Introduction

The report The Economic Potential of Generative AI: The Next Productivity Frontier has been published by McKinsey & Company in June 2023.

As the name suggests the report delves into the economic potential of generative AI.  The advent of generative AI represents a significant leap forward in the development of artificial intelligence. As businesses race to embrace and integrate this technology, comprehending its potential to contribute value to the economy and society becomes pivotal in making informed decisions.

The potential impact of generative AI has been evaluated through two lenses, a) scans use cases for generative AI that organizations could adopt resulting in some measurable positive outcome and b) the second serves as a complement to the previous one by examining the potential influence of generative AI on the work activities encompassing approximately 850 occupations.

The report modelled scenarios to estimate when generative AI could perform each of more than 2,100 “detailed work activities” that make up those occupations across the world economy. It also states that beyond its potential value in specific use cases, generative AI has the capacity to transform internal knowledge management systems, thereby driving value across the entire organization. Interestingly, the report also outline how generative AI use cases will have different impacts on business functions across industries.

Relevance of the Report

The report comes at a time when Generative AI is the buzzword in the industry with applications such as ChatGPT and Stable Diffusion capturing people’s imagination. The rate of advancement in generative AI technology is astonishing and the recent applications of generative AI has almost done the impossible like generating text, composing music and producing digital art. However, with all the achievements come the thought of risks associated with its rise. The report has given a balanced view and has showcased not only the value additions the technology has brought in but also how it should be used responsibly.

Key Takeaways

• · Generative AI has the potential to add around USD 4 trillion annually across 63 use cases spanning 16 business functions. This translates to a 15-40% increase in impact of AI and has the potential to double if generative AI is included
• · Approximately 75% of the potential value provided by generative AI applications is distributed among four key domains: customer operations, marketing and sales, software engineering, and research and development
• · Generative AI has the potential to significantly impact various industries, including banking, high tech, and life sciences, in terms of the proportion of their revenues
• · If fully implemented, the utilization of this technology in the banking sector could generate an additional annual value ranging from $200 billion to $340 billion
• · At present, generative AI and other emerging technologies hold the potential to automate work activities that currently consume 60 to 70% of employees' time
• · Between the years 2030 and 2060, approximately 50% of the current work activities have the potential to be automated
• · Depending on the rate at which technology is adopted and redirection of worker, generative AI could increase labour productivity by 0.1% to 0.6% annually through 2040
• · With the growth of generative AI, business leaders and other important stakeholders should learn how to manage inherent risks associated with the technology