December 12, 2016      

Innovation theory — and indeed, history — tells us that, every once in a while, an innovation comes along that totally disrupts an industry, causing once-household names to virtually disappear and new players to become dominant. Today, robotics and artificial intelligence are getting a lot of attention as the next — or perhaps the current — areas to watch as sources of business disruption.

But on which industries will robotics, AI, and related technologies have the biggest impact, and when? And for those wanting to champion or avoid business disruption, what should you do?

I believe there are three factors to watch for and that determine the approaches most likely to succeed:

  1. Identify which activities are most likely to be automated in the near future based on available technology and suitability of the tasks.
  2. Within these areas, find out which niche applications offer a foothold for automation to be a commercial success rather than a science project.
  3. Organizations that approach robotic development as a team sport rather than go it alone tend to be the most likely to succeed.

It’s not what you know; it’s what you do

McKinsey & Co. recently analyzed which sectors are most likely to adopt automation and concluded that the key indicator was not the level of professionalism, skill, or knowledge, but rather the level of repetitiveness of a task.

Research has also found that, contrary to popular opinion, it’s not just low-skill, low-wage activities that will be affected by automation, nor will these types of jobs be entirely wiped out by it.

In reality, “fewer than 5 percent of occupations can be entirely automated using current technology,” McKinsey said. “However, about 60 percent of occupations could have 30 percent or more of their constituent activities automated.”

This means that the job of routine surgery is only slightly less likely to be automated than repetitive manual labor.

Business disruption from automation is coming to more than just the service industry.

Momentum Machines has developed a robot that can make hamburgers from start to finish.

Indeed, for some manual activities — like preparing burgers in fast food outlets — the low pay rates make an unconvincing case for deploying robots.

Nevertheless, San Francisco-based Momentum Machines has developed a catering robot capable of creating 360 burgers per hour, which suggests there may be more to making a business case than labor costs alone.

At the other end of the scale, the spiraling cost of healthcare globally is driving significant investment in surgical robotics. There, the value of each procedure is high, but the barriers to entry (such as regulations, performance requirements, and physician/public acceptance) are also high.

All this may mean that mid-skill and low-skill but hazardous roles may be affected by new entrants that have developed robotic solutions. Companies in the construction industry or involved with the inspection and maintenance of industrial equipment should expect to use robots in the near future.

Keep it simple, stupid

Classic disruptive technologies always start out performing worse than the current generation. This is one of the reasons that the incumbent players tend to ignore them until it’s too late.

A new technology builds up a head of steam by finding niches in which it has an inherent benefit. By gaining commercial success in these niches, the champions of the business disruption can fund further development of the technology, to the point that its performance improves enough to dominate adjacent niches.

This process continues by stealth until the new technology can outperform the previous generation in all applications. The theory goes that, on average, companies that need the technology to be high-performing to get commercial success run out of cash first.

Today, robotics excel in controlled environments and give increasingly unpredictable results as an environment becomes more cluttered.

By this logic then, it follows that the winners in agricultural robot development, for example, are likely to be the companies that start putting robots into vertical farms and greenhouses where conditions are much more controllable and organized than those of traditional broad-field agriculture.

Both of these applications are new use cases, but with clear benefits of automation, they offer a strong potential route through which a new global player in agricultural machinery could emerge.

Tharsus Engineering

Researchers work together at Tharsus Engineering.

Robotics is a team sport

One of the exciting things about robotics is that it brings together innovations in many different technologies and applies these to many different business areas. No one company can exclusively provide all the innovations needed to make a robot work.

To develop a warehouse or cleaning robot requires a combination of low-power computer platforms; high-torque, small-form motors and drives; lightweight batteries; low-cost vision systems and sensors; and of course, a range of algorithms and software to coordinate everything.

A high-performing logistics or service robot requires an ecosystem of innovations in different technologies. The players most likely to succeed will have a world-class team and one or two “play makers” to coordinate the team’s efforts.

Similarly, companies that collaborate with a supply chain ecosystem are the most likely to get a robot into service much more quickly — and with higher performance — than firms that try to go it alone.

More on Business Disruption From Robotics:

Spotting business disruption

Classic cases such as the demise of Kodak, the rise of low-cost airlines, and the current IT dominance of Google and Apple are the stuff of business-school reading lists the world over. In almost all cases, they feature the decline of the incumbent in the face of a new entrant with a different attitude to new technology and a different approach to business.

These examples are often cited as a reminder of what happens to businesses that fail to “stay ahead of the curve,” so it’s no surprise to see many global organizations are pushing ahead with developing robotics today.

Siemens has created its Next47 unit, which includes robotics as one of its focus areas.

Amazon in the U.S. and Ocado in the U.K. are investing heavily in robotics for their own logistics needs.

Case New Holland (CNH), a major agricultural machinery maker, unveiled its prototype robot tractor earlier in the year.

The robotic revolution is likely to have an impact on manifold areas of the economy and society. If you’re curious for one perspective, then I’d recommend Martin Ford’s excellent book Rise of the Robots.

One thing that is clear: In this age of uncertainty, business disruption from robotics and AI will happen. The only question remaining is who will spot the niches in which disruptive technologies will take a foothold, and who can assemble the right ecosystem team to make it happen?