How Telcos Stay Relevant In A Digital Revolution

Judy Cubiss and Ginger Shimp

Digital trends are doing more than taking over the telco industry. They are disruptive, changing the way telcos must do business. Companies such as Netflix, WhatsApp, and even Google have completely transformed the customer experience—and customer expectations—through speed and efficiency.

Enter the realm of hyperconnectivity.

Recently, Brian Fanzo and Daniel Newman, co-hosts of the popular S.M.A.C. Talk (social, mobile, analytics, cloud) technology podcast, caught up with Stephan Gatien, global head telecommunications industry business unit SAP, on an episode of an extraordinary series entitled Digital Industries, which examines how digital transformation is affecting 16 different industries.

over the top players are leveraging the hyperconnected society to deliver services that used to be the bread and butter of telcos

With everything involving the Internet of Things (IoT) happening lightning-fast and at the stroke of a few keys, customers of telecommunications companies (telcos) expect the same degree of service. Telcos unable to meet the speed of demand quickly fall out of relevance. And this trend is not going to slow down anytime soon.

Compounding the problem, Gatien points out, “Voice data is almost free, and we take this for granted. And as a result, the competition of these over-the-top players has actually had a massive negative impact on the top line of most telecommunications operators.”

Furthermore, by 2020 there will be an estimated 5.9 billion smartphones in the world. In terms of speed of connectivity, the next generation of 5G wireless connectivity will be 100 times faster than 4G. Anyone who grew up at the advent of the Internet and social media is well aware of the drastic speed of growth in the tech world. This will have an immense impact on the telcos.

Moving beyond communications

Along with the disruption of technologies, telcos must disrupt their own way of doing business. These companies can no longer provide basic communications services, including telephone access and Internet service. They must push beyond the boundaries of what was formerly defined as telco provisions. Gatien said, “The entire challenge of this industry is to stay relevant in this digital era, continue to connect and power everything that we do. But find ways to create sustainable revenue streams with the new domains, like the Internet of Things and faster connections.”

Take Big Data. Telcos are in a prime position to gather data from communications customers, such as data compiled from home security systems. In fact, telcos have been at the forefront of Big Data since its conception. However, being able to store, analyze, and utilize this data is outside of the comfort zone of most telcos. It shouldn’t be. And in order for these companies to continue to remain relevant in the digital area, they need to find an efficient tech approach to dealing with Big Data.

Keeping up the pace

Telcos must also differentiate their service offerings. Look at how T-Mobile has built an alternative image against established companies. Gatien explains, “It’s not because of the inherent services they provide, but because of stances they are taking: no contract, automatic upgrade of phones, making your life easier—and as a result, being able to, or potentially able to, accompany you into your digital lives.”

Fanzo agrees that this flexibility makes a big difference to millennials. In addition, many developed markets are already saturated, so providing friendly connected services, Gatien predicts, will be one of the most important drivers for growth and relevancy.

Telcos may also need to assess a two-tier system: commercial and residential. Telcos preparing for the future may look towards industries for differentiation. Healthcare, financial services, home security, entertainment: Each of these industries requires a personalized approach that reflects the hyperconnectivity of society.

The key to this is understanding customers better so services can be easily personalized to ensure a constant revenue flow for future investment. Then telcos can move from being simple communication providers to become value-added digital service providers, offering everything from digital home automation and smart life services to e-health care and IoT services.

A good example is cybersecurity, which is fast becoming one of the more pertinent areas of telco services. Without safe and secure connections, consumers’ data and personal information, as well as the livelihood and interests of corporations, is at risk. Along these same lines is cloud computing, which has become second nature with the success of cloud sharing services like Dropbox and Google Docs. Telcos must find ways to provide these niche services without degrading the quality of communications technology.

The question of regulation always comes up for telcos as bidding for the different spectrums, and associated regulations is unique for the industry. There are positives, such as loosening of regulations in the UK, which, according to Gatien, has led to an accelerated consolidation, particularly from the traditional incumbents getting into markets that they had previously missed. And then there are negatives, such as the requirements for net neutrality, where telcos invest billions in the network but other companies reap the benefits. How this ultimately will evolve will be another factor in the success of many telcos.

Connecting with a human audience

Amid all the talk about technologies, it’s easy to overlook the end user: the consumer. Connecting with consumers in this hyper-connected culture means the difference between leading the competition and lagging behind. Without customers, after all, the latest tech advances offer little.

So where can telcos make their mark? By personalizing their customer engagement while simultaneously excelling in the retail experience. While telcos once held their presence with little to no user input, the instant access to these companies—thanks to the Internet—has changed the game. The personal touch and visibility of the company is especially important to millennials. Fanzo hailed T-Mobile’s John Leger as a great example of access to executives, which in turn changed millennials’ mindset and subsequent purchasing decisions.

T-Mobile's John Leeger's ability to be social and engaged gave me confidence that they are pushing the envelope

Today’s companies must listen to the real world and the real-time requests of consumers, creating a seamless customer experience. This is vital to staying abreast of a changing culture, which is happening in real time. It is also the keystone for maintaining a digital core that will keep telcos in touch with the rest of the technologies and opportunities thrown their way.

To listen to this episode of Digital Industries for the telecommunications industry, co-produced by SAP and S.M.A.C. Talk Technology Podcast, click here.

Transforming into a truly digital business is so much more than just implementing new technology to meet the demands of a digital age. It’s more than keeping up with the deluge of transformation happening all around us. Digital transformation is about understanding how to harness these changes and incorporate them into your business strategy. It’s about driving agility, connectivity, analytics, and collaboration to run a Live Business. A digital core empowers you with real-time visibility into all mission critical business processes inside your four walls, and in your interactions with customers, suppliers, workforce, Big Data, and the Internet of Things.

For more on how SAP can help you drive your own digital transformation in the telecommunications industry, visit us online.

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Judy Cubiss

About Judy Cubiss

Judy is director of content marketing for Finance at SAP. She has worked in the software industry for over 20 years in a variety of roles, including consulting, product management, solution management, and content marketing in both Europe and the United States.

About Ginger Shimp

With more than 20 years’ experience in marketing, Ginger Shimp has been with SAP since 2004. She has won numerous awards and honors at SAP, including being designated “Top Talent” for two consecutive years. Not only is she a Professional Certified Marketer with the American Marketing Association, but she’s also earned her Connoisseur’s Certificate in California Reds from the Chicago Wine School. She holds a bachelor’s degree in journalism from the University of San Francisco, and an MBA in marketing and managerial economics from the Kellogg Graduate School of Management at Northwestern University.

Personally, Ginger is the proud mother of a precocious son and happy wife of one of YouTube’s 10 EDU Gurus, Ed Shimp.

Three Areas Where The Smartphone Industry Needs Universal Quality Standards

Tracy Vides

Over the past 30 years, mobile devices have become a huge part of our lives. A recent study found that the average user touches his or her phone more than 2,600 times every day!

In an industry with so much demand across the globe, it seems like there is a fancy new device or feature coming out every week. However, through all the glamour and glitz, the standards of hardware quality tend to get lost in the shuffle. A prime example would be how the infamous Samsung Note 7 dominated headlines in the latter half of 2016 for its tendency to explode. The U.S. Department of Transportation even issued an emergency order to ban this device from airplanes.

This was perhaps the tipping point where many people came to the realization that there needs to be a rock-solid set of standards in place to avoid these types of safety risks. In fact, following the fiasco, the South Korean government issued a number of new, stricter regulations for mobile phone manufacturers within the country.

In a perfect world, mobile devices should be designed and manufactured not only on principles of an intuitive UX, but with a high regard to user well-being.

Currently, the smartphone industry doesn’t adhere to any sort of universal criteria in terms of quality assurance. Most aspects of the devices are subjective to the person or firm testing the product. Here are three areas that stand to benefit the most from a unified system.

Touch responsiveness

Touch responsiveness is defined by the time it takes for a user to see a reaction after an input. While there are no severe risks to human health, a smartphone’s responsiveness plays a huge role in the overall usability of the device. This concept is known as “touch latency.” If it’s shoddy, the UX is downgraded and can be extremely inconvenient, while rendering many of the core functions useless.

Source

There are three potential bottlenecks that determine the degree of touch latency.

  1. Tap latency: The time it takes between when the user presses or lifts their finger on the touch panel to when something happens on the display.
  2. Initial move latency: The time from when the first touch interaction occurs until something happens on the display as a result. Entering in a phone’s passcode would be an example.
  3. Move latency: The same concept as the initial move latency, only it is measured in later actions during swipe movements.

Issues with these metrics can be much more than skin deep. There are many contributing factors that determine touch responsiveness. It can be the application being used, software update, device configuration, and more. All the steps in the touch latency contribute to the overall latency of the device’s system, all of which make up the UX. If the responsiveness isn’t impeccable, buyers have no problem switching devices and not looking back.

For the good of the consumers and smartphone manufacturers, a universal set of standards for touch latency would drastically improve usability, and ultimately, customer retention.

Asset Science recently released a robot that runs top-to-bottom diagnostics on mobile devices. These tests can be executed in a factory setting, regional repair shop, or in-hand. Touchscreen responsiveness for both Android and iOS devices is one of the major factors this robot tests. It collects a wide range of data to analyze overall device health. The end goal is to provide quick solutions that reduce overall risk when reselling or insuring a device.

This robot will be available to networks of local shops and cellphone carrier service-provider branches. As a result, users will be able to get granular information regarding their smartphone’s hardware before sending it back to be replaced.

Battery durability

The more mobile technology advances, the more battery issues arise. Improper usage can lead to a number of hazards such as deformation, overheating, or in extreme cases, exploding.

On a more common level, using a smartphone day in and day out for a number of years can significantly deplete the charge storing capability. Many have been in the situation where their phone consistently runs out of juice halfway through the day.

Given the events of the doomed Samsung Note 7, the need for an agreed-upon procedure to test battery health is essential. Ideally, there should to be a universally understood criteria that defines a safe, usable battery.

On the surface level, the unit should have to pass an approved diagnostic that exhibits that the battery is free of oil stains, scuffs, cracks, concave/convex areas, and has flawless input/output points.

Source

Getting into the functionality, the measurements need to meet determined standards in relation to battery resistance, charging ability, voltage, and lifecycle.

Rewa, an electronics aftermarket solution provider, has a reliable system in place for testing cell phone battery health. They analyze everything in relation to the appearance, charging capability, how the energy is exerted to the functionality, and of course, the drop test.

The battery to a smartphone is the equivalent of a heart to a human. Any small defect can be dangerous, and in some cases, detrimental. Therefore, to avoid any mishaps, there needs to be a universally agreed-upon definition with which a smartphone battery must comply before it gets into the hands of consumers.

Screen brightness

It’s a common fact that we spend a great deal of time staring at our smartphone screens. Unfortunately, the long-lasting effects of this phenomenon are not yet completely known.

The brightness of your phone’s screen can be incredibly dangerous, especially if you stare at it before bed. Over time, the effects can decrease the sharpness of your vision and can even lead to blindness! This is known as “digital eye strain.” A study conducted by The Vision Council found that over 60% of respondents claimed they experienced symptoms of digital eyestrain.

Source

Smartphones emit HEV light (blue light). This part of the visible light spectrum composes light with the shortest wavelengths. These have the greatest potential to cause damage to living tissue.

Smart devices, in general, are very much in their infancy stages, making the current generations of users the guinea pigs for how screen brightness impacts overall health.

F.lux is a smart tool that automatically changes the amount of blue light your smartphone screen emits based on the time of day. In the morning, the light is bright and crisp, while in the evening, it gives off a reddish-gold light designed to make you feel sleepy as you scroll through your newsfeed.

Users need to understand how to avoid the harmful, long-term effects of smartphone lighting. In 50 years, we don’t want to look back knowing the devices we loved so much cost us our vision.

Parting words

When anything goes wrong with a smartphone, people are quick to jump to conclusions. Given the widespread usage, there needs to be a bulletproof system in place to periodically test mobile devices and assess hardware health.

For the good of human health and sanity, a universally accepted set of standards can be a game-changer in revolutionizing the mobile phone industry for the better.

For more on mobile trends, see Building A Mobile Culture In A Mobile-First World.

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Tracy Vides

About Tracy Vides

Tracy is a content marketer and social media consultant who works with small businesses and startups to increase their visibility. Although new to the digital marketing scene, Tracy has started off well by building a good reputation for herself, with posts featured on Steamfeed, Business 2 Community and elsewhere. Hit her up @TracyVides on Twitter.

How Digital Transformation Is Rewriting Business Models

Ginger Shimp

Everybody knows someone who has a stack of 3½-inch floppies in a desk drawer “just in case we may need them someday.” While that might be amusing, the truth is that relatively few people are confident that they’re making satisfactory progress on their digital journey. The boundaries between the digital and physical worlds continue to blur — with profound implications for the way we do business. Virtually every industry and every enterprise feels the effects of this ongoing digital transformation, whether from its own initiative or due to pressure from competitors.

What is digital transformation? It’s the wholesale reimagining and reinvention of how businesses operate, enabled by today’s advanced technology. Businesses have always changed with the times, but the confluence of technologies such as mobile, cloud, social, and Big Data analytics has accelerated the pace at which today’s businesses are evolving — and the degree to which they transform the way they innovate, operate, and serve customers.

The process of digital transformation began decades ago. Think back to how word processing fundamentally changed the way we write, or how email transformed the way we communicate. However, the scale of transformation currently underway is drastically more significant, with dramatically higher stakes. For some businesses, digital transformation is a disruptive force that leaves them playing catch-up. For others, it opens to door to unparalleled opportunities.

Upending traditional business models

To understand how the businesses that embrace digital transformation can ultimately benefit, it helps to look at the changes in business models currently in process.

Some of the more prominent examples include:

  • A focus on outcome-based models — Open the door to business value to customers as determined by the outcome or impact on the customer’s business.
  • Expansion into new industries and markets — Extend the business’ reach virtually anywhere — beyond strictly defined customer demographics, physical locations, and traditional market segments.
  • Pervasive digitization of products and services — Accelerate the way products and services are conceived, designed, and delivered with no barriers between customers and the businesses that serve them.
  • Ecosystem competition — Create a more compelling value proposition in new markets through connections with other companies to enhance the value available to the customer.
  • Access a shared economy — Realize more value from underutilized sources by extending access to other business entities and customers — with the ability to access the resources of others.
  • Realize value from digital platforms — Monetize the inherent, previously untapped value of customer relationships to improve customer experiences, collaborate more effectively with partners, and drive ongoing innovation in products and services,

In other words, the time-tested assumptions about how to identify customers, develop and market products and services, and manage organizations may no longer apply. Every aspect of business operations — from forecasting demand to sourcing materials to recruiting and training staff to balancing the books — is subject to this wave of reinvention.

The question is not if, but when

These new models aren’t predictions of what could happen. They’re already realities for innovative, fast-moving companies across the globe. In this environment, playing the role of late adopter can put a business at a serious disadvantage. Ready or not, digital transformation is coming — and it’s coming fast.

Is your company ready for this sea of change in business models? At SAP, we’ve helped thousands of organizations embrace digital transformation — and turn the threat of disruption into new opportunities for innovation and growth. We’d relish the opportunity to do the same for you. Our Digital Readiness Assessment can help you see where you are in the journey and map out the next steps you’ll need to take.

Up next I’ll discuss the impact of digital transformation on processes and work. Until then, you can read more on how digital transformation is impacting your industry.

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Ginger Shimp

About Ginger Shimp

With more than 20 years’ experience in marketing, Ginger Shimp has been with SAP since 2004. She has won numerous awards and honors at SAP, including being designated “Top Talent” for two consecutive years. Not only is she a Professional Certified Marketer with the American Marketing Association, but she’s also earned her Connoisseur’s Certificate in California Reds from the Chicago Wine School. She holds a bachelor’s degree in journalism from the University of San Francisco, and an MBA in marketing and managerial economics from the Kellogg Graduate School of Management at Northwestern University.

Personally, Ginger is the proud mother of a precocious son and happy wife of one of YouTube’s 10 EDU Gurus, Ed Shimp.

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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IDC 2018 Predictions: If You’re Not In The Cloud, You’re Isolated From Innovation

Susan Galer

IDC Research just released its top ten 2018 predictions, outlining why every company must operate like a digital-native enterprise. Frank Gens, IDC senior vice president and chief analyst, shared an expansive to-do list for CEOs, line-of-business and IT organizations during a webinar entitled, “IDC FutureScape: Worldwide IT Industry 2018 Predictions.”  His central message was that business is rapidly entering the Cloud 2.0 phase where public cloud is the best and increasingly only platform that every company’s ecosystem will use to hyper-connect industries for accelerated digital transformation journeys with technologies like AI, machine learning, IoT, augmented reality (AR), virtual reality (VR), and blockchain.

“Companies must re-architect operations around large-scale digital innovation networks, in effect becoming a new corporate species. We’re going to see a massive jump in the number of digital services and the pace of innovation. This is the ticking clock running inside the heads of CEOs in every industry, driving them quickly along digital transformation journeys,” said Gens. “Cloud everywhere for everything is what we’re likely to see over the next several years. Companies need to assess their cloud supplier’s ability to support an expanding range of use cases. If you’re not in the cloud, you’re isolated from innovation.”

These are IDC’s top ten 2018 IT predictions:

  1. By 2021, at least 50 percent of global GDP will be digitized, with growth driven by digitally-enhanced offerings, operations and relationships. By 2020, investors will use platform/ecosystem, data value, and customer engagement metrics as valuation factors for all enterprises.
  1. By 2020, 60 percent of all enterprises will have fully articulated an organization-wide digital transformation strategy, and will be in the process of implementing that strategy as the new IT core for competing in the digital economy.
  1. By 2021, spend on cloud services and cloud enabling hardware, software and services doubles to over $530 billion, leveraging the diversifying cloud environment that is 20 percent at the edge, over 15 percent specialized compute, and over 90 percent multi-cloud.
  1. By 2019, 40 percent of digital transformation initiatives will use AI services; by 2021, 75 percent of commercial enterprise apps will use AI, over 90 percent consumers interact with customer support bots, and over 50 percent of new industrial robots will leverage AI.
  1. By 2021, enterprise apps will shift toward hyper-agile architectures, with 80 percent of application development on cloud platforms using microservices and functions, and over 95 percent of new microservices deployed in containers.
  1. By 2020, human-digital (HD) interfaces will diversify, as 25 percent of field-service techs and over 25 percent of info-workers use AR, nearly 50 percent of new mobile apps use voice as a primary interface, and 50 percent of consumer-facing Global 2000 companies use biometric sensors to personalize experiences.
  1. By 2021, at least 25 percent of Global 2000 companies will use blockchain services as a foundation for digital trust at scale; by 2020, 25 percent of top global transaction banks, nearly 30 percent manufacturers and retailers, and 20 percent of healthcare organizations will use blockchain networks in production.
  1. By 2020, 90 percent of large enterprises will generate revenue from data-as-a-service, selling raw data, derived metrics, insights, and recommendations — up from nearly 50 percent in 2017.
  1. Improvements in simple (“low-/no-code”) development tools will dramatically expand the number of non-tech developers over the next 36 months; by 2021, these non-traditional tech developers will build 20 percent of business applications and 30 percent new application features (60 percent by 2027).
  1. By 2021, more than half of Global 2000 companies will see an average one-third of their digital services interactions come through their open API ecosystems, up from virtually zero percent in 2017, amplifying their digital reach far beyond own customer interactions.

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This article originally appeared on Forbes SAPVoice.

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