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 University 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 adverse impact on revenue margins. But at larger ranges of adoption, robots might help enhance income.
According to the researchers, this U-shaped phenomenon is as a result of relationship between lowering prices, creating new processes and innovating new merchandise. While 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 centered on their rivals quite than on creating new merchandise. However, 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, companies utilizing robots are prone to focus initially on streamlining their processes earlier than shifting their emphasis to product innovation, which supplies them higher market energy through the power to distinguish from their rivals. The outcomes are reported within the journal IEEE Transactions on Engineering Management.
Robots have been extensively utilized in {industry} for the reason that Nineteen Eighties, particularly in sectors the place they will perform bodily demanding, repetitive duties, equivalent to automotive meeting. In 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 purposes requiring higher precision, equivalent to electronics.
While 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 the same macro scale.
“If you have 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 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’s fascinating {that a} device meant to extend productiveness had the alternative impact, a minimum of at first. We wished to know whether or not there’s a related sample with robotics.”
“We wished to know whether or not corporations had been utilizing robots to enhance processes inside the agency, quite than enhance the entire enterprise mannequin,” stated co-author Dr Philip Chen. “Profit margin is usually a helpful method 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. While the information didn’t drill right down to the extent of particular person corporations, the researchers had been in a position to have a look at entire sectors, primarily in manufacturing the place robots are generally used.
The researchers then obtained robotics information from the International Federation of Robotics (IFR) database. By evaluating the 2 units of knowledge, 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 an alternative was stunning,” stated Chen.
“Initially, companies are adopting robots to create a aggressive benefit by decreasing prices,” stated Velu. “But 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 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 simple to undertake robotics right into a enterprise — it prices some huge cash to streamline and automate processes,” stated Chen.
“When you begin bringing an increasing number of robots into your course of, finally you attain a degree the place your entire course of must be redesigned from the underside up,” stated Velu. “It’s vital that corporations develop new processes concurrently they’re incorporating robots, in any other case they are going to attain this similar pinch level.”
The researchers say that if corporations need to attain the worthwhile facet of the U-shaped curve extra rapidly, it is vital that the enterprise mannequin is tailored concurrently with robotic adoption. Only 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 approach. “Incremental and step modifications on this space allow SMEs to get the advantages of value discount in addition to margin enhancements from new merchandise,” stated co-author Professor Duncan McFarlane.
The analysis was supported by the Engineering and Physical Sciences Research Council (EPSRC) and the Economic and Social Research Council (ESRC), that are each a part of UK Research and Innovation (UKRI). Chander Velu is a Fellow of Selwyn College, Cambridge.