Artificial Intelligence & Robotics Enables the 4th Industrial Revolution and Powers the Experience...

Alpesh Kadakia

Co-founder & Managing Partner

CKC Partners

October 2017

Artificial Intelligence & Robotics enables the 4th Industrial Revolution and Powers the Experience Economy

What is the average lifespan for human kind?

Credit: Cover image https://www.futurereadysingapore.com/2016/robots-versus-humans-in-the-supply-chain-who-wins.html © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED

Source: http://www.icis.com/blogs/chemicals-and-the-economy/2015/02/rising-life-expectancy-enabled-industrial-revolution-to-occur/

Survey says….~80 years in western societies

Today: ~80 yrs

200 years ago: ~40 yrs

The Top 1% lives on average another 10-12 years…

…essentially into their 90’s

© 2017 CKC Partners, LLC. ALL RIGHTS RESERVED

Average lifespan of humans is on the rise, but what will it be 50 or 100 years from now?

110-125 years??

Source: UN Economic and Social Affairs, 2017

'til death do us part takes on a whole new meaning…© 2017 CKC Partners, LLC. ALL RIGHTS RESERVED

What is the average lifespan for a US corporation?


Over the past 100 years, corporate life expectancy has declined significantly

Source: BBC 2015

1340

Declined by ~80%

gone are the days of the corporate gold watch…© 2017 CKC Partners, LLC. ALL RIGHTS RESERVED

Rising Mortality Risk

Companies don’t just die

younger; they are also more likely

to perish at any point in time.

Today, almost one-tenth of all

public companies fail each year, a

fourfold increase since 1965.

These trends of human and corporate life expectancy have accelerated in the past 3 decades

Source: BCG Analysis


1. Technology has shifted the calculus of warmore people die from suicide than are killed

2. Largely eradicated infectious diseasemore people die from old age than disease

3. On a global scale, we have reined in famine obesity kills more people than hunger

Human life expectancy on the rise due to*:

Corporations lifespan is on the decline due to:

1. Accelerating rate of technology innovation

2. Evolution of emerging asset light business models

3. Dominance of capitalism and globalization

― * Excerpt from Yuval Noah Harari, Homo Deus: A Brief History of Tomorrow© 2017 CKC Partners, LLC. ALL RIGHTS RESERVED

Life Expectancy doubles and continues to expand

Corporate Mortality 5 year exit risk for S&P 500 stands at 32%

It’s against this paradox we explore the impact of Artificial Intelligence and Robotics

# o

f y

ears

Period (Year)

This is the New Normal


Convergence of 4 Forces that are radically changing the world as we enter the 3rd Millennia

People

Robots

“Work”

ArtificialIntelligence

“Experience Economy”

People / Labor or the “Workers”

(i.e. Homo sapiens)

Organization of “Work” (i.e. the company)

Augment experiences for People and Workers

(i.e. OIT, AV/AR, etc.)

Augment the notion of “work”(i.e. RPA, Intelligent Machinery, etc.)

We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another


Before we look to the future….a quick look at the journey of how we got here

The Four Stages of Industrial Revolutions

2017

Now

Agrarian Industrial Services What’s next?


Welcome to the “Experience Economy”!

Economic Distinctions

Source: HBS, 1998

Economic Offering Commodities Goods Services Experiences

Economy Agrarian Industrial Service Experience

Economic Function Extract Make Deliver Stage

Nature of Offering Fungible Tangible Intangible Memorable

Key Attribute Natural Standardized Customized Personal

Method of Supply Stored in BulkInventoried after

productionDelivered on

DemandRevealed over a

duration

Seller Trader Manufacturer Provider Stager

Buyer Market User Client Guest

Factors of Demand Characteristics Features Benefits Sensations


Movement towards the Experience Economy

Source: HBS, 1998

Four Realms of the Experience Economy

The Progression of Economic Value

Undifferentiated

Market

Extract Commodities

Make Goods

Deliver Services

Stage Experiences

Competitive Position

Differentiated

Pricing Premium


Enterprises are responding and evolving to meet the challenge

History has shown that businesses adopt alternative service delivery operating models in tandem with major shifts in technology architecture.

/L

Decentralised Monolithic Systems

Coordinated In-House Practices

BPO/Offshorecapture labor arbitrage

Digital Operations

labor elimination

Increased cost reduction/variable structure, scalability, and agility,

Op

er

ati

on

al

be

ne

fits

5-10%

10-20%

20-40%

50+%

Enterprise wide

End-to-End Operations

Back-office Operations

Non-Core Operations

Next GenerationOperating Model

Present – FutureXaaS, AI, Automation, Robotics

Late 90’s - ~2010Web-enabled

Late 80’s - Late 90’sClient-Server

Pre-80’sMainframe

Source: PwC 2016

We are at another such inflection point… (hint: it’s digital labor)


Let’s start by defining Artificial Intelligence and having a common framework of understanding


Source: https://www.analyticsvidhya.com/blog/2015/07/difference-machine-learning-statistical-modeling/

Per Webster's:

Definition of artificial intelligence:

1 :a branch of computer science dealing with the simulation of intelligent behavior in computers.

2 :the capability of a machine to imitate intelligent human behavior

What is AI?......Good question, lots of opinions


The Machine Learning Spectrum

Source: Medha Agarwal

Recent advancements in Reinforcement/ Deep Learninghave reignited the debate……

…..and the use cases are very compelling


Deep Learning: A closer look

Source: Medha Agarwal

As we all know, clean data has always been a key ingredient…


….the program started with nothing but a blank board and the rules of the game. It learned simply by playing millions of games against itself, using what it learned in each game to improve.

The new program represents a step forward in the quest to build machines that are truly intelligent. That’s because machines will need to figure out solutions to difficult problems even when there isn’t a large amount of training data to learn from.

“The most striking thing is we don’t need any human data anymore,” says Demis Hassabis, CEO and cofounder of DeepMind.

….but wait, it may not be a pre-requisite in the future


AI is, and will continue to be, a core requirement for driving both revenue growth and cost efficiency

These capabilities are now table stakes for competing....


Although industry adoption is lumpy at present

Source: McKinsey Global Institute AI adoption and use survey; McKinsey Global Institute analysis

Early adopters

Laggards


Now that we have explored AI, let’s shift to Robotics


Robots doing physical human work in a new way

Robots doing human knowledge work “software

robots”

Robotics can take many forms and come in various colors, shapes, and sizes

Robots doing physical human work

Medical robots can perform surgery inside patients with greater precision than existing methods

“Swallow the surgeon”

The rise of RPA/ Digital Labor in global enterprises


Drones Consumer IOT Industrial IOT

Traditional robots and sensor devices also continue to evolve at a blistering pace

According to Gartner, the average household in 2020 will consume ~2 Terabytes of data per year due to the utilization of AI and Robotics in core technologies


What is “Robotics Process Automation”?

Business friendly, non-disruptive, code-free

“Software Robots”

Procedural Automations & Repeatable Decisions

Robots

Free employees to do higher-value work

People

Relationships, Judgement, Interpretation, Change Management

• 24 x 7 productivity• Faster process speed• Trained by business users• 1/3 the cost of an offshore FTE• Redistributable for short-term tasks

• Reduce data entry errors• Improved regulatory reporting & compliance• Centrally governed & secured within

existing IT landscape• Rapid continuous improvement

emulate human activity, using

existing user interfaces. This

“Digital Workforce” is managed

by business operations teams,

and centrally secured by IT.

The new kid on the block is Robotic Process Automation (RPA) and companies are rapidly adopting it across the enterprise

Source: BluePrism


Potential Paths that AI / Robotics will follow…

Path 3Transformations

Humans into new species

- We are “upgrading” ourselves into a

new form of “god-like” techno-humans

Path 1ReplacesHumans

- physical work (advanced manufacturing / factory robots)

- knowledge work (RPA)

Path 2 Augments

Human Experience

- Machine vision is imperfect; requires ‘human-in-the-loop’

- knowledge work (RPA)

vs

?


Just a few thoughts and perspectives on the opportunities ahead…


AI’s impact will be deep and wide…will refine society, commerce and humanity like we have never seen!

Economic, cultural, social, … endless disruption

Satya Nadella, AI reinforces and augments human capability and experience

Martin Ford, Rise of the Robots

Elon Musk, artificial intelligence is anexistential threat….will start WWIII

Yuval Harari, Homo Deus

”the challenge of Artificial Intelligence is to define for ourselves and for society what is truly human, and to build a world in which AI reinforces and augments human capability and experience rather than devaluing it”


The shift to the “Experience Economy” will accelerate and create new category of winners

Source: Pine & Gilmore – Harvard Business Press

Sample Companies Embracing the Experience Economy


Have a deep understanding of how your products and services support “Experience Economy” end markets

Focus design principles not only for products and services, but more importantly end user experiences


The need for “clean” integrated data– both structured and unstructured will be massive

Key take away:

Simple: siloed or dirty data will lead to ineffective AI algorithms…or worse accelerate your entry into the corporate mortality bucket

Source: Capiot.com© 2017 CKC Partners, LLC. ALL RIGHTS RESERVED

Digital Labor & RPA is transforming how businesses operate core enterprise functions

Key take away:

The real potential of RPA/automation lies at the intersection of core industry-specific operations and COGS, not G&A functions. Focus on opportunities to aggressively attack the core business and you will see a material impact to enterprise value and EBITDA expansion.

Redefine the rules of competition and play with an unfair edge...

https://www.horsesforsources.com/rpa-satisfaction-processes_080517

Finally, “Intelligence” is moving to the edge…

Source: a16z website

Movement toward “edge processing” has created an innovation cycle for GPU, FPGA and the chip industry overall

Self-driving cars perspective: Paradigm shift in “car computing”

….the car IS the Data Center


So is the Uber driver the new call center agent?

Hi, I’m Mila your virtual call center agent…on wheels!

Huh?


Parting thoughts…..

• We are living longer and notion of how and where we work is evolving

• We must find a way to harness the powerful potential of AI/Robotic technology to enhance and augment our lives

• Embrace the Experience Economy – premium rents will accrue to those who design products and services that enable these end markets


Thank You!

Contact Information:Alpesh Kadakia

Co-Founder and [email protected]

For more information visit:

www.ckc-partners.com

mailto:[email protected]

http://www.ckc-partners.com/

Alpesh is Cofounder and Managing Partner of CKC Partners, a Palo Alto-based investment and advisory

firm. Alpesh leads the strategic direction of the firm and heads its investment committee. Alpesh brings 25+

years of experience in operations, consulting, and business services across a broad range of industries and

geographies. Prior to cofounding CKC Partners, Alpesh was the Senior Managing Director of PwC’s Business

Transformation Advisory practice based in Silicon Valley. While at PwC, he advised over a third of the Fortune

100 and several leading private equity firms on large-scale operations transformation programs. During his

tenure, he also served as co-chair of the Committee on Service Delivery Innovation leading the firm’s

investment, partnerships, and solutions in areas such as Digital, Cognitive/Machine Learning, Robotic Process

Automation (RPA), and B2B/B2C Enterprise SaaS. Alpesh was also a senior advisor with Deloitte Consulting,

helping clients develop and execute global shared services and outsourcing projects. Prior to Deloitte, Alpesh

cofounded StaffLeader International, a tax and accounting BPO service provider with India-based delivery

centers. He began his career as a financial analyst with IBM and also held various leadership positions at

Hewlett Packard.

Alpesh received his BA degree in Accounting from University of Texas at Austin and an MPA from McCombs

School of Business. He lives in Palo Alto with his wife and their two teenage children.

About the Speaker


Artificial Intelligence & Robotics Enables the 4th Industrial Revolution and Powers the Experience...

Technology

Transcript of Artificial Intelligence & Robotics Enables the 4th Industrial Revolution and Powers the Experience...