Podcast transcript: What’s after what’s next?

19 min approx | 29 Jan 2019

Juliette Foster

Hello and welcome to The Better Question, an EY series of podcasts that answer the questions that will help you lead your business through this transformative age.

I am your host, Juliette Foster, and today, we are looking at megatrends, asking the better question, “What’s after what’s next?”.

An EY think tank, EYQ, has released a study that identifies 10 megatrends that will redefine many of the industries you currently operate in, and transform our working world over the next 3 to 10 years and beyond.

We’ll be speaking to two guests.

Janet Balis, EY Global Advisory Leader for Media & Entertainment and Marketing Consulting Leader in the Americas.

Chris Meyer is CEO of Nerve LLC, an innovation advisory firm, he also chairs EYQ’s Advisory Board and was heavily involved in the megatrends study.

I started by asking them to define what exactly we mean by megatrends.

Janet Balis

We're talking so much about how much disruption is impacting every industry to the point where I think disruption is almost cliché, right? Innovation is no longer an option; it's a mandate, it's an imperative that all companies need to follow. So, when I think about the megatrends and when I think about the work that EYQ is doing, it's really looking at that sort of 3-to 10-year time frame. And as we conceptualize what that future state looks like, what I think the big challenge is and the reason why this work is so important is we have to challenge ourselves to internalize what that really means for us as business leaders.

So, when I think about the megatrends, these are probably issues that are more for the C-suite, the CEO themselves, and it can be a lonely role, you know thinking about such big ideas. It's for the board to really contemplate that 3-to 10-year time line, so it doesn't come up and sneak up on you, but you’re really ready for it. Fundamentally if you're going to transform, to adapt and take advantage of these disruptive trends, it's really about thinking about them as opportunities, not as something to fear.

Juliette Foster

What is driving these megatrends?

Chris Meyer

We start by looking at three very long-term shifts: technology, globalization and demography, where these trends are creating new dynamics. So, for an example, if you ask about technology and technology has clearly been moving very rapidly lately. But five years ago, if we were here talking about the state of technology, we might have been talking about sensors and data. And by sensors, we'd include credit cards, we'd include the Global Positioning System (GPS) system on your phone, and that all leads to this idea of big data.

So now, we see as the new hot spot, what we're calling augmented humanity. And that means a set of technologies that allow technology and humans to work together, and this would include artificial intelligence (AI). It would include augmented reality. It would include robots and autonomous drones, and other vehicles. But it would also include some biological technologies and interfaces. Cochlear implants that really work for people. Exoskeletons for people who've lost a limb.

So that's an example of augmented humanity via these new technologies.

Janet Balis

If we think about what's happening around the world of emerging technology, this is an unprecedented moment because the applications are no longer gratuitous uses of technology where we're experimenting with virtual reality and trying to see what we can do with it because we can. We're starting to get to far more human ways to apply the technology. It's simply getting better. So, you see this in the interfaces. Things, such as virtual reality and augmented reality where suddenly the way I can engage with an experience is transformed.

When we talk about things, such as blockchain —suddenly, we're able to facilitate a transaction that would take enormous complexity if were to apply only humans to it. We can take processes, I’m working with clients right now to take processes, many of which are for entry-level workers, incredibly, frankly boring for the people doing those tasks, there’s a high churn in the kinds of people that you hire for those roles. And we're taking those processes, and because they're repetitive, because they actually do have a decision-making architecture behind them, if this, then that, you can actually take those processes and automate them.

And so, we're starting to put robotic process automation into place to take those either a whole process or those individual parts of processes that are really taxing, and frankly not that fun. And it's just making them so much faster, so much more efficient, and it's really reshaping how we think about autonomous technologies that can really interface with humans — as customers or as employees, and frankly make things a heck of a lot better. It's really exciting.

Juliette Foster

One of the megatrends the EYQ report identifies is something called the super consumer. Who is the super consumer?

Janet Balis

It's about taking away all the friction in everything we can do as consumers. Just think about voice. I mean we're going through a voice revolution when you can ask a smart speaker to tell you the weather — that simple thing just means we've taken the friction out of gathering information. And so, while the decision in that case might be what to wear, it also can be what to buy and what I'm going to need to buy. So, it's enabling decisions.

I also think you know we're, we're able to peruse a far greater set of options because artificial intelligence, or as we affectionately call it, AI, just allows us to peruse far more complex sets of decisions and options more quickly. So that's a way more empowered consumer.

And then I guess the third thing I would throw out there beyond the friction and the decision-making is that fundamentally the super consumer is able to enjoy an enhanced experience. So, we were talking about virtual reality before, it just makes things more fun, more entertaining and more immersive. So again, I might have more information if I'm going to contemplate traveling around the world and I can experience that place in the world through virtual reality. That's a way different set of stimuli to the decision I have to make. So that's a super consumer.

Juliette Foster

The EYQ report also identifies behavioral design as a megatrend of the future. What is that?

Janet Balis

To me, behavioral design is about thinking about experience, and really understanding the way a human will engage with something so that we're not trying to force it on them and teach them. It's that they want it because it's enhancing the way they can live or work or play. And so to me, that's a whole different shift and we're retraining ourselves in terms of how we design businesses because if you're experience-led, if you're human-led in the way that you develop your business model, it transforms the way you have to operate. We've been operating in a design-build-distribute world for a really long time. We have to flip the model which is to start with the end point, which is how is it going to connect with a human and then work backward to understand how we can innovate the things that we create for the world ahead.

Juliette Foster

So, Chris, we've been talking about the rate of change that companies and businesses will have to deal with. That is also a massive challenge for regulators. One of the megatrends you introduce in the study is adaptive regulation. Can you tell me about that?

Chris Meyer

We rely on government and regulation to literally regulate society. And the problems to be regulated change with every age. In the 1930s, we had monopolies, so we got anti-trust law and regulation. We had abuse of labor and we got labor laws. We had unsafe products being sold, and we got a food and drug administration speaking just to the US, but the problems have been similar everywhere during the industrial revolution.

Today, we do not have the doctrine needed to regulate the new problems. That's why net neutrality, for example, is a question of how we run our data networks, and it's been up and down for a decade because we don't know how to think about it yet.

So, regulation has got to become adaptive in two senses. One is the narrow sense that we can replace inspectors with sensors. We don't have to go into your plant and measure it for safety every six months or something; we can put sensors in there that tell us what's happening. All of that augmented humanity stuff that we've been talking about can automate some of this and make regulation adapt to the moment. But more importantly, it has to adapt to the economy we have. And we'll just take the issue of privacy.

Privacy is a very fuzzy term that we really have not thought about regulating. So let's talk about data access, data security and data ownership. What does each of those mean? We don't have regulatory doctrines for them. Data is becoming an increasingly valuable resource. We're going to need to develop that. And you can bet that it's going to be different around the world.

Janet Balis

The world's changing so quickly, and when you look at the way most public-sector officials were educated and the resources they have around them, we've got to very rapidly educate and surround regulators with a very different set of people to give them the expertise that they're going to need to navigate the future.

Juliette Foster

Another term coined in the EYQ report is future working worlds. What does that phrase mean and can you explain it in relation to another concept that's come out of the report, super-fluid markets?

Janet Balis

When you look at the work that EYQ did, it's these horizons. Right when we're thinking about the future, it starts with the primary force. It's what are these root causes? Then we get into the megatrends, we've been talking about which is that sort of 3-to 10-year time frame. When we get to future working worlds, we're really talking about 10 years out. Although you can see that they're starting to form at this moment.

So, for me, superfluid market is fascinating, and let's just take the term apart for one second. You know superfluid market is actually a phrase that refers to astrophysics, and it's the notion that a liquid can actually move in certain forms without losing any kinetic energy. So, put into layperson's terms, meaning for myself, it just means that things move more quickly and without any friction. And when we look at market places, that's been happening for a while. When we think about what digital does, it connects supply and demand more quickly than ever. Everything we've been talking about, from interfaces to the availability of data to the power of AI, all these things allow us to take a buyer and a seller, and instead of them doing hand-to-hand combat, suddenly we can do this globally, quickly, all around the world. And really the only constraint tends to be distribution and logistics, and physical operations. But the speed with which we can connect markets is just mind boggling. And so, we're seeing it happen industry by industry as they go through digital transformation.

Of course, I started media so that was one of the first industries to go through that supply and demand, connecting more quickly than ever in terms of how we sold digital media. But now, you can apply those same concepts to consumer behavior, business behavior. And to me, it's a powerful call to action to the C-suite, which is companies have to be able to keep pace with the markets as we look at superfluidity.

Juliette Foster

You mentioned at the beginning of our chat that the three forces behind the megatrends are technology, globalization and demographics. We talked about how technology is creating some of these megatrends — but tell me about how the current dynamics relating to globalization will impact businesses in the future.

Chris Meyer

So, populism is the facet of globalization we've identified this year as most important to focus on. It is a reaction to two strong trends. One is the shift of employment, away from what we'd normally call middle class to some combination of knowledge workers and robots. So, the employment available to a broad swath of the economy, of the labor force is diminishing. The second is winner take all results, which concentrate economic power in a few hands. And that too, if you look at any numbers is, is growing in a way that can't go on forever.

Now, populism itself cannot fix either of those problems. It can certainly be disruptive if you look at the revolutions of 1848 in Europe, they were essentially reacting to those trends as industrialization went on. But what can fix those is what EYQ calls a new social contract. And that's our future working world that says, “We need to figure out how we're going to live when actually we don't need everybody to work in order to feed, and house and clothe everyone.” You know we used to, for 100 years, we've been trying to get a shorter work week. Now, we're afraid it's going to get too short because it won't be distributed properly. So this is where the discussion of universal basic income arises. And it is a question of our age, nobody knows the answer today, but how will our society work when robots can do the work that we fundamentally need done to provide the basic life.

Janet Balis

I think it's incumbent on business leaders to play a far greater role in shaping the future of economies, of society. And I think we're seeing a real trend toward that right now in terms of the way brands are even being positioned to really take hold of that leadership and make it a reality.

Juliette Foster

So, speaking of leadership, given that the megatrends are by definition long-term trends, how do you recommend that today’s business leaders respond to the insight in this study?

Janet Balis

Yeah, when I look at CEOs and their boards, right now, the most important thing is for them to realize that transformation cannot be an ambition. It has to become a reality. This is not just about buzzwords, and talking about disruption and the need for innovation. You have to be committed to it. And in fact, when I think about transformation, we obviously do a tremendous amount of that in the Advisory services where I spend most of my time as a consultant. It's often not a challenge of problem solving. Yes, we have to think about organizational design and people. We have to think about process and work flows, and systems and technology. But that's not the big issue for CEOs and boards. This is about leadership. This is about commitment. This is about how do I drive change. And frankly, I think one of the hardest things that CEOs have to manage is actually the timing of this because they're balancing the present state and the future state. And not only is that mind boggling at moments from a strategic and an operational perspective, but financially. The financial strategy to support that in terms of capital strategy becomes enormously important. So to me, it's about making it real. Not talk, action.

Chris Meyer

We did some research last year, we called it disruption readiness, asking, “How capable is your organization of responding to this pace of change and degree of disruption?”. And it's the culture of questions, specifically how open is an organization to outside perspectives? How diverse is it internally enabling it to consider different points of view? How experimental is it? How does it use feedback? These are things you can do and must do today so that your organization is more agile tomorrow.

Juliette Foster

Are we having to build more agile business strategies to keep pace, if you like, with what is happening?

Janet Balis

Yeah, I think the cadence is totally different. When you look at agility as a notion, when we think about how most companies plan, they built a three-year plan, a five-year plan, they planned for the year ahead, then they broke down the year into budget cycles of quarter by quarter because that's when earnings were released. That cadence does not work at all for this new state. We've got to get far more agile. We've got to build a faster-paced cadence into the equation. That means moving talent capabilities around with more agility. That means thinking about decision-making in far more agile ways. That means thinking about product development in more agile ways certainly. And financial processes. I can't emphasize enough so much of the decision-making in companies comes from the cadence of when and how you get access to money. And if we don't change to get to a more agile financial world, it is really hard to imagine how companies can manage agility around business strategy.

Chris Meyer

And I would say, “It's, in the operating world, big companies are converging with start-ups in the sense of they're, they're a collection of capabilities, and they create interfaces, so you can bring in the new start-up or connect new pieces. And when they figure this out, the role of the company will be to be that agile financial funder of those different capabilities.”

And that’s it for today’s episode. As ever, the answer to a better question often leads to more questions. So let me leave you with a few to ponder.

  • Are you leading with enough commitment to the future?
  • How can you futureproof your organization now?
  • Are you moving fast enough to transform?

________

 

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Until next time, goodbye.

Disclaimer: The views of third parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were made.