Raport z Rynku Archive

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McKinsey – Economic Conditions Snapshot

Global respondents see trade-policy changes as rising risks to growth, and those in developed economies report a more cautious outlook overall than their emerging-economy peers.

Respondents around the world are sanguine about the current state of the global economy and their economies at home, according to McKinsey’s newest survey on economic conditions. But as they look ahead, they are less likely to expect global improvements, and their views divide along regional lines. Respondents in developed economies report a much more guarded outlook on their own economies, the world economy as a whole, and their trade prospects, relative to their peers in emerging economies. In particular, those in North America are more likely than others to expect declining economic conditions and trade levels, as well as changes in trade policy.

Overall, the results underline the central role that the United States plays in respondents’ thinking about growth prospects. When respondents were asked which countries will provide their companies with the biggest growth opportunities in the next year, they most often cite the United States, where interest rates—along with trade policy—have become outsize concerns. In every other region, executives also cite changes in trade policy as a risk to global growth. Since our previous survey, the share saying so has more than doubled, and the issue has also emerged as a growing risk to domestic growth and to the growth of respondents’ companies.

Increasing hopefulness in emerging economies, and waning expectations in developed ones

As we saw in the past two surveys, respondents’ views on current economic conditions remain decidedly upbeat. Fifty-eight percent of all respondents say conditions in their home economies are better now than they were six months ago—with those in India and Latin America reporting the rosiest views. Furthermore, 54 percent of respondents say global conditions are better now than they were six months ago. But their outlooks on future economic conditions diverge by region (Exhibit 1). When asked about their home economies six months from now, the shares expecting improvements range from less than 40 percent in developed Asia and North America to upward of 70 percent in India.

The contributors to the development and analysis of this survey include Sven Smit, a senior partner in McKinsey’s Amsterdam office. He wishes to thank Alan FitzGerald and Vivien Singer for their contributions to this article.

More: McKinsey

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W tym roku przychody z esportu przekroczą po raz pierwszy miliard dolarów

   

Około 75 proc. kibiców elektronicznych rozgrywek sportowych to przedstawiciele pokolenia milenialsów

Czy esport to wciąż jedynie rozrywka dla pasjonatów gier komputerowych czy już poważna część biznesu sportowego? Zdaniem ekspertów firmy doradczej Deloitte dynamiki rozwoju sportu elektronicznego nie można lekceważyć, co zauważają również koncerny z branży TMT inwestujące w ten segment. W 2018 roku przychody z tytułu wydarzeń i relacji na żywo związanych z esportem przekroczą w skali globalnej po raz pierwszy miliard dolarów. Najszybciej rynek ten rozwija się w Chinach i Ameryce Północnej.

Miliard dolarów to wciąż niewielki odsetek przychodów, które wygenerują wydarzenia i transmisje sportowe dyscyplin tradycyjnych. Według najnowszego raportu Deloitte „TMT Predictions” w 2018 roku będą to 33 mld dolarów. Najwyższe przychody spodziewane są w związku z zakończonymi niedawno Igrzyskami Olimpijskimi w Korei Południowej i odbywającymi się w czerwcu Mistrzostwami Świata w piłce nożnej w Rosji. Jak wyliczają eksperci Deloitte najpopularniejsze dyscypliny sportowe na świecie, a tym samym przyciągające największe zainteresowanie kibiców i sponsorów, to piłka nożna, rugby i baseball.

Popularność esportu rośnie

W dalszym ciągu niewiele osób wie, o co chodzi w esporcie. Nie rozumieją, że rywalizacja graczy komputerowych może przyciągać fanów i pieniądze, ale to już stało się faktem. Jednocześnie kibice przeceniają obecny rozmiar rynku, wierząc, że roczne przychody liczone są już w miliardach dolarów i porównując go do sportów tradycyjnych. Do tego jeszcze daleka droga – mówi Marcin Diakonowicz, Partner, Lider Sports Business Group, Deloitte. Dziś duże wydarzenie esportowe może przyciągnąć 40 tys. osób oglądających na żywo i dziesiątki milionów oglądających go w sieci. – Esport będzie się sukcesywnie rozwijał, a wraz z tym będzie również rosła ranga imprez – dodaje.

W tym roku nie zabraknie jednak imprez, które przyciągną kibiców esportu. Na początku marca zakończył się Intel Extreme Masters World Championship Katowice 2018, który po raz kolejny przyciągnął sporą grupę kibiców. Przed nami jeszcze chociażby rozgrywki Dota 2 International, które odbędą się w sierpniu. Pula nagród zeszłorocznej edycji to prawie 25 mln dolarów. Również w obszarze gier sportowych szykują się ciekawe wydarzenia w tym nowa odsłona FIFA Interactive World Cup pod nową nazwą FIFA eWorld Cup. Dla klubów sportowych jest to nie tylko okazja do wygenerowania dodatkowych przychodów, ale też wzmocnienia swojej globalnej marki. Co ważne rozgrywki esportowe zostały włączone do programu odbywających się w Chinach w 2022 roku Igrzysk Azjatyckich.
Przychody z reklam i treści premium. Dynamika wzrostu esportu w ostatnich latach jest imponująca. Jeszcze w 2015 roku przychody w skali globalnej z tego tytułu wynosiły 325 mln dolarów, w tym roku ma być już miliard dolarów. Tylko w Niemczech szacuje się, że przychody z esportu w 2018 roku wyniosą 90 mln euro, w 2019 roku będzie to 110 mln, a w kolejnym 130 mln euro. Struktura przychodów w esporcie jest bardzo podobna jak w sporcie tradycyjnym. Są to przede wszystkim najszybciej rozwijające się sponsoring i wpływy komercyjne, a także wpływy z biletów oraz zawartości premium. Zgodnie z badaniem Deloitte pt. „Continue to Play” w Niemczech 16 proc. kibiców w wieku od 25 do 34 lat jest w stanie zapłacić za dodatkowe treści wysokiej jakości.

W 2016 roku kibice komputerowych rozgrywek spędzili łącznie sześć miliardów godzin, śledząc wydarzenia z tym związane. Było to pięć razy więcej niż w 2010 roku. Połowę tego czasu przed komputerami spędzili widzowie z Chin. Jednocześnie należy pamiętać, że liczba sześciu mld godzin odpowiada jedynie 5,33 dniom transmisji na żywo w USA. W ESL (Electronic Sports League), czyli największej lidze esportowej na świecie, zrzeszonych jest ponad 6 mln zawodników, którzy tworzą ponad pół miliona drużyn. W 2015 roku liga ta została kupiona przez szwedzki koncern medialny Modern Times za 87 mln dolarów.

Opłacalna inwestycja. Już w 2014 roku w esport zainwestował Amazon, który za niemal miliard dolarów kupił największą na świecie platformę do rozgrywek esportowych Twitch. Oficjalne statystyki opublikowane przez Twitch za 2017 rok prezentują dobrą sytuację platformy. Użytkownicy w 2017 roku obejrzeli ponad 355 mld minut transmisji, co oznacza wzrost o 21 proc. w stosunku do roku poprzedniego. Z kolei dziennie w 2017 roku serwis odwiedzało ponad 15 mln widzów. Niemniej konkurencja ze strony YouTube Gaming, czy nowych rozwiązań, jak chociażby niedawno powstała platforma Caffeine, która już rozpoczęła współpracę z firmą ESL, pokazuje, że nadal pozostaje miejsce dla nowych graczy w tym sektorze – Firmy technologiczne i medialne zwracają baczną uwagę na esport, zarówno pod względem możliwości rozwoju i dywersyfikacji przychodów, ale również dlatego, że trafiają w ten sposób do wąskiej i pożądanej grupy demograficznej – mówi Radosław Kubaś, Partner w dziale Konsultingu, Deloitte. Aż 75 proc. kibiców esportu to osoby w wieku od 18 do 34 lat. W większości są to mężczyźni (raport Deloitte „TMT Predictions 2016. E-Sport: bigger and smaller than you think”). Z kolei z badania Deloitte przeprowadzonego na rynku niemieckim wynika, że świadomość co do tego, czym jest esport maleje wraz z wiekiem. W grupie osób od 14 do 18 lat termin ten i jego znaczenie zna 45 proc. ankietowanych. W grupie respondentów powyżej 65 lat odsetek ten maleje do 7 proc.

Esport w Polsce. Tempo wzrostu odbiorców esportu w Polsce jest imponujące. Według prognoz przedstawionych w raporcie firmy PayPal i SuperData, w 2018 roku liczba unikalnych widzów będzie bliska 850 tys. i wzrośnie o 29 proc. rok do roku. Co więcej, to najlepszy wynik spośród ośmiu krajów przedstawionych w raporcie. Jesteśmy w momencie bardzo dynamicznego rozwoju. W dużej mierze wynika to z wykorzystania twórczości youtuberów i streamerów do promowania turniejów, drużyn i eventów. Na dodatek atrakcyjność medialna esportu jest skumulowana tylko w komunikacji digitalowej – mówi Wojciech Jeznach, członek zarządu Fantasy Expo. PGL Major w Krakowie w momencie szczytowej oglądalności na Twitchu obserwowało 105,9 tys. widzów, średni kontakt widza z transmisją wyniósł 2 godziny i 43 minuty, a pula nagród sięgnęła miliona dolarów. – Po wejściu do ramówek telewizyjnych przekroczymy kolejny próg zainteresowania oraz możliwości generowania wzrostu dochodów – dodaje.

Marcin Diakonowicz , Partner w Dziale Audit & Assurance; Radosław Kubaś ,Partner;

Anna Bracik , Clients & Markets; Paweł Jakóbik , Asystent w zespole Clients & Markets

 

 

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EY Oil and gas M&A outlook positive despite deal volume at five-year low

  • Global oil and gas deal volume fell by 13% in 2017
  • Upstream deal value increased 30% year-on-year due to a strong first quarter
  • Robust M&A pipeline expected in 2018 as market sentiment improves

Global oil and gas deal volume hit a five-year low in 2017, and total global transaction value fell to US$343b from US$390b in 2016. This is according to the EY Global oil and gas transaction review 2017, which also found that while 2017 saw a 21% increase in megadeals (deals of more than US$1b), a lack of blockbuster deals (deals of more than US$50b) meant overall deal value fell. However, the 2018 outlook for mergers and acquisitions (M&A) remains optimistic, with upstream deal value increasing 30% year-on-year.

Andy Brogan, EY Global Oil & Gas Transactions Leader, says:

“Risk sensitivity and a continued focus on internal performance improvement may have delayed the uptick in deal volume we expected in 2017. But the need to demonstrate appropriate returns is now pushing companies to reposition their portfolios and seek economies of scale, which in turn we anticipate will underpin more M&A activity in 2018.”

Upstream deal value climbed to US$172b, characterized by a strong first quarter and outpacing average deal value across the rest of the year by more than 82%. North America dominated upstream activity, with deal value up 19% to US$94b in 2017. Last year also saw Europe’s best performance in more than five years at US$27b (excluding 2015’s Shell-BG deal).

Increasing activity among private equity players and the adoption of more innovative transaction structures are expected to drive upstream M&A in 2018, as joint ventures between independents become increasingly common and healthier balance sheets encourage growth the report finds.

Midstream deal volume was up 14% in 2017, but deal value contracted to US$84b – down 43% relative to 2016. And excluding blockbuster deals, total valuations continued a four-year downward trend. Meanwhile, the trend toward large North American transactions continued, accounting for nearly 90% of the top 20 deals. As commodity prices strengthen, the report anticipates a stronger midstream deal market in 2018, amid investment in North American shale basins and easing political tensions in the Middle East.

Downstream deal value declined 12% to US$59b in 2017, with the number of transactions also dropping 16% compared with 2016. This reflects less transaction activity and no movement in average deal size. However, deal values in 2017 were more than US$14b higher than the average recorded over the last five years. The US led other regions in both deal volume and value, with 43 transactions totaling US$32b.

This year is expected to see a continued focus on transactions in the downstream, as companies look to further balance portfolios across the value chain and seek growth opportunities.

Despite unreliable demand and aggressive price competition, oilfield services (OFS) operators increasingly focused on returns in 2017, yielding 215 deals – up 13% on 2016. Yet, at US$28b, deal value was down by 35% year-on-year, owing to the absence of large transformational deals. An increase in upstream capex spending and the improving oil price environment is expected to see OFS M&A activity continue to strengthen into 2018.

Brogan says: “A lack of blockbuster deals in 2017 highlights the industry’s sense of caution in the post-downturn era. But buyer and seller expectations have been narrowing and a robust pipeline of actionable M&A opportunities is now available, underpinned by an increase in the oil price, decreasing valuation gaps and improving market sentiment. We expect these trends to continue to prevail in 2018, with M&A activity flowing from portfolio optimization, increased access to capital markets and value chain integration.”

– Ends –

Notes to Editors

About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.

How EY’s Global Oil & Gas Sector can help your business

The oil and gas sector is constantly changing. Increasingly uncertain energy policies, geopolitical complexities, cost management and climate change all present significant challenges. EY’s Global Oil & Gas Sector supports a global network of more than 10,000 oil and gas professionals with extensive experience in providing assurance, tax, transaction and advisory services across the upstream, midstream, downstream and oil field subsectors. The sector team works to anticipate market trends, execute the mobility of our global resources and articulate points of view on relevant sector issues. With our deep sector focus, we can help your organization drive down costs and compete more effectively.

For more information, please visit ey.com/oilandgas.

About the EY Global oil and gas transactions review 2017

The EY Global oil and gas transaction review 2017 looks at significant trends in oil and gas deal activity throughout 2016 and the outlook for transactions in 2018. It considers the diverse dynamics in the upstream, downstream, midstream and oilfield services (OFS) segments, as well as the macro environment and regional trends, which can be found exclusively online. The report presents EY’s analysis of transaction data largely compiled by Derrick Petroleum Services.

For more information, please visit ey.com/oilandgas/transactions.

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BCG Research – Corporate Transformations Are Risky

but Evidence Shows How Leaders Can Improve Odds of Success

Many Companies Follow Their Gut Rather Than Seek Evidence of What Works, According to BCG Research Published in MIT Sloan Management Review.  Despite the frequent need for transformation—and the growing risk of failure—too many company transformations are guided by intuition, not by empirical evidence.

Research underpinning the design and execution of turnarounds and transformations is surprisingly thin, leading companies to commit to high-cost, high-risk initiatives without a clear understanding of the actions that will lead to lasting results. But a study by The Boston Consulting Group (BCG) and the BCG Henderson Institute has found several factors that increase the chances of success. The findings are published on the MIT Sloan Management Review website.

“Corporate transformations are often guided by beliefs, that, while seemingly plausible, are more anecdotal than empirical in nature,” said report coauthor Martin Reeves, a Senior Partner at BCG and Director of the BCG Henderson Institute. “It’s time for a more evidence-based approach.”

BCG studied US public companies and focused in on more than 300 with over $10 billion in market capitalization and with an urgent need to transform: their total shareholder return (TSR) had fallen 10 percentage points or more relative to their peers’ over a two-year period. The research covers the period 2004-2016.

The article points out that:

  • At any time during the study, a third of large US companies were experiencing a severe decline in their ability to create shareholder value, demonstrating a need for fundamental change.
  • Successful recovery is the exception, not the rule. Only one-quarter of the companies were able to outperform their industry in the short and long run after the point of TSR deterioration, and this trend has worsened: the transformation success rate was 30% in 2001, and only 25% in 2012.
  • The more severe and protracted the downturn, the worse the results. Of companies that suffered a two-year annualized TSR deterioration of more than 20 percentage points, 95% failed to return to their prior level of performance.

Five factors have proven to increase the odds of successful transformations, especially if used in combination

  • Cost cutting alone is not enough to start a transformation process. Most successful companies also focus on raising investor expectations with credible plans. Many companies that successfully recovered from severe TSR deterioration did indeed cut costs during the first year. But resetting investor expectations (as measured by valuation relative to earnings) was a stronger driver of short-run TSR recovery, accounting for 37% of outperformance. “Leaders must also regain investor confidence by showing how they will leverage their newfound flexibility,” Reeves said.
  • Revenue growth is the key driver of long-term success, so transformations must introduce a “second chapter.” After the first year of transformation, revenue growth became an increasingly important driver. By year five, it outweighed both cost cutting and investor expectations. “Transformation efforts cannot focus solely on short-term operational improvements,” said Reeves. “The second chapter requires that leaders challenge the foundations of the company’s business model, create a new vision for growth, and commit to see the program through.”
  • Long-term strategy and research-and-development (R&D) investment are correlated with success, especially in turbulent environments. Companies with an above-average long-term strategic orientation (as measured by an artificial intelligence algorithm developed by the BCG Henderson Institute that uses natural language processing to analyze company reports) outperformed those with a below-average orientation by 4.8 percentage points. In turbulent environments, the difference was even greater: 7 percentage points. In aggregate, companies with above-average R&D spending perform substantially better (5.1 percentage points) than those with below-average spending.
  • New leadership—especially when brought in from outside—can improve the odds of success. Only 24% of the companies launching a transformation program changed CEOs (compared with 19% at all comparable companies, including those not transforming). But, on average, companies that changed CEOs outperformed: they increased TSR by 9.2 percentage points over a five-year span, compared with 4.6 percentage points for those with incumbent CEOs. External hires performed better in the aggregate, but they had a wider range of both positive and negative outcomes than internal hires. “Companies that go to the outside need a tolerance for risk,” said report coauthor Lars Fæste, a Senior Partner at BCG and global leader of the BCG Transformation practice and BCG TURN. A similar dynamic extends to the leadership team. Only 20% of transforming companies had high executive turnover (more than 20% of officers), but those that did improved TSR by 4.4 percentage points more than others.
  • Formalized transformation programs perform better on average, as long as they’re big and ambitious enough. More than half (57%) of the companies announced a formal transformation program within a year of TSR deterioration. “Those that did, did better,” said Fæste. “In the short run, they boosted investor confidence, and in the long run they achieved sustainable improvements in the business—they increased TSR by 5 percentage points in a five-year period.” The most successful programs were generally long-term—at least five years—and ambitious.

While each of these steps led to positive performance, the companies that did best were the ones that took several of them, not just one. For example, companies that changed CEOs and also had formal transformation programs gained 7.7 percentage points in TSR, compared to just 1.4 percentage points when they had formal programs but kept their incumbent leaders. “When these success factors are used jointly, they have an additive impact, greater than the sum of its parts,” Reeves said. “Companies that used at least four of the success factors in their transformations achieved the largest increase in TSR: a gain of 17.4 percentage points over five years.”

“Not every factor will be relevant in every transformation,” Reeves explained. “But given the stakes, leaders need and deserve evidence-based recommendations. Empirical evidence shows the significant factors in transformation success and the advantages of combining them. Companies can’t afford to ignore it.”

To read the article, visit https://sloanreview.mit.edu/article/the-truth-about-corporate-transformation/.

Eric Gregoire

About the BCG Henderson Institute

The BCG Henderson Institute is the Boston Consulting Group’s internal think tank, dedicated to exploring and developing valuable new insights from business, technology, and science by embracing the powerful technology of ideas. The Institute engages leaders in provocative discussion and experimentation to expand the boundaries of business theory and practice and to translate innovative ideas from within and beyond business. For more ideas and inspiration from the Institute, please visit https://www.bcg.com/bcg-henderson-institute/thought-leadership-ideas.aspx.

ABOUT THE BOSTON CONSULTING GROUP

The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with offices in more than 90 cities in 50 countries.

BCG Continues to be Named a Premier Employer and Ranks Near the Top of Fortune’s “100 Best Companies to Work For” List for a Fifth Straight Year

The Boston Consulting Group Continues Its Highly-Placed Fortune Magazine Ranking, Staying in the Top Five for Eight Consecutive Years and Is One of Only Two Companies to Make the Top Dozen Every Year Since 2006

The Boston Consulting Group (BCG), one of the world’s leading management consulting firms, has continued its extraordinary run near the top of Fortune’s 100 Best Companies to Work For list. Ranking number four, BCG has made the top five for five years in a row and is one of only two companies to be included in the top dozen every year since it began participating in 2006.

BCG’s focus on harnessing its collaborative culture, investing in learning and development, and offering career flexibility and global mobility are instrumental in attracting top talent. The firm’s world-class benefits and its partnership with global and local social impact organizations contribute to its strong performance on the Fortune list and burnish its reputation as a premier employer.

In its profile of BCG, Fortune said: “Equality of opportunity is prized at this global consultancy, which has spent over $100 million on a program to make work schedules more predictable in a 24/7 industry. Work/life balance makes ‘employees happier, more complete humans.’ And even junior staffers feel valued: ‘I have access to leadership worldwide,’ says one.”

The firm’s innovative work-life balance program, called PTO (which stands for predictability, teaming, and open communication), helps establish a detailed road map for each project, with transparent working norms and priorities (so low-value work doesn’t consume high-value personal and professional time) and a collectively agreed-on time-off goal for each team member. PTO provides a sustainable and predictable work path.

At BCG, diversity of expertise, experience, and background are fundamental to success. The firm takes a holistic approach across all people processes to create culturally adaptive teams and an inclusive workforce.

BCG also maintains well-established and engaged employee resource networks and has launched a wide range of diversity and inclusion initiatives to connect people across the organization. Among these are local and network office affiliation activities, an inclusion dialogue series, mentorships, and career development programs. In addition, the firm’s LGBT-friendly benefits and practices have been recognized as world class, as have its programs for working parents.

Great Place to Work, which provides the research underlying the Fortune rankings and conducts an extensive employee survey, noted in its review of BCG that:

  • 98% of employees say, “We have special and unique benefits here.”
  • 98% say, “People here are willing to give extra to get the job done.”
  • 98% say, “Management is honest and ethical in its business practices.”

Joe Davis, BCG’s chairman of North America, commented: “We continue to be honored by this recognition and are proud to have placed in the top five for five consecutive years and in the top ten for a decade. This recognition is a testament to our collective purpose—to unlock the potential of those who advance the world around us by driving inspired impact for our clients, leading with integrity, and growing our people.”

This year’s 100 Best Companies list and related stories will appear in the March 1 issue of Fortune, which goes on sale on February 19. They are available now online at Fortune.com/Best-Companies.

To arrange an interview with a BCG expert, please contact Alexandra Corriveau at +1 212 446 3261 or corriveau.alexandra@bcg.com.

About Fortune’s 100 Best Companies to Work For

To identify the 100 Best Companies to Work For, each year Fortune partners with Great Place to Work to conduct the most extensive employee survey in corporate America. Great Place to Work bases its ranking on a data-driven methodology applied to anonymous Trust Index survey responses from more than 315,000 employees at Great Place to Work–certified organizations with more than 1,000 employees and receive enough survey responses to achieve a 95% confidence level with no more than a 5% margin of error.

 

 

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How artificial intelligence can deliver real value to companies

ARTIFICIAL INTELLIGENCE McK REPORT 2017 COVER

Companies new to the space can learn a great deal from early adopters who have invested billions into AI and are now beginning to reap a range of benefits.

After decades of extravagant promises and frustrating disappointments, artificial intelligence (AI) is finally starting to deliver real-life benefits to early-adopting companies. Retailers on the digital frontier rely on AI-powered robots to run their warehouses—and even to automatically order stock when inventory runs low. Utilities use AI to forecast electricity demand. Automakers harness the technology in self-driving cars.

A confluence of developments is driving this new wave of AI development. Computer power is growing, algorithms and AI models are becoming more sophisticated, and, perhaps most important of all, the world is generating once-unimaginable volumes of the fuel that powers AI—data. Billions of gigabytes every day, collected by networked devices ranging from web browsers to turbine sensors.

The entrepreneurial activity unleashed by these developments drew three times as much investment in 2016—between $26 billion and $39 billion—as it did three years earlier. Most of the investment in AI consists of internal R&D spending by large, cash-rich digital-native companies like Amazon, Baidu, and Google.

For all of that investment, much of the AI adoption outside of the tech sector is at an early, experimental stage. Few firms have deployed it at scale. In a McKinsey Global Institute discussion paper, Artificial intelligence: The next digital frontier?, which includes a survey of more than 3,000 AI-aware companies around the world, we find early AI adopters tend to be closer to the digital frontier, are among the larger firms within sectors, deploy AI across the technology groups, use AI in the most core part of the value chain, adopt AI to increase revenue as well as reduce costs, and have the full support of the executive leadership. Companies that have not yet adopted AI technology at scale or in a core part of their business are unsure of a business case for AI or of the returns they can expect on an AI investment.

However, early evidence suggests that there is a business case to be made, and that AI can deliver real value to companies willing to use it across operations and within their core functions. In our survey, early AI adopters that combine strong digital capability with proactive strategies have higher profit margins and expect the performance gap with other firms to widen in the next three years.

This adoption pattern is widening a gap between digitized early adopters and others. Sectors at the top of MGI’s Industry Digitization Index, such as high tech and telecoms or financial services, are also leading AI adopters and have the most ambitious AI investment plans. These leaders use multiple technologies across multiple functions or deploy AI at the core of their business. Automakers, for example, use AI to improve their operations as well as develop self-driving vehicles, while financial-services companies use it in customer-experience functions. As these firms expand AI adoption and acquire more data, laggards will find it harder to catch up.

Governments also must get ahead of this change, by adopting regulations to encourage fairness without inhibiting innovation and proactively identifying the jobs that are most likely to be automated and ensuring that retraining programs are available to people whose livelihoods are at risk from AI-powered automation. These individuals need to acquire skills that work with, not compete against, machines.

 

The future of AI will be innovative, but may not be shared equally. Companies based in the United States absorbed 66 percent of all external investments into AI companies in 2016, according to our global review; China was second, at 17 percent, and is growing fast. Both countries have grown AI “ecosystems”—clusters of entrepreneurs, financiers, and AI users—and have issued national strategic plans in the past 18 months with significant AI dimensions, in some cases backed up by billions of dollars of AI-funding initiatives. South Korea and the United Kingdom have issued similar strategic plans. Other countries that desire to become significant players in AI would be wise to emulate these leaders.

Significant gains are there for the taking. For many companies, this means accelerating the digital-transformation journey. AI is not going to allow companies to leapfrog getting the digital basics right. They will have to get the right digital assets and skills in place to be able to effectively deploy AI.

ARTIFICIAL INTELLIGENCE McK REPORT 2017 1 ARTIFICIAL INTELLIGENCE McK REPORT 2017 2 ARTIFICIAL INTELLIGENCE McK REPORT 2017 3

ARTIFICIAL INTELLIGENCE

Artificial intelligence is poised to unleash the next wave of digital disruption, and companies should prepare for it now. We already see real-life benefits for a few earlyadopting firms, making it more urgent than ever for others to accelerate their digital transformations. Our findings focus on five AI technology systems: robotics and autonomous vehicles, computer vision, language, virtual agents, and machine learning, which includes deep  learning and  underpins many recent advances in the other AI technologies.  AI investment is growing fast, dominated by digital giants such as Google and Baidu. Globally, we estimate tech giants spent $20 billion to $30 billion on AI in 2016, with 90 percent of this spent on R&D and deployment, and 10 percent on AI acquisitions. VC and PE financing, grants, and seed investments also grew rapidly, albeit from a small base, to a combined total of $6 billion to $9 billion. Machine learning, as an enabling technology, received the largest share of both internal and external investment.  AI adoption outside of the tech sector is at an early, often experimental stage. Few firms have deployed it at scale. In our survey of 3,000 AI-aware C-level executives, across 10 countries and 14 sectors, only 20 percent said they currently use any AIrelated technology at scale or in a core part of their businesses. Many firms say they are uncertain of the business case or return on investment. A review of more than 160 use cases shows that AI was deployed commercially in only 12 percent of cases.

Adoption patterns illustrate a growing gap between digitized early AI adopters and others. Sectors at the top of MGI’s Industry Digitization Index, such as high tech and telecom or financial services, are also leading adopters of AI. They also have the most aggressive AI investment intentions. Leaders’ adoption is both broad and deep: using multiple technologies across multiple functions, with deployment at the core of their business. Automakers use AI to develop self-driving vehicles and improve operations, for example, while financial services firms are more likely to use it in customer experience–related functions.   Early evidence suggests that AI can deliver real value to serious adopters and can be a powerful force for disruption. In our survey, early AI adopters that combine strong digital capability with proactive strategies have higher profit margins and expect the performance gap with other firms to widen in the future. Our case studies in retail, electric utilities, manufacturing, health care, and education highlight AI’s potential to improve forecasting and sourcing, optimize and automate operations, develop targeted marketing and pricing, and enhance the user experience.

AI’s dependence on a digital foundation and the fact that it often must be trained on unique data mean that there are no shortcuts for firms. Companies cannot delay advancing their digital journeys, including AI. Early adopters are already creating competitive advantages, and the gap with the laggards looks set to grow. A successful program requires firms to address many elements of a digital and analytics transformation: identify the business case, set up the right data ecosystem, build or buy appropriate AI tools, and adapt workflow processes, capabilities, and culture. In particular, our survey shows that leadership from the top, management and technical capabilities, and seamless data access are key enablers. ƒ. AI promises benefits, but also poses urgent challenges that cut across firms,  developers, government, and workers. The workforce needs to be reskilled to exploit AI rather than compete with it; and countries serious about establishing themselves as a global hub for AI development will need to join the global competition to attract AI talent and investment; and progress will need to be made on the ethical, legal and regulatory challenges that could otherwise hold back AI.

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More in the discussion paper: Artificial intelligence: The next digital frontier?

About the authors:Jacques Bughin is a director of the McKinsey Global Institute, Michael Chui is an MGI partner, and Tera Allas is an MGI visiting fellow; Eric Hazan is a senior partner in the Paris office; Sree Ramaswamy is a partner in the Washington, DC, office; Peter Dahlström and Nicolaus Henke are senior partners in the London office, where Monica Trench is a consultant.