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Prepare for the rise of the machines

Artificial intelligence is just one of the global megatrends that are set to disrupt New Zealand business in the coming years. Although we are not quite at the stage where a machine has managed to pass the Turing Test and perform decision making at the level of a human, artificial intelligence is quickly becoming business as usual.

The rise of artificial intelligence can be seen in technologies such as machine learning and automation, which are experiencing widespread uptake. This year, Salesforce partnered with IBM’s artificial intelligence platform Watson. Drawing from Watson’s ability for machine learning, users will be offered access to its superior analytics. Machine learning is also used routinely now to identify user preferences, offering customization that was not available before. Spotify uses it for recommended playlists, and Amazon integrates artificial intelligence across all of its systems, including customer recommendations, shipping, its music service Alexa, and Amazon Prime. One of the areas that we expect to see artificial intelligence have a significant impact is customer service, where it is seen as reducing costs. China Merchant Bank uses chatbots to process upwards of 1.5 million conversations a day. Other companies are turning to AI-assisted agents or human-looking avatars that help people through the decision process. An example of this close to home is Sophie, Air New Zealand’s digital human released earlier this month.

For New Zealand, artificial intelligence presents benefits as well as threats.  At the same time as it offers the potential for significant productivity gains, it also brings disruption. The World Economic Forum’s Future of Jobs Report estimates that in the years from 2015-2020 there will be a global loss of 7.1 million jobs due to automation. A survey by Genpact this year of 300 global senior executives from companies leading in artificial intelligence found that 82% expected their companies to work comfortably alongside robots by 2020.

In October last year, we partnered with Chapman Tripp to release a “Call to Action” white paper on artificial intelligence. Unlike other countries such as the United States, Canada, the United Kingdom, Japan, Singapore and South Korea, New Zealand has yet to establish a “whole-of-government” approach to dealing with artificial intelligence. This whole-of-government approach needs to include cross-sector collaboration, research and development funding, and the establishment of a high-level working group to figure out the best strategies for New Zealand to adapt. The recent establishment of the AI Forum as a collaboration between industry and government is a good start, but there is much more that needs to be done as the uptake of artificial intelligence is likely to occur quickly.

At a legal and regulatory level, this means that structures will need to be developed to account for the new environment that artificial intelligence will introduce. The use of algorithms to make decisions that impact on people’s lives poses new challenges for determining who is culpable – the company or the machine? For industries such as insurance, where machine learning offers the opportunity for predictive modelling of illness and outcomes, these questions become particularly pertinent. 

For boards developing strategies to adapt to changing technologies, regulatory and market guidance will be critical. These issues become even more pronounced when you consider that these technologies often operate across borders, and companies may be using programmes or services from overseas.

Rapid changes in technology pose challenges for all organisations, and boards may face knowledge gaps as they race to catch up. Boards need to actively consider this in their strategic planning, through building digital capability on the board and/or recruiting digital directors.

Artificial intelligence also offers the potential for further areas of economic development. While the technology sector is not officially tracked as part of our GDP, NZ Tech estimated the combined contribution of information technology companies to our GDP in 2015 as $12.5 billion. Nearly 29,000 firms were contributing to our technology economy.  New Zealand companies such as Ambit AI, Soul Machines, FaceMe and Performance Lab are already leading the way for artificial intelligence innovation.

As the technology develops, it is expected other opportunities will open up that we have not yet considered. For New Zealanders in dangerous jobs, artificial intelligence offers the opportunity for less casualties and safer workplaces. 

At a conference this month, technology research firm Gartner declared artificial intelligence will be a net job creator in the United States by 2020.  Their research chief Peter Sondergaard declared that although 1.8 million jobs will be eliminated by 2020, another 2.3 million will be created in the new industries that develop around this technology. 

New Zealand is known for its innovative culture. Companies like Weta and Xero have established Kiwis as technology leaders abroad, and we now have the opportunity to cement ourselves as leaders in the artificial intelligence industry. We just need to continue to nurture this talent.

Kirsten Patterson is chief executive of the Institute of Directors.
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