Definition of reckless: “heedless of danger or the consequences of one’s actions; rash or impetuous.”

Exec Summary:

This 2 minute video summarises the emerging digital driven trends at a macro level …

What is the difference between these 2 bikes?

The Mobike is Chinese and designed for a digital convergent business model: convenience, availability, high service, no maintenance, no sales people, no customer ownership, no infrastructure, no people in the business process. But lots of software engineers and flooded with cash to grow, for example $15Bn in Didi’s case vs Uber £0!

The Chinese investors encourage profitless growth. Mobikes are all over the UK streets.

The penny farthing was based around the latest most desirable technology of 1800, supported by a product centrist infrastructure. This was designed to sell at a profit.

What’s different in industrial revolution 4 in 2018 vs the industrial revolution of 1800?

The numbers affected:

·      In 1811 the Luddites only made up only 3% of the population’s roles were at risk of change. Roles reduced in number by 230,000 over 30 years upto 1860.

o  Increased productivity of the lower skilled workers eventually resulted in more equal income distribution

·      Today those roles at risk are the middle class. BUT rather than 3% of the population the middle class at risk make up 60-80% of working population

The technology

·      In 1811 the machines were inflexible and work to operate them standardised: so workers were free to move between operations.

·      Today these machines are self-learning and human operators must be far more skilled and operators must re educate themselves.

o  Hypothetical risks

§ AI operators won’t be able to retrain fast enough to keep up & Peoples decision making won’t be able to evaluate the outputs nor cope with the speed

Tasks replaced

·      Simpler processes AI can replace altogether: handling financial applications in Trelleborg

people do do tasks such as routing vehicles which we are totally technically unequipped to do effectively. Human decision making is very biased and often flawed.

Tasks reduced

·      Complex processes – medical scanning xrays for abnormalities

·      End – end analysis – creative clothing design Myntra – production, shorten lead time

·      Patent drafting and legal work

·      Frey and Osbourne found that 47% of US occupations are at risk of being automated within 10-20 years. Automating of higher skills jobs is likely to be lower. 32% of jobs have 50-70% chance of being automated

Skills in demand

·      The increased productivity of the tech elite will be in high demand and well paid, creating an elite of upper middle class that will benefit from the digital societal change.

·      Major Social class impact will be at clerical, sales and middle management, as seen with the current retail, banking and other manufacturing job losses.

o  60-70% of households across 25 advanced economies earned the same of less in 2014 vs 2005.

Lifelong learning

·      Lifelong learning will be critical to stay ahead

o  although its thought that many won’t be able to retrain their technical skills fast enough to keep up with the changes

o  we will also need to develop a deeper knowledge of our flaws. As humans these will be exposed by AI. bridges this gap and enables us to better cope and improve our agility, human processing and decision making.

Overall risk for societal disruption

·      During the first industrial revolution only 3% of roles in England were affected.

·      Now its 60% in the USA and over 80% or roles at risk of being affected in some EU countries

Business valuation and growth

·      The top4 companies in 1961 employed 1.4m people, now the top 4: Apple Exxon, Microsoft and Google employ only 0.3m people: 70% less people

o  These companies are driving digitisation and are rolling out these business models

·      The largest employer in the UK is retail – Walmart employed 2.2 m vs amazon employing only 0.6m people, again c70% less people

·      That’s roughly a quarter of people employed in these digital vs the traditional business models they replace

o  Their digital retail business models are growing and given they are introducing automated high street stores a further decline below 70% less roles is possible

Peoples capability vs AI now

·      Robots can already demonstrate superior skills such as facial recognition, “there is no domain that is safe from automation” (James Hughes)

·      Alpha go played a GO move than no human had ever seen beating the world champion. This was the first time in 2010 that AI was seen as creative

·      Machines cognition and recognition – can reliably learn, access and digest vast quantities of data

·      AI decision making will be “better” than humans – without bias, if they can be programmed without bias. Ai has been proven very effective tool to win and has been shown to deploy some very aggressive tactics if left the machine learning is unchecked.

·      The trend is to delicate tasks – creating music and precision surgery and at Ocado picking fruit in warehouses. Ocado define themselves as a technology business NOT a grocer.

Speed of change

·      Technology development will continue to accelerate with a wide impact on society

·      If 60-80% of people lost their jobs repercussions for society would be huge

o  A basic living wage needs considering

o  Profits will fall because there will be less profit as these digital models will, contrary to Porters advice!.. primarily compete on price, service and product. This was Porters strategy defining how to go bust!

§ Didi et all are profitless fast growth models with vast scale that are nearly impossible to compete with

§ Less corporation tax collection – so will public sectors retain control, and will there be funding to pick up the pieces

·      Why if we are not willing to stop AI would be willing to give away vast profits to look after the poor? Can the public sector cope with their burdens now?

Sentient AI

·      Sentinent AI will lead to very few competing company’s, the demise of the traditional product centrist companies, and the rise of the giants employing only 25% of the number of people employed in traditional businessses.

·      By creating creative AI – leaps in innovation and productivity will be for a very few of the digital elite

·      This would create major labour destabilisation as well as political power shifts by those countries that dominate its development.

The people aspects

·      Social media, progress to machine – machine communication, machines increasingly making decisions, more volatility, increased uncertainty, faster swings is not a situation that humans can cope with nor can plan for.

·      Polarisation of views Brexit and Trump and denial “we don’t know what the impact will be”, baseless statements that substantiate inactivity “it will be OK” are all signs people can’t cope.

·      The increasing disruption to our daily lives via social media is reducing our human ability to plan, or get to grips with the big picture

What are humans?

  • I know a CEO of a very well known AI business his mantra is “people are machines”

Machine Def: “an apparatus using mechanical power and having several parts, each with a definite function and together performing a particular task.”

If we are machines AI makes complete sense, if not its a flawed strategic mantra worth rethinking because a flawed strategy will inevitably lead to a flawed outcome?

The emerging convergent business models

·      The move for example in the auto industry from vehicle centric transport to convergent mobility models, that combine low cost of ownership, convenience, will dominate the product development and the demand, so probably render the traditional car makers and product centric solutions and technology defunct and like the Mobike be led by the digital giants.

Profitless Growth

Convergent models are often profitless growth models: even simple models such as ASOS operating in a relatively noncompetitive market right now is only making 4% net margin, and maybe less due to their reverse logistics that they have just launched.

·      Convergent models will also drive value and profits out of the downstream supply chain, and commoditise the product solutions, costs and service.

·      The increased polarisation of wealth and reducing overall profits will therefore likely reduce the size of markets and with reducing profits reduce profits to distribute.

Can we get a grip of this – is digital rational?

AI plays to all of the worst fear based human traits – fear that overrides rational thinking and with increasing speed, more panic, more greed and the big 4 fuelling the band wagon, its hard to see except by developing our rational thinking what we can do to contain digitisation and or avoid an increasingly rapid race to the bottom.

So there is no comparison in terms of the threat of IR1 Vs IR4. IR1 only affected 3% of the total workforce whereas IR4 threatens maybe upto 75% of the workforce. (based upon digital business model vs the traditional forms of employment)

The meaning that comes from work

As Elon Musk said: “The toughest challenge may not be funding the universal income gap, it is probably the loss of meaning, by not working ”

What can you do?

That is why the solution is rather timely, but like anything in your blind spot you wont get it until you experience it.

My advice is to join us at one of our seminars. It has been shown to offer the best chance of supporting your organisations decision making and increase your productivity by stopping most of (typically 50-70% can be stopped) what you are currently doing and using that time more productively to reset the strategy, increase speed, refocus on what matters, re-engage your people and typically increase profit by double digits.

enjoy Tom