We are on the cusp of a fourth industrial revolution. What might artificial intelligence mean for professional services firms?
The world has already seen three previous industrial revolutions and will no doubt see others, so what is so special about this one? Whilst in previous industrial revolutions, technological processes have been disruptive they have not, as a whole, been net destroyers of jobs.
One of the key features of the fourth industrial revolution is that innovation is now based on combining technologies which not only changes the country in which we live, but the wider world. We know that Artificial Intelligence (AI) in its simplest form is machine capability imitating intelligent human behaviour. But what we are now seeing is the development of AI, or machine learning, which focusses on the development of computer programs that can access data and learn for themselves. This allows software to become more accurate in predicting outcomes without specifically being programmed.
Take for example the financial services sector; machine learning is being used to identify important insights in data and to prevent fraud. These insights can identify investment opportunities or help investors know when to trade. Data mining can also identify clients with high-risk profiles, or use cyber-surveillance to pinpoint warning signs of fraud.
The implications for professional service firms are multiple.
AI technologies, such as IBM Watson, are changing the business model for professional service firms. It is already enabling firms to reduce timelines involved in routine tasks, which is increasingly important with clients heightened delivery time expectations, reducing human interaction and increasing accuracy. It is possible to see how phrases such as “in 10 years’ time 40% of staff in professional services firms will not be needed” can be made.
Impact on accountancy firms
Accounting, auditing, bookkeeping and tax preparation are among the functions most at risk of being automated. There is a lot of routine work performed in these services that can be largely taken over by artificial intelligence.
Take, for example, the audit. Technology is already helping auditors, who today will use drones to help stock check large warehouses and large outside assets, such as mines or forests. It will soon be possible, with the help of AI technology, to audit a company’s entire financial transaction history for the year, rather than the sample approached used today. This will give business owners, investors, and other stakeholders greater levels of confidence in a company’s reporting, whilst at the same time reducing the risk of fraudulent activity. It will also reduce audit costs.
It will also change the jobs mix in professional services firms, with fewer routine, entry-level functions and more roles focused on creative thinking and analysis.
Clients will continue to demand the all too human skills that they need to help their business grow, to get a deal across the line, to interpret financial data, or to discuss the complex tax implications of managing their wealth, assets or business. AI will free up time to concentrate on the higher value tasks with clients, which I am sure is the part of the role we most enjoy.
It will be important for professional service firms to review the skills and traits they require from people, not only for today but when creating the leaders of tomorrow.
The Big 4 accountancy firms are already working with technology organisations, and in some instances developing their own bespoke technology platforms, and a number of mid-market firms are too involved in joint ventures to set out the potential for this technology.
I would expect this technology to filter down and be adopted by mid-market firms over the next five years, resulting in greater collaboration between such firms who have a place in the market but currently feel financially constrained by the investment required.
Challenges and opportunities
There are two issues arising from this revolution. Firstly, only large organisations or countries with substantial wealth and investment will be able to cope with this change; and secondly, unemployment could rise significantly as jobs are replaced.
Taking the first of these two points; the United States (developed) and China (developing) have already amassed the wealth, talent, market share and data to drive AI forward. The challenge will be for other countries around the world to develop relationships with those countries supplying most of the AI software.
The second point is more interesting as it builds on a world of human behaviour where change, even if the ultimate outcome is uncertain, is the new norm.
People will need to be retrained or educated in tasks that AI tools are not so good at, such as creativity, planning and ‘cross-domain’ thinking. Professional service firms will value highly those individuals with strong leadership, people and interpretation skills. However, if society is to avoid largescale unemployment it may need to intervene. We are already beginning to see that happen, with India in July this year banning driverless cars to protect jobs.
The new jobs of the future could be the ‘service jobs of love’ or volunteer jobs involving spending time with people, for example, accompanying an older person to see a doctor, mentoring disadvantaged people. The funding of this is a separate debate which inevitably could lead to higher taxes to fund a social welfare need.
There is no doubt that AI and machine learning will not only change the way services are provided to clients, but also the mix of skills required within professional service firms……it is only a matter of time.
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