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 nations between 1995 and 2017, and located that at low ranges of adoption, robots have a unfavorable impact on revenue margins. However at increased ranges of adoption, robots might help enhance earnings.
In line 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’ could be simply copied by opponents, so at low ranges of robotic adoption, corporations are centered on their opponents fairly than on creating new merchandise. Nonetheless, as ranges of adoption enhance and robots are absolutely 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 provides them higher market energy through the power 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 Eighties, particularly in sectors the place they’ll perform bodily demanding, repetitive duties, equivalent to automotive meeting. Within the many years 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 higher precision, equivalent to electronics.
Whereas robots have been proven to reliably increase 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 identical macro scale.
“If you happen to take a look at how the introduction of computer systems affected productiveness, you really see a slowdown in productiveness progress 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 attention-grabbing {that a} software meant to extend productiveness had the other impact, no less than at first. We needed to know whether or not there’s a related sample with robotics.”
“We needed to know whether or not corporations had been utilizing robots to enhance processes throughout the agency, fairly 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 knowledge 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 right down to the extent of particular person corporations, the researchers had been ready to have a look at complete 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 had 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 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 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 cut back revenue margin.”
The researchers then carried out a collection of interviews with an American medical gear producer to review 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.
“While you begin bringing increasingly robots into your course of, finally you attain some extent 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 wish to attain the worthwhile facet of the U-shaped curve extra shortly, it is necessary that the enterprise mannequin is customized concurrently with robotic adoption. Solely after robots are absolutely built-in into the enterprise mannequin can corporations absolutely 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 method. “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.
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 Faculty, Cambridge.
