Invest in generative AI to catch the next productivity wave.
The past quarter century has been a success story for global productivity. Yet amid this global revolution, many economies have experienced productivity stagnation.
In a recent McKinsey Live, leaders from the McKinsey Global Institute (MGI) and McKinsey Digital discussed the problem and what business leaders can do to turn the tide.
During the session, Olivia White, a McKinsey senior partner and director of the McKinsey Global Institute (MGI), shared insights from MGI’s new report, Investing in productivity growth. She was joined by senior partner and global leader of McKinsey Digital Rodney Zemmel, who shared insights on how to deploy digital technologies to boost firm level productivity, drawing on insights from Rewired The McKinsey guide to outcompeting in the age of digital and AI.
The Global Financial Crisis in 2007-08 marked a significant turning point in advanced economies, as productivity growth dropped sharply to around 1 percent, a rate at which it has remained since then. Two primary factors contributed to this persistent decline: a long-term decrease in investment and the end of two significant waves of productivity improvement in manufacturing.
Investments in generative AI, currently being adopted by organizations of all sizes and industries, have the potential to start a new wave of global productivity growth. The technology could add to the global economy the equivalent of $2.6 trillion to $4.4 trillion annually by boosting labor productivity 0.1 percent to 0.6 percent a year.
Capturing the enormous potential of gen AI is a tall order for any company. First, it requires an investment not in just a technology but an entire organizational ecosystem. Leading companies have stopped doing gen AI pilots, which proved difficult to scale. Instead, they select a business domain where gen AI could have a large-scale impact and make changes to the area’s operating model, data governance, incentives, people training, and more. The resulting robust ecosystem can serve as a starting point for scaling the technology across the enterprise. In addition, company leaders must truly understand the risks and potential benefits of the technology, build a baseline of competence in six interconnected capabilities, and put systems, people, and processes together in the most productive way possible.
With the slowdown of global economic growth, investments in productivity are more important now than ever—critical to continued improvement in living standards for an aging population, managing the energy transition, adjusting to supply chain reconfiguration and facing inflated global balance sheets. Companies that invest in and rewire for gen AI could be part of the world’s next wave of productivity growth.
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For more on the topic, read the MGI report Investing in productivity growth. A microscope on small businesses: Spotting opportunities to raise productivity growth, the McKinsey Quarterly article “A generative AI reset: Rewiring to turn potential into value in 2024,” McKinsey Digital article "The economic potential of generative AI" and the book Rewired: The McKinsey Guide to Outcompeting in the Age of Digital and AI.
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