Why digital disruption could accelerate…

Asking one hundred or so CEOs for their definition of digital transformation would inevitably lead to more than one definition. Despite a probable proliferation of descriptions, an increasing number point to it as impacting their industries, with around half of executives confirming this, compared with only 15 percent in 2015[i].

Multiple technologies can be held up as transforming industries yet it is important to keep in mind that digital transformation is not just about adding new technologies or channels to existing organisations but rather about structural changes in the way an organisation operates. The two are related however; more than half of executives believe one of their biggest barriers to implementing digital technologies is their internal corporate culture.

A key component of this lies in skills and education. Some 70 percent of CEOs say they’re worried about the digital skills of their senior leadership team[ii]. In such instances delegating digital transformation to a CIO, for example, is unlikely to prove successful. It will take holistic executive planning and action that targets talent pathways, skills shortages and an aligned tech and overall strategy approach for digital transformation to succeed. This must include the entire workforce, not only are executives typically lacking in digital skills, nearly 6 in 10 of them believe their workforce isn’t ‘…sufficiently security savvy,’ enough to move forwards with digital transformation[iii].

Executives are often bombarded by the forecast of dire consequences of failing to digitally transform, and neither stalling out and irrelevance nor the efficiencies and new value propositions that can be unlocked by digital change should be ignored. Rushing blindly into digital transformation risks one of two unfortunate outcomes, however. The first remains the possibility of a lip-service grafting of new technologies onto old processes, structures and ways of thinking that does little to boost competitiveness or open new channels of business. The second is the lack of skills that mean that digital transformation without adequate cybersecurity could be a ‘…train wreck waiting to happen[iv].’ Some 1.5m cybersecurity positions are expected to go unfilled by 2020.

Organisations still to undertake digital transformation, or stalled part way on it, have a significant task awaiting. Attracting new talent now requires technologically savvy workplaces and ways of working, yet the implementation of such technologies requires a skill and talent base often lacking. This chicken and egg scenario necessitates the somewhat risky rebuilding of the organisation on the fly. Although a mainstay of strategic thinking and management articles for a while now, it is likely that the impacts from digital transformation are only just starting.

[i] https://connectedfutures.cisco.com/article/industries-in-the-cross-hairs-of-disruption/

[ii] https://www.strategy-business.com/blog/The-Need-for-Digital-Know-How-Starts-at-the-Top

[iii] http://www.eweek.com/enterprise-apps/dell-survey-suggests-how-automation-ai-will-change-workplaces-by-2030

[iv] https://www.linkedin.com/pulse/digital-without-cybersecurity-train-wreck-waiting-ralf-dreischmeier/?linkId=47157533


Insurance’s disappearing act?

The core model underpinning swathes of the insurance industry is shifting from the compensation of loss to the prevention of loss. This core shift has profound implications for insurers.

Enabling technologies, from the IoT to automation, and shifts in consumer expectation are common across almost all segments. Take auto insurance for example; many analysts forecast a drop off in the issuance of auto insurance given the emergence of self-driving cars but at the same time vehicle manufacturers are starting to assume responsibility at a product level. Effectively they are bundling insurance into their own product. It is even plausible that in many cases, insurance will only be sold when vendors package it with another service or product. The potential for significant disruption and drop off in traditionally core revenue stream, such as auto, is often highlighted; what is sometimes neglected is that the insurance need is shifting rather than disappearing.

There are clear opportunities to explore new and emerging revenue streams, some of which replace stagnating, or else failing, existing streams. Others however are entirely new. Rubica, for example, now offers individual cybersecurity insurance for personal customers that includes 24/7 monitoring, under the PURE insurance company umbrella. Their model is built on software and concierge services, both of which they believe will actively help to inform and educate their clients.

Doing different things – in this case offering new services – cannot be successfully done using traditional methods. Indeed, carriers will need to transform their business operations; doing so by 2022 could yield $375 billion in new revenue globally[i]. A.I is the obvious vector that will change not just the work insurers do but also what service they can offer their clients. Platforms, non-traditional intermediaries and ecosystems as well as value added services are also cited as contributory factors. Moves are already being made in this arena; Apple and Cisco have teamed up with Allianz to financially protect customers against cyber-attacks. As part of a broader package, Allianz will provide discounted cybersecurity insurance coverage to customers that use certain Apple devices and Cisco security products[ii]. The same insurer has also launched a JV with Chinese internet giant Baidu, to help customize products for individuals by accessing a wealth of data.

New opportunities also lie with the shifting nature of consumption and usage. By 2025, the European sharing economy could reach €570bn in transactions and €83bn in platform revenue[iii] (from €4bn & €28bn in 2015). The demand for accessible and customizable insurance will doubtless continue to grow. A.I will be key, but new skill-sets, new approaches and new mindsets are no longer optional for insurers. The underlying need and rationale for insurance is changing; insurance is becoming more ‘ambient’ rather than disappearing as well as shifting into new areas. Carriers need to ensure they are part of the evolution, rather than its victims.

[i] https://newsroom.accenture.com/news/insurers-that-transform-their-businesses-and-operating-models-could-see-us-375-billion-in-new-revenue-growth-accenture-analysis-finds.htm

[ii] http://fortune.com/2018/02/05/apple-cisco-allianz-cybersecurity-insurance/

[iii] https://becominghuman.ai/the-curious-case-of-sharing-economy-e2b401035a9a ?

Keeping pace or making peace? Our future with technology

In his MIT Sloan piece, professor Amit Mukharjee suggests that ‘…history warns us that mastering digital technology won’t determine which companies become corporate winners. Instead, making the necessary organizational and leadership changes will[i].’ One only needs to look at past failures such as Kodak to realise the merit of his words; despite developing digital cameras before anyone else Kodak was ultimately toppled by them because of its inability to shift its mindset and models. However, almost a third of businesses would appear to possess the Kodak mindset, and worry that technology rather than business needs will dictate their company’s future direction[ii].

Such a position suggests swathes of business are either passive in their technological exploration or perhaps too dependent on a given technology. More worryingly it suggests that some mistakenly conceive technology as strategy. Building a long-term strategy around a single technology is seldom a good idea yet there can be little doubt that technology is increasingly outpacing business, education, government and in some cases, consumers. The question we need to ask, then, is whether we are prepared to absorb the digital and automation revolutions, as organisations and perhaps even societies?

Organisations must also be careful not to fall into any of the gaps opening up between technological capability, their customers’ expectations and their own capacity. To give just one example, the traditional top-down model of innovative change is not only impossible for today’s fast-moving industries, it also constrains incumbents’ room to act.

Companies should also develop an early warning radar for the opportunities that technology could help create. Technology, or rather the strategic use of it, will continue to erode industry boundaries and craft new markets at the intersections of collision. At the boundaries of property, personal risk management and insurance, a nascent industry not owned by any of the above is set to redefine consumer wants. Will we need insurance when a water leak is identified as it is occurring and professionals immediately alerted to fix the problem? Perhaps we will, but not to the same extent as before. This is not something that new tech allied to an old business model alone can create, fix or mitigate; organisations wanting to play in this space will likely need to make huge changes to their organisational and business models to compete with future start-ups.

If we ignore silos and instead focus on outcomes, we realise the service world is full of possibilities. If we apply the same thinking to our organisations, we start on a path of accepting that organisational agility is a critical competitive advantage and a prerequisite for rapid tech turnover. The idea of keeping pace with technology is therefore a flawed one, as is the idea that we can ‘make peace’ with technology. Future leaders will need to embed, or at least implicitly acknowledge this, at the heart of their organisations. Leadership, technology, organisation (and business models) and future skills and talent all impact each other to such a degree that, from a strategic sense, you cannot look at tech in isolation.

[i] http://sloanreview.mit.edu/article/the-need-for-culture-neutrality/

[ii] http://www.digitalistmag.com/digital-economy/2017/04/24/how-smbs-benefit-from-future-technology-05044174

The repair economy

Current consumption habits and accepted obsolescence are fundamentally problematic for the environment and as several studies suggest, our humanity itself. The Economist Intelligence Unit has noted that 80 percent of customers demand new consumption models including subscribing, leasing and sharing.

Since 3D fabricating a broad array of products will create a new industry, it is likely a new ‘economy’ could also emerge. If built in obsolescence becomes questionable, the need for distribution centres, and indeed their very nature, will change. Repair components would ‘exist,’ only in cyberspace until required. As a step this is not far beyond current manufacturers (71% of the top 100 manufacturers) using 3D printing, some for rapid prototyping and others for production or custom parts.

3D printed products sell the license, not the copy (or distribution), creating a whole new business model, notes Futurist Gerd Leonhard. Indeed, the repair economy could ultimately blend some industries together and alter models as high-end design becomes mass market. Ultimately, and on a global scale, billions of people are emerging as first-time consumers, and leapfrog tech in emerging economies could mean different consumer evolution there versus mature economies.

4D printing meanwhile could evolve into an interesting recycling concept. ‘The elements for creating a “cradle-to-cradle” economy are here (one where there is no ‘grave’ or throw-away of items.). It is the killer app for 3D printing,’ suggests one MIT Sloan paper.

Thanks in part to the nature of this killer app, and the removal of the need to manufacture globally, some experts have suggested that 50 percent of manufactured goods could be printed by 2050 (or even 2040 under some scenarios)[i].

This could wipe out almost one-quarter of world trade by 2060 (or two-fifths by 2040 under another scenario). For sure, the economics for 3D-printing-based mass manufacturing don’t yet work out and it is true that 3D-printing remains but one useful enabler to respond to customer needs and wants. However, the future direction and potential of 3D printing in simplifying some structural economic and environmental factors would seem set.

[i] https://think.ing.com/reports/3d-printing-a-threat-to-global-trade/

Poisonous data

There is little doubt as to the primacy of data in today’s and future business models. Effective analysis allows us to do things more efficiently, as well as enabling completely new services. The risks in not creating data-centric business processes clearly outweigh those evident in utilising data driven strategies. There are a few reasons to suggest this calculus will shift dramatically, and potentially a lot sooner than many realise.

From 1 zettabyte in 2016 to 500 within the next three years, what to do about data in terms of volume, handling, authenticity and beyond, is central to future prospects. The sheer size of increase will lead to an average quadrupling of data storage demand, which in conjunction with a shift of data genesis towards companies (by 2025 60% of new data will be created by companies[i]) creates real structural issues for companies.

Organisations also need to examine their current data use model. Many industries and apps lack explicit consumer consent in how their data is used. Very few apps contain an equivalent of key facts as with financial service products, raising important questions of legality. When accepting terms on an app, no one reads the terms and this creates an unspoken legal risk that could upend all data reliant businesses unless proactively dealt with. This means many data models are open to huge disruption when, not if, it they are challenged in court.

Consumer awareness of what value their data carries will likely prompt this change, as opposed to privacy reasons. The WEF has already proposed the concept of a data bank account. A person’s data, it suggested, should ‘…reside in an account where it would be controlled, managed, exchanged and accounted for[ii].’ In addition, researchers at Microsoft have proposed that ‘…by 2027 a significant proportion of personal income is likely to be derived from the data people generate[iii].’

What data we hold and how we use it will be the life and death of our companies; the very data we use today could prove poisonous if misselling or similar can be proven using situal and contextual data. The risk of retroactive judgement for misusing data, whether reputational or legally, allied to sheer volume will likely create a need for regulated third party data aggregation, dissemination and marketplace formation. Proactively crafting consumer-centric data models and partnerships will not only mitigate the worst of any impending litigation or legislation but could act as an important pivot towards creating greater levels of trust by demonstrating to consumers that you are ahead of zero-sum legislation.

[i] http://www.business-standard.com/article/international/data-storage-demand-to-multiply-four-fold-by-2025-117070500271_1.html

[ii] https://www.economist.com/news/briefing/21721634-how-it-shaping-up-data-giving-rise-new-economy

[iii] https://www.forbes.com/sites/kevinmurnane/2016/12/07/future-tech-seventeen-microsoft-researchers-on-the-technology-of-2017-and-2027/#72c9a27a2bf8

A new retail paradigm

The evolution of mobile commerce, driven by consumer expectations, is set to upend several orthodoxies within the retail industry. Deep-seated change is now on the horizon.

This change will not only require a redesign of processes and organisation; it will require a new mindset that differs from even the recent past. Forrester has stated that businesses should look beyond serving customers in apps, toward a world in which boundaries between services break down to allow better experiences[i]. Customers, first and foremost, want problems solved – something that may go beyond an app. ‘Forrester expects the future will bring more openness, so that businesses can utilize real-time, multi-directional data sharing to deliver contextual experiences beyond specific apps.’ Despite this, only 4 percent of organisations say it is ‘very easy’ for their customer service operatives to access information they need and provide rapid service[ii].

As online and physical models increasingly blur, the need for all retailers to provide better customer experiences will rise. The response should include at least partial inclusion of drivers otherwise perceived as threats or challenges. Take the sharing economy, for example. In some cases, retailers are partnering with a range of sharing-economy services, driven by the desire to meet consumers’ changing expectations. Many examples are in-store but some exist online too. Nordstrom, for example, has begun utilising UberRUSH to provide same-day delivery in certain cities[iii]. This is important since 42 percent of consumers think three- to four-day shipping as fast – down 21 points in 1 year[iv]. Instant or quicker (i.e. anticipatory or predictive) could feature within a decade. Importantly, 42 percent of mobile shoppers have abandoned a purchase in the past year because shipping would take too long[v].

The evolution of existing technologies will also challenge incumbents and shape new business models. For example, social media influences 63 percent of electronic purchases[vi]. With the addition of VR (as Facebook is planning) and haptics, today’s social media could become tomorrow’s retail portals. Distributed social video, especially if linked to VR could form the basis of future mobile commerce. By 2019, 85 percent of net traffic could be via video and 50 percent of commerce via mobile[vii]. Unless incumbents adapt quickly to these opportunities and challenges, start-ups and tech companies will increasingly shape customer expectations and behaviours and provide them an outlet too.

[i] http://www.informationweek.com/mobile/mobile-applications/mobile-revolution-will-kill-siloed-apps-forrester-says/d/d-id/1324974

[ii] https://hbr.org/2016/05/tracking-the-trends-in-bringing-our-own-devices-to-work

[iii] http://www.bain.com/publications/articles/retail-holiday-newsletter-2016-2017-5.aspx

[iv] http://www.cnbc.com/2016/10/25/online-orders-must-be-delivered-in-two-days-to-be-considered-fast.html

[v] http://bit.ly/2ribzsf 

[vi] https://latestthinking.cognizant.com/perspectives/hearing-consumers-through-the-social-media-din

[vii] https://www.forbes.com/sites/steveolenski/2017/05/15/with-mikmak-latest-move-brands-can-expedite-path-to-purchase-instagram-snapchat/#44611fa445eegm

Silver wall or silver lining?

Of the megatrends set to profoundly shape the future of work and life, automation gathers the most column space and, arguably, acknowledgment at the C-Suite and boardrooms. The logic is clear enough – it will transform companies, jobs, skills and the labour market in significant ways. However, it is not the only driver of change with such transformational impact. Longevity will also induce the sort of profound changes that some analysts still argue over regarding automation.

There is a general ignorance as to the opportunities and challenges inherent in ageing. According to BNP Paribas, people over 65 will represent more than 40 percent of total global consumption by 2020. By this date their global spending power could reach $12Trillion, or 54 percent larger than Latin America’s GDP[i]. The American baby boomer generation currently outspend other generations by $400bn each year, and in twenty years, some 70 percent of US disposable income is forecast to be in the hands of those 60 and older.

If this multi trillion dollar market represents the potential silver lining for companies, the tsunami or wall is hit in terms of designing organisations for these people to work in. Indeed, the advancement of medical technology now means living past 100 is now the normal expectation for babies born in Japan and similar countries. What this means, in conjunction with precarious fiscal positions of many governments, is that today’s twenty-somethings could well be working into their 80s’. The temptation for companies to kick the can down the road is clear; it is after all decades before significant changes will occur. This would be a mistake however, since individuals are already cognizant of the shifts in the world of work, including longevity. If it’s on their radar, it should be on yours.

The half-life of knowledge is decreasing at an increasing rate, in part thanks to cognitive technologies and automation. Learning has become a life-long pursuit and will increasingly become so as careers lengthen. This will upend orthodoxies, primarily the notion of a three-stage life consisting of education, work and retirement. The implications for companies are huge, and the impacts will be felt imminently – primarily in the demand for ever expanding learning opportunities.

Lynda Gratton suggests that ‘…without changes in corporate policies, employees will struggle to build working lives that have resilience over an extended period of time. In response, companies need to initiate a top-to-bottom redesign of their human resource practices and processes[ii].’ The notion of learning as well as recruitment and retention will likely undergo significant change. Overcoming this silver wall will enable companies to better compete for the silver lining of ageing.

[i] http://bruegel.org/2017/04/embracing-the-silver-economy/

[ii] http://sloanreview.mit.edu/article/the-corporate-implications-of-longer-lives/