Researchers have discovered that robots can have a ‘U-shaped’ impact on income: inflicting revenue margins to fall at first, earlier than finally rising once more.
The researchers, from the College of Cambridge, studied {industry} information from the UK and 24 different European nations between 1995 and 2017, and located that at low ranges of adoption, robots have a damaging impact on revenue margins. However at increased ranges of adoption, robots can assist improve income.
In response to the researchers, this U-shaped phenomenon is because of the relationship between lowering prices, creating new processes and innovating new merchandise. Whereas many corporations first undertake robotic applied sciences to lower prices, this ‘course of innovation’ will be simply copied by opponents, so at low ranges of robotic adoption, corporations are centered on their opponents relatively than on creating 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 prone to focus initially on streamlining their processes earlier than shifting their emphasis to product innovation, which supplies them better market energy through the flexibility to distinguish from their opponents. The outcomes are reported within the journal IEEE Transactions on Engineering Administration.
Robots have been broadly utilized in {industry} because the Nineteen Eighties, particularly in sectors the place they will perform bodily demanding, repetitive duties, similar to automotive meeting. Within the a long time since, the speed of robotic adoption has elevated dramatically and persistently worldwide, and the event of exact, electrically managed robots makes them significantly helpful for high-value manufacturing functions requiring better precision, similar to electronics.
Whereas robots have been proven to reliably elevate labour productiveness at an {industry} or nation degree, what has been much less studied is how robots have an effect on revenue margins at an analogous macro scale.
“In case you have a look at how the introduction of computer systems affected productiveness, you truly see a slowdown in productiveness development within the Seventies and early Nineteen 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 other impact, not less than at first. We wished to know whether or not there’s a related sample with robotics.”
“We wished to know whether or not corporations 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 approach to analyse this.”
The researchers examined industry-level information for 25 EU nations (together with the UK, which was a member on the time) between 1995 and 2017. Whereas the info didn’t drill all the way down to the extent of particular person corporations, the researchers have been in a position to have a look at complete sectors, primarily in manufacturing the place robots are generally used.
The researchers then obtained robotics information from the Worldwide Federation of Robotics (IFR) database. By evaluating the 2 units of information, they have been capable of analyse the impact of robotics on revenue margins at a rustic degree.
“Intuitively, we thought that extra robotic applied sciences would result in increased revenue margins, however the truth that we see this U-shaped curve as an alternative was shocking,” mentioned Chen.
“Initially, companies are adopting robots to create a aggressive benefit by reducing prices,” mentioned Velu. “However course of innovation is reasonable to repeat, and opponents will even undertake robots if it helps them make their merchandise extra cheaply. This then begins to squeeze margins and cut back revenue margin.”
The researchers then carried out a sequence of interviews with an American medical gear producer to check their experiences with robotic adoption.
“We discovered that it isn’t straightforward to undertake robotics right into a enterprise — it prices some huge cash to streamline and automate processes,” mentioned Chen.
“Once you begin bringing increasingly robots into your course of, finally you attain a degree the place your complete course of must be redesigned from the underside up,” mentioned Velu. “It is necessary that corporations develop new processes concurrently they’re incorporating robots, in any other case they’ll attain this identical pinch level.”
The researchers say that if corporations need to attain the worthwhile aspect of the U-shaped curve extra shortly, it is necessary that the enterprise mannequin is customized concurrently with robotic adoption. Solely after robots are totally built-in into the enterprise mannequin can corporations totally use the facility of robotics to develop new merchandise, driving income.
A associated piece of labor being led by the Institute for Manufacturing is a neighborhood programme 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 modifications 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.
The analysis was supported by the Engineering and Bodily Sciences Analysis Council (EPSRC) and the Financial and Social Analysis Council (ESRC), that are each a part of UK Analysis and Innovation (UKRI). Chander Velu is a Fellow of Selwyn School, Cambridge.