An Enigma Called Automation — Is There a Concealed Goldmine Behind The $160 Billion Glitter?
$160 billion! That is the market size of the Industrial Automation industry. While this is impressive on its own, are we overlooking its true potential by relying on a popular urban legend in economics? It’s time for a disruption.It’s the American dream, you dig?
The 1950’s was known as the golden age of consumerism. The global economy was largely dominated by the United States. World War II was over. It was a time for rebuilding and growth. The general assumption about this era is that more government spending led to more jobs. No longer diverted by war, veterans returned from the front lines and together with others back home, joined the workforce. Many believe that more people in the workforce resulted in more productivity. This in turn led to a greater amount of goods and services produced. Gainfully employed masses opened up their purse strings and spent more.I didn’t change. I just see things differently.
But the real issue is, we’re not asking the right question.
As the world’s population grew, did we get richer, spend more, and fuel the economy? The answer to this is no. Let’s look at the growth of world GDP and GDP per capita (per person) through the ages.Curiously, around the 1950’s — 1960’s, world GDP and GDP-per-capita saw hockey stick-growth; not proportional to population growth.
So it’s not the size of the population that matters. What is responsible for this incredible growth from the 1950’s-1960’s?It’s ‘I, Robot’…not ‘We the People’.
Heightened productivity in the ’50s and ’60s is the reason for astronomical GDP and GDP-per-capita. Critical drivers for growth are — industrial robots and large-scale automation. Not the number of people available to work. In fact, more automation nurtures greater wealth and quality of life for a country. This is applicable even today. The appeal of lower-cost manual labor has lured many a manufacturer to other shores.But does low-cost labor = more productivity?
Take a look at the chart depicting labor costs vs. manufacturing output per person (productivity) in India, China, Germany and the US.Why settle? What’s our BHAG?
Our Big Hairy Audacious Goal. $160 billion spent on industrial automation with $48 billion on industrial robots is great. The global market for industrial robots alone is estimated to reach an impressive $5 billion by 2024 (Markets and Markets report). With a healthy CAGR of 9.2%, we’re on a good path to progress. But in contrast, another innovative market — the app and internet economy — is growing at 37% CAGR! (App Economy Report, App Annie).How can we disrupt the industrial robot and automation industry to realize its true potential?
“All disruption starts with introspection” — Jay Samit.
While $160 billion is spent on industrial automation, the world spends $15 trillion on manual labor wages.A large portion of these tasks are repetitive and require only low-level skills. The U.S. alone spends $1.5 trillion on manual labor wages.
As you sow, so you ROI.
Two-thirds of upfront costs in an automation implementation is due to customization.Also, market and customer demands are constantly changing. The days of Henry Ford’s “You can have any color as long as it’s black” are over. In an era of hyper-personalization, manufacturers must stay agile. Any more changes may need more customization — which means recurring costs.
Currently, it is easier to estimate ROI with manual labor versus robotics due to many reasons —
- Varying Object Sizes, Shapes, and Configurations: Manufacturing involves a variety of objects that need to be assembled together. Robot arms today do not “see” what they pick up and cannot adapt to even minor variations in the placement of objects or configurations. Only manual labor or expensive custom solutions can work in these situations.
- Manual labor is easier and less expensive to train: Due to mass manufacturing, there are more SKUs to manufacture and product lifecycles are shorter. What’s trending today might not be in just a year’s time. Re-configuring and re-caliberating these large industrial robots for minor changes is very time-consuming, expensive, and can slow down production.
- Even “Smart” robots require expensive customization: Picking objects from bins and assembling them together is a very high-level task for the industrial robots today — and this activity constitutes a majority of the tasks required in manufacturing. The solution is only expensive customizations — which affects the bottom line.
- Healing Manufacturing’s Trillion Dollar Migraine (Part 1)
- Healing Manufacturing’s Trillion Dollar Migraine (Part 2)
About Cynlr
I am Nikhil Ramaswamy, CEO and Co-Founder of CynLr, with my business partner, CTO and Co-Founder, Gokul N A. We are a deep-tech and venture-funded startup looking to advance the field of robotics through next-gen visual object intelligence. Whether a curious investor, robot-aficionado, software and algorithm whiz or a combination of the above, discover more at www.cynlr.com.An Enigma Called Automation — Is There a Concealed Goldmine Behind The $160 Billion Glitter? was originally published in cynlr on Medium, where people are continuing the conversation by highlighting and responding to this story.