McKinsey Eyes IT Trends for Business

When I moved to Dubai in 2006, officials were just catching on to the fact that infrastructure - streets, highways and paths - seriously lagged the crazy-rapid development of office complexes, residential high rises, and luxury hotels.  Result:  Traffic snarls, causing delays, aggravation and accidents.

This recognition was better late than never.  But I remember telling friends and colleagues that the build-up of its infrastructure had to be geometric, rather than arithmetic.  In the pre-recession era of the past decade, the development was an unrelenting army of cranes, noise and dust.  What this meant was, Dubai had to aim way ahead with its infrastructure build-up.

Let's suppose that the complex interchanges on Sheikh Zayed Road, near the Dubai Mall and Dusit Hotel, were a three-year project.  The build-up must account for how this area was going to look in 2009, knowing the city would keep developing, and not satisfy itself with catching up to how the area was to date (i.e., 2006).  If the city were to stick with an arithmetic build-up, it would actually fall further behind.

So is technology, too, a geometric progression.

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Or at least I thought technology was a geometric progression.

Consider Ten IT-enabled business trends for the decade ahead from McKinsey Quarterly:  

Three years ago, we described ten information technology-enabled business trends that were profoundly altering the business landscape.  The pace of technology change, innovation, and business adoption since then has been stunning. Consider that the world’s stock of data is now doubling every 20 months; the number of Internet-connected devices has reached 12 billion; and payments by mobile phone are hurtling toward the $1 trillion mark.

As some point the geometric curve becomes vertical, and reaches its asymptote.  Practically speaking, I wondered, what additional progress can technology make?  My reasoning isn't quite logical, really, because my initial thought had to be re-examined.

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Now I believe technology progression is more like this model of string theory, which argues that the universe has way more than three dimensions.  Eleven, I believe.

1.  Joining the social matrix

Social technologies are much more than a consumer phenomenon: they connect many organizations internally and increasingly reach outside their borders. The social matrix also extends beyond the cocreation of products and the organizational networks we examined in our 2010 article. Now it has become the environment in which more and more business is conducted. Many organizations rely on distributed problem solving, tapping the brain power of customers and experts from within and outside the company for breakthrough thinking.

McKinsey referring to this trend as matrix is instructive and brilliant.  You see, in advancing string theory, some physicists prefer to call it matrix theory or simply M theory.  Moreover, it makes me think about the complex future of the Matrix film trilogy.

Physicists' observations and formulations are absent of human beings.  But in point of fact, our cosmos is suffused with people.  More specifically, I mean two things:  One, the physical reality includes us.  Two,  the physical reality can only - I repeat, only - be understood, explained and formulated from a human standpoint.

So perhaps McKinsey unwittingly, in my line of thinking, advanced string theory - and a several-dimensional universe - by calling it social matrix.

2.  Competing with "big data" and advanced analytics

Three years ago, we described new opportunities to experiment with and segment consumer markets using big data. As with the social matrix, we now see data and analytics as part of a new foundation for competitiveness. Global data volumes - surging from social Web sites, sensors, smartphones, and more - are doubling faster than every two years.  The power of analytics is rising while costs are falling. Data visualization, wireless communications, and cloud infrastructure are extending the power and reach of information.

Because of that geometric progression, big data has rushed forward, far faster than the majority of us can keep up with.  From company employees generating data, to everyday users like us generating data, to machines generating data, we have so much at our disposal that Google, for one, will have amassed a volume that exceeds a googol and therefore will need to rebrand itself around a new name!

But he main issue here, paradoxically enough, is not the quantitative or technological stuff, but rather something else that McKinsey rightfully points out (albeit pedantically) but falls short of crystallizing:

Planning must extend beyond data strategy to encompass needed changes in organization and culture, the design of analytic and visualization tools frontline managers can use effectively, and the recruitment of scarce data scientists (which may require creative approaches, such as partnering with universities). Decisions about where corporate capabilities should reside, how external data will be merged with propriety information, and how to instill a culture of data-driven experimentation are becoming major leadership issues.

The main issue, then?  People.  Organization and culture, frontline managers, and data scientists are, the last time I checked, irrevocably people.

3.  Deploying the Internet of (all) Things

Tiny sensors and actuators, proliferating at astounding rates, are expected to explode in number over the next decade, potentially linking over 50 billion physical entities as costs plummet and networks become more pervasive. What we described as nascent three years ago is fast becoming ubiquitous, which gives managers unimagined possibilities to fine-tune processes and manage operations.

Ivan Poupyrev

After reading this part of the McKinsey article, consider Ivan Poupyrev - The Inventor of the Midas Touch (emphasis, added):

Every time you touch your iPhone's screen, you create a circuit, and a small jolt of electricity shoots through your skin. As a result, your screen knows just where you touched it. Ivan Poupyrev had a theory: What if he sent a broad spectrum of AC current through everyday objects? Would those objects be able to sense touch? The answer is yes, and Touche is the sensor system developed by Poupyrev and his team at Disney to do it.

Connect Touche to a living orchid and the plant's entire skin becomes touch-sensitive just like a smartphone screen; attach it to a computer-music program and you can play the flower like a violin. Touche is compatible with almost any object you can grab--wooden tables, metal sculptures, water tanks, even breathing humans. Touche could make every square inch of Disney World responsive to touch--and open up a world of possibility for connecting objects to the Internet. "My long-term vision," Poupyrev says, "is making the entire world interactive."

4.  Offering anything as a service

This model is spreading beyond IT as a range of companies test ways to monetize underused assets by transforming them into services, benefitting corporate buyers that can sidestep owning them. Companies with trucking fleets, for instance, are creating new B2B businesses renting out idle vehicles by the day or the hour. And a growing number of companies with excess office space are finding that they can generate revenue by offering space for short-term uses. The Los Angeles Times has rented space to film crews, for example. Cloud-based online services are feeding the trend both by facilitating remote-work patterns that free up space and by connecting that space with organizations which need it.

While we and others have written about the importance of cloud-based IT services for some time, the potential impact of this trend is in its early stages. Companies have much to discover about the efficiencies and flexibility possible through re-envisioning their assets, whether that entails shifting from capital ownership to “expensed” services or assembling assets to play in this arena, as Amazon.com has done by offering server capacity to a range of businesses. Moreover, an understanding of what’s most amenable to being delivered as a service is still evolving—as are the attitudes and appetites of buyers. Thus, much of the disruption lies ahead.

Steve Case

Consider How Steve Case and His Company are Driving the Sharing Economy, and it bears a striking resemblance to this trend (emphasis, added):

A luxury-home network. A car-sharing company. An explosive deal site. Maybe you see three random ideas. Case and his team saw three bets that paid off thanks to a new Web economy that promotes power in numbers and access over ownership. The so-called sharing economy has taken off in the Great Recession, as companies like Netflix and Zipcar have allowed the exchange of DVDs, cars, clothes, couches, and even kitchen utensils. The promise of a post-ownership society is that we can do more, own less, and rent the rest with Web-enabled companies. That's a huge break for cash-strapped families in a weak recovery.

I am reminded, too, that before there was an oil and gas industry, there was only the oil industry.  Decades ago, oil producers saw natural gas as waste that came out of extracting oil from the ground.  In fact, to get rid of this waste, they burned it.  They realized, of course, that this natural resource was another product in their business.

So are idle trucks, unused offices and spare capacity.

5.  Automating knowledge work

Physical labor and transactional tasks have been widely automated over the last three decades. Now advances in data analytics, low-cost computer power, machine learning, and interfaces that “understand” humans are moving the automation frontier rapidly toward the world’s more than 200 million knowledge workers.

To wit, consider what IBM has been working on.  Computers have the capacity to generate, process and analyze a volume of data that in time will reach googol levels.  Yet, they haven't quite matched the overall sophistication of the human brain.  They will, as I am confident about IBM's intelligence and research.

In fact, McKinsey referenced IBM as well:  

Signaling a new milepost in the quest for artificial intelligence, IBM’s Jeopardy-winning computer Watson has turned its attention to cancer research. Watson “trained” for the work by reading more than 600,000 medical-evidence reports, 1.5 million patient records, and 2.0 million pages of clinical-trial reports and medical-journal articles. Now it is the backbone of a decision-support application for oncologists at Memorial Sloan-Kettering Cancer Center, in New York.

6.  Engaging the next three billion digital citizens

As incomes rise in developing nations, their citizens are becoming wired, connected by mobile computing devices, particularly smartphones that will only increase in power and versatility. Although several emerging markets have experienced double-digit growth in Internet adoption, enormous growth potential remains: India’s digital penetration is only 10 percent and China’s is around 40 percent. Rising levels of connectivity will stimulate financial inclusion, local entrepreneurship, and enormous opportunities for business.

McKinsey itself weighed in on the compelling opportunities, as well as the challenging realities of making business models work in developing markets:

McKinsey research shows that the largest companies headquartered in developed economies currently derive only 17 percent of their revenues from emerging markets, even though these markets already represent 36 percent of global GDP.

In this video, McKinsey experts Yuval Atsmon, Peter Child, Richard Dobbs, and Laxman Narasimhan offer an overview of the opportunity - and why executives are paying attention to this driver of global growth among new consumers. Find some of our best thinking on emerging markets in "Winning the $30 trillion decathlon."

7.  Charting experiences where digital meets physical

The borders of the digital and physical world have been blurring for many years as consumers learned to shop in virtual stores and to meet in virtual spaces. In those cases, the online world mirrors experiences of the physical world. Increasingly, we’re seeing an inversion as real-life activities, from shopping to factory work, become rich with digital information and as the mobile Internet and advances in natural user interfaces give the physical world digital characteristics.

A few years ago, I heard some people distinguish Facebook friends from "real" friends.  I knew what they meant, but they revealed more about themselves than about the friends they were thinly demeaning.  I responded that Facebook friends are as real as real gets, and added that over time the line between these two groups will blur.   A friend is simply a friend, regardless of where the friendship may have originated, and these friends will have both a physical and digital presence.  

For a long while, I saw the mobile phone as the device that allows Google, Apple and Facebook and others to follow us wherever we go.  But the blurring that McKinsey frames across several industries - from gaming and electronics, to retail and fashion - is fast becoming part of our everyday landscape.  Interactive displays replace signage or posters, and prompt us to order groceries or to check a website for deals.

In other words, "Minority Report" becomes Minority Reality:  

     

8. ‘Freeing’ your business model through Internet-inspired personalization and simplification

Indeed, users will probably never pay for many valuable technology-enabled services, such as search - and the list seems to be growing rapidly. Providers of these “free” services will need to innovate with alternative business models. The most successful are likely to be multi-sided ones, which tap large profit pools that can be generated from information gathered by an adjacent free activity that’s commercially relevant. A familiar example is Google’s policy of offering its search services free of charge while garnering revenues at the other side of the platform by selling advertising or insights into customer behavior. In a world of free, the hunt is on for such monetization ideas. More and more companies, for example, are exploring opportunities to sell to third parties or to create new services based on sanitized information (“exhaust data”).

We as consumers are well-positioned to demand, because there is such competition for our wallets.  We want products and services that are quality, working and free.  Plus, we want it all now.  At the same time, we consumers must keep the score in mind, that is, the broader context in which we live and work.  Sure, Facebook is entirely free to use, but an inviolable give-and-take is part of the deal:  We officially give this site license to use our information for advertising purposes.  In-video ads on YouTube seem to annoy a lot of people, but not me.  The site is a phenomenal wealth of learning, entertainment and sports, and YouTube gives us the option of skipping or clicking off these ads.  Google search, same.  Free, but we formally agreed to let Google pose ads.

In other words:

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9. Buying and selling as digital commerce leaps ahead

New mobile-commerce platforms that manage transactions can offer customers the option of paying with credit credentials they established for other merchants. The mobile-payments provider Square offers customers using its service access to their sales data from any transaction and allows them to set up customer-loyalty programs easily.

This trend will become more striking over the next decade or so: 600 cities, most in emerging markets, will account for roughly two-thirds of the world’s GDP growth. One likely consequence for fast-growing cities will be the rapid development of dense, digitally enabled commerce—new, highly evolved ecosystems combining devices, payment systems, digital and technology infrastructure, and logistics.

I volunteered at a networking event one time, and used Square to sell books and receive payments.  The app was easy to download onto my iPhone, and after attaching a small device I was ready to go.  It was easy to swipe a credit card, and complete the sale right on the iPhone.

Square "reader"

The easier it is to do commerce, the better it is for both merchant and customer.  Clearly we've advanced beyond website e-commerce, and slid into that physical-digital space where business is at.

10. Transforming government, health care, and education 

The private sector has a big stake in the successful transformation of government, health care, and education, which together account for a third of global GDP. They have lagged behind in productivity growth at least in part because they have been slow to adopt Web-based platforms, big-data analytics, and other IT innovations. Technology-enabled productivity growth could help reduce the cost burden while improving the quality of services and outcomes, as well as boosting long-term global-growth prospects.

Enter:  IBM, and its smarter planet (city) campaign:

Bob Morison was a speaker at an IBM Analytics Summit in Chicago earlier this year, and he said it best:  We (project leaders, management consultants et al.) must build capability and appetite for analytics in the organization.  It is so easy to get enamored with, and caught up in, the sophisticated technology, that we forget that people are, and will always be, at the heart of any IT-enabled business trend.

So let's heed what Morison said.

To wit, a key implication that McKinsey identified has to do with people:

Talent. The rising economic and business impact of information technology means that competition will heat up for graduates in science, technology, engineering, and mathematics—the STEM fields, where job growth is likely to be about 1.7 times faster than it will be in other areas. As the automation of knowledge work gains momentum, and computers start handling a growing number of tasks now performed by knowledge workers, some midlevel ones will probably be displaced and people with higher-level skills will become more important. Providing new forms of training to upgrade knowledge workers’ capabilities and rethinking the nature of public education will be critical priorities for business and government leaders.

I've positioned social media as an imperative for top leaders, so is its brethren:  IT, technology, communications.  They must keep hovering attention over the current landscape and these emerging trends, while being ready to zero-in on particular matters that impact their business.  They must learn, and keep learning, which is less about formal schooling or seminars, but more about a curious, inquisitive and reflective mind.  No one can know for certain what is up ahead, and rote knowledge about this market, or that competition, or even this system may not do any good, if the landscape keeps shifting and evolving.  Like sports teams, they must have a game plan, but acknowledge the fact that the game will dictate how, or even if, they should execute on that plan.    

Thank you for reading, and let me know what you think!

Ron Villejo, PhD