Future of work and the growth of populist politics

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The future of work has been an emerging issue for a long time, and now as automation disrupts traditional employment, it is safe to say that it has emerged. It is becoming increasingly urgent to find a solution for those displaced. We need new ideas and approaches to this problem. Otherwise we will see a large number of people out of the workforce for long periods, with a concomitant growth in populist politics and the destruction of the social compact.

A good example of the issue is a recent article on NPR that shows the most common job in every US state in 2014. With the prevalence of the job of ‘truck driver’ across the country there is going to be some real pain felt when autonomous trucks hit the road in the near future. Already the so-called rust belt in the US is suffering from underemployment, and it’s about to get much worse. It’s pretty clear that all these truck drivers are unlikely to become coders, so what shall we do?

Most common job in each US State

We are seeing the fight by employers to reduce wages bills means that they are adopting automation wherever it is feasible, for example: Thanks To ‘Fight For $15’ Minimum Wage, McDonald’s Unveils Job-Replacing Self-Service Kiosks Nationwide.

More entrepreneurial, approaches are appearing, but they are on a small scale. Ideas like Phil Morle’s #nextmonday initiative, where he hosted a two day workshop where former Ford employees learned how to go about turning an idea into a new business. And initiatives like code clubs for kids seek to add new digital skills to student’s portfolios.

The gig economy is growing as old-fashioned jobs with benefits are killed off by cost saving initiatives. Even in New South Wales we  see local government jobs are being taken by cheaper foreign workers.

This growth in job uncertainty will see changes in society that we remain unprepared for. It changes the nature of the social compact with which we are all familiar. In the recent past one obtained a permanent job, borrowed money to buy a house, educated your kids and life was good. Now in the more precarious gig economy, loans for housing or cars will be difficult to come by, and home prices in east coast Australia remain stubbornly high. At the same time, conservative governments are focused on austerity and are seeking to cut costs on welfare payments and to make welfare more difficult to obtain. In Australia, under the conservative government, this seems to be following the trajectory of the UK Conservative policy, and it will likely have the similar consequences as the rules get increasingly tight.

This lack of permanency in the job market will likely drive a growth in populist politics, empowering people to vote against the major parties in Australia. This phenomenon will be similar to what happened in the UK with Brexit and US with Trump, and it means that we face continued growth in minor parties in the Senate and possibly even in the House.

It is fast approaching the time for nations to consider new policy options, such as the idea of a universal basic income. But I do not think that conservative governments will support such a notion. And therefore we are in for interesting times as the old social compact disintegrates and the world of work changes forever.

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Digital citizens and the future of government

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Hosted a panel at the UNSW Michael Crouch Innovation Centre last week with Selena Griffith on Digital Citizens and the Future of Government with Dominic Campbell, Penny Webb-Smart, and Amelia Loye.

You can view the video here

Panel members

Dominic Campbell is a digital government entrepreneur with a background in government policy and technology-led change. He is an experienced in organisation design and has senior management experience in implementing successful change initiatives within public services. Having spent six years in government in the UK, Dominic established FutureGov in 2008. A team of 40, FutureGov supports digital and design thinking in government in the UK, Australia and many places in between. Dominic has previously been voted in the top 100 most influential people in UK local government.

Penny Webb-Smart is Executive Director, Service Reform for the Department of Finance, Services and Innovation in the NSW Government. The Service Reform team was established in February 2015 to facilitate digital and service innovation on a cross-agency basis that puts customer at the heart of NSW government. The key drivers for service reform are: * Accelerating digital government * Customer centric transformation * Joined up government services Penny’s has deep experience in digital transformation, service design and development, building customer-centric cultures, and developing strategic partnerships. Prior to NSW Government, Penny spent twenty years in financial services, consulting and telecommunications in Australia and New Zealand.

Amelia Loye is a social scientist with more than a dozen years’ engaging citizens and stakeholders for Government’s in Australia, New Zealand and Canada. She has engaged across the participation spectrum, for policy, planning and project development, for legislative change, and for community education and behavioural change. Amelia now provides strategic support for organisations wanting to practice digital democracy and improve the way they engage, consider social issues, and work with others to serve the needs of community. She is also well known for her work on Australia’s first Action Plan for Open Government.

 

 

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Mobile and social media – what it means for business

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Mobile and social media have created a new business landscape

If you’re not already working out how to disrupt your business and your industry then you will be disrupted…

The web 2.0 revolution and social media changed the game for business. At a basic level brands discovered the notion of customer ‘conversations’. But for the most part this was not  strategic, rather it often consisted of random tactical efforts.

It is amusing to see that even in 2015 many brands are only just now discovering the notion of metrics and measuring their online activity:

“…many brands moving towards measuring audience impressions, clicks, and thinking cross-platform”

Tania Yuki , Shareablee CEO and Founder

Then we often hear statistics like this:

“…Instagram delivered these brands 58 times more engagement per follower than Facebook, and 120 times more engagement per follower than Twitter.”

The real question to ask about all statistics like this is “so what?” What does that engagement translate to as business outcomes?

“There is no ROI in anything if you don’t learn how to use it.”

– Gary Vaynerchuk, Founder VaynerMedia

The simple fact is that hardly anyone is driving direct revenue from social media, and many businesses are not optimized to sell via mobile. And the big question for businesses is what is the goal for their social and mobile activity?

But now all business online presence must be mobile friendly – Google and customers will punish businesses that do not embrace this. Increasingly users are accessing digital  content via mobile devices, and this means that businesses need to ensure a good quality experience.

Social media was only phase 1

Social media was phase one of the new digital revolution, next coming is the collaborative economy and internet of things ( IoT).

The present of social is mobile. The future of mobile is IoT and wearables. and these offer huge  monetization opportunities:

Cisco [former] CEO John Chambers Values Internet of Things at $19T #CES2014

People

People, both customers and staff, now have a default position that assumes access to any resources they want. And they want it online, on demand, real-time, anywhere, and on any device they choose.

This is all part of the democratisation of communication enabled by the digital revolution. It leads to an inversion of power relationships and puts the means of production for communication in the hands of the populace.

It leads to opportunities and growth in peer-to-peer and mobile. Kevin Kelly sums it up nicely as:

“…a shift towards the individual as the centre of a network of relationships mediated and enabled by technology…”

The shift is from customer channels to a customer continuum mediated by social and mobile.

This means that businesses need to connect social media activity to purchasing activity, they need to make it work on mobile and tablet. And it must be friction-less.

Changes to team and organisation structure

In a fast moving context like this command-control management is dead. This is because the operational tempo of a digital business is not days or weeks or months; it is minutes and seconds.

To support this shift in operational tempo we need employees with skills to work in a social or collaborative context. We need team members who can deal with ambiguity and a fast pace.

To support customers who do not have patience with internal silos businesses need to move towards integrated teams. This means using ideas like DevOps and agile to support cross-functional teams to meet customer needs and deliver across organisational silos. To achieve this all parts of the business will need to bring together expertise:

  • Tech
  • Marketing
  • Sales
  • Operations
  • Customer service

Workforce changes mean that new ways of working will emerge, such as co-working and collaboration. These will lead to increased decentralisation of the workforce and be accompanied by much shorter change cycles.

And these changes will all lead to issues with boundaries between public and private; between personal and business. With this blurring between roles it will be increasingly difficult to establish role clarity. And this means that team members need to be able to manage through ambiguity and across functional lines.

Risk and governance

In the fast-paced world of digital business we still need to consider how to manage risk and how to enact effective governance.  Some factors to consider in this regard include:

  • Monitor your business online
  • Assign responsibility for online channels
  • Include social & mobile in digital strategy
  • Link digital strategy to marketing strategy
  • Ensure cross media planning in place
  • Develop mechanisms to track progress
  • Create and manage loosely connected networks
  • Grow a business in a networked world
  • Engage people and garner advocates for your business
  • Focus outward while protecting your brand

Top 10 checklist for digital business

  1. Digital strategy: is just part of it, includes websites, email marketing, etc.
  2. Tactical plans: For implementation of campaigns
  3. Resource plan: Social is not free, it needs people and tools
  4. Tools: Required to enable management, tracking and monitoring
  5. Metrics: Need to be decided prior to implementation to enable effective reporting
  6. ROI: Need to track investment and results
  7. Reporting: For good governance
  8. Roles & responsibilities: Defined and clear to all parties, in particular governance + cross-functional teams
  9. Cross media plan: Integration with other digital and marketing activities
  10. Risk management: Includes social media policies and procedures and crisis management process
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Annual Global CIO Survey 2014

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The annual Harvey Nash CIO Survey launched in Sydney in early December 2014.

Think differentlyThis is a long running CIO survey with responses from more than 3,200 CIOs and technology leaders globally.

It was interesting to join the panel at this event for a lively discussion of technology and business related matters.

My fellow panelists were:

We had a wide-ranging discussion including: big data (and its friend little data); the importance of good alignment between IT and marketing for the business; and the need for a new kind of IT that is freed up from legacy systems and closely aligned to the business.

Some of the comments are documented here.

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Why privacy on the internet of things doesn’t scare me

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The debate about the internet of things often centres on privacy, but here is why privacy on the internet of things doesn’t scare me as much as digital rights management.

I tend to suspect that issues relating to privacy on the internet of things will be sorted out as a result of consumer and government expectations enshrined in privacy regulations.

A key capability that is enabled by the internet of things is that vendors can keep charging us for services related to their device. One reason why businesses are so excited by the internet of things is it allows them to move from selling a device as a one-off sale and towards ongoing fees for services associated with that device.

This phenomenon will enable internet of things companies to increase their revenue streams and to drive sales of additional services. Thus the value of an internet of things device is not so much in the hardware as in the software and services.

Take the pacemaker as an example. If you have a pacemaker installed and the vendor decides to charge a monthly service fee to keep the device going, what happens if you miss a payment? If the vendor has, very sensibly, implemented digital rights management on your pacemaker service then they will be able to turn it off if you miss a few payments.

If this sounds far fetched, it’s not, it is already here. Last December I test drove a new electric car, the Renault Zoe, at a conference in Paris. This car has implemented digital rights management.

If you do not pay the ongoing rental fee on the battery for your Renault Zoe then you will not be allowed to recharge the battery.

Also, chipmaker FTDI,whose chips are found in many consumer electronics products, recently announced that they will kill third party chips remotely via driver updates. This will likely render useless the devices that consumers have purchased in good faith which have counterfeit chips installed.

This is why digital rights management scares me more than privacy in the brave new world of the internet of things.

Welcome to the digital revolution and our networked future.

 

 

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Trade unions and the jobs free future

Image: Eight-hour day banner, Melbourne, 1856 (Wikimedia Commons / Creative Commons).
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Background to the jobs free future and trade unions

Recently I wrote about the jobs free future, where the traditional model of a job for life is dead and industries that were familiar employers during the twentieth century are significantly reducing their need for labour. The jobs free future represents a major structural change to the global economy.

Venture capitalist, Steve Schlafman noted in a recent post that we are seeing the Uberification of the US Service Economy, and the same is likely to occur in Australia. Australian industry is being hollowed out now, with new job losses announced regularly. In recent times we’ve seen the car industry in Australia close down, Qantas reduce local jobs further, BP close their Brisbane refinery, and CSIRO announce job cuts.

And, while Ross Gittins assures that all of these job losses do not mean that we’re all doomed, it does demonstrate the future trajectory of traditional work in this country. The future of low skilled and manual work is not promising, and the new jobs will likely be in services, skilled, and digital work. Callam Pickering reported, in relation to Reserve Bank Governor Glenn Stevens’ speech on Economic Conditions and Prospects, that:

“Our economy will lose some manufacturing jobs but we will gain jobs in mining and services, in health and professional services, and in industries that we do not currently understand or haven’t been invented yet.”

Source: Callam Pickering, Why she’ll be right in the long run

What is not made clear here is that the jobs of the future are not likely to be stable full time jobs. They are more likely to be portmanteau jobs, where lots of little jobs are undertaken. And life in the world of a task based worker is not an easy one, as recounted by Brad Stone in My Life as a Task Rabbit.

Nor can every worker from old industries be retrained and redeployed into the emerging industries, as Michael Bloomberg commented:

“You’re not going to teach a coal miner to code. Mark Zuckerberg says you teach them [people] to code and everything will be great. I don’t know how to break it to you . . . but no.”

Trade unions as businesses

In this context it is interesting to consider unions as a business. And, like most other businesses, unions face challenges from the jobs free future.

Trade unions have served their members (a.k.a. customers) well to date by providing collective bargaining in relation to workplace terms and conditions . During the past century or so Australian unions have lobbied to achieve key employment and workplace reforms, from which most Australians benefit today, including:

Basic WageAnnual LeaveAward wages
Penalty RatesMaternity leaveSuperannuation
Equal Pay for WomenHealth and Safety and Workers’ CompensationSick leave
Long service leaveRedundancy payMeal Breaks, rest breaks
Unfair Dismissal Protection[Source: Australian Unions]

The benefits of these reforms to workers are undeniable. However, they are predicated upon a world in which work is regular, predictable, and at least semi-permanent. The future of work is not like that; it is more likely to be disjointed, irregular, and impermanent for many workers. Further this model was predicated upon large employers of mass labour within an industry with which to bargain, and it was also reliant upon the notion that threats of labour withdrawal could force change. This is increasingly untrue, and employers have many options with which to respond to threats to withdraw labour.

The question is how unions will shift their business model to support customers who are not part of the regular routine world of work. What kind of collective model can support workers who move away from permanent or semi-permanent work within a single industry to task based and piece work across industry boundaries? And, what will this kind of shift mean for union funding models?

Further, how will unions manage in a world where the government is actively seeking to reduce union access to workplaces, remove the right to boycott, reduce or remove penalty rates and other conditions?

Core business

Historically, the funds held by unions are derived from a broad based union membership among the working population. However, the Australian unions have already experienced a substantial drop in membership over the past few decades, as noted by the Australian Bureau of Statistics (ABS) late in 2013:

“The proportion of employees who were trade union members in their main job has been steady at 18 per cent for the last three years, according to the Australian Bureau of Statistics (ABS). There were 1.8 million people in August 2012 who were trade union members in their main job.”

It is worth bearing in mind that the number of employed persons in Australia as at February 2014 was approximately 11 million. The following ABS chart from 2011 shows the problematic position of unions even before one considers the digital revolution and the jobs free future. Source(s): Employee Earnings, Benefits and Trade Union Membership, Australia

Further, the Brotherhood of St Laurence reports that youth unemployment is reaching a crisis point, with Tony Nicholson noting:

“What it means for all these young people is that they’re at risk of never being able to get a foothold in the world of work,” he said. “And in our modern economy that means that they’re really being sentenced to a lifetime of poverty.”

With a declining membership, and consequent reduction in funding, the unions were already facing an uncertain future. Now we can add to their woes the disappearance of traditional industries and jobs. This also means that unions face increased funding constraints for future business growth strategies. The real question for unions is can they survive as the jobs they seek to protect disappear in increasing numbers?

Governance and management

In addition to the decline in membership, trade unions face other challenges. For example, the recent and ongoing scandals of the Health Services Union (HSU) with Craig Thomson and Michael Williamson; and the Construction, Forestry, Mining and Energy Union (CFMEU) bribes scandal that is now widening to other building unions.

The Abbott government recently announced a  Royal Commission into trade union governance and corruption and this is likely to further destabilise public faith in the union movement and it close associate the ALP. The stories emerging to date have indicated substantial organisational, management, governance, and cultural issues within the union movement.

Some trade unionists are starting to ponder the future of their business, such as Dustin Halse in 2012: Is there a place for trade unions?

The Australian Council of Trade Unions (ACTU) has released a number of papers exploring the future of unions in Australia, for example,  Urgency & Opportunity: union membership trends and observations 2012.

The chief response seems to be an ACTU campaign called Secure Jobs, Better Future, which fails to address the structural causes of job ‘insecurity’.

“Secure Jobs. Better Future is a national campaign to improve the rights and working lives of the 40% of the Australian workforce employed in insecure work.”

Source: Secure jobs, Better Future campaign – ACTU

However, there appear to be few concrete proposals for halting the decline in union membership. Nor does their appear to be any notion of how to approach the looming structural shift due to the jobs free future.

The future

Considering unions as businesses, the issues they face include a declining customer base, declining revenue, lack of customer focus, and problematic external conditions. The lack of customer focus is especially problematic. It is always fatal for a business to lose sight of the customer. Rarely can a business recover easily from a loss of customer focus – just look at Qantas and its current junk bond status. Further, the governance and management issues that have already come to light in some unions are likely to be reinforced by additional information from the Royal Commission.

Some unions are already seeking to address the skills gap in their management teams by accessing the National Workforce Development Fund to provide management training to their staff, for example Certificate IV in Frontline Management.  However, unions were only required to educate their personnel on union governance practices commencing in 2013:

“Changes to the Fair Work (Registered Organisations) Amendment Act 2012 on Financial Governance required all union officers with financial decision-making responsibilities (including elected officials, finance staff and members of management committee) to do FWC Approved training within six months of June 29th, 2013. In some circumstances, Unions now have until mid-2014 to comply. “

This means that the unions are now working to professionalise their management and governance practice in a hostile environment. They are doing so while fighting a rearguard action with the Abbott government about working conditions (for example attempts to roll back penalty rates and conditions), and while a Royal Commission is investigating the union movement.

If ever there was a time that workers needed organisations to represent their interests, that time is now. As Halse notes:

“In a political economy governed increasingly by the market-oriented doctrine of neo-liberalism, trade unions should not so easily be dismissed.”

However, it is hard to see how unions will survive the combined onslaught of poor management and governance, declining membership, and the decline of key industries that they have relied upon for the past century.

If the unions are not up to the challenge, then how will we protect rights and working conditions from deteriorating? How will we ensure that people participating in new forms of work are not exploited?

These are very real challenges that the union movement must ponder. They must step away from their internecine struggles within the unions and the ALP factions to focus on their real business and their real customers. Otherwise the union movement will continue to dwindle into irrelevance, and workers will lose their hard won collective bargaining capability.

Perhaps Alex White is right to think that the real future of unions is crowdfunded and crowdsourced:

“…decentralised, leaderless, temporary movements, empowered by online organising platforms like MoveOn, Change.org, Avaaz, Twitter and Facebook.”

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What is the future of work? Zero hours, surveillance, robots and the jobs free future

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The future of work has been on my mind a lot over the past few years. It seems  that the future of jobs is bleak in a number of ways. For example, zero hours, surveillance, and robots are on the horizon for many workers. This is all part of what I’ve come to call the ‘jobs free future’.

This post about the future of work was originally inspired by Marissa Mayer’s pronouncement in early 2013 banning work from home at Yahoo!. The ever-present drives for efficiency and lower costs mean that businesses are changing the way we work, and they are also changing the way that we are contracted to work.

Digital Panopticon

Increasingly we live in a digital panopticon and technologies like CCTV, drones and the internet of things are emerging and merging to provide mechanisms for better and more omnipresent surveillance of  people in all aspects of their daily life. When we add this growth in surveillance to other factors, such as a shift  to lower economic growth rates and changes in the traditional twentieth century employment contract, for example the introduction of zero hours contracts, then things are really becoming quite different for workers.

Higher Skilled Jobs Disappearing

Headlines like “Cisco to cut 4,000 jobs” have become a regular sight and it is clear that it is no longer only low skilled or manufacturing jobs that are disappearing. The jobs that are going are increasingly higher skilled and middle class roles. Thus while “Robot Serves up 360 Hamburgers per Hour” is an example of the disappearance of low skilled jobs, we can also see automation impacting other industries. The young woman who used to hand back my dry cleaning is gone now, replaced by a large red machine that dispenses my laundry with nary a snide remark, and it gives a 20% discount too.

the future of workLaw is one good example of an industry that is beginning to be disrupted. The first phase is shipping expensive western jobs to lower cost geographic regions, thus legal process work is being outsourced to places like India or the Philippines. This is removing the entry level jobs that law school graduates once used to get a step up on the rungs of their new career. The next phase is automation of other legal processes within law offices, for instance adoption of legal decision support systems. Thus firms will require fewer more senior personnel and hardly any of the para-legal personnel they once required. All of this will be framed as ‘efficiency’ gains for the business. But what it really translates into is a substantial reduction workers required in the legal industry. A consistent pattern across all industries is the implementation of solutions that take human workers out of the business process and replace them with machines.

This automation trend started with the early days of computers and has gathered pace as artificial intelligence technology became a commodity and internet connectivity became ubiquitous. Typically, if a business cannot remove the human workers by means of technology, then they will shift the jobs to the lowest cost region. Thus, at best, we are seeing a downward pressure on wages and salaries, and at worst complete removal of jobs from the global economy.

Casualization of the Workforce

Many new businesses or startups rely upon outsourcing to reduce costs. This means that where once a new business would create a number of jobs at various levels they now use platforms like Air Tasker or Task Rabbit. With the adoption of these tactics by businesses there is increased casualization of the workforce. This casualization of the workforce removes the notion of job security that enables workers to plan effectively for their future by getting a mortgage or affording health insurance. Casualization of the workforce shifts the buying power of workers from the current pattern, where they are good risks for lending by banks due to their regular pay cheques, to poor risks. These shifts in spending power of the workforce will have impact on industries like retail and telecommunications.

In the US the Wall Street Journal (WSJ) reported that “A Jobless Recovery Is a Phony [sic] Recovery. More people have left the workforce than got a new job during the recovery—by a factor of nearly three”. Further WSJ noted that “Long-Term Jobless Left Out of the Recovery. Despite Improving Economy, Prospects Are Bleak for Millions of Unemployed”.

Real Jobs for Real People?

In Australia, according to the Australian Bureau of Statistics (ABS), there are approximately 140,000 job vacancies as at November 2013. And in December 2013 the ABS reported that unemployment increased to 716,000 while the unemployment rate remained steady at 5.8%. Given these numbers it is unlikely that getting the unemployed into education or training is going to help very much unless the job supply is increased substantially. Perhaps they can all become entrepreneurs and start micro-businesses?

If this is where Australia sits regarding unemployment when coming out of a mining boom, with a Triple A credit rating and having successfully negotiated the global financial crisis,  then is does not presage well for the future. The mining boom is winding down and jobs will disappear in that industry anyway due to automation (as reported by the University of Queensland).

Australia is on the cusp of a dilemma. We face an ageing population that is about to put substantial pressure on the welfare budget, reduced traditional employment opportunities for both low and higher skilled workers, and the end of a jobs-rich mining boom. Heavy industrial manufacturing is all but dead in Australia, and the car industry  is dying too. This is clearly demonstrated by the recent exit of Holden leaving Toyota as the last remaining Australian car manufacturer (and even Toyota is likely to exit the market over the next few years). Then there will likely follow the demise of car component manufacturing in Australia too, unless the component manufacturers can find other markets.

Traditionally construction and retail picked up the slack in the Australian economy during lulls in mining booms. However,  the continuing weak performance of Australian retail makes it an unlikely contender for jobs saviour.  And while we are seeing construction increase as the mining boom eases, neither industry is likely to have the capacity to fill the increasingly large gap between the number of available workers and suitable jobs. This issue is reflected by the markets in lower currency rates based on weak jobs data. And a lowering of the currency, while helpful for export driven sectors, reduces consumer purchasing power to support the retail and housing markets.

The Future of Work?

There are no obvious replacement industries to fill the gap left in the traditional jobs market in any of the western countries. We are facing enormous structural change,  and there is an emerging crisis. What is to be done about a post-jobs future? I wonder who in the Government and Opposition is thinking about these issues? It seems kind of important.

Disclosure: For a considerable part of my career I worked on large scale operational efficiency and innovation projects that removed workers from business processes and implemented process automation; where that was not possible work was typically outsourced to lower cost regions.

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How the internet of things changes everything

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The next generation of the internet is called the ‘internet of things’. Some people like to call it M2M or ‘machine to machine’ or ‘internet everywhere’. In any case it is here and it is about to shake things up.

The internet of things is where devices become connected and have embedded sensors that enable them to act and react in connected ways. It means that devices can talk to each other, can instruct and respond to each other in response to contextual stimuli. And by devices I mean any physical object that can have sensors and communications technology attached or embedded.

Objects are becoming embedded with sensors and gaining the ability to communicate. The resulting information networks promise to create new business models and disrupt existing business models.

The internet of things builds on the foundations of Web 2.0:

  1. Participation
  2. Standards
  3. Decentralization
  4. Openness
  5. Modularity
  6. User Control
  7. Identity

Source: Launching the Web 2.0 Framework, Ross Dawson, May 30, 2007

The technical plumbing that is needed to make the internet of things real is already in place: TCP/IP, wifi, Zigbee, Bluetooth, etc. Key factors are almost ubiquitous wireless internet connectivity and devices with connection capability. These are already in place across the world.

The other technology trend that is supporting the emergence of the internet of things is ‘big data’ and our enhanced ability to derive actionable insights from the collection and analysis of enormous amounts of data.

The convergence of big data and ubiquitously connected smart devices means that we can harness predictive capacity and enable things or objects to act in ways that are contextually relevant. It also means that we can finally start using this technology to market to an audience of one. That is, we can use technology to craft individually meaningful and relevant marketing messages and deliver them within a particular context to drive purchase behaviour for a particular individual. The entire marketing conversation can be automated and have human agency largely removed from it, while retaining human-like communication modes and styles of communication. It seems that Minority Report might not have gone far enough in conceptualising the future of marketing.

How big is the market opportunity from the internet of things?

There are many different estimates of the size of the internet of things market. One thing remains constant, business leaders who understand the concept are making big calls and are changing their business focus as a result. For example John Chambers from Cisco:

“The Internet of Things, I think will be the biggest leverage point for IT in the next 10 years, $14 trillion in profits from that one concept alone”
Cisco Chief Executive Officer John Chambers, AllThingsD D11 Conference May 2013
Source: Internet of Things Poses Big Questions, Ben Rooney, July 3, 2013

Where and how do the business opportunities arise?

The internet of things creates value that is not in the devices, rather it is in the new services that are related to the devices. Connected devices are transformed from a single purchase product into a service that generates recurring income.

A big part of the business opportunity is making it possible to bypass traditional aggregators of demand and access customers via peer-to-peer channels. Apps are key to this peer-to-peer landscape and they look to be an important multiplier in the growth of the internet of things marketplace.

“Between 2008 and 2017, Google Play and Apple’s App Store will be responsible for a mind- blowing number of mobile app downloads: 350 billion.”
Source: Decade of the 350 Billion App Downloads

New business models are emerging, and it is seems that open and collaborative models particularly lend themselves to this more interconnected landscape.

Some predictions:

  • Open models will rule the new landscape – organisations that try to control the entire vertically integrated supply chain will struggle unless they bring in partners to add diversity. A good example of this is Apple with their app store, which enables them to have a vertically integrated supply chain along with diversity via apps.
  • Collaboration and loose confederations – the barriers to entry that previously protected large players will begin to dissipate and provide opportunities for new entrants. Uber versus the taxi industry is a good example of this phenomenon.
  • Agile, change ready organisations will be best placed to adapt in this new highly connected world. Any organisation that needs two years to get a new product to market will be overtaken by those who can move faster. A good example of this is Nokia. Their new Lumia Windows phone is a great product that is two years too late to market. And the delay in getting to market means that they will need to find a niche to dominate rather than become a mass provider – perhaps they can dominate as a camera with connectivity rather than as a smartphone? Here Nokia’s decision to align themselves with the notoriously non-agile Microsoft Windows could be part of the problem.
  • Restructured supply chain – the internet of things offers enormous opportunities to restructure supply chains. Smart businesses will take advantage of this. In the 1990s ‘just in time’ inventory models revolutionised the cost base of doing business. The internet of things will provide similar opportunities.

What industries will be impacted?

All industries will be impacted but let’s examine the potential changes for a few that are interconnected:

  • Retail – already we are seeing shoppers use online and offline retail channels to find the best product for the best price. We can expect to see this intensify and put increased pressure on offline retail. Apparel shopping is one area that can expect disruption. Already shoppers are using terrestrial stores as places to check the fit of apparel items of interest, a practice known as ‘showrooming’. Some stores are fighting back by imposing a ‘trying on charge’ that is deducted if a purchase is made in store. But what if the in store retail experience became richer? What if the products started to sell themselves? What if the products knew that you were already wearing a particular brand and reached out to you and suggested complementary products? For example, a pair shoes could recognise that you are wearing a particular brand of jacket and offer you a special deal as a result. The convergence of ubiquitous connectivity, big data, and internet of things makes this scenario possible.
  • Transportation – We already have driverless transport with trains and Google is already showing us a glimpse of this future with their driverless car. But these new forms of transport require the development of new business models. For example, all that time we used to spend actually driving our cars will give rise to a new cognitive surplus – wonder what we’ll do with it? Play games, create art? Another example of new things that driverless vehicles will give rise to is smart intersections, because those new driverless cars will require smarter intersections that we currently deploy. The internet of things will make autonomous transport possible.
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