There is a long-standing debate about growth in productivity in the United States.
Some experts argue that we have seen the end of productivity growth, and our workforce is entering an extended period of stagnation. Others believe the opposite – claiming that technology is primed to give organizations a significant productivity boost in the following decades.
AI is a transformative technology with the potential to impact the world on the same scale as steam engines and electricity. When businesses invest the proper time and resources into adopting AI-based technologies, they will see enhanced sales, productivity and workflows.
As with all groundbreaking technologies, however, productivity may be initially suppressed after the introduction of AI as organizations work to adapt to new processes. However, once businesses have a solid foundation, they will begin to see a resurgence in productivity.
If you are a distributor who feels like the costs of AI implementation have increased without a corresponding rise in productivity or return on your investment, you may feel discouraged. There is evidence to suggest that technology-driven productivity is on the rise. The US Bureau of Labor Statistics recently reported that labor productivity in the wholesale trade was up 5.7% in 2021 – the second highest output since 1987.
The COVID-19 pandemic accelerated digitalization across the economy. Now, we are beginning to see an upturn in productivity due to what many experts call the productivity J-curve.
What is the Productivity J-Curve?
Stanford professor and department director Erik Brynjolfsson describes the productivity J-curve as “the historical pattern of initially slow productivity growth after a breakthrough technology is introduced, followed years later by a sharp takeoff.”
Brynjolfsson suggests that as innovative technologies fall into mainstream use, there is a several-year period in which businesses must adjust their fundamental operations and workflows to adapt. During this adjustment period, productivity naturally falls. However, once a company learns how to use the technology to its potential, it will see a subsequent spike in productivity.
To reap the benefits of technology like AI, companies must go above and beyond the initial tech investment to build what Brynjolfsson calls “intangible assets,” which include fundamentals like new business processes, skills and workflows.
Building “intangible assets” includes:
- Training and reskilling talent
- Redesigning factories
- Revamping data infrastructure
- Creating data lakes to train and run machine learning models
- Integrating technology use into the core company culture
Cultivating the necessary operational changes and workflows is a necessary but time-consuming process. Some studies have found that adopting only fundamental changes results in a mere 21% chance of successful AI deployment.
Conversely, companies that successfully adopt AI as a core part of their organizational strategy raise their chances of success to 73%.
Distributors must invest considerable time and resources into building fundamental workflows and intangible assets to reap the benefits of the productivity J-curve. Thankfully, there is an opportunity to get ahead of the game. As Brynjolfsson points out, “Only about the top 10-15% of firms are doing most of the investment in these intangibles. The other 85-90% of firms are lagging behind and are hardly making any of the restructuring needed.”
You can build the assets necessary to thrive by adopting innovative technologies early and focusing on restructuring your organization to become a technology-first company.
How AI Drives Productivity
When AI becomes a core part of your daily operations, it enhances productivity across every channel. Some of the ways AI improves productivity and efficiency include:
Enhanced Analytics: AI can analyze distributor data to uncover valuable insights. An AI solution designed to handle the complexity of B2B information will be able to cut through noisy, unorganized data more quickly and thoroughly than a human.
Product Recommendations and Personalization: Artificial intelligence can centralize data from various channels, platforms and departments. Once your data is in one place, the system can find patterns use those insights to make relevant product recommendations and reorder suggestions across sales channels. With data-driven upsell and cross-sell recommendations, sales reps won’t need to have an in-depth knowledge of every SKU. Instead, they can use AI-powered suggestions to ensure customers have a positive shopping and buying experience.
Warehouse Operations: Artificial intelligence streamlines warehouse operations by tracking inventory levels, automating administrative tasks and enhancing fulfillment. By combining AI with internet of things (IoT) technology, distributors can gain real-time insight into inventory levels and automatically reorder items when levels get too low – so you don’t have to worry about unexpected stockouts.
Sales Productivity: Your sales teams won’t have to spend hours poring over sales reports or customer information to identify leads and opportunities. Instead, AI can track buyer accounts and alert sales reps when to reach out, who to contact each day, what to recommend during their call and when to remind customers of an upcoming reorder.
Employee Satisfaction: When you remove repetitive and mundane workflows from your employee’s daily schedules, they will be free to focus on the tasks they enjoy. With higher levels of automation and relevant sales recommendations, your employees will be more satisfied and productive.
McKinsey & Company estimates that by 2030, early adopters of artificial intelligence will see exponential growth from their technology investments. By investing in “intangibles” such as change management, updated processes and skill acquisition, you can take advantage of the productivity J-curve and enjoy higher profits and longer-lasting productivity gains.
Benj Cohen founded Proton.ai, a growth engine for distributors. His company’s mission is to help distributors harness cutting-edge artificial intelligence (AI) to drive increased sales. Benj learned about distribution firsthand at Benco Dental, a family business started by his great grandfather. He graduated Harvard University with a degree in Applied Math, and speaks regularly at industry events on the benefits of AI for distributors. Benj has been featured in trade publications including MDM, Industrial Distribution, and Industrial Supply Magazine. His company, Proton.ai, announced a $20 million Series A round of funding in 2022, led by Felicis Ventures.