Jim Snabe, WEF - when digital and physical worlds collide

Profile picture for user pwainewright By Phil Wainewright June 7, 2016
As digital technologies enable a fourth industrial revolution, the WEF's Jim Snabe says there's all to play for when digital and physical worlds collide

Jim Snabe, WEF, speaks at DocuSign Momentum London 2016
The world faces transformative change on an unprecedented scale as digital technologies enable what the World Economic Forum is calling a 'fourth industrial revolution'. That was the message delivered at the DocuSign Momentum conference in London yesterday by Jim Hagemann Snabe, former co-CEO of SAP and now WEF chairman in the US.

Snabe's 20-minute talk succinctly captured the key themes discussed at January's WEF meeting in Davos. Especially interesting was Snabe's assertion that the race to digitize physical industries is still wide open, with digital newcomers and established businesses each forced to enter unfamiliar territory.

Snabe began by discussing the technologies that have brought change on such an unprecedented scale.

It's actually the combination of three technologies that came together and created a massive disruption:

  • The digital description of a product in data.
  • The network that allows us to distribute that product to people and things at zero costs.
  • The mobile device that allows us to consume it in convenient ways wherever we are.

You bring those three technologies together, and you have a massive disruption.

Three more technologies are now bringing digitization to physical industries, he added.

  • Artificial intelligence that doesn't need programming, it will learn and experience by itself and very rapidly it becomes more smart than we human beings.
  • Robotics, not the ones that mass produce the same piece at low cost, but the ones that are autonomous and intelligent and figure out what to do next by themselves.
  • 3D printing. The ability to create a product digitally, ship it anywhere at zero cost and then put it close to the customer.

If you add these three technologies to the three we already have seen, we are beginning to transform every industry, every physical industry that we know of.

You can ask yourself, 'Why is this happening?' It's because of Moore's Law. That's also why it's an exponential curve and the speed is accelerating quite dramatically.

Old season, new season

Snabe uses an analogy to Formula 1 car racing to illustrate the scale of disruption facing every industry. Each year, all the rules of Formula 1 change, and instead of the incremental improvements that are necessary to stay competitive within the season, teams have to essentially reinvent themselves to compete afresh in the new season. That's the scale of change industries are facing today, says Snabe, illustrating his point with a reference to Uber:

In Europe we are still in the old season — I can tell you that — because we are trying to make sure that Uber is illegal. According to the old rules, that should be the case.

We are completely forgetting the fact that the next version of Uber has no driver. So why are we trying to protect the conditions of drivers in Europe when the next version of Uber has no drivers?

Healthcare is another example.

Today we are obsessed with fixing disease with generic therapy. Imagine if we don't get sick. Imagine we prevent disease because we do DNA analysis. We may even do modifications. We certainly will have sensors, so that we see things and predict things before it's too late. If we do have to fix a disease, we do it individually because we understand the individual patient's individual situation.

Imagine what that does to healthcare spending, and to quality of life. That is the opportunity that's right ahead of us.

Every industry faces change on this scale, contends the WEF.

We are in a new season in every industry, in every country, in the world. This is not a between-seasons optimization of the car. This is a complete new season.

The speed of that change is unprecedented ... Within a generation we've got to transform, reinvent the car, the engine, and the team.

As an example of the scale of change, Snabe discusses solar power. The sun delivers to the earth 8,000 times more energy than we consume today, and the cost of harnessing solar energy is on a Moore's Law curve, halving every 16-18 months.

Imagine the impact on this world when we have energy everywhere, is clean, and is basically for free. Of course, it changes all industries.

Digital meets physical

In industries such as music and publishing, where the product could be completely digitized, it was newcomers who rose to the fore and displaced the old guard. Snabe foresees a different dynamic in the new wave of digital transformation across industries that produce physical products.

In the second transformation, the physical world and the digital world at the same time becomes the key assets. The Siemens of this world is trying to digitize everything but still minds the physics. The Google of this world is trying to get into the physical world, and so is Tesla. That's the race.

This race will be decided in three parallel transformations, he suggests.

  • Number one, massive opportunities to reinvent operations and logistics and do massive cost savings because of that.
  • Number two, the significant opportunities around reinventing the interaction with customers, so that you understand the customer uniquely and become more relevant in your interaction with the customer because you predict the next demand.
  • Finally, the incredible opportunity around reinventing entire business models, rethinking what is monetized and what is not, and how can you take full advantage of this new digital platform.

The best companies that will win this next race are going to be the companies that master all of these three.

As well as the opportunities for business, there are both opportunities and risk for society, he says — but it is up to us to seize them.

We could have a society with abundance of the resources that today are scarce, but there are also some risks. We need to manage the security around this. We need to manage and redefine privacy. Obviously, there is a risk for jobs and future jobs as machines get more intelligent and more autonomous.

Yes, there are new challenges, but the opportunity is way, way bigger than the risks. I think that we are lucky to be leaders in this phase of history with a rapid transformation right at our doorstep. We may be the first generation that can end poverty on this planet. We may also be the last generation that can stop climate change.

Don't wait. This is the time to lead. Lead a direction for a better future for business as well as society, and win in the next new season.

My take

A succinct and invaluable discussion of key factors in digital transformation. Especially noteworthy is the assertion that there's still all to play for in the race to bring digital into industries whose operations concern the physical world.