Generative AI can unlock trillions of dollars in value in productivity gains for the global economy: McKinsey

A new report published by McKinsey & Company, The economic potential of generative AI: The next productivity frontier, finds that generative AI could add between $2.6 trillion and $4.4 trillion worth of annual productivity globally. It analyzes 63 new use cases across 16 business functions that could deliver those returns, which are comparable to the UK 2021 GDP of $3.1 trillion.

McKinsey estimates that, excluding the effects of generative AI, artificial intelligence, and analytics use cases could deliver $11 trillion to $17.7 trillion in value to the global economy annually. Adding generative AI to these use cases could increase that amount by 15 percent to 40 percent.

Future of work: Impact on work activities, occupations, and productivity

Enabling workers across the economy to use generative AI, even beyond the 63 use cases, could increase productivity by 0.1 to 0.6 percent every year to 2043, compensating for declining employment growth as populations age, the report finds.

This value comes as generative AI transforms work, augmenting the capabilities of individual workers by automating some of their individual activities. Generative AI’s current capabilities together with the capabilities of other technologies have the potential to automate work activities that absorb 60 to 70 percent of employees’ time today. Generative AI has accelerated previous McKinsey Global Institute estimates, where technical automation had the potential to cover activities occupying half of the time employees spend working.

While the pace of AI adoption is accelerating, these work transformations won’t happen overnight across the global economy. Although, they could occur quickly at a specific company or site. The rate of workforce transformation is set to accelerate. The report predicts that half of today’s work activities could be automated between 2030 and 2060, the midpoint of which (2045) comes a decade earlier than previous estimates from McKinsey Global Institute.

Lareina Yee, Senior Partner & Chair of McKinsey Technology Council, comments: “Generative AI has put the pace of workplace transformation on speed dial. Jobs are being re-imagined and industries transformed in a matter of months rather than years. It gives humans a new superpower, and our economy a much-needed productivity injection.”

Generative AI use cases and value creation across industries and functions

About 75 percent of total value potential of applying generative AI value will be realized in four business functions: customer operations, marketing and sales, software engineering, and R&D

• Customer Operations to personalize and automate: Generative AI could increase productivity at a value of 30 – 45 percent of current function costs. Use cases include enhancing self-service via automated channels and giving human customer care agents more targeted information to increase sales.
• Marketing and Sales performance to be enhanced: Marketing productivity could increase by a value of between 5 -15 percent of total marketing spending, while sales productivity could deliver value of 3 – 5 percent. Example use cases include faster content ideation and drafting, higher quality data insights, search personalization, and lead prioritization.
• Software Engineering will realize product production savings: The direct impact of generative AI on software engineering productivity could range from 20 – 45 percent of current annual spending. Productivity gains could come from reducing time to code, code correction, and market research for architecture solutions.
• R&D will realize product productivity gains: A productivity valued between 10 – 15 percent of overall R&D costs could be achieved with use cases including improving overall product quality, optimizing designs for manufacturing, and reducing costs in logistics and production.

Industries are being reshaped as generative AI is deployed at a rapid pace. Generative AI could deliver significant value when deployed in some use cases across a selection of industries:

• Outside of high tech, banks could realize the most value from generative AI, generating an additional $200 – $340 billion from increased productivity. Benefits include enhanced customer satisfaction, improved decision making and employee experience. And, could lower the risk of fraud through better monitoring.
• Retail could get a $310 billion from generative AI boost by automating aspects of key functions such as customer service, marketing and sales, and inventory and supply chain management. Enhancing existing AI solutions will also improve personalized customer offerings, optimizing marketing and sales activities.
• Pharmaceuticals and medical products industries could unlock $61 – $110 billion annually through generative AI’s potential to expedite the 10 to 15-year cycle that it takes a drug to get to market. Drug compound quality could be improved, and the cost of R&D lowered.

“These powerful tools hold immense potential for the global economy, especially in the face of demographic challenges. But generative AI language capabilities also pose risks, capable of both enhancing human interactions and causing harm through misunderstandings, manipulation, and conflict,” says McKinsey Global Institute partner Michael Chui.

“With generative AI technology evolving so quickly, business leaders must act swiftly to capture its value and manage its risks. Governments also need to stay on top of the technology’s progress to address its challenges and capitalize on its benefits. And with such a significant impact on the workforce, organizations will need to accelerate workforce planning and retraining, while employees should work to master its uses and acquire new skills, concludes Chui.”

The study is a collaboration between McKinsey Global Institute (MGI), McKinsey Technology Council, McKinsey Growth Marketing & Sales and QuantumBlack, AI by McKinsey.