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Friday, May 4, 2018

AI SPECIAL... Notes from the AI frontier: Applications and value of deep learning PART II


 Notes from the AI
 frontier: Applications
 and value of deep
 learning PART II



1. Mapping AI techniques to problem types
2. Insights from use cases
1. and 2. Covered in PART I
IN PART II FOLLOWING COVERED.
3. Sizing the potential value of AI
4. The road to impact and value
3.        Sizing the potential value of AI
We estimate that the AI techniques we cite in this briefing together have the potential to create between $3.5 trillion and $5.8 trillion in value annually across nine business functions in 19 industries. This constitutes about 40 percent of the overall $9.5 trillion to $15.4 trillion annual impact that could potentially be enabled by all analytical techniques.
Per industry, we estimate that AI’s potential value amounts to between one and nine percent of 2016 revenue. The value as measured by percentage of industry revenue varies significantly among industries, depending on the specific applicable use cases, the availability of abundant and complex data, as well as on regulatory and other constraints.
These figures are not forecasts for a particular period, but they are indicative of the considerable potential for the global economy that advanced analytics represents.
From the use cases we have examined, we find that the greatest potential value impact from using AI are both in top-line-oriented functions, such as in marketing and sales, and bottom-line-oriented operational functions, including supply chain management and manufacturing.
Consumer industries such as retail and high tech will tend to see more potential from marketing and sales AI applications because frequent and digital interactions between business and customers generate larger data sets for AI techniques to tap into. E-commerce platforms, in particular, stand to benefit. This is because of the ease with which these platforms collect customer information such as click data or time spent on a web page and can then customize promotions, prices, and products for each customer dynamically and in real time.
Here is a snapshot of three sectors where we have seen AI’s impact:
·         In retail, marketing and sales is the area with the most significant potential value from AI, and within that function, pricing and promotion and customer service management are the main value areas. Our use cases show that using customer data to personalize promotions, for example, including tailoring individual offers every day, can lead to a one to two percent increase in incremental sales for brick-and-mortar retailers alone.
·         In consumer goods, supply-chain management is the key function that could benefit from AI deployment. Among the examples in our use cases, we see how forecasting based on underlying causal drivers of demand rather than prior outcomes can improve forecasting accuracy by 10 to 20 percent, which translates into a potential five percent reduction in inventory costs and revenue increases of two to three percent.
·         In banking, particularly retail banking, AI has significant value potential in marketing and sales, much as it does in retail. However, because of the importance of assessing and managing risk in banking, for example for loan underwriting and fraud detection, AI has much higher value potential to improve performance in risk in the banking sector than in many other industries.

4.        The road to impact and value
There have been many exciting breakthroughs in AI recently—but significant challenges remain. Partner Michael Chui explains five limitations to AI that must be overcome.
Artificial intelligence is attracting growing amounts of corporate investment, and as the technologies develop, the potential value that can be unlocked is likely to grow. So far, however, only about 20 percent of AI-aware companies are currently using one or more of its technologies in a core business process or at scale.
For all their promise, AI technologies have plenty of limitations that will need to be overcome. They include the onerous data requirements listed above, but also five other limitations:
·         First is the challenge of labeling training data, which often must be done manually and is necessary for supervised learning. Promising new techniques are emerging to address this challenge, such as reinforcement learning and in-stream supervision, in which data can be labeled in the course of natural usage.
·         Second is the difficulty of obtaining data sets that are sufficiently large and comprehensive to be used for training; for many business use cases, creating or obtaining such massive data sets can be difficult—for example, limited clinical-trial data to predict healthcare treatment outcomes more accurately.
·         Third is the difficulty of explaining in human terms results from large and complex models: why was a certain decision reached? Product certifications in healthcare and in the automotive and aerospace industries, for example, can be an obstacle; among other constraints, regulators often want rules and choice criteria to be clearly explainable.
·         Fourth is the generalizability of learning: AI models continue to have difficulties in carrying their experiences from one set of circumstances to another. That means companies must commit resources to train new models even for use cases that are similar to previous ones. Transfer learning—in which an AI model is trained to accomplish a certain task and then quickly applies that learning to a similar but distinct activity—is one promising response to this challenge.
·         The fifth limitation concerns the risk of bias in data and algorithms. This issue touches on concerns that are more social in nature and which could require broader steps to resolve, such as understanding how the processes used to collect training data can influence the behavior of models they are used to train. For example, unintended biases can be introduced when training data is not representative of the larger population to which an AI model is applied. Thus, facial recognition models trained on a population of faces corresponding to the demographics of AI developers could struggle when applied to populations with more diverse characteristics. A recent report on the malicious use of AI highlights a range of security threats, from sophisticated automation of hacking to hyper-personalized political disinformation campaigns.
Organizational challenges around technology, processes, and people can slow or impede AI adoption
Organizations planning to adopt significant deep learning efforts will need to consider a spectrum of options about how to do so. The range of options includes building a complete in-house AI capability, outsourcing these capabilities, or leveraging AI-as-a-service offerings.
Based on the use cases they plan to build, companies will need to create a data plan that produces results and predictions, which can be fed either into designed interfaces for humans to act on or into transaction systems. Key data engineering challenges include data creation or acquisition, defining data ontology, and building appropriate data “pipes.” Given the significant computational requirements of deep learning, some organizations will maintain their own data centers, because of regulations or security concerns, but the capital expenditures could be considerable, particularly when using specialized hardware. Cloud vendors offer another option.
Process can also become an impediment to successful adoption unless organizations are digitally mature. On the technical side, organizations will have to develop robust data maintenance and governance processes, and implement modern software disciplines such as Agile and DevOps. Even more challenging, in terms of scale, is overcoming the “last mile” problem of making sure the superior insights provided by AI are instantiated in the behavior of the people and processes of an enterprise.
On the people front, much of the construction and optimization of deep neural networks remains something of an art requiring real experts to deliver step-change performance increases. Demand for these skills far outstrips supply at present; according to some estimates, fewer than 10,000 people have the skills necessary to tackle serious AI problems. and competition for them is fierce among the tech giants.
AI can seem an elusive business case
Where AI techniques and data are available and the value is clearly proven, organizations can already pursue the opportunity. In some areas, the techniques today may be mature and the data available, but the cost and complexity of deploying AI may simply not be worthwhile, given the value that could be generated. For example, an airline could use facial recognition and other biometric scanning technology to streamline aircraft boarding, but the value of doing so may not justify the cost and issues around privacy and personal identification.
Similarly, we can see potential cases where the data and the techniques are maturing, but the value is not yet clear. The most unpredictable scenario is where either the data (both the types and volume) or the techniques are simply too new and untested to know how much value they could unlock. For example, in healthcare, if AI were able to build on the superhuman precision we are already starting to see with X-ray analysis and broaden that to more accurate diagnoses and even automated medical procedures, the economic value could be very significant. At the same time, the complexities and costs of arriving at this frontier are also daunting. Among other issues, it would require flawless technical execution and resolving issues of malpractice insurance and other legal concerns.
Societal concerns and regulations can also constrain AI use. Regulatory constraints are especially prevalent in use cases related to personally identifiable information. This is particularly relevant at a time of growing public debate about the use and commercialization of individual data on some online platforms. Use and storage of personal information is especially sensitive in sectors such as banking, health care, and pharmaceutical and medical products, as well as in the public and social sector. In addition to addressing these issues, businesses and other users of data for AI will need to continue to evolve business models related to data use in order to address societies’ concerns.. Furthermore, regulatory requirements and restrictions can differ from country to country, as well from sector to sector.
Implications for stakeholders
As we have seen, it is a company’s ability to execute against AI models that creates value, rather than the models themselves. In this final section, we sketch out some of the high-level implications of our study of AI use cases for providers of AI technology, appliers of AI technology, and policy makers, who set the context for both.
·         For AI technology provider companies: Many companies that develop or provide AI to others have considerable strength in the technology itself and the data scientists needed to make it work, but they can lack a deep understanding of end markets. Understanding the value potential of AI across sectors and functions can help shape the portfolios of these AI technology companies. That said, they shouldn’t necessarily only prioritize the areas of highest potential value. Instead, they can combine that data with complementary analyses of the competitor landscape, of their own existing strengths, sector or function knowledge, and customer relationships, to shape their investment portfolios. On the technical side, the mapping of problem types and techniques to sectors and functions of potential value can guide a company with specific areas of expertise on where to focus.
·         Many companies seeking to adopt AI in their operations have started machine learning and AI experiments across their business. Before launching more pilots or testing solutions, it is useful to step back and take a holistic approach to the issue, moving to create a prioritized portfolio of initiatives across the enterprise, including AI and the wider analytic and digital techniques available. For a business leader to create an appropriate portfolio, it is important to develop an understanding about which use cases and domains have the potential to drive the most value for a company, as well as which AI and other analytical techniques will need to be deployed to capture that value. This portfolio ought to be informed not only by where the theoretical value can be captured, but by the question of how the techniques can be deployed at scale across the enterprise. The question of how analytical techniques are scaling is driven less by the techniques themselves and more by a company’s skills, capabilities, and data. Companies will need to consider efforts on the “first mile,” that is, how to acquire and organize data and efforts, as well as on the “last mile,” or how to integrate the output of AI models into work flows ranging from clinical trial managers and sales force managers to procurement officers. Previous MGI research suggests that AI leaders invest heavily in these first- and last-mile efforts.
·         Policy makers will need to strike a balance between supporting the development of AI technologies and managing any risks from bad actors. They have an interest in supporting broad adoption, since AI can lead to higher labor productivity, economic growth, and societal prosperity. Their tools include public investments in research and development as well as support for a variety of training programs, which can help nurture AI talent. On the issue of data, governments can spur the development of training data directly through open data initiatives. Opening up public-sector data can spur private-sector innovation. Setting common data standards can also help. AI is also raising new questions for policy makers to grapple with for which historical tools and frameworks may not be adequate. Therefore, some policy innovations will likely be needed to cope with these rapidly evolving technologies. But given the scale of the beneficial impact on business the economy and society, the goal should not be to constrain the adoption and application of AI, but rather to encourage its beneficial and safe use.

By Michael ChuiJames Manyika, Mehdi Miremadi, Nicolaus Henke, Rita Chung, Pieter Nel, and Sankalp Malhotra
https://www.mckinsey.com/global-themes/artificial-intelligence/notes-from-the-ai-frontier-applications-and-value-of-deep-learning?cid=other-eml-alt-mgi-mgi-oth-1804&hlkid=32b48757dfe44926a4e5437094fbb6f1&hctky=1627601&hdpid=e82a3072-74cf-43e1-9db5-56cd6a71dbe1

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