Generative AI could add between $2.6 tn and $4.4 tn worth of annual productivity globally: McKinsey

Management consulting firm McKinsey & Company on Thursday said generative AI could add between $2.6 trillion and $4.4 trillion worth of annual productivity globally.

A new report published by McKinsey called ’The economic potential of generative AI: The next productivity frontier’, analysed 63 new use cases across 16 business functions that could deliver those returns.

These returns are comparable to the UK’s 2021 GDP of $3.1 trillion.

The global consulting firm also 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% to 40%.

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% 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, said the report.

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.

“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,” said Lareina Yee, Senior Partner & Chair of McKinsey Technology Council.

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

Generative AI could increase productivity at a value of 30 - 45% of current function costs. Marketing productivity could increase by a value of between 5 -15% of total marketing spending, while sales productivity could deliver value of 3 - 5%.

The direct impact of generative AI on software engineering productivity could range from 20 - 45% of current annual spending.

A productivity valued between 10 - 15% of overall R&D costs could be achieved with use cases including improving overall product quality, optimising designs for manufacturing, and reducing costs in logistics and production.

Generative AI could deliver significant value when deployed in some use cases across a selection of industries.

Outside of high tech, banks could realise the most value from generative AI, generating an additional $200 - $340 billion from increased productivity.

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.

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.

“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 Michael Chui, McKinsey Global Institute partner.

“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 capitalise on its benefits. And with such a significant impact on the workforce, organisations will need to accelerate workforce planning and retraining, while employees should work to master its uses and acquire new skills,” Chui concluded.

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