5 emerging technologies to watch in 2020

Monitoring these 5 emerging technologies will help directors better navigate the challenges and opportunities of a new decade, Nicholas Davis writes.

Each year at this time we see hundreds of articles offering analysis of the trends to watch for the year ahead. In today’s business climate, you can bet most of these will reference one or more emerging technologies poised to disrupt enterprises and consumers. But merely being aware of exciting technologies and their potential impact is useless unless you can link them to the governance, strategic and risk-management roles that directors undertake daily. Rather than focus on the actual technologies, here are five cross-cutting trends to track during the next year. Monitoring them will help you and your board better navigate the opportunities and challenges of emerging technologies.

New rules, new duties

Since the Cambridge Analytica scandal in April 2018, an array of global technology companies have faced public and employer concerns around their approach to data privacy, extremist content, the treatment of workers and myriad other issues. Accordingly, in 2019, legislators and regulators were more focused than ever on enforcing laws and designing new controls to hold tech companies to account.

As a result, penalties for technology-related breaches are growing by orders of magnitude for companies from all sectors. In October 2018, Facebook was fined £500,000 by the UK government for failing to protect user data. In July 2019, the UK Information Commissioner’s Office announced penalties of £99m for Marriot International and £183m for British Airways, highlighting the cost of infringing the EU’s General Data Protection Regulation (GDPR) rules. The same month, the US Federal Trade Commission announced Facebook would pay US$5b to settle a probe related to the inappropriate sharing of data.

One of the most important themes for directors to be aware of for 2020, therefore, will be the ways in which governments respond to both public concerns and competitive dynamics related to new technologies — whether this is privacy, cybersecurity or new government procurement rules. For directors, this means ensuring your board is monitoring the policy environment related to new technologies and anticipating possible risks for corporate liability. But perhaps even more important is looking for opportunities to leverage new policies for competitive advantage. For example, by creating more trusted relationships with customers.

In Australia, expect policymaking related to technology to accelerate at all levels of government as jurisdictions play catch-up to new international norms. For example, the Department of Industry, Innovation and Science may well release a standalone national AI strategy in 2020 aimed at building the country’s competitive edge in machine learning while ensuring fairness and transparency in its use.

New systems beat new technologies

Emerging technologies don’t change the world by themselves. It’s their evolution from new capabilities to entirely new systems that is revolutionary. Take the spinning jenny — a multiple-spindle machine for spinning wool or cotton. The thread it created was initially weaker than that spun by hand, and on its own it couldn’t hope to compete with the quality of production from artisanal workers. But when integrated into factories — supported by new flows of capital, new power sources, access to new types of workers and links to new markets — the jenny, the spinning mule and a host of related inventions collectively revolutionised the textile manufacturing sector and began a major social and economic transformation across 18th-century Europe.

The shift from developing single technologies to building transformative systems is well underway today with businesses and governments focusing much more on systematically building emerging technologies into new and exciting capabilities at scale.

Mobility systems are a good place to look for change of this type in the coming year. Ride sharing has already transformed the mobility landscape for passenger vehicles and 2020 looks to be the year benefits of machine learning algorithms and use of connected smart devices in public spaces begin to be truly felt by Australian commuters.

This is happening in China, where Alibaba’s efforts at managing road networks in major cities using AI (City Brain) has resulted in a 17 per cent increase of public bus use and halved emergency vehicle response times in Hangzhou. In its first foreign project, City Brain has reportedly shaved 15 minutes off the average commute in Kuala Lumpur.

Closer to home, the NSW government’s success at leveraging open data around public transport systems in Sydney — which allows commuters to remotely monitor how full carriages are — is another example of authorities investing in public technology goods that support greater system-level efficiency.

Another important shift will be from pilots to full launches. Following an 18-month world-first trial in Canberra, Project Wing (part of the US-based X, founded by Google parent company Alphabet) successfully demonstrated that Australians are pleased to receive their latte, burrito or filled prescription by autonomous drone, lowered on a wire to their driveway. In 2019 the Civil Aviation Safety Authority cleared Wing Aviation to operate ongoing drone deliveries in selected suburbs in Canberra and Queensland.

For directors, this prospect of entire systems changing presents a major strategy challenge. It requires being extreme when assessing corporate strategies against different plausible scenarios for future market structures and being more creative. And, given that new systems require new value chains, it will warrant exploring interesting new partnerships among parties you’d not normally expect to see collaborating.

Solving for sustainability

Australian companies are remarkably sanguine about the world’s changing climate. This is likely to shift in 2020 as the costs bite into corporate reputations, profits and perhaps even pose an existential threat.

Take the January 2019 bankruptcy of American utility Pacific Gas & Electric (PG&E) as an example. It could well be the first climate-change bankruptcy in modern history, thanks to the financial burden of PG&E being declared the cause of California’s deadliest, most destructive wildfire, the 2018 Camp Fire. PG&E’s infrastructure and technology systems weren’t adapted for the fact that the state’s hottest and driest summers on record have all occurred in the past 20 years.

In the AICD Director Sentiment Index in the second half of 2019, Australian directors nominated climate change as the third biggest economic challenge facing Australian business — and 44 per cent thought climate change should be a federal government priority in the short term.

In 2020, this mood can only increase as public pressure, financial risks and legal threats become far more significant for firms.

Thanks in part to the rising visibility of climate champions such as Greta Thunberg, the changing climate has become the primary environmental concern for people across 28 countries polled by IPSOS in February–March, including Australia (44 per cent).

As rising public pressure turns into widespread action, boards will have no choice but to pay attention.

Sustainability is not just an increasingly popular concern. The Reserve Bank of Australia called out risks from climate change in its October 2019 Financial Stability Review, arguing that physical exposure, the cost of transition and reputational risks significantly threaten the Australian financial sector.

This comes on top of the legal risks that have been telegraphed for both firms and directors. Referencing the landmark 2016 Hutley legal opinion (on directors’ duties in relation to climate change under Australian law), the RBA report noted: “[Australian] Firms also face legal risks if directors fail to address the potential exposure of their firms to climate-related risks”.

New legal risks linked to environmental impact are part of a global trend: the London School of Economics Grantham Research Institute on Climate Change and the Environment found plaintiffs have turned to the courts to litigate for climate action in 28 countries to date, posing a significant financial and reputational risk to firms regardless of the success of the case.

Aside from risk concerns, there may be opportunities in rethinking business models. Thus, greater board focus on sustainability seems warranted for the year ahead. A focus on more sustainable business operations will have a critical bearing on all kinds of technology-related choices for firms — from source material used for packaging to the carbon cost of your delivery network.

In addition, boards need to be aware emerging technologies can be huge consumers of energy. All of this implies directors should make sure to address climate and environmental risks in all aspects of corporate governance — including in forward-looking technology strategy.

Increasingly fractious geopolitics of technology

A fourth trend that crosses technological domains is how differing approaches to technological development among the world’s major powers is threatening to divide the world in ways that could unwind many of the aspects of globalisation that consumers and companies take for granted.

As foreign policy expert Dhruva Jaishankar has written, three different models of technology development, commercialisation and data use have emerged in China, the US and Europe. Broadly-speaking, the European Union privileges consumer rights over enterprise efficiency, as best evidenced by the advent of the GDPR, and is stepping up its investment in public research funding and innovation grants such as the €94.1b Horizon Europe research and innovation proposal. The US has given more latitude to fast-growing firms, even where these seem to create new market distortions or threaten consumer rights. And China has developed a new form of state-backed technological competition where citizen data is widely shared between the government and private companies. These factors, when combined with a locally competitive, yet globally protected digital market and significant financial resources, has lead to Chinese firms such as Alibaba, Huawei, Tencent and JD.com being able to compete successfully with US and European tech giants.

This diversity of approach has already led to geopolitical tensions and trade disputes. Following the Australian government’s ban of Huawei in August 2018, the US government put Huawei under an export ban in May 2019, effectively excluding it from US telecommunication networks. In October 2019, some of the world’s leading facial-recognition companies, all of which are Chinese, were added to the list by the US Department of Commerce.

China has responded to the bans with diplomatic overtures, making robust appeals directly to companies and has reportedly considered banning rare earth exports to the US. Early in 2019, there were fears that delays around Australian coal imports to Chinese ports were linked to the Huawei ban.

Meanwhile, European companies are doubling down on regulating the technology sector. Following a skirmish with Google over how publishers could be compensated for use of their material in search results, France has pushed for the European Commission to regulate large digital platforms as “systemic” players, in ways similar to influential financial organisations.

For directors, global technology tussles might seem just one more reason for boards to pay attention to geopolitics. But rather than seeing technology as one more pawn on the chessboard of trade wars, directors might reflect on the inverse — that trade agreements are being used to try to control the future of technological systems in ways that pose significant risks to the Australian economy.

Beyond the threat of disruption these can cause to Australian companies, such attempts may ultimately backfire by simply slowing the rate of technology adoption where it is most needed. On this point, as 2020 begins, it’s worthwhile diving into Kai-Fu Lee’s book, AI Super Powers, which puts forward a compelling case for the ways in which Chinese and US companies are competing on artificial intelligence — and the advantages China has on the application side.

Skills shifts become personal for directors

Boards and directors will be under even greater pressure to understand how emerging technologies affect both organisations and markets. While in past years it was possible to delegate technology issues to your CTO or resident tech nerd, the trends, the AICD Driving Innovation: The boardroom gap report highlights that understanding the dynamics of technology and its impact on corporate governance and business strategy will be a job for all board members.

For directors, this means taking very personally the fact that new technologies are changing the demand for skills at all levels of organisations.

The World Economic Forum’s The Future of Jobs Report 2018 argued that 42 per cent of core skills will be different for any given role by the year 2022. Over the same period, the report found that to be effective, every employee will require an additional 101 days of reskilling.

Boards and directors will need to ensure they step up their investment in knowledge partners, advisers, training courses and experiences — because directors, on average, will require 101 additional days of reskilling during the next three years.

If you break this down, it means that you, personally, should plan for approximately 20 five-day weeks of training between now and 2022.

Given your current commitments, what has to change to fit six or seven weeks of full-time Skill development into your to-do calendar for 2020?

Nicholas Davis is former head of Society and Innovation at the World Economic Forum and co-author of Shaping the Fourth Industrial Revolution. He is managing partner of Geneva-based consultancy SWIFT Partners, professor of practice at Thunderbird School of Global Management and an adjunct professor at Swinburne University.

Read, reflect and realise

As you prepare to head back into the boardroom at the beginning of 2020, keep these five trends in mind. And if you’re interested in expanding your thinking about these topics, consider diving into one or more of the following resources:

• Azeem Azhar’s Exponential View 
• Climate change a growing focus for boards
• Global Risk Institute
• Alphabeta Future Skills report