Recently I was speaking about the future of tech and somebody asked how old world companies would compete with new world companies. Perhaps my response was a bit curt: I said that if any company thinks it is old world, then the chances are it will be dead in five years.
Here’s what I was trying to articulate: if you think that the pace of change is accelerating now, things are only going to get quicker.
Last week the Prime Minister expanded on the challenges facing the UK economy, as she pledged £2 billion more investment in research and development to keep Britain at the forefront of science and innovation. Managing the transition from an industrial past to a digital future takes time and resources - help from Government is gratefully received.
But we must stop thinking of technology as a single sector that we can consider investing in, when we are not putting money into the housing market or pork bellies. Technology is not a sector with its own unique growth profile but an enabler for every single business to grow and compete. It is essential to every single business and without it I do think that swathes of enterprises will meet their demise.
It took on average 119 years for the spindle to disperse beyond Europe, yet the internet spread across the globe in only seven years. Going forward, the cost of innovation continues to fall as cheaper smartphones will help bring 4 billion more people online.
The next stage of connectivity will move from people to 'things' with Cisco estimating 500 billion devices will be connected by 2030, up from 13 billion in 2013. Increasing digital connectivity is fuelling a data boom, with data volume estimated to be doubling every 18 months.
Now add to that the constant increase in processing power for every $1k spent and you have a continued perfect storm of data, processing and capacity. That is why things are only just getting started.
The pace of disruption to our traditional business models is getting really exciting. For every large corporation out there, there are now literally hundreds of start-ups, unencumbered by legacy thinking or systems, trying to eat their lunch.
For the last 10 years, the UK has lagged many countries in our productivity per employee. Part of the problem is that we have been creating lots of jobs (a good thing) faster than our economy has been growing - which has depressed wages. Looking back in history, two great periods of productivity growth occurred between 1920 and 1970, when innovations such as the telephone, cars, washing machines and passenger jets became commonplace. More recently, there was a leap in productivity in the 1990s, when the widespread introduction of the workplace PC helped companies produce more output per worker - at the expense of secretaries and other clerical workers.
Now there is an expectation that the internet revolution of the last 10 years will lead to leaps in productivity. After all, we are all constantly connected and often working. While we have yet to see the full impact of technology on our productivity, I believe it is coming. Just look at how in a very short time we have seen the explosion of artificial intelligence and machine learning.
According to a Bank of America Merrill Lynch study, 2014 was the third consecutive record year for the sales of robots worldwide, with a 29% gain year over year. Costs have declined by 27% over the past decade and are expected to drop another 22% in the next year, according to the report.
Investment in artificial intelligence was $14.9bn (£12bn) last year, and is on track to grow 50% this year. Spending on the Internet of Things will double over the next five years. The bank’s researchers conclude: ‘The pace of disruptive technological innovation has gone from linear to parabolic in recent years.’
An Oxford University study on the impact of automation on jobs predicted that 47% of jobs in US cities were at risk from automisation. In the developing world, that figure is even higher. An update to the Oxford Martin School/Citi study this year predicted that in the emerging economies of India and China 69% and 77% of jobs could be affected.
Artificial intelligence is growing at such a pace that we now have software that writes software. We have virtual call centres delivering better service than people-managed ones and we have accelerated new product and innovation processes.
We don’t quite know what advances are around the corner but we need to embrace tech, not push it back. If we do, the impact to our economy may be a multiple of the downside of any single short term factor such as the vote in favour of leaving the EU. No company and no sector will be left untouched and many still are too fat, too fragmented and offer a poor customer experience.
Tech as we know it as a sector is dead. However, to paraphrase Bill Shankley it is not a matter of life and death, it is much much more important than that. It is, and should be, the life-blood pumping through all companies. Let's embrace it. Long live tech!
Simon Calver is a partner at BGF Ventures and the former CEO of Mothercare and Lovefilm