With an acceleration in the number of technological advancements, such as AI, Machine Learning, Big data, the Internet of Things (IoT), 5G, cloud computing, 3D printing, robotics, Augmented Reality (AR), Virtual Reality (VR), clean tech and satellites, and an increased application in a wide range of fields, the ongoing digital revolution has matured in the last decade. This means that while it continues to transform the world in profound ways, it also does so in a higher speed and with as wider reach than before. And this while highly potential technologies, such as blockchain, has yet to reach its full potential. Nonetheless, in order for businesses to seize the potential from the countless of opportunities that lie ahead which can improve both businesses and have an increased impact on Global Goals, businesses need to learn how to move from pilots to massive adoption. This blog post aims to shed light on just that.
We’re Not at Maturity Yet
1. Disrupt or be Disrupted
In a time where change happens faster, and where more and more people are becoming increasingly connected and more and more exposed to new technologies – be it young people adopting an “always-on” lifestyle, the impacts of digitalisation when performing tasks at work, or using tech to guide business decisions – it is essential to understand what the digital transformation truly means for business. What risks may lie ahead, and how could new technologies impact current practices or reinforce future ones?
New tech provides us with new data, which sheds light on otherwise overseen environmental and social aspects of importance for companies. For instance, as satellites, drones, robotics, sensors or the Internet of Things are able to measure things that could not be measured before, collect more data from a larger variety of relevant sources, provide new insights, and more accurately inform discussions and affect decision-making and implementation. In other words, new tech provides decision-makers from the floor and up with more useful information, points towards concrete solutions, and gives the ability to adjust at a moment’s notice – which is of profound interest in a time when changes in our societies occur much faster than ever before, and where the diversity of potential threats which requires adaptation only seem to grow. After all, as sound measurement is crucial for evidence-based decision-making, tapping in on the potential of tech is essential for all.
While many businesses are exploring new ways of how to use technologies to improve business performance in a variety of ways, many also fear that the transformation is going too fast for people or businesses to adapt adequately. Is it true that the digital transformation forces businesses to either “disrupt or be disrupted”, and are investments in tech automatically also suggesting less investments in human capital? Add to that an ever more urgent need to change our ways to combat climate change in a yet more hungry world, and you may understand the challenge we have ahead.
2. The Business Trend
Today, all firms and industries are already affected by the digital transformation, and will progressively continue to be so, although the speed and extent differs. It is currently overhauling industries such as retailing and publishing and is likely to soon also change trucking and banking (IMF, 2018). In another way of looking at it; no business in Europe today is run completely without ICTs (Information Communication Technology), and consequently, its impact depends on the type and sophistication of ICT tools integrated into business processes (OECD, 2019).
It is clear that, broadly speaking, a return on investment exists for digital transformation. A World Economic Forum and Accenture analysis on 16,000 companies found that there is an overall positive return on investment, although most of the gains are ascribed to industry leaders. Early adopters saw a 70% productivity increase, compared to just 30% for industry followers. As a result, some 85% of industrial equipment executives feel that they have to innovate faster to stay competitive during this, as it is known as, Fourth Industrial Revolution. These new technologies are also becoming increasingly affordable for smaller businesses, and larger businesses tend to make greater use of advanced technologies, such as automated production process technologies, where scale is important. However, according to the recent OECD report (2019), “businesses in Europe still have yet to exploit the full potential of the digital transformation”. Some sectors were generally further ahead than others, such as information and communication, travel and wholesale trade, while relative laggards where found in companies in construction services, food, textile, and metal manufacturing industries.
“Early adopters saw a 70% productivity increase, compared to just 30% for industry followers”WEF & Accenture (2018)
Moreover, since the tools to participate in the digital revolution, such as computers, the Internet, and artificial intelligence backed by electrical power and big data, are so widely available, less-developed countries who facilitated a quick adoption of new technologies have also been huge winners. Unlike many advanced economies who were tied up in pre-existing or antiquated infrastructure, countries such as Kenya (mobile payments), India (digital land registration), and China (e-commerce) managed to leap-frog and take a head start. But the future will continue to challenge even those technologies, and the one who can continue to adapt the best, will win.
3. The Impacts on Jobs
A common key fear is the belief that machines will replace human jobs and contribute to many people becoming unemployed. However, predictions vary widely between how many, and what types of jobs, are actually at risk. The World Bank (2019) argues that the threats to jobs coming from technology are exaggerated and are not uniform across the world, pointing to different studies placing the impact on jobs in Japan to be between 2-60% for instance. The reason for this is that while advanced economies are shedding industrial jobs, industrial employment is also rising in parts of East Asia and is still stable in others.
On the other hand, the OECD (2018) has pointed to other figures estimating that 14% of jobs worldwide are under risk of becoming completely automated in the next 15-20 years, while another 32% of jobs are likely to be radically reshaped. McKinsey Global Institute also pointed that 33% of US jobs could be transformed by 2020, and that;
“About half of all paid activities could be automated”McKinsey (2018)
In latest figures, 7% of surveyed European companies with more than 10 employees used robots, while 4% used 3D printing, and as a consequence, more time was spent on learning new tools and acquiring new skills in 2018, when as many as 40% of workers in the EU had to learn to use new software or ICT tools. At the same time, it has also been suggested that the introduction of new digital tools, have generally resulted in a decrease in repetitive tasks, and while workers found it easier to collaborate with colleagues, many have also been recorded to feel their performance being closely monitored. In some sectors, technology has contributed to enhancing worker productivity and improving the delivery of public services. (OECD, 2019)
The mere usage of technologies per se may also make businesses more attractive in some contexts. For instance, youth is often reluctant to work on agricultural activities and clearly doesn’t want to take the same tedious trajectory of their parents and grand parents. They prefer to migrate to cities whereas a huge number of agricultural plantations across the world are looking for people to take over. That’s good example where technologies are doubtless attractive to shape different practices and retain youth in rural areas.
How to Make Technology Work?
1. Invest in New Skills and Human Capital
Importantly, that digital technologies do not diffuse instantaneously. They do also require complementary investments in intangible assets (e.g. in human capital and organisational capabilities) to be adopted. As we know, these knowledge-based assets are generally costly at the start and do normally also take time to integrate into business models and processes. However, once knowledge has been accumulated, it can be re-used without any additional cost, allowing companies to scale up faster and more easily, and to generate increasing returns to scale (OECD, 2019).
Robots are indeed increasingly taking over thousands of routine tasks and many low-skill jobs bear the highest risks of becoming obsolete in the future. These people, who are least equipped to seize the new opportunities, as their skills do not match the new jobs that have been created, will also be most likely to look for other low-skilled jobs, further increasing pressure on other low-skilled workers with low wages.
The boundaries pushed by technology in life and business means that all types of jobs (including low-skill ones) is requiring new skill development. Especially three types of skills are becoming increasingly more important to master in order to be competitive in labor markets (while caution needs to be emphasized as newly acquired skills may quickly become obsolete because of the pace and scale of the technological advancements, which means that we cannot fully know what new jobs will look like and consequently what future skills will match them – which calls for ensuring opportunities for life-long learning and greater job flexibility) (World Bank, 2019):
1. Creativeness and capacity to manage exceptions
2. Emotional Intelligence
3. Team work and collaborative attitudes
2. The Connection Between Technology and Inequalities
Understanding the reasons for resistances, and ensuring that there will exist just transition scenarios to adapt competencies – onboarding losers and not only winners – is critical to scale up solutions. On the one hand side, ensuring that there is a strong human capital foundation is key to diffuse technological investments. In other words, human capital now has a higher premium on adaptability than ever before. This does not only require enabling pathways to life-long learning, but knowing that these particular types of skills are best acquired in a person’s most early years of life, starting with the youngest, is key.
Closely linked to how to best organize a firm around technology, is the notion of inequality which rises with the widening of the gap in efficiency and market value between firms with new business models and those that have not reorganized. These gaps can only close once old processes have been largely replaced. (IMF, 2018)
In order to thrive in a carbon-neutral, digital age, there is also a need to go beyond the notion of human capital into the broader dimensions of development to ensure a sustainable, long-term and sustainable preparedness for the future, and to ensure longevity. Here, progress in living standards, protection of rights and creating an enabling an environment that widen people’s opportunities and improve their well-being is not only good business on the short term, when minimizing the inevitable short-term disruptions, but also on the long-term, maximizing the benefits on the long term. (ILO, 2019; IMF, 2018)
3. Explore Which Technology/ies to Use
Tech opportunities exist across the full spectrum of our world, from solar concentrators, to mobile payments, to biofabrication, and have the potential to profoundly disrupt old ways of doing things to the better. One can start from the business challenges and connect the dots exploring the pros and cons of existing technologies, and ensure they are well designed for its purpose. One can also invest in new business models that can more accurately amplify making the most of each promising technology. Consequently, many benefits can come;
“Not simply from adopting the technology, but from adopting to the technologyIMF (2018)
One can also explore and carefully choose which technologies (in plural) that could be reinforced with another one, in order for the complete solution to reach its full potential (Bond, 2019). For instance, Artificial Intelligence relies on accurate information to perform its calculation and later deriving the ultimate result. Knowing that one of the key features of Blockchain, it’s security and safeguards against allowing anyone to alter its information (since the data is encrypted), one can see how Blockchain can complement AI and contribute to better simulated artificial intelligence models and better outcomes. (Blockchain Expert, 2019). Furthermore, the World Resources Institute’s Global Forest Watch program combines satellite data with crowdsourced data to monitor deforestation and makes it actionable to governments, companies, journalists, and citizen groups. The NPO Rainforest Connection together with tribes in the Amazon rainforest have used Google’s open source AI software TensorFlow to create a scalable real-time alert system for illegal logging in the Amazon, in which recycled mobile phones listen to the sounds of the rainforests and react on significant changes. (SU, 2019) Several technologies are also disrupting food processing and distribution.
New sensors and artificial intelligence are being used to sort food and inspect it for spoilage, contamination, and authenticity, which reduces food waste and food-borne diseases. Entrepreneurs are building self-driving kitchens and restaurants, complete with robotic cooks, grocery stores without checkers, and food delivery bots. The World Food Programme is also using blockchain and iris scanning to more efficiently deliver food coupons to refugees, thereby reducing costs and increasing transparency. The combination of these technologies will dramatically impact employment, considering that all of these technologies are expected to rapidly scale due to their exponential nature. (SU, 2019)
4. Give High Considerations to Practical Considerations
Devil is the details. Exploration and deployment of technologies is strongly calling for contextual and practical considerations. We explored large solar panel systems in Africa, connected using IoT solutions to move them around and ensure they would rotate and always absorb as much light as possible to maximize energy production. Unfortunately, control panels were buried under the pylon concrete structuring the entire structure. No maintenance was possible without tapping on the concrete material. A third of panels were quickly out of order after having operated 12 months maximum. To avoid looting and damage potentially caused by some poor people living around, the structure was constructed a good 3+ meter high above people, making any regular panel cleaning very challenging. In dusty environments, dust covering panels decreased quickly equipment productivity by 30%. After 12 months of operations solar panel and IoT solutions delivered way below expectations outlined across business plan for lack of robust contextual understanding of maintenance considerations.
In another example, there are interesting solutions combining smart phones, satellites and drones to track and report on human right abuses. That can be powerful to oversee challenging areas and collect critical information about child labor, forced labor, living conditions of migrant workers for instance. But this also means that systems are collecting quickly millions of pictures and data, which are not at all always pertinent and to the point. Serious efforts selecting, norming, qualifying data to document specific cases are clearly calling for massive resources using a combination of experts in development, legal issues or people who have deep knowledge of local contexts. In other words, technologies are great and powerful, but emphasize on the actual people able to process data and identify meaningful insight remains critical.
Conclusion – The New Rules of the Game
What we can take for granted, is that the ongoing digital transformation is currently reinventing core aspects of human existence as we know it. As digital transformation, and the solutions it can bring, can also be key to resolving some of our toughest challenges while improving business processes from the core, it is important that tech is applied in ways that maximizes benefits and minimizes adverse effects.
While new technologies are helping us to make headway in solving the challenges that have plagued humanity for centuries, new problems are also emerging caused by the very same technologies. In this sense, we live in times that are both hopeful and confusing – at the same time. What is certain though is that the rules of the past do no longer hold and that many of the most successful people, organizations, companies and even countries in the world right now have become that just precisely because they have understood and adapted to new ad ever-evolving rules of the game.
“One thing is certain: there’s no turning back now. Digital technology will spread further, and efforts to ignore it or legislate against it will likely fail”IMF (2018)
If you are not convinced, just look at the future disruption expected from new breakthroughs in quantum computing, which would facilitate calculations that are beyond the capabilities of traditional computers. While enabling exciting new products, these computers could also undo some of the new technologies we are currently adapting to today, such as current standards in cryptology, and which potentially then could affect communication and privacy on a global level, threatening cyber security of essential public services and private information which we are today putting online…