Technology Outlook for 2018: when Artificial Intelligence becomes the Mother of All Technologies

What does 2018 hold for the economy and society in terms of big tech and business trends? The World Economic Forum, which is taking place from January 22 to 26, 2018 in Davos, has long been a privileged place for such reflection and forecasting. At Roland Berger, we believe that the rise of Artificial Intelligence will continue to shape the global agenda in 2018 and beyond, but differently than before.

A little more than two years ago, Microsoft declared that 2016 would be the year of Artificial Intelligence (AI). There has indeed been a turning point in the general craze for AI. We marveled at the prowess of AlphaGo Zero, which plays without having memorized parts of the game beforehand, and we were frightened by the idea that algorithms will eventually destroy millions of jobs. Meanwhile, the term "AI" has become a magic formula, which all companies must claim to master (even when they don't) at the risk of finding themselves definitely old-fashioned otherwise. This is the beginning of "AI washing" which certainly has a bright future. So, between spectacular Star Wars-like achievements and horror scenarios à la Elon Musk and Stephen Hawking, what can we actually expect from AI, in 2018 and beyond?

In 2018, AI will enter its industrial era
First of all, we need to get used to the idea that AI is not a buzz-word, but a long-term, deep trend. Today, organizations and governments are confronted with an abundance of new technologies, which can be explained by an abundance of cash on a global level. In less than two decades, three waves of technological disruption have swept across our economies and societies. The first one concerned hardware, with IBM, Apple and Intel as the big winners. The second one centered around the development of software and operating systems, which Microsoft largely pioneered. The third one was supported by smartphones or Apple's iPhones that have since become the remote control of our lives. Today, we are about to enter a fourth wave, which will combine existing hardware and software, fueled by powerful AI. One figure provides an idea of the scale of this wave: between January and November 2017, companies have completed around USD 21.3bn in mergers and acquisitions related to AI worldwide (source: PitchBook).

But AI is not a just new technology, or a mere layer of innovation in addition to that of digital. AI is becoming the leader of all technologies. And this is the reason why its potential impact is huge, and yet difficult to grasp.

AI has started to feed into other technologies – such as IoT, robotics or blockchain – as well as it gets fed by other tech development (quantum computing, chips…). In 2018, AI will enter its industrial era: it will be combined with existing technologies and hardware solutions, incorporated into product development and production processes, and thus will have much bigger implications for the day to day business of companies as well as for society.

Within 10 years' time, more powerful AI will lead to a major tech revolution
It took 10 years between the launch of the first mobile phones and the arrival of smartphones, which have changed our lives. 10 years for the developers to work, for the market to get structured, for an industry to grow. We are now entering this phase for AI. Many of the current use cases still rely on relatively simple deep learning technologies (also called backpropagation, a 30-year-old technology that had lacked recognition due to slow computers and little data availability) where a machine is fed with hundreds of images to recognize a cat, for example. This is also what fosters the strength of the American and Chinese tech giants because the current technologies are so dependent on data, making people doubt the importance of the actual, massive revolution that is going on.

But as we are gradually moving from deep learning technologies to machine reasoning and genetic algorithms, there will also be progress in the development of new forms of AI solutions and technology, such as personal, portable AI devices which will be heavily disruptive.

These new personal assistants will not necessarily be connected to the internet but will feature new protocols and peer-to-peer technologies. They will be intuitive, relatively inexpensive for consumers – thus a mass product – and able to protect their privacy. They will re-empower consumers and help traditional companies regain direct access to them (e.g. an apartment owner will be able to connect directly to his short-term tenant whereas Airbnb manages everything for him today). Hence, current monopolies will be shaken up. The end of the tech monoliths and the end of platforms such as Uber/Airbnb might be nearer than we think…! In the meantime, the race for the next trillion dollar company has started.

The global race for AI has just started…
For all these reasons, the progress of AI has developed into huge political issues. What is at stake goes beyond business. Just as we were once fighting for land and resources, there is now a global technology battle. In September 2017, Russia's Vladimir Putin said that "the nation that leads in AI will be the ruler of the world". China declared AI a national priority in July 2017 and just announced a EUR 2bn investment into an industrial park for AI in Beijing, with the aim of attracting 400 companies. U.S. Fortune 500 companies (and especially the GAFAM) are pushing AI analytical tools into all major industries. Besides, the Trump administration blocked the sale of Lattice Semiconductor (AI chips are now considered strategic) to a Chinese-backed investor on national-security concerns. As for Europe, it definitely holds a strong card, too, with a lot of deep tech knowledge, and major hubs in Switzerland, the UK, the Nordics and of course, Berlin and Paris.

Companies, governments, researchers, investors and the civil society – whose leaders are about to gather in Davos – must collectively address this topic. AI will be part of mankind's future; a future that we need to own. The World Economic Forum 2018 is definitely the right place to start for collective thinking on AI.