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How to Win at Enterprise Automation: Think Big, Start Small, Validate and Move On (Part 1 of 2)

Blog: Appian Insight

Dr. Jing Bing Zhang, Robotics Research Director, IDC
Jing Bing Zhang, Worldwide Robotics Research Director, IDC

There’s a strong argument to be made that modern robots are smarter, more efficient and more capable of collaborating with other robots and humans than ever before. So much so that by 2025, industry watchers expect more than 60% of the top global companies in manufacturing, logistics, healthcare, energy and agriculture to have a Chief Robotics Officer. And by 2023, says Gartner, we’ll also see a 30% increase in the use of robotic process automation for front-office activities such as sales and customer experience.

It’s also worth noting that experts expect 40% of commercial robots to be connected by shared intelligence in 2020, driving exponential improvement in overall robotic operational efficiency. As for workforce impacts, average salaries in the robotics sector will explode. But more than one-third of the available jobs in robotics will remain vacant due to a skills gap. Which brings us to Jing Bing Zhang, Research Director, Worldwide Robotics, IDC.

Zhang is a leading expert on the commercial application of robotics technology. His research at IDC focuses on commercial robotics and robotic process automation and how autonomous and semi-autonomous technologies will:

As a futurist, Zhang expects to see exponential growth for automation in industries like banking, insurance and financial services. All of which he says are ripe for digital transformation. In this republished  and updated post, Zhang reveals why the rise of robotics and automation goes beyond streamlining administrative and transactional tasks to taking advantage of faster, better service delivery and enhancing the customer experience. Hope you enjoy the conversation.

Appian: Good morning Dr. Zhang. And welcome to Digital Masters. So, let’s start with the big picture. Last year, IDC and other industry experts predicted that spending on commercial robotics would accelerate innovation, create new revenue streams, and change the way work gets done. Have your expectations been met?

Zhang: Yes, but let me put it in context. Our IDC FutureScape: Worldwide Robotics 2017 Predictions [published in November 2016] referred to commercial robotics and the adoption of physical robots across industry sectors, like manufacturing, healthcare, retail, utilities, and construction.

Overall, we’re seeing a strong uptick in interest in physical robots and RPA.

Appian: In its 2017 survey, IDC also said that 50% of companies prioritized robotics as their top pick for tech investment. So, what’s driving that prioritization?

Zhang: That data is based on a survey we did in early 2017. We interviewed execs from 1,050 companies worldwide, covering major markets in Asia Pacific, Europe and America.

The survey covered many industries, including manufacturing, healthcare, retail, government and utilities.

In the manufacturing sector, the number one business priority was improving the product and service quality offered to customers. And, the number one concern was the rising cost of labor.

Appian: What about other industries like healthcare and retail? How are companies in these sectors leveraging robotics and automation?

Zhang: For healthcare, the top priority was improving overall patient experience. For retail, it was providing better service to the customer.

So, quality and time to service—how fast you deliver service to customers—are major drivers of automation, especially robotic technologies. That’s because robots offer better agility, precision and consistency than human labor.

“But what we’re seeing now, is that in addition to quality and cost benefits, customers are also looking at the value that automation offers customers, from searching for a product, to ordering it, to using it.”

So, companies are responding to the need to keep up with customer expectations. And these expectations are constantly changing.

Appian: So, customer expectations are a major driver of commercial automation. And these expectations are changing faster than they ever did in the past.

Appian: Speaking of automation, I’ve read news reports that China is investing more than double what the U.S. is spending on robotics. What do you make of that?

Zhang: If you dial back in time about 25 or 30 years, China enjoyed a competitive advantage because of cheap labor. But that advantage is diminishing. This is why China is betting so big on automation, robotics and artificial intelligence. They want to upgrade from a cheap labor base and low-cost manufacturing to high-tech manufacturing. In fact, China is now world’s largest robotics market.

“They’re also making a big push into artificial intelligence. The truth is, China has set a goal to become the world leader in artificial intelligence, as well as the “premier global AI innovation center” by 2030. So that’s the backdrop to what’s going on in China. The other thing, which many people aren’t aware of, is that there’s a shortage of labor in China.”

Appian: A labor shortage in China? That sounds counter intuitive. How’s that possible? They’ve got a huge population.

Zhang: There are over a billion people in China, so it’s easy to overlook the underlying threat of a labor shortage there. Thirty or forty years ago, many people downplayed the importance of automation in China, because of the country’s huge population.

In 2010, there were 110 million people 65 years of age and above in China; by 2030, the number will increase by more than 100 million, according to the United Nations. By 2050, more than a quarter of the population will be over 65.

“But, according to a United National labor report, the workforce in China peaked in 2015. From that time forward, till the foreseeable future, China’s labor force will lose about one million working-age people per year. Considering that one industrial robot can replace three to four people, China will need to install approximately 275,000 industrial robots every year to overcome its demographic shift.”

Appian: So, it sounds like China is facing a huge automation gap?

Zhang: Last year, China installed about 86,000 industrial robots, which is not even one-third of what is needed to match their 2015 labor force requirement. So, for factory managers in some parts of China, the number one worry is the threat of a human labor shortage, especially after the long holiday around Chinese New Year.

Chinese consumers are also more sophisticated now—and more demanding. Which means that manufacturers there need automation to meet the rising expectations of consumers.

Something else to think about is that the advantages of cheap labor are diminishing, because the U.S. can also set up factories with robots. And, because of that, the cost of labor is shrinking faster and faster, as a percentage of total operating costs.

This is why so many people in Asia and the Asia pacific region worry that manufacturing will go back to the U.S.

Appian: On a related note, the shoe company Adidas is building a robot-powered, on-demand, sneaker factory in Atlanta, where running shoes will be made by a team of robots, and a small human workforce, in what Adidas is calling a “Speedfactory.” Is this just automation hype, or is it for real?

Zhang: It’s real. These automated factories will manufacture a series of shoes specifically designed for six of the world’s biggest metropolitan areas.

Their first Speedfactory has already opened in Germany. And Adidas said that it would open another 74,000 square-foot facility in Atlanta, which will employ about 160 workers.

“The level of automation in these factories is incredible. Adidas is using this Speedfactory concept to produce customized shoes—on demand—for consumers in specific cities, based on local environmental factors, habits, and consumer lifestyles.”

(Editor’s note: Since the original publication of this post,  Adidas reported that it was shutting down its Speedfactories in Germany and the U.S. and moving production to Asia.)

Appian: But the flip side of that story is the fear factor—the fact that people are worried about automation replacing them. Is this something we should be concerned about? What do you make of the fear of automation and job displacement?

Zhang: There is nothing to hide. There will be job displacement. But most of the jobs that will be lost, will be jobs that people don’t want to do—jobs where people can’t match the consistency and quality of automation. Or, it could be that automation displaces work that is dangerous for people to do.

Appian: So, you expect automation to add more high-quality jobs to the economy, like managing and supervising, and creating stuff. On the other hand, though, you expect low-wage, low-skilled jobs to disappear.

Zhang: Yes. Low-skilled, repetitive, labor will be replaced. There’s no doubt about that.

“At the same time, though, automation will create lots of higher-skilled jobs related to artificial intelligence, robotics, machine learning and data science. People will need to be re-skilled to work with robots. There will be less demand for routine human labor that requires production and assembly-related skills.”

(Tune in next week for the final episode of this two-part post on how to get the most out of your automation investment.)

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