4130 Part One Organizations, Management, and the Networked Enterprise INTERACTIVE SESSION [elite NST PAN gToi NES Will Al Replace Managers? In June 2017 the global consulting firm PwC issued a report on the economic impact of artificial intel: ligence (AI) on the UK economy, concluding that 30 percent of the jobs in the UK and other major economies in the EU were at high risk of automation by 2030. In the United States, PwC estimated that 38 percent of jobs were at risk; in Germany, 30 percent; and in Japan, 21 percent. PwC defined “high risk” as meaning a substantial likelihood that the job would ‘be replaced by AI or substantially changed, result: {ng in lower compensation. According to PwC, the sectors of highest risk are transportation and storage, with 56 percent of jobs at risk through deployment of autonomous vehicles and automated warehouses; ‘manufacturing, with 46 percent at risk due to ad- vances in robotics; and wholesale and retail, with 44 percent at risk due to growth in e-commerce. In the UK, workers with a high school or less education face 46 percent risk, but for those with a college degree, the risk is substantially less (only 12 percent). On the more positive side, these same studies report that only 10 percent of these jobs will be eliminated entirely, although a larger percentage will decline in growth and compensation over time, Moreover, in the past, new technologies have created new jobs, enhanced productivity in the economy as a whole. ‘The net effect on aggregate employment is there- fore not clear, or perhaps not as worrisome, as is the impact on the distribution of the benefits, which is likely to be highly skewed toward educated and professional workers, leading to even higher levels of inequality than already exist in industrial societies, ‘The results of the PwC report echoed the results of similar studies by consulting firms, ‘As concerning as forecasts for the impact of Alon employment and compensation may be, the rapid ad- vances of Al in the last five years also raise questions about the fate of occupations that currently require relatively high levels of education and professional degrees, including managers in business and govern- ‘ment seciors. AI systems today are capable of specch recognition (Siri and Alexa), natural language reoog- nition (Google Search), language translation (Google ‘Translate), vision, pattern discovery, and facial rec- ognition (Facebook photo tagging). Because these functionalities are central to the performance of vari- ous tasks involved in management and professional work, there is the potential that many professional and managerial jobs will also be at high risk of automation, ‘What can managers do that a machine cannot—at least not yet? First-generation Al tools captured the expertise of human decisions in computer software, and could repeat these decisions faithfully at large scale and minimal cost. This approach worked for fairly simple routine decisions where the decision could be codified into a number of steps and human experts were able to specify exactly how they per formed the task, However, humans often cannot accurately describe how they perform complex deci- sion tasks. For instance, driving a car or any complex physical or mental activity is something most of us “know” how to do but cannot write down as a set of concrete steps. Second-generation AI systems rely largely on ma- chine learning techniques, which ate not traditional computer programs but instead rely on pattern rec- ognition in large data collections (big data) of prior human decisions, images, text, and speech. These systems can take input from millions of digital im- ages, documents, emails, and social media posts, and produce outputs. For example, AI programs are cur- rently being used in transport to drive autonomous cars and trucks based on data describing how human drivers actually behave when facing typical driving situations; in medicine to identify tumors, make di- agnoses, and perform surgery; in law to analyze legal documents; and in business for tasks such as hiring and promotion decisions, personalizing customer service, improving customer loyalty and retention, smoothing supply chains, detecting fraudulent trans- actions, predicting machine failures, monitoring and managing physical facilities, and career planning— to name just a few current applications. In com- plex games like chess, Go, and the television game Jeopardy, computers have often beaten world-class players. But management is a complex task that involves oth routine codifiable tasks and decisions (such as writing and filing monthly sales reports, scheduling appointments, and responding to email), as a well ‘as more complex tasks that carmnot be codified or taught’ in any simple sense to machine learning sys- tems. Generally, these tw types of tasks are interTT EERIE BO Chapter 3 Information Systems, Organizations, and Strategy 131 related and complimentary: thé performance of com- plex tasks is supported by the successful performance of routine tasks. Real-world managers define and solve problems, are able to quickly realize changed circumstances, create new products and services (often where none existed before), and play both interpersonal roles (as leaders and colleagues) and informational roles (as disseminators, spokespersons, and translators of corporate policy to workpla tings and business processes). These tasks require emotional intelligence, general intelligence, and com: ‘mon sense: in short, what we call human judgment, “The message to managers is clear: if your exper- tise relates to performing routine tasks that can be codified or behavior that can be patterned, your op- portunities and compensation are likely to decline in CASE STUDY QUESTIONS 1. What sectors of the economy will be most af fected by AI? Which the least? 2, Why are those with a college degree or above at the least risk of being replaced by AI? and retail store: websites, Sophisticated software tools find patterns in thes the future, But if your expertise isin problem solving and in creating and understanding people and situ- ‘ations, then AI may be able to help you do your job ceven better, increasing both your opportunities and compensation. Sources: Erik Brynjolfison and Tom Mitchel, What Can Machine Learning Do? Workforce Implications,” Science, December 22, 2017, “Jobs Lost, Jobs Gained: Workforce Transitions in a Time of ‘Automation, McKinsey Global Institute, December 2017; Peter. Goodman, “The Robots Are Coming, and Sweden Is Fine," New York ‘Times, December 2017; “UK Economic Outlook: Prospects for the Economy, the Productivity Challenge and Migration after Brexit* Pw, Novernber 2017; National Academies of Sciences, Engineer fing, and Medicine, “Information Technology and the US. Work force: Where Are We and Where Do We Go ftom Here" National ‘Academies Press, Washington, DC, 2017 3, What new service sector jobs have been created or left unchanged by automation in the past? Why? 4. Why is it unlikely that Al will replace managers? and data collected when people access and interact with large pools of data and infer rules from them to guide decision making. Analysis of such data drives one-to-one marketing that creates personal messages based on individualized preferences. For exampl Hilton Hotels’ OnQ system analyzes detailed data collected on active guests in all of its properties to determine the preferences of each guest and each guest's profitability. Hilton uses this information to give its most profitable customers additional privilege: such as late checkouts. Contemporary customer relationship management (CRM) systems feature analytical capabilities for this type of intensive data analysis (see Chapters 2 and 9), ‘Credit card companies are able to use this strategy to predict their most prof table cardholders. The companies gather vast quantities of data about con- sumer purchases and other behaviors and mine these data to construct detailed profiles that identify cardholders who might be good or bad credit risks, We discuss the tools and technologies for data analysis in Chapters 6 and 12. Strengthen Customer and Supplier Intimacy Use information systems to tighten linkages with suppliers and develop intimacy with customers. Toyota, Ford, and other automobile manufacturers ‘use information systems to facilitate direct access by suppliers to production schedules and even permit suppliers to decide how and when to ship supplies to their factories. This allows suppliers mote lead time in producing goods.