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Artificial Intelligence & Robotics Enables the 4th Industrial Revolution and Powers the Experience Economy

AI / Robotics presentation given to a group of senior delegates from various leading Silicon Valley companies on Oct 27, 2017. I share my perspectives on megatrends, implications, and opportunities around human and corporate life expectancy as we explore the role AI and Robotics play in shaping our future.

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Artificial Intelligence & Robotics Enables the 4th Industrial Revolution and Powers the Experience Economy

  1. 1. Alpesh Kadakia Co-founder & Managing Partner CKC Partners October 2017 Artificial Intelligence & Robotics enables the 4th Industrial Revolution and Powers the Experience Economy
  2. 2. 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
  3. 3. 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 © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  4. 4. 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
  5. 5. What is the average lifespan for a US corporation? © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  6. 6. 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
  7. 7. 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 © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  8. 8. 1. Technology has shifted the calculus of war  more people die from suicide than are killed 2. Largely eradicated infectious disease  more 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
  9. 9. 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#ofyears Period (Year) This is the New Normal © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  10. 10. Convergence of 4 Forces that are radically changing the world as we enter the 3rd Millennia People Robots “Work” Artificial Intelligence “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 © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  11. 11. 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? © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  12. 12. 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 Bulk Inventoried after production Delivered on Demand Revealed over a duration Seller Trader Manufacturer Provider Stager Buyer Market User Client Guest Factors of Demand Characteristics Features Benefits Sensations © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  13. 13. 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 © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  14. 14. 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/Offshore capture labor arbitrage Digital Operations labor elimination Increased cost reduction/variable structure, scalability, and agility, Operationalbenefits 5-10% 10-20% 20-40% 50+% Enterprise wide End-to-End Operations Back-office Operations Non-Core Operations Next Generation Operating Model Present – Future XaaS, AI, Automation, Robotics Late 90’s - ~2010 Web-enabled Late 80’s - Late 90’s Client-Server Pre-80’s Mainframe Source: PwC 2016 We are at another such inflection point… (hint: it’s digital labor) © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  15. 15. Let’s start by defining Artificial Intelligence and having a common framework of understanding © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  16. 16. 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 © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  17. 17. The Machine Learning Spectrum Source: Medha Agarwal Recent advancements in Reinforcement/ Deep Learning have reignited the debate…… …..and the use cases are very compelling © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  18. 18. Deep Learning: A closer look Source: Medha Agarwal As we all know, clean data has always been a key ingredient… © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  19. 19. ….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 © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  20. 20. 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.... © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  21. 21. Although industry adoption is lumpy at present Source: McKinsey Global Institute AI adoption and use survey; McKinsey Global Institute analysis Early adopters Laggards © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  22. 22. Now that we have explored AI, let’s shift to Robotics © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  23. 23. 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 © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  24. 24. 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 © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  25. 25. 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 ITlandscape • Rapid continuous improvement emulate human activity, using existing user interfaces. This “Digital Workforce” is managed by business operations teams, and centrally secured byIT. The new kid on the block is Robotic Process Automation (RPA) and companies are rapidly adopting it across the enterprise Source: BluePrism © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  26. 26. Potential Paths that AI / Robotics will follow… Path 3 Transformations Humans into new species - We are “upgrading” ourselves into a new form of “god-like” techno-humans Path 1 Replaces Humans - 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 ? © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  27. 27. Just a few thoughts and perspectives on the opportunities ahead… © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  28. 28. 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 an existential 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” © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  29. 29. 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 © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  30. 30. 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 © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  31. 31. 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
  32. 32. 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
  33. 33. 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 © 2017 CKC Partners, LLC. ALL RIGHTS RESERVED
  34. 34. 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
  35. 35. 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
  36. 36. Thank You! Contact Information: Alpesh Kadakia Co-Founder and Partner alpesh.kadakia@ckc-partners.com For more information visit: www.ckc-partners.com
  37. 37. 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

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AI / Robotics presentation given to a group of senior delegates from various leading Silicon Valley companies on Oct 27, 2017. I share my perspectives on megatrends, implications, and opportunities around human and corporate life expectancy as we explore the role AI and Robotics play in shaping our future.

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