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Understanding Workplace Automation

on Wednesday, 02.05.2016

Working for many years in the commercial aviation industry, I witnessed profound changes in automation at almost every level. Ticketing counters gave way to self-service check-in kiosks. Passport control is dominated by document scanning, rather than human observation. Pilots manually control aircraft for only a few minutes at the beginning and end of a flight.

What will be the impact of the accelerated and the accelerating pace of automation across all sectors of the economy? Should we expect vast improvements in productivity and freedom from boring work, or should we fear threats to jobs, disruptions to organizations, and a strain on the social fabric?

In its November 2015 issue, McKinsey Quarterly presented a preliminary report on an ongoing study of automation in the workplace and reached two key conclusions:

  • Very few occupations will be automated in their entirety in the short- and medium-term.
  • However, certain activities are more likely to be automated, requiring entire business processes to be transformed and the jobs performed by people to be redefined – much like the bank teller’s role was redefined with the advent of ATMs 30 years ago.

The Magnitude and Impact of Automation

The study analyzed work activities for which current technologies could be deployed, and concluded that if automation were deployed in place of labor, its value in wages could amount for $2 trillion. Although we often think of automation as affecting primarily low-skill, low-wage roles, the analysis noted that even some of the highest-paid occupations (such as financial managers, physicians, and senior executives) perform a significant amount of activity that can be automated. The organizational and leadership implications of this conclusion suggest that organizations planning to take advantage of automation must implement significant process changes and even reengineer themselves – from the most senior positions to positons far down on the organizational chart.

Benefits of automation include labor savings, increased output, higher quality, improved reliability, and performing some tasks at speeds and at quality levels humans cannot. However, automation costs between three to 10 times what current manual processes do. The magnitude of the benefits and the costs required to attain the benefits of automation suggest that the ability to staff, manage, and lead increasingly automated organizations will become an important competitive differentiator.

This isn’t all-good or all-bad. Automation is our friend – think of E-ZPass at crowded highway tool booths. Automation is our bane – think of being chased through the maze of automated phone-answering systems, only to be looped back to the main menu.

According to the study,

  • Approximately 45 percent of work activity could be automated to some extent, using current technology.
  • Additionally, 13 percent of work activities could be automated, if we include emerging technologies that reliably understand natural language.
  • Fewer than 5 percent of occupations can be entirely automated through current technology.
  • However, approximately 60 percent of occupations could have 30 percent, or more, of their activities automated.

This means that automation is so far-reaching that it simply cannot be ignored. On another level, the rapid introduction of technologies based on artificial intelligence are challenging assumptions about what can really be automated. It is no longer the case that only routine, codifiable activities can be automated, and that activities requiring tacit knowledge or experience are difficult to translate into task specifications and so are immune from automation.

But beware. Automation is frequently oversold regarding achievable value and ease of implementation. It is almost always harder and takes more time than automation peddlers let on, and some \ expected benefits may be sacrificed in the process.  There is also the potential for “blow back,” where automation actually makes things worse. Sometimes, staff even passively sabotages automation efforts to avoid the need to adapt.

Bottom Line

Company leadership must monitor the speed and direction of automation and determine when and how much to invest in automation. Making these determinations will require leaders who understand the economics of automation and the trade-offs between augmenting versus replacing some activities with intelligent machines. Growing in a competitive environment frequently requires leveraging automation to innovate, and fully understanding the implications for human-skills development. In our technological world, choices about automation can both sharpen and cause the loss of a competitive edge.

I favor companies’ analyzing whether, and how, automation can create a competitive advantage. I also see this analysis as vital to a company’s overall strategy. In developing strategies and plans for clients I typically ask clients to think about “looking around the corner” to see what is coming in the future – and automation is one of the first places I probe.