Researchers have discovered that robots can have a ‘U-shaped’ impact on income: inflicting revenue margins to fall at first, earlier than ultimately 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 unfavourable impact on revenue margins. However at larger ranges of adoption, robots can assist enhance income.
Based on 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 rivals, so at low ranges of robotic adoption, corporations are targeted on their rivals reasonably 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, corporations utilizing robots are more likely 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 rivals. 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, resembling 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 significantly helpful for high-value manufacturing purposes requiring higher precision, resembling 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.
“If you happen to take a look at how the introduction of computer systems affected productiveness, you truly 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,” stated co-author Professor Chander Velu from Cambridge’s Institute for Manufacturing. “It is fascinating {that a} device 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, reasonably than enhance the entire enterprise mannequin,” stated 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 right down to the extent of particular person corporations, the researchers had 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 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 larger 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 reducing prices,” stated Velu. “However course of innovation is reasonable to repeat, and rivals may also 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 gear 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,” stated Chen.
“Once you begin bringing an increasing number of robots into your course of, ultimately you attain a degree the place your complete course of must be redesigned from the underside up,” stated Velu. “It is necessary that corporations develop new processes concurrently they’re incorporating robots, in any other case they’ll attain this similar pinch level.”
The researchers say that if corporations wish to attain the worthwhile aspect of the U-shaped curve extra rapidly, 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 ability of robotics to develop new merchandise, driving income.
A associated piece of labor being led by the Institute for Manufacturing is a group programme to assist small- and medium-sized enterprises (SMEEs) to undertake digital applied sciences together with robotics in a low-cost, low-risk manner. “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 School, Cambridge.
