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 destructive impact on revenue margins. However at larger ranges of adoption, robots will help improve earnings.
In keeping with the researchers, this U-shaped phenomenon is because of the relationship between decreasing prices, creating new processes and innovating new merchandise. Whereas many corporations first undertake robotic applied sciences to lower prices, this ‘course of innovation’ might be simply copied by opponents, so at low ranges of robotic adoption, corporations are targeted on their opponents reasonably than on creating new merchandise. Nonetheless, 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, corporations utilizing robots are more likely to focus initially on streamlining their processes earlier than shifting their emphasis to product innovation, which supplies them larger market energy by way of 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} for the reason that Eighties, particularly in sectors the place they’ll perform bodily demanding, repetitive duties, resembling 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 notably helpful for high-value manufacturing functions requiring larger precision, resembling electronics.
Whereas robots have been proven to reliably increase labour productiveness at an {industry} or nation stage, what has been much less studied is how robots have an effect on revenue margins at an analogous macro scale.
“For those who take a look at how the introduction of computer systems affected productiveness, you really see a slowdown in productiveness development within the 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 attention-grabbing {that a} instrument meant to extend productiveness had the alternative impact, no 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 inside the agency, reasonably than enhance the entire enterprise mannequin,” mentioned co-author Dr Philip Chen. “Revenue margin is usually a helpful technique to analyse 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 info didn’t drill all the way down to the extent of particular person corporations, the researchers have been ready 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 knowledge, they have been in a position to analyse the impact of robotics on revenue margins at a rustic stage.
“Intuitively, we thought that extra robotic applied sciences would result in larger revenue margins, however the truth that we see this U-shaped curve as a substitute was shocking,” mentioned Chen.
“Initially, corporations are adopting robots to create a aggressive benefit by reducing prices,” mentioned Velu. “However course of innovation is affordable to repeat, and opponents may 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 sequence of interviews with an American medical tools producer to review their experiences with robotic adoption.
“We discovered that it isn’t simple to undertake robotics right into a enterprise — it prices some huge cash to streamline and automate processes,” mentioned Chen.
“While you begin bringing increasingly robots into your course of, finally you attain some extent the place your entire course of must be redesigned from the underside up,” mentioned Velu. “It is essential that corporations develop new processes concurrently they’re incorporating robots, in any other case they may attain this similar pinch level.”
The researchers say that if corporations wish to attain the worthwhile facet 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 corporations totally use the facility of robotics to develop new merchandise, driving earnings.
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 adjustments on this space allow SMEs to get the advantages of price 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.
