Researchers have discovered that robots can have a ‘U-shaped’ impact on earnings: inflicting revenue margins to fall at first, earlier than finally rising once more.
The researchers, from the College of Cambridge, studied {industry} knowledge from the UK and 24 different European international locations between 1995 and 2017, and located that at low ranges of adoption, robots have a unfavorable impact on revenue margins. However at greater ranges of adoption, robots will help improve earnings.
In response to the researchers, this U-shaped phenomenon is as a result of relationship between decreasing prices, growing new processes and innovating new merchandise. Whereas many firms first undertake robotic applied sciences to lower prices, this ‘course of innovation’ may be simply copied by rivals, so at low ranges of robotic adoption, firms are centered on their rivals relatively than on growing new merchandise.
Nevertheless, as ranges of adoption improve and robots are totally built-in into an organization’s processes, the applied sciences can be utilized to extend income by innovating new merchandise.
In different phrases, companies utilizing robots are more likely to focus initially on streamlining their processes earlier than shifting their emphasis to product innovation, which supplies them higher market energy through the flexibility to distinguish from their rivals. The outcomes are reported within the journal IEEE Transactions on Engineering Administration.
Robots have been broadly utilized in {industry} for the reason that Eighties, particularly in sectors the place they’ll perform bodily demanding, repetitive duties, similar to automotive meeting. Within the a long time since, the speed of robotic adoption has elevated dramatically and constantly worldwide, and the event of exact, electrically managed robots makes them notably helpful for high-value manufacturing functions requiring higher precision, similar to electronics.
Whereas robots have been proven to reliably increase labor productiveness at an {industry} or nation stage, what has been much less studied is how robots have an effect on revenue margins at the same macro scale.
“In the event you take a look at how the introduction of computer systems affected productiveness, you truly see a slowdown in productiveness development within the Nineteen Seventies and early Eighties, earlier than productiveness begins to rise once more, which it did till the monetary disaster of 2008,” mentioned co-author Professor Chander Velu from Cambridge’s Institute for Manufacturing. “It is fascinating {that a} instrument meant to extend productiveness had the alternative impact, at the very least at first. We needed to know whether or not there’s a comparable sample with robotics.”
“We needed to know whether or not firms have been utilizing robots to enhance processes throughout the agency, relatively than enhance the entire enterprise mannequin,” mentioned co-author Dr. Philip Chen. “Revenue margin could be a helpful solution to analyze this.”
The researchers examined industry-level knowledge for 25 EU international locations (together with the UK, which was a member on the time) between 1995 and 2017. Whereas the information didn’t drill right down to the extent of particular person firms, the researchers have been in a position to take a look at entire sectors, primarily in manufacturing the place robots are generally used.
The researchers then obtained robotics knowledge from the Worldwide Federation of Robotics (IFR) database. By evaluating the 2 units of information, they have been in a position to analyze the impact of robotics on revenue margins at a rustic stage.
“Intuitively, we thought that extra robotic applied sciences would result in greater revenue margins, however the truth that we see this U-shaped curve as a substitute was stunning,” mentioned Chen.
“Initially, companies are adopting robots to create a aggressive benefit by decreasing prices,” mentioned Velu. “However course of innovation is reasonable to repeat, and rivals will even undertake robots if it helps them make their merchandise extra cheaply. This then begins to squeeze margins and scale back revenue margin.”
The researchers then carried out a collection of interviews with an American medical tools producer to check their experiences with robotic adoption.
“We discovered that it is not straightforward to undertake robotics right into a enterprise—it prices some huge cash to streamline and automate processes,” mentioned Chen.
“Once you begin bringing an increasing number of robots into your course of, finally you attain a degree the place your entire course of must be redesigned from the underside up,” mentioned Velu. “It is essential that firms develop new processes similtaneously they’re incorporating robots, in any other case they’ll attain this identical pinch level.”
The researchers say that if firms wish to attain the worthwhile aspect of the U-shaped curve extra shortly, it is essential that the enterprise mannequin is tailored concurrently with robotic adoption. Solely after robots are totally built-in into the enterprise mannequin can firms totally use the ability of robotics to develop new merchandise, driving earnings.
A associated piece of labor being led by the Institute for Manufacturing is a neighborhood program to assist small- and medium-sized enterprises (SMEEs) to undertake digital applied sciences together with robotics in a low-cost, low-risk means. “Incremental and step adjustments on this space allow SMEs to get the advantages of value discount in addition to margin enhancements from new merchandise,” mentioned co-author Professor Duncan McFarlane.
Extra data:
Chander Velu et al, The Impact of Robotic Adoption on Revenue Margins, IEEE Transactions on Engineering Administration (2023). DOI: 10.1109/TEM.2023.3260734
College of Cambridge
Quotation:
Robots trigger firm earnings to fall—at the very least at first (2023, August 3)
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