evidence giving meeting #4 - appg · • 3. digital leaders in industries are in the frontier of ai...
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EVIDENCE GIVING MEETING #4
All Party Parliamentary Group on Artificial IntelligenceAPPG AI
@BigInnovCentre#appgAI
10 July 20175:30 – 7:00 pm
House Of Commons, Committee Room 9
• How does AI impact new markets and business models, and their formation?
• Trade and commerce• Standards• “Peak stuff” versus activity/contact• Business models• Wealth creation by AI’s intellectual property• Transformation survival (balancing business as usual
vs. rapid innovation)
Main Focus
• Mike Lynch, Founder, Invoke Capital• Martin de Heaver, Director, ORBIT• Husayn Kassai, Co-Founder and CEO, Onfido• David Kelnar, Investment Director and Head of Research,
MMC Ventures• Abhijit Akerkar, Head of Delivery - Bank of the Future Pilot, Lloyd
Banking Group• Michael Aikenhead, Head of Strategic Artificial Intelligence Advisory,
Cognitive Finance Group
Thought Leaders
Mike Lynch, Founder, Invoke Capital
• Creator of the investment fund, Invoke Capital; supported several AI companies such as Luminance, DarkTrace, and Neurence
• Analyzing the landscape, he commented that given his experience as an investor, most UK companies don’t have advanced AI within their business models• 90% don’t have ‘real’ AI capability• 5% have basic AI capability• 5% have ‘real’ or advanced AI capability
• First mover advantage - The space is still not very competitive according to Lynch. The winners will be those who enter markets first.
• Eventually, AI will disrupt all industries - including traditional businesses• There are issues that have to be addressed regarding: explainabilty, ethics, transparency, lack of skills, etc.• Companies need to use strategic data to compete in new and growing markets; they need to learn from data
Martin de Heaver, Director, ORBIT
• Orbit is an observatory for Responsible Research and Innovation (RRI)• Key characteristic of 4IR is its remarkable speed. This is a challenge because stakeholders
have to act strategically in such a fast-paced environment. • De Heaver argued that stakeholders should pay close attention to how the initial stages of a
project are carried out à to ensure social purpose• Stakeholders advised to follow AREA framework:
• To anticipate impact• To reflect on the process• To engage with a variety of stakeholders• To act accordingly
• RRI can provide a macro-analysis lens to understand the interdependence of developing technology
Husayn Kassai, Co-Founder and CEO, Onfido
• Onfido uses machine learning to help businesses digitally verify people’s identities• Kassai argued AI has changed markets across industries
• AI ultimately reduces costs and makes processes more efficient• AI has the ability to bridge economic gaps
• i.e. Onfido helps the financial service by reducing the gap between access and security – it makes financial services accessible to more while at the same time maintaining the transaction’s security
• AI will disrupt traditional markets and business models. Policy makers need to be aware of areas that will be most affected• AI will disrupt the job market. In the short-term, automation will disrupt more traditional jobs then
create new ones. • There is a threat of monopolization as certain companies like Google, Apple, Microsoft, etc. are
dominating the markets. Government needs to provide financial and non-financial support to start ups to compete with MNCs in this environment.
David Kelnar, Investment Director and Head of Research, MMC Ventures
• MMC is a venture capital fund investing in early stage, high growth UK companies• Kelnar has worked on two big projects to understand the UK landscape:• 1. Analysis of 300 software start-ups in the UK
• 4 key findings:• AI activity has increased sharply in the recent years. 60% of all start-ups in the analysis were
founded in the past 36 months.• AI start-ups tend to have a B2B focus – partly due to the access of corporate data• The entrepreneur focus is highly uneven• UK sectors are at early stage (angel investment) compared to the US
• 2. investment framework – 17 success factors for the age of AI• Key factors identified include the data network effect, distance from monoliths, proprietary
algorithms, and ability to obtain and retain talent• Policy makers should address the issue of talent: to support people in building the STEM skills required
from early-stage education
Abhijit Akerkar, Head of Delivery - Bank of the Future Pilot, Lloyd Banking Group (see slides from Anhijit’s presentation in an Appendix)
• Akerkar noted 5 key trends in how AI is impacting markets and business models• 1. Tech giants have made staggering investments to get AI ready for business
• $20-30 billion in 2016 alone• 2. Easy access to AI has provided instant ignition to innovation.
• Over 550 AI start ups have raised $5 billion in funding in 2016 alone• 3. Digital leaders in industries are in the frontier of AI bandwagon
• 20-60% CAGR in spending on AI expected• 4. AI underpins several disruptive business models
• Radical personalization would potentially save $2-10 trillion in healthcare costs globally• 5. UK market is the reservoir of potential waiting to be unleashed
• UK GDP could be up to 10.4% higher in 2030- the equivalent of an additional #232 billion• Policy makers need to decide how these developments will benefit the UK society
Michael Aikenhead, Head of Strategic Artificial Intelligence Advisory, Cognitive Finance Group
• Aikenhead noted we are currently in the 2nd wave of AI that is moving at a very high speed• To predict the impact in business models is an impossible task because the arena is
changing dramatically• Pressures will transform markets and models across industries
• There is a trend towards radical personalization• MNCs such as Amazon, Google, and Apple are gaining more and more power
• Ex. Apple has entered the financial sector through products such as ApplePay• Open banking and digital banks is growing in countries like Germany
• Banks are responding to these changes/pressures at different speeds• US banks so far are the most advance and responsive
Questions and Answers
• 1. How has AI impacted the legal sector and its business models?• Although the legal sector tends to be more resistant to change, we are witnessing business models
change dramatically.• 2. Which type of model is preferable? Vertical or horizontal?
• There are pros and cons in each model but companies need to be clear in which they choose to focus their business on.
• If a company applies a horizontal model, they need to define their strategy in order to distinguish from others in the landscape.
• There is a trend of having horizontal companies with vertical openings.• 3. What does the shift from e-commerce to AI-commerce look like?
• Industries are witnessing a dramatic shift in value creation.• The revolution involves radical personalization – the ability to produce services/products that are
tailored for the consumer.
Key Takeaways
• AI will transform existing markets AND create new markets
• Business models are being transformed across industries:• The main trend is of radical personalization
• Ultimately, AI is making processes more cost-efficient• UK can reap large economic benefits if AI is adapted
in businesses• Policy makers should be conscious of the disruption
in the job market and market competition
www.biginnovationcentre.com
SecretariatAll Party Parliamentary Group on Artificial Intelligence (APPG AI)
Big Innovation Centre appg@biginnovationcentre.com
Ergon House, Horseferry RoadWestminster, London SW1P 2AL
Evidence Meeting 4 -Markets and AI enabled business modelsDiscussion documentJuly 10, 2017
Evidence Meeting 4 - Markets and AI enabled business models
� Tech giants have made staggering investments to get AI ready for business$20-30bn in 2016 alone
� Easy access to AI has provided instant ignition to innovationover 550 AI start ups have raised $5B in funding in 2016 alone
� Digital leaders in industries are in the frontier of AI bandwagon20-60% CAGR in spending on AI expected
� AI underpins several disruptive business modelsRadical personalisation would potentially save $2-10 trillion in healthcare costs globally
� UK market is the reservoir of potential waiting to be unleashedUK GDP could be up to 10.3% higher in 2030 – the equivalent of an additional £232bn
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5
Abhijit Akerkar, Driving Bank of the Future Pilot @ Lloyds Bank, ex-McKinsey, tech intrapreneur (abhijit.akerkar@deug.co.uk) 1
� Tech giants have made staggering investments to get AI ready for business
1
In 2016, Tech Giants invested
$20-$30bnin artificial intelligence
90% of spend on R&D, 10% on AI acquisitions
Pay-as-you-go access to
� Scalable computing power (using specialised chipsets) and storage
� Machine Learning (ML) and Cognitive applications
� Data services
Free access to open-source deep learning frameworks
Access to data scientists for solving ML problems
AI is ready for business What does this mean for you?Examples
No upfront investment in specialised hardware; buy capacity as demand grows
Convert speech into text at £1.1 per hour with no upfront cost or minimum commitment
Get your ML problem solved by putting it in front of half a million data scientists
Freely access commonly required ML tools from online libraries
Source: McKinsey; Company websites
2Abhijit Akerkar, Driving Bank of the Future Pilot @ Lloyds Bank, ex-McKinsey, tech intrapreneur (abhijit.akerkar@deug.co.uk)
� Easy access to AI has provided instant ignition to innovation
Source: CBInsights
2
Over 550 start ups raised $5B in 2016 alone B2B is experiencing explosive growth
0.6 1.0
2.7 3.1
5.0
2012 2013 2014 2015 2016
160253
364493
658
xxx Number of deals
AI Global Financing, 2012-2016
Over 550 start ups
� US leads in share of deals with 62%; UK at 6.5%
� In nascent stages; only 10% revenue generating
� B2B start ups is the fastest growing category
� Full Stack start ups are disruptors
Crowdsourced hedge fund for ML experts
Made-to-order knitwear manufactured on an industrial scale
Underwriting platform for financial services companies
Platform for accelerated development and design of advanced materials
3Abhijit Akerkar, Driving Bank of the Future Pilot @ Lloyds Bank, ex-McKinsey, tech intrapreneur (abhijit.akerkar@deug.co.uk)
� Digital leaders in industries are in the frontier of AI bandwagon
Source: McKinsey; IDC; Tractica; Markets & Markets; BCC Research; Transparency Market Research
3
AI adoption is greatest among strong digital adopters Industry analysts forecast strong growth
…but uneven growth across sectors
High AI adoption
Medium AI adoption
Low AI adoption
� High tech / telecom� Automotive / assembly� Financial services
� Retail� Media / entertainment� CPG
� Education� Health care� Travel / tourism
20
36
58 58 63
Global spending on AI, CAGR 2016-2020, %
….will hinge on 3 factors
� Technical: Access to structured data, employees with technical skills
� Commercial: Higher benefit for complex businesses whose performance is driven by forecasting, fast and accurate decision making, and personalised customer interactions
� Regulatory: Product liability (especially for automakers), privacy considerations restrict access to data, ethical issues e.g. algorithmic transparency, job security concerns
4Abhijit Akerkar, Driving Bank of the Future Pilot @ Lloyds Bank, ex-McKinsey, tech intrapreneur (abhijit.akerkar@deug.co.uk)
AI underpins several disruptive business models
Source: McKinsey, Financial Times; Business Insider; Company websites
Business impact examples
4
Radical personalisation
�Tailored treatments could save $2-$10tn in healthcare costs globally
�Netflix’s personalised recommendations save revenue worth $1bn annually
Personalised cancer treatment regimens
Adaptive learning system
Customised travel trips
Incisive predictability
�£3.3bn potential savings in UK using AI to provide preventive care and reduce non-elective hospital admissions
�National Grid aims to cut national energy usage by 10%
Fraud detection and prevention
Spot patterns and prevent cybercrime
Predictive maintenance for industrial IoT
Efficient production
�Amazon increased inventory capacity by 50%, and reduced operational cost by 20% by using Kiva robots
�Aircraft maintenance automation can create $5-$15bn of value for the industry annually
Collaborative robots
Analytics platform to increase throughput
AI controlled CNC machines
Start up examples
5Abhijit Akerkar, Driving Bank of the Future Pilot @ Lloyds Bank, ex-McKinsey, tech intrapreneur (abhijit.akerkar@deug.co.uk)
� UK market is the reservoir of potential waiting to be unleashed
Source: PWC
5
UK GDP could be up to 10.3% higher in 2030 – the equivalent of an additional £232bn
0
50
100
150
200
250
2017 2024 2030
£ bn
Labour productivity Personalisation Time Saved Utility
Economic impact of AI on the UK economy
6Abhijit Akerkar, Driving Bank of the Future Pilot @ Lloyds Bank, ex-McKinsey, tech intrapreneur (abhijit.akerkar@deug.co.uk)
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