Sunday, February 9, 2025

Robots trigger firm income to fall — at the least at first — ScienceDaily


Researchers have discovered that robots can have a ‘U-shaped’ impact on income: inflicting revenue margins to fall at first, earlier than ultimately rising once more.

The researchers, from the College of Cambridge, studied {industry} information from the UK and 24 different European nations between 1995 and 2017, and located that at low ranges of adoption, robots have a destructive impact on revenue margins. However at larger ranges of adoption, robots might help improve income.

In keeping with the researchers, this U-shaped phenomenon is because of the relationship between decreasing prices, creating new processes and innovating new merchandise. Whereas many corporations first undertake robotic applied sciences to lower prices, this ‘course of innovation’ might be simply copied by opponents, so at low ranges of robotic adoption, corporations are centered on their opponents relatively than on creating new merchandise. Nevertheless, as ranges of adoption improve and robots are absolutely built-in into an organization’s processes, the applied sciences can be utilized to extend income by innovating new merchandise.

In different phrases, corporations utilizing robots are prone to focus initially on streamlining their processes earlier than shifting their emphasis to product innovation, which provides them better market energy by way of the flexibility to distinguish from their opponents. The outcomes are reported within the journal IEEE Transactions on Engineering Administration.

Robots have been broadly utilized in {industry} for the reason that Eighties, particularly in sectors the place they will perform bodily demanding, repetitive duties, equivalent to automotive meeting. Within the a long time since, the speed of robotic adoption has elevated dramatically and persistently worldwide, and the event of exact, electrically managed robots makes them notably helpful for high-value manufacturing purposes requiring better precision, equivalent to electronics.

Whereas robots have been proven to reliably increase labour productiveness at an {industry} or nation stage, what has been much less studied is how robots have an effect on revenue margins at an analogous macro scale.

“In the event you have a look at how the introduction of computer systems affected productiveness, you truly see a slowdown in productiveness development within the Nineteen Seventies and early Eighties, earlier than productiveness begins to rise once more, which it did till the monetary disaster of 2008,” stated co-author Professor Chander Velu from Cambridge’s Institute for Manufacturing. “It is attention-grabbing {that a} instrument meant to extend productiveness had the alternative impact, at the least at first. We needed to know whether or not there’s a comparable sample with robotics.”

“We needed to know whether or not corporations have been utilizing robots to enhance processes throughout the agency, relatively than enhance the entire enterprise mannequin,” stated co-author Dr Philip Chen. “Revenue margin could be a helpful approach to analyse this.”

The researchers examined industry-level information for 25 EU nations (together with the UK, which was a member on the time) between 1995 and 2017. Whereas the information didn’t drill right down to the extent of particular person corporations, the researchers have been ready to have a look at entire sectors, primarily in manufacturing the place robots are generally used.

The researchers then obtained robotics information from the Worldwide Federation of Robotics (IFR) database. By evaluating the 2 units of information, they have been in a position to analyse the impact of robotics on revenue margins at a rustic stage.

“Intuitively, we thought that extra robotic applied sciences would result in larger revenue margins, however the truth that we see this U-shaped curve as a substitute was shocking,” stated Chen.

“Initially, corporations are adopting robots to create a aggressive benefit by reducing prices,” stated Velu. “However course of innovation is affordable to repeat, and opponents can even undertake robots if it helps them make their merchandise extra cheaply. This then begins to squeeze margins and cut back revenue margin.”

The researchers then carried out a collection of interviews with an American medical gear producer to check their experiences with robotic adoption.

“We discovered that it is not simple to undertake robotics right into a enterprise — it prices some huge cash to streamline and automate processes,” stated Chen.

“If you begin bringing increasingly more robots into your course of, ultimately you attain some extent the place your entire course of must be redesigned from the underside up,” stated Velu. “It is vital that corporations develop new processes similtaneously they’re incorporating robots, in any other case they’ll attain this identical pinch level.”

The researchers say that if corporations need to attain the worthwhile aspect of the U-shaped curve extra rapidly, it is vital that the enterprise mannequin is customized concurrently with robotic adoption. Solely after robots are absolutely built-in into the enterprise mannequin can corporations absolutely use the facility of robotics to develop new merchandise, driving income.

A associated piece of labor being led by the Institute for Manufacturing is a group programme to assist small- and medium-sized enterprises (SMEEs) to undertake digital applied sciences together with robotics in a low-cost, low-risk method. “Incremental and step adjustments on this space allow SMEs to get the advantages of price discount in addition to margin enhancements from new merchandise,” stated co-author Professor Duncan McFarlane.

The analysis was supported by the Engineering and Bodily Sciences Analysis Council (EPSRC) and the Financial and Social Analysis Council (ESRC), that are each a part of UK Analysis and Innovation (UKRI). Chander Velu is a Fellow of Selwyn Faculty, Cambridge.

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