 Good morning everybody from day four of the annual meeting of the World Economic Forum 2016 here in Davos and welcome to this press conference And welcome to everybody on the live stream as well The question we want to answer in this press conference today is what are industries facing in terms of digital transformation So it's at the very heart of the theme of this meeting the fourth industrial revolution And we're joined by an expert panel today to try and answer that question. So I Let me without further due introduce the panel to you to my immediate left I'm joined by my colleague Bruce Vinald Who is the head of digital transformation at the World Economic Forum right at the center of our panel? We're joined by Paul Daugherty who's the CTO the chief technology officer of Accenture and Last but definitely not least at the very end of the panel We're joined by Eric Brynjolfsson who's the director of MIT initiatives on the digital economy at the MIT Sloan School of Management Based in the US. He's also a member of our global gender council on the future of IT software and services Thank you very much for being here and Bruce Let me hand over right to you and ask you why is the forum working on that topic and what are we doing? Maybe you can provide us with some context, please. Yes, absolutely. Thank you very much, Georg so the World Economic Forum started this project a year ago on digital transformation of industries and the objective of this is to actually analyze the impact of digital and digitalization on industries amongst themselves and across industries as well as well as on the enterprise as well as on society and The idea behind this was really that the World Economic Forum is the one place where we can collect multiple industries and The public and the private voice and actually discuss the impact of digital which is quite Significant and it is also very much anchored in the theme of the fourth industrial revolution Which is the theme of this year's of this year's Davos So what we did is that we actually engaged over a hundred one over a hundred of our partner organizations We engaged in over 230 subject matter expert interviews across eight industries and Collected a lot of information on how digital currently is transforming everybody's life both in business as well as in society And we did this both from a perspective of analyzing a deep dive within the industries So we analyzed how industries are changing due to digitalization But we also identified the common themes and the common patterns and the common trends Which might have very different taxonomy in different industries, but ultimately if you boil it down It's exactly the same pattern. It's exactly the same trend and these impact industries very much in the same way so one of the key findings or one of the assumptions actually going into this project was that digital is very much a horizontal play and Not a vertical play and it is these cross-industry themes that we then discussed it was the theme around Digital consumption. How is digital changing consumption patterns both in a B2B as well in a B2C world It was a digital enterprise So if you think of digital consumption as the demand side of things then the digital enterprise has to respond to this demand It's the supply side of things. How do your products and services remain relevant? How do you set your organization up and what decisions do you make? The third topic that we had was the impact on society and there really we did some fantastic work some pioneering valuations and we tried to look at the valued stake of Digitalization for business as well as for society and the fourth topic was on platform governance And that is very much the discussion around scale versus monopoly The benefit of the platforms that are out there at a global level at the pan industry level and industry level versus the consumer consumer interests Thank you. Thank you Bruce Paul. Let me ask you at Accenture You're you're probably landing hand to many of the companies here represented here in Davos to to succeed in the digital transformation. So how's it? How's it going? Are you optimistic that they're that they're going to succeed? Yeah, very optimistic and we were very proud and pleased to have partnered with the World Economic Forum on the digital transformation of industry's work and if I look at the the broader arc of this that we see in the in the in the world overall is that you know if I look back a couple of years the discussions that we were having with With with leaders was around Digital they were what is digital there was they were trying to learn more about it If I look back even to last year in Davos and let you know last about a year ago The discussions were having with clients was again It's still trying to learn what it is and see how the digital effects spreading through some industries through You know through the media industry through the music industry etc people trying to learn from that and see how it applies to their business Where we are today is very different I think the lead it with the fourth industrial revolution in the theme of Davos here has really captured it and that the fourth industrial Revolution is really about the digital transformation of industries for business and for society And those are all very important words and leaders here in Davos You know what we're seeing this week are now they're not learning looking to learn about it They're not looking to observe passively what we're seeing in our business Globally as well as here in Davos is that leaders are engaging in their transforming their organizations They're transforming their businesses of their other organizations to take advantage of the digital opportunity But they're looking for the roadmap. They're looking for the guidance on how to transform I think that's the power of what what Bruce just described and the work that's been laid out of here initially the You know that the powerful implication here is that this is about business and society And the digital transformation as I'm sure Eric Eric will talk about it. It's a it's really a once in a Once in a generation certainly maybe once in a lifetime opportunity for a transformation driven by technology that we're seeing and It's a big prize that we see one of the things that that we've done That the team has done with the with this research is look to quantify the impact and the impact is big We see a hundred trillion dollar impact over the next ten years An opportunity created by by digital, but that's across Business and society and that's a really fundamental point that we might want to come back to which is Of the hundred trillion dollar opportunity most of that is societal benefit not direct business Benefit which is why the areas that Bruce just talked about the four horizontal things are critically important for us to work on To look at how we can take this from you know Take this from what the leaders are trying to do within their organizations to look at the What we need to do across industries within ecosystems across stakeholders with governments and regulators to really maximize the share of that Hundred hundred trillion that does really That does really accrue in a positive way to business society and improving the world overall And what the what this report really provides and I'd encourage everybody to really read the research because a lot of depth There is the North Star around how do we how do we guide and align the efforts that we're doing in line the discussions that we're having across Organizations so that this does accrue and the benefit accrues in a positive way To project the impact that we see being possible for business and society Thank You Paul Eric over to you. You're representing one of the most prestigious Institutions of higher education. What's your perspective? Particularly from there on the on the digital transformation. Do you share the optimism of Paul? I share the optimism I mean there's certainly a lot of challenges ahead of us as well, but ultimately we have an far power more powerful tools that are esposal than ever before You know there was a time not that long ago where people talked about you know that the digital industries And maybe they focused on the internet or the software industry But the reality is that now all industries are becoming digital whether you're in finance or retailing You see that the biggest most successful competitors are increasingly digital whether you're in manufacturing As well as in different functions in in marketing and human resource each of these areas Digital technologies are becoming the core value creators and Mark Andre sense evocative term software is eating the world And that means that some of those basic economics that we saw in the pure digital industries earlier You know a very low marginal costs a kind of I'd call it a shumpeterian Competition where you have to compete much more aggressively the you can rise very quickly if you've got a superior product And you leverage it using a digital platform But you can also fail just as quickly if a competitor comes out with a product with higher quality or that suits customer needs More easily so you can't count on the sort of a slower or more stable kind of world that we used to have of course You know the pure digital industries have we're experiencing this You know 20 30 years ago, but that's coming to every industry No one's going to be able to hide from it. No one should want to hide from it It's good news. If you do have a superior product Superior customer value proposition is not so good news. If you're not you're not going to be able to hide the way that you once were able to But the other thing that's important to bear in mind is that there are some big challenges as I alluded to This doesn't come automatically. It's not like you can go out and just buy You know digital strategy off the shelf or digital technology and be done with it in fact Most of the real Transformation comes in reinventing your business processes your strategy the way you organize your company The technology is a catalyst for all that and it makes it possible to do things you could never do before But in our research at MIT We found that that up to nine-tenths of the cost and the effort and ultimately the value comes from that transformation of business processes and Organizations that's enabled by the technology and in a way This is actually an old story if you go back to say electricity when it was implemented in in companies We saw that that it took up to about 30 years for companies to reinvent their business processes to take advantage of that Technology and these digital technologies are no less revolutionary and require at least as big a transformation of organizations and processes Thank You Eric Paul you want to add to that Yeah, I think the the way Eric framed the the challenges is very important because that's what this is all about is how do we work together to enhance and accelerate the benefits and the You know the challenges come into two different categories challenges that business leaders need to address within their organizations And that's one of the challenges there is how do you how do you deal with disruptive innovation in your business and manage the cycles through innovation culture and culture and skills the culture of the organization is something that Many companies are focused on including ourselves in terms of creating a culture that is more digital. That's more agile That's more able to move with the speed of flexibility. That's required in the digital economy So those are the types of things business leaders are Grappling with and are starting to transform in their organizations and then from a societal perspective We need to rethink, you know some things for example as we look in certain certain areas the incentives aren't aligned properly We need to look at the way Policies and regulations are formed in some of these areas to give one example think of the automotive industry the The research that we've done shows that when you look at the the benefits to the automotive industry There is a benefits of you know somewhere a little bit less than a trillion dollars that we see to the to the businesses to the You know that the companies in the automotive industry But a much higher value of the multiple billions of multiple trillions of dollars that are the societal benefits that will accrue That's in areas like better safety It's less less lives lost due to traffic accidents and such and then if you look at how the technology is being deployed You look at telematics for usage-based insurance policies and such the nature of the current economic opportunity for an industry in this case insurance Isn't really leading to the broad adoption of telematics across the automotive industry at the pace and scale that will Get us those societal benefits at the pace that we would really look to get them So that's what we mean by incentive alignment I think those types of issues are very important for us to address across you know across our business organizations and industries But also with the appropriate government and policy makers Thank you Paul Let me let me follow up on your question there and in Bruce you might step in as the forum person here on the panel You mentioned the public sector So we do have 40 heads of states here in Davos We do have about 300 ministers if you had if you had the like a call to action or a wish list to them What would it be? I'm happy to step in yes And first of all I would like to comment on polls and just to make a quick remark on Paul's comment In this project we obviously talked about multiple industries multiple sectors the impact on digital and automotive was one of them And we talked about the benefit to society and I'd like to illustrate that just with a very simple example The seat belt I'm through this project. I got to be a little bit of a seat belt expert as sad as that might sound Sounds good. It sounds good. Thank you The seat belt was invented in the mid 19th century It was first patented in 1885 and it was made not even Mandatory but sub actually as a company started issuing it in every single car and the other automotive manufacturers pulled along with it It was made basically mandatory in 1959 That is 75 years later. We look back now and wonder why on earth wasn't on made mandatory How many lives could have been saved it is not fathomable for us We're now in exactly the same situation However, as you said the pace has changed It is not going to be three generations further that are going to ask us But it's going to be my children who are going to ask me first of all used to own the car in 2016 2017 and Secondly they're going to look at me and say you actually drove it yourself. Was that legal is that not very dangerous? So it is this kind of value to society that we actually quantified in our report because as long as you don't have a common definition A common denominator that you can talk about in this case We can save over 150 we estimate that we can save over 150 lives through telematics by 2025 So it's you need to have a common denominator to talk about these things ideally in a measurable term That you can bring all the stakeholders to the table which brings me to your question I think it is absolutely paramount that we have a very open discussion between all the industries within the industries amongst the industries themselves, but also that the governmental voice the public figures and civil society be at the table We had a session this morning where actually a public figure told us don't ask us to regulate anything until we have a common definition That is I think so important We all need to have an understanding of what the common base is and what the risks and the opportunities are And it was also Klaus mentioned his opening speech to the fourth industrial revolution He talked about the fact that we're at a cusp we're kind of teetering between hope and fear and I think it is absolutely tantamount that the Opportunity that it is clearly perceived that the opportunity is larger than the downside of this and as soon as then everyone starts moving towards hope I think all these things all these predictions that we talk about are going to come true And I think digitalization is really going to just start blossoming from here and out and really benefit business as well as society Thank you, Bruce You want to add to that Otherwise, I would ask you So usually the Fortune 500 companies look at startups a bit with a With caution, but shouldn't they owe a big thank you to the startups for helping them to to you know move faster on the digital transformation Well, we're certainly seeing a transformation I mentioned earlier about the the more shumpeterian competition and the essence of that is this More rapid churning and and you see it in the in the way that the Fortune 500 have evolved the average age of the Fortune 500 companies that has been plummeting and now it I learned from Bruce that It's much quicker for companies to reach One billion dollars in revenue. I may get the numbers a little bit wrong Invaluation sorry in valuation. Yeah, that the average of these startups get there in as little as four years now I mean in terms of them being younger It's not just the age of the company if you look at the age of the founders as Well, and that says something about the way that younger people are grasping the Value of this technology and understanding that you need to have new ways of thinking about it. So The older companies can learn from this last night Jack Ma was talking about how in his own company He has a real push to push down Push decision-making to younger people in his organization because he sees that they also are quicker to grasp these The benefits and the potential of the digital technologies So I think we can we can learn both from younger people and from the younger organizations Thank you, Eric. Yeah, just to add on to that I think the one of the The phrases we use in the work we do with our clients is that it's moving from being you know disrupted to being the disruptor When we look at the incumbents and the large organizations and if this was all going to be about Startups redefining building this new world that would take far too long I think that's that's not the realistic way It's gonna play out there's certainly gonna be a lot of disruption and changes the leaderboard in different industries But we believe in many cases it will be the incumbents who are redefining their businesses Transforming not their own not just their own business, but their industries and driving that types of change And we see a lot of changes in organizations as they drive to that type of goal For example, one of the discussions we had earlier this week in Davos was with CEOs and board chairman talking about the need for increased Technology savvy on the boards of corporations to help drive them in this direction And there's a widespread, you know Agreement that that's that that's needed going going forward. Also, you can see larger organizations and investing Investing more in disruption in startups in other areas in the fintech sector alone The established large financial companies increase their investment in the fintech sector by well over a hundred percent You know year over year and that's that pace is only increasing Which is their app, you know, which is showing the appetite to invest and innovate And then you also see partnerships between the large established leading organizations and startups as we've seen with Companies in the automotive industry partnering with Lyft for example Recently and things like that and we think all those types of moves in addition to the real fundamental work of Replumbing the organization changing the culture to be more digital and adapt these changes to the kinds of things that are going to help the The incumbents in their industries transform their organizations redefine their strategies with very strong top-down digital leadership to To help drive into this digital economy That was if I can just mention it was a quote that I was a quote to this morning in our session for a month Of the CEO's and you talked about driving the driving it top down through the organization And the quote was that a leader without a follower is simply someone taking a walk And I think it illustrates perfectly that not only have we learned through this research that it's mustn't be only The CTO the C chief digital office, etc. Who lead this but it has to be a uniform voice across The leadership within the organization But that doesn't necessarily also answer the question that if you believe in it as a leader Do three levels below you believe that three levels below you might well be afraid that Their job function is going to change something is going to be disrupted So you have to communicate very clearly down all the way through the shop floor that digital is important and the benefits of digital And to make sure that you're not just someone taking a walk But may your entire company believes in you and drives this with you Could I add one point on to that as Bruce just mentioned Mentioned the workers and the jobs and driving it through the organization I think that's a very fundamental point something we've looked at a lot in this report and other work We're doing has been a big topic of discussion here in Davos, which is what is the impact on the worker and What is the impact on jobs and Eric may want to follow me with some comments here as well But the view is this is technology certainly transforming the way that that we work But it's it's not as simple about saying that it's machines or people in that You know one is going to you know the machines are going to replace people or there's going to be a competition between the two What this is really about is using technology to improve the way people work using technology to improve the way consumers live their lives and You know and augmenting you know the capabilities that people have to do their work effectively now as you look at that There's certainly going to be cases where where jobs are replaced by by automation Which is something that's happened you know happened throughout history and throughout the other industrial revolutions that that have happened There will continue to be those displacements, but overall there's a lot of opportunity for people to do more rewarding work Better work do their jobs more effectively use technology to upscale the work people do and we believe that's a big opportunity one in just a couple statistics around that we released some Accenture research earlier this week that that had a survey of work of Workers around the world and the the conclusion was that by six to one margin Workers were optimistic that digital technology and everything we're talking about would improve their work and by about the same margin They also believed it would improve their job prospects So there's an optimism in the workforce provided they have that leadership driving in the right direction Provided we address some of the educational issues and provided we do a Klaus Schwab talked about earlier this week With with a quote that I loved where a dr. Schwab said The fourth industrial revolution will redefine what it means to be human and I think we need to think about human We need to think about people first and how we drive this and enable people to accrue the benefits of the Of the fourth industrial revolution and digital transformation, and I think that focus is very very important in the debate Thank you Paul Well, let me pick up on Paul's point about about the jobs because it's probably the most common question I get now we're hearing a lot here with the fourth industrial revolution and there's some important issues But probably the most common misconception is this idea that the big impact of the technology will all be about destroying Jobs and the thing we have to bear my first off is that the technologies have always been destroying jobs have always been creating jobs But the emphasis we should have is on how technology can enhance and create new jobs Not just simply automate the existing jobs, and I'm not just saying that from a societal point of view Certainly, that's important that we don't want to just focus on destroying jobs But also from a value creation point of view, you know, if you're a CEO If you're one of those those rare CEOs do who doesn't care at all about that society just wants to focus entirely on the bottom line I would still say focus on understanding how you can use the technology to enhance The products enhance the services make labor more valuable. That's ultimately not just good for society. It's a more profitable strategy There's only so much you can squeeze out from the cost side But on the revenue side the top line has much more potential and that's where you see most of the value The problem is that it's just much easier in a way lazier to look at your existing tasks and say Okay, let's take these tasks. What can we use technology to automate this piece and this piece and this piece and That takes a little bit of creativity, but not much It takes a lot more creativity to think how can we invent an entirely new way of reaching our customer? How can we digitally transform our processes and our industries? What new jobs could exist that never existed before? That's a harder task and it's one that ultimately plays out often therefore often over five ten twenty years But it's the one where most of the value comes from and so I would encourage Executives who are in the process of digital transformation to put extra effort on that side of the ledger and not simply automating your existing tasks, you know I'll just put one one one example around that as I agree with Eric's point is that you take one sector in particular that we looked at electricity and The the forecast show a net job a net job increase in the industry Certainly a lot of automation a lot of things traditionally done in the industry done differently But new jobs created in their areas like smart grid management digital energy energy supply and other other jobs requiring different skills But creating job opportunities in a different way provided we prepare the workforce accordingly So we see those types of opportunities when you look at it sector by sector basis. Thank you Paul You mentioned that with digital transformation everything moves faster today. I'm afraid it also is true for our press conference Let's open the floor for some questions. We have a microphone here if you could state your name and organization Please for the sake of our online audience. Thank you Hi there, my name is Jeff black. I'm from Bloomberg news. Thanks very much for your very interesting comments I've got two questions and I'll leave it up to you who picks it up The first one is if we look specifically at manufacturing in advanced economies I'd like to hear what you think needs to exist in terms of common standards for Software and common software platforms that everybody can access Things like data protection legislation other types of legal systems that enable these These changes to take place what needs to exist in order for Companies of no matter what size to be able to take advantage of the opportunities that this Technological advance offers and my second area is When we look at the the the world's major economic areas for the US Europe and Asia Which of these would you say is is currently best placed to be able to take advantage? Of the opportunities here perhaps given some of the factors that I just mentioned There is the idea that increasingly we're in a winner take all Economy so that the first mover benefit so who's ahead and who's lagging behind that's my question. Thank you Thank you So the first question on manufacturing and what kind of the common regulations are we need the common common platforms for software I'll just very briefly start and you mentioned about the manufacturing industry. That's interesting because we had a conversation yesterday Which which industry is the automotive industry and is it manufacturing or is it a service industry and Some people in the room argue that it's a software business now rather than a manufacturing business So industries themselves are actually being redefined as we speak but to to get to your specific question And as I mentioned, we are looking at platforms and platform governance and the benefits of platforms Which undoubtedly are driven by global platforms, which we all are subscribers to but also industry platforms It is very much a question of scale versus monopoly How can you make sure that all the benefits that you derive which are through innovation? entrepreneurship and jobs and I was saved the fact that I did most of my Christmas shopping I hope my parents aren't listening all over Amazon It just it's a reality and you just have to do that while taking into account the The consumer rights and the consumer benefits of all of this, but maybe I let Paul who lives and breathes Platforms respond as well. Yeah that Billy point I'd add is that you know the technology one of the others You know we question what's the enabler? What's the driver? But there's clean enabler around these platforms with what's happening with the cloud What's happening in in new forms of software engineering the other they're allowing API's and things that are allowing companies to piece together and stitch together capabilities in a more integrated fashion And I think there's also a lot to learn from other industries that have created platforms if you look at everything from you know retail and what Amazon and others have done there to To the music industry to trans to transportation. What's happening? And there's a lot of lessons to be learned there that that now need to be applied into other industries There's forecasts that suggest that there's gonna be 200 over 200 industry-specific platforms created over the next several years including in manufacturing and In the need the standards are clearly gonna be a part of that along with the security and data protection are the things You mentioned and I think it'll be key to learn from industry to industry and look at how we accelerate the doctor those platforms up as we go forward And let me I agree with all that, but let me touch take a Comment on your second question about the the areas of the world that will benefit most me in principle This is a much flatter world that everyone is having access to the internet in a much more even way You're absolutely right that increasingly we're getting winner-take-all winner-take most markets So you see some of the dominant players being able to leverage that but we're also in a world where you have much frequent Frequent change I alluded to the Schumpeterian Competition and that does usually doesn't mean that you take on the incumbents head-to-head and try to do the exact same thing They're doing you know IBM had dominance in mainframe for many years and Apple didn't go and and become the most valuable company in the world by By taking them on in mainframes that could go through many many examples of these platform changes where a new winner emerged you know Microsoft and Google and and these companies that are dominant right now Facebook most of them are in industries and Products and platforms that didn't even exist 10 or 20 years ago So there's an opportunity there for countries and companies that aren't leaders right now to catch the next wave and there are things happening in mobile and many other areas that I think the space is completely wide open and It's going to be a matter of whether you you understand the the potential of the challenges whether you put in place the right skilled workforce whether you Have the technology infrastructure whether you have the institutions in your government that support the kind of entrepreneurship and innovation and business Redefinition that are needed that that in principle is wide open to anybody Evenly and I wouldn't simply look at what the incumbents are doing in existing industries today Yeah, just add one point One of my favorite phrases from the week is the future is hacking the present Which I think is a fantastic way to look at the the fourth industrial revolution because we you see uneven impacts of the changes that are happening and So to address your questions geographically, there's a some research that we can share with you for you to take a look at later That talks about the effect The enablers in different parts of the world and we looked at it in three categories We looked at we looked at infrastructure skills and other enablers such as regulatory and policy issues And you find that when you look at areas like the the US The infrastructure is there the policies, you know The policy is okay the skills is a big issue or focused on in the US Do you look at Europe policy, you know becomes a higher issue with some of the some of the issues that are being worked out there Yeah, more work to be done and when you look at Africa say in countries regions of Africa Infrastructure becomes a big issue and we've looked at the relative weighting of where we think the focus needs to be in Different parts of the world to to accelerate countries at the right pace to keep up So if you're interested in that we can share some of the specific data with you But it's it's kind of that it's not a simple who's ahead who's behind and what it what a country need to do We're trying to look at it a more granular level at those three kinds of enablers within the markets Thank you Paul. So there's still work to be done. I have to be the disruptor of the panel here There's the report on digital transformation that the forum published in collaboration with ExCenture So have a look check it out. It's on our website as well. Thank you very much to our panelists Thank you for being here and thank you for watching. Thank you very much