In his June contribution to WIRED Innovation Insights, Jason Kingdon discusses the rise of robot entrepreneurs, comparing robotic process automation (RPA) to the 20thcentury car manufacturing industry and the Internet boom of the 90s. Jason explains how RPA, like most emerging technology markets, provides numerous opportunities for new entrants and entrepreneurs who see the potential of RPA to gain competitive advantage. To learn more about opportunities in the robotic automation market read the full post here or see below:
Rise of the Robot Entrepreneurs
In 1895, there were four cars officially registered in the U.S. Nine years later, in 1904, there were 121 U.S. firms assembling and producing around 22,000 automobiles.
When you think of the car, the complexity of the components and the sheer diversity of parts that are needed, this seems an amazing accomplishment. The sort of achievement that only capitalism and evolution seem to effortlessly solve.
What is even more remarkable is that the people building the cars were not really financed. In fact, they had little in the way of upfront investment and yet somehow, through entrepreneurial alchemy, produced the leading manufacturing industry of the 20th century.
It turns out that a major factor in what they were doing was exploiting an earlier development in manufacturing techniques which allowed “standardized interchangeable parts manufacturing.” The sewing machine, bicycle and wagon industries all by 1900 were capable of building wood and metal subparts to specification, and they offered this as a service with payment terms on ordered parts of between 30 and 90 days from delivery.
The wonders of motivational zeal then took over: the nascent car manufacturers could assemble a car from ordered parts and sell it before the payments on the parts were due. In fact, by taking 20 percent deposits on car orders, one fifth of the sale was already made before the parts were ordered. Financial risk was converted into assembly risk.
The car has created vast wealth, employed one in seven people, transformed the landscape, uprooted lifestyles, even damaged the planet, and yet, at its dawn, the industry was under-invested and poorly resourced. It’s a bet that a command economy ordered to “create” a car would have cost vastly more and probably failed.
Why this is so fascinating is that even with the complexity of the car — a technology requiring multitudes of bits and bobs, let alone the infrastructure to run it — it is still yet another example of a new technology democratizing access to the overall economy. The automobile industry was created by newcomers and was therefore another example of new industries begetting new players.
Certain new technologies offer such low barriers to entry that they invite a veritable gold rush of business first timers. Think of the Internet rush in the late 90s — the barrier amounted to the ability to believe the Internet’s transforming vision and the rest was about having a go.
I mention this because software robots seem likely candidates for a similar invasion — certainly within clerical office administration. In car years, we are probably living in 1899-1904 for the software robot, maybe 1992-95 for the Internet.
Software robots are replacements for human clerical staff doing routine back office work. Unlike traditional IT, this software sets out to mimic the way a human uses other software to complete tasks. As such, it has no limits in what it can interface with and can be trained by anyone to do a task that a person would.
Why will this have such an impact? Well, firstly, the brochure cost of the robot is already two to three times less than a globally sourced human. Once productivity and the real cost of a human is taken into account, the business case becomes overwhelming. For example, once factors like hiring, training, housing, taxing, firing, transporting, feeding, entertaining, security checking, auditing, documenting, mentoring, monitoring and measuring (all of these last items are automatically captured by a robot) are included, plus if you consider scaling, syndicating, re-using, reformatting (all aspects at that are at least tricky with humans), the count seems well and truly out on the lowly admin clerk. By rights, the robots should cost more, but as is often the way with technology, it doesn’t.
Given this background, it does not seem a big bet to say that over the next 20 years such robots will replace humans doing routine, rules-based jobs that do not involve customer contact. That is back office unattended automation. If this is so, how will such a revolution happen?
As is usual in such situations, entrepreneurs are self-definably seeing this first. With some poetic license, the cost of setting up a robot outsourcer is currently “free” — someone with industry knowledge can sell a robot outsource vision now, and then contract the robots once the sale is in place. In fact, the robot software developers would even train the would-be entrepreneurs to do this!
Situations like this bode well for exciting new entrants. The contenders for the next titans of the service industry may well be people who see the vision and have enough of an industry network to connect to potential needs. It is like the Business Processes Outsourcers (BPOs) made over as technology companies are based on a new form of employee, and echoes the birth of the large outsourcers who used global wage arbitrage by exploiting advances in global telecommunications (another industry that took shape in about 20 years). The new players will also know that they can raise barriers to entry by using knowledge and skills to self-fulfilling advantages.
As in most new markets, there will be new companies — new names. Not least because of the classic innovator’s dilemma. The BPOs have so much invested in human capital that they are likely to be human in resisting change. Real change can only occur with cultural shifts that start to focus on “problem-solving” and technology engagement. One can only imagine what the nascent car assemblers faced in their quest — most established firms cannot take that kind of heat. Henry Ford set up Ford Motors in 1903, just before his 40th birthday. Within five years, he dominated an industry that became a true icon of the 20th century.