News and Insights

Robotics & Automation: Everyday automation

We have all been brainwashed to a degree by our creative friends in Hollywood and by science fiction writers the world over, to expect that technological change will arrive one day abruptly, perhaps brought to earth by alien life forms, and this change will be so significant that it will transform our lives overnight, and in the bleakest scenarios subject the human-race to servitude under the rule of a super-intelligent being or sentient machine.

Intelligent humanoid robots, flying cars and an omnipresent super intelligence may one day become a reality. But contrary to the script above, and assuming for the time being that advanced technologies are not delivered to us abruptly from the other side of the universe, we expect that technology will advance gradually, seep into our lives slowly like sand through the hourglass, with an impact so gentle as to go almost unnoticed.

What we already have and take for granted

While many people are waiting for a technology revolution to transform our lives and bring us into “the future”, we believe we are already experiencing and living in a world steadily and surely being changed by technology.

Occasionally many people suffer from bouts of technology frustration. Have you forgotten your password? Where is that email I sent yesterday? Where did I save that photo? Is the WiFi down again? Fixing and fiddling with technology appears to take up more of our time today than ever before. But the simple reason is that we are surrounded by more technology than ever before. Automation systems have moved out of the industrial factory arena and into the lives of everyday people.

While it is easy to bemoan the problems of technology, let us stop for a moment to consider the convenience and great benefit we derive from technologies we have today and which we often take for granted. The obvious ones are the benefits of smart mobile devices, such as phones and tablets. Weather, news, email, camera, music, videos, payments, all available and customized for you in the palm of your hand at the press of a virtual button. These benefits of course come with what economists know as “negative externalities”, in that we often find these devices so useful and absorbing that they can easily distract from face to face human interaction and enjoyment of the moment.

The future is already here. It is just not evenly distributed.

William Ford Gibson, The Economist, December 2003 (Canadian-American author of “cyberpunk” science-fiction)

Wind back the clock a few years

Many people spent part of February clicking through the channels trying to find a Winter Olympic sport which did not require obscure technical expertise to understand or to enjoy. While engaged in this exercise myself, it occurred to me that when I was a child, a TV remote control was still quite a novelty. To change the channel on the TV in my parents’ breakfast room meant standing up and actually walking over to the television set to press the button. Worse still, pushing the button would sometimes nudge the aerial out of position and require careful repositioning to “de-fuzz” the picture.

Today of course many systems allow us to select the desired channel using voice control, and since media content is now generally “streamed” not “broadcast”, we are able to “pause” live television, rewind back to something we missed earlier and order “on-demand” what we want to watch from a vast catalogue of content at the push of a button. Blockbuster Video was a casualty of this convenience. At its peak, Blockbuster operated more than 9,100 rental video stores. They filed for bankruptcy in 2010.1

Self-service automation

Beyond the television remote control, there are myriad examples of technology innovations enabling automation solutions to increase convenience and efficiency in our daily lives. One recurring theme is technology used to extend customer service hours beyond the regular working day. Automated self-service solutions offer the economic appeal of making the customer perform work which would otherwise be done by an employee.

In the retail sector, automated self-service check-out counters at supermarkets are now a familiar site around the world. US internet giant, Amazon, appears intent on taking this automation to the next level with its “Just Walk Out” Amazon Go concept store2. Similar automation is being utilized by some dry-cleaning businesses which now offer their customers an automated “drop-box” for both picking-up and dropping-off laundry, to reduce the queues and allow for 24 hour, 7 days a week service.

In the travel industry, we see more airlines are adopting complete self-service check-in systems, which eliminate the need for airline personnel to process checked luggage, substantially streamlining the check-in process at the airport and reducing passenger waiting times. KLM has used this type of system at Amsterdam’s Schiphol Airport since 2008, and they can now be seen employed by different airlines in Singapore, Toronto, Auckland and Stuttgart. Airlines are also starting to use facial-recognition and other biometric software systems to perform the pre-boarding identification function. Airports are adopting similar automation technologies in unmanned passport control gates.

Lowering the cost of doing business

As a concept this type of self-service automation is not new. Cash machines, or Automated Teller Machines (“ATMs”) have, since they were first introduced in 1967 by the British bank, Barclays3, automated many of the functions performed by and in some cases completely replaced tellers in the bank branch, increasing efficiency for the bank’s customers and lowering the fixed cost of employees in the bank branch.

This reduction in fixed costs can have a positive economic impact which some alarmist media articles fail to grasp. Automation technologies at first glance often appear to threaten employment in an economy. However, in certain circumstances they can lower the cost of providing a service to such an extent that many businesses decide to offer their services more broadly, to ever smaller and more remote markets. As the technology became more affordable and more reliable, the number of ATMs proliferated fast in the 1990s, and most people assumed, quite sensibly that bank tellers would become a thing of the past, like the black-smith following the mass adoption of automobiles. Surprisingly, it was not to be.

Currently there are approximately 400,000 ATMs in the US, a 400% increase since the mid-1990s. Yet the number of bank tellers has also increased4 and in fact grown faster over the last 10 years than the labor force in the US as a whole. The reason being that the automation function provided by the ATM lowered the cost of operating a branch to such an extent that the banks decided to increase the number of branches in operation in order to better serve their customer base. While some branches are simply ATM booths, many others are staffed by bank tellers, financial consultants and managers.

Mass consumption drives down cost

We have described just a few examples of automation technologies present today in the daily lives of many people. Yet there are, and there will be so may more examples, as the cost of automation technology continues to decline and the capability continues to increase. These powerful dynamics will pull automation technologies into new areas, and slowly but steadily, they will become a normal part of our everyday lives.

In the last decade, many economists have questioned whether the improvement in productivity achieved in developed economies adequately reflect the adoption of technologies such as high performance computing, the internet and high-speed mobile networks. This question is more complex than at first it appears, however, we suggest two ideas: 1. Productivity gains often filter through into an economy many years after the introduction of a new technology, since processes and behaviors may need to change and new systems may need to be developed in order to generate productivity gains; and 2. Many recent technology innovations have targeted the consumer world of media and entertainment, and have not been designed for productivity.

On this second point, economists may lament that so much technology is being used to keep us entertained, to keep up to date with football matches, to publish video clips of cats and children and take “selfies”, and generally distract the workforce from their daily grind. However, in the long term we believe the benefit of these consumer focused applications may be better recognized, since it is the mass adoption of technology by consumers and businesses alike has been the driving force behind the declining cost of automation technologies. In the year 2000, there were an estimated 740m mobile phone subscriptions worldwide. At the end of 2017 there were close to 8bn5. That increase in number of mobile phones can be added to a similar increase in tablet computers, laptops, digital health trackers and sports watches, and other electronics such as ATMs and self-service check-outs, and has been a major contributor in the declining cost of components used in automation technologies. Microprocessors, touch screens, cameras, microphones, accelerometers, gyroscopes, magnetometers and GPS systems, are now far more affordable and therefore economically viable as automation solutions, thanks in large part to the mass consumer adoption of electronics.

Conclusion

We are all using automation systems in our daily lives today and as the cost of these systems continue to decline, the number of systems in use is likely to proliferate. But the other key driver beyond cost is intelligence. As technology advances and processing power increases, the automation systems we use today will become smarter, easier to use, more intuitive, self-healing and ultimately more useful. As a result we will likely spend less time logging in, asking to be reminded of our passwords, and investigating why the WiFi is not working.

Advances in technology are creating a new age of automation in which ever smarter and more versatile robotic systems will be deployed in ever wider use cases in the factory, in our homes, offices, hospitals, infrastructure and transport systems. Automation and artificial intelligence are increasingly delivering cost efficient solutions to improve quality of life, increase productivity and perform dirty, dangerous or dull tasks.

As robotics, automation and artificial intelligence become omnipresent, connected and critical to our daily lives, the implications for security and safety also become more critical. The relationship between robotics and security is symbiotic, with more automated systems requiring more security and controls to be put in place, and in turn, more security and controls necessitating more automated management and coordination tools to operate the security systems efficiently. Credit Suisse Asset Management have designed two strategies to provide clients with “pure-play” exposure to these compelling and complementary long-term secular growth themes: robotics & automation and security & safety.