Business in the age of disruption

The speed of change brought about by technology and disruption can be scary but at the same time, exciting. It brings with it challenges and opportunities.

There are over 150 emerging technologies; of these, PwC selected eight that are considered to have the most significant global impact across industries.

1. Artificial intelligence (AI) refers to technologies that perceive and learn from their environment, then act based on that information. A subset of AI, machine learning, focuses on the development of computer programs that can teach themselves to learn, understand, reason, plan and act when fed with data. Machine learning carries enormous potential for the creation of meaningful products and services—for example, hospitals using a library of scanned images to quickly and accurately detect and diagnose cancer, insurance companies digitally and automatically recognizing and assessing car damage, or security companies trading clunky typed passwords for voice recognition.

2. Augmented reality (AR) is a visual or audio “overlay” on the physical world that uses contextualized digital information to augment the user’s real-world view. AR-enabled smart glasses help warehouse workers fulfill orders with precision, airline manufacturers assemble planes, and electrical workers make repairs.

3. Blockchain is a distributed digital database or, more broadly, a digital ledger that uses software algorithms to record and confirm transactions with reliability and anonymity. Blockchain has the potential to usher in an era of autonomous digital commerce.

4. Drones are small aircraft without a human pilot. It can be used for wide-ranging reasons, including surveillance, survey, sport, cinematography and delivery.

5. The Internet of things is a network of physical objects—devices, vehicles, appliances—embedded with sensors, software, network connectivity and computing capability enabling them to collect, exchange and act on data, usually without human intervention.

6. Robots are machines with enhanced sensing, control and intelligence used to automate, augment or assist human activities. These applications are transforming manufacturing and nonmanufacturing operations with new capabilities that address the challenges of working in changing, uncertain and uncontrolled environments, such as alongside humans without being a danger to them.

7. Virtual reality (VR) abolishes logistical limitations and makes anything possible. In a computer-generated simulation of a three-dimensional image or environment, viewers can use special equipment to interact with the simulation in realistic ways. The gaming and entertainment industries are obvious proving grounds for VR. However, VR has the potential to transform many other industries as well, especially in the realm of experiential training where workers can be put into hazardous, difficult or cost-prohibitive situations without the intense risks associated with these activities in the real world.

8. 3-D printing creates three-dimensional objects based on digital models by layering or “printing” successive layers of materials. 3-D printing relies on innovative “inks,” including plastic, metal and, more recently, glass and wood. 3-D printing has the potential to turn every large enterprise, small business and living room into a factory. The construction industry is now looking at 3-D printing your house.

In line with this year’s Management Association of the Philippines (MAP) International CEO Conference, we tackled the theme of “Business in the Age of Disruption.” A total of 114 CEOs and business leaders answered the survey, with about 40 percent from large organizations and 60 percent from small, medium and microenterprises. It is noteworthy to mention that 15 percent of the respondents identified themselves as startups.

Globally, the business landscape has changed. In fact, 94 percent of the survey respondents believe disruptive innovations have changed their industry over the past 10 years—in particular, shifting from being product-centric to focusing more on consumer experience.

Uber and Grab are still providing transportation service, but more than that, they offer convenience. Netflix offers entertainment with wider choices, on demand and on various devices. Amazon offers the same goods that you can buy from the shops but with 480 million products listed, no mall in the world is bigger than that. In these instances, technology is not the disruptor but rather the enabler, the tool used to deliver more value to customers.

With this in mind, 68 percent of the CEOs and leaders surveyed believe that they will need to change their business models in the next three to five years to cope with the evolving business environment. Of this, 80 percent are looking to change how their products and services are created and delivered to customers.

Yet not all organizations are technology-savvy. Given the role technology plays in all major disruptions, 47 percent of our CEOs prefer to enter into some form of commercial agreement with technology providers while 34 percent choose to create their own technology so they can have better control.

In our interview with Edwin Bautista, CEO of Union Bank of the Philippines, he pointed out that, “In the Philippines, the banks are not yet feeling them (fintech startups) because they’re targeting the unbanked or underbanked sector. They are getting traction. The problem is, these players will eventually dominate the mass market because their approach utilizes a lot of technology, such as data science, robotics, artificial intelligence and use of algorithms. While these new players target the mass market, they will eventually move up the food chain—from the mass market to the retail segment and eventually to the wealthy customers. The traditional banks are forced to move up the food chain, and the banks will start competing and will have a smaller market. Competition will intensify, and the margins will eventually go down.” He added that they are partnering with a lot of fintechs as they see that many of these startups have great ideas and enthusiastic founders.

We have seen a number of these fintech startups beginning to gain traction. Magellan Fetalino, founder and CEO of Acudeen Technologies, Inc., reported, “Our volume in 2017 was around $3 million, and we were serving 200 SMEs (small and medium-sized enterprises). This year, in just six months, our volume reached $6 million and we’ve provided financing to 400 SMEs. Our bank partners were saying that we’re now even bigger than some rural banks. The banks were saying that our performance was impressive, and that we need to work together to make it more beneficial for the ecosystem.”

The fourth industrial revolution is changing the way we do business, the way we collaborate. So it is not surprising to see that 79 percent of our CEOs say that they will form strategic partnerships, and 75 percent say that they will invest in new technologies. In certain cases, working with startups is also a strategy that 45 percent of our leaders are looking at. Recently, we have seen more transactions involving traditional businesses investing in or acquiring startups. And they do not just invest in their own verticals. Take for instance Coca-Cola’s investment in Spotify. Startup and corporations can interact in different ways where both emerge as winners. Startups can show corporates how to be agile again. In today’s market, speed to market is more important than bringing a perfect product. Startups can be the R&D group, constantly looking at ways to innovate. They also bring fresher outlook and revitalize the aging culture of corporates. On the other hand, corporates can provide startups financing and access to its business network. This will give startups credibility and a form of validation.

Disruptions, together with the opportunities and challenges that they bring, should be at the core of every organization’s strategy and top of mind of every CEO/business leader. To borrow a quote from Facebook’s Little Red Book, “If you don’t create the things that will kill Facebook, someone else will.”

To know more about the results of the PwC MAP 2018 CEO Survey, please visit www.pwc.
com/ph/ceosurvey.

This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or MAP. The author is a member of the MAP Trade, Investment and Tourism Committee, and the Deals and Corporate Finance Managing Partner of Isla Lipana & Co./PwC Philippines. Feedback at [email protected] and [email protected]. For previous articles, please visit .