Based here in the centre of Leeds, we are constantly reminded of the massive changes brought about by the industrial revolution. Leeds was at the heart of the multiple revolutions in manufacturing and continues to lead in digital technology and services today. I also have a personal interest in the subject. Other than being born and bred in Leeds, my father was an inventor, an electrical engineer and the introduction of electricity was at the heart of the later stages on the industrial revolution. 

The introduction of artificial intelligence (AI) into modern business is often compared to the uptake of electricity in the manufacturing process at the turn of the 20th century. However, this comparison goes beyond the simple replacement of one power source with another. Just as the shift from steam to electric power revolutionised factories, bringing about far-reaching changes in business organisation:- factory layouts, quality control, working conditions, and operational flexibility, AI promises to be a similarly transformative force in today’s industries. Let me explain: 

Electricity in manufacturing, more than a power source 

In the late 19th century, factories primarily relied on centralised steam engines to power their operations. These engines were connected to a complex system of belts, pulleys, and gears, which distributed mechanical power across the factory floor. When electricity first became available, it was initially used for lighting rather than as a direct replacement for steam power. The early adoption of electric power in manufacturing involved using electricity to light the factories and centralised electric motors to drive the existing line shafts, maintaining the old mechanical systems rather than rethinking the entire factory setup. 

The true revolution began when businesses recognised the unique advantages of electricity—not just as a power source, but to decentralise and streamline operations. Electric motors were increasingly placed directly at individual machines, offering precise control over production processes. This flexibility allowed for significant improvements in factory layouts, enabling manufacturers to design more efficient workflows, reduce labour costs, improve product quality and improve working conditions by eliminating the noise, heat, and pollution associated with steam engines. 

This transition wasn’t instantaneous; it took decades for electric power to become the dominant force in manufacturing. By 1929, electric motors were responsible for about 80% of mechanical power in American factories, a dramatic shift from the 80% dominance of steam power just a few decades earlier. This change wasn’t just about replacing one power source with another—it was about unlocking new possibilities in business operations, enabling manufacturers to increase their productivity, reduce costs, and adapt to new market demands more swiftly. 

AI, the modern equivalent of electricity 

Today, we find ourselves at a similar place with AI. Much like the early days of electricity in manufacturing, AI is currently being used to enhance existing processes—automating routine tasks, improving decision-making, and analysing data to refine business strategies. However, the real potential of AI, like electricity before it, lies in its ability to fundamentally change the way businesses operate. 

As Azeem Azhar notes, we are currently in a phase where AI is akin to the early use of electric drives connected to line shafts. Many companies are applying AI to improve specific functions, much like how early factories used electricity to drive existing mechanical systems. However, few have fully embraced AI’s potential to create entirely new classes of operations, products, and services. The businesses that do will be the ones to truly transform their industries, just as those that fully adopted electric power revolutionised manufacturing a century ago. 

The shift to AI will not only enhance efficiency and reduce costs but also lead to new business models and innovations that were previously unimaginable. Just as the introduction of electric motors led to the decentralisation of power and more flexible factory layouts, AI has the potential to decentralise decision-making, automate complex processes, and create more personalised products and services. This could lead to a significant reorganisation of businesses, much like the changes seen in manufacturing during the early 20th century. 

The broader implications of AI 

The impact of AI on the economy could be profound. According to McKinsey & Company, AI could add as much as $13 trillion to the global economy by 2030, potentially boosting global GDP by approximately 1.2% annually. Similarly, J.P. Morgan estimates that AI’s impact on labour productivity could surpass that of the internet and personal computers, with a projected increase of around 17.5% over the next two decades​ (McKinsey & Company, J.P. Morgan Private Bank). 

However, this transformation will not be without challenges. Just as the transition to electric power required new skills, tools, and ways of working, the adoption of AI will demand significant changes in the workforce. Jobs that are easily automated may disappear, while new roles will emerge that require advanced digital skills and the ability to work alongside AI systems. This shift will likely have a profound impact on employment, particularly in advanced economies where up to 30% of jobs could be affected by AI-driven automation​ (IMF , SpringerOpen). 

A new era of transformation 

The introduction of electricity into manufacturing was a transformative event that went far beyond simply replacing steam engines with electric motors. It brought about a fundamental rethinking of business operations, leading to significant improvements in efficiency, flexibility, and working conditions. AI has the potential to bring about a similar transformation today. While we are still in the early stages of this transition, the businesses that fully embrace AI’s potential—beyond simply automating existing processes—will be the ones to drive the next wave of innovation and economic growth. 

As with the advent of electricity, the shift to AI will require time, investment, and a willingness to rethink established practices. The full impact of AI may take decades to realise, but its potential to reshape industries and economies is already becoming apparent. The question for businesses today is not whether to adopt AI, but how to do so in a way that unlocks its full potential. Just as with electricity, those that lead the way in this new era of technological transformation will be the ones to reap the greatest rewards.