Is Now the Time to Increase Automation?
- May 18, 2020
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In a moment where we all have some reasonable fear about our health, the health of our loved ones, and of our friends and coworkers – we also have short-to-medium-term economic uncertainty. The temptation is to take shelter in place as a motto for the day. In other words, close the storm shutters, and ride out the storm.
There are two countervailing lines of thought out there though, that make the case that this is exactly the opposite of what we should be doing:
- Entrepreneurs and investors have, time and time again, started or developed their most profitable ventures during downturns or in the aftermath that follows.
- The idea that the time to invest in your business is precisely when your competition is cautious. Steal a march while they are busy sheltering in place.
It’s with this backdrop that an article from RPA Today got my attention with the headline “Covid-19 Recession will cause Surge in Automation“. Will it?
It turns out there are some pretty compelling arguments that it will, and they cited two sources for their conclusions. First, from a study entitled “Can Pandemic-Induced Job Uncertainty Stimulate Automation?” (emphasis added)
The COVID-19 pandemic has raised concerns about the future of work. The pandemic may become recurrent, necessitating repeated adoptions of social distancing mea- sures (voluntary or mandatory), creating substantial uncertainty about worker productivity. But robots are not susceptible to the virus. Thus, pandemic-induced job uncertainty may boost the incentive for automation. However, elevated uncertainty also reduces aggregate demand and reduces the value of new investment in automation. We assess the importance of automation in driving business cycle dynamics following an increase in job uncertainty in a quantitative New Keynesian DSGE framework. We find that, all else being equal, job un- certainty does stimulate automation, and increased automation helps mitigate the negative impact of uncertainty on aggregate demand
Of course, there’s a whole 52 page research paper on the subject (most of which is graphs, references, and formulas in the appendices). With my favorite part being the equations in the back:
And the second source RPA Today cites is a Forrester report that I recommend reading; one of the points it makes is:
› Automation increases after global shocks. Recent recessions have often been followed by jobless recoveries.12 In the aftermath of recessions between 1970 and 1982, it took two to six months for unemployment to begin to recover (see Figure 1). But in the wake of the three recessions between 1991 and 2009, this process took 17 to 23 months. And these jobless recoveries occurred predominantly in middle-skill, routine jobs due to increased effectiveness of and investments in automation technology. For example, in the UK, 25% of supermarket assistant jobs were eliminated due to automation between 2011 and 2017.13 The aftermath of COVID-19 will be no different.
Partly, Forrester is coming to this conclusion by looking at how long it takes for employment to expand beyond the levels just prior to economic shock. Shorter time frames tend to indicate less automation impulse (e.g. in the 70s and 80s), longer time frames tend to indicate more automation (90’s, 2000’s). This certainly aligns with my experiences in previous times of economic uncertainty.**
It’s a good bet that Automation will increase after the current COVID-19 economic shock recedes… and in factories that might well mean more robots. In the rest of the world, it likely means more RPA (emulating a human driving the screens), process automation (orchestrating work across systems, departments, and people).
And if you agree with that conclusion, the question is, can you start now. Is there a faster way to that business outcome you’re looking for? Is there a faster way to jump-start your automation goals? Is there a faster way to do that? Because the best time to steal a march on the competition is when they’re still too hesitant to act.
**I would caution that every recession or shock is different- and the effects are not always predictable. In the tech recession in the mid-90’s, a focus on automating the configuration of hardware was a boom business to help tech companies be more successful. In the tech bubble bursting, however, those same hardware companies opted for commodity hardware, and abandoning customization in favor of lower unit costs – rendering configuration software less useful to the industry.