Proactive Investors - Generative AI could add trillions of dollars in value to the global economy, increasing the impact of all artificial intelligence by 15% to 40%, according to a new report by McKinsey Digital.
Entitled ‘The economic potential of generative AI: The next productivity frontier,’ the report asserts that generative AI is also poised to unleash the next wave of productivity.
“Our latest research estimates that generative AI could add the equivalent of $2.6 trillion to $4.4 trillion annually across the 63 use cases we analyzed — by comparison, the United Kingdom’s entire GDP in 2021 was $3.1 trillion,” authors of the report said.
“This estimate would roughly double if we include the impact of embedding generative AI into software that is currently used for other tasks beyond those use cases.”
Capturing the imagination
Generative AI applications such as ChatGPT Copilot, Stable Diffusion, and others have captured the imagination of people around the world in a way that previous AI milestones were unable to, according to the report.
“The latest generative AI applications can perform a range of routine tasks, such as the reorganization and classification of data,” the authors said.
“But it is their ability to write text, compose music, and create digital art that has garnered headlines and persuaded consumers and households to experiment on their own. As a result, a broader set of stakeholders are grappling with generative AI’s impact on business and society but without much context to help them make sense of it."
The management consultancy believes that roughly 75% of the value that generative AI use cases could deliver falls across four areas: customer operations, marketing and sales, software engineering, and research and development (R&D).
In an examination of the 63 use cases in which generative AI can be used to address specific challenges with measurable outcomes, McKinsey determined that the banking, high tech, and life sciences are among the industries that could see the biggest impact as a percentage of their revenues.
If the use cases were fully implemented, it said the technology could deliver value equal to an additional $200 billion to $340 billion annually. In retail and consumer packaged goods, the potential impact is also significant at $400 billion to $660 billion a year.
Freeing up time
It is also expected to change how people work, with the potential to automate work activities that absorb 60% to 70% of employees’ time today
“In contrast, we previously estimated that technology has the potential to automate half of the time employees spend working,” the authors said.
“The acceleration in the potential for technical automation is largely due to generative AI’s increased ability to understand natural language, which is required for work activities that account for 25% of total work time.”
Due to the rapid acceleration of generative AI, McKinsey said half of today’s work activities could be automated between 2030 and 2060, with a midpoint in 2045, or roughly a decade earlier than in its previous estimates.
Generative AI could also boost labor productivity growth by 0.1% to 0.6% annually through 2040. Combining it all other technologies, work automation could add 0.2 to 3.3 percentage points annually to productivity growth, the report said.
“Excitement over this technology is palpable, and early pilots are compelling. But a full realization of the technology’s benefits will take time, and leaders in business and society still have considerable challenges to address,” the report said.
“These include managing the risks inherent in generative AI, determining what new skills and capabilities the workforce will need, and rethinking core business processes such as retraining and developing new skills.”