It was not long ago that the idea of Artificial Intelligence was relegated to science fiction and philosophical exercises. Though early forms of AI have been integrated into our lives as long as computing has, it was assumed that we were generations away from a machine with true intelligence. Now everyone from tech industry giants to the media, to your cab driver is obsessed with the Artificial Intelligence (AI) Industry. It’s not difficult to see why; with the explosion of innovation, investment capital, the sheer number of companies the global AI sector has grown at a rate that few others have.
In that, the past three years the global AI industry revenue has grown from $3.2 Billion to $11.2 Billion and is expected to reach $89.8 Billion by 2025. Governments worldwide are competing to attract, retain, and create essential talent to work on this problem, generate revenue and win the global tech race. For economic developers, the question of how to approach this industry, or even if doing so makes sense for their regions, to begin with, has many facets to consider. In the first segment of this two-part blog series, we will look at what AI is and how to identify companies that would be appropriate for your region.
The Ultimate Question
With all the buzz, it’s hard to imagine that so few people really know what AI is. However, the confusion is widespread as evidenced by a study reported by Forbes in March showing that nearly half of the supposed AI-focused tech start-ups in Europe that received recent funding had been misclassified as they showed little to no evidence of AI being used in their product.
So what is it? Artificial Intelligence is the broad concept of machines that can think or perform smart functions. In many ways, we can think of companies working on AI development as constantly approaching an asymptote of truly independently minded machines, with each generation moving away from a simple data input – transformation – output model towards layered processes. These technologies can identify their own salient data from a stack of information and then transform that data for multiple purposes, producing results that could generate insights, and even learn over its lifetime to predict results. In this way what we consider AI has evolving criteria, with some early versions of the technology becoming so mundane that we hardly notice how they are now integrated into our lives, such as in the fields of data analytics, natural language processing, and image recognition.
Now that we have a bit of an understanding of what AI is, we will spend time on why economic developers should be pursuing this industry, and what kind of regions will have the best success.
Identifying AI Companies That Fit Your Region
Not every region can offer the same value proposition as Silicon Valley, but that doesn’t necessarily mean that there isn’t enough of this pie to give others a taste. One thing often forgotten about the AI industry is that it has many faces. Every day, new start-ups appear on the scene, trying to create intelligent machines to solve a different problem. From marketing to manufacturing, from accounting to fashion, there are AI companies looking to streamline processes, disrupt industry standards, and revolutionize operations. While at their base, all of these companies will require individuals trained in mathematics, engineering, and computer sciences, many will also need support in other fields. For example, climatology, linguistics, law, or marketing are all side industries that some AI companies are sourcing talent to help build their models.
To this end, it would serve EDOs well to stop thinking of AI as an industry category unto itself, and instead view them as support and feeder services within the fields of their specializations. For example, if your region has traditionally attracted automotive producers, targeting AI companies in the autonomous driving or vehicle repair and diagnostic field makes sense. AI companies focused on medical applications will need environments where medical researchers are present, those that focus on smart automation for manufacturing might prefer to be in regions where their customers are abundant. There is even the Agri-AI sector to consider for rural regions that could act as testing grounds for everything from automated irrigation to full crop cycle solutions.
Eating an Elephant One Bite at a Time
Just as we can divide the multifaceted AI industry into their sectors of focus, we can view AI companies on a micro level as being organizations with distinct functions or units. For some areas, it may not be realistic to try and target the technical side of these companies. If your region’s value proposition is not particularly geared towards STEM and R&D, you can still get a piece of the AI pie by finding companies that need support services.
A company operating in a more expensive region for its product development may need satellite offices for HR, accounting, or sales and marketing departments with lower costs. Obviously, here you would be targeting companies that are further along in their lifecycle and have reached a certain size where splitting up business units would make sense. These companies will have already brought their product to market and would likely have at least 100 employees.
A natural question would be why you would target AI companies at all if you can’t get the tech component. Getting your foot in the door with companies at the forefront is a good way to not only attract the investment and jobs in the short term but to build and nurture a cluster in the long term. Once applicable tech companies set up peripheral services and satellite offices in your region, you can begin to focus on building the kind of talent and environment that would encourage them to expand their presence in your region, and attract other similar companies to do the same.
Be sure to follow us for Part 2 of our Economic Developer’s Guide to the World of AI, where we will look at major AI hubs and how your region can attract growing AI companies.
For assistance in developing your region’s AI attraction strategy and generating leads in this industry, please contact our team.