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By disrupting its own industry, Ocado has proven the power of automation

4 Oct 2018

This article first appeared in City AM.

Further evidence of automation’s benefits has emerged this week following the news that online retailer Ocado’s revenue jumped by 11.5 per cent in the last quarter – largely thanks to the automation of its warehouses.

The effects are unquestionably positive, with the average number of orders processed by the firm reaching 283,000 per week. Its fourth automated fulfilment centre opened this summer in Erith, taking three months to process 20,000 customer orders.

By comparison, its non-automated Andover warehouse took well over a year to reach this figure.

Naysayers will be fearful of what this means. According to this month’s Future of Jobs Report from the World Economic Forum (WEF), automation will make up 52 per cent of jobs by 2025, compared to 29 per cent today. The same WEF report suggests that within four years, everyone will need 101 days of extra learning per year to keep up. This rapid shift is a difficult prospect to comprehend.

But the bigger picture is far more positive, with Ocado trailing a path that will change the landscape for UK productivity.

On average, UK workers produce 16 per cent less than their equivalents in the rest of the G7, with workers in France producing more in four days than British workers in five.

This does not mean that the clichéd “robots will take our jobs”. Instead, the most successful robot designers will look at how best robots can interface with humans and enhance an employee’s ability to complete tasks.

It could be something as simple as a collaborative warehouse robot being built so that a human doesn’t have to bend down too far when reaching to stack items from it. This would barely save seconds in individual cases, but it could reduce the number of workplace injuries, and result in a similar boost in productivity and revenue as seen at Ocado.

The opportunities that excite early-stage investors are those that use artificially intelligent technology to turbo-charge productivity.

It’s particularly the agriculture and construction industries where intelligent machines offer the possibility of creating safer working environments, while taking over more menial tasks that reduce productivity.

Humans may hold less than half of jobs in seven years’ time, but there will be far more jobs to fill.

For 75m that will be lost, almost double – 133m – will be created. Job reassignment should not be feared, just as humanity has adapted to the challenges all forms of technology have previously presented.

Historian Yuval Noah Harari discusses this in his book, 21 Lessons for the 21st Century, referring to a farm worker laid off in 1920 due to mechanisation but who later found a factory job.

In 1980, factory workers could become cashiers at supermarkets. Cashiers are now being replaced, but will find new jobs in managing these machines.

A survey from the Brookings Institute found that many people remain fearful about automation. But it also demonstrated that most respondents were equally unaware about the opportunities it creates, and how it could actively help them.

I hope the Ocado news can shed a light on why automation is a future we should be excited for, rather than concerned about.