Creating industries of the future: where do the biggest opportunities lie?

In early 2015 an international group of thought-leaders comprising early-stage investors (Angels, seed funds & VC), serial entrepreneurs and futurists got together to contemplate the future. The following is a brief summary of this private and informal journey into possibility and opportunity followed by a quick update.

Disclaimer – this is just one group of perspectives and perceptions. Only hindsight can really say what is right and wrong, and even then perspectives matter. This is a group of individuals looking from the viewpoint of the next wave of start-up companies addressing the world from an Australian and Asian context.

Trends we spotted in early 2015:

1. Today the biggest growth in computing and communications technology-based business innovation is being driven by ego-centric consumer retail services and products.
2. Tomorrow there will be a shift back to business optimisation and performance but, around fully distributed, cloud-based, always-on infrastructure and the emerging business models that are disrupting the established industry structures.
3. As the centre of gravity of growth shifts away from the USA towards Asia there will be a shift away from the habit of excess consumerism that props up the USA economy.
4. Broadly change is being driven by a prolonged phase of business model innovation rather than fundamental technology disruption. However, in the life sciences in particular we are seeing a continuing rapid development of new technologies, each enabled and facilitated by each other. In this space, business model innovation has not yet caught up so looking ahead we can expect to see a lot more disruption of the health sector industries.
5. Banks, financial services and governments stand out as the fat and slothful dinosaurs ripe for disruption. The technology has arrived in the shape of block chain, peer-to-peer networks, smart phones and cloud. New business models that deliver equivalent or superior security while radically reducing costs and red-tape will fundamentally change the shape of these foundation stones of our economies.
6. The Internet and ICT generally is rapidly becoming a huge consumer of electricity and consequently, the an important factor driving production of greenhouse gases. While fundamental science will still take some time to address critical aspects such as battery chemistry, room-temperature super-conductors and super efficiency photovoltaic cells there is enormous opportunity for improvements in energy efficiency. Photonic computing, intelligent battery management, energy sensitive networks, energy scavenging, data centre design optimisation and software controlled distribution can help shift the ICT load from the forecast 4% of electricity consumption in 2020 to a much more modest level.
7. The emerging economies of the Developing World will achieve scale in new technologies and new business models due to a lack of legacy barriers, low cost of operation and the attractive business model combining doing well with doing good.
8. Automotive platforms, household duties, industrial roles, space exploration, agriculture, food processing and more will be changed dramatically by the availability of smarter and cheaper robotics and artificial intelligence.
9. The advent of Big Data will mature as the tools of data mining, analysis, synthesis, fusion and presentation become widely accessible, affordable and tuned by the demands of users with improving insights into the questions they are asking of the data. Issues around privacy and security will continue to be high on the list of concerns. The evolution of new database models will be required to fully exploit the potential of Big Data and is likely to lead to some fragmentation of the highly concentrated database software industry sector.
10. The Internet of Things is happening and its impact will be disruptive as applications evolve beyond single use models. Pervasive availability of a wide range of sensors, data fusion, monitoring and beacons will bring location-based applications indoors, deliver mass customisation to shopping experiences everywhere and raise additional concerns about Big Brother oversight by governments and corporations.

So, a year later, what is happening?

1. Ego-centric consumer retail continues to thrive but, as the market gets noisier and consumers are driven by their faddish, fickle natures the ventures in the space are returning to the traditional shape of retail. Enormous capital requirements, large human labour force required, a strong complement to on-line brands through the establishment of bricks & mortar identities.
2. Business optimisation is happening at both the retail and the enterprise level. There is a return to genuine enterprise grade solutions rather than just little apps addressing symptoms of issues. However, the new enterprise solutions are agile, adaptable and can be implemented rapidly for relatively small amounts of money. This is shifting the risk of new technology solutions more into the management and culture realm than the purely financial and technical model of the past.
3. The USA is fighting hard to stay in front. Its economy is struggling and its leadership is faltering but, it has a long way to fall. Asia growth has slowed and the export of American consumerist culture is making inroads. The troubled European community is not helping but, strong focus by China, India and Japan on industrial exports and for the former two, substantial improvements in living conditions are sustaining the Asia Rising model. China is the number one or two trading partner for almost every one of the top 20 industrialised nations. Chinese and Indian consumers pursue brands differently to Western consumers and prefer to buy long-term value over short-term economy. The clash of American excess consumerism with Asian brand consumers is generating a lot of noise and we expect a new, hybrid model to emerge. Most likely everyday commodities will increasing be sourced as local brands at highly competitive prices while prestige goods will continue to be sourced as foreign (Western & Japanese) brands.
4. The business model innovation has seen the rise of the Unicorns, an increasingly crowded club of rapid growth companies valued in excess of $1b by market cap or investment transaction. The bubble this has promoted in the American venture capital space is spilling out all over the world. As the challenge of differentiating and justifying valuations gets harder there is a slow shift back towards technology innovation. Israel, with its focus on solving really hard problems, is noteworthy in this shift. The strong technology innovation of life science continues with the commercialisation of new gene manipulation technologies, radically improved imaging tools and rapidly expanding diagnostic systems taking advantage of the scale of cloud-based processing.
5. Banks, financial services and governments are still dragging their feet. Innovative start-ups are rapidly chipping away at the foundations and changing consumer/customer/citizen expectations. The strong regulatory barriers that these corporate and government players share between them are being used to insulate them against change. However, sticking your head in the sand ash never been a very good long-term survival strategy.
6. The Global e-Sustainability initiative reported this month that greening by ICT could enable a 20% reduction of global CO emissions by 2030, effectively holding ICT emissions at 2015 levels. Further, ICT can reduce global CO emissions by an amount equal to approximately 10 times its own carbon footprint. The report notes that the overall effect of greening ICT could generate more than $11 trillion in sustainable benefits annually - saving 300+ trillion litres of water, reducing demand for oil by 25 billion barrels and by 2030 potentially give 1.6 billion more people access to medical services via telemedicine and provide 500m+ with education via e-learning tools.

The GreenTouch Consortium launched in 2010 with the ambitious goal of realising a 1,000 fold improvement in communications network energy efficiency by 2020. They did much better!!

If networks in 2020 are built using technologies from the GreenTouch portfolio, they would consume 98% less energy than those of 2010. The annual energy savings would be equivalent to eliminating the greenhouse gas emissions of 5.8m cars and the networks would handle more traffic. Results included:

• 10,000-fold increase in energy efficiency in mobile access networks with traffic growth of 89 times;
• 254-fold increase in energy efficiency in residential fixed access networks, with traffic growth of 8 times; and
• 316-fold increase in energy efficiency in core networks, with traffic growth of 12 times.

1. This is still playing itself out. Mobile phone penetration in China is over 75% and smartphone over 50%. In India the numbers are 77% and 26% respectively. In Africa the numbers are 83% and 14% respectively. Africa is leading the way in developing new economies based entirely on mobile phones, most often texting. These include moving money, completing sales transactions, accessing goods market pricing data and long distance relationship communications.

Xiaomi surprised many with its rapid climb to challenge the world’s leading mobile phone brands. While there is little doubt that a Chinese brand will assail the top position it is now considered more likely to be Huawei.

1. The promise of robotics and artificial intelligence are finding expression in unexpected quarters. Rapid growth in drones and their multifarious applications is delivering us mobile robots. While we are still waiting for something more exciting than an automated vacuum cleaner in our homes, it seems that drones will be in our skies within a year or two.
2. Big Data is still there but, as people delve more deeply into specific applications and industries we hear less about the generic Big Data and more about the applications specific solutions. However, data analytics generally is the fastest growing segment of the data industry with new solutions being launched in everything from food to philanthropy, steel, to software, environment to economics.
3. IoT is here! The promise is not quite fulfilled, yet. The rapid availability of a first generation of relatively dumb sensors, beacons and devices has encouraged experimentation but, the system s have not yet been compelling enough for wide spread commercial adoption. There is still time for new entrants to make their mark with effective and economically viable systems that meet real needs in everything from the essential (energy, emergency, food) to the ephemeral (entertainment, fashion, gaming).

Prognostication is never easy and fraught with danger because the most significant changes are almost always the ones least expected. However, for those living their lives in the world of high-growth start-up ventures, having some sense of the where the future might go is essential. Short of discovering an actual oracle, our best hope is to practice some future-casting and frequently check back in on our guesses. With enough humility, dedication to the evidence and a persistent passion to imagine we just might get it right, some of the time.