The emerging technologies that are set to shape the future of business

The integration of key technologies and the specialisation of the value propositions on large-scale operating platforms are the core driver of the today’s reorganisation efforts, says Joerg Ruetschi

Digital innovation has accelerated since the second half of the 20th century and became transformative with the broader establishment of the internet in the mid 1990s. Over the last 25 years technology not only drove the way we communicate but shaped commercial models, operating platforms and the broader customer engagement. The pandemic triggered another leap forward in which social distancing created unexpectedly the requirement for a virtual environment. Many believe that soon, within the next ten to 20 years, we reach the point of singularity, at which technological growth becomes exponential and irreversible, resulting in unforeseeable transformative impact. This leads to challenges but also immense opportunities for businesses and entrepreneurship. Digital transformation has been driven by open architecture and decentralised systems been.

These trends are underpinned by three key technologies and building blocks of technology innovation. Each of these building blocks represents a value-creation pillar of the industry’s digital transformation agenda. They establish an analytical framework on how to commercialise and operationalise technology innovations.

The value creation framework

Value creation is a management philosophy with the goal to drive an institution’s growth and performance agenda. Value creation but also protection are natural stages of corporate development during the life cycle of a business. As a methodology, it is defined by the concept of intrinsic value that measures the financial impact of specific strategic and operational initiatives. It can equally be applied to growth and transformational situations. Technology innovation adds a specific lens to value creation with core focus on the commercialisation and operationalisation of emerging technologies. This lens requires to understand the potential of a technology before specifying its use cases to solve a specific business problem. The digital transformation agenda has accelerated and put corporate organisations in continuous demand to identify the key technologies, assess the impact on their business and adapt their operations accordingly. It requires decision makers to establish a structured response framework to protect the value of their businesses but also accelerate growth.

Emerging technologies and their value-creation pillars

Several key emerging technologies are the building blocks of this change and growth agenda. They can be classified in three; each of them defines their own value-creation pillar in the way the shape the future of the business. They are part of an overarching analytical framework to assess the commercial and operational implications.

Advanced software and open architecture

Advanced software solutions such as application programme interfaces (API), cloud computing (CC) and smart desktops (interoperability) shape today’s open architecture models. Open architecture has substantially improved operational efficiency through automation and collaboration as the first pillar of transformation agenda.

API is a software and web development concept that represents a set of clearly defined methods of communication among various components. By connecting software, API connect businesses with other businesses, businesses with their products, services with products, or products directly with other products. CC is the on-demand network access and system resources availability to many different users over the internet. It is applied especially to data storage and computing power, and has added completely new features to technology infrastructure and software applications. The technology enables corporations to dynamically scale their data storage, computational power and bandwidth. It leads to a huge advantage compared to previous solutions around data centre and servers. CC relies on the pooling and sharing of configurable computing resources to achieve economies of scale and coherence. When multiple users access the same virtual resources in the cloud such as software, storage or virtual machines, those resources know multiple tenants. Virtual applications can be installed with their own operating systems and different set of applications. Different service models emerged such as software as a service (SaaS) and platform as a service (PaaS).

Smart desktops bring different software solutions and applications together through one unified customer experience. Smart desktops create intelligent workflows with customised workspaces. This concept of interoperability offers a full-service platform solution which includes container support, basic exchange between web and web but also native support for other application types and advanced window management. It allows cross-application data sharing in an instant and eliminates manual re-entry and error rates. This optimisation of workflows leads to substantial gains in effectiveness and efficiency in an open architecture framework.

Blockchain and decentralisation

The second emerging technology are decentralised technologies such as distributed ledger technology (DLT), the parent technology behind blockchain. It facilitates identity management, value storage, and back‐office operations such as settlement of payments and securities transactions. DLT and blockchain digitise and renovate todays financial and legal infrastructure. The technology has so far mainly be known for financial speculation through cryptocurrencies such as Bitcoin and Ether, and experimental forms of finance under the broad term of Decentralised Finance (DeFi). DeFi utilises smart contracts on blockchains to perform financial services functions but without the traditional intermediary model. With Web3, there is now even a more ambitious vision of digital decentralisation and tokenisation emerging. It envisages a next iteration of the world wide web across a variety of use cases such as data ownership, scalability, security and privacy.

The dynamics are similar to the establishment of the internet in the 1990s and will take five to ten years to play out. The uncertainty remains high. Besides the current hype around the speculation in crypto assets, there are several challenges. The high environmental costs have questioned the proof-of-work system of validating blockchain transactions (which underpins bitcoin and most other crypto currencies). It leads to the open question if cryptocurrencies are an effective means of payment and can be scaled in the broader context of the monetary system. Only a few frontier countries have adopted cryptocurrencies (i.e. Bitcoin) as a legal tender. Academic research concludes that they have scarcely been used for daily payments. In fact, the high price volatility of Bitcoin makes it almost impossible to use it as a conventional form of payment. Stablecoins and forms of synthetic trading of fiat currencies and other underlying assets are exposed to huge counterparty risk which may lead to a forceful response of regulators to safeguard financial stability. The legal uncertainty around tokenisation (such as through non-fungible tokens or NFTs) remains substantial. Ownership that is purely defined by the blockchain has no inherent legal meaning yet, and does not necessarily grant copyright, intellectual property rights, or any other legal rights.

Artificial intelligence (AI) and system augmentation

Artificial intelligence (AI) represents with its augmentation across decision making and workflow automation the third pillar of value creation. There are many and varied definitions of AI and the term is often interchangeably used with machine learning (ML). ML is a key field of study of AI that uses mathematical procedures, algorithms, for the analysis, manipulation, pattern recognition and prediction of data. This allows to process large data with mathematical accuracy and objectivity which leads to unbiased results, substantial efficiency gains and new insights. It allows the optimisation of decision analytics and leads to a more comprehensive, objective and accurate decision making such as the prediction of specific political, macroeconomic and/or corporate events. With robotic process automation (RPA), AI further drives the autonomous replication of repetitive tasks through intelligent behaviour. It allows an organisation to keep the value chain with its processes unchanged while automating its workflows. It therefore not only improves decision making but also contributes to operational performance improvement.

Business reorganisation

The integration of key technologies and the specialisation of the value propositions on large-scale operating platforms are the core driver of the today’s reorganisation efforts. Digital business models with their technology-enabled services that apply the open design principles follow a model of collaboration and integration. An operating platform with an open-source architecture builds on a universal offering by integrating best-in class services. There is a role for specialised, i.e. the challengers but also for large-scale incumbent players.

In the financial industry for instance, specialised businesses target consumer and commercial segments with dedicated and tailored propositions. These specialty finance players focus on assessing risk in a more tailored and effective manner, looking at a broader range of available data as opposed to the more ratio-driven, formulaic approach that traditional financial institutions have been following. The global scale and reach of their businesses in a highly regulated environment require these specialised players though to work with the incumbent and use their distribution channels. The incumbent response by opening their proposition with its services and integrating third-party service through a broader best-in class service offering. We are at the beginning of an accelerated trend that will fundamentally reshape the way we do business and live our lives.

Dr Joerg Ruetschi is value-creation, transformational technology and turnaround specialist, and author of new book Transforming Financial Institutions (Wiley).

Dr Joerg Ruetschi is value-creation, transformational technology and turnaround specialist, and author of new book Transforming Financial Institutions (Wiley).

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