The Internet of Things (IoT), artificial intelligence (AI), and blockchain represent an unprecedented opportunity for the enterprise and the public sector. Every institution capable of exploiting these technologies will have a chance to radically streamline and enhance existing processes, create entirely new business models, and develop innovative products and services for a new generation of consumers. But this isn’t a vision of a utopian, tech-enabled future—the technology capabilities are available today to help build the business of tomorrow.
We consider these three technologies IoT, AI, and blockchain to be truly transformational. Alone, any one of them would have the power to alter business, leisure, and society as a whole. But together, their transformative impact will be unprecedented. This is the first time in modern history that three transformational technologies have emerged in the same generation.
IoT is transforming a world of things into a world of data. Practically anything can be equipped with a sensor and made smart—from a smart watch that monitors your blood pressure, heart rate, and blood sugar levels to a connected factory that oversees every stage of the production process. There’s clearly great potential in IoT. It’s estimated that there will be 20.4 billion IoT devices in circulation by 2020, generating in excess of 14 zettabytes of data every year.
IoT will affect some industries more than other. The public sector, manufacturing, transportation, automotive, consumer goods, and even healthcare will never be the same once IoT takes hold. It provides an opportunity to extract new data and improve existing business processes, bring innovative products and services to market fast, and gather new information on consumer trends and preferences.
It’s easy to picture IoT in use for consumer applications, and around the home. A host of smart household appliances and personal electronic devices will help to transform the consumer goods industry—revolutionizing the user experience, and providing retailers with a flood of useful data. But the impact of IoT will be felt far beyond the home. In the automotive industry, IoT is helping manufacturers make connected, autonomous, shared, and electric (CASE) vehicles a safe, workable reality. Insurers can use the data produced by these connected vehicles (among countless other things) to monitor driving habits, develop personalized cover options, and accurately process claims. And manufacturers can create connected smart factories capable of monitoring equipment health, minimizing production costs and downtime, and maximizing productivity.
If IoT is the sensing part of transformational technology, then AI is the thinking part. Within the broad field of artificial intelligence, machine learning is poised to make the greatest impact. It has the potential to enable fast, intelligent decision-making—either in support of human intelligence, or in place of it. Businesses can delegate complicated tasks to achieve a level of accuracy and efficiency beyond the capabilities of human workers.
The insights generated by machine learning will help the enterprise better understand customer expectations and market trends, enabling automated, personalized engagements. It will help in the creation of new goods and services, designed to quickly and accurately meet the demands of modern consumers or fill gaps in the market. Moreover, it will empower business operations through insightful recommendations and strategic input. Machine learning has the power to transform human resources by enhancing recruitment, staff retention, and maximizing productivity. In the automotive industry, it is the driving force behind autonomous vehicles. It can help the telecommunications industry identify and address network faults, and allow financial services institutions to more accurately profile consumers. Machine learning powers customer service chatbots, provides marketing insights, identifies cybersecurity vulnerabilities, and enables personalized products and services, and much more.
So IoT feels. And AI and machine learning think. Blockchain, meanwhile, can be said to remember.
Blockchain is known as the technology that underpins Bitcoin and other cryptocurrencies, but in reality, it is much, much more than that. Think of blockchain as the foundation of high-trust computing. It brings reliability, transparency, and security to all manner of data exchanges— whether financial transactions, contractual and legal agreements, or changes of ownership. A blockchain uses a distributed peer-to-peer network to keep an unalterable record of every exchange—removing the need for trusted, third-party intermediaries in digital transactions. This leeds to faster processes, real-time transaction visibility, and reduced costs across every industry. There are few areas where blockchain’s transformative influence will not be felt. Gartner estimates that blockchain could create US$176 billion of value-added revenue by 2025— revolutionizing the supply chain, enabling new business models, and disrupting existing ones.
Blockchain will prove to be a game-changer in numerous industries and sectors—financial services and insurance, ecommerce, healthcare, human resources, and more. Essentially, anywhere digital information is exchanged. In the consumer goods sector, blockchain will provide transparency across the supply chain through asset tracking—enhancing accountability, streamlining product recalls, and improving consumer trust. In education and research, it will help to ensure that intellectual property rights are upheld. And, of course, in finance, blockchain is the rocket fuel powering the technical revolution.
We are now in the early stages of the next technological revolution: the development of a ubiquitous wireless network that will marry data collection and computation with billions of devices. This will provide us with unprecedented insights and abilities that will change what we do and how we do it. This network is called 5G.
Unlike its predecessors, 5G is a technological paradigm shift, akin to the shift from typewriter to computer. And it isn’t just a network. 5G will become the underlying fabric of an entire ecosystem of fully connected intelligent sensors and devices, capable of overhauling economic and business policies, and further blurring geographical and cultural borders. It will be capable of delivering at every rung of the ecosystem’s ladder, and will provide seamless, continuous connectivity for business applications.
All industries will feel the effects of the shift to 5G. In particular, automotive, health care, and the Internet of Things (IoT) are expected to bring about dramatic transformations in our daily lives. For example, think about the relationship between the smart city and an autonomous car. With a 5G connection, your car will know your ETA at work, taking the optimal route based on traffic data communicated from other cars and the roadways. While a handful of companies are working on this level of automation, the ability to deliver this type of functionality at scale will require the marriage of intelligent devices and the 5G network.
In health care, 5G will enable always-on, secure device connectivity for patients, caregivers, and care providers. The combination of timely medical-grade connectivity and data integration across the care continuum will lead to radically transformed, predictive care.
And when it comes to IoT, 5G will upgrade the human experience as we connect virtually everything.
5G will generate new revenue. After examining 21 unique 5G use cases, such as enhanced indoor wireless broadband coverage, augmented reality and virtual reality, asset tracking, and autonomous vehicles, IHS Markit found that 5G has the potential to unlock up to $12.3 trillion of revenue across a broad range of industries. To put this in perspective, that revenue figure is nearly equivalent to total U.S. consumer spending in 2016, and more than the combined spending of China, Japan, France, Germany, and the U.K. This revenue also represents about 4.6 percent of all global real output in 2035.
It will inspire new growth. The 5G Global Value Chain, including network operators, core technology and component suppliers, device OEMs, infrastructure providers, and content and application developers, is expected to grow output to $3.5 trillion in 2035 – larger than the entire mobile value chain is today. China will contribute the most in gross output, with the U.S., Japan, Germany, South Korea, France, and the U.K following, in that order. Researchers also foresee 5G supporting 22 million jobs around the world.
5G’s deployment in enhanced mobile broadband applications, massive IoT, and mission-critical services will fuel sustainable long-term growth in annual global GDP. Between 2020 -2035, the total contribution of 5G to global GDP is predicted to be equivalent to an economy the size of India today – the seventh-largest economy in the world.
It will accelerate innovation. 5G will enable new products and services that have yet to be invented. 5G will stimulate innovation, and the technologies and inventions inspired by it will lead to smarter homes and cities, and even healthier people.
The next generation of mobile will inspire the emergence of new industries as well as impact existing businesses and the products and services they design and manage. Business leaders feel strongly about 5G’s promise: 92 percent think 5G’s ability to protect sensitive data is important, while 91 percent value its potential to deliver ultra-high reliability. Nearly 70 percent are concerned that without 5G, their country will become less competitive globally.
The evolution from “just another network” to a robust ecosystem will be the result of new 5G technologies converging with those used today in advanced Wi-Fi and 4G LTE applications, building on current cloud analytics processes to continue to develop unique data insights.
What is the role of governments in developing a digital economy in their own countries?
The transition to the digital economy and the advent of innovations are transforming nearly every aspect of individuals’ and enterprises’ lives. Governments that design the right strategy and governance can play an important role for their countries to embrace the benefits of digital transformation.
Government leaders worldwide recognize the value of information technologies for social and economic development. In the late 1990s, the advent of the internet drove them to step up support for technology investment in both the public and private sectors. The goals were to increase overall access to technology for individual and enterprises, grow ecommerce, improve public sector service access and delivery, and spur the growth of new businesses. European governments responded by designing information society actions plans.
These plans had common traits:
- Public investment and support for private investment in infrastructure, particularly broadband connectivity.
- Public investment and support for private investment in IT literacy and skills programs
- Support for online services, including e-commerce, internet banking, e-government, e-health, and e-learning
Today, Governments should embrace digital transformation to make a lasting impact at three levels:
- Transforming the administration, by innovating processes, so that they are more efficient and more agile to respond to change.
- Transforming public services, by offering a seamless use and leveraging data to optimize service value streams.
- Transforming the country, by enabling citizens and businesses to be more productive and engaged with the social fabric of their community.
Governments that plan to launch new digital transformation strategies for their countries should align strategic vision, people, process, technology and data elements of their digital agendas.
The EU Digital Single Market (DSM) strategy, based on three pillars: access to all online products and services, improvement of the conditions of services and digital networks and, ultimately, the growth of the European digital economy is already being successfully implemented. Some major acievements are listed below:
- The end of roaming charges within the European Union was “one of the greatest and most tangible achievements. People can now travel with their online TV, film, sports, music or e-book subscriptions at no extra cost.
- From September, Europeans will have increasingly the right to use their national electronic identification (eID) across the whole EU to access public services.
- The new General Data Protection Regulation is already mandatory for all the countries of the European Union. Everyone across Europe can enjoy world-class data protection rules that ensure all Europeans have better control over their personal data.
- As of December 2018 , everyone will benefit from the free flow of non-personal data, as they will have access to better and more competitive data storage and processing services in the EU, thus complementing the free movement of people, goods, services and capital. Entrepreneurs meanwhile will have the right to decide where in the EU they store and process all types of data.
- Geographical blocking of online products and services is no longer allowed on grounds of nationality, place of residence or place of establishment of customers. As of 3 December, Europeans will be able to shop online without unjustified discrimination wherever they are in the EU. They will not have to worry about a website blocking or re-routing them just because they – or their credit card – come from a different country.
- As of next year, citizens will be able to compare parcel delivery costs more easily and benefit from more affordable prices for cross-border parcel delivery.
- With the recently agreed European Electronic Communications Code, Europeans will have the right to switch internet services and telecoms providers in a simpler way. They will also have the right to receive public alerts on mobile phones in case of an emergency. The new rules will also guarantee a better and more affordable connectivity across the EU.
- Agreed rules on value added tax for e-commerce will allow entrepreneurs to take care of their cross-border VAT needs in one online portal and in their own language.
- With the updated rules for audiovisual media, Europeans will have the right to a safe online environment that protects them from incitement to violence, hatred, terrorism, child pornography, racism and xenophobia.
The future actions include:
- Achieve a complete transition of the Administrations and public services to digital management.
- Conclude the Strategy for the Digital Single Market to achieve a definitive regulatory framework.
- Build an infrastructure and a communications network of the first order, which requires international cooperation for the implementation of fixed and mobile very high speed (5G) networks and coordinate increase the available spectrum.
- Adopt a common vision of cybersecurity, guaranteeing proactive trust and security, providing adequate certifications in this regard and increasing the capacity to prevent, talk out, detect and respond to cyber attacks
- Increase efforts to fight against terrorism and online crime.
- Obtain labor markets and education and training systems that are adapted to the needs of the digital era.
- Make an effort in research and development and investment, supporting new forms of entrepreneurship and stimulating the digital transformation of industries and services.
- Adopt an effective and fair tax system, adapted to the digital era, guaranteeing equal conditions in all countries.
The implementation of DSM Strategy creates favourable framework for the member states to rethink and effectively adopt their policies towards the digital transformation of the economy and society.
Needs of emerging economies and digital agenda
The digital age is transforming everything: the nature of markets and products, how to produce, how to deliver and pay, the scale of capital to operate globally, and human capital requirements. It is also boosting productivity, exposing companies to new ideas, technologies, new management and business models, and creating new channels of market access. Moreover, all of this at relatively low costs. For digital technologies to impact economic development, however, appropriate policies have to be in place to remove the obstacles preventing emerging economies from fully engaging in the digital economy and optimizing the benefits, while minimizing the risks.
The benefits and challenges of the digital economy for emerging countries
First order benefits
The benefits of the digital economy for emerging economies are potentially large. That is because it can have significant competitiveness and productivity-boosting opportunities related to access to digital products and services that help optimise processes and production, reduce transaction costs, and transform supply chains. Declining information and communication technology (ICT) prices encourage investment and adoption of digital technologies in emerging economies, providing their firms with cutting-edge services at competitive prices. All of this enable firms to participate in global value chains and directly access customers in foreign markets in ways previously only feasible for large and established companies from advanced economies.
For consumers, the benefits are associated with access to a wider range of goods and services at competitive prices. It also offers new opportunities for entrepreneurship and job creation. Governments also benefit from the digital economy to the extent that they have access to technologies that help them deliver more and better public services, improve governance, evaluate policies, and deliver better results overall.
Second order benefits
In this new global context, it is important to distinguish “use” from “development, distribution, and management” of digital technologies. While the vast majority of businesses are mere users of digital commodities, a much smaller share falls into the category of developers, distributors, and managers of those technologies. The actors in this latter category are the ones defining the standards and the platforms on which digital commodities and cross-border trade are operated and employed.
Countries that have firms acting as developers of platforms and managers of digital technologies are those most likely to reap the second order benefits that arise from the digital economy – i.e. better prospects in terms of long-term growth, job and wealth creation, and lasting positive effects on productivity and competitiveness. Their populations and firms are those that tend to benefit the most from the indirect effects of being in a richer, open, and innovative environment.
It is widely agreed that governments of emerging economies need to work on several fronts in order to enable the digital transition and reap the associated benefits. These areas of intervention include reducing capacity constraints and improving skills; investments in ICT ecosystems, connectivity, and digital infrastructure; agreements to promote ICT adoption and diffusion as well as market access; regulatory frameworks that foster competition and market conditions; and policies to boost investment and innovation.
This policy agenda is key to accelerating technology adoption and reducing digital divides in emerging economies, which will have positive effects on firms, consumers, and governments.
Emerging economies need to formulate policies with the ambitious goal of reaping second order benefits. Policies targeted at enhancing participation in e-commerce and digital platforms, for example, can only boost a country’s long-term competitiveness if there is a clear understanding that an extra effort will be needed to push the economy towards a position of digital technology development and management.
Different initiatives therefore need to be blended under a single national strategy aimed at preparing the economy to go beyond the adoption and use of such technologies. This is not an easy task, especially because some of the policies designed to seize first order benefits may not initially be aligned with reaching second order benefits.
Countries should pursue a bold agenda focused on knowledge, one that goes well beyond infrastructure and takes into account issues such as the generation, storage, processing, and transfer of data – both within and across national boundaries; data privacy and security; taxation in the digital economy; and non-discrimination and access. To highlight the importance of this cross-cutting approach, the strategy for digital development should have a symbiotic relationship with policies in the areas of trade, education, technology, innovation, services, and competition. Trade policy, for example, has increasingly included elements that go beyond traditional trade in goods, such as services, e-commerce, data flows, intellectual property, and public procurement.
There is also a need to bring competition policies to the digital age, so that they are up to the challenge of restraining oligopoly and monopoly positions and protecting consumer interests. If the benefits of the digital economy mostly accrue to technology and platform developers and managers, there should be clear space for policy implementation and regulation.
The coordination of these policies at a high political level – for subsequent translation into action – can determine the success of future programmes designed to enable the development of platforms.