The just concluded World Economic Forum in Davos, Switzerland, was a time for world political and business leaders to come together to think bigly. But it would be a mistake to think that a confab of leaders would produce the last word on anything though you can certainly see the outlines of the future from what they all said.
From another perspective though, Davos, looks like an echo chamber of the bright and the powerful talking about what would be good for them, not necessarily what would be good for the global community. An article from the conference by Joe Kaeser, president and CEO of Siemens, AG provides a synopsis of the meet-up and its ideas giving a strong and unintentional implication of what could go wrong.
He begins with a big idea percolating at the conference, the Fourth Industrial Revolution:
Although we have only seen the beginning, one thing is already clear: the Fourth Industrial Revolution is the greatest transformation human civilization has ever known. As far-reaching as the previous industrial revolutions were, they never set free such enormous transformative power.
This would be the first time a revolution of this type was telegraphed in advance. Usually they are discovered by historians and other social scientists trying to figure out how we got here. Kaseser implies we know where we’re going and we do but only in a general sense. We need to maintain some respect for randomness as expressed by Ian Malcolm, the character in “Jurassic Park”. Malcolm was always reminding us to consider the unknown unknowns. For him it was living things mutating, for us it’s the free market, mutating. As for great transformations, let’s not forget inventing agriculture and civilization back in the Bronze Age.
Kaeser’s piece is really a self-serving paean to technology, which his company knows a thing or two about. But it should not be taken as a recipe for future success. He writes,
If we get the revolution right, digitalization will benefit the nearly 10 billion humans inhabiting our planet in the year 2050. If we get it wrong, societies will be divided into winners and losers, social unrest and anarchy will arise, the glue that holds societies and communities together will disintegrate, and citizens will no longer believe that governments are able to fulfill their purpose of enforcing the rule of law and providing security.
Acknowledging there will be 10 billion of us on this tiny planet by mid-century is good. But it would be better if he acknowledged that there are more than 60 million people on the run from their countries according to the UN, because they are (mostly) climate refugees. Another 780 million people live on less than $1.90 per day. Provisioning for these, and other, classes of unfortunate people, classes that are likely to grow by 2050, should be something that Siemens and the other engineering and tech companies at Davos will of necessity have a hand in. Absent that the descendants of the politicians in attendance will have some harsh conflicts to settle one way or another.
Last week the New York Times ran a story that could easily foreshadow a more dystopian world at mid-century. In “Warming, Water Crisis, Then Unrest: How Iran Fits an Alarming Pattern,” Somini Sengupta writes of the devastating affect climate change has on the world community,
Nigeria. Syria. Somalia. And now Iran.
In each country, in different ways, a water crisis has triggered some combination of civil unrest, mass migration, insurgency or even full-scale war.
It traces how declining water resources turn farms to wasteland incapable of producing crops to feed domestic populations. Sengupta writes of Syria,
Its drought, stretching from 2006 to 2009, prompted a mass migration from country to city and then unemployment among the young. Frustrations built up. And in 2011, street protests broke out, only to be crushed by the government of Bashar al-Assad. It piled on to long-simmering frustrations of Syrians under Mr. Assad’s authoritarian rule. A civil war erupted, reshaping the Middle East.
The Syrian mess, along with Nigeria, Somalia, and the potentially nuclear tipped Iran, could give very different meaning to Kaeser’s trope “If we get it wrong, societies will be divided into winners and losers, social unrest and anarchy will arise.” By the way, that’s not even all of the bad news. The Times article also offers this,
“The World Resources Institute warned this month [January 2018] of the rise of water stress globally, “with 33 countries projected to face extremely high stress in 2040.”
You can count China and India in that group right now. Both countries have nukes and they might also have the wherewithal to escape that eventuality but others might not be so lucky.
It’s great that Davos turned its attention to the world at mid-century. But it would be greater if they and we didn’t stride around thinking that we have it all figured out. We don’t. The free market and human behavior can assure us of this. The problem of too many people and not enough resources should be top of mind in a gathering like this for if we can’t discuss these hard issues at Davos, where can we discuss them? And if the answer is that we can’t discuss them anywhere then what’s the point of rich people swarming over the Swiss Alps in winter like ants at a picnic?
Discussing 4IR in mostly technological and economic terms short-changes everybody. It frames a discussion of the future that only extends the current technology paradigm but doesn’t replace it. The paradigm has served us well but the demands of the future include more jobs and more resources to support more people, not automation and commoditization. They are polar opposites.
But the free market is operating just fine. Next year virtually every carmaker on the planet will begin bringing out electric vehicles in quantity. That is a signal event that will transform the world creating new market demands and reshaping the world. It will help to determine, what we make and how we sell it and where and how we live. That’s a revolution. Davos will catch up but as a fast follower and not as the innovator it fancies itself.
I attended a Siemens analyst event last week in which they announced a new product called Project Ansible. In a quirky embargo between us I am able to say that much and a bit more but I must point out that their full details will be available after July 16. Generally speaking Ansible concentrates on unified communications but I will defer till July any further descriptions or discussion of roll out and roadmap.
That notwithstanding, Siemens has caused me to do some deep thinking about product category rollouts and their lifecycles and that has made me go back to Arnulf Grübler’s classic, “The Rise and Fall of Infrastructures: Dynamics of Evolution and Technological Change in Transport”. Grübler was associated with the International Institute for Applied Systems Analysis in 1990 when he published this and while the book might be getting old, it still offers some great insights.
Grübler traces transportation from the days of canals through the beginning of air transport after World War Two and yes, there is an important CRM component to this. If you look at the figure supplied here, you notice that each type of infrastructure has its rise and fall, as the title implies and as the S-curves amply demonstrate. If it looks like the curves were traced over by a fourth grader, it’s because the idealized shape is imposed on actual data. See how well they overlap?
The 55 year span between peaks of each curve is also significant as it represents a “long wave” interval first recognized by Kondratiev and others. It is the duration of an economic wave or paradigm and there is a great deal of writing available on this subject. Quick question: Where are we on the IT long wave? If we assume it started in about 1960, this paradigm where we all earn a living is getting old. But I digress.
Here’s what’s most interesting to me. Canals were developed to move heavy raw materials like coal and iron ore (and later some finished goods) from the mines to the factories. But they were replaced by railroads that, in addition to moving freight, began doing business transporting people. In each case, the transportation mode supported a kind of communication.
Canals moving raw materials had little need to be more explicit communicators. Directions, bills of lading and the like were hand delivered on paper with the order. Rails, on the other hand, began to move people associated with raw materials as well as finished goods. People came along to sell the goods and train others about them. People also came along to provide pure services. Ball teams, politicians (arguably), business people, and circuses all traveled by rail and their principle interest was either communicating ideas or delivering a personal service to patrons. Life became richer because of transportation.
Rails also moved people not associated with goods too, people on private business and those bringing information from place to place. It is also no coincidence that the telegraph spread at the same rate as rails, at least initially. When pure information was the only thing to be transported, telegraphy was better, faster, and cheaper than sending a body.
Roads accelerated the trend started with rails of enabling movement of goods, people, and it should be said, ideas. Newspapers, for instance, extended their reach with trucking and eventually the telephone working on the same or very similar infrastructure replaced the telegraph for most voice communication.
The revolution in air travel has gone differently. While airfreight has gained an important and lucrative part of the transport market — sending an over night package is no longer cheap — air travel has not replaced roads and rail to the extent you might have expected. We travel long distanced by air but the flying car never took off due to energy concerns and because humanity’s dreadful driving record is no endorsement for making everyone a pilot. But the communication theme remains in place. People fly to communicate ideas in business and to communicate on a more personal level when flying for pleasure. But lurking in the background is the new fangled Internet, which nicely takes on the functions of the earlier telephone and telegraph and which is competing with conventional transportation infrastructure.
We increasingly trade in information and not in goods and we have the ability to separate physical delivery of goods from virtual delivery of ideas. So, at least in some forms and for some needs, communication is in the process of replacing transportation.
The potential for disruption that this presents will be huge. For example, during 2009 (the latest year I have insight to, though there is more information on line) the U.S. Business Travel Association estimates that American business spent $234 billion in business travel costs. If business can find a way to communicate more through electronic means than by transporting people, that number will surely go down. It will hurt a part of the economy in the same way that the interstate highway system and trucking drove a few nails into railroads’ coffin. But it will also raise up a new industry and a new technology platform which might likely exceed the revenues of what is being lost. That’s the creative destruction that the economist Joseph Schumpeter wrote about in the 1930’s.
Unified communications — bringing together Internet, telephone, conferencing, software, video, and social media — has the capacity to be the disrupter of transport and the plain old next disruption. It might be the next thing on the horizon and the next platform we need to think about beyond ERP and CRM. Already Microsoft, Shoretel, ATT, Siemens, and many other vendors, have product sets that they are working to build out in this space. There is more work to do to bring so many disparate technologies together but that work is ongoing. There is also a great deal of work to be done explaining unified communication to a skeptical market. Naturally, there are early adopters to be found too. But I also think unified communication will inform how we think about CRM in the years ahead.
Sustainability and CRM
There was an interesting article in the New York Times last week, “When Flying 720 Miles Takes 12 Hours” about airlines but the subtext was all about CRM, or at least where CRM has to go. If you know me at all, you know I closely attend to macroeconomics and energy issues and they are all over this article.
The story documented how small regional airlines are having trouble in an economy where fuel prices are rising and there are fewer passengers willing to pay higher prices. The typical response you’d expect in such a situation is some combination of reducing the supply of seats and raising prices to enable the carriers to at least break even.
The article shows both but this is not a simple exercise from ECON 101. Higher prices and fewer flights signal stress on the economy because less business is getting done and that’s a downer economically speaking.
A few years ago a Forbes editor, Chris Steiner wrote, “Twenty Dollars a Gallon: How the Inevitable Rise in the Price of Gasoline Will Change Our Lives for the Better” that postulated what might happen to the economy as fuel prices rise. We’re right on time with his predictions, but I think there will be much change and dislocation before we see the promised land.
With fuel heading for five bucks a gallon, we are seeing mergers and acquisitions of sick air carriers along with fewer feeder routes according to the Times article and Steiner. As prices continue to escalate we’ll see fewer short hops and fewer long distance routes as airlines try to hang on.
But also, Steiner thinks places that exist on the end of an umbilical cord filled with jet fuel — Las Vegas, vacation destinations (think ski areas and islands in the sun) — will see a decline in the traffic that brings tourists and their cash. The immediate fallback position is cars, but gassing up a car that gets 12 or even 20 miles per gallon has already gotten old.
The secondary default position will be to get serious about alternatives and since trains and new cars or especially more hybrids are an expensive proposition the next steep won’t be travel alternatives but conservation in the form of travel reduction.
Just a few weeks ago people were talking about the resurgence in U.S. oil production. We went from producing 4.95 million barrels of crude per day to pumping 5.75 mbpd and French champagne started flowing. But the sad reality is that we need 19.2 mbpd every day and while 5.75 mbpd is nice, even getting up to the 9 or 10 mbpd optimists predict would be nice but still leave us quite a bit short. And those are today’s numbers, they make no accommodation for growth.
Even worse, in 2007 just before the financial meltdown, U.S. crude demand was 20,680,000 mbpd meaning that the recession has done as much to reduce demand as drill baby drill has done for supply. I dare say reduced demand will be easier to come by than increasing domestic supply.
When we think we have spare capacity we lose track of the longer-term need for alternatives and we stick with what we know. That’s one reason we don’t have a more aggressive energy and transportation policy. But when we’re feeling sanguine about energy we’re also riding an economic roller coaster up and then down because higher prices inevitably choke off growth. So we find ourselves in a position where the economy gets a little better then a bit worse with the peaks never reaching the previous troughs and the moving average is ever downward.
Alternatives do not simply mean smaller cars or windmills. If you can find a way to do business with fewer energy inputs, you could call it conservation but in reality you are developing an alternative path to profits and that’s where CRM can add so much.
First off, the huge move towards social technologies is one example of using alternatives. Social (along with analytics) enables us to communicate with and understand customers without jumping on a plane or into a car all the time for a face-to-face meeting. But there’s more. We are rapidly approaching a time when the videoconference has to replace at least some face-to-face meetings. Video conferencing can be easily built into CRM applications and as a stand-alone it is a great way to communicate with people.
Some companies are using video conferencing to knit together enterprises strung together across time zones and supply chains. Others are embedding video chat into customer service — another good practice because it produces a more intimate interaction and improves the customer experience.
Companies are looking over unified communications solutions right now but few seem to have the interest in pulling the trigger. That’s to be expected. Big companies like ATT, ShorTel, Siemens, Cisco and Microsoft are offering solutions though I don’t know any CRM vendor with an eye on the subject just yet. It’s too bad because I think unified communication is where social was about 5 years ago — on the periphery but moving inexorably into the CRM suite.
Given unified communications’ upside and relatively modest down side it’s a wonder to me why more companies — vendor and customer alike — are not swarming this solution class already. Business is a game of thrust and counter thrust and everyone must be ready for change or risk being road kill. This is our next challenge and CRM is right in the middle.