After decades of false starts, Artificial Intelligence (AI) is already pervasive in our lives. Although invisible to most people, features such as custom search engine results, social media alerts and notifications, e-commerce recommendations and listings are powered by AI-based algorithms and models. AI is fast turning out to be the key utility of the technology world, much as electricity evolved a century ago. Everything that we formerly electrified, we will now cognitize.
AI’s latest breakthrough is being propelled by machine learning—a subset of AI which includes abstruse techniques that enable machines to improve at tasks through learning and experience.
Although in its infancy, the rapid development and impending AI-led technology revolution are expected to impact all the industries and companies (both big and small) in the respective ecosystem/value chains. We are already witnessing examples of how AI-powered new entrants are able to take on incumbents and win—as Uber and Lyft have done to the cab-hailing industry.
Currently, deployed key AI-based solutions, across industry verticals, include:
Predictive analytics, diagnostics and recommendations: Predictive analytics has been in the mainstream for a while, but deep learning changes and improves the whole game. Predictive analytics can be described as the ‘everywhere electricity’—it is not so much a product as it is a new capability that can be added to all the processes in a company. Be it a national bank, a key supplier of raw material and equipment for leading footwear brands, or a real estate company, companies across every industry vertical are highly motivated to adopt AI-based predictive analytics because of proven returns on investment.
Japanese insurance firm Fukoku Mutual Life Insurance is replacing its 34-strong workforce with IBM’s Watson Explorer AI. The AI system calculates insurance policy payouts, which according to the firm’s estimates is expected to increase productivity by 30% and save close to £1 million a year. Be it user-based collaborative filtering used by Spotify and Amazon to content-based collaborative filtering used by Pandora or Frequency Itemset Mining used by Netflix, digital media firms have been using various machine learning algorithms and predictive analytics models for their recommendation engines.
In e-commerce, with thousands of products and multiple factors that impact their sales, an estimate of the price to sales ratio or price elasticity is difficult. Dynamic price optimization using machine learning—correlating pricing trends with sales trends using an algorithm, then aligning with other factors such as category management and inventory levels—is used by almost every leading e-commerce player from Amazon.com to Blibli.com.
Chatbots and voice assistants: Chatbots have evolved mainly on the back of internet messenger platforms, and have hit an inflection point in 2016. As of mid-2016, more than 11,000 Facebook Messenger bots and 20,000 Kik bots had been launched. As of April 2017, 100,000 bots were created for Facebook Messenger alone in the first year of the platform. Currently, chatbots are rapidly proliferating across both the consumer and enterprise domains, with capabilities to handle multiple tasks including shopping, travel search and booking, payments, office management, customer support, and task management.
Royal Bank of Scotland (RBS) launched Luvo, a natural language processing AI bot which answers RBS, Natwest and Ulster bank customer queries and perform simple banking tasks like money transfers.
If Luvo is unable to find the answer it will pass the customer over to a member of staff. While RBS is the first retail bank in the UK to launch such a service, others such as Sweden’s SwedBank and Spain’s BBVA have created similar virtual assistants.
Technology companies and digital natives are investing in and deploying the technology at scale, but widespread adoption among less digitally mature sectors and companies is lagging. However, the current mismatch between AI investment and adoption has not stopped people from imagining a future where AI transforms businesses and entire industries.
The National Health Services (NHS) in the UK has implemented an AI-powered chatbot on the 111 non-emergency helpline. Being trialled in North London, its 1.2 million residents can opt for a chatbot rather than talking to a person on the 111 helpline. The chatbot encourages patients to enter their symptoms into the app. It will, then, consult a large medical database and users will receive tailored responses based on the information they have entered.
Image recognition, processing and diagnostics: On an average, it takes about 19 million images of cats for the current Deep Learning algorithms to recognize an image of a cat, unaided. Compared to the progress of natural language processing solutions, computer vision-based AI solutions are still in developmental stage, primarily due to the lack of large, structured data sets and the significant amount of computational power required to train the algorithms.
That said, we are witnessing adoption of image recognition in healthcare and financial services sectors. Israel-based Zebra Medical Systems uses deep learning techniques in radiology. It has amassed a huge training set of medical images along with categorization technology that will allow computers to predict diseases accurately better than humans.
Chinese technology companies Alipay (the mobile payments arm of Alibaba) and WeChat Pay (the mobile payments unit of Tencent) use advanced mobile-based image and facial recognition techniques for loan disbursement, financing, insurance claims authentication, fraud management and credit history ratings of both retail and enterprise customers.
General Electric (GE) is an example of a large multi-faceted conglomerate that has adopted AI and ML successfully at a large scale, across various functions, to evolve from industrial and consumer products and financial services firm to a ‘digital industrial’ company with a strong focus on the ‘Industrial Internet’. GE uses machine-learning approaches to predict required maintenance for its large industrial machines. The company achieves this by continuously monitoring and learning from new data of its machines ‘digital twins’ (a digital, cloud-based replica of its actual machines in the field) and modifying predictive models over time. Beyond, industrial equipment, the company has also used AI and ML effectively for integrating business data. GE used machine-learning software to identify and normalize differential pricing in its supplier data across business verticals, leading to savings of $80 million.
GE’s successful acquisition and integration of innovative AI startups such as “SmartSignal" (acquired in 2011) to provide supervised learning models for remote diagnostics, “Wise.io" (acquired in 2016) for unsupervised deep learning capabilities and its in-house the data scientists, and of “Bit Stew" (another 2016 acquisition) to integrate data from multiple sensors in industrial equipment has enabled the company to evolve as a leading conglomerate in the AI business.
Industry sector-wise adoption of AI: Sector-by-sector adoption of AI is highly uneven currently, reflecting many characteristics of digital adoption on a broader scale. According to the McKinsey Global Index survey, released in June, larger companies and industries that adopted digital technologies in the past are more likely to adopt AI. For them, AI is the next wave. Other than online and IT companies, which are early adopters and proponents of various AI technologies, banks, financial services and healthcare are the leading non-core technology verticals that are adopting AI. According to the McKinsey survey, there is also clear evidence that early AI adopters are driven to employ AI solutions in order to grow revenue and market share, and the potential for cost reduction is a secondary idea.
AI, thus, can go beyond changing business processes to changing entire business models with winner-takes-all dynamics. Firms that are waiting for the AI dust to settle down risk being left behind.
The author is Founder and Partner of digital technologies research and advisory firm, Convergence Catalyst.