Digital Disruption: Implications and opportunities for Economies, Society, Policy Makers and Business Leaders

By Bharat Vagadia

This book goes beyond the hype, delving into real world technologies and applications that are driving our future and examines the possible impact these changes will have on industries, economies and society at large. It details the actions governments and regulators must take in order to ensure these changes bring about positive benefits to the public without stifling innovation that may well be the future source of value creation. It examines how organisations in a world of digital ecosystems, where industry boundaries are blurring, must undertake radical digital transformation to survive and thrive in this new digital world. The reader is taken through a framework that critically examines (i) Digital Connectivity including 5G and IoT; (ii) Data Capture and Distribution which includes smart connected verticals; (iii) Data Integrity, Control and Tokenisation that includes cyber security, digital signatures, blockchain, smart contracts, digital assets and cryptocurrencies; (iv) Data Processing and Artificial Intelligence; and (v) Disruptive Applications which include platforms, virtual and augmented reality, drones, autonomous vehicles, digital twins and digital assistants. 

• Language: English
• Publisher: Springer
• Release date: Sep 25, 2020
• ISBN: 9783030544942

Book preview

© Springer Nature Switzerland AG 2020

B. VagadiaDigital Disruption Future of Business and Financehttps://doi.org/10.1007/978-3-030-54494-2_1

1. Introduction

Bharat Vagadia¹ 

(1)

London, UK

This is not a how to book or one that details comprehensive business strategies or specific policies for the digital ecosystem. To do so, would be delusional given the unbelievable change and uncertainty at present. Instead, this book details the technology and digital disruption that is taking place today, beyond what is hype, examines the developments foreseen and the considers the impact these changes will have on industries, economies and society at large. In light of these changes, it details as far as is possible at this juncture, the actions governments and regulators need to consider in order to ensure these changes bring about positive benefits to society at large without stifling the innovations that may well be the source of value creation.

1.1 A Precipitous Cross Road

To realise the full benefits of digital disruption, governments need to reach across traditional policy silos and across different levels of government and develop a ‘whole of government’ approach to policy making. At the same time, business leaders need to explore the new possibilities such digital disruption opens, whilst becoming more ethical in terms of how their products and services impact society at large.

The true (equitable) impact of digital disruption can only be realised where the regulatory environment and wider ecosystem enables frictionless digital trade, where cost effective and trusted digital services are utilised by all and where digital content (in all its forms) is produced and consumed with appropriate safeguards against antitrust behaviour, privacy, cyber security and interoperability standards.

If fundamental and lasting economic benefits are to be realised at a nation level, digital entrepreneurship also needs to be nurtured, otherwise nations will find value flowing from their countries to those countries where innovation and entrepreneurship lead (which currently includes the USA, Israel, South Korea and increasingly will be countries like China and India). Digital entrepreneurship includes a range of factors that need to be addressed, from digital and technology skills and education, to government promotion agencies, to universities, to financers such as venture capitalists, to R&D agencies, to the attitudes and legal systems that accept failure as a learning process rather than a curse to be avoided.

Many may say that there has been significant strides made in technology innovation in the past, and that this will just be another gradual process of adaption by societies and enterprises. I however believe that the pace of technology innovation, together with the convergence and integration of such technological innovations, which to date have been treated as separate streams, makes this juncture very different. We are at a precipitous cross road. Actually it would be better described as a precipitous roundabout with many roads to choose—some of which lead to dead ends, some of which lead to a cliff edge, whilst some may lead to the ‘promised land’. Choosing the right road is a major challenge and one that will require much thought and many difficult choices. However, that choice must start to be detailed today, for many of the roads that may lead to the ‘promised land’ may be cut off if we leave it too late. Figure 1.1 lists some of the decisions we need to start thinking about now.

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Fig. 1.1

A precipitous cross road/roundabout

As Max Tegmark remarks, technology is giving life the power to flourish like never before or to self-destruct. We might create societies that flourish like never before, on Earth and perhaps beyond, or a Kafkaesque global surveillance state so powerful that it could never be toppled.¹ The potential dominance of a few key organisations, with their own self interested goals could command control over governments and society.

Policy makers, regulators, industries and civil society need to begin the conversation. We need to have an open dialogue of how technology, policies, and leadership can be used to turn the world into a better place, a better place for all, rather than the few, rather than those lucky enough to be in the right profession, or those lucky enough to be born into countries that are net beneficiaries from this digital disruption.

This book explores these digital technologies that will shape the future world—a world in the next decade or two. It explores the ingredients required to nurture such technologies to bring economic and societal benefits, the policies that will help drive such innovation and wide-spread adoption, as well as the moral questions that we must as humanity ask ourselves. The book also considers possible controls that we need to place on such technologies to ensure the technologies are not used for harm either by unscrupulous individuals, businesses or rogue nations, or the technologies themselves (sorry, this book will not be discussing terminator style artificial intelligence developments).

1.2 The Fourth Industrial Revolution

The production, delivery and consumption of goods and services within the economy is changing, and changing fast. The availability of technologies such as smart phones, mobile connectivity, artificial intelligence, cloud computing, analytics and platforms such as Facebook are dramatically altering the way we live, work and interact—in what has been termed the fourth industrial revolution and which some people refer to as ‘digitalisation’. Society as a whole will see a fundamental shift in the way governments, businesses and citizens communicate, collaborate, share information or buy products/services as a result of this digitalisation.

Virtual visits to museums that are on another continent; driving safely thanks to autonomous vehicles or making transactions and commerce without the need for a centralised bank, or indeed the optimisation of cities or improving the production, manufacture and interaction with customers are just some of the changes we are starting to see today.

The technology and telecommunications sector at the beginning was focused on connecting people; then in the 2000s when smart phones and tablets came around, the industry focused on capacity. Today, we are at the beginning of the fourth wave; one that is about creating a digital economy, connecting not only people but things (‘Internet of Things’ or ‘IOT’), and connecting these at speeds that were never dreamed possible just a decade ago. That connectivity is being complemented by massive strides in data processing capabilities, giving rise to Artificial Intelligence (‘AI’); Virtual Reality (‘VR’) and Augmented Reality (‘AR’). All of these are being combined with advances in mechanical engineering as we enter into a realm where robotics are developing a level of dexterity that allows them to perform human like functions.

An intermediation layer between the connectivity and the AI/VR/AR layer is data aggregation and distribution. Technologies such as Blockchain, designed to provide data integrity, distributed security and governance of data are emerging that may help to securely distribute and govern the use of data, including the ability for data owners/controllers to monetise their personal data; reduce data monopolies and potentially tokenise physical assets into the digital world.

Many commentators have captured the wide array of technologies under the heading digitalisation. This is a very broad term and I can see its appeal in trying to define what is otherwise a diverse set of technologies. It however does not adequately define the specific functions that different technologies play in the technology stack, blurs the very different technology trajectories and our understanding of how they actually complement and converge. I therefore try not to use the broad brush definition within this book, although do make reference to it when detailing other sources or commentary from other learned colleagues.

It would be wrong for me to portray that digital disruption is only now beginning to happen. Even without sophisticated technologies like IOT or AI, there is already a lot of digital disruption happening today, through digitising processes, retail channels and payments. These are already changing how services are delivered and disrupting the old order. This book however seeks to look beyond these current digital initiatives and to the next digital wave.

1.2.1 What is at Stake?

The World Economic Forum (WEF) estimates point to more than US$10 trillion of value from digitisation in five key global industries² over the next decade, being directly dependent on essential infrastructure, applications and productivity improvements delivered by the telecommunications industry.³

IDC forecasts that IOT spending will experience a compound annual growth rate (CAGR) of 13% over the 2017–2022 period and reach US$1.2 trillion in 2022.⁴

McKinsey estimates IOT has a total potential economic impact of US$3.9 trillion to US$11.1 trillion per year in 2025 and the value of this impact, including consumer surplus, would be equivalent to about 11% of the world economy in 2025.⁵

I am not saying that I believe all these forecasts, but what they all do show is an upward trajectory in value from the various elements that make up digital technologies.

The value that can be derived from digital technologies are wide and varied. Analysis has shown that new and emerging digital technologies affect productivity through mechanisms that are many and varied.⁶ Some of these include:

Speed and strength: by being faster, stronger, more precise and consistent than workers, robots have vastly raised productivity on assembly lines in the automotive industry. They will do so again in an expanding range of sectors and processes;

Productivity enhancement: the combination of new sensors and actuators, big data analytics, cloud computing and IOT is enabling autonomous productivity enhancing machines and intelligent systems;

Predictability: automated maintenance scheduling, enabled by new sensors, artificial intelligence and machine to machine (M2M) communications, will reduce disruptions to production caused by breakdowns. Condition based maintenance in airplanes could reduce maintenance spending between 10 and 40% for air carriers, by shifting from rules based maintenance routines to predictive maintenance based on actual need, which is made possible by real-time monitoring;

3D printing: which can remove the need for assembly in some stages of production by printing already assembled mechanisms.

Aside from the economic benefits, digital disruptive technologies have the potential to significantly improve consumer lives and create broader societal good, while providing businesses with new opportunities for value creation and capture. Digital disruptive technologies can promote social inclusion by creating better access to quality education and offering new opportunities for skills development.⁷ Digital learning environments can enhance education in multiple ways, for example by expanding access to content to people from low income backgrounds or disadvantaged areas; supporting new teaching methods with learners as active participants; fostering collaboration between educators and between students; and enabling faster and more detailed feedback on the learning process. New digital technologies can better connect disadvantaged groups.⁸ For example, mobile connectivity is helping reach remote populations as well as those with lower incomes.

Digital technological innovations in the financial and health sectors can also promote social inclusion. Digital lending innovations and innovative financing like peer-to-peer lending and crowd funding platforms are already helping fill a bank lending gap and improving access to finance for both households and small enterprises, allowing for the participation of smaller investors.

Digital disruption fuelled by the rise of IOT and Smart Cities⁹ has the potential to make meaningful contribution to the achievement of the UN Sustainable Development Goals (SDGs).¹⁰ In tackling global development challenges, digitally disruptive technologies are being utilised across the full spectrum of development activities. The ITU report ‘Harnessing the Internet of Things for Global Development’, released in 2016, highlights many IOT applications that are having a material impact on lives in many developing countries and contributing to the achievement of the UN Sustainable Development Goals. Sensors in agricultural fields are monitoring soil conditions and moisture levels; Radio Frequency Identification (RFID)¹¹ tags are helping farmers provide more personalised care for their livestock; connected thermometers are monitoring vaccine delivery and storage in real-time; cameras and sensors in smart phones and tablets are allowing healthcare workers to provide remote diagnosis of disease; and off-grid solar systems monitored via SMS are bringing affordable electricity to lower income families. Advances in nanotechnologies are making the diagnosis and delivery of medicine much more effective with less intrusive needs for surgery and real-time diagnosis and treatment.

There have been numerous studies quantifying the societal benefits from digital disruption and in particular the benefits from connected IOT devices. PwC has estimated that mHealth (health services delivered through the use of smart phones) could save 1 million lives in Sub-Saharan Africa over the next 5 years; traffic telematics could help Chinese commuters reclaim nearly 2 h each week and add US$20 billion to Chinese GDP; technology enhanced learning could save South Korean families between US$8k to US$12k on private tuition for their children; eHealth initiatives (health services delivered through the use of computers and smart phones) could save €99 billion and add €93 billion to the EU GDP; mEducation could provide 180 million children with the opportunity to stay in school and smart meters could save enough electricity through efficiency gains and reduced theft to power more than 10 million homes in India.¹² A 20% reduction in Person to Government (P2G) transactions in Australia (from the approximately 800 million conducted with federal and state levels) through the use of digital technologies could deliver over AU$17 billion to the Australian government and over AU$8 billion to its citizens.¹³

Unfortunately, aside from the rosy economic and societal benefits, there will be significant potential for adverse impacts on society and the accompanying need for government policies, including:

Employment: jobs lost to automation and the use of robotics and artificial intelligence (AI) enabled decision making, with the accompanying need to redesign government social security schemes in light of possible mass unemployment; with a need to re-skill vast amounts of the population which could be a slow and expensive process, with a need to redesign the whole education system;

Privacy and freedom: increased threats to personal and state security and risks to privacy from developments in AI and more opportunities for mass surveillance and a big brother society either by governments or large private sector organisations;

Health: less human interaction which may lead to more loneliness and depression in society; and potentially adverse health effects from the use of nanotechnology

Inequality: increasing the digital divide within society and between nations;

Investment: a massive need for investment in digital infrastructure, including 5G and fibre;

And many that we just cannot fathom at this stage…

1.2.2 The Need for Refreshed Government Policy

Governments face a delicate balancing act in nurturing these digital technologies whilst also trying to limit the adverse impact they may have on society and the economy at large. Digital disruption also brings into sharp focus government policy around digital versus non-digital businesses, how they are licensed, taxed and more broadly controlled.

Some governments have sought to develop policies towards the development of National Broadband Infrastructure, National Digital Economy, National Cyber-security, National Smart Cities, Artificial Intelligence, as well as policies that seek to help develop a digital start-up ecosystem allowing start-ups to disrupt the market with new value propositions. The Dublin Digital Hub demonstrates how such regulation overhauls can maximise the potential of the digital start-up ecosystem.¹⁴ The hub focuses on coordination and facilitation between Dublin’s start-up centres and key regulatory players (such as lowering the administrative burden and enhancing the visa regime for entrepreneurs).

Today, many of these policies are disjointed or overly regulatory focused and not holistic in their outlook. When I say some governments, actually it is really just a handful—the vast majority firmly have their heads in the sand.

Some have also developed policies addressing the demand side, with a focus on protecting consumers and citizens. In an ever more digital world, data privacy and protection are a critical dimension as part of broader cyber security regulations—however such policies need to tread a fine line between making data available for use in innovative applications (and AI and smart cities) and the privacy of data subjects. This is where data and AI policies are likely to diverge between the EU on one side and the USA and China on the other. We are back to that question of values.

Footnotes

1

Tegmark, M. (2017). Life 3.0 being human in the age of artificial intelligence.

2

The five key global industries are: E-commerce (US$3.1 trillion), Automotive (US$2.6 trillion), Logistics (US$2.1 trillion), Electricity (US$1.5 trillion), Media and Entertainment (US$0.7 trillion).

3

World Economic Forum. (2017). Digital transformation initiative telecommunications industry.

4

IDC Worldwide Semiannual Internet of Things Spending Guide (2H17), published on 18 June 2018.

5

McKinsey. (2015). The internet of things: mapping the value beyond the hype.

6

OECD. (2016). Enabling the next production revolution: the future of manufacturing and services. Interim Report. Meeting of the OECD Council at Ministerial Level, 1–2 June 2016.

7

OECD. (2014). Trends shaping education 2014; Spotlight. OECD.

8

OECD. (2016). The productivity-inclusiveness nexus. OECD.

9

A smart city is an innovative city that uses information and communication technologies and other means to improve quality of life, efficiency of urban operation and services, and competitiveness, while ensuring that it meets the needs of present and future generations with respect to economic, social and environmental aspects.

10

The Sustainable Development Goals (SDGs) are the blueprint to achieve a better and more sustainable future for all. They address the global challenges we face, including those related to poverty, inequality, climate, environmental degradation, prosperity, and peace and justice. The SDGs interconnect with targets set for achievement by 2030.

11

Small electronic devices that consist of a small chip and an antenna. The chip typically is capable of carrying 2000 bytes of data or less. The RFID device serves the same purpose as a bar code or a magnetic strip on the back of a credit card or ATM card; it provides a unique identifier for that object. RFID technology has been available for more than 50 years. It has only been recently that the ability to manufacture the RFID devices has fallen to the point where they can be used as a throwaway inventory or control device, largely as a result of standardization efforts. EPCglobal, the standards body for the RFID industry, has set a goal to reduce the cost of an RFID tag, now 15 cents, to 5 cents.

12

PwC Report. (2015). Realising the benefits of mobile enabled IOT solutions.

13

GSMA. (2016). Advancing digital societies in Asia.

14

www.​thedigitalhub.​com

© Springer Nature Switzerland AG 2020

B. VagadiaDigital Disruption Future of Business and Financehttps://doi.org/10.1007/978-3-030-54494-2_2

2. A Framework for Understanding Digital Disruption

Bharat Vagadia¹ 

(1)

London, UK

A well-thought through and holistic policy framework which reflects the changing digital landscape can deliver the best outcomes for society and the economy. How policy makers look at the digital landscape in developing such a holistic policy is however vital. Looking at each element of the digital ecosystem in silo would be a major mistake, given value creation will be through the convergence of the different elements of these disruptive technologies.

This framework needs to look at both supply and demand sides of the digital ecosystem more than ever before, for one will not flourish without the other. If regulatory policies and institutions fail to acknowledge these separate, yet converging digital technologies and adapt, markets will become distorted in ways that harm competition, slow innovation and ultimately deprive consumers of the benefits of technological progress, whilst doing irreparable harm to employment, tax receipts and the general well-being of citizens and residents.

Whilst existing policies will need to be adapted, new policies will also be needed. Some of these policies go beyond policy making in the traditional technology areas. A fundamental re-examination of the wider digital ecosystem is required, looking at a whole of government approach including education policies, government investment and innovation policies, social protection systems, frictionless trade, equality, privacy, anti-trust policies, as well as trust building mechanisms.

2.1 The Digital Ecosystem

Not only are policy makers being called upon to update and strengthen policies to protect the privacy and property rights of businesses and consumers, but they will also need to regulate entirely new forms of activity in the public sphere. Autonomous vehicles are the most obvious example of this challenge. Even as carmakers and technology companies edge closer to road-ready autonomous cars, regulators have not created clear rules that would allow widespread use of these vehicles.

Figure 2.1 illustrates the areas that require focus.

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Fig. 2.1

A holistic approach to policy development

Government policies, regulations and standards enter in the pores of every aspect of the economy and society. The use of Internet of Things (IOT) and Artificial Intelligence (AI) within industries falls under some form of government regulation, E.g., governments set rules for aircraft and railway equipment maintenance that may need to be modified with the advent of AI driven maintenance; aviation policies and regulation will need to be adopted in the advent of drones; healthcare policies and regulations will need to be modified with the advances in nano-technologies, IOT and AI.

For the wider digital eco-system to deliver its maximum economic impact, certain conditions need to be in place and several obstacles need to be overcome, some of these issues are technical, some are structural and behavioural; consumers for example need to trust IOT and AI based systems and companies need to embrace the data driven approaches to decision making that IOT and AI enables. In addition, a number of regulatory issues need to be resolved, such as determining how autonomous vehicles can be introduced to public roadways and how they will be regulated, liabilities apportioned and insured.

With an interconnected nation, privacy and security become of paramount concern. Governments will be required to address security risks, convene and fund multi-stakeholder centres to set standards and share information, model good security practices and craft thoughtful rules to encourage security management and punish bad actors.

At the time of writing, as illustrated in Table 2.1, most national digital policies simply do not go far enough. They focus primarily only on broadband infrastructure or pay some lip service to education or enabling e-transactions. Whilst there will be a number of reasons for this and for sure, there may be other policies in each of the countries that may try to deal with other aspects of digital disruption, I have not seen many government policies that attempt to examine and deal in a holistic manner the whole digital ecosystem (the USA and UK has made progress and EU is attempting to do this as I write this book). I suspect this is because it has simply been too complicated to understand and instill appropriate policies. Nevertheless, national digital policies can become a key reference point for regulators, for investors and for service providers and can determine the nature and scope of investment that may be apportioned to these technology sectors. National digital plans can provide valuable insight into governments’ digital priorities, degree of commitment and capacity to deliver on the aspirations of the country and its people.

Table 2.1

Snapshot of digital plans