The rapid rate of technology change can be overwhelming for leaders with 73% of Australia’s CEOs seeing the speed of technology change as a top threat to growth.
Tech is disruptive and CEOs need to consider new ways to better serve customer needs before a competitor does.
The world is entering the fourth industrial revolution – an intelligence revolution which has Artificial Intelligence (AI) as its cornerstone.
AI can transform the productivity and gross domestic product potential of the global economy. In fact it’s forecast to contribute up to $15.7 trillion to the global economy in 2030 which is more than the current output of China and India combined. (Of this $15.7 trillion, $6.6 trillion is likely to come from increased productivity and $9.1 trillion from increased consumer demand.)
In Australia 77% of CEOs believe changes in core technologies such as AI, robotics or blockchain technologies will be disruptive for businesses over the next five years.
And they may well be right. AI for example is remarkably complex and advancing quickly. It’s doing far more in some areas (but far less in others) than anyone would have guessed a decade ago and it’s impossible to offer a precise vision of how the next five — much less ten — years will unfold.
This is why only 10% of surveyed CEOs say they strongly agree when asked if they are clear how robotics and AI can improve their customers’ experiences, yet 65% are concerned about changing consumer behaviours (down from 79%) and respondents list changes in consumer behaviour as the likely number one disruptive trend over the next five years.
Like asking previous generations to foresee what impact electricity, the internet or social media would have on businesses; CEOs face a similarly overwhelming task when asked to predict what impact AI will have on their business model.
The rapid advancement of technology has made it necessary to change how you relate to your customers, change your business models, and change the structure and design of your organisation.
Artificial intelligence (AI) will utilise data to assist us with the many tasks that we currently do ourselves today and will be able to do things that we’ve never even conceived of before.
The challenge for leaders is how to ensure the organisation’s purpose permeates all areas of the business, as this will make it easier to invest strategically in technology.
There is an opportunity for leaders to use technology to analyse data for customer insight and to then tailor experiences, products and services to better serve customer needs. Yet only 30% of Australia’s CEOs (and 44% of CEOs globally) say that, to a large extent they are creating transparency around the usage and storage of customer data in an effort to build trust with their customers.
The added difficulty for leaders is the change that this will require. Changes that may affect, but are not limited to: processes, systems, products and messages, along with attracting the right skills and talent.
Technology offers many opportunities for organisations to better serve customers and, here, AI can help.
In a world that is increasingly digitally connected — yet ideologically splintered — geopolitical turmoil can spread in real time via the internet. This interconnectivity puts key infrastructure at risk of cyber-attacks perpetrated by nation states, politically or ideologically motivated hacktivists and terrorist organisations.
The risk of malevolent attacks or cyber hacks is escalating but the underinvestment in preventing these attacks is startling. The reality is that it’s about when, and not if a breach occurs and preparation is essential.
AI has immediate and long-term security applications and thanks to AI’s advanced machine learning, cyber defence can be more effective. On the flip side, AI allows hackers to exploit vulnerabilities more efficiently. So, whether through the in-house IT department or through external providers cyber defence is where organisations will get their first real understanding of the power and application of AI.
This could be a rude awakening. Last year Australia was second only to the US in its concerns around cyber threats. This year, not only has the US and Australia seen increases in concern but China has shot up from a point where 59% of CEOs were somewhat or extremely concerned about cyber threats to a point where 91% are concerned. This is potentially due to regulatory changes to cyber security as well as to the handling of personal data.
In Australia 89% of CEOs are concerned about cyber threats. Yet less than half (44%) are investing more heavily in cyber security protection to a large extent in order to build trust with customers.
Advances in technology and the ‘internet of things’ has led to vast amounts of personal information being collected increasing the fallout from cyber attacks. With greater volumes of data comes greater risk of damage through disclosure or misuse. Particularly so with personal information. Not only is there potential damage to the individuals concerned, whether that damage is financial, reputational, emotional or otherwise, but the digital economy relies on trust to function.
New mandatory data breach reporting as well as the EU General Data Protection Regulation (GDPR) seeks to protect organisations that are proactive and respond quickly and effectively to data breaches and suspected data breaches. They will also result in organisations undertaking cyber breach remediation being put in the spotlight, heightening reputational risk if best practice is not followed.
Forward thinking organisations will not see this as simply a compliance burden, they will appreciate the sensitivity of the personal information they hold on behalf of their clients.
Many organisations that may be at risk of cyber attacks remain unprepared to deal with them. Leaders must assume greater responsibility for building cyber resilience and then adapt faster in an effort to keep up with technological innovations.
One problem is that technology is often still confined to the domain of ‘Information Technology’ and so it’s not seen as a strategic risk to the whole of the business. Robotics are often procured and managed by operations which sit outside the organisation’s digital security fence and the CIO regularly sits two or more levels below the CEO.
The c-suite must therefore lead the charge when it comes to cyber security and boards must be engaged. Industry and government leaders must work across organisational, sectoral and national borders on cyber dependency and interconnectivity risks.
Achieving greater risk resilience is one pathway to stronger long-term economic performance. Business leaders should approach risk management with a larger framework in mind as the management of cyber threats cannot be episodic.
Technology advancements can enable organisations to win new customers and improve the experience for existing customers. The winners will be those who embrace opportunities in answer to their customers’ needs.
Partner, PwC Australia
Tel: +61 2 8266 6388
Partner, PwC Australia
Tel: +61 3 8603 3676