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BOOSTS
INDUSTRY PROFITS
AND INNOVATION
REINVIGORATING 04
PROFIT POTENTIAL
THE VALUE OF 08
AI TO INDUSTRY
BOOSTING INDUSTRY 12
PROFITS WITH AI
CROSS-INDUSTRY 20
STRATEGIES FOR SUCCESS
APPENDIX 24
REINVIGORATING
PROFIT POTENTIAL
Corporate profits are now in decline. In the United States,
after reaching their highest share of national income in
the post-war era, the growth of profits dropped from
25 percent in 2010 to -3 percent in 2015 (Figure 1).
25.0
25%
13% 2.5
20%
12%
11% 15%
US$ trillions
10% 1.0
10.0
10%
9%
8% 5.9
5% 4.0
7%
1.7
6% 0.0
1948
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
-3.0
-5%
2010
2011
2012
2013
2014
2015
Corporate profits as a
Corporate profits Corporate profit growth
share of nominal GDP
Our research reveals that AI could double The impact of AI technologies on business
annual economic growth rates by 2035 by is projected to increase labor productivity
changing the nature of work and creating by up to 40 percent—and enable people
a new relationship between people and to make more efficient use of their time.
machines, in which people are firmly in For further insights please refer to our report,
control and technology increasingly “Why Artificial Intelligence is the
adapts to our wants and needs. Future of Growth.”
4.6
4.1
3.9
3.6
3.2
3.0 3.0 2.9
2.7 2.7 2.5
1.8
2.6 2.5
2.1
1.7 1.6 1.4 1.4 1.7 1.6 1.7
0.8 1.0
US
Finland
UK
Sweden
Netherlands
Germany
Austria
France
Japan
Belgium
Spain
Italy
THE VALUE OF
AI TO INDUSTRY
Our second phase of research shows AI holds vast
potential for avoiding the low-profit spiral and for
ushering in a new era of growth for businesses
across industries.
4.8
4.4 4.3
4.0 4.0
3.8
3.4 3.4
3.4
2.3
2.4 2.3
2.1 2.1 2.2
2.0
3.4
3.2 3.1 3.1
2.8
2.3
1.7 1.6
1.9
1.4 1.4 1.6
1.3
0.9 0.7 0.9
12.2
9.3
8.4
2.7
2.0
1.3 1.3 1.2 0.8 0.6 0.54
2.3 0.6 0.5 0.45
1.5 1.1 1.0 1.1
Healthcare Accommodation Social Utilities Education Agriculture, Other Arts,
& Food Services Services Forestry Services Entertainment
& Fishing & Recreation
BOOSTING
INDUSTRY
PROFITS
WITH AI
What could the increases in economic output generated
by AI mean for corporate profitability spanning multiple
industries? Significant improvements to the bottom line,
according to our research—AI has the potential to boost
rates of profitability by an average of 38 percent by
2035 across 16 industries.
Intelligent automation
AI offers huge advantages over traditional For instance, in 2014 a fire in a Chinese DRAM
automation. Take supply chain management, chip factory put a considerable squeeze
where time means money. For example, (25 percent) on world supply. Whereas most
for the average Fortune 100 company, equipment manufacturers were only made
a supply chain shortened by just one day aware days later, Elementum’s customers
frees up anywhere from US$50 million knew about the incident within minutes and
to US$100 million in cash-flow3. secured their supply of DRAMs before prices
reacted to the shortage.7
Companies that rely on a globally integrated
network, such as Tesla and Johnson & Johnson, But it is not just the production chain that
are turning to Elementum, an AI start-up, can benefit from intelligent automation.
to streamline their supply chains4. Elementum With valuable time and resources spent
monitors one-off incidents, tracks transportation chasing sales leads, sales activities are also
and records manufacturing outputs to provide poised to change dramatically with AI.
real-time supply chain visibility.5 By analyzing Lattice Engines is focusing its AI capabilities
more than 10 million incidents per day and on streamlining the sales process. By learning
US$25 trillion worth of products in real time, companies’ buying patterns, it can sort the
Elementum can provide early warning “hot” leads from the “cold” ones. Using Lattice’s
of potential problems and propose AI platform, Dell’s European marketing
alternative solutions6. department cut its sales leads by 50 percent,
resulting in a doubling in sales productivity,
efficiency and revenue.8
Innovation diffusion
AI is poised to drive innovation by accelerating AI is also helping companies to create
the development of new products. This increase new products based on design goals and
in innovation eliminates redundant costs and constraints. Autodesk is pioneering this new
generates new revenue streams, thereby approach with its computer-aided design
increasing profitability. system, Dreamcatcher.14 Using AI algorithms,
Dreamcatcher draws on the power of the
The development of new drugs is an instructive cloud to create thousands of virtual prototype
example. Currently, drug development is iterations and compare their function, cost
dominated by a hypothesis-driven discovery and material along their specified criteria.
method, with less than 10 percent of new drugs Dreamcatcher starts off with a solid mass
obtaining final approval. Using AI, Berg Health that fits a desired shape, then begins to chisel
monitors the progress of cancers by following away material. Removing a piece of material
trillions of data points from both cancerous that worsens or improves performance is
and non-cancerous cells.12 So far, the effort “remembered,” enabling the algorithm to
has yielded a new cancer-fighting drug that comprehend how each bit of material
is currently undergoing clinical trials. This AI contributes to performance.
approach to new drug discovery is estimated
to halve the development cost of a single In the Healthcare industry, Dreamcatcher
drug from US$2.6 billion to US$1.3 billion.13 has been used to design a facial implant that
accelerates recovery and tissue regrowth. In the
Automobile industry, the AI-powered product
has helped to develop a new roadster.15
Manufacturing
307
2,071
+ US$ 3,776 billion
1,398
8,397 8,397
Figure 8. Wholesale and Retail GVA in 2035 Figure 9. Healthcare GVA in 2035 (US$ billion)
(US$ billion)
205
102
943
+ US$ 2,225 billion 75
+ US$ 461 billion
1,077 284
Source: Accenture and Frontier Economics Source: Accenture and Frontier Economics
CROSS-INDUSTRY
STRATEGIES FOR
SUCCESS Regardless of industry, companies have considerable
opportunity to apply AI now and invent new business
capabilities for unprecedented growth, profitability
and sustainability. But to achieve the full potential of AI,
they must fully prepare for the attendant disruption.
As a new factor of production, AI will interact with traditional capital and labor inputs to create
fresh challenges, and leaders will need to evolve in new and unexpected ways as their roles
become increasingly interdependent. To prepare their organizations for a successful future
with AI, business leaders have opportunities to adopt the following eight strategies:
MODELING THE
GVA IMPACT OF AI
This report examines the impact of AI on 16 industries.
In the publication “Why Artificial Intelligence is the
Future of Growth,” Accenture analyzed the economic
impact of AI on 12 advanced economies.
The results of these publications are based on the same economic model that we developed
in association with Frontier Economics. We introduce AI as a new factor production that will
change how growth is generated on a country and industry level. To measure this growth,
our model proceeds in three steps as shown in Figure 10:
We draw from research that looks at the share of tasks that are susceptible to AI in
1 the overall labor force. We estimate the probability of individual occupations to be
automated in the future. We then look at the spread of these occupations across
industries and countries from the labor statistics data of the analyzed countries.
This exercise of matching the susceptibility of tasks to AI with the spread of
occupations per country and industry enables us to determine a view of the
AI absorption rate per country and industry.
Having taken these steps, we have a view of the economic potential of AI per country and
industry. For the country results, we aggregate the results for each of the 16 industries per
country. For the industry results, we aggregate the data across the 12 countries per industry.
Our profitability forecasts are based on the industry GVA results. To arrive at a proxy for profits,
we subtract labor compensation from GVA. That gives us the gross operating surplus (GOS)
per industry (GOS describes the surplus generated by operating activities after the labor factor
input has been subtracted), an approximation of profits. For a truer measure of profitability,
we apply a deflator comprising data on capital depreciation to the GOS results.
AI ECONOMIC OUTPUT
enhanced by
International Federation of Robotics; Google
REFERENCES
1 Bureau of Economic Analysis, March 30, 2017; Office for National Statistics, March 31, 2017.
2 Organisation for Economic Co-operation and Development Statistics, April 2016.
3 Nader, Mikhail, “Focus on Cash, Not Costs, in the Supply Chain,” CFO, May 12, 2016.
4 Kim, Eugene, “This Man Is Solving Every Product Company’s Biggest Headache – and Billionaire Investors
are Buying into It,” Business Insider UK, July 11, 2015.
5 R. John, “Elementum of No Surprise,” Harvard Business School Digital Initiative, November 23, 2015.
6 Elementum website, product brochure.
7 Zaino, Jennifer, “The Supply Chain is One Big Graph in Start-up Elementum’s Platform,” Dataversity, February 4, 2014.
8 King, Rachel, “How Dell Predicts Which Customers Are Most Likely to Buy,” The Wall Street Journal, December 5, 2012.
9 Miborrow, David, “Breaking Down the Cost of Wind Turbine Maintenance,” Wind Power, June 15, 2010.
10 NEM Solutions website, Aura expert.
11 Weston, David, “Gamesa Acquires Stake in Data Specialist,” Wind Power Monthly, December 18, 2015.
12 Thomas, D.W. et al, “Clinical Development Success Rates 2006–2015,” BIO Industry Analysis, June, 2016.
13 Medeiros, João, “The Start-up Fighting Cancer with AI,” Wired, March 22, 2016.
14 Autodesk, “Project Dreamcatcher”.
15 Rhodes, Margaret, “The Bizarre, Bony-Looking Future of Algorithmic Design,” Wired, September 15, 2015; Mogk, Cory,
“When the IoT meets Generative Design for Cars,” Autodesk Research, February 11, 2016.
16 SAP press release, “SAP and SuccessFactors Introduce Next Generation of Intelligent HCM Software,” August 11, 2015;
SAP News Center, “Microsoft Selects SAP SuccessFactors HCM Suite to Transform HR Globally,” November 16, 2016.
17 Kharpal, Arjun, “MasterCard Using AI to Turn Staff into Top Sellers,” CNBC, March 3, 2016.
18 Accenture, “Analytics in Action: Breakthroughs and Barriers on the Journey to ROI,” 2013.
19 Gartner press release, “Gartner Estimates that 90 Percent of Large Organizations Will Have a Chief Data Officer by 2019,”
January 26, 2016.
20 Accenture and Frontier Economic analysis, 2016.
21 Juskalian, Russ, “Bosch’s Survival Plan,” MIT Technology Review, June 21, 2016.
AI RESEARCH
AUTHORS
www.accenture.com/aiboostsprofits
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