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McKinsey’s Generative AI Report

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Mckinsey recently published their most recent report, discussing how to win with AI. At this point, there’s almost too much content coming out about AI.

I spent last month learning a new tool only for it to be superseded by another tool the following month. But the reality is, AI is still very early. Only ~9% of the population has even used ChatGPT.

Anyways, let’s dive into the report and I will do my best to dissect what’s important.

In a world where Global GDP is low; AI is medicine

The largest economies are most flat in real GDP terms. China, India, and the Emerging economies are growing in real terms but the gains are slowing.

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What McKinsey knows is that the shift to urbanization: moving farmers to metros and trading corn fields for computers is the primary mover of economic growth.

They finish this chapter on TFP (Total Factor Productivity) with the paragraph:

“If there is a common thread in our research, it is the vital importance of investment. In most places, capital deepening (that is, the growth of capital per worker) explained 70 to 80 percent of productivity growth over the past 25 years. Fully half of the drop-off in productivity growth in advanced economies is a slowdown in capital deepening. High capital deepening is also a key characteristic of emerging economies in the fast lane.”

People using AI is the move forward

I continue to see pundits saying AI will cause mass unemployment. By this logic, the computer would also cause mass unemployment.

The reality is every company, harnessing the power of the PC, now has a computer as table stakes. A world where everyone uses Microsoft Excel is normalized and we as a nation are back to even.

But McKinsey did a really interesting job of surveying GenAI employees vs. non-GenAI employees (whatever that means). There’s a huge divergence in things like managing workload and care for family. Additionally, I expect a number of the young stars at companies to advance with AI fast, leaving a lot of room for growth as executives need productivity gains.

Speed to Decision

The below is a mockup of varying welding helmets, which an employer generated in minutes. This mockup would have probably taken months of designing and taken 3-5 stakeholders before final creation.

Now, mockups can be sent to prospective buyers - where the owner gets immediate buy-in and user feedback. McKinsey estimates this would save $60B in productivity loss annually, I think it’s an understatement. Today, our firm creates thousands of images each month which are only the tip of the iceberg for usage.

AI = Customer Care

Customers are increasingly more important, as brands fight for their life to remain relevant. I found this point as pretinent as ever:

“Leading customer care organizations also understand that they need to engage with their customers to delight them. Currently, only 11 percent of respondents say reducing contact volume is important to them, a 20-percentage-point drop over 12 months. Indeed, 57 percent of leaders expect call volumes to increase by as much as one fifth over the next one to two years. Separate research suggests that these leaders are right to stay focused on direct personal interaction, even when many of their customers are young digital natives. In a recent McKinsey survey of 3,500 consumers, respondents of all ages said that live phone conversations were among their most preferred methods of contacting companies for help and support. That finding held true even among 18- to 28-year-old Gen Z consumers, a cohort that favors text and social messaging for interpersonal communications. There’s also evidence that younger consumers are getting tired of the digital “self-service” paradigm.

One financial-services company reports that its Gen Z customers are 30 to 40 percent more likely than millennials to call, and they use the phone as often as baby boomers. Premium-segment customers of all ages also prefer the phone, with many saying that live phone support is part of the premium service they are paying for.”

If you found this useful - have a look at the full McKinsey report here: https://www.mckinsey.com/quarterly/overview

That’s it for now, stay nimble.

Justin