Exploring The Impact of Artificial Intelligence (AI) On Human Resource Management (HRM)
Exploring The Impact of Artificial Intelligence (AI) On Human Resource Management (HRM)
Lorenzo Milani, Dario Rahmati, Rizky Nurakbarianti & Philippe von Klitzing
London School of Economics, January 25th 2017
Project Genesis: bringing academic tools with real life case studies to help Oracle better understand the impact of AI
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Methodology: timeline, sequences and tasks of our project with Oracle on the impact of AI on HRM
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Background
Definition of scope Sector research Cases Field work Analysis
Sequences & Tasks
research
Learning around the Defining the scope Looking deeper into Evaluating AI per Aggregating primary Reviewing fieldwork
technology, gaining of the project and role of AI in each sector by finding and secondary results and industry
understanding on creating the overall sector & gathering real life and current information and analysis under
technicalities and structure in agre- information through cases where AI has establishing trends management
laying foundation to ement with Oracle various published been employed theories, connecting
build the project resources and 1-1 the concepts with
interviews the overall findings
Case & Sector
Sectors researched:
Analysis
! Logistics
! Healthcare
! Retail
! Finance & Banking
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Agenda
II. Literature Review: AI in the context of Innovation and Human Resource Theories
V. Appendix: Interviews
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State of Artificial Intelligence (1/2): an old concept being revived by business opportunities
1 Overview 2 Applications
• System that thinks and acts like humans and Embedded in a product or service to provide end-
rationally (Russell & Norvig, 2009) customer benefits, e.g.,
• Narrow AI: ability to do selected set of tasks
• General AI: general human intelligence
Product Netflix uses machine learning to predict
• Super-intelligent AI: intelligence exceeding human which movies a customer will like !
capacity accounts for up to 75% of Netflix usage
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State of Artificial Intelligence (2/2): AI transforms society and the business environment
Japanese insurance company, Fukoku Mutual Life Work directly with advancing
Insurance, replaces 34 members of its claims assessment Develop human- or life-like AI, e.g., AI technology, including
team with IBM Watson software emotion and feelings recognition, deep learning, predictive
augmented reality, robotics APIs, and Image and
KFC launches first AI-enabled outlet in Beijing to create
speech recognition.
more innovative and interesting dining experiences
Rethinking Humans
Nissan will use AI technology from NASA for their cars Core Technologies
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Agenda
II. Literature Review: AI in the context of Innovation and Human Resource Theories
V. Appendix: Interviews
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Literature review (1/3) – AI: human intelligence can be so precisely described that a machine can be made to simulate it
! "The art of creating machines that ! "A field of study that seeks to explain Mathematics
perform functions that require and emulate intelligent behavior in
intelligence when performed by terms of computational processes”
people" (Kurzweil, 1990) (Schalkoff, 1990)
Behavior
! "The study of how to make ! "The branch of computer science Philosophy
computers do things at which, at the that is concerned with the
moment, people are better” (Rich & automation of intelligent behavior”
Knight, 1991) (Luger & Stubblefield, 1993)
Innovation theory provides a framework to identify rationales behind the adoption of AI by companies
" “Innovation is a process of industrial mutation that incessantly revolutionizes the economic structure from within, destroying the old one
and incessantly creating a new one” (Sledzik, 2013)
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Four categories of " Product innovation; Creation of new types of products and
innovation " Process innovation; machines that perform narrow tasks,
(Tidd, Bessant & " Position innovation; Product
automation of manual processes #
Pavitt, 2001) " Product paradigm. autonomous vehicles
2 Delivering better customer service at
" Disruptive innovation:
creating a new value lower costs # AI learns about
proposition; Artificial Process customers and augments the
" Radical innovation: Intelligence capabilities of humans, virtual
Innovation & consumers benefit from a assistance
Competitive
product with higher quality; 3 Making use of unstructured data, seeing
Advantage
" Complex innovation: patterns in data that are not visible to
(Tidd et al., barriers to entry remain
2001) Insight humans # fraud spotting in
high; insurance, imaging analysis in
" Incremental innovations: healthcare
continuous movement of the
cost/performance frontier.
Companies that adopt AI now gain a competitive advantage: achieve operational efficiencies
well before others even have the chance to play catchup
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Literature review (3/3) – AI in the context of HR theories defines a framework to understand workforce transformation
$ Firm competitiveness derives from building $ Although the implementation of AI can be $ Knowledge Management can foster the
the Core Competencies. seen as a “quick fix”, the shift in knowledge creation of Organizational Memory in
and skills required by the workforce order to store important knowledge for
$ With the emergence of AI, Core creates a new work environment. current and future decisions.
Competencies for many businesses shift to
acquiring and best implementing new AI $ Knowledge Management practices can foster $ The workforce will contribute to this
technologies for their needs. the creation of relevant skills and “database” and grow because of it,
knowledge to enhance the workforce in leading to a more specialized,
$ Although AI can be imitated by competitors, implementing and working with the new AI knowledgeable and highly skilled
it becomes a Core Competence in the way it technologies. workforce.
becomes implemented and integrated in the
business and in the workforce. $ The efficiency improvements granted by $ AI technology will aid in the formation of
AI technologies will allow more this “collective memory” as knowledge
$ Therefore, as a result of this, there is a employees to focus on capturing new and tasks become more easily
change in the skills and knowledge required knowledge, which will support accessible.
by the workforce. differentiation.
$ Furthermore, as the technology develops,
AI can itself become a depository and
user of this idiosyncratic knowledge.
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Agenda
II. Literature Review: AI in the context of Innovation and Human Resource Theories
V. Appendix: Interviews
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FINANCE Case Study (1/2): AI responds to a need to pursue lower costs and increase in the usage of data…
Processing ! Accenture study reports a record high $22 Billion figure for global A series of AI-backed chat bots
power ! investment in Fintech for 2015 that can handle conversation
1 and assist bank customers with
Cost " ! Overwhelming amounts of data and information require computer
Data ! aid as success relies on speed, accuracy and volume capability day to day activities.
! Young and mid age demographic are more comfortable with mobile
The Tech and tech which is exactly who financial institutions are targeting
2 ! This demographic trusts tech companies and technologies such as
Generation AI based financial search
AI more than banks engines that gather data and
use NLP and other AI
! Cost reduction in processes that are “people-heavy and content-
light”, a description that fits well with bank tellers technologies to interpret and to
Cost ! A 40 man-hours financial analysis done by highly paid financial create meaningful information
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Reduction analysts with average salaries around $350,000 within few for investment decisions.
minutes through its AI analytic engine
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FINANCE Case Study (2/2): …and its impact on HR seems to be important in the long-run
1 shape of work engineers and progr ammers, a level similar to Fac ebook and
therefore higher IT costs plus increased
larger than payroll of Twitter (Business Insider, 2015)
high skill IT workforce.
McKinsey’s report in 2013 “Change management is key in next few years as companies will
…reshaping the suggests 110 million full-time automate and r emove people from work flows, ther efore understanding
4 skills sets needed workers to be displaced as a the phases, where the impact lik ely to be and having concrete plan is
in this industry result of AI and robotics key to retain people within or ganization for new roles which is the cost
banking by 2025. effective way.” – David D’Souza Head of Engagement CIPD
AI in Finance
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HEALTHCARE Case Study (1/2): AI responds to rising demand & costs of supplying healthcare…
Increase in ! More chronic diseases that were once fatal (e.g. HIV/AIDS); Analysis of unstructured data
demand diseases related to Western lifestyles (e.g. diabetes) (e.g. symptoms, medical
1 records) to help clinicians in
for ! Ageing population: the population aged 65 or above in Europe is
healthcare projected to rise to 224 million by 2050 developing treatment plans
with the highest probability of
! Patient-centered healthcare: diagnosis, drugs to devices will be success
Quality of custom designed to integrate into a patient’s daily life
2 Using big data and
healthcare ! New treatment methods with better outcomes result in shorter
algorithms, the drug
admissions discovery process is reduced
and improved
! Expensive new technologies and treatment methods: the health
benefits that are subsequently realized are diminishing compared Virtual medical assistants
Rising
3 to the associated costs analyze symptoms, give out
costs
! The global shortage of medical workers and allied a list of possible diagnoses,
health professionals drives up the costs of healthcare provision and guide users toward next
steps for their care
! Wearables can constantly collect data, which serves as the basis The combination of AI and
of the medicalized quantified self precision medicine can
Increased ! Digitized and decentralized doctors: improved connectivity and predict what will happen
need for miniaturized diagnostic technology means accessibility and within a cell when DNA is
tech- convenience for future medical consultations altered by genetic variation,
nology ! Medical robots and AI create more efficient healthcare platforms whether natural or
that are powered by the insights of data analytics therapeutic
(Source: CBInsights, IBM, Google DeepMind)
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HEALTHCARE Case Study (2/2): …but its impact on workforce and HR remains limited
“[AI technology] has not yet been applied “So far AI has not entered wide scale use and so
The use of AI is enough to be able to assess its impact” its’ true impact [on workforces] is yet to be
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still limited Dr. Christian LOVIS, Head of Medical understood” – Guy MARTIN, Clinical Researcher for
Key takeaways from interviews and field research
““I don’t see an impact in a 5 years’ “The use of AI will have [a] limited impact upon recruitment
AI’s impact on visibility. It will and has already but there will be a need for IT professionals to support
recruitment
3 impacted education, but this is more in AI, which may be difficult to recruit given their shortage,
processes is
simulation than in AI” – Dr. Christian and subsequent demands on pay and conditions” – Guy
growing…
LOVIS MARTIN
…reshaping the “Skills include technical learning to “We may need to ensure that people do not over-depend
skills sets better use the decision supports, and on technology, and use any new technology to augment
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needed in this skills to tackle legal/ethical issues” – and improve existing medical knowledge rather than
industry Dr. Christian LOVIS replacing them” - Guy MARTIN
AI in Healthcare
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RETAIL Case Study (1/2): AI offers solutions to the changing competition and consumer’s demand in the industry …
! Customers have increased availability and accessibility to IBM Commerce Insights and Watson
Customer information Order Optimizer monitor information
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expectation ! As a result, they demand unforeseeable level of personalization in (e.g. weather) purchase rates and
terms of products and services offering consumer behavior, to generate
optimal inventory plans that meet
! Retail value chains has become more complex and variable,
Complexity customer requirements and avoid
especially as retailers grow bigger and expand globally
2 in supply
! Overseeing logistics by considering the impact of many factors out-of-stocks
chain
(e.g. weather) can be time-consuming
The use of AI, machine learning and
! Retailers are increasingly integrating distinct channels – store, natural language processing to
catalogue, e-commerce, mobile – into one coherent customer interact with customers, respond to
Omni-
3 experience their queries and offer personalized
channel
! Consistency in terms of holistic, personalized experience must be recommendations
maintained across all sales channels
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RETAIL Case Study (2/2): … and there appears to be some impact of AI on the industrial workforce.
“Major retailers are already employing AI technologies or actively exploring them… AI adoption is in early
AI adoption is in
1 stages and most retailers are being quite secretive about their AI forays”
exploratory stage
– Carol SPIECKERMAN, President of Spieckerman Retail
Key takeaways from interviews and field research
“As with any disruptive innovation, there will be a transition period and current people-powered
Changes in processes will stay in place or be modified. Down the road, some jobs will go away, others will be
2 workforce created, but regardless, overall workforce reductions should absolutely be expected…” – Carol
SPIECKERMAN
! Inventory manager: less focus in planning resources allocation, and more focus in understanding
Implication on
and executing the optimal inventory plan generated by AI into action
3 supply chain
! Purchasing manager: leave AI to do the repetitive task of screening and ordering from suppliers, shift
management
more of their focus in making strategic and tactical purchasing decisions (River Logic, 2016).
“What AI does is help marketers focus less “We’re already seeing some retailers minimize or
Implication on on tedious day-to-day task and more on eliminate chief marketing officer roles for example,
4 marketers the bigger picture, delighting the customer” in favor of newly-created titles that focus on overall
– Harriet GREEN, General Manager of IBM customer experience” – Carol SPIECKERMAN
“Ultimately, then, a lot of the repetitive tasks in retail will “…require retailers to also re-think and
go away. And we’ll be looking for a totally different kind of upgrade skill standards for store-level
Implication on
5 individual to work in stores – dynamic, creative, employees … [The non-routine] tasks
sales assistant
expressive and outgoing” – Doug STEPHENS, founder of that remain, therefore, will require more
Retail Prophet skill” – Carol SPIECKERMAN
AI in Retail
Real-time Product Targeting Location-based Marketing & Multichannel Marketing Real-time Pricing & Incentives
Analytics
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LOGISTICS Case Study (1/2): The current state of logistics and the implementation of AI…
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LOGISTICS Case Study (2/2): …and the impact on the Workforce and HR through the lens of two companies
The 2016 LTR details new technological trends, “In my work the applications of AI technology are very limited
View of Artificial including specific AI that are being adopted in the (…) but we can recognize the use of AI in the management of
Intelligence industry as well as social and business trends that documents from other departments” – “We primarily use OCR
influence and are influenced by new technology. Technology” – Luca BRUZZO, Owner of Seatrade
New trends such as De-Stressing the Supply Chain and “Beyond the sorting of documents, the human element in the
How do HR negotiations of rates and logistics organisation is fundamental” -
Fair and Responsible Logistics require new creative
practices
skills. But ones such as On-Demand Delivery can put “Although bigger companies (…) try to lower cost by automating,
change?
stress on the workforce and a reactive HR framework. they actually have to hire new personnel” – Luca BRUZZO
The human element is still prevalent for working in tandem with AI innovations. Whether it is for a new socio-business
strategy or for negotiating with clients and partners, “soft knowledge” and intelligent “know-how” is required from workers
Key Takeaways
in order to tackle various and very specific circumstances (cultural, social, political) (Kowalski et al. 2012)
The time and scale of new logistics trends though can put pressure on HR and the labor market
AI in Logistics
Cloud Logistics and Internet Digital Identifiers and Low- Fair and Responsible and Smart
AR: Vision Picking
of Things Cost Sensor Technology Energy Logistics
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Agenda
II. Literature Review: AI in the context of Innovation and Human Resource Theories
V. Appendix: Interviews
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Future trends and Recommendations: AI’s true impact will be seen in the mid- to long-term
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Thank You & Acknowledgments
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