Post on 21-Jan-2018
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
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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
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
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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
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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
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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?
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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
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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
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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)
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Let’s start by defining Artificial Intelligence and having a common framework of understanding
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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
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The Machine Learning Spectrum
Source: Medha Agarwal
Recent advancements in Reinforcement/ Deep Learninghave reignited the debate……
…..and the use cases are very compelling
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Deep Learning: A closer look
Source: Medha Agarwal
As we all know, clean data has always been a key ingredient…
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….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
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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....
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Although industry adoption is lumpy at present
Source: McKinsey Global Institute AI adoption and use survey; McKinsey Global Institute analysis
Early adopters
Laggards
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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
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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
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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
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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
?
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Just a few thoughts and perspectives on the opportunities ahead…
© 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
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”
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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
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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
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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
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So is the Uber driver the new call center agent?
Hi, I’m Mila your virtual call center agent…on wheels!
Huh?
© 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
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
© 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
Thank You!
Contact Information:Alpesh Kadakia
Co-Founder and Partneralpesh.kadakia@ckc-partners.com
For more information visit:
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
© 2017 CKC Partners, LLC. ALL RIGHTS RESERVED