AI and Work. John Boudreau Professor and Research Director Center for Effective Organizations at the University of Southern California

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1 AI and Work John Boudreau Professor and Research Director Center for Effective Organizations at the University of Southern California Ravin Jesuthasan, CFA Managing Director Willis Towers Watson

2 What We Know: Business leaders to rethink how they execute their business models Of specific concern are: Optimizing speed to capability in an environment when competitive advantage can be quickly diminished A cost structure that is sustainable over the long-term (i.e., an optimal mix of fixed and variable cost) A risk profile that ensures sustainability. This has a number of elements to it: As organizations move work outside the organization, what are the risks associated with the potential lack of control of the workforce (e.g., liability, loss of IP, etc.). Alternatively, is risk mitigated by having a more variable cost structure through use of a more on-demand workforce Reducing the risk of obsolescence. As the half life of skills continues to shrink, the growing premium on reskilling is causing many organizations to rethink the risks associated with full-time employment Copyright 2017 John W. Boudreau <john.boudreau@sbcglobal.net>. All rights reserved University of Southern California 1

3 Copyright 2017 John W. Boudreau All rights reserved University of Southern California CURRENT STATE

4 Certain activities are more susceptible to automation 4

5 Enablers of work automation Robotic Process Automation Cognitive Automation Social Robotics TASKS Routine, High-volume Non-routine, creative Routine, collaborative MATURITY HIGH EMERGING MEDIUM IMPACT MEDIUM HIGH HIGH 5

6 Cognitive Automation Reinventing the Retail Store What is it A combination of Artificial Intelligence, Machine Learning and other technologies to fully reinvent a business model Example Amazon Go is a fully automated convenience store, currently piloting in Seattle AI and sensors track what you buy; so you do not have to wait at the cashier There are 3.5m people working as cashiers in US Things to consider Does cognitive automation replace, augment or transform a job? What new jobs are necessary to support the new AI-enabled business model? What are the risks and liabilities for this new business 6

7 What can AI do for your business The 3 things that Cognitive Automation can do for business 1 Automate & re-engineer tasks and processes 2 Develop new products & services 3 Gain new Data 7

8 Not binary anymore: the employment relationship is changing A plurality of work is already here Traditional employees Outsourcing Free agents Alliances Talent platforms Volunteers Robotics Artificial Intelligence 8

9 Automation and Digitalization are Transforming Work It is enabling the deconstruction of Destruct jobs to Jobs increase the efficiency, effectiveness and impact of work It is increasing the speed, complexity and insight associated with matching talent to work It is enabling access to alternative sources of work beyond employees It is enabling individuals to optimize their own career experiences and rewards and support continuous learning A Cognitive Automation-Enabled HR Function Business issues arising from this transformation: AI and robotics are automating tasks within jobs, driving deconstruction Premium placed on some skills/ discounts on others, emergence of new skills A resulting shortage/surplus of certain types of talent and skills can t find the people needed Increase in risk from obsolescence of skills and rapidly changing job scope - driving the need for continuous reskilling Often easier for employees to find work outside of their organization companies (via LinkedIn etc.) than inside Talent Analytics Software / Rally Team Lack of clarity on the optimal sources of work and the new language of work 9

10 Sample Output Sample analysis: Technology enablement/replacement Compliance: Compliance Analyst vs. RegTech (AI) Human (now) Artificial Intelligence (future) Compliance Analyst (FT) Analyzes regulatory requirements Identifies necessary data sets Collects and analyzes data Reports data to regulator and business Keeps up and adjusts with regulatory change Time to productivity is significantly affected by the high time to hire Average time to hire is 60 days Reward premiums for expertise Potential liability from employee behavior/ negligence Turnover Specific sourcing channels Multiple organization stakeholders for requisition, screening, interview management, offer management, new hire setup Average time and cost to hire 60 days / $12,000 Organization development across technical and professional disciplines Average learning cost per employee $2,000 Direct manager coaching, development HR workforce administration including data management and processing Activities Speed to capability Risk Source Develop Manage Artificial Intelligence (RegTech) Analyzes regulatory requirements Identifies necessary data sets Collects and analyzes data Reports data to regulator and business Keeps up and adjusts with regulatory change Talent/vendors can be identified and onboarded quickly Average time to identify and contract with a free agent is 4.9 days Time to contract and engage with a vendor is 10 days Vendor risk (i.e. the vendor "going under ) A software provider of the service; probably as SaaS AI-based RegTech enhances its performance exponentially through machine learning Natural language (voice/text) interface makes the use of the AI=based compliance agent resemble the experience of working with a human contractor Foundational, career and environment, performance-based rewards for average total loaded cost ~$120,000 annually Reward Estimated on current prices for compliance automation SaaS application: ~.$20,000 annually (includes implementation of solution) Sources: General Benchmark sources Google Search; current annual enterprise pricing for HubSpot, a marketing automation tool, American Staffing Association, Glassdoor 10

11 Sample Output Sample analysis: Technology enablement/replacement Compliance: Compliance Analyst vs. RegTech (AI) Human (now) AI (future) Cost Analysis Source Develop Avg. time to hire Avg. cost to hire Compliance Analyst (FT) 60 days $12,000 Artificial Intelligence (RegTech) System configuration, onboarding and data ingestion --- Avg. annual learning cost $2, Manage Avg. annual HR admin cost per employee $ Reward Foundational rewards $100,000 (Salary plus hiring bonus) $6,000 Retirement of pay) $3,000 (Medical and welfare benefits) $20,000 Total $123,078 $20,000 11