Future of Manufacturing Project

The Future of Manufacturing Project has become the premier platform for exploring the transformative forces shaping the manufacturing industry. At the 2024 event, David R. Brousell, MLC’s Founder, Vice President and Executive Director, delivered a powerful opening address that set the tone for the discussions and presentations to come. In his speech, Brousell examined the meteoric rise of AI technologies like ChatGPT, the growing global competition for AI leadership, and the profound implications for manufacturers. He offered data-driven insights, candid reflections on challenges, and practical guidance for navigating the AI-driven future. Below is a recording and the full text of his address — an essential read for anyone seeking to understand the opportunities and responsibilities that lie ahead for manufacturing and beyond.

Good morning, everyone, and welcome to the fourth annual Future of Manufacturing Project event.

Two years ago in Nashville, when MLC first devoted this event to examine the potential as well as challenges with artificial intelligence in manufacturing operations, OpenAI had just released the generative AI tool ChatGPT.

I had mentioned OpenAI in my talk that day, but little did we know what would soon be coming. ChatGPT took off like a rocket ship, capturing the imagination of the public, businesses, and governments, raising both aspirations as well as fears about the technology.

ChatGPT reached 100 million users in just two months after its launch, becoming the fastest growing consumer application in history at that time. Today, ChatGPT has a reported 200 million users.

ChatGPT became an inflection point for AI in general. The energy and momentum around AI in its many forms – IBM alone has identified seven types of AI — have not only continued but appear to be picking up even more steam. In the generative AI market alone, a flood of competitors has joined ChatGPT including Midjourney, Stable Diffusion, Bard, and, of course, Copilot, and others.

The amount of literature being produced about AI – and I use the term “literature” with an asterisk attached – is almost impossible to keep up with. Every day, it seems, there are multiple newspaper and magazine articles, research reports, case studies, government reports, product and service announcements, and conferences extolling both the virtues and warning of the challenges with the technology.

Huge sums of money are flowing into the AI market as nations earmark funds, announce national strategies, and set up organizations to capitalize on the technology; as technology and service providers produce new AI and augmented products and offer implementation methods; and as businesses assess the effect of AI on their competitive posture and develop their own goals and objectives with the technology.

As I said in Nashville two years ago, a worldwide competition for dominance in AI is underway – and it appears to be intensifying.

Here are a few datapoints to consider:

• In a report published in September, International Data Corp. predicted that AI would have a cumulative global economic impact of $19.9 trillion through 2030, representing 3.5% of global GDP by that year. Every new dollar spent on business-related AI solutions and services will generate, IDC estimated, $4.60 into the global economy, in terms of indirect and induced effects.
• Meanwhile, spending on AI is growing at double-digit rates. IDC estimated that worldwide spending on AI, including AI-enabled applications, infrastructure, and related IT and business services, will grow at a 29% compound annual growth rate between this year and 2028, reaching $632 billion in 2028. In terms of use cases, Smart Factory floor investments are expected to grow at a 32.5% CAGR in that time period.
• The number of AI patents granted worldwide rose 62.7% between 2021 and 2023, according to the 2024 Stanford AI Index Report. In 2022, China led global AI patent origins with a 61.1% share, significantly outpacing the U.S., which accounted for 20.9% of AI patent origins. In that same year, however, the U.S. far exceeded China in terms of financial investments. In the U.S., AI investments reached $67.2 billion in 2022, 8.7 times more than China.
• Announcing AI strategies has become commonplace among nation states. The U.S. has its National AI Initiative Act, a Presidential Executive Order on AI, and is in the process of standing up an AI Institute under the America Makes program.
• In China, well, we know there is much activity but getting reliable data is a challenge. For example, International Data Corp. estimates that China’s investment in AI will reach $38 billion in 2027. Meanwhile, a report in Yahoo Finance in September said that China’s AI industry could invest $1.4 trillion into developing the technology in the next six years. Pass the salt!
• On the other side of the world, the European Union has its AI Innovation Strategy, which calls for the creation of AI Factories across the European Union. Back in Asia, India has its AI Mission initiative; Japan’s Ministry of Economy, Trade and Industry has allocated $740 million to subsidize the AI computing industry in Japan; and South Korea has a plan to spend $6.9 billion by 2027 on artificial neural processing units and high bandwidth memory chips.

But one of the more notable announcements this year came from Saudi Arabia, which created a $100 billion fund to invest in AI and other technologies.

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Now, cautious observers, particularly those with a historical context, might say that all the posturing and the financial projections and investment numbers merely reflect an inflated state of expectations, a euphoria born of excitement about the shiny new car. We are in what Gartner calls a hype cycle that will, in time, deflate as the challenges of implementing and optimizing use of the technology become better understood and experienced.

No doubt there is some truth in this. As we know from the experiences we’ve had with other technologies, strategic, organizational, cultural, and human behavioral challenges govern whether a technology project will ultimately be successful. I myself have talked for many years about what I call The Absorption Gap – the time and effort required to go from implementation to benefit. It often takes much longer to get to benefit than we think at the outset.

Could history repeat itself with AI? Could we yet experience a third AI winter, after the two that occurred last century when expectations were disappointed?

Anything is possible, of course, but I wouldn’t bet on it. The foundational conditions that were lacking years ago to enable AI to take off – compute power, storage, communications bandwidth, sufficiently large data sets – have all been addressed. Moore’s Law will ensure that price/performance will improve, perhaps significantly, over time. And the unrelenting need to find new competitive advantage will compel companies to go forward into the known and, perhaps more importantly, the unknown.

My friends, the AI train is leaving the station – and you must be on it.

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The encouraging news is that aspirations with AI among manufacturers are strong and there is already some evidence that AI is, as they say, worth the squeeze.

Recent MLC research shines a light on what manufacturers are thinking about the use of AI in their operations.

Among the many findings of our new AI study, results of which were published in the Manufacturing Leadership Journal in August, perhaps the most important is that a majority of manufacturers, 55%, see AI as a “game-changer” in the industry by 2030, even though only 5% at this point in time assess their maturity level with AI in operations as “advanced”.

Perhaps propelled by this perception, 78% said they plan to increase spending overall on AI tools over the next 12 to 24 months, with

one-fifth expecting to increase their spending by more than 30%. Already, more than half are using GenAI tools such as ChatGPT or Microsoft’s Copilot, and more than 80% said they expect to increase the use of such tools in the next two years.

As manufacturers ramp up their AI investments, early indications about the impact and return on these investments are looking positive.

In July, EY, a member of the Manufacturing Leadership Council and a partner in the Future of Manufacturing Project, published the results of its first AI Pulse survey, which asked 500 senior leaders across industries in the U.S. about AI investments, impacts, and challenges.

The study found that senior leaders whose organizations are investing in AI have seen tangible results across business functions, including about three-quarters who are already experiencing positive ROI in operational efficiencies, employee productivity, and customer satisfaction.

Moreover, the EY study found that organizations that are committing 5% or more of their budgets on AI are seeing “outsized returns.”

And all of this is happening as AI continues to advance. This year’s Stanford report assessed that AI has now surpassed human performance on several benchmarks, including in image classification, visual reasoning, and English understanding. However, the technology still lags human capabilities in competition-level mathematics, visual common-sense reasoning, and planning, Stanford said.

I suppose that we can all take some comfort in those findings. We humans will continue to dominate – at least for the moment. We don’t know how fast AI will evolve and how capable and powerful it will become in the years ahead, but we know one thing for sure – with the amount of capital flowing into the AI market and the amount of effort being applied to its development, AI will not sit still.

As it continues to move, manufacturers have a host of issues to deal with to ensure that AI is used effectively to advance their organizations’ business and operational goals, and in a responsible manner.

Once again, MLC research spotlights some of the challenges.

The top concern, say 68%, is around data – quality, contextualization, and validation. More than 40% also identify AI skills and AI business case development as issues. Sixty-six percent say they do not have a specific set of metrics to measure the effectiveness and impact of AI implementations at this time.

This all goes back to that single digit finding I mentioned earlier about maturity levels with AI. The question is: what will it take to accelerate adoption and use of AI in operations and enable companies to climb up the maturity curve?

The easy answer is time, money, and persistence. But there’s a bit more to it than these three foundational elements. Please allow me to offer a few recommendations:

First, I can’t emphasize strongly enough about having a vision for what you want to do with AI. That may sound obvious, and it is on one level, but it takes a lot of thinking, strategizing and even soul-searching to craft an idea of what your company could be in 10 or 15 or 20 years.

So, think big about AI and what your company might be able to do with it. Think about the art of the possible. Think about growth and not just in what you are doing now but what you could be doing that’s new, innovative, and exciting.

At first, you will turn your attention to using AI to become more efficient, more cost-effective, faster. These are all important objectives, but don’t stop there. Imagine a better future.

And once you craft a business vision for the future – a vision that should be flexible enough to change when needed – make sure your AI strategy “functions as the fuel,” as Council member Deloitte says, for the business strategy.

Second, keep up with the evolution of the technology. There is a lot of energy and momentum around AI, as I have detailed, and new developments are occurring frequently. The technology must be monitored and understood, as well as the rules, laws, and regulations that will govern its use. Designate someone or a specific business unit in your company to keep track of developments to understand their potential to help your business.

Third, don’t try to go it alone. Plug into the community. MLC is here to bring together your fellow manufacturers, technology and services providers, academics and research organizations, and sister groups such as the IRI, CESMII, and MxD so you have access to a robust community for help.

Fourth, work on the metrics. Experimentation with AI is necessary and important, but the laws of business must be served. Find, adopt, and use ROI models to prove return so that investment continues.

Fifth, it is essential to take a human-centered approach to AI. Bring people along by showing them the benefits and being candid with them about the challenges. Change management and training are key.

Taken together, these simple, common-sense tenets can help you navigate your journey with AI.

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What we do here today, and what you do after this conference when you go back to your companies, will help propel the manufacturing industry forward.

But our responsibility is greater than just our own industry. AI has not only the potential to reshape manufacturing but society itself. As it has many times throughout history, this industry is playing a vital role in deciding what the future might look like. Once again, the mantle of change lies at our feet.

I would like to close with a quote from a book called “The Age of AI And Our Human Future,” authored by Henry Kissinger, Eric Schmidt and Daniel Huttenlocher:

“The advent of AI, with its capacity to learn and process information in ways that human reason alone cannot, may yield progress on questions that have proven beyond our capacity to answer. But success will produce new questions … Human intelligence and artificial intelligence are meeting, being applied to pursuits on national, continental, and even global scales.

“Understanding this transition, and developing a guiding ethic for it, will require commitment and insight from many elements of society: scientists and strategists, statesmen and philosophers, clerics and CEOs. This commitment must be made within nations and among them. Now is the time to define both our partnership with AI and the reality that will result.”  

Thank you and have a great conference.

 

About the author:
David R. Brousell is the Founder, Vice President and Executive Director, Manufacturing Leadership Council

 

Photos by David Bohrer / National Assoc. of Manufacturers