Disruption of existing markets is another prime opportunity using new technology. Disruptors change an existing industry. They create jobs and often destroy jobs but they succeed if they add value to a customer experience for a price that is usually lower. Disruptors may also be small start-up companies or giant companies that still remember when they were a start-up. Disruptors in large part create or use technology to change markets. Disruptors are often tied to the use of technology to automate a process.
Automation has been making America’s manufacturing industry the most competitive and productive in the world but it is also played a large part in dropping the number of manufacturing jobs in the U.S. About 9% of the US workforce is in manufacturing and this total has dropped from over 30% in the 1950s. However, recent advances in machine learning, robotics and artificial intelligence are driving major changes in the economic marketplace all of which impact a region’s economic development strategy. More importantly, automation is expanding beyond manufacturing into the service sector which dominates the US economy.
Automation is having a major impact on retail. The growth in e-commerce matched by the evolution of robot technology are making major changes in the retail industry. The retail industry employs roughly 16 M Americans and nearly half of these retail workers are at risk of losing their jobs to robots and other automation technology.[i] Retail Cashier will suffer the most job losses from this industry that covers one in ten American workers. As an example, Wendy’s recently purchased a 1000 kiosks that are replacing workers taking and processing food orders in their restaurants and the pay-off for this investment is only expected to take three years.
The financial services industry will also see major changes spurred on by automation and the advances of Artificial Intelligence. McKinsey estimates the 25% of the current jobs in the American insurance market will be gone in 10 years.[ii] Insurance positions in operations and administrative support are especially likely to be consolidated or replaced but jobs in information technology and operations will see declines as well in the insurance industry.[iii] However, new positions will be created as the insurance industry goes digital from a customer service standpoint and also benefits from the use of Artificial Intelligence for repetitive back-office jobs now performed by humans.[iv] The impact of automation on the insurance industry illustrates that “white collar” as well as “blue collar” jobs are at risk.
Similar predictions of job losses and productivity increases are seen in the banking industry with the growth of digital banking and spread of 400,000 ATMs across the United States.[v] The banking industry is leading the way in automation of back office functions. As an example, JPMorgan Chase created a Contract Intelligence platform to analyze legal documents and extract important data points and clauses to replace the manual review of 12,000 annual commercial credit agreements normally requiring an estimated 360,000 hours now done in seconds.[vi] Wells Fargo created a virtual assistance launched through a Facebook application to assist customers with resetting account user names and passwords.[vii] Bank of America has seen their mobile banking customer base gain from 12 M in 2012 to 22 M in 2016 and they created a mobile banking virtual assistant, named Erica, to assist mobile banking customers with a range of operational and financial needs.[viii]
Health care, a growing sector of the American economy, will of course be impacted by automation. McKinsey estimates that about 36 % of the health care industry has the technical potential for automation but only 30% of a registered nurse’s daily activities could be automated, compared with 13 percent of a dental hygienist’s daily activities.[ix] Not all the industry news related to automation is bad for workers and customers. Health care is a prime example. Walter Reed Medical Center is using Artificial Intelligence to better predict medical complications and improve treatment of severe combat wounds, leading to better patient outcomes, faster healing, and lower costs.[x] Data analytics tools are predicting complications to enable preventive treatment to reduce hospital-acquired infections at Johns Hopkins University.[xi] The current transition to electronic health records, predictive analysis of health data may play a key role across many health domains like precision medicine and cancer research.[xii]
Artificial Intelligence (AI) is expected to dramatically transform the transportation industry. Smart Traffic management applications are reducing wait times, energy use, and emissions by as much as 25 % in some places.[xiii] Smart Traffic systems help cities leverage the type of responsive dispatching and routing used by ride-hailing services, and linking it with scheduling and tracking software for public transportation to provide just-in-time access to public transportation that can often be faster, cheaper and, in many cases, more accessible to the public.[xiv] AT&T’s network serves as the fiber backbone for the operation of Smart City applications across the U.S. where communities build a sensor network often located on utility poles or streetlights that monitor and provide public service, traffic, safety and utility monitoring services.
Based in large part in the development of new technology tied to automation and AI, information technology is the automotive industry of the 21st Century. The Bureau of Labor Statistics believes that employment of computer and information technology occupations is projected to grow 13 percent from 2016 to 2026, faster than the average for all occupations.[xv]These occupations are projected to add about 557,100 new jobs, and demand for these workers will stem from greater emphasis on cloud computing, the collection and storage of big data, and information security.[xvi] The median annual wage for computer and information technology occupations was $84,580 in May 2017, which was higher than the median annual wage for all occupations of $37,690.[xvii]
Deloitte notes that the IT subsectors driving growth will focus on cloud computing, flexible consumption, cognitive computing, user-friendly tools, APIs, and apps, and big data.[xviii]
Information Technology Growth Drivers[xix]
|Cloud Computing||Innovations in cloud computing will continue to transform company operations and business models accelerating the deployments of artificial intelligence and Internet of Things solutions, while enabling deep, analytics-driven insights|
|Flexible Consumption||The Cloud is driving demand for flexible consumption (“pay as you go”) models where connected devices and the Internet of Things have made more products suitable for “as a service” consumption—enabling lower unit costs and enhanced customer relationships|
|Cognitive Computing||Helps companies enhance products and services, make better decisions, and improve operations through machine learning where technology helps companies find patterns (and anomalies) in large data sets|
|APIs and Apps||Ensure that in the future fewer people will need to know how various technologies actually work|
|Big Data||Breakdown of data silos and the emergence of tools that connect disparate information with companies getting better at extracting key business insights|
Based upon these and other industry trends, spending on data center systems and related technology is forecast to grow 3.7 percent in 2018, while the overall IT industry is expected to grow by 6.2 percent, reaching 3.74 trillion U.S. dollars.[xx] In 2019, spending on Enterprise Software is anticipated to increase by 8.4%.[xxi] Emerging technologies and the resilience of historically leading categories will drive the U.S. consumer technology industry to a record-breaking $351 billion in retail revenues ($266 billion wholesale) in 2018 – 3.9 percent higher than 2017, according to new research from the Consumer Technology Association. No matter the measure, the growth in the IT industry will continue to be dramatic over the coming years.
Root Insurance is a Columbus, Ohio based company that is leading the technology revolution in the insurance industry. Root Insurance sets rates based primarily on actual driving behavior, using variables that drivers control to give fair and accurate auto insurance rates. Since Root’s launch in Ohio, the insurtech startup has experienced continued growth, expanding to nine additional states, including Arizona, Indiana, Utah, Illinois, Oklahoma, Pennsylvania, Texas, Kentucky, and Mississippi. Root is the nation’s first carrier to leverage mobile technology and data analysis to base rates primarily on how individuals drive. While most traditional insurers calculate rates by categorizing drivers into demographic risk pools, Root takes a more personalized approach by using mobile technology to accurately understand which drivers are least likely to be involved in road incidents. To join Root, customers download Root’s iOS or Android app and drive for two to three weeks. Their driving behavior is then analyzed through a proprietary rating engine, which measures activity, such as acceleration, braking, turns and mileage. Good drivers then receive their quote and manage their policy entirely through Root’s smartphone app. Root Insurance is growing jobs and has continued success on the horizon.
Autonomous Vehicles (AV) and embedded technology is a substantial automation-based market place. AVs drive themselves without any human intervention, employing inbuilt software, sensors, and communication systems. Global AV market revenue, based on the sensors, hardware, software, services, regions, and autonomous vehicles types, is expected to grow 39.6% during 2017-2027 reaching $126.8 B by 2027.[xxii] Automakers are focusing on AVs to satisfy customer demand, to remain competitive and to improve their product portfolio.[xxiii]Shared vehicle service models empowered by a Millennial generation less interested in owning a car are driving AV adoption rates projections as well, and, in the next couple of years, fully autonomous vehicles are expected to be launched.[xxiv]
Pillar Technology Group, LLC is a computer software developer focused on disruptive technology and is a leader in the AV industry. Pillar is enjoying explosive growth based in Columbus, Ohio but with offices in Ann Arbor, Michigan, Des Moines, Iowa and Palo Alto, California with plans for expansion projects across the U.S. Pillar Technology is planning an autonomous vehicle lab and recently received a substantial private equity investment from NewSpring Capital to fuel the substantial growth the company is enjoying. The financing comes after a year of 30 percent growth for Columbus-based Pillar, which had $52 million in revenue for 2017 and is aiming to continue at the same trajectory to top $75 million this year according to CEO Bob Myers. Pillar is to become anchor tenant on the top floors of the 711 N. High St. building when construction is complete. The company added 47 jobs in Columbus last year and expects another 50 local hires in 2018. Pillar currently has 163 Columbus employees, half its companywide 320; another 80 new jobs are expected in other markets this year. Pillar and the state of Ohio also announced plans to develop an AV R&D Center in Central Ohio that will focus on developing innovative software and hardwire tied to this growing industry.
The Autonomous Vehicle industry received a substantial boost when Ford Motor Company announced a billion dollar investment in Pittsburgh’s Argo AI. Born out of the Carnegie Mellon National Robotics Engineering Center, which has been a global leader in autonomous vehicle research, Argo AI leaders are formerly with the self-driving car teams of Google and Uber, respectively.[xxv] Ford intends to develop autonomous vehicles by 2021.[xxvi] The current team developing Ford’s virtual driver system – the machine-learning software that acts as the brain of autonomous vehicles – will be combined with the robotics talent and expertise of Argo AI.[xxvii] This innovative partnership will work to deliver the virtual driver system for Ford’s SAE level 4 self-driving vehicles. Ford will continue to lead on development of its purpose-built autonomous vehicle hardware platform, as well as on systems integration, manufacturing, exterior and interior design, and regulatory policy management.[xxviii] Argo AI will join forces with Ford’s autonomous vehicle software development effort to strengthen the commercialization of self-driving vehicles, and the company intends to add 250 high-tech jobs in Pittsburgh, Michigan and California.[xxix]
[i] “Retail Automation: Stranded Workers? Opportunities and risks for labor and automation,” Capestone Capital Group, May 18, 2017.