When Developing Your Internet Of Things Strategy, Prioritize Privacy And Security

Tom Raftery

Former Cisco CEO John Chambers famously predicted that there would be 50 billion connected devices by 2020. Thanks to the Internet of Things (IoT), his forecast may soon become reality.

Things such as appliances, cars, medical devices, street lights, wearable technologies, industrial machinery, military equipment, and logistics systems are beginning to share huge volumes of information. Organizations that collect, store, and analyze this data can increase efficiency, cut costs, and make smarter decisions.

Despite this rapid growth, however, IoT technologies are still in their infancy. Consumer devices have drawn the most attention so far, but it’s likely that IoT will have more widespread applicability in business applications.

That’s why executives who want to gain value from IoT technologies need to make hard decisions about this dynamic, maturing technology. Among the most important concerns are privacy and security. To stay compliant with regulatory mandates and to create trusted relationships with customers, companies must protect and secure data.

Protecting data assets – and your reputation

Thinking about what’s possible with IoT is not enough. You must also consider what’s responsible in your data practices.

For example, who owns the data you collect? Is it the consumer, the device owner, or the device manufacturer? In the United States, Internet service providers are now permitted to sell any and all of their consumers’ information without consumer consent. Is it a breach of consumer privacy if the ISP’s customers buy data that tracks individuals’ entertainment preferences? E-mail communications? Online bill payments?

What about data created by an asset that has multiple owners over its lifetime? If a customer rents or leases an air compressor, the company owns the asset and the data it produces. But if the company later sells the compressor, who does the data belong to – the old owner or the new one? Should the data be stored by a trusted third-party to prevent breaches?

Many cars can track driver behaviour. Some consumers elect to share that data with their insurance carriers. But should the car’s technology alert the police or the insurer after every minor accident? Should law enforcement officials be able to access that vehicle data, or does it belong to the driver?

Developing trust

As you develop your IoT policies and strategies, look for ways to increase consistency across all touch points while correlating your interactions with customers’ changing wants and needs.

For consumers who opt in, you can use the IoT to enable a constant feedback loop that can boost product innovation, enhance service interactions, and engender new customer loyalty. For example, imagine a family whose vacation is interrupted by a rainy day. The beach resort that recognizes this need could save the day – and develop a loyal customer – by sending the parents coupons to enjoy a local movie theatre, museum, or bowling alley.

Balancing privacy and security and the insights enabled by data can be tricky in the age of the IoT. But organisations that adopt sophisticated data and analysis strategies for using IoT data – while still protecting customer privacy and security – stand to gain a practically unbeatable competitive advantage.

To learn what leading executives think about the privacy and security concerns in the IoT, read our e-book.

Follow me on Twitter @TomRaftery.

This article originally appeared on Forbes SAPVoice.

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Tom Raftery

About Tom Raftery

Tom Raftery is Vice President and Global Evangelist for the Internet of Things at SAP. Previously, Tom worked as an independent analyst focusing on the Internet of Things, energy, and clean technology. Tom has a very strong background in social media, is the former co-founder of a software firm, and is co-founder and director of hyper energy-efficient data center Cork Internet eXchange. More recently, Tom worked as an industry analyst for RedMonk, leading the GreenMonk practice for seven years.

The Promise And The Peril Of Blockchain

Andre Smith

This past year has seen the integration of blockchain technologies into businesses around the globe. Serious technology professionals regard the technology as a great leap forward for distributed computing, transparency, and security. The blockchain may well be the panacea that they envision it to be, but that doesn’t mean that it is without its share of risk.

The overwhelming hype about blockchain-based services (aided by the explosive rise in the value of Bitcoin and other cryptocurrencies) has created an investing frenzy that calls to mind the dotcom bubble of the late 1990’s or the more recent derivative-fueled financial crisis of 2008. The problem is that the level of excitement far exceeds the tech sector’s ability to bring meaningful and innovative blockchain products to market. This reality has resulted in a speculative vacuum.

Hype breeds fraud

As is usually the case, the first people to notice the overwhelming potential of blockchain technology as a moneymaker were those who would use it for nefarious purposes. As investors clamored to pour money into any ICO they could find, crypto pioneers and financial moguls sounded alarms that were mostly ignored. There have already been some notable red flags.

In November, the team behind a startup called Confido disappeared, taking $375,000 of investor funds with them. The company had claimed to be creating a blockchain-based escrow platform. Investors, in their rush to get involved, were duped by their false promises. In December, the U.S. SEC intervened in the ICO of a company known as PlexCoin, putting a stop to what they identified as a plot by long-time fraudsters to cash in on the ICO craze.

Secure reputation, insecure products

Defrauding investors isn’t the only trend associated with blockchain technologies that should be cause for concern. There is also the potential for the technology to be misused by criminal enterprises to hide illicit transactions, and by startups relying on the public perception of the blockchain as inherently secure as a means of selling products that are anything but. Both have already become a problem.

There are a number of ways that cryptocurrencies, underpinned by the blockchain, may be used as a conduit for illegal activity. There are already real-world examples of the technology being utilized to funnel money to terrorist organizations. Then there are companies like Privatix. Once a consumer VPN service, similar to wink-and-nod offerings like the VPN Hidemyass, Privatix suddenly rebranded itself as a blockchain VPN bandwidth marketplace. In practice, this has the same inherent risks as the Tor network, and they seem to be conflating “blockchain” with “secure” in an effort to mislead consumers.

Guilt by association

What’s at stake in these early days of the blockchain story may be the fate of the technology itself. As large financial institutions and consulting firms seek to position the blockchain in the public consciousness as the ultimate trust platform, there are no shortage of damaging incidents and examples working to undermine them. It also isn’t reasonable to expect that the public at large will draw a distinction between public and private blockchains, nor that they will even comprehend the difference.

It’s far too early to know if big business will be able to co-opt the blockchain and disassociate it from an external market that has been likened to the Wild West. The only thing that is certain is that they have great incentives to do so, since the blockchain could, at least internally, be as transformative as advertised. For now, all we can do is to stay tuned to see what comes next.

To learn more about the blockchain as a trusted platform see Blockchain: Pharma’s Answer to Restoring Trust in Healthcare.

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Andre Smith

About Andre Smith

An Internet, Marketing and E-Commerce specialist with several years of experience in the industry. He has watched as the world of online business has grown and adapted to new technologies, and he has made it his mission to help keep businesses informed and up to date.

These Aren’t The Data Files You’re Looking For

Branwell Moffat

Rebels hacked the Death Star: Is your organization next?

A long time ago in a galaxy far, far away, the Empire made one critical and fatal mistake that would lead to their eventual downfall. They never believed that the rebels would be able to breach their defenses at Scarif and steal the plans for their most prized weapon: The Death Star.

Plans were placed in a vault, in a tall tower, surrounded by thousands of heavily armed troops and Imperial Walkers, on a planet completely surrounded by an impenetrable force field, defended by hundreds of spaceships.

Yet it only took a group of highly motivated and determined individuals to get through their defenses, and the consequences were dire.

Where was the Empire’s incident plan? Why weren’t the Death Star plans encrypted? Why didn’t they user two-factor authentication?

Every day brings news of another data breach. Some are huge data breaches like eBay, Equifax, or Yahoo, while others are much smaller. However, they all have one thing in common: Once in, hackers were able to get a lot of data.

Often, hacks are limited to users’ personal data, but sometimes customers’ credit card details are also stolen. Many companies that suffer a breach already have security measures in place: They patch servers, firewalls, wide-area file services, and intrusion detection systems. Many have an information security policy and carry out penetration tests, but the hackers get through anyway.

Plan for the breach

No matter how high you build your walls, someone with enough skill, determination, and resources can get in. Nation states are now engaging in corporate espionage, and if North Korea really wants your data files, you are going to find it very difficult to keep them out.

Humans are often the biggest attack vector in any system, and highly sophisticated security systems can be breached through clever social engineering. In an effort to keep their data safe, organizations are spending more and more to build taller walls with increasingly sophisticated technology, but, time and again, these are breached and data is exposed – sometimes through very sophisticated attacks, and sometimes through human error.

While it is extremely important to focus on strong information security, what the Empire forgot to study was how to mitigate the damage if and when rebels managed to breach their security. They didn’t plan for a breach because they never thought it would happen. This is the same mistake that many organizations on this planet are making, too.

Create an incident plan

Every organization should have a data-breach incident plan. When the proverbial item hits the fan, the last thing needed is employees running around like headless chickens, desperately trying to manage the situation, and making things up as they go along.

The moments after a breach is discovered are extremely stressful for all involved, but they are also the most crucial. Without a plan, matters can be made much, much worse.

Forensic evidence can be destroyed, further data exposed, and misinformation can be disseminated. During this time, everyone should know what they need to do so that the crisis can be managed.

Audit your data

One of the great features of the forthcoming GDPR regulations is that European organizations are being forced to audit their data. Many organizations don’t know what data they hold, how much of it they have, and where it is located.

Organizations that have grown organically over time are likely to have many legacy systems with different data residing in each. Companies should consider what personal data they actually need and ensure that the rest is removed, or at least fully encrypted. Is it really necessary to keep the personal details of someone who bought from you five years ago?

Separation of systems to avoid cross-contamination

A chain is only as strong as its weakest link. Many secure systems have been breached because of a weak entry point. It is important to ensure that systems are separated. That way if one is breached, the breach is contained to that system rather than across all systems, thus limiting your exposure.

Implemented correctly, an e-commerce site built on a highly secure platform is going to be very difficult to breach. You may also have a WordPress blog sitting within the same environment. WordPress is by far the most-hacked web platform in the world. Data released by Securi showed that 74% of a sample of hacked websites in 2016 ran WordPress.

While some of that blame is on WordPress users not keeping their software up to date, this number should concern you if you run a WordPress site. You concern should be magnified if you run a WordPress site hosted on the same environment as your e-commerce store.

If your WordPress platform is breached, it could be used as an entry point into your e-commerce website, where the most valuable data resides. The WordPress site should be hosted on an entirely different and separated hosting environment than your e-commerce platform to ensure that there is no cross-contamination.

Data encryption

Data encryption is more complex than it may immediately appear. In theory, it makes complete sense to encrypt all personal data held within your e-commerce platform’s database. If the data is breached without the key, it is meaningless.

The biggest problem is that your application generally needs to be able to decrypt data on the fly, meaning that somewhere within your code is the key. Therefore, if someone gets hold of your application and the data, they may be able to decrypt the data using that key.

Another encryption challenge is performance. If your application needs to decrypt data in real time, this can significantly increase performance overheads, and often it is just not practical. Encryption is a great way to protect your data, but it comes with its own set of challenges.

Deception-based security

Deception-based security presents hackers with fake vulnerabilities, or even fake data that can obscure the real thing.

Hackers generally look for the most basic vulnerabilities, like known exploits, before deploying more advanced techniques. Once they find a vulnerability, they are likely to focus on that. If they are then given access to data that appears sensitive and real but is, in fact, fake, you have a chance of throwing them off the scent.

You can also more easily monitor that activity, which increases your odds of identifying, then blocking, the attacker. By deploying decoy systems and data, you can give the attacker the illusion of successfully breaching your network.

Best cybersecurity practices for the future

Organizations should not solely focus on keeping hackers out, as this alone will not protect their data from everyone. A determined, experienced, and well-resourced team could probably hack almost any e-commerce platform if they tried hard enough.

Building a bigger wall will only deter them for so long. A greater focus on mitigating breaches rather than just trying to prevent them is needed to ensure that all of your data is as protected as it can be.

If the Empire had tasked someone with auditing their data and creating a robust and tested incident plan, things could have turned out very differently.

Do or not do. There is no try!

The first step in breach remediation is knowing you’ve been hacked. See The Future of Cybersecurity: Trust as Competitive Advantage.

This article originally appeared on Future of Customer Engagement and Commerce.

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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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Human Is The Next Big Thing

Traci Maddox

One of my favorite movies of 2016 was Hidden Figures. The main character, Katherine Johnson, and her team of colleagues had an interesting job title: Computer. Here’s what Katherine said about her job: “On any given day, I analyze the binomial levels of air displacement, friction, and velocity. And compute over 10 thousand calculations by cosine, square root, and lately analytic geometry. By hand.”

That was the 1960s. It was amazing work, but work that took hours to complete – and something an in-memory computer could do in a fraction of a second today.

Just as in-memory computing transformed calculating by hand (and made jobs like Katherine’s much easier), digital technologies are transforming the way we work today – and making our day-to-day activities more efficient.

What’s the real impact of technology in today’s workplace?

We are surrounded by technology, both at home and at work. Machine learning and robotics are making their way into everyday life and are affecting the way we expect to engage with technology at work. That has a big impact on organizations: If a machine can do a job safely and more efficiently, a company, nonprofit, or government – and its employees – will benefit. Digital technologies are becoming increasingly more feasible, affordable, and desirable. The challenge for organizations now is effectively merging human talent and digital business to harness new capabilities.

How will jobs change?

What does this mean for humans in the workplace? In a previous blog, Kerry Brown showed that as enterprises continue to learn, human/machine collaboration increases. People will direct technology and hand over work that can be done more efficiently by machine. Does that mean people will go away? No – but they will need to leverage different skills than they have today.

Although we don’t know exactly how jobs will change, one thing is for sure: Becoming more digitally proficient will help every employee stay relevant (and prepare them to move forward in their careers). Today’s workforce demographic complicates how people embrace technology – with up to five generations in the workforce, there is a wide variety in digital fluency (i.e., the ability to understand which technology is available and what tools will best achieve desired outcomes).

What is digital fluency and how can organizations embrace it?

Digital fluency is the combination of several capabilities related to technology:

  • Foundation skills: The ability to use technology tools that enhance your productivity and effectiveness
  • Information skills: The ability to research and develop your own perspective on topics using technology
  • Collaboration skills: The ability to share knowledge and collaborate with others using technology
  • Transformation skills: The ability to assess your own skills and take action toward building your digital fluency

No matter how proficient you are today, you can continue to build your digital IQ by building new habits and skills. This is something that both the organization and employee will have to own to be successful.

So, what skills are needed?

In a Technical University of Munich study released in July 2017, 64% of respondents said they do not have the skills necessary for digital transformation.

Today's workplace reality

These skills will be applied not only to the jobs of today, but also to the top jobs of the future, which haven’t been imagined yet! A recent article in Fast Company mentions a few, which include Digital Death Manager, Corporate Disorganizer, and 3D Printing Handyman.

And today’s skills will be used differently in 2025, as reported by another Fast Company article:

  • Tech skills, especially analytical skills, will increase in importance. Demand for software developers, market analysts, and computer analysts will increase significantly between now and 2025.
  • Retail and sales skills, or any job related to soft skills that are hard for computers to learn, will continue to grow. Customer service representatives, marketing specialists, and sales reps must continue to collaborate and understand how to use social media effectively to communicate worldwide.
  • Lifelong learning will be necessary to keep up with the changes in technology and adapt to our fast-moving lives. Teachers and trainers will continue to be hot jobs in the future, but the style of teaching will change to adapt to a “sound bite” world.
  • Contract workers who understand how businesses and projects work will thrive in the “gig economy.” Management analysts and auditors will continue to be in high demand.

What’s next?

How do companies address a shortage of digital skills and build digital fluency? Here are some steps you can take to increase your digital fluency – and that of your organization:

  • Assess where you are today. Either personally or organizationally, knowing what skills you have is the first step toward identifying where you need to go.
  • Identify one of each of the skill sets to focus on. What foundational skills do you or your organization need? How can you promote collaboration? What thought leadership can your team share – and how can they connect with the right information to stay relevant?
  • Start practicing! Choose just one thing – and use that technology every day for a month. Use it within your organization so others can practice too.

And up next for this blog series – a look at the workplace of the future!

The computer made its debut in Hidden Figures. Did it replace jobs? Yes, for some of the computer team. But members of that team did not leave quietly and continue manual calculations elsewhere. They learned how to use that new mainframe computer and became programmers. I believe humans will always be the next big thing.

If we want to retain humanity’s value in an increasingly automated world, we need to start recognizing and nurturing Human Skills for the Digital Future.

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Traci Maddox

About Traci Maddox

Traci Maddox is the Director of the North America Customer Transformation Office at SAP, where she is elevating customer success through innovation and digital transformation. Traci is also part of the Digital Workforce Taskforce, a team of SAP leaders whose mission is to help companies succeed by understanding and addressing workforce implications of digital technology.