Strategic Plan

Megatrends

Analysis

PESTEL Analysis

Political	Economic Emerging business models Shift in global economic power
Social Demographic and social change Urbanisation	Technological Artificial Intelligence The fourth Industrial Revolution Nanotechnology
Environmental Climate change and resource scarcity	Legal

Insight Details

Artificial Intelligence

AI encompasses a variety of different methods. AI researcher Pedro Domingos explains that there are five basic approaches to machine learning, from neural nets that mimic the brain, to support vector machines that classify different types of information and graphical models that use a more statistical approach. (Source: Four Things Every Leader Should Know About Applying Artificial Intelligence To Business – Innovation Excellence published 01/11/2018)

Considerations:

• Artificial intelligence will destroy some forms of work whilst create new forms of work. No-one knows for sure what the net effect on jobs will be, but the skills required to succeed in the future will be different.
  
  The invention of the wheel in about 5,000 BC meant that you needed fewer people to move a heavy stone block. Instead of making the rest redundant, they simply started moving more and larger stones. The same can be said for steam power, electricity, and computing power, and there is little reason to believe that the same will not be true of artificial intelligence, and whatever follows it.
  
  
• As machines take on more and more complex roles, the ethical considerations become more complex. For example, in a situation where the death of either a passenger or a pedestrian is unavoidable, how should an autonomous vehicle choose?

Emerging business models

There is a gradual shift from business models predicated on selling products to business models predicated on service subscriptions, shared ownership and rental:

• Netflix and Spotify allow members to pay a monthly fee for streaming access to their film and music libraries.
• The Dollar Shave Club allows members to pay a monthly fee to have razor blades sent to them on a regular basis. (Source: Subscription models of financial advice emerge - FTAdviser.com)
• Subscription models of financial advice are emerging in the US (Source: Subscription models of financial advice emerge - FTAdviser.com)

There is further an emergence of two side markets:

• Uber
• AirBnb
• Amazon Markets

Personalisation and Mass Customisation

Since the second industrial revolution, commerce has been driven by economies of scale: standardising products and services and then flogging them to as many people as possible. (Think of the Model T Ford, available in any colour as long as it is black!)

But that is changing. Technology is allowing firms to deliver services personalised to individual customers and customised to increasingly small customer segments.

This is enabled by technologies such as Artificial Intelligence, 3D printing. AI allows firms to line about customers on an increasingly granular level, whilst 3D printing allows them to personalise products for those customers.

Examples:

• Shapeways profiles customers before sending them a selection of clothing. The customer buys what they want and returns the rest. The AI learns from these choices and then sends a better selection next time. (Source: Bigger Is No Longer Better When It Comes to Consumer Brands published 29/08/2018)

Climate change and resource scarcity

• As the world becomes more populous, urbanised and prosperous, demand for energy, food and water will rise. But the Earth has a finite amount of natural resources to satisfy this demand. (Source: Megatrends - Issues - PwC UK)

The fourth Industrial Revolution

The first Industrial Revolution was powered by the invention of the steam engine. The second was powered by electricity and characterised by the development of the mass production assembly line and the division of labour. The third was powered by the development of the digital computer. The fourth is being powered by artificial intelligence.

(Image source: 4th Industrial Revolution Will Change Companies from the Inside – Innovation Excellence)

The fourth Industrial Revolution is powered by a combination of:

• Artificial Intelligence and machine learning,
• the Internet of Things (IoT),
• additive manufacturing or 3D printing, and
• robotics

BNY Mellon has described it as "the convergence of physical and digital that can create a digital feedback loop leading a specific outcome in the real world." (Source: The many faces of Industry 4.0)

The digital revolution has no boundaries or borders. It is changing behaviour and expectations as much as the tools used to deliver new services and experiences. (Source: Megatrends - Issues - PwC UK)

Demographic and social change

• By 2030 the world’s population is projected to rise by more than 1 billion. Equally significantly, people are living longer and having fewer children. (Source: Megatrends - Issues - PwC UK)
• By 2020, the spending power of people aged 60 and over will reach an estimated $15trn. (Source: Are megatrends simply hype or a serious investment opportunity?)
• The millennial generation is growing and could soon be one of the largest in history. (Source: Are megatrends simply hype or a serious investment opportunity?)

Shift in global economic power

Some emerging economies that were growing rapidly are now in recession. Commodity prices have played a considerable role in sending these economies into reverse. (Source: Megatrends - Issues - PwC UK)

Urbanisation

• Today, more than half the world’s population live in urban areas and almost all of the new growth will take place in lesser known medium-sized cities of developing countries. (Source: Megatrends - Issues - PwC UK)