A Defining Moment: The Internet Of Things And Edge Computing

Chuck Pharris

Part 1 in the 3-part “Edge Computing Series”

When it comes to defining IT terms, I say the simpler the better. Let’s start with the Internet of Things (IoT).  The IoT is the network of connected things—like industrial machines or coffeemakers, things with sensors and APIs that enable connectivity and data exchange. Simple enough.

Before defining edge computing, however, we need to understand that the “edge” gets its name from its relation to the core. The core is simply the collection of technologies (housed in a data center or distributed in the cloud) that make up the critical IT and business functionality for any organization. When a business deploys an IoT scenario—say a series of HVAC machines throughout a college campus—the machines are, by definition, deployed at the edge.

Another term bandied about is “edge processing”—which is basically data processing that happens at the edge rather that at the core. This brings us to the question: Why process at the edge?

An answer to a problem

The idea of processing data at the edge is a solution to a practical engineering problem. IoT as a concept has always assumed that connected things would exchange data with the core via the cloud. Problem is, obstacles stand in the way. Some of these involve:

  • Bandwidth: For many IoT deployments, the bandwidth required to transmit data from edge devices is cost-prohibitive.
  • Connectivity: For moving deployments (such as connected vehicles) or for deployments in remote locales (such as an oil rig in the ocean), connectivity may not be reliable.
  • Latency: In situations where real-time data is required—say construction equipment designed to detect and avoid potential collisions—the data latency of the cloud is unacceptable.
  • Power consumption: Many sensors in edge devices cannot live up to the power-consumption demands required for transmitting data to the cloud.
  • Security: Most sensors—often limited in functionality—cannot provide the kind of security required in a digital economy with an expanding threat landscape.

Edge computing overcomes these obstacles with the use of an IoT gateway. Think of the gateway as a hub of sorts that lives in close proximity to the edge devices within a local area network (LAN). This hub—a full-blown server or something more purpose-built—can help conserve bandwidth by running an analytical algorithm to determine the business value of incoming sensor data and transmitting to the core only what makes sense. The hub also addresses the issue of intermittent connectivity by housing software and functionality that can be used to make decisions on the ground without access to the core. Similarly, latency and power-consumption issues are addressed through the hub, which communicates quickly and efficiently with sensors through fast, low-energy protocols such as Bluetooth or ZigBee.

On the security front, an edge computing hub can provide secure tunnels back to the digital core IT infrastructure. Remember that the October 2016, a denial of service attack—which brought down the Internet in North America and Europe—was executed with a botnet of unsecured IoT devices. As far as use cases for edge computing go, let’s call this one a slam dunk.

The role of microservices

Microservices as loosely coupled, independently deployed nuggets of application functionality. Communicating through APIs and running as unique processes, microservices are ideally suited for IoT scenarios. Why? Because they’re deployed in isolated containers so that if they fail, they don’t take down the entire network or interrupt an entire business process.

The idea is that microservices are created at the core and then delivered to the hub at the edge. The hub then makes them available to each device on the edge as needed. The algorithms that determine the business value of sensor data? These run in microservices. Predictive analytics—let’s say to predict the failure of an HVAC machine on the college campus? Also delivered via microservices. Indeed, microservices are what make the IoT a practical reality. Without them, the IoT would still be only a concept.

There’s a lot more to discuss on the topic of edge computing, but I’ll stop here for now. To dive in further, see this paper on the “4 Ps” of intelligent edge processing: Excelling at the Edge: Achieving Business Outcomes in a Connected World. Also look for my next blog in this series: “The IoT Data Explosion, IPv6, and the Need to Process at the Edge.”

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Chuck Pharris

About Chuck Pharris

Chuck Pharris has over 25 years of experience in the manufacturing industries, driving sales and marketing at a large controls systems company, overseeing plant automation and supply chain management, and conducting energy analysis for the U.S. Department of Energy’s research laboratory. He has worked in all areas of plant automation, including process control, energy management, production management, and supply chain management. He currently is the global director of IoT marketing for SAP. Contact him at chuck.pharris@sap.com.

What Every CIO Needs To Know About Trends In User Experience Design

Ivo van Barneveld

Part 4 in the “UX Design for CIOs” series

If designed well, conversational user interfaces offer many benefits to end users. Language is the most natural interface humans understand. Therefore, talking to a machine rather than entering specific commands facilitates a more natural user experience. It will take a user less effort to get familiar with an application as there is no need to get used to screens, navigation hierarchies, input fields, and buttons. Thanks to machine learning, applications will learn how to adapt to humans, rather than humans needing to adapt to applications.

Conversational user interfaces also save time. First, users do not need to download an application or navigate to a website to communicate with a company. Second, they can start a conversation right from a messaging app (like WhatsApp, WeChat) or digital assistant (like Siri, Alexa) – interfaces they know and understand. Third, being able to talk rather than type frees up your hands so you can multitask. And fourth, chatbots offer a 24/7 service availability – so users can engage with companies also after office hours.

Another benefit for users is the personal touch that conversational UIs can offer. Two-way communication gives a feeling of personal attention, even if the “person” at the other end is a machine. Natural language processing and machine learning keeps improving. Digital assistants get better and better at understanding the user’s intent and context. They can remember the user’s preferences and previous interactions like purchases, complaints and requests. This information is used to generate tailor-made answers and to make proactive suggestions. And the more digital assistants are able to understand humans, the more users will trust them – or even bond with them!

Big benefits for companies

By introducing chatbots on popular messaging services like WhatsApp, WeChat, and Facebook Messenger, companies can tap into an audience of billions of users immediately. Rather than spending effort promoting the use of an application or Web site, companies can easily reach their customers through existing messaging channels. For example, when KLM Royal Dutch Airlines announced to be first airline with a verified business account on WhatsApp, the CEO stated his motivation very clearly: “We want to be where our customers are and, given the 1 billion users, you have to be on WhatsApp.”

Another benefit of deploying chatbots and digital assistants lies within efficiency and cost. While it might take a couple of days or weeks to train a new employee, chatbots can be trained in hours – and they improve over time as they are fed with real-life input and feedback, thanks to artificial intelligence. Moreover, intelligent assistants can take over routine or low-level tasks so employees can focus on exceptions or high-level tasks – thus adding more value to the company.

And finally, conversational applications can be rolled out at scale, while still offering a personal, 1-to-1 experience to customers. An artificial intelligence system can talk to (nearly) an infinite number of users simultaneously, and learn what they want. On one hand, this will allow companies to strengthen their brand widely and consistently. On the other hand, this will lead to higher customer satisfaction and more business transactions.

In my next and last blog in this series, I’ll look at how to design a conversational user interface.

Find out more

If you’d like to learn more about conversational UIs and chatbots in general, I recommend subscribing to Chatbots Magazine on Medium. If you’d like to know more about SAP’s digital assistant, you can follow the blog posts about SAP CoPilot on Experience.sap.com. You can also follow me on Twitter and reach out to me if you’re interested in co-innovating with us, or joining our next planned customer engagement initiative.

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Ivo van Barneveld

About Ivo van Barneveld

Ivo van Barneveld is a passionate evangelist of innovations in user experience, mobile, and Internet of Things. His work focuses on the intersection of technology and business. He is currently a member of the UX Customer Office team in SAP Global Design, with the remit to drive adoption of SAP’s award-winning user experience, SAP Fiori. Previously, he worked at SAP as a lead consultant, supporting customers with planning and executing digital transformation strategies. Prior to joining SAP in 2012, he held several business development, account manager, and partner manager roles at Nokia and Layar, among others. Ivo holds a Master’s degree in Applied Physics from the Delft University of Technology, and is based in the Netherlands.

It’s Time For Corporate Spending To Manage Itself

Shivani Govil

The past few months have shown that natural disasters such as fires and hurricanes can wreak havoc on our lives, devastating regions and destroying homes. For our businesses, they can also disrupt supply chains and impact operations. But what if you could predict the occurrence of a disaster, anticipate its impact, and act preemptively to avoid any disruption to a production line or your business operations?

What the world considers magic, SAP Ariba considers intelligent procurement – and it’s right around the corner.

For many global organizations, managing hundreds of millions of dollars of spend each year remains a daunting task due to strenuous manual effort. Every day, procurement professionals need to navigate a complex environment with imperfect information. Their goal is to answer questions such as:

  • How do I maximize my spend under management?
  • How do I get insight into my categories of spend, and plan my sourcing strategies?
  • How do I optimize my contracts so that they meet my key goals?
  • How do I minimize supply chain risks while supporting sustainability goals?
  • How can I be sure that orders and invoices comply with preferred suppliers and negotiated prices?
  • How do I process incoming invoices accurately and efficiently?

In fact, there are answers – and solutions. Artificial intelligence (AI) technologies have tremendous value to create better connections between people, processes, systems, data, and context. With AI, the systems you rely on can be more intelligent, instantly and reliably identifying the right information and providing the right insights to help you deliver better business outcomes.

AI technologies can be used to combine relevant data on spend, demand, suppliers, contracts, company policies, and so on, as well as contextual information such as commodity prices, news, and financial data sentiment. Using these technologies, you can discover hidden patterns and relationships in your data, gain valuable new insights, and make better decisions about sourcing strategies, supplier risk assessments, contract negotiations, purchasing decisions, and related procurement activities.

Monitoring and predicting risk events

Consider the potential to improve supplier risk assessments. Imagine if an intelligent system could do the work of a team of analysts, compiling information across reputational, financial, operational, and compliance risks in a fraction of the time. Going further, it could continuously monitor new data and reevaluate risk scores across all key commodity categories. This intelligent system, running 24 hours a day, 7 days a week, could even predict risk events and mitigation measures before the event happens.

AI’s potential to impact the purchasing process can be equally transformational. Imagine being able to use simple voice commands to buy a product through your requisitioning system while being compliant with the existing policy. Or simply taking a picture of a broken part and having your procurement system automatically identify the part and order it for you. Going further, what if your procurement system already anticipates when you need to order something, sends you an alert, and helps place the order – making things easy for you so you don’t have to do the work.

With a new generation of self-learning systems, the procurement process can constantly deliver increased value for the organization – improving effectiveness and accuracy, automating tasks, and detecting opportunities for cost savings. User experiences can be improved through conversational interactions, voice commands, and enabling interactions through messaging platforms.

Are you ready to join the discussion? Listen to SAP Ariba’s Webinar on Intelligent Procurement to learn more.

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Shivani Govil

About Shivani Govil

Shivani Govil is the VP and Global Lead, Mobile Innovation Program, at SAP. Her specialties include mobile, Big Data, IoT, cloud, analytics, product management, sales/go-to-market, strategy, and business development.

Tick Tock: Start Preparing for Resource Disruption

By Maurizio Cattaneo, Joerg Ferchow, Daniel Wellers, and Christopher Koch

Businesses share something important with lions. When a lion captures and consumes its prey, only about 10% to 20% of the prey’s energy is directly transferred into the lion’s metabolism. The rest evaporates away, mostly as heat loss, according to research done in the 1940s by ecologist Raymond Lindeman.

Today, businesses do only about as well as the big cats. When you consider the energy required to manage, power, and move products and services, less than 20% goes directly into the typical product or service—what economists call aggregate efficiency (the ratio of potential work to the actual useful work that gets embedded into a product or service at the expense of the energy lost in moving products and services through all of the steps of their value chains). Aggregate efficiency is a key factor in determining productivity.

After making steady gains during much of the 20th century, businesses’ aggregate energy efficiency peaked in the 1980s and then stalled. Japan, home of the world’s most energy-efficient economy, has been skating along at or near 20% ever since. The U.S. economy, meanwhile, topped out at about 13% aggregate efficiency in the 1990s, according to research.

Why does this matter? Jeremy Rifkin says he knows why. Rifkin is an economic and social theorist, author, consultant, and lecturer at the Wharton School’s Executive Education program who believes that economies experience major increases in growth and productivity only when big shifts occur in three integrated infrastructure segments around the same time: communications, energy, and transportation.

But it’s only a matter of time before information technology blows all three wide open, says Rifkin. He envisions a new economic infrastructure based on digital integration of communications, energy, and transportation, riding atop an Internet of Things (IoT) platform that incorporates Big Data, analytics, and artificial intelligence. This platform will disrupt the world economy and bring dramatic levels of efficiency and productivity to businesses that take advantage of it,
he says.

Some economists consider Rifkin’s ideas controversial. And his vision of a new economic platform may be problematic—at least globally. It will require massive investments and unusually high levels of government, community, and private sector cooperation, all of which seem to be at depressingly low levels these days.

However, Rifkin has some influential adherents to his philosophy. He has advised three presidents of the European Commission—Romano Prodi, José Manuel Barroso, and the current president, Jean-Claude Juncker—as well as the European Parliament and numerous European Union (EU) heads of state, including Angela Merkel, on the ushering in of what he calls “a smart, green Third Industrial Revolution.” Rifkin is also advising the leadership of the People’s Republic of China on the build out and scale up of the “Internet Plus” Third Industrial Revolution infrastructure to usher in a sustainable low-carbon economy.

The internet has already shaken up one of the three major economic sectors: communications. Today it takes little more than a cell phone, an internet connection, and social media to publish a book or music video for free—what Rifkin calls zero marginal cost. The result has been a hollowing out of once-mighty media empires in just over 10 years. Much of what remains of their business models and revenues has been converted from physical (remember CDs and video stores?) to digital.

But we haven’t hit the trifecta yet. Transportation and energy have changed little since the middle of the last century, says Rifkin. That’s when superhighways reached their saturation point across the developed world and the internal-combustion engine came close to the limits of its potential on the roads, in the air, and at sea. “We have all these killer new technology products, but they’re being plugged into the same old infrastructure, and it’s not creating enough new business opportunities,” he says.

All that may be about to undergo a big shake-up, however. The digitalization of information on the IoT at near-zero marginal cost generates Big Data that can be mined with analytics to create algorithms and apps enabling ubiquitous networking. This digital transformation is beginning to have a big impact on the energy and transportation sectors. If that trend continues, we could see a metamorphosis in the economy and society not unlike previous industrial revolutions in history. And given the pace of technology change today, the shift could happen much faster than ever before.

The speed of change is dictated by the increase in digitalization of these three main sectors; expensive physical assets and processes are partially replaced by low-cost virtual ones. The cost efficiencies brought on by digitalization drive disruption in existing business models toward zero marginal cost, as we’ve already seen in entertainment and publishing. According to research company Gartner, when an industry gets to the point where digital drives at least 20% of revenues, you reach the tipping point.

“A clear pattern has emerged,” says Peter Sondergaard, executive vice president and head of research and advisory for Gartner. “Once digital revenues for a sector hit 20% of total revenue, the digital bloodbath begins,” he told the audience at Gartner’s annual 2017 IT Symposium/ITxpo, according to The Wall Street Journal. “No matter what industry you are in, 20% will be the point of no return.”

Communications is already there, and energy and transportation are heading down that path. If they hit the magic 20% mark, the impact will be felt not just within those industries but across all industries. After all, who doesn’t rely on energy and transportation to power their value chains?

The eye of the technology disruption hurricane has moved beyond communications and is heading toward … the rest of the economy.

That’s why businesses need to factor potentially massive business model disruptions into their plans for digital transformation today if they want to remain competitive with organizations in early adopter countries like China and Germany. China, for example, is already halfway through an US$88 billion upgrade to its state electricity grid that will enable renewable energy transmission around the country—all managed and moved digitally, according to an article in The Economist magazine. And it is competing with the United States for leadership in self-driving vehicles, which will shift the transportation process and revenue streams heavily to digital, according to an article in Wired magazine.

Once China’s and Germany’s renewables and driverless infrastructures are in place, the only additional costs are management and maintenance. That could bring businesses in these countries dramatic cost savings over those that still rely on fossil fuels and nuclear energy to power their supply chains and logistics. “Once you pay the fixed costs of renewables, the marginal costs are near zero,” says Rifkin. “The sun and wind haven’t sent us invoices yet.”

In other words, zero marginal cost has become a zero-sum game.

To understand why that is, consider the major industrial revolutions in history, writes Rifkin in his books, The Zero Marginal Cost Society and The Third Industrial Revolution. The first major shift occurred in the 19th century when cheap, abundant coal provided an efficient new source of power (steam) for manufacturing and enabled the creation of a vast railway transportation network. Meanwhile, the telegraph gave the world near-instant communication over a globally connected network.

The second big change occurred at the beginning of the 20th century, when inexpensive oil began to displace coal and gave rise to a much more flexible new transportation network of cars and trucks. Telephones, radios, and televisions had a similar impact on communications.

Breaking Down the Walls Between Sectors

Now, according to Rifkin, we’re poised for the third big shift. The eye of the technology disruption hurricane has moved beyond communications and is heading toward—or as publishing and entertainment executives might warn, coming for—the rest of the economy. With its assemblage of global internet and cellular network connectivity and ever-smaller and more powerful sensors, the IoT, along with Big Data analytics and artificial intelligence, is breaking down the economic walls that have protected the energy and transportation sectors for the past 50 years.

Daimler is now among the first movers in transitioning into a digitalized mobility internet. The company has equipped nearly 400,000 of its trucks with external sensors, transforming the vehicles into mobile Big Data centers. The sensors are picking up real-time Big Data on weather conditions, traffic flows, and warehouse availability. Daimler plans to establish collaborations with thousands of companies, providing them with Big Data and analytics that can help dramatically increase their aggregate efficiency and productivity in shipping goods across their value chains. The Daimler trucks are autonomous and capable of establishing platoons of multiple trucks driving across highways.

It won’t be long before vehicles that navigate the more complex transportation infrastructures around the world begin to think for themselves. Autonomous vehicles will bring massive economic disruption to transportation and logistics thanks to new aggregate efficiencies. Without the cost of having a human at the wheel, autonomous cars could achieve a shared cost per mile below that of owned vehicles by as early as 2030, according to research from financial services company Morgan Stanley.

The transition is getting a push from governments pledging to give up their addiction to cars powered by combustion engines. Great Britain, France, India, and Norway are seeking to go all electric as early as 2025 and by 2040 at the latest.

The Final Piece of the Transition

Considering that automobiles account for 47% of petroleum consumption in the United States alone—more than twice the amount used for generators and heating for homes and businesses, according to the U.S. Energy Information Administration—Rifkin argues that the shift to autonomous electric vehicles could provide the momentum needed to upend the final pillar of the economic platform: energy. Though energy has gone through three major disruptions over the past 150 years, from coal to oil to natural gas—each causing massive teardowns and rebuilds of infrastructure—the underlying economic model has remained constant: highly concentrated and easily accessible fossil fuels and highly centralized, vertically integrated, and enormous (and enormously powerful) energy and utility companies.

Now, according to Rifkin, the “Third Industrial Revolution Internet of Things infrastructure” is on course to disrupt all of it. It’s neither centralized nor vertically integrated; instead, it’s distributed and networked. And that fits perfectly with the commercial evolution of two energy sources that, until the efficiencies of the IoT came along, made no sense for large-scale energy production: the sun and the wind.

But the IoT gives power utilities the means to harness these batches together and to account for variable energy flows. Sensors on solar panels and wind turbines, along with intelligent meters and a smart grid based on the internet, manage a new, two-way flow of energy to and from the grid.

Today, fossil fuel–based power plants need to kick in extra energy if insufficient energy is collected from the sun and wind. But industrial-strength batteries and hydrogen fuel cells are beginning to take their place by storing large reservoirs of reserve power for rainy or windless days. In addition, electric vehicles will be able to send some of their stored energy to the digitalized energy internet during peak use. Demand for ever-more efficient cell phone and vehicle batteries is helping push the evolution of batteries along, but batteries will need to get a lot better if renewables are to completely replace fossil fuel energy generation.

Meanwhile, silicon-based solar cells have not yet approached their limits of efficiency. They have their own version of computing’s Moore’s Law called Swanson’s Law. According to data from research company Bloomberg New Energy Finance (BNEF), Swanson’s Law means that for each doubling of global solar panel manufacturing capacity, the price falls by 28%, from $76 per watt in 1977 to $0.41 in 2016. (Wind power is on a similar plunging exponential cost curve, according to data from the U.S. Department of Energy.)

Thanks to the plummeting solar price, by 2028, the cost of building and operating new sun-based generation capacity will drop below the cost of running existing fossil power plants, according to BNEF. “One of the surprising things in this year’s forecast,” says Seb Henbest, lead author of BNEF’s annual long-term forecast, the New Energy Outlook, “is that the crossover points in the economics of new and old technologies are happening much sooner than we thought last year … and those were all happening a bit sooner than we thought the year before. There’s this sense that it’s not some distant risk or distant opportunity. A lot of these realities are rushing toward us.”

The conclusion, he says, is irrefutable. “We can see the data and when we map that forward with conservative assumptions, these technologies just get cheaper than everything else.”

The smart money, then—72% of total new power generation capacity investment worldwide by 2040—will go to renewable energy, according to BNEF. The firm’s research also suggests that there’s more room in Swanson’s Law along the way, with solar prices expected to drop another 66% by 2040.

Another factor could push the economic shift to renewables even faster. Just as computers transitioned from being strictly corporate infrastructure to becoming consumer products with the invention of the PC in the 1980s, ultimately causing a dramatic increase in corporate IT investments, energy generation has also made the transition to the consumer side.

Thanks to future tech media star Elon Musk, consumers can go to his Tesla Energy company website and order tempered glass solar panels that look like chic, designer versions of old-fashioned roof shingles. Models that look like slate or a curved, terracotta-colored, ceramic-style glass that will make roofs look like those of Tuscan country villas, are promised soon. Consumers can also buy a sleek-looking battery called a Powerwall to store energy from the roof.

The combination of solar panels, batteries, and smart meters transforms homeowners from passive consumers of energy into active producers and traders who can choose to take energy from the grid during off-peak hours, when some utilities offer discounts, and sell energy back to the grid during periods when prices are higher. And new blockchain applications promise to accelerate the shift to an energy market that is laterally integrated rather than vertically integrated as it is now. Consumers like their newfound sense of control, according to Henbest. “Energy’s never been an interesting consumer decision before and suddenly it is,” he says.

As the price of solar equipment continues to drop, homes, offices, and factories will become like nodes on a computer network. And if promising new solar cell technologies, such as organic polymers, small molecules, and inorganic compounds, supplant silicon, which is not nearly as efficient with sunlight as it is with ones and zeroes, solar receivers could become embedded into windows and building compounds. Solar production could move off the roof and become integrated into the external facades of homes and office buildings, making nearly every edifice in town a node.

The big question, of course, is how quickly those nodes will become linked together—if, say doubters, they become linked at all. As we learned from Metcalfe’s Law, the value of a network is proportional to its number of connected users.

The Will Determines the Way

Right now, the network is limited. Wind and solar account for just 5% of global energy production today, according to Bloomberg.

But, says Rifkin, technology exists that could enable the network to grow exponentially. We are seeing the beginnings of a digital energy network, which uses a combination of the IoT, Big Data, analytics, and artificial intelligence to manage distributed energy sources, such as solar and wind power from homes and businesses.

As nodes on this network, consumers and businesses could take a more active role in energy production, management, and efficiency, according to Rifkin. Utilities, in turn, could transition from simply transmitting power and maintaining power plants and lines to managing the flow to and from many different energy nodes; selling and maintaining smart home energy management products; and monitoring and maintaining solar panels and wind turbines. By analyzing energy use in the network, utilities could create algorithms that automatically smooth the flow of renewables. Consumers and businesses, meanwhile, would not have to worry about connecting their wind and solar assets to the grid and keeping them up and running; utilities could take on those tasks more efficiently.

Already in Germany, two utility companies, E.ON and RWE, have each split their businesses into legacy fossil and nuclear fuel companies and new services companies based on distributed generation from renewables, new technologies, and digitalization.

The reason is simple: it’s about survival. As fossil fuel generation winds down, the utilities need a new business model to make up for lost revenue. Due to Germany’s population density, “the utilities realize that they won’t ever have access to enough land to scale renewables themselves,” says Rifkin. “So they are starting service companies to link together all the different communities that are building solar and wind and are managing energy flows for them and for their customers, doing their analytics, and managing their Big Data. That’s how they will make more money while selling less energy in the future.”

The digital energy internet is already starting out in pockets and at different levels of intensity around the world, depending on a combination of citizen support, utility company investments, governmental power, and economic incentives.

China and some countries within the EU, such as Germany and France, are the most likely leaders in the transition toward a renewable, energy-based infrastructure because they have been able to align the government and private sectors in long-term energy planning. In the EU for example, wind has already overtaken coal as the second largest form of power capacity behind natural gas, according to an article in The Guardian newspaper. Indeed, Rifkin has been working with China, the EU, and governments, communities, and utilities in Northern France, the Netherlands, and Luxembourg to begin building these new internets.

Hauts-de-France, a region that borders the English Channel and Belgium and has one of the highest poverty rates in France, enlisted Rifkin to develop a plan to lift it out of its downward spiral of shuttered factories and abandoned coal mines. In collaboration with a diverse group of CEOs, politicians, teachers, scientists, and others, it developed Rev3, a plan to put people to work building a renewable energy network, according to an article in Vice.

Today, more than 1,000 Rev3 projects are underway, encompassing everything from residential windmills made from local linen to a fully electric car–sharing system. Rev3 has received financial support from the European Investment Bank and a handful of private investment funds, and startups have benefited from crowdfunding mechanisms sponsored by Rev3. Today, 90% of new energy in the region is renewable and 1,500 new jobs have been created in the wind energy sector alone.

Meanwhile, thanks in part to generous government financial support, Germany is already producing 35% of its energy from renewables, according to an article in The Independent, and there is near unanimous citizen support (95%, according to a recent government poll) for its expansion.

If renewables are to move forward …, it must come from the ability to make green, not act green.

If renewable energy is to move forward in other areas of the world that don’t enjoy such strong economic and political support, however, it must come from the ability to make green, not act green.

Not everyone agrees that renewables will produce cost savings sufficient to cause widespread cost disruption anytime soon. A recent forecast by the U.S. Energy Information Administration predicts that in 2040, oil, natural gas, and coal will still be the planet’s major electricity producers, powering 77% of worldwide production, while renewables such as wind, solar, and biofuels will account for just 15%.

Skeptics also say that renewables’ complex management needs, combined with the need to store reserve power, will make them less economical than fossil fuels through at least 2035. “All advanced economies demand full-time electricity,” Benjamin Sporton, chief executive officer of the World Coal Association told Bloomberg. “Wind and solar can only generate part-time, intermittent electricity. While some renewable technologies have achieved significant cost reductions in recent years, it’s important to look at total system costs.”

On the other hand, there are many areas of the world where distributed, decentralized, renewable power generation already makes more sense than a centralized fossil fuel–powered grid. More than 20% of Indians in far flung areas of the country have no access to power today, according to an article in The Guardian. Locally owned and managed solar and wind farms are the most economical way forward. The same is true in other developing countries, such as Afghanistan, where rugged terrain, war, and tribal territorialism make a centralized grid an easy target, and mountainous Costa Rica, where strong winds and rivers have pushed the country to near 100% renewable energy, according to The Guardian.

The Light and the Darknet

Even if all the different IoT-enabled economic platforms become financially advantageous, there is another concern that could disrupt progress and potentially cause widespread disaster once the new platforms are up and running: hacking. Poorly secured IoT sensors have allowed hackers to take over everything from Wi-Fi enabled Barbie dolls to Jeep Cherokees, according to an article in Wired magazine.

Humans may be lousy drivers, but at least we can’t be hacked (yet). And while the grid may be prone to outages, it is tightly controlled, has few access points for hackers, and is physically separated from the Wild West of the internet.

If our transportation and energy networks join the fray, however, every sensor, from those in the steering system on vehicles to grid-connected toasters, becomes as vulnerable as a credit card number. Fake news and election hacking are bad enough, but what about fake drivers or fake energy? Now we’re talking dangerous disruptions and putting millions of people in harm’s way.

The only answer, according to Rifkin, is for businesses and governments to start taking the hacking threat much more seriously than they do today and to begin pouring money into research and technologies for making the internet less vulnerable. That means establishing “a fully distributed, redundant, and resilient digital infrastructure less vulnerable to the kind of disruptions experienced by Second Industrial Revolution–centralized communication systems and power grids that are increasingly subject to climate change, disasters, cybercrime, and cyberterrorism,” he says. “The ability of neighborhoods and communities to go off centralized grids during crises and re-aggregate in locally decentralized networks is the key to advancing societal security in the digital era,” he adds.

Start Looking Ahead

Until today, digital transformation has come mainly through the networking and communications efficiencies made possible by the internet. Airbnb thrives because web communications make it possible to create virtual trust markets that allow people to feel safe about swapping their most private spaces with one another.

But now these same efficiencies are coming to two other areas that have never been considered core to business strategy. That’s why businesses need to begin managing energy and transportation as key elements of their digital transformation portfolios.

Microsoft, for example, formed a senior energy team to develop an energy strategy to mitigate risk from fluctuating energy prices and increasing demands from customers to reduce carbon emissions, according to an article in Harvard Business Review. “Energy has become a C-suite issue,” Rob Bernard, Microsoft’s top environmental and sustainability executive told the magazine. “The CFO and president are now actively involved in our energy road map.”

As Daimler’s experience shows, driverless vehicles will push autonomous transportation and automated logistics up the strategic agenda within the next few years. Boston Consulting Group predicts that the driverless vehicle market will hit $42 billion by 2025. If that happens, it could have a lateral impact across many industries, from insurance to healthcare to the military.

Businesses must start planning now. “There’s always a period when businesses have to live in the new and the old worlds at the same time,” says Rifkin. “So businesses need to be considering new business models and structures now while continuing to operate their existing models.”

He worries that many businesses will be left behind if their communications, energy, and transportation infrastructures don’t evolve. Companies that still rely on fossil fuels for powering traditional transportation and logistics could be at a major competitive disadvantage to those that have moved to the new, IoT-based energy and transportation infrastructures.

Germany, for example, has set a target of 80% renewables for gross power consumption by 2050, according to The Independent. If the cost advantages of renewables bear out, German businesses, which are already the world’s third-largest exporters behind China and the United States, could have a major competitive advantage.

“How would a second industrial revolution society or country compete with one that has energy at zero marginal cost and driverless vehicles?” asks Rifkin. “It can’t be done.” D!


About the Authors

Maurizio Cattaneo is Director, Delivery Execution, Energy and Natural Resources, at SAP.

Joerg Ferchow is Senior Utilities Expert and Design Thinking Coach, Digital Transformation, at SAP.

Daniel Wellers is Digital Futures Lead, Global Marketing, at SAP.

Christopher Koch is Editorial Director, SAP Center for Business Insight, at SAP.


Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.

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No Longer Soft Skills: Five Crucial Workplace Skills Everyone Should Learn

Carmen O'Shea

My child’s elementary school focuses on skills they believe support children in becoming changemakers. Through use of an integrated, project-based curriculum, they explicitly teach and assess “learner values” such as iteration, risk, failure, collaboration, and perspective. Their philosophy is that these attributes long considered “soft skills” have become the crucial educational priorities for this generation.

Why do they believe this? Much knowledge is now easily accessed and readily queried, such that the acquisition of specific content or know-how is far less important than how to apply that content in different situations and how to interact with others in the pursuit of goals. This holds true in the workplace as well as the academic environment. When I think about how I operate in my job at a large technology company, it’s not really what I know but what I do with what I know, and whom I engage to get things accomplished.

Watching the school teach these skills just as they do math or language has made me stop and consider what they look like for an employee. I wanted to share my thoughts on five qualities beyond relevant academic skills or professional experience that are just as important (if not more so) in predicting top work performance. These are more qualitative skills that managers should hire for, employees should develop, and organizations should optimize for.

  • Empathythe ability to see and integrate multiple perspectives and to understand the impact of how others think. Empathy can also mean advocating and showing empathy for oneself and for others. Empathy is assuming a good intention even when someone has said or done something we dislike – to stop and pause, attempt to understand, and respond compassionately in a difficult workplace situation. Empathy also extends to intuiting beyond just the professional environment to more of a personal level to truly understand what drives a colleague or employee.
  • Resiliencethe ability to take risks even when you know you may fail and then to bounce back, sometimes repeatedly, from failure. Inherent in resilience is the idea of iteration – that it is often essential to try things multiple times, in multiple ways, from multiple angles, before achieving a desired outcome. Resilience is receiving difficult yet constructive feedback from a manager or peer and resolving to act positively on it instead of wallowing or harboring a grudge. Resilience is maintaining a sense of optimism even in a down quarter at work.
  • Creativitythe ability to think differently or expansively and to approach a problem from multiple angles. Sometimes it’s called “thinking outside the box.” Creativity often includes inquiry, the act of questioning and satisfying one’s curiosity about particular topics. Torrance defined it along several parameters – number of ideas generated, number of categories of ideas, originality of ideas, and how detailed each idea is elaborated. We see it in action during brainstorming phases of projects, but it’s also possible to apply creativity on a continual basis, by pushing colleagues to expand on their thoughts, by not being satisfied with a less than stellar answer, by taking time to understand how multiple approaches to an issue could be combined, or by simply trying something new in a familiar situation.
  • Collaborationthe ability to interact and work productively with others, in all size groups. Effective collaboration requires empathy, especially when collaborators have different backgrounds, styles, or thought processes. Collaboration also requires exemplary communication skills, both oral and written, as well as reflective listening. So much of our tasks on the job require collaboration with others, whether to inform, persuade, learn, or engage, and these interactions form the bedrock for innovation. It’s tough to innovate without collaborating.
  • Flexibilitythe ability to adapt or change course if that is what the situation demands. Flexibility includes letting go of one’s idea in the interest of attaining a goal more quickly. It can also include development a comfort level with uncertainty or ambiguity, especially in times of change. Flexibility is a willingness to absorb feedback objectively and course correct as needed without personalizing the information or demonizing the provider of it. Expounding on another’s idea (not our own) in a brainstorming session demonstrates flexibility, as does remaining calm while an org change takes effect and roles are temporarily unclear.

When employees exhibit these qualities, they are better able to understand their purpose at work and to unleash their passions in the pursuit of that purpose. When teams exhibit these qualities, achievement and employee engagement are higher.  I wager that retention and innovation will improve as well. It’s heartening that as a society we’re beginning to consider how to best prepare our children educationally for the kind of work environments they will encounter after they finish their academic journey.

Do you also see these qualities as valuable in assessing employee fit? How can managers and organizations better identify, train and reward employees for living these qualities?

For more on this topic, see Your Business Needs People With Skills, Not Just Qualifications.

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Carmen O'Shea

About Carmen O'Shea

Carmen O’Shea is the Senior Vice President of HR Change & Engagement at SAP. She leads a global team supporting major transformation initiatives across the company, focused on change management, employee engagement, and creative marketing and interaction. You can follow Carmen on Twitter.