Senior management teams must put technology at the core of strategy formulation if they are to survive and thrive, writes David Lee, a Partner in the Technology Advisory division of accounting and consulting firm PwC.
When asked which factors would influence the future of her industry, the COO of a multinational financial services company focused on the opportunity presented by technological advances such as blockchain and robotics. It was clear that technology wasn’t just an enabler of her business strategy, but was core to the strategy. Technology has moved from being the preserve of the CIO to being fundamental for all senior executives.
Disruptive technologies are not new
The concept of disruptive technology is not new, but what is unique today is the ubiquity of technology, together with its accessibility, reach, depth, and impact. The 2016 PwC CEO Pulse Survey asked CEOs what they believe will most shape stakeholders’ expectations about businesses over the next five years. Respondents pointed to technological advances as the most influential by far. Due to a combination of the following forces, technological advancements are appearing – rapidly and simultaneously – in fields as disparate as healthcare and manufacturing:
- Cheaper access to technology;
- Globalisation of technology;Increased comfort with technology;
- The competitive advantage of tech-nology; and
- The multiplier effect of technology.
Eight technologies you should consider
Collectively, these factors raise big questions. What technologies should you invest in? How do you stay current? How can you reduce the risk of failure? To help provide answers, PwC tracked more than 150 technologies against criteria that aimed to assess their business impact and commercial viability. While the specific technologies most impactful to a company will vary, eight technologies emerged. Some have been around for years and are finally hitting their stride, while others are maturing rapidly. None are surprising, as they feature regularly in the media.
Artificial intelligence (AI): software capable of performing tasks that normally require human intelligence (speech recognition, decision-making and language translation, for example). AI is an umbrella concept that covers subfields such as machine learning, which focuses on software that can teach itself to learn and act when exposed to new data.
Augmented reality (AR): the addition of information or visuals to the physical world, via graphics and/or audio overlay, to improve the user experience. This real world “augmentation” is achieved through devices that render and display information.
Blockchain: a distributed electronic ledger that uses algorithms to record transactions reliably and anonymously. Records are shared between parties, and information, once entered, cannot be altered as the downstream chain reinforces upstream transactions.
Drones: these are air or water-based devices and vehicles that fly or move without an on-board human pilot. Drones can operate autonomously on a pre-defined flight plan or be controlled remotely.
3D printing: a manufacturing technique used to create three-dimensional objects based on digital models by “printing” successive layers of materials. 3D printing relies on innovative “inks” including plastic, metal, glass and wood. Bain & Company believes the 3D printing market will grow to a size of $12.5 billion by 2018.
Robots: electro-mechanical machines or virtual agents that automate, augment or assist human activities autonomously or according to set instructions – often a computer program.
Virtual reality (VR): computer-generated simulation of a three-dimensional image or a complete environment within a defined space that viewers can interact with in realistic ways. VR typically requires equipment, such as a headset.
Internet of Things (IoT): a term to describe a network of objects – devices, vehicles, etc. – embedded with sensors, software, network connectivity and compute capability, that can collect and exchange data over the Internet. According to McKinsey & Company, the Internet of Things could add up to $11.1 trillion to the global economy by 2025.
How will the “essential eight” impact your business?
The “essential eight” will impact all aspects of your business model in both beneficial and challenging ways.
Strategy: this is about defining what business to pursue and technologies are opening up new opportunities and corresponding considerations. IoT, for example, is giving manufacturers the ability to “sensorify” their existing products, creating “intelligent” value-added service offerings.
Customer engagement: the “essential eight” are reshaping companies’ interactions with their customers, from sales and marketing to billing and after-sales support. For example, AI, applied as machine learning, can process volumes of customer-behaviour data to identify patterns that enterprises can use to improve customer engagement.
Operations: AI, robots, drones, and 3D printing can improve operational efficiency and provide significant competitive advantage. In the hospitality industry, for example, service robots can reduce delivery costs by one or two orders of magnitude.
People and talent: the “essential eight” are creating new job categories while threatening some traditional jobs. PwC’s CEO Pulse survey showed that 56% of CEOs expect robots to reduce headcount over the next five years. A Citibank report also contended that the banking industry could lose 30% of its workforce owing to technologies such as AI and blockchain. Concurrently, new technologies beget new companies (Google, just 18 years old, has 60,000 employees) and new job categories (a “data scientist” was all but unknown a decade ago). So employers have to determine how to integrate machines into their talent pools and how to hire, retain, and develop talent.
Compliance: the “essential eight” will see companies looking to adapt to and influence the resulting regulatory landscapes. Regulators will be in catch-up mode. How do we protect the data collected by billions of IoT devices? How is blockchain regulated? Questions like these are not hypothetical. There have already been incidents where drones have entered commercial airspace.
So what should you do?
Many companies have laid foundations for emerging technologies by investing in social, mobile, analytics and cloud. Executives now need to take a broader view of more advanced technologies that will have a greater impact on business.
The “essential eight” will shake up companies’ business models in both beneficial and challenging ways. Across industries, emerging technologies will influence strategy, customer engagement, operations and compliance. But how do you assess their impact? For starters, the “essential eight” is not a checklist to delegate to the CIO. Executive teams must take seriously their obligations to turn these technologies into strategic advantage – and to protect their organisations against others using technology for advantage.
Tracking, evaluation, and action plan development for emerging technologies must be an integral component of corporate strategy. There are three key questions that executive teams must ask:
- Do we have a sustainable innovation strategy and process?
- Have we quantified the impact of new technologies? If not, how can we do that?
- Do we have an emerging-technologies road map? Is it current?
Answering these questions will enable executive teams to begin to harness the best new technologies and help avoid the fate of the ice-cutting industry.