No need to fear the digital revolution

The onward march of digitalization affects us all – from individuals to globally active enterprises. While the resulting anxieties are understandable, history shows that technological disruption has always speeded up social development.

No doubt about it – business is undergoing a radical transformation. The world’s largest media company doesn’t produce any of its own content (Facebook); the world’s largest taxi company doesn’t own a single car (Uber); the world’s largest provider of accommodation doesn’t offer a single hotel bed (Airbnb). And yet the market value of overnight accommodation exchange Airbnb is currently estimated at around 25.5 billion dollars – meaning that just eight years after it was launched, the online platform is worth 15 times more than the long-established Hyatt Group, which owns more than 600 hotels in 50 countries and employs around 45,000 people.

But this dawning new age is not just transforming companies and business models – on many shop floors, the most strenuous and difficult jobs are now handled exclusively by robots. Robot vacuum cleaners are appearing in every consumer electronics store. And very soon, robots will be ready to take on more household chores, enabling individuals in an aging society to remain autonomous and self-determining for longer than ever before. At the same time, the networking of digital products and the use of “deep learning” algorithms are enabling digital devices to climb ever steeper learning curves – to the benefit of users everywhere. Using swarm intelligence, the new algorithms positively suck up knowledge and experience, and we’re already seeing the benefits – when a smartphone’s cloud-based voice control software also understands dialects, for example, even though they were never explicitly included in the program code.

Networking will soon enable cars, trucks and trains to drive themselves – and enable robots to deliver packages to the doorstep. And because more of us are working in flexible digital workplaces, we also have more time to enjoy TV programs. As we relax on the terrace after work, we can make our evenings even more enjoyable by ordering – in real time, using an app – a fresh, juicy steak accompanied by a tasty salad. Indeed, the supplier’s algorithm already knows what we want b­efore we pick up the smartphone.

Change always causes anxiety

Modern consumers are permanently on the move, networked, with a perfectly transparent overview of everything. But the very changes that are supposed to make our everyday lives easier inevitably arouse anxiety – even fear. Back in 1843, well-known German poet Heinrich Heine reacted to the opening of the Paris-Orléans railway by feeling “a spine-chilling horror of the kind we always feel when the most alarming, the most unexpected things happen, with all their unforeseeable, incalculable consequences.” The poet’s strong reaction is understandable; at the time, doctors feared the human eardrum would rupture at speeds over 20 miles per hour. After all, in more than 200,000 years of human history, nobody had ever traveled at such extreme velocities.

These anxieties are essentially identical to the fears aroused by processes of change in earlier times. Thus the Silesian weavers tried to destroy the newfangled mechanical looms when they first appeared in the 1840s. In a sense they were right, because their jobs soon disappeared in much the same way as typesetters’ jobs vanished during the 1980s. But over the last 150 years of industrialization, new jobs have always emerged – usually more than compensating for those that were lost. In anxious Germany, for example, the digital economy already accounts for more than 4.6 percent of the country’s commercial value added, embracing 92,000 companies and employing over one million workers – 10 times more than the steel industry, about the same as the automotive industry, and more than the mechanical engineering industry.

Not really new – just much faster

Perhaps what’s really new is not so much the digital transformation itself as the suddenly accelerating pace of change associated with it. There is plenty of evidence to show that mankind has been engaged in a continuous process of transformation since the start of the Industrial Revolution. Since the middle of the nineteenth century, not a single generation has lived in exactly the same way as the previous one – a radical shift from the conformity that previously characterized society.

The steam engine was the first thing to transform – in a remarkably short time – ways of life that had hardly changed for centuries. The next major change was sparked by electricity in the early twentieth century. Then the microprocessor appeared in the 1970s, kicking off the evolutionary “ever smaller, ever more powerful” trend that has paved the way for today’s paradigm shift – digitalization.

Digitalization started with the internet, which began its triumphal march some 20 years ago. Since then, personal use of IT has reached saturation point, covering almost 85 percent of the population.

Accompanying phenomena

Digitalization represents a new chapter in the history of industrialization. But it is accompanied by two other phenomena that have also accelerated dramatically, and without which digitalization would be impossible to imagine: globalization and urbanization.

At the end of the nineteenth century, London was the only city in the world with more than five million inhabitants. Nowadays, some 12 percent of the world’s population lives in 29 megacities, each with more than 10 million inhabitants. Since 2008, more people have been living in towns and cities than in the countryside. And a study by UN-Habitat – the United Nations Human Settlements Program – predicts that two thirds of Earth’s human population will live in cities by 2030.

Naturally enough, urbanization also has an impact on our mobility. The need to preserve air quality, as well as the quality of life in cities, is driving the transition to electrically powered transportation and increasing the pressure to develop more advanced electric vehicles. Routes are steadily becoming shorter – for logistics companies in particular. To deal with the growing urban demand, digital management systems are essential. By 2030, the number of cars on the world’s roads will nearly double. Without automation and networking, individual mobility in metropolitan areas will soon be inconceivable.

Nothing for it – change or lose

Those who don’t play an active part in this process of change will, quite simply, lose. This is why automakers are no longer exclusively concerned with vehicle manufacturing as the main source of v­alue. They are transforming themselves into mobility providers, setting up car-share fleets and developing apps for enabling users to find the fastest routes between two places by all means of transport available – not just cars. “The industry’s value added is shifting away from hardware toward software and services,” confirms Harald Krüger, CEO of BMW. The automotive industry already knows how to interpret the many examples of once-proud top dogs sinking into sudden obscurity. These unfortunates miscalculated the dynamics of the transformation process – the sheer speed of the shift from analogue to digital photography, for instance, or the transition from daisy-wheel typewriter to PC printer.

The real challenge is knowing how to look outside the box – and that’s not just true of our current age of digitalization. Back in 1967, for example, Finland’s leading manufacturer of rubber boots merged with a paper factory and cable company Finnish Cable Works under the name of Nokia. In 1981, the new company put together Finland’s first mobile telephone network; within 25 years, it had become the world leader in telecommunication technology. But Nokia failed to keep up with the rapid trend away from keypad-equipped mobile phones to smartphones, and in the space of just five years, practically disappeared from the marketplace.

If they don’t want to suffer the same fate, automakers and their suppliers must constantly seek out new business models that will enable them to anticipate trends while at the same time benefiting from the experience and expertise embodied in their core competency: mobility. Joint ventures offer one of the most promising ways forward, through cooperative agreements that benefit both parties.

The varying pace of digitalization

Nobody is in any doubt that digitalization is transforming our society. But over the last 150 years of industrialization, change has become a normal part of everyday life. Change demonstrates just how astonishingly adaptable our economic and labor systems really are. Companies are also capable of taking advantage of such change – indeed, they have no choice. To do so, they must actively seek to drive and guide change, rather than allowing unexpected change to overwhelm them.

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