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} knowledge from the UK and 24 different European nations between 1995 and 2017, and located that at low ranges of adoption, robots have a adverse impact on revenue margins. However at greater ranges of adoption, robots may also help enhance income.
Based on the researchers, this U-shaped phenomenon is because of the relationship between lowering prices, growing new processes and innovating new merchandise. Whereas many corporations 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, corporations are targeted on their rivals moderately than on growing new merchandise. Nonetheless, as ranges of adoption enhance 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 prone to focus initially on streamlining their processes earlier than shifting their emphasis to product innovation, which supplies them better market energy by way of the power to distinguish from their rivals. The outcomes are reported within the journal IEEE Transactions on Engineering Administration.
Robots have been extensively 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 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 better precision, similar to electronics.
Whereas robots have been proven to reliably elevate labour 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.
“If you happen to take 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,” stated 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, at the least at first. We wished to know whether or not there’s a comparable sample with robotics.”
“We wished to know whether or not corporations have been utilizing robots to enhance processes inside the agency, moderately than enhance the entire enterprise mannequin,” stated 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 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 knowledge 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 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 shocking,” stated Chen.
“Initially, corporations are adopting robots to create a aggressive benefit by decreasing prices,” stated Velu. “However course of innovation is reasonable to repeat, and rivals 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 sequence of interviews with an American medical gear producer to check their experiences with robotic adoption.
“We discovered that it is not simple to undertake robotics right into a enterprise — it prices some huge cash to streamline and automate processes,” stated Chen.
“If you begin bringing increasingly more robots into your course of, finally you attain a degree the place your complete course of must be redesigned from the underside up,” stated Velu. “It is vital that corporations develop new processes similtaneously they’re incorporating robots, in any other case they may attain this similar pinch level.”
The researchers say that if corporations need to attain the worthwhile facet of the U-shaped curve extra shortly, it is vital 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 price discount in addition to margin enhancements from new merchandise,” stated 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.
