CEOs say AI is about to trigger a boom in productivity after years of stagnation: ‘It’s going to be explosive’

Good morning.

Is the economy on the verge of a productivity boom? From a macroeconomic perspective, growth in productivity has been well below historical averages for the past decade, putting downward pressure on growth and wages and upward pressure on inflation. But could that be about to change? Fortune discussed the issue this week in a virtual session with a diverse group of CEOs, held in partnership with McKinsey. All said they see signs of a new, technology-driven unlock in business productivity. Some excerpts:

From our clients, we are starting to see a much sharper focus and a higher degree of ambition in the last six months than we may have seen before. All of this requires a lot of change…to people, processes, tools, capabilities. But the catalytic moment has really been triggered by generative AI.”

— Asutosh Padhi, managing partner, McKinsey North America

We have a small content team and sell 0- to 10-year-old cars—hundreds of makes and models. We wanted reviews on all those cars. Its thousands of reviews and would have taken years for our content team to do. With generative AI, we got all those reviews done in about 90 days.”

— Bill Nash, CEO, CarMax

The consumer world and the enterprise world are colliding. In your personal life, AI is all over everything we do. Things that we never did in the enterprise world are becoming more and more acceptable. Video, augmented virtual reality, AI….That’s becoming very comfortable for the end consumer as well as for employees and clients in the business space.”

— Steve Bandrowczak, CEO, Xerox

We’re integrating investment management tools, financial planning tools and practice management tools in such a way that it unlocks the efficiency and effectiveness of the financial advisor to spend more time relationship-building with the client. What it will enable us to do is become not just a data-informed organization, but a knowledge-enabled organization…That productivity unlock is about two years away. And it’s going to be explosive.”

— Penny Pennington, managing partner, Edward Jones

“We are embarking on a huge business transformation project…which will touch every single aspect of our business. Our objective is to grow maybe another 30% with no net additions to headcount. It’s really not about eliminating jobs. It’s about freeing our people up from tasks that should be automated or in some cases eliminated in the supply chain.”

Kathy Mazzarella, CEO, Graybar Electric

The biggest kind of transformative change we’re really seeing is in the supply chain and in product placement…actually making sure that that item winds up in the right place, whether that’s the right store, the right distribution center, to get it fastest to the customer…The biggest benefit is going to be reducing markdowns, which will really impact profitability and gross profit.”

— Marc Rosen, CEO, JCPenney

The last decade was the free money decade with zero interest rates…When that happens, people get lazy. The world is obviously changed. Interest rates are much higher today, and that has all sorts of different impacts, in terms of…cost of leverage, cost of capital, and what that means for the future. So I think people are focusing on this because they have to.”

— DJ Deb, CEO, Francisco Partners

Our young workers are productive today, but I worry about the longer term. I worry this virtual workforce, this hybrid workforce will have an impact on productivity and, of course, [on] values and culture.

— Stan Bergman, CEO, Henry Schein

On that last point, it looks like Labor Day may have been an inflection point in the return-to-office saga.  Read more here.

Alan Murray