D/SRUPTION Magazine - January 2017

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JANUARY

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Making sense of a changing world

2017

Everything is connected

From the cars we drive to the clothes we wear, the Internet of Things is set to change our world‌ forever

Economics/

Why the API economy has become something that every business needs to know about

Innovation/

How close are we getting to self-driving, Internet of Things-enabled cars?

Talent/

How artificial intelligence has the power to disrupt highly skilled jobs

Technology/

The power of visual search and its potential to reveal the internet to the whole world

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/welcome

Everything is connected...

The internet is now connecting more people at a faster rate than ever before. An estimated 91% of 18 to 44 year olds now carry a connected device around with them. Through it, they each have access to the internet every moment of every day… or at least until their monthly allowance runs out. It would seem that as a species, we’ve all got very used to the idea of being online.

Only now, of course, it’s not just people that are connected. Billions of ‘smart’ objects are joining the online conversation as the Internet of Things grows at a breathtaking pace. The current prediction is that by 2025, around 80 billion ‘things’ will be online.

The recent CES Show showed what a gold rush era we’ve entered, as hopefuls keen to cash in showcased connected products ranging from a smart toothbrush and mirror to a smart trash bin. These are trivialities that attempt

to solving meaningless first world problems.

If that’s all the IoT has to offer then it’s understandable why so many people are still wondering what all the fuss is about.

To truly understand its value, we all need to look beyond these distractions to the bigger picture. The IoT transforms any physical object into a digital data product by attaching any number of sensors to it. It then emits data about its usage, location and state. It can be tracked, controlled, personalised and upgraded remotely. If artificial intelligence is brought into the equation, the AI can analyse the masses of data produced to manage usage and improve both products and services, theoretically without any additional human involvement.

The IoT isn’t about being being able to see on your phone when your cat last used its smart litter tray. It’s about integrating intelligent, predictive, collaborative and autonomous products. An entirely new form of interaction is emerging. A connected world. /Rob Prevett Managing director, D/SRUPTION

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/january_2017

The future of work

Regulars 06 Signing in Is the world set to finally shake off its reliance on high cost oil?

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The Internet of Things 32 The future of the office

Day in the life

The evolution of workplaces to meet the changing needs of both companies and employees

Accenture Analytics’ chief analytics officer Narendra Mulani

16 Anatomy of the IoT Why the data generated by IoT machines might have a cash value

22 Smart clothing How IoT clothing can connect users with fashion designers

12 The big idea The API economy and how you can make it work for your business

26 When cars connect The value of making the world’s vehicles a major part of the IoT

30 Driven to disrupt How the UK is determined to make self-driving cars a reality

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40 AI versus skill sets How your future depends on whether you have a ‘proficiency’ or a ‘pivotal’ role in your business

Technology

January 2017

Strategy 48 Investing in disruption 42 Augmented reality The role of computer vision in redefining web searches

Strengthening your portfolio by recognising the companies willing to embrance change

50 Signing out Why creativity remains the key differentiator between humans and artificial intelligence

On the hub www.disruptionhub.com

D/SRUPTION magazine Editor/Cam Winstanley Editor-in-chief/John Straw Publisher/Rob Prevett Head of marketing/Tania Duarte Design/Dylan Channon disruptionhub.com Content manager/Laura Cox Head of digital/Jayson Winters Copy editor/Kev Cooke Contributing editors/ Sam Ashken, Omaid Hiwaizi, Andre Klotz, Dave Locke, Narendra Mulani, Marcello Tamietti, Chris Wood, Lucy Yu, George Zarkadakis iDisrupted Ltd 86-90 Paul Street London EC2A 4NE www.disruptionhub.com @disruptionhub Contact our editorial team on: editorial@disruptionhub.com Contact our sales team on: media@disruptionhub.com

46 Innovation Europe’s largest innovation ecosystem is in… East London Go to our website for daily news updates, essential insights and expert opinion on technical disruption, innovation and ongoing global digital transformation.

No part of this publication may be reproduced, stored in a retrieval system or transmitted by any means without the Publisher’s permission.

The editorial does not necessarily reflect the views of the Publisher. The Publisher accepts no responsibility for errors within the publication.

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/signing_in

Is this the end of peak oil?

Fewer cars on the road would be better for our planet but what about the people living on it?

D/SRUPTION founder John Straw looks at the effects of overhauling the haulage industry

or months now we’ve been hearing about the negative effects of cheap oil on the world’s sovereign economies. Russia’s in trouble, Venezuela is essentially broke and even Saudi Arabia has issued a public bond in order to maintain its generous social spending.

So is peak oil over and done with and are we looking at cheap oil for the rest of our days? My view is yes, which is both very good and very bad at the same time.

Breaking it down, nearly 60% of oil is used as some form of fuel. If the world

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can dramatically reduce the overall demand for fuel then the price will drop and we can all enjoy cheap oil forever.

Here’s why that might happen…

Firstly – the sharing economy. Uber’s phenomenal success has extended into package and food delivery, all in the last mile. It stands to reason that if you have a single vehicle capable of delivering everything from people to food then you’re going to need fewer vehicles on the road that will use less fuel. Currently, Uber still uses drivers – inefficient humans who speed up and brake on a whim. Driverless vehicles would be safer and more fuel efficient and Uber’s testing driverless Volvos right now.

And that’s just cars. Driverless delivery trucks would completely transform logistics, saving a fortune in fuel.

Mercedes is bringing new driverless trucks to market in the next two years but at $250,000 each, the adoption curve is going to be relatively flat.

However, when a US startup called Otto came out with a retrofit kit for existing

trucks for under $35,000, Uber bought Otto for $600m. If fleets adopt this quick fix then worldwide diesel consumption could go into permanent decline.

Then there are advances in materials science. Commercial vehicles are solidly built but heavy vehicles burn more fuel and lighter vehicles less. Boeing just launched a new allow called microlattice that’s ten times stronger than steel and – wait for it – 99.9% the weight of air. Imagine an airliner body built mainly from this and the tiny, fuelsipping engines required for take off and cruising. Across the global air fleet, the fuel savings would be colossal.

Then the Internet of Things. Once every part of every vehicle is connected to the web as well as each other, we’ll have a grid of superintelligent cars that talk to each other in order to optimise traffic

flow. There’ll be no more traffic jams burning fuel but going nowhere. There won’t even be any traffic lights. Web connected tyres could even track hyper local weather conditions to continually match their pressure to road conditions.

Since tyres underinflated by just 1bar can increase fuel consumption by 6%, having ever tyre optimally inflated would again slash the demand for oil.

These are just a few examples that don’t even get into typhoon turbines, super efficient solar cells, tidal wave power generators and advanced battery technology. And let’s not forget Elon Musk, who recently launched a range of roofing tiles that double as solar panels.

While you’re thinking how all this will be great for the environment, inner city air quality and family budgets, hang on a moment… it’s not that simple. Oilproducing nations have generated huge surpluses of cash for decades. Norway, for example, has a near $1tn sovereign wealth fund to invest in anything it deems as ethical. But once oil stops being so lucrative, we’ll potentially have a world cash liquidity problem. Who will finance banks to allow lending once oil revenue ceases to slosh round the banking system? Given that liquidity is essential to economic growth, governments may end up printing

money, which would cause inflation.

This, in turn, would mostly impact on the poor – precisely the people who benefit the least from greater energy efficiency.

And what of the 3.5m truck drivers in the USA who currently haul goods in an industry that employs a further 5.5m workers? Bring in self-driving trucks and a lot of those jobs disappear overnight.

The real benefit of any disruptive technology is that it can make our planet a better place for everyone. However, the ripple effects can be so far-reaching, unexpected and significant that we need to consider each and every one of them.

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/day_in_the_life

Narendra Mulani The chief analytics officer at Accenture Analytics explains the importance of finding balance, even in this era of turbulent digital transformation

bout three years ago, I realised how easy it is to get caught up in the sheer pace of life. Accenture Digital had just been formed and Accenture Analytics, the part of the business I lead, was growing incredibly quickly. I needed to bring some stillness to my days so I began to meditate. Whether I’m in a taxi in Japan, on the London Tube or taking the New York train from my home in Connecticut, I switch off my phone, tablet and smartwatch to focus on… nothing. Nobody recommended it and it’s not something I was brought up doing, it just seems to keep my mind sharp all day.

I travel widely and while that can be wonderful, it can also be exhausting. So whenever I’m at home, perhaps half of each week if I’m lucky, the first thing I do on waking up at 5am is have a cup of tea with my wife. An artist who works from her home studio, she indulges my early starts and this is valuable time together.

This wouldn’t be a true ‘Day in the life’ article if I didn’t say I worked out but it’s true! After the gym, I’m set for the day. On

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the move, I’ll have a look at Nate Silver’s fivethirtyeight blog and The Economist and I also love to listen to music. The recommendation playlists from Spotify are an incredible demonstration of the power of machine learning and always raise a smile when I hear an old favourite.

By the time I start my working day, I’ve already had all the time I need for myself, so I can focus fully on the day ahead. I write a fresh ‘To do’ list and go through my emails to see what surprises have popped up overnight. There are thousands of people in over 120 countries working on projects that ultimately roll

“With all the travel and working across time zones, about 80% of each day is spent on video calls”

up to me, so although I’m very clear on where my working day begins and ends, my inbox is less disciplined!

With all the travel and working across time zones, about 80% of each day is spent on video calls, either in one of our telepresence rooms or over Skype. The difference of seeing another person’s face when we speak is really something remarkable and it keeps you focussed on that person. And I’m sure I’m not alone when I say that I couldn’t do my job efficiently without my mobile and its constant demands.

I deal with each day in a very structured way – another trick to make sure that nothing falls by the wayside. Every task falls into one of three ‘buckets’, which roughly reflect the equal attention I pay to the most important parts of my job: Clients, People and Ideas.

‘Clients’ is self-explanatory. Accenture Analytics is lucky enough to be working with some of the world’s biggest, most innovative companies, helping them

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drive digital transformation by unlocking the power of their data. Nine out of ten of the top pharma companies and telcos work with my teams, while we’re also involved in projects across global banking, energy and retail, to mention just a few industries. Helping to create insight from data that, in many cases, has lain almost dormant in the cloud or taking up server space for years, is one of the most energising parts of my job.

With the rise of devices in the Internet of Things and channels creating big data, we’re speaking to clients about a massive influx of data that might offer them insight into everything from identifying new revenue opportunities to creating highly personalised experiences for customers and running predictive analytics to reduce downtime. There’s incredible value hiding in data and I work with teams to uncover it.

One of the projects I am proudest of is with Boston Scientific and two Scandinavian hospitals, where we applied analytics to track the treatment of cardiac patients. We identified a 25% unnecessary heart failure readmission rate and provided solutions that could help reduce that, providing better care alongside cost reductions. I constantly find the transformative power of data amazing.

The individuals I work with are the ‘People’ – the second third of each day. Although we already have over 1,800 data scientists across Accenture, we need more – and so do our competitors

and clients! This demand for talent means I must constantly ensure that we are providing an inspiring, exciting and innovative workplace. Not only do we want current teams to be proud of where they work, we also want to be attractive to potential recruits. These people deliver for our clients, so I take their careers and their working environment personally.

Education is also enormously important in my strategy for success. The world needs dedicated people who can build such complex algorithms that other people with completely different skill sets never have to! Technology is progressing so quickly that it’s vital for us to be at the cutting edge of every trend, working out what potential each one might offer our

clients and how we might use it to create something awesome.

And that’s what I spend the rest of my day on – ‘Ideas’. Innovating, discussing and experimenting are major drivers of my strategy for leading Accenture Analytics.

We can never stand still and must not even walk slowly. The disruption that we tell clients about is something that we must stay ahead of. I intend to keep leading teams that constantly try out their ideas, learn from failures and share in our successes.

When I’m in a different city or if some of our partners are in town, we often go for informal dinners but when that’s not the case, I like to end my working day around 7pm by totally switching off and I encourage my teams to do the same. Since eating out so much can be a dangerous game, I have a FitBit to make sure I’m doing enough activity and also track my food with the MyNetDiary app.

Given my job, you won’t be surprised to learn that I regularly review my stats and trends!

I am a living cliché – I love my work but I also believe that having time to oneself is vital to performing at the top of one’s game. I always encourage everyone to take their holidays to recharge and I love my weekends. Finding the right balance, taking time to live my life so that my time at work is focused and I am the most productive person I can possibly be – for me, that’s what every day is about.

Accenture Analytics, part of Accenture Digital, is helping its clients to turn insights into actions in the digital age www.accenture.com/analytics

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/the_big_idea

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The API economy Every company wants to be be part of it but do they all know enough about the API economy to make a splash? Chris Wood lays out some dos and don’ts

fter being a tech buzzword for the better part of a decade now, no doubt many of you are bored of hearing about APIs before you’ve ever really understood what they are. Yet for anyone serious about disrupting the incumbents in their industry, it’s hard not to overuse a word that creates such an air of intent, purpose and the expectation of a ground-breaking result.

API stands for ‘Application Programming Interface’ and its roots lie in software development to describe a means for sharing the features and functionality of a given piece of software. APIs have now become a byword for any way of providing products and services that deliver flexibility and choice to customers.

Due to the widespread use of APIs, we’ve seen the growth of the ‘API economy’.

Like most ‘happenings’ in tech, APIs have become collectivised from an individual entity to a system, in the same manner as the Internet of Things or the digital ecosystem. The API economy describes the production and consumption of services and the supply of money fuelled

by APIs. Like most economies, the growth of the API economy has been organic in nature and its creation was not a conscious decision taken by the thousands of business who deliver APIs – the API providers – across the world.

Instead, the creation of the API economy came about due to numerous unplanned factors, such as the need to expediently provide backend services to deliver functionality to mobile apps.

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/the_big_idea Over time, an API has become both a self-contained product offering and a business model. And with its continued growth, there are many reasons why being part of the API economy will become even more strategically important to many organisations:

API first Many businesses now deliver using an ‘API first’ model, where the API is the first – and sometimes the only – mechanism for their products and services to reach the market. The API has effectively become the product. The API first model has the significant advantages of speed to market and a generally lean business model that allows API providers to be both dynamic and nimble. It has also contributed towards the creation of a paradigm known as the ‘developer experience’ or ‘business to developer/ B2D’, where the developer experience is concerned with providing the features and functionality that support an API and helping developers learn about, work with and, ultimately, implement a software integration with the API. A great developer experience establishes a conversation between the API provider and the developer and while this does little to enhance the technical implementation of the API itself, it is essential to the overall product offering as it creates a buzz around the API provider and enhances their reputation and standing in their industry.

Doing things differently Modelling their business around APIs also allows API providers to do things differently. In a world of startups and ‘distech’ (as in ‘disruptive technologies’ – FinTech, RegTech, EdTech and all their cousins), finding ways to make inroads to incumbent business models by using

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“Modelling their business around APIs also allows API providers to do things differently” eye-catching new features to capture the attention of customers is an obvious business advantage. Such differentiation does not necessarily mean a unit price cost reduction however. API providers who deliver unique solutions to the marketplace often do so with a verve and creativity that instantly makes them an attractive organisation to do business with. Accurately solving a customer’s problems can often be a bigger draw than simply offering the lowest price.

APIs are the ‘thing to do’ Whether it’s real or perceived, there is currently a need for most businesses to become an API provider in order for them to gain or maintain competitive advantage within their industry. If any given organisation has an API (regardless of its capabilities), it has a significant perceived value as a marketing tool alongside being a mechanism for product delivery. Conversely, businesses without an API who are competing against them are developing an arms race mentality and feel the needs to build their own API in order to compete on a level playing field. Payments is a great example of this

mentality. There is an ever-increasing number of API providers with new entrants and the existing players are each trying to grab more market share by diversifying their offering based on the capabilities of their own API.

Accessing your customers’ customers Providing an API alters the addressable market for businesses, expanding it to encompass a new and possibly unseen audience – your customers’ customers. Many APIs are integrated into an application that adds value to the features and functionality of the API (often referred to as a ‘mash-up’) while still relying on the product or service the API offers. Integrating an API into an application drives customers towards the API provider through this intermediation, opening up a customer base that may not be addressed directly but that ultimately enhances the bottom line of the provider as well as the application developer. It goes without saying that such a model can affect the existing business or operating model of the API provider, from perspectives such as how to charge

customers to industry regulations, especially in areas such as KYC and AML. However, despite these possible constraints, APIs can still be a great way to increase the addressable market.

APIs in the real world Examples of these factors manifest themselves across several industries.

For example, in the payments world, Stripe should be considered the poster child for the API first approach to service delivery by being the company that the term ‘developer experience’ seems to have been invented for. Stripe’s method is simple. They deliver a payments API that provides multiple payment rails EMV, Apple/Android Pay, ACH, Bitcoin and Alipay - that’s easy to implement for all methods and that also contains numerous additional features that can be added at any point by any developer.

Stripe’s developer experience is second to none and integrating it with a task typically takes minutes or hours compared to days or weeks. Purely because of the elegance of the delivery model, Stripe have made significant inroads against competitors such as PayPal who were much earlier to market and better established. While Stripe do not offer any real cost savings, they are winning because they deliver the same services as their rivals but they do so far better.

Another frequently cited example of the disruptive power of APIs is the Walgreens Photo Prints API, which has been successful in driving in-store photo printing sales at Walgreens kiosks. The premise of the API’s service is to allow third-party developers to add a ‘Print at Walgreens’ button to their own photo apps. Customers can then send their photos to print at their local Walgreens store while the app developer earns a commission for each photo printed.

This example is interesting, given the elegant way that a traditional bricks and mortar business has extended its addressable market to photo app customers not previously used to shopping at Walgreens. Moreover, the commission model also incentivises uptake by third-party developer, instantly providing them with an easy way to monetise their apps on an ongoing basis.

One final example of how APIs broke the mould is in the case of the recently IPOd Twilio. This company disrupted the telecoms industry by providing developers with easy-to-implement telephony functionality via the kind of Software Development Kits (SDK) and APIs that massive, less nimble incumbents such as Cisco could never deliver in such a timely fashion. As with the case of Stripe, developers using Twilio can build software that integrates telephony functionality in a matter of hours and the company focuses on the paramount importance of developer experience. It speaks volumes that Twilio’s market capitalisation is currently approximately $2.5b – a value that has doubled since its initial offering in June 2016. At face value, this shows the value of delivering a focused product that’s aimed at disrupting the industry

incumbents and made possible by a welldesigned API plus a developer experience that engenders productivity and nearimmediate results.

What next for APIs? Although any business could be an API provider, it will be not a natural course for all organisations to take. Some will find themselves coerced, if the actions of the Competition and Markets Authority and their Open Banking reforms become widespread and commonplace.

But while APIs are a great vehicle for delivering new products and services, simply having one is not enough to make a splash within the API economy.

Creating and maintaining a viable business in the API economy requires innovation, tenacity and skill over and above delivering a piece of technical infrastructure. Having those capabilities and applying them to the product or service that is created and delivered using an API is what singles out the API providers that are both disruptive and truly successful in their industry.

Chris Wood is a freelance API consultant http://apibloke.tech

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/internet_of_things

Anatomy of an IoT solution The data generated by the Internet of Things isn’t just informative, it can also be valuable in its own right. IBM’s Dave Locke unbolts a simple washer to explain how…

lot of people like to describe data as the ‘new gold’ but a better analogy is that it’s the ‘new oil’. For when oil comes out of the ground, it is raw. Although it does have an intrinsic value, until it’s refined into petrol or diesel, its true value is not realised. Data from sensors is similar in that it’s raw and needs refining in order for insight to be gained from it. Refining data is at the heart of any successful Internet of Things (IoT) project that can lead to business growth and transformation.

There are any number of examples that can be used to explain how data can be used to gain value in different ways but we’re going to use the humble washing

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machine as a use case. While at first glance this might not seem an interesting choice, the washer’s actually perfect for showing us how the IoT works, how value can be gained from its data and how that can be used for business purposes. Just bear in mind that all lessons learned from our washing machine can be equally applied to all ‘things’ across all sectors.

manufacturer can now communicate directly not only with the machine but also to its end user and it’s this second link that’s exceedingly valuable to the manufacturer’s chief marketing officer.

CMOs want to interact with the owners of their products and the value of this IoT enabled touch point is that it can provide better customer service.

Closing the missing link When a traditional washing machine is manufactured, it goes out the factory door through distribution, into the sales chain and the manufacturer loses sight of that unit forever. They don’t know who ends up owning it or how the consumer uses it. So one of the first benefits of an IoT washer is that it can report back. The

Currently, when a washing machine breaks, a consumer will typically do one of two things. If it’s out of warranty, it’s often cheaper and easier to discard it and replace it with a new model. If it is still covered, however, the owner is likely to call out the service engineer, who’ll then investigate the problem. While on site, that engineer will make a diagnosis and

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/internet_of_things and might discover, for example, that the pump is faulty. But if a replacement part isn’t in his van, the engineer can only apologise to the owner, order the part and return to repair it two weeks later.

In this scenario, the result is ultimately satisfactory as the machine is returned to use. The owner won’t see it that way however, since they’ve been inconvenienced for two weeks. While that is annoying for a home owner, it would be catastrophic if it’s a commercial washer in a hospital or launderette. And what about the service company? Their engineer had to schedule two trips to complete one job, using two lots of time, double the fuel and extra administration.

All these wasted trips would be avoided with a connected washer. Existing machines already have a lot of data in them – they work by using sensor data to control the wash cycle so already monitor temperature and pressure and may also check on limescale build up and component wear. But until a machine is connected, that data is siloed. Only by connecting it can the data flow, allowing it to be refined using analytic capability.

Predictive analytics to predictive maintenance Data coming out of our washing machine can be compared to a computer model of that make and model. If there’s a correlation then life is good – the machine’s working as expected. Should anomalies be detected though, what might happen in the future can be predicted. And of course, any problem that can be predicted can be fixed before it even happens.

Let’s look at our faulty pump again and the preventative actions that could

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“Telemetry data is what most users think about when looking at IoT devices but usage data is just as important”

be taken. First, order the right pump.

Next, contact the owner to arrange a convenient maintenance slot. Finally, send the engineer to fix the problem before it occurs, thereby providing an elevated level of service and increased customer satisfaction due to them having a washing machine that always works. In a predictive world, efficient maintenance leads to happier, more brand loyal customers while the service company keeps operating costs to a bare minimum by only scheduling a single visit. These savings from optimisation result in more opportunities to grow the service business, using the same number of engineers and assets to do more jobs.

Moving on to predictive engineering The class of data used to predict problems – temperatures, pressure, etc – is called ‘telemetry’. But there’s another interesting class of data that can be collected from an IoT device and that’s ‘usage’. How is each owner using their device? Washing machines typically have ten or more wash cycles but which is the most popular and does anyone ever bother with the ‘delicates’ setting? By simply polling people who visit the IBM IoT showcase lab, we’ve determined that around 99.5% of visitors only ever use between one and three of their settings, suggesting that many of the other options aren’t useful at all.

But that’s just us asking a few people.

In the instance of an IoT connected washing machine, not only is every single machine in the entire world sending telemetry data, it’s also sending real-time information about usage. If all that data was received and analysed and the manufacturer matched our revelation that 99.9% of users only

use the same three wash cycles, that knowledge is exceedingly valuable.

Future models would be simpler, more elegant machines that only offered the useful cycles, dramatically reducing design, engineering and test costs. For the consumer, their next washer would be far easier to use, with fewer choices and simplified settings.

Telemetry data is what most users think about when looking at IoT devices but usage data is just as important.

Combined, they can make a difference when engineering and building the next version of any product, be it a physical object or software.

Data as a service The next step involves how individuals and organisations interact with IoT devices in different ways. So far, we’ve seen how the owner of the washing machine, its manufacturer and the service company have all benefited from the connected washing machine but in addition to them, there are many other people and companies that might also profit from both the machine and its data.

An insurance company, for example.

Insurance is a business based on pricing cover according to risk, so since a connected washing machine with predictive capability is far less likely to break down or flood the kitchen, premiums on both the machine and house insurance can be offered at a lower rate.

It’s very similar to ‘pay as you drive’ and ‘pay for how you drive’ insurance, but applied to home insurance.

Another interested party might be the energy supplier. They’d like to be able to interact with the washing machine

in real-time in order to ask it to stay off at peak periods when energy is at a premium, spreading demand for electricity more evenly across the day.

And, of course, there are detergent suppliers who would love to go beyond the Amazon Dash button to the next level. Since the washing machine knows exactly how much powder or liquid it is using, it can request replenishment before the current supply runs out. And since the user need never think about buying detergent again, the supplier can work extra-hard to gain loyalty in the knowledge that the customer will probably stick with them for years thereafter, the same way that offices tend to stick with their automatically replenished printer ink suppliers.

Another benefit of IoT connectivity is the prevention of fraud. If the machine’s owner makes an insurance claim based on it flooding their kitchen, when in fact they let the sink overflow, data from the connected washer can help the insurance company detect the fraudulent claim by providing data of flawless machine performance. The insurer benefits by preventing a fraudulent claim while consumers generally will not be penalised by higher premiums due to the false claims of a minority.

Data diffusion powered

by API management It’s clear that a lot of businesses would be interested in ‘talking’ to our IoT washing machine but how can its data be made available to them? This is where the API economy and API management comes in by controlling who, when and how often the data can be accessed.

Most importantly, API management also

determines how much it will cost each interested party to access it. This ‘data as a service’ would be a brand new revenue stream to the company that previously just made and shipped washing machines.

The API economy already enables data to be shared internally between departments and externally with partners and other businesses. Whether this is directly monetised to third parties in a data as a service model becomes a pure business decision.

Towards the ‘as-a-service’ model As things currently stand, a consumer buys a new washing machine, uses it until it breaks, then buys another one.

The same can be true for most consumer items, from technology and automotive to tableware and electronics. However, we’re seeing a shift towards a ‘products as a service’ model, where consumers only pay for what they use.

Applying that here, a new model could be one where the manufacturer gives the consumer a ‘pay as you use’ washing machine supported by a ‘pay per wash’ plan. Rather than getting paid upfront, the manufacturer then enjoys a longterm revenue stream based on a small fee for every wash cycle.

While this may sound radical, the model is far from new. For decades in the UK, a company called Radio Rentals charged monthly fees for expensive consumer items that included televisions and – you’ve guessed it – washing machines.

This was fairly common when most households couldn’t afford to buy these items outright so ‘as a service’ is just re-spinning that model by charging for usage rather than by the month.

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The leading global event for the

Internet of Things

GLOBAL

EUROPE

OLYMPIA, LONDON

ESTREL, BERLIN

23-24TH JAN 2017

1-2ND JUNE 2017

NORTH AMERICA

29-30TH NOV 2017 SANTA CLARA, CA

Conference Tracks Include: Developing for the IoT (free to attend) Connected Industry Smart Cities IoT Innovations & Technologies Connected Services Connected Living Data & Security

www.iottechexpo.com

+44 (0) 117 980 9023 - enquiries@iottechexpo.com

“Who would have thought there was so much to learn from a humble washing machine?”

However, this slight change in emphasis may have some interesting knock-on effects. Typically, a washing machine is designed to last between five and seven years. With the prospect of the machine supplied for free as part of a pay per use plan, it would be in the supplier’s interest (in this case, the manufacturer) for each unit to last as long as possible in order to ensure a healthy return on investment. In the long run, this type of business model could eliminate built-in obsolescence and push a design ethos change which encourages the manufacture of goods that are built to stand the test of time.

By improving the longevity of every manufactured unit, the amount of waste could be reduced, resulting in a vast, positive impact on the environment due to dramatically reduced rates of raw material consumption.

Data flowing in both directions For the use cases discussed so far, most of the data has been flowing away from the washing machine and towards something like a Watson IoT platform, in the cloud, where it can be analysed. However, the beauty of IoT is that data can just as easily flow in both directions.

But what’s to gain from sending data to a washing machine? Well, if a problem is detected after it’s been shipped, a software update can be created and pushed to the washing machine. More interestingly, as long as there is spare capacity within the unit, additional

features such as on-demand wash cycles can be pushed out, with the development costs recouped on a pay to use basis.

This ability to deploy fixes and new features to existing things again moves away from the whole built-in obsolescence business model since there’s no need to buy an entire new device in order to take advantage of the next big thing. A great example of this in action is the way Tesla is pushing out new features such as battery optimisation and self-drive features to its cars. In addition to over the air software updates, there is also an emerging trend for modular hardware that enables parts of the hardware to be upgraded.

So what did we learn here?

Who would have thought there was so much that could be learned from a humble washing machine? n A connected washing machine gives the manufacturer a touch point to communicate to the end user n Telemetry data can be used to determine whether something’s going to break before it actually does so n Preventive maintenance can be used to take actions that can stop problems occurring, or to enable a service department to fix a problem with limited disruption to the thing’s service n Usage data, a new class of data, can now be accessed and used to understand user experiences and interactions n Continuous engineering can be used

to optimise future designs, creating improvements based on real use n New updates and features can be added based on an individual’s interests and usage patterns, thereby increasing loyalty and satisfaction n Data as a service opportunities can be used to better enable a wider set of stakeholders across different companies, partners and even different departments within an organisation n Numerous third-party organisations stand to benefit from interacting with an IoT device’s data, from utilities and insurance through to consumables manufacturers. All have a vested interest in the connected machine and its user n New business opportunities can turn the machine itself into the free part of long-term pay per use services n Updates can add new features, security updates and fixes as unobtrusive downloads, giving the machine a longer shelf life without compromising relevance or modernity, but paving the way for more sustainable practices n Eliminating built-in obsolescence and promoting device longevity can have wider ramifications for waste and reduce consumption of raw materials Our washer has served us well as an example since these lessons are universal. Going forward, the challenge for developers, engineers and designers will be to explore how and where these ideas can be used in new devices, or perhaps retrofitted to existing things.

Dave Locke manages the IoT ecosystem and partner programme at IBM. The IBM IoT technology and cloud portfolio provides the capability to implement all the uses cases described https://www.ibm.com/blogs/internetof-things

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Smart clothing Making clothing part of the Internet of Things creates a world where the web can be worn.

Andy Hobsbawm looks at this fashion/tech overlap ashion is, by its very nature, fleeting. While trends come and go with the seasons, this year has shown that fashion’s relationship with technology is unlikely to ever fade. The intersection of these two spheres continues to attract an extraordinary amount of attention from designers, investors and consumers alike.

The 2016 Met Ball – one of the most important events in the global fashion calendar – was titled ‘Manus x Machina: Fashion in an age of technology’ and explored how technological advances are shaping fashion. But while visions of the near future can be exciting and inspiring, the fashion community’s biggest failing to date has been to flirt with and fixate on the daring possibilities of what might soon be possible rather than look at what innovations relevant to the average consumer can be realistically delivered at scale right now.

Karl Lagerfeld opened the launch of his spring/summer 2017 collection for Chanel at Paris Fashion Week with

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‘CocoBots’. While full of theatrical flair, most consumers would be forgiven for thinking “But what’s the point?”

3D-printed shoes and set designs inspired by data centres help to bring an element of techno intrigue to the catwalk but don’t help create pathways for that same technology to reach high street stores.

Fashion has the power to combine the aspirational with the essential, so should be able to drive technology into the mainstream. Everyone gets dressed every day – at least on week days – and fashion is driven by the ‘next big thing’. So, while in a decade, consumers may all be leasing cars rather than buying them and some may possibly be aided by robot butlers, everyone will still be buying clothes.

21st century fashion Fashion houses are already responding to consumers’ demand for instant access in the digital age. In September 2016, when Burberry staged its London Fashion Week show, it ensured its collection could be bought and worn immediately, bucking the traditional lag time of

“Fashion has the power to combine the aspirational with the essential, so should be able to drive technology into the mainstream” several months. Major labels such as Tom Ford, Paul Smith and Tommy Hilfiger are following suit, moving away from using fashion shows as a teaser for clothes that may or may not be available to buy somewhere down the line.

Yet technological integration offers fashion brands the opportunity to do more than just ‘do digital’ with an Instagram channel or ecommerce site.

They can be digital in the same way as

Tesla and Uber are for transportation, Airbnb is for travel and Amazon and Google are with their data ecosystems.

Fashion can now be digital at its very core, allowing companies to extract the full value of digital data, digital relationships, digital applications and services through the clothes themselves.

Fashion brands are starting to realise that ‘connected’ clothing is no longer just a concept and that Internet of Things (IoT) technology can already be applied in ways that enhance customers’ experience of their products. This is achieved by giving each physical item a unique digital identity in the cloud, allowing them to tap into real-time software capabilities, applications and analytics by making dresses, outerwear and shoes part of the ecosystem of the web.

Born to be different EVRYTHNG is an IoT smart products platform that, last year, closed a deal with Fortune 500® packaging materials leader Avery Dennison that will enable clothing and footwear to be ‘born digital’.

For both consumers and brands, the benefits of such connected products are far-reaching.

The Rochambeau experiment uses the clothes as tickets to exclusive events

Unique IoT identities will be a powerful way to prove items are genuine

Being born digital enables brands to achieve new levels of retail service personalisation. Customers can scan their garments to receive style tips, outfit recommendations and loyalty rewards based on what’s in their wardrobes.

Wearing a certain item of smart clothing could even act as a ticket or pass for an exclusive event. This has already been demonstrated in a collaboration with New York menswear brand Rochambeau, EVRYTHNG and Avery Dennison Retail Branding and Information Solutions (RBIS). The partnership produced an exclusive fall/winter run of connected jackets (Brightbmbr.nyc) that offer consumers access to exclusive dining, art, retail and fashion experiences – including a ticket for Rochambeau’s spring/summer 2017 New York Fashion Week show. As Rochambeau co-founder and designer Laurence Chandler put it, “The world we

pull our inspiration from, that leads to our design, can now be experienced by the purchaser of one of our products. It’s like a day in our life, experienced through wearing our garment.”

A better business model Personalisation aside, connected clothing cements brand authenticity, with garments’ digital identities proving to customers that they have bought the real thing, not an elaborate fake.

Similarly, making clothing born digital allows brands to be more transparent about the origins of materials and the manufacturing processes used. This transparency can add real value to a brand, especially now that consumers have become increasingly conscious of the ethical and sustainability issues relating to the products they buy.

Unique digital identities attributed to each item make it possible to monitor garment re-use and recycling, aiding environmentally friendly disposal methods. And clothing born digital should also be less susceptible to fraud and theft, since it’s easier for brands to detect misdirected shipments and to identify, intercept and rectify fraudulent attempts to sell products.

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Rochambeau uses NFC and QR tags to create IoT items using existing tech operations with real-time analytics.

By becoming more intelligent, more interactive, more characterful and more personal, brands can provide relevant, hyper-individualised, and ‘in-themoment’ mobile content, triggering unique digital experiences and services for each person through each product.

It’s important to inspire people with realistic, viable possibilities. Bringing products to market can be such a complex process that it can be helpful for brands to dramatise what success looks like – namely, a product that has its own digital life, a one-to-one relationship with its owner, and that is a data- and insightgenerating connected asset.

On top of this, every forward-thinking fashion brand and retailer is trying to integrate the experience of their physical stores with their digital services, all powered by intelligent data platforms to personalise shopping and product ownership. Adding digital identities to garments creates a valuable new data

signal to use for purchase validation, for loyalty programmes or for programmatic re-targeting campaigns. These all create new channels for direct consumer engagement which, in turn, heralds a brand new future for the way products are made, shipped, sold, enjoyed and responsibly disposed of.

A conversation through clothes By making apparel smarter and enabling products to connect with other applications and services within the owner’s digital life, brands can create new consumer experiences, bring their values to life through consumer/product interactions and garner new insights to help them optimise their product

“Ultimately, the future of fashion lies in having digital material literally stitched in the very fabric of a garment, from the very start of the design process”

This means that goods will become their own channel for media communications and interface for service delivery, enabling brands to connect with all consumers, regardless of where they purchase. Digital connectivity means products can provide previously unknowable insights about how they are experienced in the world. As the Rochambeau case study has shown, the future is already here – it’s just waiting to be more evenly distributed by brands taking a leadership role in a digitally transformed world.

Ultimately, the future of fashion lies in having digital material literally stitched in the very fabric of a garment, from the very start of the design process. Born digital clothes destined to be worn globally can now be digitised at source.

There’s no need to wait for embedded, washable electronics to become cheap enough for mass market manufacturing.

The strategy of embedding a smartphonereadable software identity into products using proven, cost-effective technologies that already exist is making born digital clothing a reality today.

Andy Hobsbawm is co-founder and CMO at EVRYTHNG, an IoT smart products platform company www.evrythng.com

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/internet_of_things

When cars connect Our vehicles are destined to be a major part of the Internet of Things.

Marcello Tamietti, connected transport lead at Accenture Mobility, explains how we’re already a long way down that road

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he pace at which in-car technologies is changing has become so rapid that unless you’re the type of person who buys a new car every year, the current state-of-the-art will almost certainly surprise and amaze you.

Most of us are familiar with built-in GPS and sensors or cameras to assist you as you park. Some may also be aware that buttons attached to your key fob are gradually replacing keys to open doors and start the engine, or that pull-up hand brakes are giving way to buttons.

But that’s only the start of it. While cruise control was once considered the ultimate driver assistance technology, lane assist options can now aid drivers in busy traffic or poor visibility, while increasingly sophisticated sensors can let them know if anything’s getting too close. With the advent of the Internet of Things (IoT), cars are even on the brink of ‘talking’ to the vehicles they share the road with, offering safer driving for everyone.

Other increasingly popular in-car technologies are less about what’s going on with the vehicle itself and more about providing an enhanced driving experience. The rise of ‘infotainment’ systems is well underway and Accenture Mobility, for example, has been working with Fiat Chrysler Automobiles for some years on their UConnect LIVE™ system.

This allows drivers not only to access up-to-date traffic and route data via an in-vehicle screen but also to link to their

music or radio services via a smartphone, which also offers access to real-time vehicle diagnostic services.

Connectivity – at the heart of progress Like many other new services and those still under development, services such UConnect LIVE™ require connectivity.

At the moment, this mostly means linking cars to smartphones or tablets to use existing data plans but it has been predicted that by 2020, 98% of new cars sold will be IoT enabled. In the intervening period, expect to see cars with their own SIM cards, or embedded

nearby drivers to avoid traffic jams or even find a parking space.

The rise of these connected cars opens up a world of opportunity not only for traditional vehicle manufacturers but also for other companies whose products or services can even change the very notion of car ownership.

The future of ownership In addition to offering greater usability to consumers, there are two compelling reasons why any company might consider implementing IoT technologies. One is that doing so could improve its own

“Cars are even on the brink of ‘talking’ to the vehicles they share the road with, offering safer driving for everyone” connectivity with the car manufacturer offering data bundles as an additional paid-for service.

Sensors will allow many new services to be offered. For example, mapping company Here was recently bought by a consortium of German vehicle manufacturers that includes Audi, BMW and Daimler, who announced that Here will combine data from sensors in vehicles to generate real-time information on current road conditions, traffic and accidents. This live view of traffic can be shared with other vehicles, helping

processes and operations by using the in-use data from connected devices to make better informed decisions and improve the products. The other is to drive innovation and growth by using the data to identity new revenue streams.

Since developing a physical product such as a car is no longer where the money is, it’s this second kind of IoT activity that we’re starting to see make a profound difference to businesses.

In many cities around the world, we’re seeing car clubs allowing people to rent vehicles for a short amount of time. We’re

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/internet_of_things “Within car insurance, we are already seeing the collection of valuable user journey data result in the provision of new and completely personalised services”

also seeing many of these clubs run by car manufacturers themselves, who see ‘pay as you drive’ services as a new revenue stream with vast growth potential.

Booked online or through mobile apps, for people who can’t afford their own car or who simply don’t need one all the time, this ability to share a vehicle not only makes economic sense to many users but also, if scaled up, would effectively widen city byways by reducing the number of cars permanently parked on the streets.

At Accenture Mobility, we created a proof of concept with Visa and Intel, built on Intel in-vehicle systems, that demonstrated what we believe will be the next stage of this trend. This concept showcases exciting new possibilities for personalised services such as ‘pay as you drive’ and even ‘pay how you drive’.

How would these work in the real world?

Well, imagine if you were able to use your smartphone to hire a car that is also available to all your neighbours and is parked at the end of your street. You can ‘sign in’, again through your phone, or possibly using in-car biometrics such as a thumbprint reader, so that the car will automatically adjust its temperature settings, seat positioning and even the radio station to the selections you set the last time you used it.

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Using data collected from previous journeys, the car would also know if you have an affiliation to a certain petrol vendor so that as your tank empties, it can guide you to the nearest location.

Since your secure profile has been uploaded, the could even ‘call ahead’ to that station to pre-authorise payment and your car pool account might only get charged for the fuel used, rather than the usual inflexible ‘bring it back full’ arrangement. For company car users, this sort of technology could also simplify life by automatically separating personal journeys from business trips for tax or expenses purposes.

Disrupting the car market Car manufacturers have always created alliances with associated industries such as the tyre and sound system manufacturers.

With the dawn of the IoT, it’s logical to assume that we’ll see a broad diversification of their ecosystems in order to offer people more personalised, digitally delivered services.

Manufacturers are already focused on providing after-sales services to users, building on a relationship that previously may only have had one touch-point each

decade. These relationships may start to blur industry lines, making retail partnerships with roadside services for example, or collaborating with entertainment content providers.

We recently worked with manufacturer SEAT to develop an app that connects a car to a

smart home thermostat, connecting two previously separate elements of a person’s life. The app allows drivers heading home to remotely set their home temperature to match that of their car by the time they get home. “The MY SEAT app represents the next step to position ourselves in the connected vehicle ecosystem,” said Pablo Barrios, global head of digital marketing and CRM at SEAT. “With this new app, we will enable a permanent, customised and relevant dialogue with customers while bringing many benefits for both SEAT and the customers themselves.”

user, even extending to altering the performance of the vehicle itself in real time. Imagine if the route programmed into the navigation system includes such a steep hill that the car might benefit from a temporary burst of additional horsepower. The car might then ask the driver: ‘Want to add that power, just for today?’ and, with the touch of a button and an automated one-off payment, your vehicle’s power could increase using a software patch. Such a scenario is still a little way off but being able to have a deeply personalised driving experience is certainly closer than you might think.

Within car insurance, we are already seeing the collection of valuable user journey data result in the provision of new and completely personalised services. Telematics boxes are helping to bring down insurance costs – particularly for new drivers – by tracking the way they drive. These boxes use sensors and gyroscopes to track driver behaviour and how consistent they are, what their average speed is and the measurement of numerous other metrics allows insurance companies to determine how ‘safe’ they are on the road and offer entirely personalised cover accordingly.

AI – it’s not just about robots What if your car could do more than just play your favourite music and adjust your seat to the comfiest position? What if it could use every journey to learn your routes and give you traffic updates, or automatically defrost the windscreen five minutes before you leave in the morning?

By bringing insurance providers into their ecosystem and integrating insurance monitoring to a vehicle that also has preregistered, secure payment capabilities, vehicle manufacturers can offer more than just ‘pay as you drive’ but actually ‘pay per journey’ and even ‘pay according to how you’ve driven today’.

The proof of concept we developed with Visa and Intel showed how integrated payment capabilities could make this personalised vehicle provision an entirely frictionless experience for the

Over the next few years, we will see machine learning, an element of AI, start to find its way into our vehicles. Cars will offer ‘zero touch’ navigation, proactively offering the quickest, safest route each morning based on real-time traffic and driving conditions as well as your previous behaviour.

Cars will also be able to interact with other systems and sensors as part of the IoT, so could be aware of freezing temperatures or spots of black ice a few miles down the road, or that you prefer to get into a hot car before continuing your journey in a cool one. Such responsive, adaptive climate control could mean that you never have to take your eye off the road to fiddle with controls again, since everything will be automated and tailored to you.

Arguably the most outlandish next progression of the driving experience due to connected vehicles will be the ability of cars to change the way they drive, based on machine learning. So, for example, a car may be able to learn an individual’s driving style along a specific stretch of road, automatically adapting the suspension according to road surface, weather conditions and driver behaviour. Since this kind of service will be a real differentiator for manufacturers, each one will seek to provide the most personalised experience they can.

IoT cars - the bigger picture Self-driving, fully autonomous vehicles are on the horizon but they are far further away than the types of technology covered here.

There are significant regulatory challenges that must be overcome before we see fleets of selfdriving cars take to the roads. But even when that happens and new laws are in place, the chances are you’ll still have to pay for some sort of vehicular service. You’ll therefore still want a seamless, comfortable and personalised experience, just like the ones we’re already starting to see.

Marcello Tamietti is connected transport lead in the IoT practice at Accenture Mobility, part of Accenture Digital www.accenture.com www.youtube.com/ watch?v=j4eQKNakPjI

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/autonomous_vehicles

Driven to disrupt How close are we to autonomous cars on Britain’s roads?

Lucy Yu explains how UK innovators are determined to get in the driving seat so the rest of us will no longer have to fter the Queen’s speech in 2016, when a royal pronouncement on driverless cars had captured the headlines, one tweet dryly noted that… “Only in Britain would someone arrive by horse-drawn carriage to tell everyone they’ll soon be travelling in driverless cars.”

Yet the bemusement shown by some observers doesn’t detract from a serious level of government commitment. In 2015, the Centre for Connected and Autonomous Vehicles (CCAV) was formally established, creating a team dedicated to safely and securely bringing self-driving vehicles to the UK’s roads before they appear elsewhere. This was backed up

by Chancellor Philip Hammond’s autumn statement, which committed a further £100m to the cause.

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For while the most widespread image of driverless cars is a Google pod making its way round sunny Californian streets, that kind of real world testing is only the small, highly publicised tip of the iceberg. It’s supported by far more onand off-road simulation and testing and in all of these spheres, the UK already has strong capabilities. There are controlled facilities such as those at HORIBA MIRA and Milbrook. There are campus environments in Culham Science Park and Cranfield University, as well as real world testing environments in Greenwich, Milton Keynes, Coventry and Bristol, with a high degree of collaboration between such institutions. At the same time, the universities of Leeds, Nottingham and Southampton are spearheading investigations into issues of trust and the social acceptance of our public roads being full of driverless vehicles.

“You need a lot of testing before you get the confidence to test in the real world and simulations help bridge that gap” One of the groups leading technical and user testing is WMG at the University of Warwick. With funding from the Engineering and Physical Sciences Research Council (EPSRC), WMG has built a ‘3xD Simulator for intelligent vehicles’ to test and evaluate new technologies in representative real world conditions.

Gunny Dhadyalla, principal engineer at WMG’s Energy and electrical systems group, explains, “We wanted to make our simulator unique and complementary to others in existence. It has a 360-degree screen and we will be able to emulate GPS, ITS, 3G, 4G and other protocols as well as the vehicle’s sensors, engines, gearbox and so on. It’s a shielded environment where we can control the signals going to the vehicle. We also have the ability to drive any vehicle into the simulator. Typically, simulators house the same vehicle for three to four years but we wanted a more flexible environment.

“We can’t have scenarios in the real world where we put people in front of vehicles and see how they or the user in the vehicle react,” adds Dhadyalla. “We also can’t control weather factors or the variety of terrains and road surfaces that we need to test on. You need a lot of testing before you get the confidence to test in the real world and simulations help bridge that gap.”

In recent years, British SMEs including DeepMind, Magic Pony Technology and SwiftKey have seen high profile acquisitions by Google, Twitter and Microsoft respectively. All produce software based on machine learning and AI – key disciplines in the development of autonomous vehicle software.

Why is this so significant? “The existing automotive control systems community is risk averse,” says Dhadyalla. “It wants systems to behave in a given way for given circumstances. Contrast that with the world of computer scientists who want systems to adapt to their environment and learn over time. That’s why startups such as Oxbotica and Five AI are becoming the UK’s biggest assets.”

Yet the prospect of autonomous vehicles that will ‘do the right thing’ out on the road raises fundamental questions for the automotive community. “What does testing for that look like?” he wonders.

“Is it no longer ‘does it do what I want it to do?’ and more about ‘is it learning the right things?’. The questions for testing communities will shift.” And so too, will those for policy makers.

Lucy Yu is head of innovation at the CCAV www.gov.uk/government/collections/ driverless-vehicles-connected-andautonomous-technologies

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/work

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The future of work Jobs for life are a thing of the past and artificial intelligence is a threat to all white collar workers.

Where does this leave the office and how are these work spaces adapting to future needs?

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/work

“We know that people will have to be in the workplace into their 70s, so how to adapt work spaces for four generations of employees is a big challenge”

obots are going to steal your job – it’s the tabloid headline that’s guaranteed to grab everyone’s attention. But for once, this isn’t just about outdated media empires trying a last-ditch attempt to sell more newspapers, it’s about the growing public awareness of something that the tech sector has known about for years.

Machine learning, big data analytics, the Internet of Things… they’re already here and as they start to bite, there’s a gorwing awareness that artificial intelligence doesn’t need to be supersmart on a sci-fi magnitude in order to surpass the abilities of humans. When AIs reach the point that they can do a certain job well enough, that’s when machines working tirelessly 24/7 will start to put people out of work. And we’re so very, very nearly at that point…

It was Bank of England Governor Mark Carney who prompted the most recent alarmist headlines when he warned

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that up to 15 million UK jobs could be automated, adding that even his own position as an economist had a 40% chance of being done faster, more accurately and cheaper by AI analytics.

His dire predictions of the “hollowing out” of the middle classes were based on an Oxford University paper called The Future of Employment: How Susceptible Are Jobs to Computerisation? which estimated that 47% of American could be automated over the next two decades, with call centre jobs almost certain to be rendered extinct by advanced Siri and Cortana-styled speech assistants. From transportation and logistics through to most office and administrative roles, technological advances look set to wipe out skill-based roles the same way the Industrial Revolution eliminated the need for a massive manual labour pool.

But hang on, is society really so blind as to voluntarily impose obsolescence by robot? Is big business so focussed on the pursuit of cost cutting and profit enhancement that it can’t anticipate the

implications of plunging the majority of the population – and therefore its own customers – into long term, or possibly even permanent, unemployment?

D/SRUPTION says of course not. That’s why we’re slicing off a small corner of this vast subject to take an overview of the traditional office. How are these spaces likely to evolve? What kinds of work will be done in them and, more significantly, who will be doing it? For while the nature and type of work will certainly be disrupted by current advances, emplyment itself will always remain.

Offices – who need them?

Time was that the office was where all the instruments of work were kept. The typewriters on desks and paper records in filing cabinets – these were the machines of manufacture and administration that allowed employees to do whatever it was they were paid to do. They were watched over by tiers of management who worked out of their own offices, the size of which denoting their status.

Meetings were conducted behind closed doors on a need-to-know basis, the office walls providing a castle-like barrier to the prying eyes of external oversight and business competitors.

The world has moved on from this Mad Men era of rigid hierarchies and few of us can relate to a workplace full of clockpunching workers overseen by middle managers rigorously enforcing toilet breaks. Despite that, many aspects of the nine to five job remain. City workers still swallow the cost in time and money of their daily commute, just as the cities struggle to maintain transport networks that overflow during rush hour yet idle at all other times.

It’s easy to regard the ceremony of work as a kind of First World collective madness. Employees who have spent a fortune to own powerful web-connected computers and centrally heated homes leave both in order to speand another fortune to commute to offices that are being climate controlled at great expense for their comfort. Surely it would make sense for everyone who could work from home instead of an office to do so?

Juliette Morgan of global property consultancy Cushman & Wakefield says that’s exactly what many are doing… kind of. Since her company’s clients make their money from business property, it’s her job to keep them informed about the changing trends that will affect the patterns of office usage. And she’s certainly got plenty to talk about.

“People still want to be able to work in the cities,” she says, “but they also want to

be able to work from home, to work with their clients, to basically work wherever they like. So coming into the office needs to become a great experience, one that’s good enough to attract talent to the business and one where high value work gets done, not just filing and administration tasks housed inside some expensive real estate.

“Because of economics and changing pension ages, we now know that people will have to be in the workplace into their 70s, so how to adapt work spaces for four generations of employees is a big challenge. We’re also seeing the advance of a freelancing army, with companies employing fewer people directly but calling on consultants on a projectby-project basis. This leaves corporate headquarters becoming smaller as coworking sites such as WeWork are on the rise. Finally, many people would just prefer to work from home and their devices now give them the flexibility to do that rather than go to the office.”

So the office needs to become a place for workers and clients, aged between 20 and 70, to meet, exchange ideas and project a better image of the company? In a stroke, the open plan office divided into Dilbertstyle cubicles sounds entirely unfit for purpose. So if filling several floors of an inner city office blocks with everyone from administration to call centre staff is becoming a vision of the past, what does the future look like?

The office as a destination When the London Olympics wrapped in 2012, the worry was that the elephant in the room would be a white one. The

The matter of millennials Millennials are those people born between the 90s and noughties. By 2020, they will account for 50% of the global workforce, yet they’ll be sharing work with older generations whose priorities, skills and advantages are very different: n Millennials’ lack of responsibility or wealth isn’t unusual – every young generation struggles. However, the combination of limited prospects for both home ownership and jobs for life are factors that have defined them n Since they are the first generation to grow up with broadband, smartphones, laptops and social media, they often enter the workplace with a better grasp of technology than their employers n Priced out of the property market, millennials are more likely to relocate for work, to rent rather than buy and to frequently change employer. They are expected to have 15 jobs over their career Taking at all these factors together, it’s clear that businesses shouldn’t aim to recruit millennials for the long term but instead should aim to become attractive places for short term, project based employments that will enhance employees’ CVs. In this respect, making the workplace an appealing, engaging physical space will be a key factor in attracting this generation’s top talent.

35

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buzzword around every Olympics has become ‘legacy’ and, more specifically, the fact that few modern events have ever achieved one. Determined not to see the billions poured into infrastructure fall into ruin as they had so many times before, London set about turning the Olympic Park in Stratford into something meaningful and vibrant.

One of the more problematic buildings was the former broadcast centre, with cavernous ten-metre high studios that had no obvious use other than what they’d been designed for. It was taken on by Here East as a privately owned technology innovation campus that’s currently home to an eclectic mix of clients, including Loughborough University, BT Sport and choreographer Wayne McGregor’s Random Dance studio.

By adding extra floors around some of the former TV studio space, Here East retained the airy feel of the building while also increasing available floor space from around 960,000 to 1.2m square feet – enough for 5,500 people at full capacity.

Here East’s Chief Executive Gavin Poole sees his role as being far more than finding new clients and allocating office space. “For this site to flourish,” he says, “we need to curate the right mix of companies, from ones that take up 50,000 square feet to individuals who’ve just become a member in a coworking space. What we’re trying to create is a culture of collaboration, with all of them ending up being aware of each other.”

To that end, Here East has created artand culturally-infused spaces where events are scheduled and catering available on site. “Our message is that dynamic, small to medium organisations working in the technology and digital

spheres can enrich their culture, not necessarily by being around the same kind of business but around likeminded individuals,” says Gavin. “We have programmed activities that some people will want to participate in and that others will want to sit and watch because meeting and sharing ideas is what drives innovation. We want people from different spehere to meet up and say, ‘Hey, we’ve got 25 employees now and need to restructure… how did you manage it?’”

Here East is just one successful iteration of the coworking concept that a different company, WeWork, has launched globally across 139 offices and 34 cities. By giving small startup companies, or even individuals, a desk to work from and the opportunity to use meeting rooms, freelancers can work from home when they want to but also have access to a more professional setting in which to meet clients.

Here then, is an example of office space as a meeting place, with the emphasis on making the environment as appealing as possible. Yet appeal can go far beyond replacing beige-walled cubicles and grey carpets with modern decor and a few extra pot plants. Accountancy group KPMG is a good example of taking the concept of a workspace as far as possible.

The company recently opened Number Twenty in Grosvenor Street, London as a client hospitality centre. The building has no offices at all, just a collection of bars, restaurants and library spaces that more resemble a private club. And, just like a membership-only club, KPMG’s clients are given access cards and encouraged to use the space whenever they like, regardless of whether they’re meeting their KPMG contact or not.

The rise of the anyplace office?

The ubiquitous nature of the internet means that, in theory at least, anyone can work from anywhere. But how does that affect the need for large offices in prime city centre locations?

“Clustering – the combination of workspaces, housing and amenities – is a proven approach to driving economic prosperity in regions,” says Here East’s Gavin Poole. “No one else was going to take these building on but we’ve come to the Olympic Park with a vision and what we’ve done here can be applied anywhere.

“So take a look at Wigan or Sunderland or the South West… What were the industries that used to be there? How could we capitalise on what has been left behind?

Because there will be lots of young talent coming out of colleges with the right types of education, the right kind of aspiring teachers, and they might not want to move to London. So all they need is some support for their entrepreneurial spirit.”

Gavin sees Here East as a prototype for kickstarting anyplace innovation but even he concedes that location plays a part in this. “If you want to get into producing clothing with a ‘Made in Britain’ stamp,” he says, “then we are quite a small country with a very good road and rail network. So all you need to do is find out where there’s residual capacity which can be turned on very cost effectively. So prototype and showcase it in a small London office but manufacture it two hours down the motorway in Wales. Why not?”

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“Thanks to technology, the work itself can be done anywhere and any time by employees with an off-the-shelf laptop�

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Obviously, not all companies can afford such a setup and few businesses have as many clients so densely clustered together, so KPMG’s approach wouldn’t be applicable to all. But it does show how importantly they have placed the highvalue collisions between clients and other clients, as well as clients and employees.

And what’s the bet that clients are now name-dropping KPMG like they’ve never name-dropped an accountant before?

What about the work?

When offices contained the machinery and paper records necessary for work to be done, work was defined by the basic nine to five, with employees clocking in and clocking out. Authoritarian oversight has always been so built into the workplace that even now, some employers remain hesitant about allowing home working for fear that their employees will simply slack off.

Yet the metrics of successful work are changing, going far beyond simply being in a designated place at a set time. And, in a world where it’s possible to remotely monitor an individual’s keystrokes against time, monitoring activity can, if needed, be a science rather than an art.

That said, if KPMG and its clients regard spending time in what’s effectively a private club as a profitable way of spending work time, where does that leave other sectors? Shouldn’t work be heads down, hands on a keyboard, or on the phone to a client following the marketing mantra of ABC - Always Be Closing? It would seem not.

NBBJ is an architectural company that has partnered with companies including Google, Amazon, Samsung and Microsoft.

Why are they so in demand? Juliette Morgan again…

“NBBJ worked with neuroscientist Jon Medina to prove that not only do people hate open plan offices, they can actually feel hunted in them,” she says. “They found that floor plans larger than 30 square metres are stressful because they trigger a fight or flight response as your primitive brain looks for an escape route.

Workers will want to block that space off with desks and effectively build a cave.”

NBBJ’s research also noted that a walking meeting was more productive than a sitting one and concluded that a brain on the move was a better oxygenated brain.

They have since gone so far as to design buildings that have pathways around them to facilitate such optimum on-thehoof meetings.

We can see how the nature of work is changing due to technology and along with it, how the role of the office is also shifting. When employees are only required at the office for high-value activities such as brainstorming or meeting clients, it means that offices are increasingly becoming hospitality environments rather than areas packed full of workstations.

There’s a knock on effect to this. Inner city locations continue to be sought after because of their prestigious post codes and their convenience to clients.

With this constant demand, office space remains an expensive overhead. Yet as we’ve seen, these spaces are increasingly being used for meet and greets rather than to warehouse large numbers of full time employees. These changing demands mean that the corporate HQ of the future will no longer needs the same physical footprint it once did as a social hub requires less space. Which leads us onto our final topic…

Is this the end of the office?

Once you accept that a single full-time employee can coordinate a freelance team online thrn can’t an office be anywhere there’s good wi-fi? signal. Can a beach front coworking hub in Bali turn in work just as quickly as one on the other side of town? Couldn’t we all just live the surf office dream?

Well, yes, we could. But as long as most of us still want to work near where we live, the office isn’t going to become extinct. It’s just that it might start to look more like a Starbucks than a corporate headquarters. And it might be full of clients dropping by to hang out or teams of freelancers meeting up for a monthly meeting with their team manager.

It might even be in a converted 19th century cotton mill in Manchester or in a small ski resort town in the Rockies.

Ideas, relationships and plans – that’s the way forward. Because thanks to technology, the work itself can be done anywhere and any time by employees with an off-the-shelf laptop. With advances in AI, it might eventually be done by the laptop itself.

As for the physical buildings? That’s something that Cushman & Wakefield devote a lot of thought to. “The timeline from buying land to filling a finished building with paying clients is generally about ten years,” says Juliette Morgan, “so we’re currently trying to procure space for industries that we don’t even know will exist in a decade. But we work with a really great architect who says ‘Long life, loose fit’. People will always value a well-built open space that they can reconfigure and do what they like with. And that’s the future of the office.”

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/talent

AI versus the worker At what point is being good at your job no longer good enough? George Zarkadakis looks at which highly skilled roles will be disrupted by AI and which ones won’t

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s artificial intelligence and machine leaning applications become pervasive, questions arise with regards to rationalising jobs and managing human talent. Businesses must decide how best to balance the efficiencies of automating tasks using intelligent machines while at the same time managing the risks of automating too quickly or slowly. A useful tool in deciding how jobs may be affected in the era of robotics and cognitive machines is the ‘Return on Improved Performance’ (ROIP) curve shown in the graph. Using it, companies can make the important distinction between two categories of role: ‘proficiency’ and ‘pivotal’.

Let’s take the airline industry as an example. A typical ‘proficiency’ role is that of a pilot, whose performance increases as they notch up flying hours.

They achieve a minimum performance level – when they get their licence – then go up a level when they become a captain.

For as long as they are progressing their careers towards becoming captains, each pilot keeps returning higher value to the organisation. However, once they have achieved that level, the value returned ‘flattens out’ since they will continue to perform essentially the same tasks – commanding the airplane, supervising the junior crew – while continuing to demand more pay and benefits due to their longer years of service.

When good just isn’t enough Since all proficiency roles have a similar relationship between performance and value, they are highly susceptible to transformative disruption by intelligent machines. It is not impossible to imagine a future in which pilots have been replaced by automation since the latest generation of commercial aircraft is already capable of autonomous take off and landing. While most passengers might currently feel safer knowing that human pilots are sitting up front, there is also an increasing awareness that the majority of crashes are caused by pilot error and that computers should be given the ability to override human decisions if the safety of the plane is at stake. If that sounds too much like HAL from 2001: A Space Odyssey, consider the recent highprofile cases of planes crashing either due to poor pilot judgement or personal psychological issues.

Pivoting on the human touch If a pilot is an example of a ‘proficiency’ role, let’s now turn to the flight attendant as a ‘pivotal’ position. In this job, great talent really can be a differentiator since an ever-increasing performance level can keep returning more and more value to the organisation. A talented flight attendant can deliver superior customer satisfaction and with that, lasting customer loyalty and advocacy.

The value of work Where great human talent makes the difference (in a ‘pivotal’ role) and where being good enough is sufficient (a ‘proficiency’ role) Flight attendent ‘Pivotal’ role

Pilot ‘Proficieny’ role

Value to the organisation

Legally required to operate in designated role

Expectations met as experience is gained over time

Outstanding pivotal individual performance

Performance level over the course of a career SOURCE: WILLIS TOWERS WATSON

Pivotal roles are hard to replace by AI since creativity and the human touch are hard to define and harder to replicate.

However, they can be susceptible to augmentative disruption by intelligent machines. Imagine the benefits of a flight attendant using a Google Glass type device to access information on each passenger in real time. Equipped with such machine learning-powered technology, the flight attendant can augment their performance and deliver even greater value to passengers and, therefore, to the organisation.

Retain or retrain?

Over the coming decade, companies will need to be able to identify and segment jobs according to the pivotal or proficiency characteristics in order to make the right decisions about automation. Pivotal jobs will be the

©HBR.ORG

clear winners in the fourth industrial revolution but what about proficiency jobs? Will they be eradicated across sectors, the way pilots stand to become substituted by fully-autonomous planes?

Without doubt, some proficiency jobs will go but for most roles, automation will offer opportunities for them to become transformed into pivotal jobs. Companies will need to analyse these opportunities in order to retain vital talent while whitecollar workers will need to assess their skill sets and retrain, as well as retool, for a future where the ability to manage human interactions will become more valuable than task-based skills, since it will be the hardest thing to automate.

Dr George Zarkadakis is digital lead at Willis Towers Watson www.willistowerswatson.com

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/augmented_reality

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Visual search Discovering more about the world we see Omaid Hiwaizi and Sam Ashken echnology has shaped human development since the dawn of time, from cave drawings that allowed stories to be recorded, to combustion engines bringing people closer. The World Economic Forum’s Professor Klaus Schwab summed it this way: “The first Industrial Revolution used steam power to mechanise production. The second used electric power to create mass production. The third used electronics and information technology to automate production. Now a fourth Industrial Revolution is building on the Third. It is characterised by a fusion of technologies that is blurring the lines between the physical, digital and biological spheres.”

We’re at the start of an age in which AI – artificial intelligence – will enable machines to help us to enhance how we communicate, think, feel and see. And since vision accounts for more than 80% of our engagement, computer vision will become critical. It’s the branch of AI that’s teaching computers to see the way we do yet it’s proving to be a tough nut to crack. Sight uses as much as 50% of our brain function but much of it is in ways

which aren’t clear. By comparison, chess utilises just 5% of our brain capacity!

Reverse engineering sight has been worked on since 1966, when Professor Seymour Papert, a founding father of modern AI, issued a project brief to solve it over the summer break, which he thought would be plenty of time. Yet it took until the 1990s for the breakthrough of face detection and recognition that is now commonplace in cameras and smartphones. And since these algorithms can only detect human faces, in order to recognise other objects, a new approach has been needed for a long time.

The quest for recognition Several competitions have been launched to assess success, with ImageNet the most successful initiative, providing millions of tagged images to allow projects from companies and universities to test their technologies. The format of an annual competition has added a fun element but has also shown that over the years, improvements have been in incremental steps rather than the huge leaps forward everyone was hoping for.

It’s clear that while it’s easy for humans to

recognise a banana, a bunch of bananas and a drawing of a banana as the same thing, it’s far, far harder to teach an AI to do the same thing.

Yet in 2012, the introduction of deep learning on GPUs – Graphical Processing Units – proved to be a game changer.

GPUs had been developed to drive the huge mathematical needs of real-time 3D gaming but their supercomputer processing power was soon identified as a way to exponentially increase the deep learning abilities of AIs, increasing the rate at which they could be taught.

A tipping point was reached in 2015 when the abilities of the best systems finally beat human recognition at the ImageNet competition. Since then, we’ve been in an arms race, with multiple companies working on applications ranging from production line systems through to consumer applications such as driverless cars or visual search.

Visual search vs text search Question: how is text-based searching helpful? There’s no doubt that search on smartphones gives people great access

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to information, particularly given the powerful machine learning algorithms that prioritise internet content to keywords. Text entered gives a very clear intent signal on the part of the searcher, which also creates a clear question for relevant advertisers to address.

But words do not always have the ability to describe the thing we’re curious about.

If you see an unfamiliar flower, breed of dog or unusual street food, what words can you choose in order to learn more?

Visual search allows someone to just point a smartphone at each thing in order to get an answer. As with text-based search, there is a clear intent so again, any advertisers with brands, logos or related objects in the image can follow up with a targeted message.

Drawing comparisons between visual and text searches only hints at the scale of this opportunity. Consumers inhabit a world of overwhelmingly abundant content – social media, video, gaming, VR… There’s so much competing for consumers’ attention that it can be hard for brands to be noticed. We feel that visual search will be crucial to the ability of brands to fight for that attention.

At root, branding is about highlighting or reinforcing some benefit of the product so that consumers are more likely to remember and buy it. Audience fragmentation across mass and social media channels, as well as the high cost of advertising, have make any fresh approach highly attractive, while the perfect moment to deliver any message is when the product is in the customer’s hand. Visual search will make it frictionless for brands to nudge customers towards a point of purchase by making the in-store moment of decision a valuable, more fulfilling one.

Where is this taking us?

Visual search will enable quick serve restaurants (QSR) to turn their outdoor advertising into actual incentives to go in-store… right now. Once shoppers are in the store, the brand will then be able to serve personalised incentives to increase basket size. For cosmetics brands, visual search will show customers what looks a specific mascara can create just by pointing their phone at the product.

“Visual search will make it frictionless for brands to nudge customers towards a point of purchase” For food and drinks brands, visual search will deliver nutritional information which goes beyond what’s on the label.

It will provide recipe inspiration, offer complementary products and, ultimately, will be the route into queue-less, mobileenabled payment.

For car brands, visual search will turn the whole world into a showroom. Car buyers will get performance information about models by pointing their smartphones at them in the street. Then, using the phone’s GPS, local dealerships can attempt to engage each one with a deal.

Visual search will change shopper journeys higher up the funnel too, in the inspiration phase. When a garment catches the eye of a fashionista, they will

be able to find where it comes from and what other pieces of clothing are like it.

In the same vein, if a colour takes their fancy – it could be a flower, a painted wall or a sunset – they will be able to search for shoes or clothing in that exact shade.

These use cases are only the start. We can’t anticipate all the ways that brands will be able to use visual search but what’s certain is that this new way to link the digital and physical worlds will offer a wide range of a opportunities.

Creating knowledge parity We’ve discussed how visual search will change how brands engage with consumers. However, perhaps the biggest area in which it will transform our lives is the issue of ‘knowledge parity’ – the uneven global distribution of expertise and information.

A seventh of the world’s population can’t read or write and two sevenths have only basic literacy. Even the ‘educated’ four sevenths only use 12% of the languages they speak. The potential applications of visual search and computer vision are therefore broad – from helping illiterate farmers increase their crop yields to the distribution of medical expertise.

Humans are a visual species yet we’ve grown up with the idea that digital is predominantly a ‘text first‘medium. In the future, the current era in which we access information primarily through the keyboard will seem so anachronistic as to be almost unimaginable.

Omaid Hiwaizi and Sam Ashken are global head of brand experience and strategic planner at AR and computer vision company Blippar blippar.com

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/innovation

Europe’s largest innovation ecosystem

Set at the heart of London’s Olympic Park, Plexal is on a mission to be the epicentre of tech startups and innovative thinking

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ith a mission statement “To set the international gold standard for the innovation experience,” Plexal, sitting at the heart of Queen Elizabeth Olympic Park, started as it means to go on when it launched in October 2016. Located in “the most connected building in Europe” and part of the privately owned Here East development, the Plexal innovation centre offers around 70,000 square feet of offices and flexible space that it hopes will attract and incubate innovators in AI, Internet of Things, VR, cyber security , AR and analytics.

Plexal is the brainchild of founder and CEO Claire Cockerton, a specialist in tech clusters, innovation services and startup ecosystems. As the founder of innovation design and delivery firm ENTIQ and cocreator of Level39 technology accelerator in Canary Wharf, she has previously founded successful businesses in the fields of financial services, technology and sustainable architecture.

Claire is working alongside COO Ricardo Moral who, prior to joining Plexal, was part of the senior management team that, over ten years, built and scaled Globant, a $1.4bn public company that builds and delivers new digital consumer journeys for corporates. Ricardo has also created and led teams responsible for designing and developing technology products for organisations including Ford, Sony, HSBC and IBM. Plexal is located within Here East, a 1.2 million square foot facility built inside the former London Olympics Press & Broadcast centre that has its own events space, cafes, kitchens and library. A fiveminute walk from Hackney Wick and a

five-minute bike ride from Stratford, the location already puts London City airport and the Eurostar within easy reach and will soon also be served by Crossrail. Here East’s chief executive, Gavin Poole, notes that “With reference to the industries that we’re appealing to, something like 70% of the workforce in the creative digital sector live east of Tottenham Court Road. Since they all already live over this side of London, they want to work over here too.”

As Europe’s largest innovation ecosystem centre, Plexal has already occupied 68,000 square feet which, at full occupancy, will house 800 members.

In addition to providing office and

workshop space, Plexal offers accelerator and corporate innovation programmes, practical entrepreneurship courses, prototyping facilities and a state-of-theart tech lab.

Says Claire Cockerton, “Our ambition is that this centre will be where chain reactions begin; a node for tech companies coming to the UK and home for British-based businesses looking to forge internationally.” Plexal is set to open fully in spring 2017.

For more of Gavin Poole’s thoughts about innovative workplaces, turn to page 32 www.plexal.com @plexalcity

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/finance

The team at ALVA Capital offers advice on choosing the right kind of investment in an increasingly disrupted financial landscape

Are you finding it challenging to find a fundamentally good investment for the longterm? There is a chance you may be a victim of Disruptive Technology (DT) and its impact on investment portfolios.

Why does DT have such an impact even on the most experienced investors? The speed of innovation is accelerating and, in most cases, improving our lives as consumers.

The variety of technological advances creates efficiencies in the way we communicate, shop, travel, exercise and use financial services. However, our gain is often an enterprise’s loss. This is where DT can destroy a whole industry or business.

Obvious examples are the disappearance of video rental stores, or 35mm cameras, but the impacts are wide-ranging. It’s quite bizarre to think that currently, Amazon is bigger than Walmart.

DT risk should be at the forefront when considering an investment in any business but especially so in regards to traditional businesses that are resistant to change.

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We only have to look so far as the yellow pages businesses, where $39bn of debt value was impacted. The digital business model (online search and advertising) was simply too powerful, leading to a total revaluation of the whole industry.

ALVA research shows that between 2010 and 2015, there were over $100bn of corporate defaults driven by the forces of disruption. You would expect executive teams and boards across industries to be attuned to the risks and perils of disruption but unfortunately this is not the case. Despite being aware of imminent

“Disruptive risk should be at the forefront when considering an investment in any business”

disruption, only 25% of leaders are taking an active approach to it.

Investors should think twice before investing in an incumbent business for the simple fact that these businesses now operate in an increasingly different environment. Ultimately, unit economics of the old and new products determine the impact on valuation, positively or negatively, and this is often where change is greatest with innovation.

For example, the US pay TV industry is seen as a highly stable and cash flow generative industry but streaming products now offered at a third of the price have put this position under threat. The lifetime customer values are now materially below that of the current pay TV paradigm, dramatically altering unit economics.

Even real estate, which is considered as a very secure investment, is at risk. How can this very low-tech industry be massively impacted by high-tech companies such as Amazon and other online retailers?

The fact is that many shops are closing

Disruption affects all industries Advertising / PR

22%

62%

Tech / telecoms

59%

Retail / leisure

57%

Professional services

28%

Advertising / PR

31% 35%

Retail / leisure

79%

16%

39%

Professional services

39%

Financial services

Healthcare

51%

40%

Healthcare

48%

Utilities

49% 46%

36%

Construction

28%

Manufacturing

28%

Pharmaceuticals

50% 51%

Major market share loss

74%

Some market share loss

as consumers migrate to shopping online, office buildings closing down as employees work through the cloud and this is only the beginning. Shopping mall and commercial real estate investors are already finding it hard to increase rents or even to fully lease out their spaces.

On the other side of the equation, cloud computing has fundamentally improved global software delivery. Previously, most companies sold software upfront but today, the whole industry is shifting to a subscription/service model called ‘software as a service’. Unit economics are initially impacted but over five years, the recurring payments generate a massive financial boost to software providers.

HMV CEO quote 2012:

Education

26% 23%

73%

Transport

67% 48%

20% 22% 35%

Construction

60%

30%

Energy

59%

30%

53%

Pharmaceuticals

35% 61%

Less than 2 years

The key to investing through change is to follow a framework to gauge whether the emerging business model will be more or less profitable. It’s a key question, alongside assessing the management team’s and the board’s willingness to drive change towards the new paradigm. For without key stakeholder support, radical change that ultimately might allow a business to flourish becomes very difficult to implement. The corporate world is full of examples of visionaries but also ‘ostrich’ management teams that put their head in the sand and hope for the best, to the detriment of their investors. Read the selected quotes below for examples of both types of business leaders, plus how their approaches played out.

SuperMedia CEO quote 2013:

23%

75%

Manufacturing

54%

18%

70% 68%

Utilities

44%

35%

Energy

20% 17%

54%

45%

75%

Tech / telecoms

51%

Transport

11%

78%

Financial services

Education

82%

Broadcast / media

2-5 years

39%

SOURCE: Harvey Nash / KMPG 2015 Annual Executive Survey of 3,691 leading global firms

75%

Broadcast / media

So next time you look at a business in an industry at risk of disruption – and most are – try to understand the above points, or make sure your investment manager does. Otherwise, there could be a disruption coming that may either result in significant value loss to your portfolio, or cause you to miss out on a lucrative opportunity as value is transferring from the analogue to the digital space.

Andre Klotz is investment director at ALVA Capital LLP, which has created a proven investment methodology that allows it to capitalise on superior investment opportunities caused by the technological disruption of industries www.alvacapital.com

Thomas Cook CEO quote 2013:

Netflix CEO quote 2011:

“Our offer will be differentiated through the quality of our in-store experience”

“We believe Yellow Pages provide a better return on investment relative to many other media alternatives”

“Our online business is changing and will become our key distribution channel as we will continue to invest in order to harness the power of technology”

“We believe that DVD will be a fading differentiator given the explosive growth of streaming and that in order to prosper in streaming, we must concentrate on having the best possible streaming service”

84% fall in revenue

54% fall in revenue

10% increase in cash flow

155% increase in revenue

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/signing_out

What to do when AI takes your job ill AI and robotics take your job? It’s a question we keep returning to but I think the consensus is, for large groups of workers, yes and soon. A great quote I heard recently sums it up well: “If you can write a tight job description then an AI robot can do that job – for free.”

Economist Michael Baxter, author of iDisrupted, said: “Emerging trends, such as the Free Economy and the Sharing Economy, can potentially make most of us better off, but they carry dangers…

The combination of the Free and Sharing economy could lead to lower tax receipts for governments. Also, if AI and robotic technologies continue to develop at a rate commensurate with Moore’s Law, many jobs will be replaced by robots, which don’t require wages…

We must find a way of ensuring that the fruits of technology trickle down, creating demand for the kind of jobs that computers will find hard to do.”

So where does that leave you when you’ve lost your job to a robot yet retain a lifetime of skills? Firstly, there is significant evidence that we are moving 50

towards the ‘gig economy’, where fulltime employment is being replaced by tasks that are advertised on marketplaces like Peopleperhour.

But a real shift will come from people’s innate creativity, which remains the core differentiator between computers and humans. My partner has great fashion sense and a desire to design her own shoes. Thanks to technology, nothing’s now stopping her. Lucy can just download an app to her iPad and iterate her shoe design to perfection. She can then email the design to Amazon’s 3D printing bureau (launched in 2015) and Amazon will mail back her prototype.

By spending a few dollars, she could

“If you can write a tight job description then an AI robot can do that job – for free”

accomplish a lifetime ambition in a few hours. But it gets even better than that.

Amazon recently launched its 3D printing store, where designers and makers can showcase their wares. When someone clicks to buy, Amazon prints the product, ships it and sends the designer their commission. So from a standing start, Lucy can become a fully fledged business, with a design workshop, production, supply chain, marketing and accounting.

It’s never been so easy to start a business – just go to Amazon’s Launchpad section.

Combine technology with creativity and you’ll have an emerging artisan economy.

To quote author Alan Moore, “Businesses that embrace craftsmanship are the ones with higher valuations and resilient revenues. They are the ones that work with optimism, dedicating themselves to creating products and services that uplift their customers experience of the world in large and small ways. In so doing, the profits take care of themselves.”

John Straw is an advisor to McKinsey & Co and IBM. The views expressed are his own. @john_straw

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