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Optimism & Courage January 19–21, 2019, Munich
Evolutionary Potential Table Of Contents 4 10
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Trust: Handle With Care Corporate responsibility The potential of blockchain Powering The Future A new digital era is beginning Artificial intelligence, 5G and quantum computing A New World Order Political powers are shifting The innovative capital of different regions All Change Please Time to rethink everything The future of work On The Horizon Arriving soon: tomorrow’s technologies Passenger drones and the business of space Deloitte Analysis
Editorial
These are exciting times, with technology SPEEDING AHEAD – from artificial intelligence to 5G and quantum computing. Next stop: passenger drones and outer space. All this was on display at this year’s DLD, and I invite you to REVISIT MAJOR TOPICS on the following pages, alongside complementary insights from Deloitte. Personally, I came away from the conference with a clearer view of several important issues. First, the notion of Europe being a technological laggard is OUTDATED. There has been much progress in the continent’s digital transformation, in traditional industries as well as in the startup arena. Still, a successful long-term strategy for Europe requires more commitment from governments and businesses alike. There is also CONCERN about technology Nikolay Kolev developing so rapidly that REGULATION is Lead Partner Digital becoming more pressing. We certainly do Transformation at Deloitte need rules and order, but we also need them to be POSITIVE and FORWARD-THINKING. To benefit from the next wave of developments, like blockchain and AI, we must focus on the potential that these technologies hold for entire professions and industry clusters. Staying on top of where the world is heading is part of our DNA at Deloitte, and we are grateful to have found in DLD the perfect forum for an exchange of ideas and insights that can help us all to make the most of the opportunities ahead.
TRUST: Handle With Care
Facebook COO Sheryl Sandberg addressed the importance of fighting misinformation in social networks
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Trust & Corporate New technologies NEED TO Responsibility EARN PEOPLE’S TRUST before they can scale successfully. This requires companies that hope to thrive on innovation to act responsibly – for their own benefit and that of society. Innovation can be frightening. Elevators, cars, credit cards and the Internet all once represented concepts so alien that few people were willing to give them a try. “When people take a risk to do something new or in a fundamentally different way that would once have been unthinkable, we take what I call a ‘trust leap’,” explained Rachel Botsman, author of Who Can You Trust? How Technology Brought Us Together – And Why It Might Drive Us Apart. “The first time we take a trust leap,” she told the audience, “it feels weird, it feels scary, even frightening, because we don’t know what the outcome may be.” To overcome this initial hurdle of adoption, radically different products need to convince enough early adopters that the benefits are worth taking the perceived risk. Trust is therefore, in Botsman’s words, a “conduit for new ideas to travel” – whether they are digital assistants, self-driving cars, or pills that can tell the doctor what’s going on inside a patient’s body. Once ideas reach critical mass, widespread adoption tends to speed up because “when we’ve seen other people take trust leaps we are very quick to follow,” explained Botsman. The trouble is that “we become so good at taking trust leaps that it’s really easy to forget that we’re asking people to leap faster and higher than ever before.”
The result, Botsman argued, is a feeling of uncertainty in many areas of life. If our faith in new products or services turns out to be misplaced, anger and disappointment follow. “Why is it we feel the world is falling apart when we’ve never been more connected?” asked Ian Goldin, Director of the Oxford Martin Programme on Technological and Economic Change. His reasons included a lack of trust in experts and leadership as well as growing frustration with technological developments despite the opportunities they provide. TAKING RESPONSIBILITY Goldin also addressed a topic that was present in many sessions this year: How can democracy be protected from manipulation when the Internet gives misinformation a chance to spread just as quickly and easily as factual news? And how much responsibility do companies bear when their platforms are abused? “We need to make sure that the Web does not spread terror and bad ideas but only good ideas,” Goldin demanded. In a highly anticipated keynote speech, Facebook COO Sheryl Sandberg struck a contrite note, admitting that her company had not anticipated how the social network could be used for mass manipulation. Until the U.S. election campaign in 2016,
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Sandberg said, Facebook’s security focus had been on traditional attacks like hacking and phishing. “What we didn’t understand was a new and more insidious threat: Rather than states trying to take people’s data, they could try to sow disinformation and dissent into societies,” she said. “Now that we know what this threat is, we’ve built up big defenses against it.” Along the way, many users also started to doubt the company, Sandberg acknowledged. “Trust is so fundamental to the work we do, and we need to earn back people’s trust,” she said. While Sandberg pledged that Facebook would do better, partly by financing a new research institute for ethics in artificial intelligence at the Technical University of Munich, others called for more drastic measures. NYU Professor Scott Galloway,
The digital age offers many reasons for optimism. But we also need courage to seize the boundless opportunities, and to deal with challenges along the way. Steffi Czerny DLD founder
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author of The Four: The Hidden DNA of Amazon, Apple, Facebook and Google, demanded that Facebook’s supervisory board consider a leadership change. He also predicted that 2019 would turn out to be a watershed year for technology giants in general if they are perceived to put their self-interest too far ahead of the common good. “2019 will be the year of immunities kicking in against the tyranny of technology that has run unfettered,” Galloway said. Echoing discussions of an increasing “techlash,” Galloway made the case that companies like Amazon, Facebook, and Google would face growing resistance, especially across the Atlantic. “The war against Big Tech is breaking out in Continental Europe,” Galloway said. These companies, he declared, could expect to be hit with additional taxation “and possibly even antitrust action.” GEOGRAPHIC DIFFERENCES In this light, it may come as a surprise to learn that trust in the technology sector is actually on the rise, according to the Edelman Trust Barometer, an annual global survey. “Technology remains the most trusted sector in business,” the company’s Vice President, Margot Edelman, pointed out in her presentation. Earning a vote of confidence from 78% of all survey participants, “it’s more trusted than automotive, telco, and financial services,” Edelman said. “There is a halo of trust around technology.” A deeper dig into the results, however, reveals notable geographical differences. China tops the list with 91% of respondents saying they trust the tech sector, as compared to 73% in the United States and 68% in Germany. There are also wide gaps between trust in technology in general and
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Deloitte Analysis
Trust & Corporate Responsibility
Vocal critic: Scott Galloway sees more trouble ahead for tech giants
faith in specific sub-categories. Blockchain and artificial intelligence, for example, earned relatively low trust scores, with 55% and 62% respectively. “There is a lack of understanding among the general population of these technologies,” Edelman said, while at the same time expressing confidence that, in general, “there is a clear mandate for tech companies to play a bigger role in society.” If true, that may only heighten consumers’ privacy concerns. “Digitization feels very pervasive and ubiquitous,” said Jutta Steiner. The founder and CEO of Parity Technologies called connected speakers like Google Home and Amazon’s Echo (home to Alexa) “hardware surveillance infrastructure” and warned that “this will make George Orwell look like Sesame Street” if we don’t get to work laying down firm ground rules. ENGINEERING TRUST Steiner’s company is one of many startups banking on blockchain technology bringing more transparency to the way user data is handled on the Internet. In this vision – also expressed by several other speakers – the blockchain principle of an
Trust & Corporate Responsibility
Blockchain: Democratized Trust Trust is a foundational element of business. Yet maintaining it – particularly throughout a global economy that is becoming increasingly digital – is expensive, time-consuming, and, in many cases, inefficient. Organizations are exploring how blockchain provides viable alternatives to current procedural, organizational, and technological infrastructure and business models required to create institutionalized trust. The payoff could be profound. Like the Internet reinvented communication, blockchain can similarly disrupt transactions, contracts, and trust – the underpinnings of business, government, and society. This will be the foundation of emerging ecosystems and networks, radically changing the way we do business. To be effective, blockchain requires collaboration, which is why companies – both allies and competitors – have begun working together in consortia. But creating a successful blockchain consortium requires planning, investment, and commitment. In particular, adequate funding, robust governance, and commitment from key companies are critical. Source: Tech Trends 2016
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Given the fact that entries in a public blockchain database (also called a “ledger”) are permanent and can be vetted by all participants, the technology offers an opportunity to establish more trust in a digital environment, said Don Tapscott, Chancellor of Trent University and founder of the Blockchain Research Institute. “Trust is not achieved by banks or governments or credit card companies or social media companies,” Tapscott argued. “It is achieved by cryptography, collaboration, and some clever code.”
Trust humans to ask the right questions, author Rachel Botsman suggested
open, distributed database will allow users themselves to control the information that is currently aggregated by social media platforms, search engines, or media firms specializing in targeted advertising. Joe Lubin, co-founder of Ethereum, spoke of a transformation “from a company-centric, siloed, walled garden kind of architecture for Web 2.0 to a user-centric, self-sovereign identity-based architecture for Web 3.0, where we are in control of our identity.” Lubin, now CEO of blockchain startup Consensys, expressed confidence that the dramatic downturn in cryptocurrencies like Bitcoin would not have a lasting negative effect on the closely related blockchain technology. “Once you’ve seen the power of blockchain and decentralized protocols, you can’t unsee it,” he said. “The technology is here to stay. The people who are still building the foundational infrastructure are there, and we’re seeing releases of great projects.”
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SAFE AND SECURE MIT Professor Alexander Pentland explained how blockchain could be used to make data handling “inherently more secure” and compliant with Europe’s strict rules on privacy protection. “The key is you don’t move data around,” Pentland said. “Instead, ask questions of data and log those questions on an immutable ledger like the blockchain or any other sort of consensus ledger.” He pointed to Estonia as an example of how such a system could successfully be used to digitize government services in a trustworthy way. But as tempting as it may be to rely on more technology to solve the problem of trust in an all-digital world, author Rachel Botsman recommended a different approach: “What we all need to do is slow down,” she said. “Trust needs friction, it needs us all to seek the right kind of information to ask: Is this person, is this product, is this company, is this piece of information worthy of my trust? Each time we go through this process, we are taking responsibility for preserving society’s most precious and valuable currency – which is trust.”
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Trust & Corporate Responsibility Traditional vs. Blockchain-based transactions Deloitte Analysis
Trust & Corporate Responsibility
Traditional digital transactions
Blockchain transactions
leverage central counter parties for clearing and storing information
are managed by a network of nodes which enable P2P transactions
Source: Deloitte Blockchain Institute
What Is Blockchain? Source: Blockchain: Legal Implications, Questions, Opportunities, and Risks
At its simplest, blockchain involves recording information in a way that creates trust in the information recorded. The blockchain software is used to synchronize data stored in a distributed manner amongst peers on all the computers or servers (“nodes”) participating in a particular network. This allows for multiple records of identical data. Trust is created because all the nodes in the network control, check and consent to any additions or changes to what is recorded. Blockchain can be used for record keeping, transferring value (via cryptocurrencies or otherwise), and smart contracts to automatically execute a transaction when one or more preconditions is met. Once stored on the blockchain, the data cannot be manipulated or changed – it is immutable. Every block contains a unique summary of the previous block in the form of a secure hash value – think of the way the pieces of a jigsaw puzzle fit together. And because each block is connected, the timing, order and content of transactions cannot be altered and blocks cannot be replaced unless the participants, according to specific governance principles, agree with the proposed change. Ideas & Insights
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Powering The FUTURE
With artificial intelligence, the Internet of Things and quantum computing, the digital revolution is entering a NEW PHASE – offering fresh opportunities but also challenging humans to stay relevant in an age of algorithms and machines.
the Internet of Things, and – leaping ahead a decade or two – quantum computing. “We’re living in a golden age of innovation,” said Gabi Dreo Rodosek, a Professor at Munich’s University of the Federal Armed Forces. “Technology is moving so fast that we will have 50 billion interconnected devices by 2020, 163 zettabytes of data in 2025, and we are developing algorithms and quantum computing that will allow us to solve problems that we cannot [solve] now.” To realize their true potential, these technologies require vast amounts of data. These bits and bytes also need to be able to travel at lightning speed between sensors and chips and supercomputers in the cloud. This will require a major upgrade to the telecommunications infrastructure because today’s networks were largely designed to handle the needs of humans, not billions of connected devices. To power the digitial world of tomorrow, telecom providers worldwide are racing to implement the newest mobile networking technology, called 5G, which promises to become the backbone of future technological developments.
Having left the first wave of digitalization behind us, as Don Tapscott observed, we’re now heading into a “second era where technology infuses itself into everything.” The best-selling author of books like The Digital Economy envisions an age of “machine learning and artificial intelligence, where, in the physical world, we have trillions of inert objects becoming smart and interconnected – not only communicating but doing transactions. Where we have vehicles that drive themselves, creating virtual mass transit systems.” This sweeping change is arriving in the form of machine learning, voice assistants,
A SMARTER INFRASTRUCTURE Offering much higher capacities and faster data transmission, 5G is widely seen as critical if Industry 4.0 applications are to go mainstream. Deutsche Telekom Board Member Claudia Nemat noted that by 2020, “10 times as many things as human beings will be connected, and to do that efficiently, 5G is the best technology. You need it for automotive as much as you need it for the agricultural industry.” Markus Haas, CEO of Telefónica Germany, agreed. “The true potential of 5G lies in industrial applications,” he said. “Things like smart logistics and autonomous factories.”
Don Tapscott praised the possibilities of a new digital era
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Powering The Future
People lock their cars and homes, but still have to learn to secure their digital assets in the same way. Udo Helmbrecht European Network and Information Security Agency
While 5G is still in a nascent phase, artificial intelligence is speeding ahead, with a broad array of AI-driven technologies now being implemented. Applications presented at DLD show the range of what is becoming possible: IN MEDICINE, finding the next miracle drug typically requires sifting through an ocean of data that grows every day by more than 10,000 newly published scientific papers and by countless patents, updated chemical databases, and new results from clinical trials. Joanna Shields and her team at BenevolentAI are using algorithms to trawl that data, facilitating the search for medicines that can be tailored to each individual. “We have developed the world’s leading AI-powered drug discovery and development platform to accelerate this journey from data to medicine,” Shields said. IN TRANSPORTATION, sensors and algorithms promise to vastly improve the reliability of railways through predictive maintenance. In Europe alone, “we have
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Powering The Future a half million rail switches and they cause around 21 percent of all delay minutes,” explained Andreas Kunze, co-founder of Munich-based startup Konux. Railway workers currently have to go out, conduct inspections and write reports. Konux, though, employs sensors that constantly monitor whether the switches are showing signs of wear. By comparing current and long-term data, the system is able to warn of a possible malfunction before a switch actually breaks.
5G will be crucial for Industy 4.0 applications, Claudia Nemat said
A NEW KIND OF SUPERCOMPUTER As these types of applications become more powerful, they tend to test the limits of traditional computing. Airlines, for example, have to process vast amounts of information. Grazia Vittadini, CTO at Airbus, noted how each of the company’s
long-haul A350 aircraft is equipped with over 250,000 sensors. This is helpful for predictive maintenance, for example, but operators would also love to make micro- adjustments to a flight route in real time to save fuel. “If you want to keep it as cheap as possible,” Vittadini explained, “you can
choose to optimize the time in the air – or, to cut down on fuel, look for ideal meteorological conditions, like having a tail wind the whole time.” This is currently an either-or decision because computers are not fast enough to simultaneously calculate the costs and benefits of both approaches. Quantum computing could overcome the limits of binary processors. This cutting-edge technology tries to tame the irregular behavior of subatomic particles in order to speed up calculations. The processing units – called “qubits” – these machines rely on can represent various states between zero and one at the same time. While this effect is hard to control, it offers the prospect of greatly increased computing power. Airlines, for example, could use quantum computers to optimize “both equations at each single point of [the] journey,” Vittadini said. “Quantum computers can solve this
Powering The Future in a matter of seconds, whereas classic computers take days.” While they’re far from replacing ordinary computers anytime soon (see Deloitte analysis on p. 15), quantum computers hold great promise for answering “what if ” scenarios in both science and business. In theory, quantum computers also have the ability to “break all RSA-based encryption techniques, which are the foundation of our current security and financial transactions,” Paul Daugherty, author of Human + Machine: Reimagining Work in the Era of AI, pointed out. Digital security risks of all kinds are a more immediate worry. The more interconnected our world becomes, the more vulnerable it will be to attacks. This makes security a top concern, said Abe Chen, Vice President of Digital Technology at
Deloitte Analysis
For some organizations, harnessing artificial intelligence’s full potential begins tentatively with explorations of select enterprise opportunities and a few potential use cases. While testing the waters this way may deliver valuable insights, it likely won’t be enough to make your company a market maker (rather than a fast follower). To become a true AI-fueled organization, a company may need to fundamentally rethink the way humans and machines interact within working environments. Executives should also consider deploying machine learning and other cognitive tools systematically across every core business process and enterprise operation to support data-driven decision-making. Likewise, AI could drive new offerings and business models. These are not minor steps, but as AI technologies standardize rapidly across industries, becoming an AI-fueled organization will likely be more than a strategy for success – it could be essential for survival.
Everyone’s winning, but some industries are winning bigger AI investment and ROI: Relative landscape of industries
22% RETURN ON INVESTMENT
Artificial Intelligence
20%
Industrial products and services
18% 16%
Professional services Financial services and insurance Consumer products
14% 12%
Government/public sector (including education)
Life sciences and health care
10% LOWER INVESTMENT
Source: Deloitte Tech Trends 2019
Technology/media and entertainment/ telecommunications
MEDIAN
HIGHER INVESTMENT
Note: The dotted lines in the graph represent the median ROI and median AI investment for all respondents, cross-industry. Source: Deloitte State of AI in the Enterprise, 2nd Edition, 2018
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Powering The Future Chinese electric carmaker Byton. “If you hack a phone, it’s just data that’s lost,” he said. “Data’s important – it could be your identity or your money. But when you hack a car, it’s a serious safety issue.” The hacking of entire networks could even become a national security issue. The result being that infrastructure-critical products and networks would have to be monitored 24/7, argued Axel Stepken, Chairman of the German inspection and certification company TÜV SÜD. To make matters worse, it no longer takes an army to potentially bring down a whole country, Wolfgang Ischinger, Chair of the Munich Security Conference, warned. Smart hackers working alone or on behalf of terrorist groups “can today inflict damage in dimensions which used to be, until quite recently, totally and absolutely the reserve of the nation-state.”
Powering The Future
Angelika Niebler, a Member of the European Parliament from Germany, argued that, given the borderless nature of the threat, the response must be international. “We need cyber-security units in Europe, but we also need a European approach, a central agency that is well-equipped, that coordinates the efforts and has the manpower to cope with threats.” SOCIETY, DISRUPTED For society, the accelerating technological revolution could prove to be “perhaps the biggest challenge since the invention of the steam engine,” German Economics Minister Peter Altmaier observed, “because it will cover the entire range of industrial production, of services and of cultural and social life.” Several speakers noted that the job market will become particularly vulnerable to disruption. Frank Appel, CEO of Deutsche Post/DHL, said: “If you are young,
Airbus executive Grazia Vittadini discussed the potential of quantum computing
regardless what kind of profession you take, there’s no guarantee your job will still be around in 10 or 15 years.” In part, that will be the effect of increasing automation thanks to AI and robotics. “Routine jobs are going to be replaced,” Janina Kugel, Chief Human Resources Officer at Siemens,
said. “We have seen that on the shop floors in the factories and that’s also happening in the office space.” Even highly trained specialists will likely be affected. “Computers can diagnose people better than doctors,” Don Tapscott argued. “They can dispense pharmaceuticals better than druggists and they can analyze X-rays better than radiologists. Get ready for massive structural relocation.” And yet, that may not be entirely bad, given that disruptive technologies also tend to create jobs in entirely new fields, even as they are eliminated in established ones. “I’m a big believer in [Joseph] Schumpeter and creative destruction,” Tapscott said. “Technology comes in and wipes out old industries, but it generates new stuff and that’s what’s so awesome about capitalism.”
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Deloitte Analysis
5G: The Chance To Lead For A Decade
Quantum Computers The next supercomputers, but not the next laptop
Source: Deloitte Perspectives
5G technology introduction marks the beginning of a new era in connectivity that will impact almost every element of daily life. First-adopter countries embracing 5G could sustain more than a decade of competitive advantage. Countries that were first to adopt prior generations of wireless technology were also rewarded with broader macro-economic benefits, but 5G has potential for an even larger first-mover advantage. What’s different this time? 5G is more than just a new wireless interface protocol offering more capacity and better performance for smartphones. It is also myriad technology innovations like antenna designs and device communication protocols to standardize both the way licensed and unlicensed networks interact and the way network applications collaborate. With this array of capabilities, 5G technology will influence everything we do. As a result, the value that 5G can create is not constrained by the number of people and the amount of time we have for consuming information. The opportunity for technology to influence productivity and automation could have a seismic impact on our macro economy.
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Quantum computers will not replace classical computers for decades, if ever. Yes, there will be certain useful and important computational problems that will be better solved by QCs, but that does not mean that QCs will be superior for all, most, or even 10 percent of the world’s computing tasks. The quantum computer market of the future will be about the size of today’s supercomputer market – around $50 billion. Even in 2030, none of the billions of smartphones, computers, tablets, and lower-level enterprise computing devices in use will be quantumpowered, although they may sometimes or even often use quantum computing via the cloud. The first commercial general-purpose quantum computers will appear in the 2030s at the earliest. The 2020s will likely be a time of progress in quantum computing, but the 2030s are the most likely decade for the larger market to develop. Source: TMT Predictions 2019
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A New WORLD ORDER
Speaking with Rebecca Blumenstein, Kai-Fu Lee predicted that China and the U.S. will dominate the field of artificial intelligence
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A New World Order On a data-driven planet, the power of GLOBAL LEADERSHIP is shifting, politically and economically. What role will Europe, the U.S., and Asia play – and where do each region’s competitive advantages lie? Troves of data, far too big for the human mind to comprehend, are becoming the main source of power in the knowledge economy. Companies that manage to use this information to better understand customers, markets and their own business processes stand to benefit while others risk falling behind. Technological mastery is therefore becoming a strategic asset, not only for companies but for entire nations. This sentiment pervaded many of the sessions at DLD 2019, often with a shared conclusion: The U.S. and China are headed for leadership in the digital world, while Europe and others risk falling behind. The argument follows the logic that information is the single most important resource for the further development of life-changing technology, specifically the algorithms that underpin artificial intelligence (AI). Kai-Fu Lee, CEO of Sinovation Ventures and author of AI Superpowers, called data the “rocket fuel to make AI work.” From that perspective, nobody is as rich as China. The country counts 1.2 billion 4G subscriptions, 825 million Internet users and 600 million mobile payment users. A growing number of companies are able to collect and leverage that data, quickly improving their algorithms and services. “China and the U.S. will be neck-and-neck for the next five years in various types of AI,” Lee predicted in his presentation. “China will be ahead in some areas – facial recognition, speech recognition, machine
translation, drones. The U.S. will be ahead in certain areas – in autonomous vehicles and business AI, for example. The U.S., Europe, and Japan may be ahead in robotics. But if you think of it as one pie with a dollar sign on it, China and the U.S. will each take a very large piece.” EUROPE: TOO SLUGGISH? Much of the pessimism surrounding Europe tends to focus on the continent’s perceived lack of speed and innovation, and the fact that no European startup has grown into a global giant comparable to Apple, Google, or Facebook. “We’re too slow as Europeans,” acknowledged Manfred Weber, a leading politician with the center-right European People’s Party. Yaron Valler of the Berlin-based venture capital
Ideas & Insights
The answer for the future is not to be quick, the answer for the future is to be sustainable. Manfred Weber European Parliament
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A New World Order
In much of Asia, you have optimism and a desire to build cross-border connectivity. Parag Khanna FutureMap
firm Target Global stressed that in 2004, Europe was responsible for 32 percent of global GDP while by 2014, that share had dropped to 22.3 percent. “Europe is in danger,” Valler warned, “if it doesn’t learn how to continuously innovate.”
Diego Piacentini, who until recently served as Italy’s digitization czar, recommended investing more in education, specifically science, math, and programming, and suggested that Europe should find its own areas of strength rather than try to copy existing technology powerhouses from abroad. But how? Money is a key issue, observed German Economics Minister Peter Altmaier. Why, he wondered, do “we have no venture capital fund in Germany that would be able to finance companies which have become unicorns, companies in need of 200 or 300 million euros?” In light of the continent’s many challenges, some experts even fear a new age of colonialism, driven by the dominance of a few global giants that control core areas of technology. “If Europe decides to do nothing, I would make the prediction that we have a great chance [of becoming] developing nations 20 years from now,”
Deloitte Analysis
Innovation In Europe Source: Deloitte Insights, Innovation In Europe, 2019
In the competition for the digital future, Europe is often seen as having been outflanked technologically by both Asia and the United States and at risk of being left behind because of a long-term lack of investment in research, digitalization and education. But this view is, in Deloitte’s judgement, excessively bleak. Growth is recovering in Europe and there is an optimistic, vibrant air in the region that is fostering a renewed sense of ambition. The biggest hurdles to innovation are cultural – and resistance to change is high. In a recent Deloitte survey on Innovation in Europe, 32 percent of respondents identified cultural resistance as the main obstacle to fostering innovation. In addition, data security is seen as inhibiting data-driven innovation (30 percent). There is no denying that Europe is feeling competitive pressure. European companies face the need to undertake substantial investment in digital infrastructure while being constrained by legacy ecosystems and aging workforces. Yet Europe still reveals a strong ability as an innovation powerhouse. The continent is neither poorly positioned nor lacks confidence in its ability to compete.
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A New World Order
warned Chris Boos, CEO and founder of Arago, an artificial intelligence company based in Germany. Others argued that Europe has an opportunity to chart its own course – “a third way” as it is often called – into a future that reflects the continent’s cultural and ethical standards. With respect to China, a number of speakers mentioned widespread concern about the country’s approach to privacy and data – particularly its “social scoring” system that uses technologies like facial recognition and machine learning to rate citizens’ behavior on a scale from good to bad, as seen from the government’s perspective.
In a panel discussion, Manfred Weber spoke about Europe’s need to catch up
PRIVACY AND INNOVATION “If I look at China, I see mass surveillance,” said Ann Mettler, Director-General of the European Political Strategy Centre. Paul Vallée, CEO of the IT consulting firm Pythian, said that the Chinese government has “made it a matter of policy that any data that the government can reach, it may reach at its own discretion.” In the U.S., meanwhile, data tends to be in the hands of powerful private companies such as Google, Facebook, and Amazon. This model, which follows the free-market philosophy of the U.S. economy, seems “based on the assumption that individual behavioral data in principle belong to the data platform in exchange for free services,” said Deutsche Telekom Board Member Claudia Nemat. By contrast, policymakers in the EU are attempting to put people in control of their data. The most prominent example is the General Data Protection Regulation, or GDPR, which limits what companies can do with information provided by their users. While some speakers noted that the
regulation risks stifling the free flow of data necessary to train AI algorithms, the broad consensus was hope that European privacy protection could give the continent a boost in the years to come. “Europe is really the only place with a human-centric, rights-based framework, and nobody else is doing that,” said Francesca Bria, Chief Digital Innovation Officer for the City of Barcelona. “But privacy, data sovereignty, rights: Those aren’t just our values. It is our competitive advantage.” The potential good news for Europe is that smart technology can offer a solution for privacy protection as well as for many other issues facing us today. “Privacy and innovation are not in conflict,” emphasized Marc Rotenberg, President of the Electronic Privacy Information Center. “If you can make de-identification work, you can actually use very large datasets and not run the risk that someone could be adversely affected. But it’s a hard problem, and the companies that solve that problem and successfully implement that solution will do very well.”
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A New World Order Deloitte Analysis
A New World Order
AFRICA: The Continent Of Opportunity The pace at which innovation is progressing is faster than anywhere else. Fatoumata Ba Janngo
When it comes to the cashless economy, Africa has everyone beat. M-Pesa in Kenya was one of the earliest mobile payment platforms, and these days, up to 80 percent of all transactions undertaken in Zimbabwe don’t involve cash. That example, argued Okendo Lewis-Gayle, the founder of Harambe Entrepreneur Alliance, is unlikely to stand alone. “It is very clear to me,” he said, “that Africa will be the laboratory for many new technologies.” In his view, the continent has “all of the main ingredients to make the most out of technology and continue surprising the world.” The vast majority of Africa’s potential as a significant player in the tech world has not yet become visible. But as speaker after speaker pointed out, the speed at which the African population is growing – from 1.2 billion today to an estimated 2.2 bil-
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lion in 30 years – surpasses that of all other regions of the world. By 2035, the continent will have a workforce larger than that of China or India. With an average age of just 19.5 years, this workforce will also be much younger than elsewhere. For founders and entrepreneurs, these could be the perfect conditions for creating the business successes of tomorrow. “Typically, when we look at those numbers, we think doom and gloom,” said Fred Swaniker, founder of the African Leadership Group. “But I think we’re missing the point. In that population is the next Elon Musk. What people are missing is that the greatest opportunity for prosperity and innovation this century is going to come from Africa.” Swaniker’s group is focused on grooming young Africans as innovators. He has already set up several educational institutions in Africa, with a goal of training 3 million leaders in the next decade and a half. EDUCATION IS KEY For the continent to fulfill its potential, however, education will be crucial at every level, as Elizabeth Tanya Masiyiwa emphasized. With her startup Simba Education, she is using mobile technology to increase access to early childhood education. Masiyiwa is also involved in launching a leadership academy focused on teaching high-schoolers the tech skills they will need. “Some of the things that we’ve heard
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Africa Rising Fred Swaniker aims to help millions of young Africans become business leaders
about in this conference – AI, sustainable foods – if we do not invest in Africa and Africa’s youth, then the impact of all of those things is not going to be effective,” she said. “We’re at a juncture where you either do something about Africa’s growing population or you leave it to chance.” Fatoumata Ba is leaving nothing to chance. The winner of this year’s Aenna Burda Award for Creative Leadership, Ba founded Africa’s first unicorn, the online retail platform Jumia, in addition to Janngo, which provides consulting to companies wishing to sell their wares online. Ba has focused on promoting SMEs, specifically those run by women entrepreneurs. In 2015, for instance, she sought to expand Jumia’s reach by outfitting women in rural communities with tablets so they could help others access the platform and earn commissions for doing so. “In Africa, technology is not an alternative way, like it is in developed countries, to do something in a fancy manner,” Ba said. “It is a very fundamental way to access capital, to access products, to access essential services. Success stories are possible for those who dare to see Africa as a continent of opportunity.”
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The 20th century saw Asia recovering an influential position in global affairs. In the 21st century, Africa could do the same. The majority of the continent’s economies are growing, strongly propelled over the past decade by high oil and commodity prices, rising consumer spending and the potential for early stage industrialization. This mimics numerous Asian countries. Companies have awoken to the Africa opportunity and their expansion strategies in the region have mostly focused on capturing consumers and consolidating marketplaces. For companies to build embedded businesses in Africa, Africa’s new growth trajectory must be sustainable – Asia-style. This is what many corporates in South Africa and beyond are now facing when entering the African region: seeking to strategically position their businesses in uncertain markets. For real economic transformation to take place, Africa’s notoriously non-inclusive growth model must adapt, and adapt fast. Countries will need to deepen their economies through diversification and those that are able to achieve this will move towards a more qualitative and ultimately sustainable growth trajectory. Source: Is Africa the Next Asia?
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All CHANGE Please
All Change Please
With companies needing to REINVENT themselves constantly, workers can no longer expect to have a career for life. Collectively, humans will NEED TO CHANGE many habits to conserve the resources of an increasingly overcrowded planet. But the pressure to adapt also opens up many opportunities. In a restless age, speeding up seems to be our only option. “This is the slowest moment you will know in your lives,” Oxford University Professor Ian Goldin said as he welcomed his audience. “We’re in an age of discovery. Every day, there are more and more ideas and there’s potential to solve cancer, Alzheimer’s, and dementia, potential to create a carbon-free global economy to address climate change.” Goldin sees parallels to the Renaissance. Italy’s Florence “was the Silicon Valley of the late 1400s,” he said. The Gutenberg printing press made knowledge accessible to a
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broader public, resulting in an explosion of scientific discoveries and artistic creativity. But, Goldin noted, there was a downside to that rapid pace of change: disorientation and a widespread inability to cope with the permanent need for readjustment. The biggest lesson for our age, Goldin concluded, is that we need to get better at handling disruption. “If you don’t manage progress, people don’t feel comfortable with it,” Goldin warned. “We need to recognize that we are at a crossroads. This could be the best century ever” or, alternatively, “the final century for humanity. The choice is ours.”
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Musician Renzo Vitale creates signature sounds for electric cars
FRESH PERSPECTIVES Luckily, there is no shortage of ideas for addressing mankind’s challenges. And solving them can often create new opportunities, as the conference showed. E-mobility is a case in point. Electric cars do not make much noise, which can become a hazard, explained musician and sound designer Renzo Vitale. “If you think of blind people who can’t see a car approaching” or the rest of us lost in thought, perhaps a smartphone in hand – “in all those situations, sound can become our precious companion.” This gives carmakers
the chance to incorporate sound into their branding by creating a signature whisper for each model. “Sound is emotion and sound is sublime,” Vitale said, “and when it comes to cars, sound is also information.” It’s an example of art advancing business, which seems only fitting for a world that sees silos crumbling and ideas criss-crossing between disciplines. Perhaps companies ought to have artists on their boards to provide inspiration and guidance, Hans Ulrich Obrist, Artistic Director at London’s Serpentine Galleries, proposed. Artist Jon Rafman agreed. “I’m just amazed that
Ideas & Insights
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“There is an artwork in the Met collection that could inspire each person on the planet.” In order to remove “every single barrier” between people and objects that might inspire them, the museum is digitizing its collection of approximately 1.5 million objects and making images freely available on the Internet. “We’re really moving toward this idea that a museum is also a platform,” Tallon said.
You won’t find truth in art. But you will find imagination, which is the presentation of alternatives. Katharina Grosse Artist
doesn’t happen more often,” he said, “that people aren’t looking to artists more for things that are outside the art world.” German painter Katharina Grosse suggested that art could best be seen as a powerful source of answers to open questions – both in business and in daily life. “That is one of the most important things we as artists can give to society,” she said, “that we point at the field of possibilities and thus stir up solution-making.” Then again, attracting attention to artists and their works is becoming a challenge in itself, as Loic Tallon can attest. Until he left his position right after DLD, the Chief Digital Officer at New York City’s Metropolitan Museum of Art had been tasked with reinventing the 149-year-old institution for an age that is short on time and rich in other sources of entertainment and information. Still, the same connectivity that may tempt New Yorkers to stay at home watching YouTube or playing Xbox could also help the museum attract visitors digitally, Tallon explained.
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LEARNING TO PROSPER Speakers agreed that many of us will have to be equally inventive in adapting to the changing needs of the labor market as technologies like artificial intelligence and robotics make themselves felt in many professions. And yet, there was also plenty of optimism. “Mass unemployment is not the big worry – there will be a lot of jobs,” said AI expert and investor Kai-Fu Lee. “But many of the jobs that open up require training and skills that the people who are displaced may not have.” Training and retraining, therefore, will be essential for the job market of tomorrow. If smart algorithms can take over more and more tasks, it follows that humans need to keep upgrading their skills, even long after graduation. This also requires a different approach to learning, as several speakers emphasized. “At the moment, we have an education system that lasts until you’re 18 or 19, then you go to university and it’s over,” said Frank Appel, CEO of Deutsche Post/DHL. “That will not be effective in the future.” DLD Founder Steffi Czerny was even more adamant in her opening speech: “As long as we don’t manage to reinvent or rebuild the schools, the universities and business education systems for the digital age,” she said, “we are fighting a lost cause.”
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In some places, that reinvention has already begun. Ruimin Shen of Shanghai Jiao Tong University promoted the establishment of courses like “Introduction to AI” and “Program Design” in schools to “help prepare students for the workplace of the future.” Diego Piacentini, the former Italian government Commissioner for the Digital Agenda, pointed out how Milan’s Bocconi University has introduced a mandatory course in the programming language Python for first-year students. “Not everybody will start coding,” he said, “but at least you get the logical process into your mind.” Fred Swaniker, founder of the African Leadership Academy in Johannesburg, sees a need for developing what he calls just-in-time education. “You enter, but you never graduate,” he explained, “because you keep reinventing yourself and learning continuously.” CHANGING HABITS A similar willingness to adjust will be necessary in society and politics as well. With almost 8 billion people now sharing a single planet, some of our common habits are threatening to become self-destructive, as evidenced by the problem of plastic waste polluting the world’s oceans and
Fighting plastic waste: Marcella Hansch
All Change Please Deloitte Analysis
All Change Please
Rise Of The Social Enterprise Organizations are no longer assessed based only on traditional metrics such as financial performance or the quality of their products or services. Rather, organizations are increasingly judged on the basis of their relationships with their workers, their customers, and their communities, as well as their impact on society at large – transforming them from business enterprises into social enterprises. Today, successful businesses must incorporate external trends, perspectives, and voices by maintaining positive relationships, not just with customers and employees, but also with local communities, regulators, and a variety of other stakeholders. Building these relationships challenges business leaders to listen closely to constituents, act transparently with information, break down silos to enhance collaboration, and build trust, credibility, and consistency through their actions. This is not a matter of altruism: Doing so is critical to maintaining an organization’s reputation; to attracting, retaining, and engaging critical workers; and to cultivating loyalty among customers. Source: 2019 Global Human Capital Trends
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Deloitte Analysis
Survey: Expectations of respondents that their professions will be affected by technological change Over the next 10 years, my job will ...
Loic Tallon helped redefine the Met’s role in the connected world
13% … be exactly the same as today
31% … change only a little
30% … evolve slowly
21% … require very different skills
3% … not exist anymore Note: Percentages do not add to 100% because responses in the category “I cannot say” are not shown in the graph. Source: The Deloitte European Workforce Survey, 2018
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rivers. “We need to completely change our behavior,” demanded Heike Vesper, the Director of Marine Conservation at WWF Germany. According to the environmental organization, 83% of tap water samples now contain tiny particles of plastic, and on average, 3 million plastic bottles are sold every minute. Marcella Hansch, a former architecture student, developed a platform that skims plastics from the sea and went on to found Pacific Garbage Screening, a non-profit organization that aims to turn her idea into a reality. Sportswear manufacturer Adidas is already using recovered plastic as a raw material. In 2015, the company made the first shoe constructed entirely out of yarns and filaments reclaimed and recycled from ocean waste. Sam Handy, Vice President of Design for Adidas Running, noted that the company has committed to eliminating the use of all new plastics by 2024. “Once we bring reclaimed plastics completely into our supply chain and stop using virgin plastic, consumption can become part of the solution,” he argued. CHANGING APPETITES The challenge of sustainably producing food for a projected 10 billion people in
2050 was another key topic at DLD this year. California-based New Age Meats is among a growing number of startups worldwide that produce meat in a laboratory. This eliminates the need to breed and slaughter animals. A pig called “Jessie” – still alive and well – is the cell donor for New Age Meats products, and a sausage made of her tissue tastes “just like the bacon you can buy down at the store,” the company’s CEO Brian Spears promised. It may take some convincing for millions of people to develop an appetite for this kind of meat, but the environmental benefits could help allay such worries. According to Spears, growing meat from cells reduces greenhouse gases by 96% and uses 99% less land, while consuming 96% less water and 45% less energy. Renewable energy shows that a collective rethink is possible. Bill Gross, the founder and CEO of Idealab, emphasized in his speech that the sun could provide humanity with all the energy it needs. Gross presented a new kind of energy storage system developed by his company that could help bring the cost of power down to 3 cents a kilowatt hour. The system uses a computercontrolled crane which lifts 35-ton cement bricks onto a tower when there is excess energy in the grid and then lowers them back to the ground to retrieve the power once it is needed. It’s the kind of inventive spirit that gives investor Albert Wenger of Union Square Ventures hope that all will be well after all. “We’re not doomed as long as we stay optimistic, because when we stay optimistic, that’s when we find the courage to do things,” he told his audience. “It’s when we find the courage to protest, to innovate, to research and to make small changes in our individual lives. All of that adds up, in the end, to progress.”
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All Change Please
Deloitte Analysis
All Change Please
Voice Of The Workforce Source: Voice of the Workforce in Europe, 2018
To successfully adapt and thrive in a new environment, companies, public institutions, and individuals need to change their mindset in key ways: TAKE ADVANTAGE OF LONGER CAREERS Many organizations are unprepared to deal with the aging workforce. This could be a strategic mistake and a missed opportunity for organizations. 2 ENGAGE AND MOTIVATE A BROADER WORKFORCE Views on what is important and motivating vary. The possibility to broaden skills ranks higher among under-35s. As age increases, so does the value of being trusted by colleagues and having a sense of purpose in the job. 3 SHAPE STRATEGIES FOR ALTERNATIVE CAREER MODELS Although salaried work remains the most attractive form of employment, there is a moderate interest in less traditional working arrangements, especially among older respondents. 4 PROMOTE LIFELONG LEARNING If a person’s working life spans half a century or longer, what they learned in their 20s will not keep them employable over decades. No matter how high in demand their skills are now, technological progress will outpace them, and their job will cease to exist – at least, in the same form – even as the need to work persists. 1
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On The HORIZON From augmented reality in operating rooms to micro-satellites and biochips made of brain cells, BREAKTHROUGH TECHNOLOGIES are redefining what’s possible. Imagine a digital assistant in the operating room with a surgeon. An augmented reality application, it helps physicians find optimal surgical pathways by merging real- life images with a digital model of the patient’s body. Wearing a special headset, the surgeon can, in effect, follow an anatomical map compiled specifically for each patient.
Intelligence will eventually be a merger of synthetic neurobiology and silicon. Osh Agabi Koniku
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That’s the project the Florida-based startup Magic Leap is working on in cooperation with the German medical technology firm Brainlab. Rio Caraeff, Chief Content Officer at Magic Leap, described the medical application as an example of “spatial computing,” which aims to seamlessly integrate the physical and virtual worlds. In this concept, the physical world becomes the “base layer” for various digital layers that are projected on top of it. “You can have transportation data, energy and water data, healthcare data, education, communications, entertainment,” Caraeff said. “I like to talk about activating your superpowers or your inner 10-year-old.” SMELLING DISEASES Another medical breakthrough could emerge from biochips designed to detect early signs of illness. Osh Agabi, CEO and founder of Koniku, explained how his company has developed a method for cultivating brain cells in a laboratory and giving them
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specific properties by modifying their DNA. For now, the company is focusing on the powers of smell. “When you fall sick, your smell changes,” Agabi said. “In fact, there are some dogs that are trained to detect cancer.” In similar ways, Koniku’s biochips could monitor people’s health. Designed to detect tiny organic compounds in the air, the sensors could recognize changes in body odor and provide the user with an early warning of a possible medical condition. “For some diseases, liver cirrhosis for example, you need just 11 volatile organic compounds” to detect them, Agabi said. The technology also holds potential for other applications, such as airport security. Koniku’s first product is designed to sniff out explosives and is currently being tested, according to Agabi. “We are working with some of the biggest names in airport security, and our goal is that this thing comes to an airport near you within the next year or thereabouts.” MIND-BENDING POSSIBILITIES Conventional technology is getting an upgrade as well. Bill Liu, CEO of Royole, presented a novel type of display developed by his company. Paper-thin and extremely light, it is covered with millions of tiny transistors attached to a bendable, rollable film. This makes it possible to design a mobile phone, for example, that has a screen as large as a tablet but can be folded for easier carrying. “Flexible electronics, including flexible displays and flexible sensors, are very, very important for the next-generation human-machine interface,” said Liu. Bulent Altan, managing partner at Global Space Ventures, seemed to sum up a core message of this year’s conference when he said, “People need to realize that this isn’t just science fiction now – this is business.”
On The Horizon His company is focusing on the fast-growing market of commercial space applications. “We had an industry that used to launch satellites for $30,000 a kilogram,” Altan observed. “Today you can send a kilogram up to space for about $3,000.” As a result, thousands of small and lightweight satellites are now used for tracking ships and aircraft, providing pinpoint weather forecasts for agriculture and delivering data for autonomous driving support. In many cases, Altan said, the satellites are used by companies “that we wouldn’t have thought of as space businesses in the past.” The investor is reminded of the early days of the Internet. “Space and the use of spacial data is going to set the stage for any industry out there that can utilize its capabilities to be disruptors in their own markets,” Altan predicted. “We’re going to see people in the agriculture business, in the insurance business, in the automotive business acquiring space companies and finding ways to utilize their assets to make the best and the most disruptive products out there.”
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Worlds of opportunity: investor Bulent Altan
Ideas & Insights
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Deloitte Analysis
On The Horizon
The Decline Of Commercial Space Launch Costs The business opportunities for companies in space could include new services and products in nearly every industry. Companies like OneWeb and SpaceX plan to create mega-constellations of thousands of satellites designed to bring Internet service to every corner of the globe. Additionally, existing products could be manufactured in new ways using the unique conditions of space. These promising business opportunities will continue to drive the rush towards space; however, this will also bring a fair number of challenges. The increase in space launches has already outpaced the federal government’s capacity to effectively regulate in the United States. Furthermore, international challenges relating to space debris and scarcity of physical orbital patterns or electromagnetic spectrum bandwidth for communications will require collaboration between governments, state-owned companies, and private-sector businesses.
Imprint Publisher
Managing Editors
Annette Jung Sonja Retzlaff & Dr. Pascal Schneider
Associate Editors
Charles Hawley, Karsten Lemm, Daryl Lindsey
Art Director
Photos
Dominik Gigler Daniel Grund Gandalf Hammerbacher, picture alliance
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Source: Deloitte Perspectives
Considerations for commercial passenger drone development and adoption
Nikolay Kolev Deloitte Digital GmbH Rosenheimer Platz 4 81669 München
Production
Dominic Fischer
REGULATIONS Regulations for pilotless vehicles, airworthiness certifications, and the need for a pilot’s license
PSYCHOLOGICAL BARRIERS
L/M/B Druck GmbH Mandelkow, Herzogenaurach
TECHNOLOGY MATURITY On-board sensors, collision detection systems, and advanced technologies, such as artificial intelligence and cognitive systems
Addressing psychological barriers related to flying an unmanned aircraft
INFRASTRUCTURE
SAFETY
Building of takeoff and landing zones, parking lots, charging stations and vertiports
A flawless operational and mechanical safety record
AIR TRAFFIC MANAGEMENT Source: Deloitte Insights, Elevating the Future of Mobility
Printed by
A robust air traffic management system integrated with other modes of transport
Many passenger drone and flying-car manufacturers have passed the conceptualization and design phase. A majority of them are in the prototyping and testing stage, with most expecting delivery by 2020.
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