james manyika at ai frontiers: sizing up the promise of ai
TRANSCRIPT
November 2017
Artificial Intelligence The next digital frontier?
JAMES MANYIKA
CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited
Rated #1 Think Tank 2016 (private sector category) by the Global Think Tank Index, University of Pennsylvania
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Machines can now match and even exceed human performanceImage recognition accuracy rate
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Present2010
70%
80%
90%
100%
Human performanceMachine performance
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Who is investing and where?1
Who is adopting AI today and how?2
Where can AI improve business performance?3
What do we need to do tomorrow morning?4
Four key questions for AI today
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Investments in AI include several types of technologies
Computer vision
Natural language
Machine learning
Virtual assistants
Robotics and autonomous vehicles
28%
56%
7% 6%4%
EXTERNAL INVESTMENTS
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There is increasing interest from VC and PE funds
Electric vehicles
+285%
Biotech
IT
Total VC
Energy
AI
AI investments in 2016 VC investment growth, 2013–16
External investments (VC, PE )
$6–9B
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Tech giants are the primary investors
AI investments in 2016
External investments (VC, PE )
$6–9B
$20–30B
Corporate investments (tech giants) 42
19
1413997
2010 20122011 20162013 2014 2015
Number of AI acquisitions
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China and the United States dominate the investment scene, while Europe is lagging
North America$15–23B Europe
$3–4B Asia$8–12B
AI investment in 2016
External investments (VC, PE, M&A)
Internal corporate investments
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Higher potential
Media
Consumer
Energy
Agriculture Manufacturing
Public/socialHealth careAutomotive
Finance TelecomPharmaceuticals
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9
Impact score
Travel, transport, and logistics
Volume
Identifyfraudulent
transactions
Personalizefinancialproducts Identify
and navigate roads
Personalizeadvertising
Optimize pricingand schedulingin real time
Predict personalizedhealth outcomes
Optimize merchandising strategy
Discover newconsumer trends
Personalize crops to individual conditions
Predictive maintenance(manufacturing)
Diagnose diseases
Optimize clinical trials
Predictive maintenance(manufacturing)
Lower priority
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Yet adoption at scale is limited, even among AI-aware firms
20%early adopters
%
40
Contemplators
40
Experimenters
2 technologies
1 technology
3+ technologies
73
10
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What about the non-adopters?
28%don’t have the technical capabilities to implement AI effectively
Technical capability
Return on investment
41%of AI-aware firms are uncertain about AI’s ROI
30%of AI-aware firms can’t see a business case for AI
Business case
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Sectors leading in AI adoption today look set to pull away further from slower adoptersFuture AI demand% ∆ AI spending 2017–20
Current AI adoption% of firms who are early adopters
Sloweradopters
Frontier sectors
5
0
10
15
25 3010 2015
Automotive
Tech andtelco
Finance
Construction
CPG
Transport
Retail
Media
Health care
Energy
Education
Professional services
Travel
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Digitally mature industries lead in AI adoption
AI Index
Digitization Transformation Index80
40
20
100
0 60
60
40
80
Travel
Construction
Finance
Retail
Tech and telco
Transport
Health care
Media
Professional services
Energy
Education
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The early adopters of AI have five distinctive characteristics
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Digitally mature1
Larger businesses2
Adopt AI in core activities3
Focus on growth over savings4
C-suite level support for AI5
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AI can more than double the impact of other analytics across industries
Publicandsocialsector
100%
Travel, transport,andlogistics
Telecom, media,andtechnology
Pharmaandmedical products
Healthcare systemsandservices
Globalenergyandmaterials
Advanced manufac-turing industries
Consumer FIG
Additional AI impact Analytics impact
~60%
~40%
PRELIMINARY
SOURCE: McKinsey analysis
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AI use cases have the potential to materially impact corporate performance PRELIMINARY
SOURCE: McKinsey analysis
Potential impact as % of revenue
Advanc-ed elec-tronics aero
PMPTele-com
InsLogis-tics
Media Auto Basicmate-rials
Oil and gas
PSSHSS Trans-port
TravelCPGHigh tech
Chem andagri-culture
Retail Banking
Average~10%
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AI use cases have the potential to materially impact corporate performance
Advanc-ed elec-tronics aero
PMPTele-com
InsLogis-tics
Media Auto Basicmate-rials
Oil and gas
PSSHSS Trans-port
TravelCPGHigh tech
Chem andagri-culture
Retail Banking
Average~10%
SOURCE: McKinsey analysis
PRELIMINARY
High data availability, particularly labelled and structured data
Potential impact as % of revenue
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AI use cases have the potential to materially impact corporate performance
Advanc-ed elec-tronics aero
PMPTele-com
InsLogis-tics
Media Auto Basicmate-rials
Oil and gas
PSSHSS Trans-port
TravelCPGHigh tech
Chem andagri-culture
Retail Banking
Average~10%
SOURCE: McKinsey analysis
PRELIMINARY
Operationally oriented manufacturerscan realize significant improvements in supply chain and production
Potential impact as % of revenue
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AI use cases have the potential to materially impact corporate performance
Advanc-ed elec-tronics aero
PMPTele-com
InsLogis-tics
Media Auto Basicmate-rials
Oil and gas
PSSHSS Trans-port
TravelCPGHigh tech
Chem andagri-culture
Retail Banking
Average~10%
SOURCE: McKinsey analysis
PRELIMINARY
Pharma and med products companies can unlock additional R&D productivity
Potential impact as % of revenue
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AI use cases have the potential to materially impact corporate performance
Advanc-ed elec-tronics aero
PMPTele-com
InsLogis-tics
Media Auto Basicmate-rials
Oil and gas
PSSHSS Trans-port
TravelCPGHigh tech
Chem andagri-culture
Retail Banking
Average~10%
SOURCE: McKinsey analysis
PRELIMINARY
Industries with significant physical plant and equipment assetscan optimize their capital expenditures
Potential impact as % of revenue
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Potential AI impact by function varies by industry
Travel, transport,andlogistics
Telecom,media, andtechnology
Public and socialsector
Healthcaresystemsandservices
FIGConsumerGlobalenergy, andmaterials
Advanced industries
100%
Pharmaceu-ticals andmedicalproducts
OrganizationOtherOther operations
RiskStrategy and corporate financeService operationsManufacturing
Marketing and salesSupply chain managementProduct development
PRELIMINARY
SOURCE: McKinsey analysis
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Techniques and tools
Open organization
Workflow integration
Data ecosystem
Use cases/sources of
value
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There are five pragmatic steps businesses can take to start adopting AI tomorrow
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Governments need to act now to promote AI development
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RegulationSkillsSupport and
incentives
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