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Paul Daugherty is the Chief Technology and Innovation officer at Accenture, where he oversees the company’s overall technology strategy, research and development, and ecosystem relationships. He is also responsible for developing Accenture’s business in emerging technologies such as artificial intelligence (AI), cloud, and blockchain.

Recently named as Computerworld's Premier 100 Technology Leaders for 2017 for his extraordinary technology leadership, Paul is co-author of Human + Machine: Reimagining Work in the Age of Artificial Intelligence, a management guide to AI, to be published by Harvard Press in early 2018.

Paul was one of the AI Trailblazers appearing at Salesforce this year. He delivered a Dreamtalk entitled “AI: The Missing Middle And The Future Of Work”, and contributed to our “Promise of AI” panel with Terah Lyons of The Partnership on AI, and Liesl Yearsley of Akin.com.

Between 2004 and 2014, we’ve seen the launch of many new technologies (smartphones, IoT) with great fanfare about their potential impact on productivity. Yet in that same period, productivity growth in the US fell to a rate of 0.4 percent. That is the slowest growth rate since records began in the late 1800s.

Now your recent report--“Why Artificial Intelligence is the Future of Growth”--suggests AI could boost US labor productivity by 35% by 2035.

What makes AI different to those other technologies, and how do you anticipate it boosting productivity?

First off, AI isn’t a single technology. Accenture defines it as a constellation of technologies, such as computer vision, natural language processing, or inference engines, that allow smart machines to extend human capabilities and enable people to achieve much more.

When these kinds of technologies are integrated, they have the unique capability to sense, comprehend, act, and learn. Unlike smartphones or IoT, however, AI has so much more potential because the technologies can adapt and evolve, which fundamentally changes how businesses compete, and how people work and live.

In terms of how AI boosts productivity, and more importantly profitability, we see the potential is much, much bigger than past technology waves.

Accenture research findings suggest that AI could boost economic value by $14 trillion across 16 industries in terms of gross value added (GVA), a close approximation of GDP that accounts for the value of goods and services produced in a certain sector. It can be thought of as the contribution of different sectors to economic growth.

How is this possible when growth typically has been driven by increases in capital investment and labor?

Because AI functions as a new factor of production — as a capital-labor hybrid. This transforms the very idea of how growth is created.

Our research findings suggest that AI could boost growth and productivity in three ways.

  1. Intelligent automation — Create a new virtual workforce. For example, using tools such as warehouse robots alongside human workers, or using an AI platform to handle customer queries.
  2. Labor and capital augmentation — Complement and enhance the skills and ability of existing workforces. For example, using AI to review millions of publications about emerging risks to help insurance underwriters make better decisions.
  3. Innovation diffusion — AI innovations in one area will cascade out across multiple industries. Consider how autonomous vehicles will free up people’s time to accomplish tasks like shopping or banking, which opens up options for retailers and financial institutions.

In another report, you’ve looked at AI’s impact on 16 distinct industries. The impact on retail and healthcare — 59% and 55% increase in share of profit respectively — is significant. Yet financial services and communications only see growth of 31% and 17% respectively.

Can you share your thoughts on why certain industries are likely to see a far greater impact from AI than others?

The news is still very good for the information and communication industry. Our findings show it’s one of the three sectors that will see the highest annual GVA growth rates with a potential to generate $4.7 trillion in GVA by 2035.

But to your point, certain industries have more potential initially in the three areas I just described — intelligent automation, labor and capital augmentation, and innovation diffusion — depending on whether they are labor-intensive or capital-intensive sectors.

With labor-intensive sectors, such as retail and healthcare, AI augments the human workforce, enabling people to become more productive over time and more able to redirect their focus to critical tasks.

Healthcare providers, for example, can benefit from AI-powered systems that analyze massive amounts of unstructured data and produce predictive diagnoses to help detect issues before they become a serious health risk.

In capital-intensive industries such as manufacturing, AI powered machines will eliminate faulty machines and idle equipment.

Financial services can use AI technologies to relieve knowledge workers from repetitive tasks such as generic customer queries, mortgage reviews, and market research. Overall, our research findings indicate this sector will benefit from $1.2 trillion in additional GVA by 2035.

What steps do you recommend companies follow to prepare themselves for AI’s impact on their industry and workforce? What opportunities are there for innovative companies to disrupt their industry and evolve their business models?

Regardless of industry, companies have considerable opportunity to apply AI now and invent new business capabilities for unprecedented growth, profitability, and sustainability.

But as a new factor of production, AI will change the future of work in terms of how humans and machines work together. Companies must actively prepare for the third generation of work because it will create entirely new categories of jobs for people, or what I call the missing middle (you can learn more about the missing middle in my Dreamtalk).

In the future, people will help machines become more empathetic (as trainers, explainers or sustainers), and machines will help people do more in their current role (by amplifying, interacting or embodying). My upcoming book, Human+Machine: Reimagining Work in the Age of AI, covers these topics in depth.

In terms of steps to prepare for AI, I’ll highlight two that Accenture developed that apply directly to the workforce.

  • Reinvent HR — Since AI is a form of virtual labor, it will interact with the workforce, contributing and adding value in the same way a human co-worker would. Hence, the role of the Chief HR Officer will not only be about managing human employees, but also the supervision of AI workers. 
  • Learn with machines — To fully exploit AI, human and machine intelligence must be tightly interwoven. There will be a new emphasis on human abilities — judgment, communication, creative thinking — that complement technologies. AI will transform not only what people learn, but also how they learn.

AI promises not only a far deeper understanding of a company’s customers, but a far greater ability to personalize and tailor the service, products, and experiences a company offers.

How will AI allow companies to upgrade the experiences they offer to their customers?

AI can play three main roles in improving the customer experience.

  • Curator — AI curates content for people, like a mobile app suggesting new music based on previous listening choices.
  • Advisor — AI applies machine learning to guide actions toward the best outcome. Farmers are improving yields by implementing AI-enabled crop management systems, for example.
  • Orchestrator — AI collaborates across experiences and channels, often behind the scenes, to accomplish tasks, learning from interactions to help suggest and complete new tasks.

As AI takes over more of the customer experience, it grows beyond just an intelligent interface. With each customer interaction becoming more personalized and natural, AI moves into the role of a company’s digital spokesperson — and eventually their digital brand.

Another way that AI will upgrade the customer experience is through intelligent automation with a virtual workforce. Instead of interacting with one customer at a time, an AI system can interact with an infinite number of customers at once.

This means that AI can create and maintain a powerful, 100%-consistent brand experience through every interaction to develop stronger customer relationships.

Your recent article in HBR discussed how AI — via chatbots and voice technology — is changing how brands and their customers interact. As companies begin to think about AI as their front office, how should they begin to design for new types of interface with their customers?

Companies need to design for humans specifically to account for individual human behavior. This will expand the quality of the experience for customers and the effectiveness of the technology solutions.

With AI, we’ll see technology is capable of understanding people’s behaviors and goals — and responding appropriately. This is quickly becoming real because of the data stores that companies collect, which provide not only vast amounts of information about how customers live, but also opportunity for companies to use more sophisticated analytics to understand how people behave.

Companies suddenly have insight into how people think, what they want and how they react. Designed with this in mind, technology can operate at a human level.

Paul Daugherty, CTIO at Accenture, spoke twice at Dreamforce this year. His first contribution was in our “Promise of AI” panel with Terah Lyons of The Partnership on AI, and Liesl Yearsley of Akin.com. He also delivered a Dreamtalk, entitled “AI: The Missing Middle And The Future Of Work”.