The Super Materials Revolution

Dan Wellers

Thousands of years ago, humans discovered they could heat rocks to get metal, and it defined an epoch. Later, we refined iron into steel, and it changed the course of civilization. More recently, we turned petroleum into plastic, with all that implies. Whenever we create new materials that push the limits of what’s possible, we send the world down an entirely new path.

Today, we’re on the verge of a revolution in materials science that will transform the world yet again. Scientists have developed tools that make it possible to design, build, and shape new “super materials” that will eclipse what we once believed were physical limits, create previously unimaginable opportunities, and expand the capabilities of what we already think of as exponential technologies in ways limited only by our imaginations.

Super strength in a pencil

The materials of the future are already being made in the present. One astonishing example is graphene, derived from the same graphite that’s in the pencil on your desk. A sheet just one atom thick, graphene is essentially two-dimensional. It weighs next to nothing, yet is up to 300 times stronger than steel. It conducts electricity more efficiently and faster than any other material. It dissipates heat faster than any other known material. It’s the only substance on earth that is completely impermeable by gas.

Excitement about graphene’s potential was high from the first, and it’s not ebbing. At least 13 conferences focusing on graphene, 2D substances, and nanotechnology are scheduled for 2016. The European Commission has created Graphene Flagship, Europe’s largest-ever research initiative, to bring graphene into the mainstream by 2026. And researchers have already developed an array of fascinating uses for graphene: new types of sensors, high-performance transistors, composites that are both super-light and super-strong, even a graphene-based gel for spinal cord injuries that can help nerve cells communicate by conducting electricity between them.

In 2015, IBM achieved a breakthrough in carbon nanotubes — graphene rolled into a tubular shape — that opens the door to faster transistors that will pack exponentially more computing power onto a single silicon chip. In fact, taken to its logical conclusion, the ability to shrink transistors to nanoscale could lead to processors that combine vast power and tiny size in a way that could be called “smart dust” (good news for those of us who don’t prioritize good housekeeping).

But that’s not all we’ll be doing with graphene. Here are just a few examples of what researchers say this single super material is likely to bring us in the not-too-distant future:

Transparent future mobile phone in hands. Concept.
  • batteries that last twice as long as they do now and could offer electric cars a 500-mile range on a single charge.
  • solar cells that are up to 1,000 times more efficient
  • clothing that conducts electricity and has wireless connectivity
  • bendable, highly conductive display screens
  • water desalinization using 15 to 50 percent less energy
  • coatings that can be applied to almost any surface that needs protection from water and air
  • meteor-resistant spacecraft and lightweight bulletproof armor, both enabled by graphene’s ability to dissipate energy from incoming projectiles

Marveling at the possibilities

Amazingly, graphene barely scratches the surface. Consider these advanced materials, all of them currently in development, and let yourself marvel at how we might put them to work:

Nanomaterials artificially engineered at molecular scale are giving rise to cotton-blend fabric that kills bacteria or conducts electricity, a coating that makes objects so frictionless they give no tactile feedback, and ceramics that bounce back from extreme pressure.

Recyclable carbon fiber composites that can be turned back into liquid form and remolded will replace the current versions that can only go into landfills when they’re broken.

Ultra-thin silicon circuits will lead to high-performance medical instruments that can be not just worn, but implanted or swallowed.

Flexible solar cells will replace large, unwieldy solar panels with thin film that can go almost anywhere and be incorporated into almost anything, from windows to tents to clothing.

Rechargeable metal-air batteries that can store electricity in grid-scale amounts will bring plentiful low-cost, reliable energy to places that currently have unreliable or no access to the traditional power grid.

Biomaterials will allow us to build robotic structures out of engineered materials that mimic organic ones. Soft materials that can be activated by an electric field will give us a whole new take on the human/machine interface. The next generation of prosthetics, for example, will be more comfortable, more functional, and harder to distinguish from living flesh.

Metamaterials, synthetic composites designed at the inter-atomic level, will have properties not found in nature. Those of you who love Star Trek and/or Harry Potter will be thrilled at this example: Scientists have already created a thin skin of metamaterial that makes whatever it covers undetectable. That’s right—an actual invisibility cloak. (Unfortunately, non-Romulans and Muggles will probably have to wait quite a while for the retail version.)

Designing the future, one molecule at a time

More mind-boggling developments in material science are on their way. The Materials Genome Initiative (MGI) is a multi-agency U.S. government project designed to help American institutions discover, develop, and deploy advanced materials at lower cost and bring them to market in less time. One central part of the initiative is a database attempting to map the hundreds of millions of different combinations of elements on the periodic table so that scientists can use artificial intelligence to predict what properties those combinations will have. As the database grows, scientists can draw on that data to determine how best to combine elements to create new super materials that have specific desired properties.

Of course, no technological advance is without its challenges, and the rise of the super materials is no exception. One technical hurdle that’s already pressing is the need to find ways to integrate graphene into a high-tech world in which industry and academia have already invested trillions of dollars in silicon. That sum is impossible to walk away from, so unless (until?) graphene supplants silicon entirely, factories, production lines, and research centers will have to be retooled so that both materials can co-exist in the same projects.

That said, advanced materials are a fundamental building block for change, so keep your eye on them as they develop. As super materials become exponentially easier to produce, we’ll start to see them in common use — imagine 3D printers that can create new objects with high-performance computing and battery power literally baked in. As they become more common, expect to see them weaving exponential technologies tightly into the fabric of daily life, both literally and figuratively, and bringing us ever-closer to a world of ambient intelligence. And as these foundation-shaking new materials become ubiquitous, it’s likely that they’ll make today’s technological marvels seem like a preschooler’s playthings.

Download the executive brief Super Materials: Building the Impossible

super-materials-thumbnail

To learn more about how exponential technology will affect business and life, see Digital Futures in the Digitalist Magazine.

Comments

About Dan Wellers

Dan Wellers is founder and leader of Digital Futures at SAP, a strategic insights and thought leadership discipline that explores how digital technologies drive exponential change in business and society.

The Future Belongs To Industry-Busting Ecosystems

Dan Wellers and Timo Elliott

The digital revolution has returned nearly absolute power to the customer – and that’s upsetting not simply legacy corporations, but long-held notions of business models, competition, and industry boundaries. As companies examine their customers’ journeys, they are realizing that they alone are not capable of optimizing them. The customer experience today transcends corporate and industry borders – and in order to transform them, companies must work with a much wider range of players than ever before. And, thanks to the advance of digital technologies that dramatically reduce the cost and effort required to connect and collaborate, they can.

Digitally native companies have been the first to explore this new world, where industry limitations serve little more purpose than maintaining an increasingly insignificant status quo. As pointed out in a recent McKinsey Quarterly article on the topic, one would be hard pressed to put a company like Amazon or Japan’s Rakuten Ichiba in a single industry box. After all, neither is simply an online retailer. Amazon is a cloud computing provider, a consumer electronics company, a grocer – just for starters. Rakuten Ichiba is a financial services company, a travel website, a social media provider, and a gaming company.

But legacy organizations, too, must look beyond their own walls – even beyond their own industries – to co-create their futures or risk losing market share to the other companies that do. They will have to take fuller advantage of digital advancements to combine the capabilities of multiple entities to develop not just new products and services, but new business models. A recent article in the Harvard Business Review says this shift is not only possible, but necessary, calling collaboration “the essential new secret sauce for startups and industry leaders alike.” A whitepaper sponsored by the World Economic Forum (WEF) goes a step further, arguing that “only operating models that support partnerships and platforms will survive in the future.”

A mere 3% of corporate leaders say their organizations have completed digital transformation projects across the enterprise, according to a recent survey of 3,100 global executives from the SAP Center for Business Insight. It may well be that the disruptive transformation required to meet ever-increasing customer demands is something companies simply cannot accomplish alone. The select few digital transformation leaders identified in the survey have successfully connected their customer-facing efforts to business processes across the enterprise and extended them to partners and suppliers. As a result, nearly all (92%) of have derived significant or transformational value from digital transformation in customer satisfaction and engagement, compared with 22% of others.

“By understanding the network-multiplier effect of platform-driven ecosystems, companies can digitally tap into the many networks of people who are working toward the same goals. They can then leverage these networks to drive sustainable growth in faster and economically smarter ways,” says the WEF report. Indeed, 81% of respondents to an Accenture survey believe that industry boundaries will dramatically blur as platforms reshape industries into interconnected ecosystems. By 2018, more than 50% of large enterprises – and more than 80% of the Global 500 – will create or partner with industry platforms, according to IDC.

Beyond partnerships to ecosystems

We will see the increasing formation of horizontal ecosystems built around experiences, such as wellness, mobility, or community, for example. Partnerships have long been an essential component of business. But when we’re talking about ecosystems, we’re talking about something more.

British ecologist Arthur Tansley first used the term “ecosystem” to describe the relationship between organisms and their environment in 1935. Nearly 60 years later, in a 1993 Harvard Business Review article, business strategist James F. Moore co-opted the word to describe the interconnected business world. “Innovative businesses can’t evolve in a vacuum,” he wrote. “They must attract resources of all sorts, drawing in capital, partners, suppliers, and customers to create cooperative networks.” Moore suggested that companies were not members a single industry but part of a business ecosystem in which they co-evolve “cooperatively and competitively to support new products, satisfy customer needs, and eventually incorporate the next round of innovations.”

Moore was ahead of his time. But the complex and multi-faceted nature of digital disruption and transformation highlights the appeal of business ecosystems today. “Business ecosystems are not just the province of the digital businesses,” said Marc Strohlein, adjunct research adviser with IDC’s Research Network. “Traditional businesses can adopt ecosystem thinking to evolve partner networks into powerful systems that increase the breadth and value of products and services, grow audiences, build strong competitive strengths, and deliver continuous innovation.”

Customer-centric transformation

Digital transformation is really about providing new and better customer experiences. However today’s complex customer journeys are not easily optimized – spanning not only devices and channels, but also businesses and industries. Taking them to the next level requires the input, innovation, and cooperation of ecosystem partners. Consider the experience of travel, which takes consumers through a series of interactions with multiple entities across sectors – airlines, airports, ground transportation, retail, hotels, government entities – each with different approaches and incentives and few working in collaboration to improve the customer journey. In the future, these entities might band together to innovate and deliver an improved customer experience across those touch points.

Ecosystems can deliver products, services, and experiences that would be difficult, costly, or even impossible for individual businesses on their own. It’s their differences – and their combined ability to learn, innovate, and execute – that make them successful. And in a world of commoditization, that network effect can prove invaluable.

China’s Ping An insurance company is aggressively expanding beyond its sector under a CEO who says the company’s role is not simply to provide insurance products, but help customers improve their lives. Some 89 million people are using Ping An Good Doctor, a platform to connect with doctors not only for online appointment booking but to receive diagnoses and suggested treatments – complete with the ability to share pictures and video.

Roche Diagnostics is innovating in the connected healthcare ecosystem by partnering with SAP to develop not just another blood glucose monitor, but a diabetes management platform. The Accu-Chek View offering integrates a blood glucose monitoring with a wearable fitness tracker and a mobile app so that a diabetes patient’s vital signs and blood sugar level are not only monitored remotely but can be analyzed in relation to their physical activity. The app and its connectivity to caregivers can encourage better lifestyle choices and empower individuals to take an active role in their disease management, improving outcomes.

Tire maker Michelin has created an ecosystem involving training, telematics, and electronics providers to sell not wheels, but a mobility service to help fleet managers control costs and environmental impact.

The CEO of Japan’s Softbank has stated that, “by providing all manner of services and content on (our) platforms, we are aiming to create a comprehensive ecosystem that other companies will never be able to rival.”

Customer co-innovation

Companies are beginning to explore the benefits of business ecosystems, from smart city consortia to mobility efforts, and borders are sure to be redrawn. That’s also true for the boundaries between businesses and their customers. As businesses and the ecosystems they create and participate in deliver more complex and customized products and services, the customer will take a larger role in their creation.

The $20 billion dollar online gaming business not only connects customers with each other, but involves them in continuous development of their products. In 2014, Coca-Cola rolled out its do-it-yourself soda fountains, which enable customers to mix their own beverage concoctions, and has since launched countertop versions and a mobile app.

It’s not just happening in consumer goods, but in the B2B space as well, with organizations working ever closer to provide complex, customized solutions developed with – rather than simply for – customers. Home appliance and electronics maker Haier turned itself around by focusing on customer-driven innovation. The company even created an open innovation platform that enables 670,000 users to communicate with suppliers and other customers searching for new business opportunities. Packaging provider Weig has transformed itself from a product-centric industrial company to a digital industrial service provider that’s integrating partners into production. Weig’s customers are increasingly working with the company to co-invent the perfect materials for their needs.

How to build an ecosystem

Transcending historical conceits and constraints won’t happen overnight. It will demand new mindsets and capabilities, more open corporate cultures, new business processes to support sharing, and technology infrastructures to underpin new cross-business and cross-industry networks. But it’s clear that business ecosystems will be the sources of new value and disruptive innovation in the future.

Company leaders who want to be a part of this collaborative future should start by taking a hard look at the end-to-end customer experience, including the aspects that aren’t controlled by the company’s own organization. Such customer journey mapping can help identify other members of the ecosystem with whom the company might want to collaborate or partner. Future planning and foresight exercises can enable companies to determine not just who the key players are today, but where the valuable partners will be in the future and where it’s best to buy, partner, invest, or incubate.

Technology will play a significant role in enabling the ecosystems of the future. Companies that want to spearhead or join such ecosystems will aggressively adopt systems that encourage open collaboration among stakeholders and iterative innovation such as cloud technologies, APIs, and micro-services. They will also want to create or join the kinds of platforms that will underpin ecosystem development.

Finally, embracing the ecosystem approach to value creation will require new mindsets and disciplines. Many corporate leaders have gotten to where they are because they excelled at coloring inside the lines. Companies will need to make sure those in strategic positions have the requisite creativity, open mindedness, and experience with more disruptive development approaches such as design thinking to re-imagine business models, customer experiences, and corporate value.

Read the executive brief The Future Will Be Co-Created.

Comments

About Dan Wellers

Dan Wellers is founder and leader of Digital Futures at SAP, a strategic insights and thought leadership discipline that explores how digital technologies drive exponential change in business and society.

Timo Elliott

About Timo Elliott

Timo Elliott is an Innovation Evangelist for SAP and a passionate advocate of innovation, digital business, analytics, and artificial intelligence. He was the eighth employee of BusinessObjects and for the last 25 years he has worked closely with SAP customers around the world on new technology directions and their impact on real-world organizations. His articles have appeared in publications such as Harvard Business Review, Forbes, ZDNet, The Guardian, and Digitalist Magazine. He has worked in the UK, Hong Kong, New Zealand, and Silicon Valley, and currently lives in Paris, France. He has a degree in Econometrics and a patent in mobile analytics. 

Swimming In The Immersive Digital Experience

Kai Goerlich

If you’ve chased a Pokémon down the street or visited Antarctica via the New York Times’ VR app, you’ve already experienced how quickly immersive digital experiences have begun to feel real. This first wave of virtual reality (VR) and augmented reality (AR) is using smartphones, glasses, and goggles to place users in the middle of a 360-degree digital environment or overlay digital artifacts on the physical world.

As machine learning and artificial intelligence (AI) become more sophisticated, so will immersive experiences. The devices that deliver those experiences will inevitably get smaller, with a higher image resolution, faster data handling, and inbuilt AI. They won’t just display information in ways we can interact with; they’ll also gather information from the environment in real time and pass it back to an AI for analysis that drives an equally rapid response. As that happens, digital experiences will become increasingly multi-sensory, making them even more convincingly “real” and creating new opportunities for forward-thinking businesses to deliver information to customers and employees alike.

Making a splash

Companies are anticipating remarkable business benefits from immersive digital experiences in areas as diverse as maintenance, logistics, field service, and medicine, in which critical hands-on tasks are more easily demonstrated than explained. VR and AR promise to accelerate, simplify, and extend existing business processes while creating new ones that weren’t previously possible. And although we’re still in the early stages of immersive technology, the pace of innovation and adoption is moving ever faster as new prototypes, pilot projects, and first movers emerge.

SAP, for example, is experimenting with multiple immersive reality use cases. One solution uses AR-enabled glasses to guide warehouse pickers to the right shelves or ensure truck loaders put the right cargo in the right truck in the most efficient way. Another AR solution overlays up-to-date blueprints, measurements, and supply tickets over construction sites in real time so project managers can see the current status of a project at a glance and identify assets that aren’t insured. SAP Analytics 3D is being used to build “digital twins” and prototypes of buildings and machinery — including helicopters — so they can be tested virtually and their maintenance cycles adjusted remotely.

Other early forms of immersive experiences have appeared elsewhere in the marketplace. For $8, anyone can buy a pair of Google Cardboard VR goggles to explore 360-degree visual environments on a smartphone, but that’s just the beginning. The British Army uses a 360-degree VR video for recruiting; Lowe’s has its VR Holoroom where customers can build a mockup of their kitchens and bathrooms with new cabinets and appliances. L’Oreal Cosmetics has deployed an AR application that lets customers try on makeup at their laptops; medical schools are adopting Microsoft’s HoloLens so students can learn from diagnostic information and surgical instructions overlaid on patients’ bodies.

Diving deeper into a digital world

VR and AR hardware has advanced so quickly that the boundaries of what’s possible seem to be expanding by the day. Nvidia’s Project Holodeck, launched in May, generates photorealistic VR environments that multiple people can use and interact in simultaneously. Lenovo’s New Vision AR subsidiary (LNV) and AR engine firm Wikitude announced in June that they’re collaborating on a cloud-based platform that will deliver industrial AR applications over LNV’s next-generation smartglasses. At the same time, Meta, which introduced the first commercially available AR system in 2014, unveiled its new AR Workspace and Meta 2 headset, which lets users interact with AR artifacts by simply touching them as if they were physical objects.

The speed at which these technologies are evolving — and, let’s face it, the sheer science fiction thrill of using them — are good reasons to get excited about the possible ways they could be used, from design and maintenance to customer service. It’s not just that we’ll use new tools to perform existing tasks like consuming content, viewing instructions, augmenting employee performance, or delivering more engaging customer experiences. It’s that we could create entirely new ways of doing things.

Before long, you’ll be able to create a VR avatar that looks like you, sounds like you, and can meet with other VR avatars in an entirely realistic virtual meeting space. You could sit around a table in a digital conference room — or tour the digital twin of a factory, or attend a keynote speech — with colleagues from around the world, and interact both with them and with your surroundings, all without leaving your desk or, if you prefer, your home. With sufficient computing power and a smart enough AI, you could even program your VR avatar to participate in a virtual meeting as your proxy, and (theoretically) to do a good enough job that your colleagues would never guess it wasn’t actually you. That will raise questions about how to tell an avatar being controlled live by a human from one being operated by a bot — and whether to make the difference both obvious and mandatory.

Soaking it in — and soaking in it

As of now, of course, a 100 percent immersive experience that’s indistinguishable from real life is impossible. For one thing, not every task is best done in a VR or AR environment. More importantly, though, current technologies don’t have the power, throughput, or battery life necessary to stream the level of data necessary to build an entirely convincing digital world outside the confines of a purpose-built facility with wired headsets. In addition, although the eyes are the primary user interface for VR and AR, making experiences even more immersive will require companies to engage other senses as well, especially touch and sound.

That said, to make technology truly immersive, we need to make it align with the physical world. That’s going to require more sensors to make more objects interactive; technology infrastructure powerful enough to create convincingly realistic 3D models; and screens, glasses, and other interfaces smart enough to not just show data, but interpret it and allow us to interact with it.

The smaller sensors get, the easier it will become to embed them in everything or even use 3D printers to make objects out of materials that are themselves sensor-sensitive. Our entire physical environment will be intelligent and interactive, gathering and responding to all kinds of information, from the ambient temperature to hand gestures, in real time.

Imagine being in a factory — or an operating room — in which every item has an AR overlay or VR presence that lets you drill into information about that item, handle a digital version of that object, or operate it remotely. Consider the possibilities of technology that lets you see your GPS location or visualize heat gradients, that automatically uses your unique biometrics to log you into your company’s network when you sit down at your desk, that launches a video chat when you make a certain hand gesture. When everything around us is intelligent and interactive, omnipresent sensors and ambient AI could even enable a true virtual assistant capable of responding to requests that you speak into thin air, or of inferring from your current actions what you’ll want to do next.

Potential use cases for immersive digital experiences will include both the highly specialized and the mass market. Areas like military combat, fire and rescue, remote maintenance and repair of delicate or dangerous equipment, professional handling of data, and extreme sports could give rise to niche immersive applications that require intensive training and sophisticated virtual twins.

Meanwhile, at the consumer level, we’re likely to see easy-to-handle devices that add data overlays and immersive input to all kinds of experiences, from shopping and education to gaming and movies. Those could in turn give rise to open source platforms that make it easy for the public to create, crowdsource, and share their own VR and AR experiences. As immersive digital technology becomes commonplace, we could also see a backlash against it, with trendsetters insisting there’s no substitute for the authenticity of the physical world.

The definition of “immersive” is always a few steps ahead of wherever we happen to be. Remember, the racing simulator arcade games of the early 1990s with their surrounding video screens, working pedals, and haptic feedback in the steering wheel seemed completely realistic at the time. Some say we’re still five to ten years away from a truly convincing immersive digital world, one that engages multiple senses and allows us to move through it in 360-degree space. If and when that world arrives, it will change our entire sense of what’s real, what’s relevant, and what we can tangibly affect.

Read the executive brief Diving Deep Into Digital Experiences.


Comments

Kai Goerlich

About Kai Goerlich

Kai Goerlich is the Chief Futurist at SAP Innovation Center network His specialties include Competitive Intelligence, Market Intelligence, Corporate Foresight, Trends, Futuring and ideation.

Share your thoughts with Kai on Twitter @KaiGoe.heif Futu

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.

Comments

Tags:

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.

Comments

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.