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TRANSCRIPT
Nicholas Davis
Head of Society and Innovation, World Economic Forum
The Fourth Industrial Revolution
Augmented Reality
12+key technologies
recombinant innovation
Neurotechnologies, Biotechnologies, Distributed Ledger Technologies, IoT, Advanced Computing, Cybersecurity, Geoengineering, Space, Breakthrough Energy Technologies, Advanced Materials…
Artificial Intelligence
Robotics
3D Printing
Autonomy
4IR
First Industrial
Revolution
Second Industrial
Revolution
ThirdIndustrial
Revolution
Fourth Industrial
Revolution
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4IR Dynamics
Crossing traditional boundaries Compressing timescales Becoming more accessible Demanding different skills Creating new inequalities
The opportunity and challenge of transformation
The rise of technological risks
Source: World Economic Forum Global Risks Report 2019
…which are driving geopoliticaland social risks
0
1
2
3
4
$5T
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
YoY Market Cap Growth Among Top 25 Largest Public Firms
Other
Digital Companies
Seven digital companies are responsible for ~80% of value
creation in last 10 years.
Note: Data set includes Top 25 companies in the world by market capitalization; Each year was categorized by digital and non-digital; Net value creation measured for each year§Source: Capital IQ Database; Bain Analysis
In the transition to the Fourth Industrial Revolution, firms building on digital foundations appear to be winning
Leaders are asking challenging questions along the way….
“What will interaction with citizens, employees and customers look like in the future?”
“How can we anticipate the next dominant organizational model of our sector?”
WHAT WILL MY SECTOR LOOK LIKE?
“Should we forget our history? How much attention should we give to historical capabilities vs.
groundbreaking innovations?”
“How do I think about my sector’s digital direction when it is part of a broader ecosystem… how will
boundaries change?”
HOW MUCH SHOULD I DISRUPT MYSELF?
“How do leaders simultaneously make sure there is clarity of execution, while also building in agile
processes which give more decision making to teams on the ground? Are traditional methods of
governance fit for purpose?”
“Digital natives tend to run future-oriented business models at a loss and worry about
profitability later… how do I compete?”
“Overformal product development roadmaps deliver scale but lack speed & flexibility.
A more agile approach delivers speed but lacks scale. How do you balance this?”
HOW DO I BALANCE CLEAR DIRECTION WITH AGILE INNOVATION?
Source: Digital Enterprise, World Economic Forum in collaboration with Bain & Company, 2018
Chess: 1997 (Deep Blue v Garry Kasparov)
Go: 2016(AlphaGo v Lee Sedol)
2018(OpenAI Five v non-pro players)
Starcraft II: 2019(AlphaZero v top-ranked players)
To win at a new game, you need to become a new player
Some organizations are adept at change: Netflix has repeatedly transformed the underlying economics of its business
Content acquisitionspend
100%
0%
100%
0%
Revenues
Onlinesubscription
(1999)
Payper rental
(1998)
Streaming + original content
(2017)
Streamingplatform(2013)
DVDrentals(& sales)
DVDpurchases
Streamingsubscriptions
Originalcontent
Contentlicenses
DVDsubscriptions
Source: Digital Enterprise, World Economic Forum in collaboration with Bain & Company, 2018
…but most transformation efforts fail to deliver
12%
50%
38%
Achieved or exceeded the expectations that were set
Settled for dilution of value and mediocre performance
Failed to deliver, producing less than 50% of the expected results
In a study of hundreds of companies executing major changes… Based on Digital Barometer 2017 (n=1,012)*…
5%
71%
19%
Achieved or exceeded the expectations that were set
Settled for dilution of value and mediocre performance
Failed to deliver, producing less than 50% of the expected results
TRADITIONAL TRANSFORMATION DIGITAL TRANSFORMATION
Source: Bain Digital 360 Barometer survey 2017, cited in Digital Enterprise, World Economic Forum in collaboration with Bain & Company, 2018
The challenge: Moving from strategy to operational excellence
Digital Strategy
Digital departure
Enablers
Business Model
Systems and technology
Operating model
Talent and culture
Data and analytics
Orchestration
Leadership and engagement
Regulatory andcommunity engagement
Scaling
Governance, metricsand risk management
Funding and investor management
Products & services
Economic model
Operations
Customer and channel engagement
Industry direction
Organizational vision
Stepping stones
Source: Digital Enterprise, World Economic Forum in collaboration with Bain & Company, 2018
The need for innovation-focused partnerships
No matter who you are, most of the smartest people work for someone else.”
– Bill Joy, Co-founder Sun Microsystems
In any given sphere of activity most of the pertinent knowledge will reside outside of the boundaries of any one organization. The central challenge is to find ways to access that knowledge.”
– Karim Lakhani and Jill Panetta, Harvard Business School and Innocentive
Other sectors dominate R&D spending related to emerging tech
Source: Collaborative Innovation, World Economic Forum in collaboration with AT Kearney, 2015
Jan 2016
Mar 2016
Apr 2017
Investment in Lyft to develop “autonomous,
on-demand network of cars”
Acquired Cruise to lead self-
driving division
Announced new hiring program for
autonomous division
Announced investment in two
autonomous facilities in Michigan
$500M ~$800B 1,110 Employees
$100M
Oct 2017
Acquired Strobe to enhance car communication
technology
N/A
20%of 2016 income
25% of 2017 CAPEX
or
GM had to fund a range of ‘big-bet’ investments in smaller firms to accelerate its AV strategy
$2B+big-bet
investments
Mar 2018
May 2018
$1.1bn
GM co-invests alongside a $2.25bn
from Softbank Vision Fund, which takes a 20% stake in Cruise
Source: Collaborative Innovation, World Economic Forum in collaboration with AT Kearney, 2015
- Collaborative contracting
Misconstrued
MisalignedMismanaged
Misfed
Missed
Lost potential
More likely to occur with traditional partners
Learning from common partnering failures
Wasted resources
More likely to occur with new, non-traditional partners
The importance of talent and culture
Culture eats strategy for breakfast.”
– Peter Drucker, author and consultant
A company’s culture is the foundation for future innovation. An entrepreneur's job is to build the foundation.”
– Brian Chesky, Co-Founder and CEO of Airbnb
by 2022, the core skills required to perform most roles will
change by
42%
Challenge: An increase in skills instability
in demand
Challenge: The rise of employee activism
People are talking to governments on 21st century technology, the government hears them on 20th century technology, and responds with 19th century ideas”
– Madeleine Albright , Former United States Secretary of State
Opportunity: Engaging people effectively in a digital world
Opportunity: Focusing on orchestrating success, creating partnerships and building culture, not refining strategyDigital Strategy
Digital departure
Enablers
Business Model
Systems and technology
Operating model and partnerships
Talent and culture
Data and analytics
Orchestration
Leadership and engagement
Regulatory andcommunity engagement
Scaling
Governance, metricsand risk management
Funding and investor management
Products & services
Economic model
Operations
Customer and channel engagement
Industry direction
Company vision
Stepping stones
Source: Digital Enterprise, World Economic Forum in collaboration with Bain & Company, 2018
systems, not technologiesempowering, not determining
by design, not defaultvalues as a feature, not a bug
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Opportunity: Building a human-centered future
Committed to Improvingthe State of the World