us in the old technology. We have a KODAK-moment!
From this, I form two predictions:
# 1: Intelligent technologies connected with IoT and 5G will not replace businesses, but businesses that use them will replace those that do not.
# 2: Businesses that do not use intelligent technologies will appear in bankruptcy statistics before they reach the productivity statistics.
That worries me!