There are concepts that guide us strictly concerning innovation and artificial intelligence (AI). One is that society only associates positive things with innovation. We want to bring about change; we want more and better with the same effort. AI is supposed to help. But stop. An “I” is considered creative and not innovative. Only the company or the enterprise are innovative. So, Dr Christian Rammer, what about innovation and AI?
"When we talk about innovation, we outline the project and the process of doing something better." By us, Rammer means his research colleagues on his team at ZEW in Mannheim. His responsibility and research area examines innovation economics and business dynamics. He looks at innovation from an economical view. Simply said, he examines the benefits and added value for the economy of a country, which involves innovation.
Not every innovation pays off, but is it worth nothing, Christian Rammer? "Yes and no." Innovation is an action, wrapped in a normative concept, in order to make it measurable. It is not just doing something different. It is to improve what has been made or done before or come up with something completely different.
And can AI do that? It promises almost everything. Companies are obsessed with AI. However, the expert has not yet been able to verify that the use of AI leads to an immediate increase in sales, but a change in the sales composition. AI can produce more innovative products; so-called world market novelties have increased. And that is where companies are making big sales gains. "AI pays off for those who see the use case and implement it." However, only 6% of companies do so. Rammer concludes soberly: "As an economist, I call this 6% the pioneer."
48,000 new hires
Against this background, the debate about threatened jobs and the fear of AI cuts may seem exaggerated. Rammer and his team observed that most companies do not rely on rationalization. That is, they do not want to lay off employees for efficiency reasons when targeting AI. The focus would be more on new products, new offers or improved customer value. "It is not about replacing work. It is the quality you are trying to improve," Rammer says.
New AI experts will still have to be hired in order to generate innovation. Rammer has determined that this was around 48,000 hires in 2019. "Essentially, additional IT staff have been hired. Companies have a great need to equip themselves with the right experts in the AI field. However, if we look at the effects of AI on the labor market as a whole, these are so far very minor."
"Companies are obsessed with AI."
Back to the fear of job losses through robotic innovations: talking them away would be fatal because it exists. Denying technological innovation does not harm jobs would be a lie. "For some areas, this is not entirely absurd," says the economist. He means manual activities and service work, in, for instance, the financial sector. "We must always keep an eye on the balance of new technologies. They can never be understood as a one-dimensional development. A saved position is offset by a newly created one elsewhere. It is inherent in human beings that they keep coming up with something new." And at the same time, he reassures: "There will be no mass unemployment because of innovation via AI."
In this way, new fields of activity are constantly developing in which people find work again. The centuries of technology development would show this, Rammer says. "We were always afraid that we would be running out of work. However, that has never happened before."
The future outlook
Companies are not yet able to do as they (perhaps) would like to. There are some hurdles to overcome in the corporations. There is a certain resistance to a) to change established processes; b) to take the employees with them, and c) to take responsibility when something goes wrong. The question of the obligation to recourse has an inhibiting effect. That is not clear. This is where we have to start in order to keep Germany as a location for innovation – not to completely renew its business models as AI manufacturers promise in their advertising messages. But to make something better out of something existing or to use something existing to create something completely different.
"By the way: It is not AI, but digitization itself that often puts existing business models into question. A taxi company is under competitive pressure over Uber. This compulsion necessarily leads to the need to change a business model. But this has nothing to do with AI itself," says Rammer. Over the past three years, 4% to 5% of companies have innovated their business model in such a way that they have produced something fundamentally new. And that, according to Rammer, is a healthy rate. "There is nothing more to do. After all, a business model is the basic idea of a business. If you want to turn them around, you need a lot of patience. Even and just because of AI."