Economic Potential of Generative AI

The rise of Generative AI is creating groundbreaking breakthroughs in how we used to operate and manage business and industry operations traditionally. It is the mastermind behind the surging success of LLM models, like ChatGPT, Google Bard, GitHub Copilot, and others in the making.  

These generative AI models can change the face of businesses, organizations, and the world. According to a recent report by McKinsey, the introduction of Generative AI in business operations has the potential to add trillions to the current world economy. 

The advent of Generative AI could add around $2.6 – 4.4 trillion annually across different industries; in context, the entire GDP of the United Kingdom was $3.1 trillion in 2021. Let’s delve into the discussion and learn more about Generative AI’s impact on the world’s economy in the coming years. 

How Generative AI Can Change Operations Across Different Industries?

Generative AI, the next step in the evolution of AI, has made industries and businesses rush to adapt and transform their operations worldwide. To analyze how Generative AI can bring a change in productivity across industries, let us have a look at the different scenarios: 

Impact of Generative AI on business operations

Generative AI can automate business operations and processes in 63 identified use cases. Use cases refer to implementing AI to overcome a business hurdle and result in one or more outcomes. For example, Generative AI can be used by marketing companies to create creative content for personalized emails which can significantly cut expenses and increase revenue. As per reports, 63 use cases in 16 different business functions from several industries can generate $2.6 – 4.4 trillion in economic benefits annually. 

Impact of Generative AI on business processes

Thinking about the impact of Generative AI on work activities required in business occupations, the report revealed that it could perform 2,100 detailed work activities required in 850 occupations, including communicating operational plans to the team. So, keeping this in mind, the economic benefits of Generative AI, when applied across knowledge workers’ activities, will amount to $6.1 – 7.2 trillion. 

Customer operations, marketing and sales, software engineering, and R&D are the four major business areas that will generate 75% of AI use cases value when rolled out worldwide. Besides, it can significantly impact the banking, retail, consumer packaged goods, and pharmacy industries. Generative AI deployment can increase annual revenues by 1.2 – 2.0% ($400 – 660 billion) for retail and consumer packaged companies, 2.8 – 4.7% ($200 – 340 billion) for the banking industry, and 2.4 – 4.5% ($60 – 100 billions) across all medical-products and pharmaceutical industries. 

To provide you a glimpse of how Generative AI will transform the current landscape of different industries, here is how: 

• Transformation in Customer Operations

  1. Human-like chatbot will resolve complex customer queries.
  2. Agents will use AI-developed called scripts and real-time assistance to provide real-time information to the customer.
  3. AI will provide a quick conversation summary to create records of managing customer queries.

Result – Productivity will increase by 30-45% at current business costs. 

• Transformation in Marketing and Sales

  1. Gather information from unstructured data resources to create effective strategies.
  2. Customized campaigns tailored as per their demographic, sentiment, and location.
  3. Offer comprehensive information, comparisons, and dynamic recommendations to customers.

Result – Productivity will increase by 5-15% at current market spending. 

• Transformation in Software Engineering

• 1. Analyze, clean, and label large volumes of data
  2. Develop multiple IT architecture designs and iterate the potential designs.
  3. Reduce development time by providing code drafts and rapidly finding prompts.
  4. Deploy algorithms to perform functional and performance testing to ensure quality.
  5. Provide insights on system logs, performance issues and suggest fixes.

Result – Productivity will increase by 20-45% at current global expenditures.

• Transformation in R&D

  1. Improvise market reporting, creativity, and solution drafting
  2. Generate prompt-based drafts and designs
  3. Enhance and create rich and immersive virtual simulations
  4. Implement optimized test cases for efficient testing

Result – Productivity will increase by 10-15% at current R&D costs.

Impact of AI on the Growth of the Economy And Society

Generative AI will accelerate the technical automation of individual processes and enhance economic growth. MGI (McKinsey Global Institue) estimated that technology performance for natural language understanding will match human median performance by 2027, but with Generative AI, 2023 is the year of transformation. Here is how Generative AI will change the economy and society: 

• The total hours that could be automated by integrating Generative AI into existing technologies is increased to 60-70%, which was previously 50%. 
• Developed countries will adapt to Generative AI early compared to developing countries with lower wages, like China, India, and Mexico because higher wages will make it economically feasible. 
• As AI’s ability to excel in natural language processing is accelerating, it is estimated that 50% of industrial processes will be automated by 2030 – 2060. 
• The midpoint scenario at which 50% of the work will be automated is accelerated by a decade and is expected to be by 2045, which was 2053, as per 2016’s reports. 
• With the advancing Generative AI, the potential to automate management and develop talents has increased by 43%, which was 16% in 2017.
• Advances in technical capabilities can risk the work of higher-wage knowledge workers, who were earlier thought to be immune from automation. 

The global economic growth in the past decade was 2.9% which slowed down in the past decade as compared to the previous two decades. However, automation can help improve statistics and boost economic growth with annual productivity. Depending on the rate of AI adoption, it can accelerate economic growth from 0.2 to 3.3 between 2030 – 2040. Moreover, the best part is that Generative AI can boost labor productivity. Transitioning to new activities and changing their work is essential to take advantage of these benefits. 

The Bottom Line

We are entering a new world only possible in Sci-Fi movies and books with Generative AI. It can transform our lives and fuel economic growth. Amidst the new and growing possibilities with Generative AI, it is essential to mitigate the risks. Business leaders, policymakers, and individuals play a fundamental role in devising and implementing policies to maximize benefits. 

Generative AI has a bright potential for revolutionizing the world. However, working together to utilize AI ethically to create significant value and limit the potential disrupt lives and livelihoods is essential. 

If you are interested in exploring Generative AI and have any relevant projects or collaborations in mind, we would be pleased to hear from you. Please feel free to contact us to discuss any ideas, questions, or potential opportunities. Once again, thank you for your readership, and we look forward to connecting with you!

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About the Author:

Dr. Kiran Kumar is an accomplished AI researcher, innovator, and senior data scientist. With a Ph.D. in Supply Chain Analytics, he possesses a profound understanding of data analysis and machine-learning techniques. His extensive research contributions are showcased through numerous publications in esteemed international journals. Driven by a passion for pioneering advancements, he holds patents for groundbreaking innovations in the field. Currently, he is focused on developing cutting-edge products by leveraging his expertise in Prompt engineering and Generative AI.