Westpac Industry Insight: Artificial Intelligence

Oh yes, this is the great transformer.

Businesses who adopt AI are likely improve their competitiveness, while those who don’t will struggle and face an uncertain future, according to a report by Westpac NZ’s Economics team.

Westpac’s Industry Economist Paul Clark says that AI is critical for firms who want to maintain competitiveness and improve their profitability. AI achieves this by increasing the adaptability and responsiveness of the firm to changing circumstances, boosting productivity, and delivering a sharper customer focus.

“Despite these benefits, most firms in New Zealand remain ambivalent about AI and are not pursuing it with urgency. In part that’s because most businesses in New Zealand are small and operationally focused.”

“Other barriers include an inbuilt resistance to change and a lack of trust in AI as a technology. There is also the technical challenge of having to integrate AI within existing systems and data architecture.”

“Education is key to overcoming many of these barriers, either to demystify what AI is or to alleviate concerns relating to job losses. Other steps include developing an AI strategy with clearly articulated goals, having the appropriate data governance frameworks and process controls in place, reskilling workers so they can work in an AI powered world, and having access to the appropriate AI integration tools,” Mr Clark says.

“Firms who do not adopt AI will lose competitiveness. Without a unique value proposition, we think it will become increasingly difficult for firms who remain tied to the past to match the productivity gains of those that adopt AI.”

“That said, as AI adoption deepens overseas and the competitive benefits of it become more widely acknowledged, we think more firms in New Zealand will look to AI for a competitive edge. That is likely to set off a virtuous AI investment cycle, which will intensify competition and generate ever greater levels of industry rivalry.”

“That competition will not just be about achieving supremacy over traditional rivals. AI will lower barriers to entry, allowing new market entrants and smaller firms from within the same industry to compete on a more equal footing with larger incumbents. We think that some larger firms encumbered by silo structures, defined hierarchies and legacy systems may struggle against these smaller AI powered rivals.”

“That is not to say they will not be able to compete. Large firms too have competitive advantages. While they may find it more difficult to completely embrace AI, they will still be able to apply it to specific end uses that deliver superior returns, leveraging off larger proprietary data sets to deliver hyper personalised customer experiences.”

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