Light at the End of the Tunnel? How Fourthindustrial Revolution Business Models Andtechnologies Willtake Ustothe Future

#9 –January 2019 Special Edition for the World Economic Forum’s Annual Meeting In Davos

THE PLATFORM ECONOMY DESIGNING AN AI CYBERSECURITY SCENARIOS $60 TRILLION TO STRATEGY FOR 2025 FLOW THROUGH DIGITAL TOOLS FOR THE BOARD PREPARING FOR AN ECOSYSTEMS AND C-SUITE UNCERTAIN FUTURE LIGHT AT THE END OF THE TUNNEL? HOW FOURTHINDUSTRIAL REVOLUTION BUSINESS MODELS ANDTECHNOLOGIES WILLTAKE USTOTHE FUTURE

Bibop Gresta, Chairman and Co-Founder of Hyperloop Transportation Technologies, aWorld Economic Forum Tech Pioneer, at the company’s innovation center in Toulouse, France

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0000101011110001011010001101100000001100111001000001010011110011001100101111100011 000011101100000000011000011101100000100000011010000111011000011001111000010110000 010000000000101111110100001000111100000110000001000011000010111001000000001011 01010000001100110111010111000011011010100010000101100010010011011010100000000011 1011100111100000010110000010111011100000100010110000001000011111010000010111001010000 010000000001001101101010101010010111010111010110111000011101100111111010000011 111001000110000111000000100101010111000101110111010110011001110100101111101001 110000000110000111000000001010111101001111011101100010110100011010000001111100 0000001111000001010011010010100000001011011010001110010110100101011010111000 TABLE LETTER FROM THE EDITOR OF CONTENTS

P.04 DAVOS TECH TALK Europe is lagging in the digital transformation of industries key to its success in the Fourth Industrial Revolution. None of the world’s lar- P.06 THE PLATFORM ECONOMY gest digital platforms are European. And Europe needs to ensure that it has P.12 ALIBABA’S NETWORK EFFECT thekey technologies underlying manufacturing and supply chain management. Europe created chip companies like ASML, NXP and STMicroelectronics P.14 ANT FINANCIAL: A$150 BILLION FINANCIAL SERVICES COMPANY but other upstream activities of the semiconductor industry have been moved offshore. One Taiwanese company,TSMC, now makes 50% of the chips P.16 PINGAN: ONE OF THE WORLD’S MOST in the world, six OEMs -Foxconn, Quanta, Compal, Pegatron, Winstron, VALUABLE INSURANCE COMPANIES Invenec—control crucial parts of the supply chain and South Korea has the P.18 KLÖCKNER STEELS FOR CHANGE monopoly on the memory side with companies like 3D NAND and DRAM, ,points out Haisong Tang, aShanghai-based serial entrepreneur and inves- P.22 VATTENFALL’S NEW DATA PLATFORM BUSINESS tor.Rebuilding this competence will require 10 years or 20 years of investment, which will requirelong-term thinking. P.24 ADIGITAL PLATFORM FOR CORPORATE All of these issues are bigchallenges for Europe.The World Economic Forum PENSIONS is trying to help in two very concrete ways. It has formed the Digital Platforms P.26 OPENING ADIGITAL DOOR TO THE FUTURE &Ecosystems executive working group, ahigh-level committee to help established companies embrace platform business models. (See the cover sto- P.28 HOW HYPERLOOPTT CROWDSOURCES ITS STRATEGY AND TECHNOLOGY ry on page 6). And it has also formed the Digital Europe initiative to create the building blocks for acommon vision, identify action areas, and develop P.30 ASTRAZENECA’S ANTIDOTE FOR THE concrete suggestions to make European innovation ecosystems more suc- INCUMBENT’S CURSE cessful, and identify an innovation model that will allow it to effectively P.32 AI AND THE FUTURE OF MEDICINE compete with other regions. (see the story on page 46). Both initiatives could go along way towards helping the Continent harness P.34 DESIGNING ACORPORATE AI STRATEGY its potential and become aglobal innovation leader.Success will depend, in P.36 TOP 25 WORLD ECONOMIC FORUM TECH part, on the enthusiastic participation of Europe’s largest companies in their PIONEERS TO MEET IN DAVOS own –and in the Continent’s digital transformation. As Davos approaches P.38 ABATTERY BREAKTHROUGH FOR and 2019 begins let’s hope that corporate Europe comes back down from ELECTRIC VEHICLES AND GRID STORAGE. the mountain with aresolve to execute. P.40 HOW BLOCKCHAIN IS TRANSFORMING THE ENERGY GRID P.42 CYBERSECURITY SCENARIOS FOR 2025 P.44 HOW FUTURE COMPUTING TECHNOLOGIES WILL IMPACT BUSINESS P.46 HARNESSING EUROPEAN INNOVATION P.48 GENDER EQUALITY: By Jennifer L. Schenker ABIG TOPIC IN DAVOS Editor-in-Chief, The Innovator

—P.3 DAVOS TECH TALK

MOONSHOTS FOR IOT: EUROPE AIRPORTS GET THEIR OWN PILOT

Harnessing European purpose for the people –not merely Industrial IoT is expected to new norms and best practices for innovation will be abig topic in Davos as consumers and target groups but be one of the largest drivers of the security of industrial IoT devices this year. TheWorld Economic as empowered citizens. economic growth in the coming and systems. Through this project, Forum’sDigitalEurope initiative In thisscenario, political and decade,transforming sectors that the same incentive structure—tying willbereleasingareport on the corporate leaders play avital role accountfor nearly two-thirdsof minimumsafetystandards and topic (seethe story on p. 46)and in fostering innovation and creating the global gross domestic product. practices to the sale andpricing Futur/io, anew platform and abolder vision for acommunity of But many companies and of insurance policies—will be applied community for European innovation common values and progress,”he governments areunprepared for to industrial IoT deployments. In leaders that aims to help co-create says in the book’s opening chapter. the potential risk and liability that parallel, this approach could also “a vision for desirablefutures” will “Let’s inspire Europe’s leadership may be brought on by these new be applied to government stimulus be hostingaside event to launch to create aboldervision for technologies, including new threats funding and financing programs abookcalled MoonshotsFor Europe, tomorrow.” to public safety,physical harm, and for industry. containing essays by aselect group catastrophic attacks on shared The policyframeworkaimsto of futurists and innovators including public infrastructure. At its annual generate an understanding of how Pablo Rodriguez, CEO of Telefonica’s meetinginDavos, Switzerland, the insurance canfacilitate the Alpha, Europe’s firstmoonshot World Economic Forumisscheduled improvement of industrial IoT factory; Henkel CDO Rahmyn Kress; to announce the launch of apilot security design, implementation SAP’s Chief Design &Futurist Martin project for airports that will test and maintenance practices. It also Wezowski and Jennifer L. Schenker, aIndustrialIoT Safetyand Security sets forth auniversal set of security The Innovator’sEditor-In-Chief.The Protocol co-designedbythe Forum’s bestpractices that should be book–and the Davos event –are Centre Forthe Fourth Industrial incorporated in all industrial IoT the brainchild of Futur/io founder Revolution and more than two deployments. The next step of this Harald Neidhardt, aveteranofthe dozencompanies, governments, project is to develop and pilot an European tech scene. organizations anduniversities. incentive framework withinsurance “Moonshots for Europedemanda The idea is thatisjust as lower companies, insurance brokers, and new,courageous leadership for the insurance premiumsprompted industry stakeholders and share the next decades and anticipationof millions of business and consumers outcomes to scale-up the framework’s breakthrough technologies, shifts to install fire and security systems, adoptioninternationallyand across in humanbehavior,benefits for market forces couldplay acritical sectors. society and the environment and roleinhelping establishand catalyze

P.4—THE INNOVATOR are some really exciting opportunitiesgoingforward and alot of interesting experimentation, including government institutions andbanks. Ithink we will see acentral bank digital currency.Acouple of countries are really looking at this in alot of detail, which tells us alot about digital currency andwhatrole it might play in monetary policy. We are working on a projectwith 30 central banks aroundthe world, includingsome in emerging economies. We are creating opportunities for them to realize scale and receive objectiveinformationabout the technology from academics and people with deep tech knowledge.

How is sector-specific implementation of blockchain technology evolving? SW: We are seeing some robust experimentationinthe energy sectorthat is promising. Ithink we will also see utilities –like water -start thinking BLOCKCHAIN about blockchainiftheyaren’t alreadybut,again,alot of thisishappening PREDICTIONS FOR 2019 quietly.Wesee alot of smartcontract engagement with all thedifferent actors along the supply chain. They have well-honed processes and are adheringtocomplicated regulations. We are already seeing aton of things happening in that space. We have ameeting planned in the spring to talk about laying down principles to make blockchain interoperable across the supply chain. Alot of big players are experimentinginternally so the next At last year’s annual meeting of the World Economic Forum in step is to look at how to connect those systems in terms of standards and Davos there were overflow crowds at blockchain sessions inside the policy.Weare planning to issueaseries of guidelines that will focus on conference center and at off-the-grid meetings organizedbythe cryptocurrency how to think about interoperability of the blockchain system over the crowd on the main promenade. It wasthe height of the hype. The market course of the next six months that will be co-authored and co-created by value of cryptocurrencies has shrunk since then but interest in the technology awide variety of stakeholders and serve as atool kit on asystem-wide underpinning it has not. approach. Sheila Warren, the World EconomicForum’s Blockchain and Distributed Ledger Head recently spoke to The Innovator’s Editor-in-Chief about How might governments use blockchain technology? blockchain initiativesthe Forum is launching and outlined herpredictions SW: We are planning to announcethe opening of anew Fourth Industrial for the technology in the year ahead. Revolution Affiliate Center in Colombiaand atransparencyproject focused on anti-corruption. We are planning to look at howdoweuse the potential What has changed since Davos 2018 ? of blockchain to increase access to immutable information in away that SW: We are movingbeyondthe hype.There has been abursting of the reduces corruption and defines who has access to what and when. financial bubble and some of the less legitimate or less rigorous projects have disappeared and Ithink that is areally good thing. We are now in a How long will it be before smart contracts, aself-enforcing set period of intense creation and we areseeingthe buildingofsomeofthe of software rules, become areality? really exciting innovation that is neededatthe infrastructure level, such SW: Smart contracts are one of the promises of the technology that people as enhancingthe speedand the scalabilityofthe technology and things are really excited about and with good reason. But alot of legal infrastructure like security and achieving consensus [a way of reconcilingthe accuracy really needs to be thought through before thiscan be converted into of adigital record]. These things are not sexy but they are critical for the meaningful real-world contracts. Context is important and in the period growth of the technology. of time we are in there isn’t as much trust in technology as there was five or even twoyears ago. The ideathatacomputer is determining triggers Cryptocurrencies had awild year in 2018. What should we expect is not something that most people are comfortable with. It is an example in 2019 ? of how technology is often ready to do more than people are ready for it SW: There were some lessons learned that were really important.There to do.

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—P.5 COVER STORY

THE PLATFORM ECONOMY —Platforms could account for more than $60 trillion by 2025, or more than 30% of global corporate revenue, and yet only 3% of established companies have adopted an effective platform strategy. By Jennifer L. Schenker

Seven of the10most valuable companies globally are now based effective platform strategy.Itisnosurprise, then, that the platform economy on aplatform business model: the creation of digital communities and will be on the agenda at the World Economic Forum’s annual meeting in marketplaces that allow different groups to interact and transact. Companies Davos, SwitzerlandJanuary 22-25.“Big companies are struggling with if like Apple, Google, Amazon and Alibaba have used the model to grow andhow to leveragedigital platformand ecosystemmodels fortheirindustries,” exponentially and grab significant market share from established firms. says Cristian Citu,the Forum’sDigital Transformation Lead. “They are asking Platforms represent abig change in the way industries have traditionally how do Icreate acore platform that will deliver on the promise of exponential beenorganized. And first moveradvantage is important in an environment growth? Network effects are very tricky.They need to learn how they can where the winner often takes all. But all is not lost. Experts say established work in this new world of ecosystems which requires acompletely new way companies have the chance to create platforms of their own, partner to of dealing with customers, partners and traditional competitors.” jointlycreate platforms, or figure out how to leverage other platforms to Over 50 large corporations are participating in aWorld Economic Forum’s their advantage. “The bulk of the power in industries is likely to shift to Digital Platforms &Ecosystems executive working group, part of the Forum’s these ecosystems,” says Geoffrey G. Parker,aDartmouth College professor, Digital Economy and Society system initiative. Massachusetts Institute of Technology (MIT) research fellow and business Members of the committee’s Rotating C-Level Steering Committee include author who regularly advises C-Suite executives on platform strategies. Allianz, Booking.com, Deutsche Bank, GE, Henkel, Huawei and Klöckner. “So the message is every firm needs to understand platformsand figure out B2B platforms could represent $10 trillion in socio-economic value creation their place in the industry structure that is coming.” More than 30%of from 2016 to 2025,according to an Accenture report compiled in partnership global economic activity -some$60 trillion -could be mediated by digital with the Forum. The report notes thatthis estimate,derived from alarger platforms in six years’ time, according to aMcKinsey research report, and forecast which estimates $100 trillion of value is at stake through 2025 may, yet experts estimate only 3% of established companies have adopted an in fact, be conservative. European companies in sectors as diverse as steel

P.6—THE INNOVATOR LARGEST GLOBAL COMPANIESIN2018 VS 2008: SEVEN OUTOFTEN ARENOW BASED ONPLATFORM BUSINESSMODELS

2018 2008 RANK COMPANY FOUNDED USBn RANK COMPANY FOUNDED USBn * 1. 1976 890 1. 1999 728 * 2. 1998 768 2. 1870 492 * 3. 1975 680 3. 1892 358

4. * 1994 592 4. 1997 344 * 5. 2004 545 5. 1984 336

6. * 1998 526 6. 1989 332

7. 1955 496 7. 1975 313 * 8. 1999 488 8. 1907 266

9. 1886 380 9. 2000 257

10. 1871 375 10. 1885 238

* Companies based on the platform model Sources :Bloomberg, Google

distribution, energy,corporate pensions, cement, insurance and even door understand in much greater depth the economics of platformbusiness models manufacturing are starting to embrace platform business models. (See the and how to operate them,” says Torrance, amember of the Forum’s Digital stories on pages 18, 22, 24, 40, and 26.) And awhole industry is emerging Platforms &Ecosystems executive working group. “Platforms will mediate to help them. The MIT Initiative On The Digital Economy holds its annual more and more socio-economic activity.There are plenty of high value Platform Strategy Summit.Europe launched its own conferenceonthe topic niches available to be grabbedbyexisting businesses.But,while 90%of -- the Platform Economy Summit -- on November 20–22, in Berlin. corporate leadersare saying -- anonymously in surveys -- that they know The executive producer of that conference, U.K. national Simon Torrance, their current business model is not ﬁt for the future, very few are acting fast an independent advisor to boards and leadership teams on business model enough to create platformstrategies that can meaningfullyimpact their transformation, has designed an online education program to help leaders performance.” understand the key principles of platform-based business model transformation The reason more companies arenot adopting platform strategies is thatthis called The New Growth Playbook. MIT’s Parker,Marshall N. model is not something that today’s corporate leaders were taught at business VanAlstyne and Sangeet Paul Choudary co-authored abookentitled Platform school,says Torrance. “Very few leaders at non-digital companiesunderstand, Revolution: How Networked Markets Are Transformingthe Economy and to aprofound degree, business models like this and even when do they do How to Make ThemWork for You, while French nationals Laure Claire it takes time to percolate throughthe strategy process,” he says. “In areally Reillier and Benoit Reillier,co-founders of aLondon-based consultancy connected world what aplatform business does is to optimize supply and called Launchworks that specializes in helping companies adopt, design demandbetween the producers of certaingoodsand services and consumers. and scale platform business models, co-authored abook in both English It orchestrates those interactionsand makes them more efﬁcient -- just like and French entitled Platform Strategy: How to Unlock The Power of Communities and Networks To Grow Your Business. “Boards and leadership need to

—P.7 COVER STORY

WINNERSTODAY HAVE INVESTED HEAVILY IN PLATFORM BUSINESS MODELS AS PART OF A SYNERGISTIC PORTFOLIO BUSINESS MODEL (RELATIVE ALLOCATIONOFCAPITAL)

Platform services Software Digital services Masters Physical prouducts

Typical farmers’ markets or stock exchanges do. In adigital world you can put many, Core incumbents many more types of people together,aseBay and then Apple, Facebook, business (worlwide) Amazon and Alibaba, have demonstrated. Europeancompanies are starting to wake up but theyare five years behind andtheircultures arecertainly FINANCIAL SERVICES AUTOMOTIVE TELCO not digital.”

Why Companies And Countries Need Source :Simon Torrance, 2018 To Embrace Platforms While many established firms believethat platform models are onlyrelevant in abusiness to consumer (B2C) context, it is thebusiness to business (B2B) world that is currently seeingthe most activity,” says Launchworks’ Laure Claire Reillier, aformer senior executiveateBay Europe whohas workedfor anumber of high-growth startups and establishedtech firms. She cites as examples recent B2Bplatform developments in many verticals (Siemens’ EasySpareParts marketplace), boutique law firm services (Lexoo), andoffice supplies for businesses(Amazon Business marketplace). Reilliersees B2B and B2Cplatforms emerging in many sectors including retail, education,healthcare, transport, agritech, fintechand real estate. Business author Choudary,aWorldEconomic Forum Young Global Leader Key Takeaways From The Most Successful andpublisherofablog called From Pipes to Platforms,believes platform Platform Plays business models willalso be adoptedinlogistics,manufacturing and So what cantraditionalcompanies learn from platformplayers? In China industriesthat rely on heavyengineering. “Blockchain and digitalledger- an example of atraditional corporation transforming its business model is based initiatives will be an important startingpoint to creating interoperability PingAn, an insurancecompany that decided five yearsago to reframe itself in traditional industriesand,overthe coming years,wewill see new as atechnology company with financial services licenses as away of embedding platforms coming up around these initiatives,” he saysinablog posting. itself more deeply into more aspects of peoples everyday lives. “They have He makesacase for whynot onlycompanies but countries needtopay created aportfolio of platform businesses that are directly related to insurance: attention to platform models. in healthcare, connecting patients with doctors; in automotive forbuying The platform economy is reshaping global trade,hesays. Global small and selling cars; and even in entertainment,” says Torrance. “Thanks in part and medium-sized business trade is on the rise, driven by the growth of to these moves, PingAn is now the most valuable insurance company in the platforms such as Alibaba (see the storyonpage x), which allow much world.” In South Africa Naspers, a100-year-old company, transformed from smaller enterprises to participateinglobal trade, without theneed to being aprinter of newspapers to adigital and platform company in the last invest in their own supply chains. As these platforms scale, control over five years. It took astake early on in Chinese Internet giant Tencent that is trade could shift from countriestothesedigitalplatforms. In aworld now worth more than the whole of all their companies combined, built up dominated by platformcompanies that offer ways for customers and aglobal online classified business called OLX and acquired astable of tech companies to connect,countries that want to actasglobal trade hubs and platform businesses like food delivery startupDelivery Hero. must think likeaplatformnation, Choudarysaidduring apresentation Torrance says American incumbents are startingtobebolder.Hepoints to at the Platform EconomySummit in Berlin. Walmart’s acquisitions of Jet.com and Flipkart.“These have already started

P.8—THE INNOVATOR EUROPE’S LEADING COMPANIESARE LAGGING R&D AS %OFREVENUE BEHIND/THE US HAS CREATED MORE, LARGER TOP 50 LISTED COMPANIES PLATFORM-ENABLEDBUSINESSES Distribution of predominant business models, 2017 (Top 50 listed companies) 2011 2016

100% Platform-enabled hybrid 7.00% business models 90% Pure-play digital platforms 6.00% 80% Software &Biotech 70% 5.00%

60% Financial &Professional Services 4.00% 50% 3.00% 40% Physical capital intensive businesses 30% (manufacturing, retail, telco, utilities) 2.00% 20% 1.00% 10%

0% 0.00% FR GE UK EUROPE US FRANCE GERMANY UK US

Sources :Morningstar data, Simon Torrance analysis, 2018

to pay dividends,” he says. “Walmart has movedfrom 15 million SKUs (stock Platforms &Ecosystems’ Rotating C-Level Steering Committee. He cites keeping units or unique items for sale) to 60 million. That sums up the three lessons the company learned from beingaB2B digital pioneer: Rather power of creating aplatform. By havingasystem that allows and incentivizes than build your own data centers, partner with technology companies and others to plug into it, Walmart could quadruple the number of SKUs offered focus on your core competency; volume isn’t necessarily agoal on B2B to customers without takingoninventory risk. This is essentially what Amazon platforms, focusinsteadonstrong partnerships with thepeople you want did 18 years ago -- let other people fulfill their customer requirements and to reach in your sector; the best way to prompt the necessary cultural change rent out their infrastructure to enableit. This results in stickiercustomers is to pair digital natives with the company’s in-house industry experts. and alower cost structure fundedbyothers.” General Electric (GE) has been “Transforming an incumbentbusiness model to be fitfor adigital economy using platform thinking for adifferent purpose. It wanted to figure out how is very hard,” says Torrance. “If you look at the top 1,000 publicly traded other people could develop useful applicationsthat would help customers companiesworldwide theamount traditional companies have invested in leverage GE’s increasingly connectedmachines. So, GE decided to create platform strategies -- the mostpowerful digital business model -- is stilltiny. an ecosystem of innovators to createdigital solutions forcustomers. The Youneed to boldly re-allocate capital and resources if you want to be able idea was that GE Digital would be at the heart of this platform and generate to play in this market.” significant new revenue streams from the platform. “The vision was excellent and GE was atrailblazer for traditional corporates but unfortunately GE How To Get Started Digital was established in apretty traditional way within an organization So whatstepsshould corporates take to getstarted? Don’t try to developa that has big fundamental challenges,” Torrance says. platform strategy entirely within the existing corporate structures, warns “The evolutionofGEDigital is stillbeing written,” says Karthik Suri, General Torrance. “Itwill fail due to cultural challenges andexisting metrics. Create Electric’s Chief Operating Officer and amember of the Forum’s Digital

—P.9 COVER STORY

aseparate unit to invent the future, allow it to work in adifferent way and, powered ecosystem is that the combination of businesses –phone and app crucially, have it reportdirectly to the CEO,not the core, otherwise any store -isworthmore than the sum of its parts,” she says. “In fact, this is the innovation will be stifled and killed,” he says. Trynew approaches, like joint rationalebehind Apple’s decision to stop reporting hardware sales. They ventures with entrepreneurs, to grabopportunities fast before they disappear want analysts to start assessing them on the health of their ecosystem –and andtobuild up experienceand knowledge,headvises. “Oneofthe best the margin generated -rather than the number of products sold.” methods is to proactively create joint ventures with proven tech entrepreneurs whereby the entrepreneurs can leverage acorporate’s assetsbut don’t have Platform 2.0 to work for the corporate,” he says.One example is Factor10,anindependent Established companiesnot only havetoplaycatch-up,theymay have to corporatecompany builder,which is working with European energy provider leapfrogsince some of the best-known Platform 1.0platforms,including Vattenfall and other incumbents.(See the story on pageX.) Factor10 is a Amazon, Facebook and Google, are now heavily investing and developing member of the Forum’sPlatform Economy executive workinggroup. AI [artificial intelligence] and blockchain technologies that will help them “Nowadays there are more and more entrepreneurs who haveexperience of create Platform 2.0 models, says Reillier.She notes that Amazon WebServices creating and scaling platform business models, who may have recently exited has recently launched two new blockchain products for its Cloud offering, aventure and are looking forthe next big thing butdon’twant to start from while Google Cloud’s division is catching-up fast. There are also many scratch,” says Torrance, aventure partner at Factor10. “Big corporates are rumors surrounding Facebook’s growing blockchain team and what their very slow to changetheirinternalculture andcan’t move very quickly,but leader DavidMarcusmight be workingon.“Thequestion is: will today’s they have cash and great assets.Soitmakes sense to create aportfolio of successful Platforms 1.0 use these new technologies to simply make their joint venture ‘speedboats’ with successfulentrepreneurs to grab new ‘white current platformmodel more efficient or will they enable different, more space’ market opportunitiesfast. This model is relatively new but proving decentralized, more transparent,morecooperative newbusinessmodels, very popular.” where governance principles are co-developed by the community,” says Reillier.“Smart contract ecosystems like Ethereum pave the way to enable Hybrid Models new organizational models that we call Platforms 2.0. We are at the very Not all companies require afull move to apure platform model, says beginningofthis trend, and probably afew yearsbefore widespread adoption, Launchworks’ Laure Claire Reillier.“More often than not, we see the need but it is importanttokeep an eye on this next wave of disruption.” to shift towardsahybrid model, or what we call aplatform-poweredecosystem, in which the existing traditional model of the firm is supplemented by a State of Play platform business forsomeactivities,asakeysuccessfactorfor differentiation,” The adoption of aplatform model -- like Amazon with its marketplace, Apple she says. Forexample, amanufacturer couldadd amarketplace of spare with its appstore, or Alibaba from birth -- should mean abig improvement in parts or aplatform of complementary value-added services. Aretailer could financial performance metrics. This is why you see car companies investing supplement its inventory with along tail of complementary products. in ride hailing or other platform business models, says Torrance. “But these This combination of traditional models and platforms is at the heart of many arestill relativelytiny, tiny investments andthey arenot really moving the successful businesses, says Reillier.Apple uses avalue chain to produce its needle because full commitment to the principles of the platform business hardware –raw materials are transformed into phones and laptops that are model are not there yet,” he says. Germany’s Klöckner has invested in an open then sold at amargin. But increasingly the value of the firm is driven by its digital platform to try and help the whole steeldistribution market operate millions of apps, through the platform app store. “The beauty of aplatform- more efficiently. (Seethe storyonpage 18.)But,itisveryearlydays. On the industrial side, Schneider Electric, Bosch and Siemens arelaunching new IoT

P.10 —THE INNOVATOR GLOBALTOP 100 CORPORATIONS ORIGINS OF PLATFORM BUSINESSES VALUATIONINCREASE/DECREASE EUROPE HAS 4% MARKET SHARE

VALUATION $BN

12 000 +49% US CHINA 10 000 EUROPE 8000 JAPAN

6000 REST OF WORLD

4000 -12%

2000 +13% 0 2011 20121 20131 20141 2015120161 2017

Sources :Morninqstar data, Simon Torrance analysis,2018

platforms, but these are still very technology focused.“Ireally can’tpoint to models. Henkeljoinedthe Forum’s Digital Platforms &Ecosystems’ Rotating aEuropean company today and say that company hastaken bold shifts to C-Level Steering Committee because it, too, is acting as akind of platform radically transform their overall businessmodel with aplatform strategy.Less for collaboration on business models,hesays. “The initiative brings together than 2% of companies have committed to bold platform-based growthstrategies globalrepresentativesfrom corporations and start-ups as wellasacademia let alone proved their ability to successfully implement them,” Torrance says. and government, policy-makers and policy-shapers, who share an interest in how digital platforms operate, howcorporations are lookingtoset up Will Open Innovation Platforms Help Corporate digital businesses and engage in ecosystems, as well as understanding the Europe Move Forward ? complexities related to trust and governancesurroundingdigitalplatforms Althoughresearch shows that the U.S. andChina have created more and and ecosystems,” says Kress. “It is clear that platforms will bring about larger platform-enabled businesses and that Europe is not investing enough transformational change, but thereare anumber of challenges that must in newbusiness models(seethe charts), Rahymn Kress, Chief Digital Officer be addressed. And the Forum has taken the initiative to confront these and Chairman of the Digital Executive CommitteeatHenkel, a143-year- challenges. Platforms are hard to build and leaders must establish an old German conglomerate, says he remainsbullish on Europe. environment in which they can flourish.The rapid paceoftechnological In addition to overseeinghis owncompany’s digitaltransformation Kress progress,culturaland organizational transformation,outdated regulations has launched HenkelX, an open innovationplatform that brings together a and irrelevant metrics are key priorities for policy-makers and business diverse network of partners and experts sharing knowledge, views and leaderstoaddress.” Thanks to HenkelX andthe Forum executiveworking ideas. “It is an agile, hyper-connected and entrepreneurial platform for group, Kress says he thinksthat in 2019“we will see abyfar more engaged collaboration and innovation,” he says, and its aim is to help the entire corporate Europe that has understood that there are big opportunities and European market move forward by collectively driving industrial business also threats if corporates don’t engage.”

—P.11 PLATFORM ECONOMY

November11Chinese shopping spree. It is alsobreathing new life into Alibaba’s Network China’sphysical stores, includingsupermarkets, malls and Momand Pop shops, one illustration of Alibaba’s New Retail model.Tothat end, Alibaba Effect has investedmore than $9 billioninbrick and mortar storessince 2015. It is also extending its reach by providing technologyservicestoits clients, —One of the leading technologycompanies in becomingthe go-to-provider for AI nervous systemsfor smart cities in theworld is nowpoised to play an increasinglylarger China, and it is helping to digitalizethe global supply chain, facilitating role in the future of global trade trade forsmall and medium-sizedbusinesses (SMES). Alibaba’s stated mission-it’s ‘massivetransformational purpose’ -isto ‘make it easy to do business anywhere’. It can only achieve this by leveraging others, orchestrating an ecosystem of many different parties to serve unmet market needs, says Simon Torrance, an independent advisor to boards on business model innovation and amember of theWorld Economic Forum’s Digital Platforms&Ecosystems executive working group. «This new type of businessmodel-using platformthinking to enable it -iswhat has catapulted its growth. Alibaba said it was ‘creating an ecosystem’ over 100 times in its IPO prospectus in 2014. It understands what this really means in practice in waysthat 98%ofleaders of traditional businessesdonot.»

An Electronic Silk Road In early December Alibaba announced that it was extending its electronic world trade platform (eWTP)initiative, which seeks to lower barriers to global trade forsmall and medium-sizedenterprises (SMEs), to Europe. One of the biggest benefits of the digital platform business TheeWTPwas conceivedbyMa, currentlyAlibaba’s executivechairman, model is the so-called networkeffectwhichoccurswhen acompany’s in 2016 as an electronic Silk Road thatwould give SMEsthe ability to productorservice becomesmore valuableasusage increases. And China’s sell anywhere in theworld.Italready operates in Malaysia and Rwanda. Alibaba, the country’s largest ecommerce provider-which is also active in The benefits of using eWTP hubs include speedy customs clearance, logistics cloud computing, online-to-offlineretail, financingservices andsmart support andminimal tariffs. logistics services-is aperfectcase study. Some 98%ofEuropean companies beingsmall to mediumbusinesses, It is one of themost powerfulplatforms in theworld. The company began Alibaba chief executive Daniel Zhang said in astatement the move «signifies life in 1999 as an e-commerceprovider.Its businessmushroomed, giving ourinitial and expanded effort to enhance inclusivetrade opportunities it avaluation of $21.8 billion whenitwent public in 2014. That was only for these businessesinBelgium andacrossEurope.» the beginning. Alipay, the payments business it createdtohelp it establish As part of that initiative, Alibaba-owned Cainiao Smart Logistics Network trustbetween clients on its network, was spun-off into anew stand-alone signed acontractwithBelgium’s Liege Airport to leasea220,000-square business, Ant Financial, whichisnow ranked as one of the most valuable metresite where the Chinese companywill build asmart logisticshub. financial services businessesinthe world and apowerful platform in its Alibaba estimated the project will entail an initial investment of €75 million ownright. (See thestory page 14)Alibaba’s e-commerce business has euroswiththe firstphaseofoperations expectedtostartin2021. continued growing: it recentlybroke its own record by rackingup$30.8 The Liege smart hub will allow products to be shippedanywhereinthe billion sales in one 24-hour periodduring China’s Singles Day,anannual world within 72 hours,animportant ingredient for success for both buyers

P.12 —THE INNOVATOR Jack Ma, the billionaire founder of Alibaba

and sellers. «Wesee ourselves as atechnologycompanythatuses data in without investing in their own supply chains. Alibabaenables asignificant cooperationwith our partners to improve the consumer experience, »says portion of SME trade and has moved to financingthese SMEs in China, Terryvon Bibra, General Manager, Europe,Alibaba Group. notes business author andplatform specialistSangeet Paul Choudary, Alibababenefits not just from additional revenues but also fromcollecting another memberofthe World EconomicForum’s DigitalPlatforms & insights. «Weare aplatform business that include B2B, B2C, and B2B2C» Ecosystemsexecutiveworking group says von Bibra. The way our platforms are built are ideally virtuous circles, Platforms that facilitate interactions and capture data will have an increasingly themore you put in the strongeryou get. The more participants the better. largerrole to playinthe future of global trade, Choudary says in ablog Data is the newfuel, making our ecosystem more andmore efficient and posting. «Asthese platforms get bigger and benefitfromwinner-take-all moreand more valuable.» Alibaba doesn’t think in terms of online or scenarios, we may seecontrolpoints over tradeshifting frompolitical offline,von Bibra says. In China it is helpingoffline shops to connect to countries to digital platforms, »hesays« Make no mistake: The rise of the network. «Weare taking an approach that might seem hugely inefficient platform-led trade is one of the defining shifts of our times.» and making it offlineand online agnostic.» he says. «The eWTP hub is part of the same approach. Getting apackage from oneplace to another and making it affordablerequires alevel of scale. So how do we involve other companieslike sellers and logistics providers?We givethem aplatform. J.L.S. »Platformsenable much smaller enterprises to participate in global trade

—P.13 PLATFORM ECONOMY

ANT FINANCIALNOW RANKS AMONGTHE WORLD’SMOST VALUABLE FINANCIAL SERVICES FIRMS

JP Morgan $391B ICBC $345B Bank of America $325B Wells Fargo $308B China Construction Bank $257B HSBC $219B Agricultural Bank of China $203B Citi $203B Bank of China $182B ANT FINANCIAL $150B How An Alibaba RBC $123B Santander $116B Commonwealth Bank $112B Spin-Off Became A MUFG $112B

$150 Billion Company Source :CBINSIGHTS Note: Market caps as of Jan. 12, 2018. Ant Financial private valuation as of latest financing round. —Ant Financial demonstrates the powerofplatform businessmodels

Ant Financial, whichgot itsstart powering Chinese Internet giant previouslytried and failedtobuy Moneygram, aU.S. money transfer Alibaba’se-commerce platform and was later spun out as as separatebusiness, service, said it could not comment.Ant’s current business operations demonstrateshow platform business models allow companies to successfully include: extend into adjacent businesses. Alibaba used its original business –ecommerce —Alipay: The biggest player in China’s $17 trillion online payments market, -and technology to move into payment solutions. Thepayments business handles transactionsonAlibaba’sTaobao andTmall e-commerce platforms begat Ant Financial, which today has avaluation of around $150 billion, but has evolvedintoalifestyleenabler.Users can hail ataxi, book ahotel, making it one of the most valuable financial companies in the world. (See buy movie tickets, pay utility bills, make appointments with doctors, or the chart). Ant Financial grew out of Alipay,amobile and online payment purchase wealth management products directly from withinthe app. In platform that launched in 2004 and contributed significantly to Alibaba’s addition to online payments, Alipay is expanding to in-store offline abilitytosucceed. (See the story on Alibabaonpage X) “Alipay was initially paymentsbothinside and outside of China. Alipay’sin-storepayment established as athird-party escrow service to bridge the gap in trust between service covers over 40 countries and regions across the world, and tax online buyers and sellers,” says Douglas Feagin, president of Ant Financial’s reimbursement via Alipay is supported in 29 countries and regions.It International Business Group.“By utilizing this escrow account, complete also works with over 250overseas financialinstitutions and payment strangers became comfortabletransacting online with each other.Once our solution providers to enable cross-border payments for Chinese travelling users were abletoconduct e-commerce, they naturally developed other overseas and overseas customers who purchase products from Chinese needs such as financing, wealth management and insurance, which motivated e-commerce sites. Alipay currently supports 27 currencies. us to offer an innovative suite of these servicesbuilt aroundthe core payment —Yu’e Bao: What began as an online spare cash management platform use case.” Recently Ant Financial launched anew brand devoted to yet withinthe Alipay appthat enables userstoefficiently manage theirspare anotheradjacent business: providing advanced technology servicestofinancial funds to make onlineand offlinepurchases has morphedintothe world’s institutions. “Whenever we decide to move into anew area, our first largest money market fundwith more than $200 billion in assets. considerationisalways whether it is asolution that ourclients need, that —Ant Fortune: Awealth management platformlaunched in 2015 that no oneelse has been able or willing to provide,” says Feagin. “This stands uses technologytoconnectfinancialinstitutionswithindividualusers in contrast to the traditional metrics of whether anew service has the whohave littlefinancial expertise andhelps them understand wealth potential to become aprofit-making business.” management products and services. Through Ant Fortune’splatform and Alipay,users can purchase these products as well as obtain market information, participateinforums, and access other services. Ant Fortune An Open Platform, Driven By Technology also aims to address the needs of financial institutionsthat lack efficient And Ambition channels to engagewith and understand the needs of users, through At presstime Ant Financial was rumored to be in advanced talks to buy innovations such as AI-poweredoperationaloptimization, marketing, U.K. currency transfer service WorldFirst. The Chinese company,which and risk management. More than 110 mutual-fund asset management

P.14 —THE INNOVATOR HOW ALIPAY’S APP PULLSUSERSINTOOTHERFINANCIALBUSINESSES AND OFFLINE SERVICES Once transaction data is obtained via the wallet, Ant financial can offer ancillary financial products according to user risk profiles. The key to Alipay is unlocking massive opportunities from distribution +data

Users can scan QR codes to pay, ”Collect” allows small businesses and have their own without POS systems QR codes to receive funds Scan Play Offers to receive payments

Money can be sent to other users, Users can invest left-over funds without scanning in amoney-market fund Transfert Card Replay TopUp Yu’E Bao Credit card bills can be repaid within the app Alipay records all digital Movies Didi Taxi City Service Zihma Credit transactions and issues acredit score and installment credit

Auser can apply for consumer loans from Jiebei, while terms differ from person to person. Air &Rail Jiebei OfoBike More

Source :CBINSIGHTS

companiesinChina have joined theplatform, providing over 4,000 institutions, including more than 100 banks, over 60 insurance companies, productstotensofmillions of AntFortune users. and more than 40 asset management firms and security brokers. —Ant Insurance: Founded in 2015, the Ant InsuranceServices Platform Xi Hu, the company’sdeputychieftechnology officer, notes that Ant Financial’s provides technology services to insurancecompanies who serve consumers technologies have withstood the tests of some of the world’s most extreme andsmallbusinesses.More than70% of AntInsurance employees are use cases through in-house use. Forexample, in the large-scale financial techniciansworking on innovativetechnologies to support the insurance transaction portfolio Alipay,Ant Financial’s mobile payment and lifestyle industry.AsofJanuary 2018, more than 100 insurance companies in platform, was able to process arecord breaking 256,000payment transactions China had used technology offered by Ant Insurance to collectively per second at the peak of the 2017 Singles’ Day Shopping Festival. In May service 510 million customers. 2018, several banks signed strategic cooperation agreements with Ant —Zhima Credit: An independent, private, alternative credit service that Financial to support their digital transformation. And, amonth later,Ant aims to bridgethe “trustgap”betweenconsumers and businesses by Financial announced that it would share afullsuite of artificialintelligence assessingindividuals’willingnessand ability to fulfill acommercial capabilities with asset management companies to increase operational contract. Users with higher Zhima Credit scores haveaccess to benefits efficiency and reduce costs. “Our mission is financial inclusion —webelieve such as depositwaivers when renting abikeorstayingatahotel. that financial services should be easy to use, low cost and available to the —Jiebei: Launched in April2015, is aconsumer finance productthat many,not thefew,” says Ant Financial’s Feagin. “Wecan only achievethis Alipayusers can usetomeetshort-termcashneeds. Borrowing quotas objective through an open platform, driven by technology.Wework closely differfromusertouser. with adiverse group of partners who create arange of products and services —Huabei: Launched in December2014, it offers arevolving line of to serve the widest possiblecustomerbase.”Simon Torrance, author of The credit to Alipay users for purchases with online and offline businesses. New Growth Playbookand amember of the World Economic Forum’s Digital —MYbank: Aprivate onlinebankestablishedinJune2015, is the first Platforms &Ecosystems executive working group, says established companies bank in Chinatorun entirelyonthe Cloud with no physical branches. can learn alot from AntFinancial. “Facilitatingpayments is justthe hook At theend of August, MYbank and itspredecessor,Ant Micro Loan, to enableAnt Financial to offerhigh margin technology services and reap had served the financing needs of 11 million small businessesinChina. even higher margin marketplace fees from the ecosystem theyare curating,” —Ant Financial Technology, launched in September of 2018, it offers says Torrance.“Their open platform approach, enabling competitorsaswell large-scaletransaction technologies, securitytechnologies, intelligence as their own internal product teamstotransact and innovate efficiently, technologies, next-generation interaction technologies and blockchain puts them at the center of aself-reinforcing and self-sustaining flywheel for applicationstofinancial institutions. new growth andvalue creation. Leaders of traditional companies need to Evenbefore thelaunch of aspecifictechnologybrand aimed at the financial rapidlylearn thesenew principles of business or be left behind in an increasingly industry, the company says AntFinancial’stechnologyproducts and services hyper-connected world.” have improved efficiency and lowered costs at approximately 200 financial J.L.S.

—P.15 PLATFORM ECONOMY

licenses in adjacent financial businesses and those licenses to this day have How PingAn Became the widest range of financial servicesinachain that includes abank, «says Larsen. «Wehave awhole range of new generation fintech businesses as One Of The World’s well.» Today there are 32 businessesinthe group and only two are material acquisitions, he says. «Every other business has beengrownfrom nothing. Most Valuable That’s the culture of PingAn,togrow the business from astanding start. » The next phase of the company was all about market share and volume Insurance Companies growth rather than shareholder value, says Larsen. The focus was on the right product mix, smart risk taking and the rightsales and service models. Ma madeacrucial decision to pivot from products to client services early on —Aplatform-based strategy hashelped it create and integrated all of PingAn’scall centers and all of its customers communications new growth and value in one place, integrated databases across every single entity.«The next phase wasreally using this businesses to pivoting the whole company around client services, »says Larsen. Ma watched Alibaba and TenCent emerging as significantplayers in China using completely new business models that would have atransformative effect andoffer awhole range of opportunities whichthe offlineworld would not be able to capture. At thatpointPingAn began its journeytobecoming adeep technology company,Larsen says. The companydecidedtovery quickly digitize everything it did. «Ifyou became aPingAn insurance agency you were recruited online, trained online, and yourcustomer relationship managementsoftwarewas drivenbymobile and tablets and your customer marketingintegrated into social networks, »says Larsen. «Tothis day Iam unaware of any company that does everything digitally end-to-end the way PingAn, China’s largest insurer, with amarket cap of $180 billion, PingAn does. » decided five yearsago to morph from a financial servicescompany to a technology company with financial services licenses. This radicalre-articulation Going Digital of its business modelnow drives everything it does. PingAnthen decided not only to move all of its operations onto the cloud The Chinese company «realized that re-allocating capital and resources to but to create its own cloud. «Wehave 180million financial clients, 500 aplatform-basedstrategy was the best way to create new growthand value milliondigital users across all of theproprietaryeco-system, »says Larsen. in the digitaleconomy,»saysSimonTorrance, an independent advisorto «This was areally, really significant thing to do. The simplificationitachieved boards on business model innovation and amember of the World Economic andthe integrationofwhatpreviously was connected but separate technology Forum’s Digital Platforms &Ecosystems executive working group. «Itthen allowed adifferent level of agility and cost-effectiveness. »From there the boldly executed against this epiphany in ways that few -ifany -traditional companystarted to invest into arange of newtechnologies that were incumbents elsewhere have done.» transformative. The company’s structure today is very different from the one that chairman PingAn has used the platform model to branch out from insurance, banking and CEO Peter Ma started 30 years ago,says Jonathan Larsen, Chief Innovation and asset managementinto healthcare,automotiveand entertainment.(see Officerofthe Group. thechart). And the company’s earlyembrace of cutting-edge technology has «PeterMaalways tookthe viewthatthere wasenormousvalueinhaving helpedPingAnincrease efficiency,reduce costs, improvecustomerexperience,

P.16 —THE INNOVATOR PINGANHAS BECOMEA‘PLATFORM-POWERED ECOSYSTEMORCHESTRATOR’

REAL ESTATE THIRD PARTYPRODUCTS P2P/WEALTH

REALESTATE THIRDPARTY THIRDPARTY PRODUCTS CONSUMERS P2P/WEALTH INSURANCE, ASSET MANAGEMENT, BANKING COREOFFERINGS DIGITAL CORE CONSUMERS PLATFORMS (SINGLE +MODULARFINTECH SIGNON) NEWFINANCIALINSTITUTIONS

AUTOMOTIVE THIRDPARTY PRODUCTS HEALTHCARE THIRDPARTY ENTERTAINMENT CONSUMERS

Financial DNA +Biometrics,Blockchain, Cloud,Big Data, AI

Sources :Simon Torrance analysis,2018

strengthen risk management,and sharpen thegroup’scompetitive edge. Based on four core technologies, biometrics, AI, blockchain and cloud computing, Forexample, the companyhelpedpioneer the use of facial recogniztion OneConnect provides intelligentsolutions in sales, risk management, products, technology.«Thatallowed us to eliminateIDfraud in China andbuild our services andoperations to 483banks, 42 insurance companies and2,400 ownvoice print technology so when you contact one of our call centers we non-bank financial institutions nationwide. In 2018 OneConnect started knowwho youare from the moment youopen your mouth,» says Larsen. introducing the technological solutions to overseas markets. Today,OneConnect PingAn claims to be the first in the world to apply micro-expression recognition is serving financial institutions in Thailand and Indonesia, among other South technology in its lending arm. Over 500billion yuan in loans havebeen EastAsianmarkets, puttingOneConnect on the map of global competitors facilitated using the technology,saysthe company,helping it cut credit losses in fintech. by 60% and shortenthe approval time from five days to two hours. Expect the company to continue moving into adjacencies. «Itishealthy to The company has alsolaunched dozens of start-upsfocused on areassuch keep evolving as an organization and be unafraid to cannibalize your own as medical care, financial technology,onlinecar sales and artificialintelligence. business to create something better,»Larsen says. One of the conglomerate’s start-ups, OneConnect started as an internal unit that developed financial technology for the group. It has since launched an outward-facing business that sells such technologytosmall banks, insurance companies and non-bank financial institutions around China. J.L.S.

—P.17 PLATFORM ECONOMY

to the construction industry: think cement, screws or even plastics.Gisbert Steeling Rühl, the company’s CEO,says he was first sold on the conceptofgoing digital following avisit to Silicon Valley in 2014. While the first generation For Change of large Internetplatforms disrupted digitizable services like music, the second generation of so-called online to offline, or O2O,platforms covered wide-ranging groupsofconsumer-driven industries like urban transportation —Germany’sKlöckneriscreating an open digital (Uber and Lyft), lodging (Airbnb) and food delivery (Just Eat and Delivery platformtogirdits position in the steel distributionbu- Hero). Rühl’s light bulb moment came when he realized that the same siness and beyond fundamentals that drive consumer 020 platforms can also be applied to goods and services that companies trade with each other. The key takeaway was that “platforms will become the dominant business model of the 21st century,not only in B2C but also in B2B,”says Rühl, Faced with pressure on margins and convinced that platforms would define thefuture, Rühl set about the difficultbusiness of transforming not only his company but also the way the entire steel distribution industry works. His reasoning? If Klöckner didn’t do it someone elsewould. Rühl’s insight has provedtobeprescient: After successfullydisrupting numerous traditional industrieswithits platform approach Amazon now sells industrial-grade steel online. Klöckner is one of over 50 large corporations such as Henkel, Schneider Electric, Deutsche Bank and General Electric that are participating in the Digital Platforms &Ecosystems workinggroup, part of the World Economic Forum’sDigitalEconomy and Societysystem initiative.All are grappling with howtobest applythe platform business modeltotraditional industries. Klöckner&Co., one of the largest producer-independent distributors B2B platforms could represent $10 trillion in socio-economic value creation of steel andmetalproducts worldwide, is not the first company that comes from 2016 to 2025, according to an Accenture report compiled in partnership to mind when thinking about digital pioneers even though the 113-year- with the World Economic Forum. The report notes that this estimate – old German group has arguablyearnedthat moniker.Itisamong the first derived from alarger forecast which estimates $100 trillion of value is at traditionalbusiness-to-business (B2B) companies in Europe to adaptthe stake through 2025–may,infact, be conservative.Separate independent platform business model popularized by Internet giants. Platform business research confirms that more than 30% of global corporate revenue will models create ecosystems that attract, match and connect different groups come from digitalplatforms by 2025, and yet only 3% of established companies across the globe and enable them to interact. Unlike traditional linear value haveadoptedanactive platform strategy.Klöckner’s transformation holds chains, in platform models valueisdistributed across adynamicnetwork important lessons for other B2B companies, says Cristian Citu, Digital of customers, suppliersand competitors,creating anetwork effect that has Transformation Lead at the Forum.“There is obviously no silverbullet when allowed new businesses to growatanunprecedented rate. Apple, Facebook, it comes to adopting the digital platform business model, but there are Amazon, Baidu, Alibabaand Tencent are all examples of companies that certainly strong learnings to be taken fromKlöckner,”says Citu. “t is impressive have done justthat(see the cover story). Theyhavegrown exponentially to observe the way the organization learned from a first attempt to build by placing themselves at the center of ecosystems. theirown webshop, and thenlaunched avery successful separate digital Klöckner,which has adistribution and service network of about 170locations platform which has evolved into across-industry platform.” in 13 countries supplying around 130,000 customers, began fully digitizing its supply and service chain five years ago. Online transactions already contribute 23% of the group’s €6billion 2017 sales revenues. The goal is ASector In Crisis to shift atotal of 60% of itsbusinesstodigitalinthe next three years. It has Klöckner has long played an important roleinthe steel industry value chain. separately created an independent open industry platform called XOM Onlycustomers that buy huge amounts of steel canorderdirectly frommills Materials which it hopeswillbecome thedominant global ecosystem not and delivery can take up to three months. The German distributer buys just for steel andmetal but also neighboringindustries thatsupply materials steel frombig mills, whichitstores in some 170 warehouses around the

P.18 —THE INNOVATOR world in order to efficiently serve local markets. Its customers include of 500+entrepreneurs and freelancers. Their mission? Find out if startups construction companies and automakers as well as craftsmen who want to would be interested in working with Klöckner on acustomer-focused digital buy smallamounts of steel and for delivery within as littleas24hours.But strategy.Interest was “extremely high because bringing the steel industry demand for steel in Europe fell 20% after the 2009 global financial crisis online was better for startups than starting the fifth online shop for pet but production remained the same, leading to huge overcapacity. Steel from food,” says Pokropp. “The potential for B2B marketplaces is far bigger.” China also flooded the European and U.S. markets, putting margins under With the help of some local startup talent the group created aseparate pressure. This forcedKlöckner to reduce itsworkforce from11,700 to 8,700 company,calledklöckner.i, in Dec. 2014,and launched an onlinemarketplace andcloseanumber of warehouses in Europe. “It was clearthat the company for Klöckner’ssteel customers. “This was really arevolution forthe steel needed to find growth and justclosing unprofitable sites couldnot be the business,” says Pokropp, amember of the board of klöckner.i. “Before we only solution,” says Christian Pokropp, aKlöckner managing director.“We did this prices werenot transparent and most orders were sent by fax. Now saw digitalizationasachance to differentiate ourselvesand also to spur our clients can order steel via theirsmart phones. It is way more comfortable new growth.” for them.” klöckner.i also created aservice that gives customers an overview Getting started proved tougher than imagined. “Weset up an internal group of all of the contracts it has with the company. to develop innovation for our industry but it soon turned out we were not “Wegot very positive feedback from our customers but we needed to convince innovative enough,” saysPokropp. “Everytime someone came up with a our sales people,” says Pokropp. “When all the digitalization initiatives new idea someone else thought of areason why it should be killed. After a started there was fear that we would further reduce our workforce. We fewweeks we realized this wasthe wrong approach and stopped this group.” completely changed our internal communications in order to convince and An outside advisorwas hired who presented ideas that could make it easier educate our people.” for Klöckner to collaborate with its clients –basingits suggestionsoninterviews It took several initiatives, the use of digital communication tools and several with customers.“This customer-focused approach fascinated our CEO,” says years to foster the right cultural change.Alongthe way adecision wasmade Pokropp. It led to adecision by thecompanytoask two management trainees to create stronger ties between Berlin-based klöckner.i and the parent company to rent workspace at betahaus, aBerlin-basedco-working space and community

—P.19 PLATFORM ECONOMY

BUSINESS MODELEXPANSION TIMELINE

Supply Side Customer and Distribution Side

Mills Distributors Customers

Steel/Speciality Metals Steel/Speciality Metals/ Addit Industries

Purchasing Fulfillment

Software Software Integrations Ads Cust. Support Finance Integrations Sources :XOM Materials

in Duisberg. “Wefound our people in Berlin really needed knowledge of that are sold in large volume while the Klöckner online shop and marketplace thetraditionalbusiness in ordertosell steel online,” says Pokropp. “And sells more specialized products in smaller amounts. “Many of our products people from the traditional business reallyneed to understand what the require specialized logistics,” says Pokropp. “Thesecannot be offered by people in Berlinare doingsotheycan contributetoour future success.” Amazon but this might change in the future so we have to grow our marketplace Klöckner employees from all over theworld are regularly sent to workin as soon as possible.” the Berlin digitalization unit for two months, spending 50% of their working The idea behind XOMMaterials is to createanopen ecosystemthat enables time helping further the group’s digital strategy.Some of them act as digital transactions among all market participants: steel mills, distributors -including ambassadors when they are sent back to their business units. Klöckner has competitors -and customers. The expected benefits for customers are efficiency also launched adigital academy that offers online courses about e-business. gains, better pricingconditions due to highertransparency,faster delivery More than 1,100 employees have already signed up, says Pokropp. Managers times due to network-enforced demandmatching, and faster purchase are alsoexpected to have abasic knowledgeofcoding and take classes that realization cycles. XOMMaterials also offers advantages to small- and medium- expose themtostartup thinking, such as agile working and launching sized distributors, allowing themtoaccesslarger customer basesbytaking minimally viable products. advantage of platform servicessuch as fulfillmentand finance. It also aims “The most difficult part of the digital transformation is the cultural change to cutdistributors’ costs through better demand forecasting. Suppliers and that accompanies it,” says Rühl, “to convince your own employees and producers are expected to benefitbybecoming less dependent on distributor customers of the benefits of digital distribution channels and inspire them networks and partnerships.The XOMMaterials networkisbeing built step to embrace newforms of cooperation.” by step. It is first targeting small- and medium-sized distributors, then large distributors and eventually the supply side, i.e. large steel mills. The total addressable steel market in the U.S. and Europe alone is €250 billion. But The Move To Open Marketplaces Klöcknerdoesn’t expect to stop there. It is already selling plastic parts into In 2018 the company opened up its marketplaces: first creatingadigital the construction industry,promptingXOM to change its name to XOMMaterials. platform for third-partysellers, like distributorswho offer complimentary “The race for themarket sharesofthe future is being decided today,” says products such as asteel grade that Klöckner does not have in its portfolio, Rühl, thecompany CEO. “Thedigitization of existing offline processes is so that it could offer customers awider range of products, and then creating not enough to be one of thewinners. Rather,itisabout creating disruptive aspin-offcalled XOMMaterials, the completely independent industry platform business models such as platforms. With our industry know-how and digital that was launched in Feb. 2018. Tendistributors, including some of Klöckner’s competencies, we have agood chance of playing adecisive role in the direct competitors, are live on the XOMMaterials platform and about 100 platform business of the steel industry and adjacent sectors.”- customers have registered. The platformisfocused on commodity products J.L.S.

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[email protected] ENERGY

collectedfromsimilar installations, and makearecommendation. Bloomberg How ANew Data New Energy Finance forecasts that installedsolar capacity will increase 14-fold worldwide by 2040.This is expected to lead to agrowing demand Platform Business for toolsthat help optimizereturn on investment. Solytic’s ownmarket research estimatesthat around 25%ofall solar-PV installations are underperforming. But that is just the start. The plan is to evolve the service Could Energize A to amulti-sector platform businessmodelthat willnot only leveragethe vast amountsofdata it collects from solar installations but also add in 110-Year-Old Electric other sectors, such as insurance and financial services. “Solytic’sability to aggregate millionsofdata points acrosshundredsof Utility thousands of solar energy assets will ultimately not only make these assets more efficient for theirownersbut lay the groundwork foradecentralized, —Vattenfallisexpecting adecentralized, large-scale large-scale trading platform that our future digital energy economyneeds,” solar energyanalytics business to generate exponential saysMichaelStephanblome, aco-founder of Factor10,anindependent growth corporatecompany builder that helpedVattenfall build Solytic.

Moving From A10X Factor On Margins To 100X Or More Although Vattenfall’s wind and solar renewal energy businesses are relatively young, the division had already grown to over 500people by 2016 -about 80% of them engineers–and had established structuresand processes thatmade it difficulttobeentrepreneurial and agile,saysSchulze. “Wewantedtounderstand what the energy market looks like from the perspectiveofentrepreneurs, to know how theysee the world through their digital glasses, to look at what we could learnfrom businessmodels Like other energycompanies,Sweden’s Vattenfall, one of Europe’s fromtotally differentindustriesand how we could transform frombeing largest producersofelectricityand heat,isgrappling with smallermargins, assetdriven to being data driven,” shesays.Tothat end, Schulze started increased competition and adaptinganasset-heavy business to an increasingly speaking to members of theBerlin startup community and eventually data-centric, service-driven world. connected with Factor10, amember of the World Economic Forum’s Digital “Wesaw howdigitalizationwas changing other industries intensely and Platforms &Ecosystemsworking group, which focuses on how to best didn’t haveaclue how it wouldeffectenergymarkets in the future,” says apply the platform business model to traditional industries.Factor10’s Juliane Schulze,who heads up business development for renewableenergy team is comprisedofover100 tech entrepreneurs and industryexperts assets at the utility, which sellselectricity,heat, gasand energy services with along trackrecord in the European startup and digital ecosystem. to around 14 million customers in Sweden,Germany,Netherlands, Denmark It partners with big corporations and helps them create new digital ventures and theU.K. and adopt the powerful platform business models that the world’s largest Eager to createnew revenue streams, the utility setupanew firm from Internet companieshaveusedtogrowexponentially.(Other clients include scratch in 2017 and enticed outsiders to run it. Today, that company, Adidasand Allianz.) Berlin-based Solytic, is running avendor-independentsolar analytics Brainstorming with Factor10led to the idea of creating asolar monitoring platform with the aim of cutting the cost of operatingphotovoltaicpanels and analytics product that has the potential to grow into aplatform business. for business customers such as maintenance companies servicing factories, In July of 2017 Factor10recruitedJohannesBurgard, an engineer and small and medium sizedbusinesses, and farms. The company’s technology project manager with five years experienceworking at Airbus and other –whichincludesartificialintelligence and InternetofThingshardware – companies. Initially hiredasanentrepreneur-in-residence at Factor10, replacesmanualmonitoring systems. It is abletotellbusinessesinreal- Burgard began creating aminimally viableproduct with the techteamat time that one or more of its photovoltaic (PV) power plants is only operating Factor10 and Alwin Nagel,aVattenfall employee who leftthe parent at afraction of full-capacity, that this is abnormal based on the data company to workonthe project full-time. Solytic wasestablishedasa

P.22 —THE INNOVATOR the communityisfar moreinteresting,” he says. “By interlinking service providers with the owners of solar assets we can movefroma10X factor on margins to 100Xormore. Tappingintothis marketwilllead to exponential separate legal entity in the summer of 2017. The young company hit all growth. That is where the magic happens.” of its milestones, leading Vattenfall to invest €3million at theend of 2017. Vattenfall says it believes in that vision. “Once you have cracked the software- Solytic is run by Burgard, Nagel and Konrad Perényi, an entrepreneur with as-a-service analyticsnut and you have asubstantial customer base and 11 years of experience working for digital ventures such as Rocket Internet. you have enough data, you can start to provide alot of interesting services Shareholdingissplit among Vattenfall,Factor10 and the threefounders. to clients that are adjacent to the energy market,”saysSchulze. “For “Changing abig company is liketurning around atanker,” saysBurgard. example,grid operators need detailed data about fluctuationsinrenewable “But we canbeagile and move fast.” energy sources. Thisisvery hard to predict.Ifyou can develop datascience In addition to an innovativecompanystructure “Solytichas theability to for weather –asone example–and the analytics aredeveloped well really leverage the datathattheyshowtotheir customers,” says Schulze. enough you can grab asubstantialshare of that market. Car-sharing “The data science layer is very under-developed in this industry.They have companies may want to use time-sharing cars when pricesare cheap strong partnerships and astrong tech team in place that is able to analyze because solarproduction is cheap.That couldbeavery nice service for the root causesfor failures. This is acompletelynew market segment in this kind of customer group. And if you are able to provide information Europe.” aboutthe performanceofassetstoinsurance companiesorbanks that By automating and improving on today’s manualmonitoringofindustrial help them judgetheirrisks thatcouldalso be avaluable service. There is PV installations Solytic can, among other things,lower risks for banksand the possibility with this platform to createawhole ecosystem of services insurance companies, says Burgard.“The whole idea of providing knowledge based on data.” and creating more transparency forevery single partythat is involved in J.L.S.

—P.23 PLATFORM ECONOMY

“Only adigital solutioncan solve this,” saysXpension chairman Lars Hinrichs, ADigital Platform For founder of the European career-oriented social network Xing, whichhas acurrentmarket capitalization of more than $1.5 billion. Although Xpension’s approachisdisruptive it has buy-in fromtraditional industry players. Pensions Global insurer Talanxwas the firsttojoin Xpension. Othersquicklyfollowed. Twenty of Germany’sbiggestlife insurers,including Zurich, SignalIduna —AGerman startup is targeting the €10 billion and Sparkasse Verischerung, which together represent the majority of life market for corporatepension administration in Europe, insurers in Germany,more than 5,000 insurance agents, and more than with industrybuy-in 1,800 companies are already using the platform, thecompany says. It sees more opportunities for growth of theplatforminGermanybytargeting the market forprivatepensions as well as “socialpartners” i.e. the employer and uniongroups, who, thanks to anew law,will increasingly help employees chooseand enroll in pension funds. The startup alsohas ambitious plans to expand the Xpensionplatform to other countries on the Continent. Xpension’s creation comesatatime when public pensionsare shrinking significantly,leadingtoanincreaseindemand for work-relatedand private pensions.The upside for Europe’s aging population is that the digital platformwillmakes pensions moretransparent, understandable and accessible for everybody,says Hinrichs, aWorld Economic ForumYoung GlobalLeader. The corporate pension systeminEurope, which is bogged down by bureaucracyand mountains of paperwork,isbadly in needofadigital update.Changes–suchasmoving to anew employer and takingyour Changing The Industry Model pension with you,orsimplyupdating asurnameaftermarriage -require When XpensionCEO Martin Bockelmann, an insurance industry veteran, loadsofpaper forms andfaxes, causing headachesand months of delays. founded the companyin2007 it, like every other player in the industry, And the inefficiency carriesahuge pricetag. was set up to work in an analogue world. He saw the potential in digitization There are about 15 million corporatepension policesinGermany alone and built up ateam and investors whoshared that vision. “Welooked at and about 100 million in Europe. The estimated overhead perpolicyper the value chain and realizedwecould changethe entire model of the annum is between €100 and €200. The typical savingsinacorporate industry, ”hesays. pension is around €1000 perperson per year. “If €200 of thator20% per Individual insurance companies could not create such an ecosystem, says annum is wasted over 30 years it makes ahuge difference:people have Bockelmann. The platformhad to be vendor-independent in order to be significantly lesstoretireon,” says Malte Dummel, chief financial officer inclusive.Asthe providerofthe only neutral, fully-digital platform in at Xpension,aGerman startup. Germany Xpension reduces the cost of administering pension polices for Xpension is using theplatformbusiness model to build anew type of insurers and companies by up to 80%, facilitates more effective distribution ecosystem: an independent software-as-a-service that provides ashared by agentsthrough aconsumer-friendly advisorysoftwareand rapid processing, serviceinterface among pension product providers, insuranceagents, and enablesconsumers to be better informed about one of the most important companiesand employees. The platform aims to facilitate and slash the financial decisions theywill make, he says. cost of creatingnew and managing existingpension policies. The Munich-based startup is currently focusing on Germany,the largest The administrationand distributionofwork-relatedpension polices in and most complexmarketinEurope with a €3billion annual cost for Germanyisoftenmanual and requires 30 or moredifferent steps, is slow administrating employer-related pension plans. Thereare over 80 life (six monthsorlonger in somecases) and complex,withsome8,000 insurers in Germany,350,000 companies and around 50 worker unions. variables. It is also costly for insurers, companies and agents who spend

P.24 —THE INNOVATOR Xpension

an estimated 25 millionhours or moreper year managing them, says company CFO Dummel, whopreviously spenteight years at Goldman Sachs in pension advisory, corporate finance and technology M&A. In October Xpensionraised a$24 million funding round led by Armada Investment. Daniel S. Aegerter,Armada’s Executive Chairman and founder 25 LARGEST LIFE INSURERS of TradexTechnologies, aB2B software company,joined Xpension’s Supervisory Board, which alsoincludes Hinrichs andHerbert Henzler,the former European CEO of McKinsey.Existing investors, ledbyHinrichs, plus an international network of 20 venture capital, technology and insurance industry veterans, also participated in the round.Xpensionsays it plans to use part of thenew fundingtoroll out technology that will help industry players implement a2018German law that mandates sector-wide auto- enrollment in corporate pension plans. The new Germanlaw gives employer andunion groups the power to oversee work-related pension adoption and help employees with informed 350,000 COMPANIES 35,000 AGENTS decision-making. So, in parallel to working with insurers, Xpension is partnering with theseemployerand union groups. These groupscan distributeXpension consumer accountsdirectly to their members, helping the startup’s platform quickly reach up to 10 million employees looking for information about pensions. Xpensionallowsemployees andconsumers to manage their own pension policies, making it easyfor themtoestimate their retirementincome gap andtransferpoliciesafter ajob change,saysDummel. The startup is also planningtotarget the market for private pension savings, asegmentwith €2trillion in assets under management in Germanyalone.

The B2B2C Multiplier Effect Xpension does not target consumers or corporations directly.“We target the one stakeholder who is hurting themost–and that is theinsurer, because theyhavethe highest cost base,” says Dummel. On top of a subscriptionmodel its pricing is success-based, driven by ashare of costs saved or leadsgenerated, creatingastrong incentivefor insurers and agentstotest and thentypically keep using its platform. The B2B2C multiplier effect could help Xpension become one of Europe’s next unicorns,the term used for businesses valuedat€1billion or more, says Hinrichs. “There are similarchallenges in other European markets,” says Hinrichs. And Xpension may eventually target them. “ButGermany 35 MILLION EMPLOYEES in itselfisahuge market andwehave only targeted onesliver of that marketsofar,” he says. “Thereisenormouspotential to expand in this marketalone.” J.L.S.

—P.25 PLATFORM ECONOMY

Opening ADoor To The Future —Anew platform pairsmanufacturers of office building equipmentwithastartup to generate revenue streams fromdigital services

Torben Friehe, co-founder and CEO of 1aim, demonstrates adigitally- service revenue. “Weare helping powered door handle that Forsome established products they discovered amuch is creating new revenue streams them make the change away from companies platform business models larger potential: Companies were for traditional makers of doors hardware to amore software driven represent adoortothe future. struggling to understand how to best and door handles. approach,” Friehe says. “Wewant Foratleast two European companies use theiroffice space and were to work with such companies to it’s literally the case.Germany’s unhappy with their employees’ poor show them how much potential Hormann Group, the world’s fourth workspace experience. So,the two there is to leverage.” largest door maker, and Schorghuber, decided to develop technology to Providers of products like doors amaker of securitydoors, are among track, monitorand analyzehow “realize that digitalization is the first establishedcompanies to businessesuse theirrealestate -in happening and they want to shift joinanartificial intelligence-powered partthrough informationcollected to modern approaches by applying platform that acts as acentral nervous by the door accesscontrol system - an additional service layer,” says system for office buildings. The goal? and sell thedataitcollects as aservice. Friehe. “The problem is that even Reducethe amount of under-utilized “Until we came along therewas no IntroducingManufacturers if they have astrong customer base office space by collecting datathat means to connect the physical to the To ASoftware-As-A-Service theydon’twork directlywith clients allows businesses to make better use digital world,” says Friehe. “You can Model but rather through anetwork of of theirresources. use softwaretobookameetingroom 1aim’s strategy is to approach one partners, usually small shops. The Theplatform was first launched by butifnoone comes after 15 minutes market leader from each segment: further manufacturers are from 1aim,aBerlin-based company founded there is no way to alert the company onedoormaker,one security door customers the more they will remain by two entrepreneurs with that the space is empty.” maker,one door handle manufacturer, old-fashioned companies.” backgrounds in software engineering, 1aimfound it difficulttopenetrate onemaker of intercoms, etc. Partners The platform also aids 1aim. “We mechanical engineeringand theglobal commercialreal estate take astake in 1aim so they have don’t want to build doors or door electronics. The two started out by market on its own. That’s where areal interest in the company’s handles,” says Friehe. “Our partners devising an access control system partnershipswith companieslike success, and make a10-year invest in our company,wedigitize for offices that would allow any door Hormann Group come in. “In order commitment. their products, and we share the to be opened by any type of mobile to deploy our software on alarge Through its platform 1aim allows profits fromthe software-as-a-service phone but remain highly secure. After scaleitmade sense to digitalize these manufacturers to generate business. It’s awin-win approach.” shipping their first door access control existing products,” says Friehe. subscription-based software-as-a- J.L.S.

P.26 —THE INNOVATOR MEET THE GAME CHANGERS. THE DIGITAL ARCHITECTS. THE INNOVATORS.

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WWW.4YFN.COM OPEN INNOVATION Hyperloop Transportation Technologies Chairman Bibop Gresta standing in atube at the company’s innovation center in Toulouse, France. The graphic names some of the global companies that are collaborating with the hyperloop company on technology development and strategy.

Pioneering The Future —Hyperloop Transportation Technologiesuses thepower of the crowd to develop its technology andeventhe waythe company is managed.

Hyperloop Transportation Technologies,a2018 World Economic development labs.Over 900 individuals such as engineers,designers and Forum Technology Pioneer,hopes to transport us to the future in more ways technologyexperts collaboratepart-time. Digital tools are used to track work thanone. It is notonly working on ahigh-speed levitating train that is expected on the projectand compensate contributors, who mostly work virtually as to dramatically change inter-city travel; it is changing the way people think independentcontractors, with stock rather than paychecks. about building companies and just might change the way the entire global While the company uses a flat team-based structure more senior and experienced transportation ecosystem is organized. HyperloopTThas crowdsourced its members of theecosystem known as “hyperleaders” takeresponsibilityfor design and early financing and the development of technology necessary to ensuring team members are actively engaged in accomplishing the work of transport people in capsules pushed through giant tubes at speeds of over the ecosystem.The Harvard BusinessSchool case studyoutlineshow the 700 mph. It even uses the power-of-the-crowd to manage the company, company organizescross-team projects into “sprints,” using aso-called “agile/ prompting Harvard Business school to write acase study about the company. scrum”approach to designing complex software systems,with aproductteam The genesis for this novel approach to open innovation came after SpaceX owner responsible fordeliveringthe work product andasmall setofteam and Tesla founder Elon Musk posted adesign documentfor amoonshot members whosigned on to do the sprint over ashort period of time.For product authored by Tesla andSpaceXengineers, entitled “Hyperloop Alpha,” example, the case study notesthat HyperloopTT’ssuccessful project proposal in 2013.HyperloopTT co-founder Dirk Ahlborn,anativeofGermany,received in Abu Dhabi was completed in less than twoweeks involving contributors permissiontopostthe whitepaper on acrowdsourcing platform he created in engineering, marketing, production, finance andmedia relations -none of calledJumpStartFund.comand asked participantsifthe hyperloop could or whom werefull-time -and led by aproduct team owner who was alsoapart- shouldbebuilt. Hundreds of peopleresponded enthusiastically and some timecontractor. shared hyperloop designs and ideas. So, Ahlborn and co-founder Bibop Gresta, Tapping into the power of the crowd not only allows HyperloopTTtoconnect atech industry veteran who got hisstart as an Italianpop star,devisedaplan with alarge pool of people to work on projects, it inspires those that it attracts to create aversion of ahyperloop transportation system through the power to go above and beyond, says Gresta. The developmentofacarbon fiber of the crowd. composite material that will be used in its futuristic capsuleisacase in point. “Weknew it needed avery big effort and that the money needed was too Named “Vibranium” after the fictional substance used to protect the comic muchfor whatcould be raised throughtraditional methodssowedecided book character Captain America,the material is eight times strongerthan to do it with acall to action to whoever wanted to join,” Gresta, the company’s aluminum and10times strongerthan any steel alternative but much lighter, chairman, said during arecent interview in Dubai. “Scientists from all over reducingthe amountofenergy needed to propelthe capsules over long the planet started contacting us. We also knew that the majority of the technology distances. ASpanishcompany called Airtificial(formerly knownasCarbures) we needed already existed inside labs or companies, so we took thesame hasbeen working on thismaterial,which can be embedded with thousands approachwith themand asked them if they would be willing to jointhe of sensorsthat canrelay real-time data on temperature,damage, and structural effort.” TodayHyperloopTTisworking with 40 big companiesand organizations integrity.Anengineeratone big aeronautics company, who moonlightsat including government transportation agencies, universitiesand research and HyperloopTT,was able to improve the material evenfurther,saysGresta.“It’s

P.28 —THE INNOVATOR amazing,wheneverweencounter aproblem we simplyask thecrowdand has 39 patentsand 56 trademarks.“We will be cheaper, faster to market and withinafew days we will often have aviable solution.” have less environmental impact than any other system,” he vows.HyperloopTT, HyperloopTT hasalsohit on anovel way to attractgovernmentfunding. which is headquartered in Los Angeles, has signed deals to build hyperloop Eleven governments aroundthe world have alreadysigned agreements that systems with governmentsinAbu Dhabi, France, Ukraine and China. are in different phases of implementation with many committing millionsof The first segment of HyperloopTT’s first commercial system is expected to dollars to become membersofthe HyperloopTT’scrowd-powered ecosystem. be operational by October 2020. The projectwill include an “experience This has enabled the company to raise over $100 million in in-kind contributions center” in Al Ghadeer,which is located between the United Arab Emirate and around$40 million USD in cash. “This system can make money andpay cities of Abu Dhabi and Dubai. Visitors to the World Expo 2020 will be back the state,”says Gresta.“Most transportation systemsare subsidized by among the firstinthe world to to try out thecompany’s tubular transport thegovernment,wewant to do theexact opposite.” system, Gresta says. Once fully operational the capsules can move 20 to 50 The ability to attract customers –i.e. governments -topay for designinginitial people every 40 seconds, which translates into 3,600 people an hour or pilot tests, strengthens thebonds that hold the ecosystem together,says the 160,000 passengers daily.HyperloopTTsaysitisworkingonthe passenger business case study.Itnotes that members of thecrowd have also enabled experienceand innovative ways of generating additional sourcesofrevenue, thecompany to securecriticalstrategic and university R&Dpartnerships. For such as fees fromadvertisingprojected onto interactive windows or augmented example, it has licensed its levitation technology from the U.S.’s Lawrence reality entertainment services. And it might end up selling energy to others Livermore National Laboratory,which firststarted testing the technology back as the system is expected to generate more then it consumes. But HyperloopTT in 1995;partnered with Atkins -aleading global design, engineering and doesn’t want to stop by designingonly hyperloop systems. It thinks that the project management consultancy that had workedoncomplex infrastructure same approach could also be appliedtoovercome humanity’s other great development projects for governments around the world -and developed a challenges. “By tapping into humanity’s collective knowledge we can begin close working relationship with Leybold Vacuum, inventor of the vacuum to conquer our greatestchallenges at afraction of the cost and time compared pump. What’s more, the manufacturing value chain “has been completely to what thetraditional business model allows,” says Gresta. “Whether it redesigned with this model,” saysGresta.“We are notbuilding, operating or be energy,housing, food and, yes, transportation, what HyperloopTTis maintaining any part of the productionourselves;weare licensing other demonstrating is that when you put together the best and brightest minds companies to do it.” Since the company launched in 2013anumber of other in the planet to solve the biggest problems of humanity,something magical ambitious hyperloopcompanies have beencreated.The power of the crowd happens -they do it.” is one of HyperloopTT’skey differentiators, says Gresta.The company now J.L.S.

—P.29 Björsne, asenior executive at global drugmaker AstraZeneca, was first asked An Antidote to develop aprogram in Sweden that would help the company connect with entrepreneurs he refused, for these reasonsand more. “Innovation is to For The some extentatoddswithtraditional business development,” say Björsne. “You cannot anticipate the outcome. If you cannot predictthe outcome you can’t generate abusiness case and anything you don’t understand or predict Incumbent’s Curse will never be subject to an investment. So how do you embark on disruption?” —Drug maker AstraZeneca’snovel open Björsne eventually agreed to take on the challenge, providing he could innovation initiative is being copied andstudied by other have free rein to develop it. He hit on anovelapproach: set up aseparate bigcorporates legal entity,place it in the middle of the AstraZeneca Gothenburgcampus, encourage close collaboration betweensalaried employeesand entrepreneurs from the hub with no strings attached on either side, and take away all financial pressure by securingfunding from local government to make the projectcostneutral for the drug maker,allowingspace for experimentation andfailure. One-thirdofthe cost of running BioVentureHub, the initiative he started in 2014,ispaid by theSwedish InnovationAgency (Vinnova), the regionalgovernmentofwestern Swedenand the city of Gothenburg, who collectively have invested 19.6 million krona (€1.91 million). Athird Corporationsinjustabouteveryindustryare struggling withhow is paid by Carl Bennet, principal shareholder and chairman of the global to innovate. Culture clashwith startups,anot-invented-here attitude and medtech company Getinge.Astra-Zeneca’s contributionistooffer 20 million fear of anything thatmight change traditional business modelsand impact krona (€2million) of in-kind servicesand facilities. quarterly results are some of the reasons why large, incumbent firms rarely The approach, “a macro-inclusivemeans of innovation that can serve as introduce radical product innovations.The phenomenon is sometimes an example forthe rest of theworld,” is payingbig dividends for the referred to as “theincumbent’scurse.”And the pharmaceutical industry, companyand thegovernment, saysBjörsne,BioVentureHub’s CEO. and life science in general,face additional challenges due to complex and “Swedenisaninnovative nation,” he says. “Wehavestrong biotech, uncertaindevelopment processes, regulatory issues,long lead times, large diagnostics, medtechand pharmaceutical companies and strong digital investments, huge financial risks, and high failure rates.Sowhen Magnus players, likeSpotifyand Skype,but they operateinsilos. The ideawas to

P.30 —THE INNOVATOR OPEN INNOVATION

Inside alab at global pharmaceutical company AstraZeneca’s Gothenburg, Sweden campus. Entrepreneurs participating in its BioVentureHub share lab facilities with the drug maker, which has devised anovel open innovation system on its campus.

catalyze innovation across these different industriesand in doing so for things that are synergistic.” To be admitted in the program companies strengthen the entire ecosystem.” havetoalready have acertain level of maturity and funding. Hub participants The linksbetween industrieshelps AstraZeneca, in turn, with its goal of pay amodest rent, which is cheaperthanwhatuniversity incubators forging partnerships with youngcompanies workingonemerging typically charge, in exchange for office space anduse of lab facilities. communicationsand sensor technologies,toprepare forashift in the AstraZeneca has no rights to the young companies’ information or potential health sector away from stand-alone products (i.e. medicines) to outcomes. inventions or intellectualproperty –not even a first right of refusal, says Rather than paying for drugs, in future patients will pay to stay well, says Björsne. Some 30+ young companies, from all over the world, have so Björsne. So, the pharmaceutical industry is preparingfor ashift to this farparticipated in theprogram, leadingtoanumber of collaborations, “pay-per-performance” model, which is expected to include digital monitoring “which probably neverwould havehappenedotherwise,” he says. of apatient’s health, allowing doctors to view the impact of specificdoses Forexample, together with aBioVentureHub company called MentorMate, of medicine on their patients in real-time and make adjustments accordingly. aU.S.-basedcustom software development company,AstraZenecahas There are other,more intangible, benefits. “In the short term, economic developed asystem that aims to improve quality-of- life forpatientswith growth and transactional valueextraction were the least important outcomes severe asthma. The digital patient-monitoring system collectsupto54 of the AZ BioVentureHub,” notes aSwedish School of Economics business different in-body,on-body or external parametersthatmay impactthe case study of BioVentureHub. “What was more evidentwas how the patient’s well-being and riskofanasthma attack. The project has already employees’ engagement in open innovation resulted in amore open and successfully completedaninitial six-month data collection trial.The dynamic climate —abetter placefor the employees to develop their skills information generated is being used to build adatabase for future development and relationships. The openness linkedtothe establishment of AZ BioVentureHub of artificial intelligence-drivenalgorithmsthat could provide an individual also positively influencedthe organizational imageand identity for risk forecast for patients, allowing them to make necessary adjustments AstraZeneca, internally andexternally.” to their behavior or environment to prevent asevere attack. Similar systems The roboticsdivision of Swiss-SwedishmultinationalABB has copiedthe are also being developedthroughthe hub collaboration betweenAstraZeneca modeland other companies, such as automaker Volvo,and Holland’s and MentorMate, to collectdatadirect frompatients on adaily basisin AkzoNobel, amultinational chemicalcompany, have been in discussions investigational clinicaltrials, with the aim of lowering theburden on the with BioVentureHub about howthey might adapt the model to their own patient to participate, by reducing the number of physical visits to the businesses, says Björsne. clinic, and at thesametimeincreasingthe data quality. Such collaborations help contribute to AstraZeneca’s digital transformation. Thedrugindustryknows it hastochange, saysBjörsne. “Today we sell Preparing For The Shift To Digital hardware:apillthatisnot desiredbythe customer. Thecustomer wants Health Services to be welland the pill is ameans to obtain that outcome. Thepayer model Nestled in the heart of the Gothenburg campus, the BioVentureHub, which is about to change to apay-per-performance model. That means we are has filled a2,400 squaremeter, three-story buildingand is now spilling about to change howwedefine whatwevalue.” over into other campus facilities, is designedfor emergingbiotechand Addingdigital services and new technologiestowhat it developsrequires medtech companies and academic groups.Itoffers aunique opportunity that the company change the way it sourcesinnovation. The BioVentureHub’s to co-locate andinteractwith2,500 AstraZeneca professionals, as well as approach to open innovation works well in Europe –and particularly in with each other.“The hub sits as centrally as possible on this R&Dsite,” acountry likeSweden–where there is aculture of trust andopenness, says Björsne. “Theyhave the same access to theentire site that Ihave. he says. “Inthe U.S. companies would be worriedthat if theygiveyoung They caneven walkinto our labs.” companies wrong advice they couldbesued and in China both sides would There is no requirement that the youngcompanies in the hub target the worry that their intellectual property will be jeopardized,” he says. That drug maker’s strategic areas of focus. “There is no alignmentwith our said, Björsne says he believes BioVentureHub’s brand of “deep, meaningful productstrategy and thecompanies in the hub because it is easiertohelp collaboration is the future of innovation.” acompany that is notapotentialcompetitor,” saysBjörsne. “Weare looking J.L.S.

—P.31 Today there are an estimated 9,000 untreated diseases and 300 Developing ACure million people suffer from rare diseaseswith little hope of effectiveorlife- saving treatment. Even in an age of unprecedented technological advancement, developing anew drug costs big drug companies an average For What Ails of €2.5billion, takes 10 to 15 years,and more than 95% of efforts fail. BenevolentAI, a2018 World Economic Forum Pioneer,believes it has a The Health Sector cure: using artificial intelligence and machine learning to lookatmassive amounts of data to bring new insightsintodiseases and how we think —BenevolentAI, a2018WorldEconomic Forum Tech abouttreating them. Pioneer,istaking anew approachtotackling disease The London-based startup has developed aplatform of computational and experimentaltechnologies and processes that can drawonvast quantities of biomedicaldatatoadvance theentire drug development process. The platform is built by scientists, researchers and technologists working side- by-side. The company says itsstrength comes from thisintegrated,end- to-end approach. “In order to develop effective cures we need to define diseasesand to do that we needtounderstand the underlying biology,” says KenMulvany,the company’s chairman. “The human system is a biological machine andifwemisssome small aspectwemay be missing thebig picture.” It is necessarytoknow the molecular basis for adiseaseinpatients to pre- determine who within apatient population is most likely to respond to

P.32 —THE INNOVATOR HEALTH

Ken Mulvany, founder and chairman of Benevolent AI “Biological scientists do not know what is impossible and computer scientists can do amazing things but don’t have domain knowledge. Bring the two sides together on the same squad treatment. Anticipatingthe best respondersfor specificdrug treatments ahead of clinical trials is afundamental shift in approach, says the company. and therein lies It is developingnew machine learning methodstounderstand patient endotypes, asubtype of acondition, whichisdefined by adistinct functional the opportunity,” or pathobiological mechanism, an approach it hopes will fundamentally says Ken Mulvany. change the ability to interveneindiseases at the righttime. The companyhas foundthat successful AI-enabled molecular design programs need the full contextoftarget, mechanismand patient endotype. “Even the safest molecule in the world willdonothingtotreat disease if it hits the wrong target,”says Mulvany.The company’s interdisciplinary teamsworkinfast, experimentalcycles, buildingonnew and existing experimentaldatafromall stages of drugdevelopment, to ensure adrug hasthe greatest chance of efficacyinpatients. BenevolentAI is using its AI platformtoleverage researchand generate hypotheses that have ahigherlikelihood of being correct. brainrather than ahuman brain.”The company’sAItechnology is being Even the most motivated researchers only read between 250 to 400research used to developtreatmentstounmet patients’needs across awide range paperseach year,but some 10,000 new medical research papers are published of diseases, including Motor Neuron Disease, Parkinson’s Disease, Glioblastoma everysingle day,notes Mulvany. and Sarcopenia. Mulvany first began to thinkabout the knowledge issue at his previous In addition to speeding up the front-end of discovery,the company also company,Proximagen. He was CEO whenthe biotech company was sold wants to find ways to accelerate clinicaltrials andregulatory approvals to Upsher-SmithLaboratories in 2012 for about $350million. He says he by making thoseprocesses more efficient. To that end it acquired R&D realized then that the drug development process typically takes along space at the BabrahamResearch CampusinCambridge, Englandin2018 time and has ahigh failure rate because the path toward drug discovery to allow it to do morelate-stage clinical testing. remainsahuman-driven one, based on experienceand intuition. In April of last year the company raised$115 million in investment capital “One of the biggestfundamental issueswehaveisjustthe amount of from new and existing investors, giving it avaluation over $2 billion. And information that is being generated in our space,” says Mulvany.“Only a last May,BenevolentAI announced anew CEO: JoannaShields, aformer tiny fraction of that information is being used to understand the human U.K. Minister for Internet Security and Safety who previously worked at body.” After leaving Proximagen, MulvanylaunchedBenevolentAItofind both Googleand Facebook. amore effectiveand efficientroute toward developing new pharmaceuticals The winning formula for discovering newdrugs will notcomefromincumbent and began recruiting developers who couldbuild aplatform and write pharmaceuticalcompanies,saysMulvany.“Biological scientistsdonot algorithms that could accurately and speedily analyze massive amounts know whatisimpossible andcomputer scientistscan do amazing things of researchtocreatebetter hypotheses. but don’t have domain knowledge. Bring the two sides together on the “We’reahybridorganization,” Mulvanysays. “It lookslike abiotechor same squad and therein liesthe opportunity,” he says. pharma company.Wehaveeverythingyou need to develop yourown pharmaceuticals. It’sjustthat the initial ideas are coming fromamachine J.L.S.

—P.33 but particularly strategy and risk,” says Kay Firth-Butterfield, head of AI Designing An AI and Machine Learning at theWorldEconomic Forum’s Center ForThe Fourth Industrial Revolution. “Therefore, when the C-suite proposes use Policy of AI the board mustunderstand how such use will affect thecompany for good or ill. In doingsotheywill need to appreciate that AI is anew —The World Economic Forumisintroducing type of tool which allows a360 vision of the business, and appraise the atoolkit forcorporateleaders to help them avoid legal strategy accordingly.Additionally,asAIisbeing used more we are learning moreabout things which cangowrongwith algorithms. In their risk and ethicalpitfal function membersofthe board must be able to assess brand and social risks of uses of AI. This tool will help them to make the necessary decisions.” The tool kit will be available later this yearthrough awebsite which will be organizedinmodules: *A brandmodule willgiveadvice aboutboth howtoprotect company image in the eye of the publicand build brand reputation by usingAIto improve society.*Acompetition module will look at how companies might use AI to accomplish theirmission, covering areas suchasimpact on Global spending on artificial intelligence is forecast to reach $52 strategy,competition and industries, and using AI to disrupt and compete. billionin2021,achieving acompound annualgrowth rate of 46.2% from It will also talkaboutforeseeing risk. 2016. Howcan decision-makers andboardsmakemore intelligent *A customers module will focus on how to use AI to strengthencustomer investments and decisions when planning their AI strategy? That’s the topic relationships by building trust andimproving service.*An operating model of asession scheduled duringthe World Economic Forum’sannualmeeting will advise companies on how to use AI to improve processes and productivity. in Davos, January 22-25, which will explore trade-offs,opportunitiesand *A people and culture modulewill look at howAIcan be used to augment risksassociated with AI investments.Concerns regarding racial or gender the work force, for employeeengagement and forimproving diversity. bias in AI have ariseninareas suchashiring, policing, judicialsentencing *Control moduleswill cover ethics, governance, risk and audits. The launch and financial services, so at thesession, theForum is planningtointroduce of thetool kit comes at atimewhen companiesare increasingly concerned aprototype toolkit to help companies avoid such legaland ethical pitfalls. about the risk of their products being used in ways that are unpredictable “Boards are tasked with oversight of all aspects of the work of the company and unintended. Salesforce made headlines in December when it hired

P.34 —THE INNOVATOR ARTIFICIAL INTELLIGENCE

AREAS COVERED BY THEWORLDECONOMICFORUM’S Frida Polli, CEO and co-founder of pymetrics, NEW AI TOOLKIT a2018 World Economic Forum Technology Pioneer. The company says that by using neuroscience and artificial intelligence it can predict the right person for the Competition job, while removing bias from the process.

People Risk Customer and Culture an “ethical andhumaneuse officer.”InDavos, “weare goingtoinvite people to gets their hands on the tool kit and then pilot it,” says Firth- Butterfield.BBVA, the largeSpanish bank, hasalready agreed to apilot andthe Forum is hopingahalf dozen others will as well. EthicsAudit

HR’s Use Of AI Is Growing And So Are Concerns As partofits work on AI and Biasthe Forum is planningonreleasing awhite AI paperinFebruarythat will specifically focus on guidelines for applying AI Technology Governance Brand to human resources (HR). Some 78% of HR departments expect to see machine learninginatleast one HR process within two years,accordingto arecentsurvey conducted by Bain &Company,which polled human resources Operating Model executives and managers at 500 large companies in the U.S., Germany and the United Kingdom, including publicly traded and private companiesacross awide-range of industries from manufacturingtoretail to healthcare. Sources :World Economic Forum Some companieshave already run into problems. Amazon,for example, had to scrap asystem it was using because it found it was biasedagainst women candidates. Amazon’s computermodels were trained to vet applications by observing patternsinresumes submitted to the company over a10-year from using AI in hiring, says Frida Polli, CEO and co-founder of pymetrics, period. Most came from men, areflection of male dominance acrossthe a2018 World Economic Forum Technology Pioneer.Technology can be a tech industry.Since machine learning is based on historical data, biases can double-edged sword: the company says that by using neuroscience and easily be baked in. Such institutionalpatternsofdisadvantage, stemming artificial intelligence it can predict the right person for the job, while removing fromcontemporary and historical legaciessuch as racism, sexism and unequal bias from the process. economic opportunity,continuetodeeply affectthe workplace and make “AIisgetting tainted but it is neutral,” says Polli, who has an MBA from the creation of fair and transparent algorithms for hiring very difficult, Harvard Business Schooland aPhD in neuropsychology.“It is not good or according to the Forum. The recognition of acandidate’s abilities and bad.” Polli says her company’s technology can pinpoint 80 cognitive and achievements is also contingent on the structures of relations and associations emotional features collected from people in aggregate and use them as that define positions within organizations, so gender stereotypes may lead predictors of success in different roles. some managerstooverlookthe ability of afemale candidate for aspecific It workslike this: Objective behavioral data is collected using neuroscience position. Potential recommendations include encouragingemployers and exercises in the form of games. Customized, automated machine learning vendors to actively fight against potential bias at every stepofthe hiring is used to maximize prediction. Pymetrics’ technology methodologically process: from sourcing through screening andinterviewing to selection. removes bias from algorithms via an algorithm auditing process, which it This could include prompting human resource officers to ask: How is the says ensuresalack of bias. And rejected candidatescan automatically match job description framed? Who can see this job ad? How do we examine to other opportunities at other companies using pymetrics. resumes? How do we conduct interviews? The company,which launchedin2016, has 100 corporate clients, including Another issue is that someofthe AI systems currently being deployed are Unilever,Accenture and Microsoft. Unilever decided to do all of its hiring opaque, offeringlittle insight into whyone candidate is recommendedover through pymetrics andishappy with the results, saysPolli. “What they found another.When acompany fillsaposition it shouldbeable to explain the was that they increased their ethnic representation and also hired from a rationale to successful and rejected candidates. “HR professionals should much more diverse socio-economic group. We knowthese people would keep in mind that ensuring equal opportunities to all qualified candidates not have been hired otherwise and they have been successful.” irrespective of their backgrounds is not aclassic data science challenge -i.e. Polli argues that it is easier to audit algorithms than human recruiters, many finding top talent and good fitbyunlocking information contained in data of whom are hard-wired with biasesoftheir own. “If you are not using a that was previously unusable or inaccessible -but requires questioning of technology there is amuch greater risk that your hiring practicesare on the biased metrics by which algorithms assess ability and potential,” says legal shaky ground,” she says. Firth-Butterfield. But that doesn’t mean that corporations should shy away J.L.S.

—P.35 COMMERCE COMMERCE COMMERCE BITPESA WAYSTOCAP OVAMBA SOLUTIONS SENEGAL MOROCCO UNITED STATES WHAT IT DOES: Uses blockchain to allow WHAT IT DOES: Logistics, paymentand WHAT IT DOES: Innovatestechnology solutions companiestobuy and sell currencies in frontier financing options that enable cross-border B2B for smalland medium-sized businesses operating markets without using the U.S. dollar as amiddle trade in Africa. in Africa’strade and commodities sector, then currency. It creates currencypairs with the aim helps these businessesgrow by combining these of improving settlement time, lowering costs,and innovations with capital. reducing risks for businesses operating in emerging markets. https://www.bitpesa.co https://www.waystocap.com https://www.ovamba.com

FOODTECH FOOD TECH FOOD TECH PLENTY AGROSMART APEEL SCIENCES UNITED STATES BRAZIL UNITED STATES WHAT IT DOES: Indoor vertical farmsthataim WHAT IT DOES: Agronomicmodelsbased on seed WHAT IT DOES: Edipeel, its plant-derived to bring local produce to people and communities genetics, soil type and microclimate data.Ituses technology, promises to double the lifespan of worldwidebygrowing fruitsand vegetables sensors and satellite data to help food producers harvested fruits and vegetables by formingan using 1% of the water, less than1%ofthe land, conduct real-time monitoring of their crops, with imperceptible, edible plantmaterial barrier on the and none of the pesticides used in conventional the aim of saving water and energy and improving surface of fruit that naturally slows water loss and agriculture. productivity. oxidation –the factors that cause spoilage. https://www.plenty.ag http://www.agrosmart.com.br https://apeelsciences.com

ROBOTICS SOFT ROBOTICS UNITED STATES WHAT IT DOES: Soft robotic gripping systems and 25 WORLD ECONOMIC automation solutions that can graspand manipulate items with thesame dexterityasthe human hand.Companies in the food and beverage, advanced manufacturing and e-commerce sectors FORUM TECHNOLOGY are using its technology. www.softroboticsinc.com PIONEERS TO MEET IN DAVOS FINTECH SUADE LABS Each year the World Economic Forum’s Technology Pioneers community recognizes UNITED KINGDOM innovative young companies that are poised to have asignificant impact on business WHAT IT DOES: Regulation-as-a-service and society. These 25 companies are among the Tech Pioneers scheduled to participate platform that aims to automate regulatory in the Forum’s annual meeting, which takes place January 22 to January 25. compliance for financial institutionstoreduce costsand ease transitions as regulations evolve.

https://www.suade.org

BLOCKCHAIN BIOTECH DRONES HORIZON STATE MODERN MEADOW DELAIR AUSTRALIA UNITED STATES FRANCE WHAT IT DOES: Blockchain-powered platform WHAT IT DOES: Producesbioleather througha WHAT IT DOES: Makes fixed-wing commercial enables people in communities or workersat process in which yeast cells are used to create drones that canfly long distances, making them companiestovote on issues via asecure digital collagen, aprotein found in animal skin and akey attractive to industries such as utilities, mining, ballot box, with the aim of creatingbetter collective component of leather. Thecollagen is assembled constructionand agriculture. decision-making. into afibrous material and then tanned, much like real leather. https://horizonstate.com http://www.modernmeadow.com https://delair.aero

P.36 —THE INNOVATOR HEALTH HEALTH HEALTH 1928 DIAGNOSTICS COLOR GENOMICS AC IMMUNE SWEDEN UNITED STATES SWITZERLAND WHATITDOES: Online bioinformatic analysis of WHATITDOES: Usesnext-generationsequencing WHATITDOES: Developsinnovativetherapeutics genomesequencing. By identifying resistance technology,software engineeringand robotics to for treatment of Alzheimer’s disease, including markersinbacterial DNA it aims to reduce time to create affordable andaccessible tests to detect vaccines, antibodies and small molecules. treatmentfrom several days to just hours for gene mutations that can cause serious health antibiotic-resistant infections. conditions. https://1928diagnostics.com https://www.color.com https://www.acimmune.com

PRODUCTION PRODUCTION PRODUCTION PRECOGNIZE TULIP INTERFACES DESKTOP METAL ISRAEL UNITED STATES UNITED STATES WHATITDOES: Predictive maintenancesoftware WHATITDOES: An intuitivedrag and drop WHATITDOES: An integrated system of software, for the process industry, including chemicals, interface lets engineers inside factories build parameters and materials that allows teams to go petrochemicals, oil and gas, and metallurgy. It apps, connect to the Industrial Internet of Things, directly from computer aided designtorapid helps prevent shutdowns, lowerdowntimetoa integrate with their systems and collect real-time prototyping and volume production, accelerating minimum, andreducemaintenance costs. data withouthaving to write any code. product development and manufacturing. http://www.precog.co https://tulip.co https://www.desktopmetal.com

ROBOTICS AUGMENTEDREALITY FINTECH FETCH ROBOTICS UPSKILL MELONPORT UNITED STATES UNITED STATES SWITZERLAND WHATITDOES: Autonomous mobile robotsthat WHATITDOES: Industrial augmentedreality WHATITDOES: Open-sourceblockchain software provide on-demand automationfor warehouses, software platform allows workers to access for digital asset managers allows investment factories and distribution sectors. company data,broadcast point-of-view video or fund rulestobecoded into smart-contracts and Cloud-based software allows robots to be photos and receive live assistance without having enforced by blockchain technology. operationalwithin 24 hours. to move from their work. www.fetchrobotics.com https://upskill.io https://melonport.com

ARTIFICIAL INTELLIGENCE ARTIFICIAL INTELLIGENCE BLOCKCHAIN COGNITIVE SCALE MALONG TECHNOLOGIES EVERLEDGER UNITED STATES CHINA UNITED KINGDOM WHATITDOES: Industry-specific augmented WHATITDOES: Usesmachine learning and WHATITDOES: Usesblockchain to trackthe origin intelligence software for financial services, computer vision technologytohelp machines and shipment of high-value assets, such as healthcare and digital commercemarkets. ”see” products with the aim of making retail diamonds, on aglobal digital ledger. Products help enterprises leverage AI and product checkouts, manufacturing defect blockchain technology to increase user detection,and baggage scanning more efficient. engagement and improve decision-making. https://www.cognitivescale.com https://www.malong.com https://www.everledger.io

MOBILITY ED TECH BESTMILE CODE.ORG SWITZERLAND UNITED STATES WHATITDOES: Its mobility servicesplatform WHATITDOES: Non-profitdedicatedtoexpanding Compiled and written enables end-to-end fleet optimization and access to computer science and increasing by Chris O’Brien managementfor autonomous and human-driven participation by womenand underrepresented vehicles. minorities.Its vision is to provide every student with the opportunity to learn computer science, just like biology, chemistry or algebra. https://bestmile.com https://code.org

—P.37 TRANSPORTATION AND ENERGY

ABattery Breakthrough That Could Help Industries Power Up And Impact Climate Change

—This2018WorldEconomic Forum Tech Pioneer is targetingtwo $100billionmarkets

Christina Lampe-Önnerud, in the first half of 2019, for use in abig impact on climate change was the cell and isolate damage if one of anative of Sweden with adoctorate grid storage and electric cars in China, not having to build its own plants the jelly rolls short-circuits. This in in chemistry, gets acharge out of the world’s largest electric vehicle andevery single battery,she says. So, turn, preventswhat’s known as “thermal inventing new battery technologies. market. The U.S. startup is also in Cadenza Innovation decided to develop runaway” which causesbattery fires. Her expertise helped two of her the process of testing an energy storage aunique business model. In tests conducted by the U.S. companies become World Economic system for potential use by the New The U.S. startup, which has raised Department of Defense lithium-ion Forum Tech Pioneers, adistinction York Power Authority, the largeststate- $17 million, including more than $6 batteries made with the company’s bestowed on young companies that owned public utility companyinthe millionfromthe U.S. Department of technology didn’t catch fire in standard are poised to have asignificant impact U.S. The aim is “to deliver safer,more Energy and the states of New York, testing “even if anail was driven into on business and society. powerful and more sustainable Connecticut and Massachusetts, doesn’t the battery,” says Lampe-Önnerud. Her first company,Boston Power,a technology to batterymanufacturers make lithium-ion batteries. It licenses “Underthese abusive conditions, the lithium-ion battery cell, pack and worldwide by targeting two sectors its technology,which focuses on the battery just shuts down.” system provider,received the critical to solving the complexities way energy is packaged, to traditional The stability of Cadenza Innovation’s Technology Pioneer designation in and challenges of global climate players in the battery sector supply cellsisconsideredamajor advantage 2010. Lampe-Önnerudserved as the change,” says Lampe-Önnerud, one chain. Clients can even temporarily because lithium-ion battery packs CEO until the company moved of 31 technology pioneersinvited to rent Cadenza Innovation’s team, which have traditionally been anythingbut. operations to China in 2012. Her the World Economic Forum’sannual includes experts in lithium-ion In 2016 Samsung was forced to recall second company,Wilton, Connecticut- meeting in Davos, Switzerland January technologiesand manufacturing from its Galaxy Note 7handsets after a based Cadenza Innovation, was named 22-25. Boston Power’s original crew. number of thephones caught fire or a2018 World Economic Forum Rechargeable lithium-ion batteries explodeddue to shortcircuits within Technology Pioneer for developing are usually powered by coded the lithium-ion battery cells. Cadenza anew design that improves the LEGO Blocks of Energy electrodes wound into what are known Innovation claims its super cell performance, cost and safety of large After leaving Boston Power Lampe- as “jellyrolls.” Packagingthe jelly rolls technology can make electricvehicles lithium ion batteries used in two Önnerud, an Ernst &Young tightly allows forgreater energy density even more stablethan cars powered emerging $100 billion markets: grid EntrepreneurOfThe Year HallofFame but it was not considered agood by fossil fuels (about 500 carspowered storage and electric vehicles. winner who has earned multiple option because if one of the jelly rolls by fossil fuels burst into flames every In September Cadenza Innovation distinctionsfor her commitment to overheated it could catch fire. To solve day.) The startup’s technology also partnered to manufacture its proprietary environmental sustainability,set out this problem Cadenza has patented aims to bring down the cost. The “supercell” battery architecture with to create Cadenza Innovation. “I abattery system it calls the “supercell” current price of commercial lithium- Shenzhen, China-based BAK Battery thought, ‘what if Icould use all the in which smaller energy units in the ion battery packs that are used in Company,one of the world’s largest knowledge we have learned to lower form of jelly rolls are packed very electricvehicles ranges from$200to lithium-ion battery manufacturers. the cost and increasethe energy density tightly into ahousing material made $400 per kilowatt-hour.Cadenza The companies announced BAK would while making the batteries more of anon-combustible ceramic fiber Innovation says it believes it can trim begin mass producing batteries based reliable,’” she says. containing fire retardants. The material the priceto$125 per kilowatt-hour on Cadenza’s supercell architecture The key to ramping up fast and having helps control temperature throughout because its system uses standard

P.38 —THE INNOVATOR Asiansuppliers. Cadenza Innovation has already demonstrated its “The aimis“to deliver proprietary supercell battery safer,morepowerful architecture in Fiat’s 500e car model. and more sustainable Transforming technology to battery The Energy Grid manufacturers Transformation of the global energy worldwide by targeting sector is anotherbig focusfor Cadenza two sectors criticalto Innovation. Lampe-Önnerud is a solvingthe complexities regular speaker on World Economic Forum panels with members of the and challenges of global traditional energy sector,many of climate change” whom are reluctanttoembrace change. The test of its storage technology with New York state will be an important proofpoint. The demonstrationproject will be astand-alone system that includes arack-mounted 200kWh, 50kW battery storage unit and will feature Cadenza Innovation’s super cell technology.The project, expected to be completed by fall 2019, is an example of New York GovernorAndrew Cuomo’s commitment to fostering the use of clean energy,she says. New York state has announced an energy storage target of 1,500 megawatts by 2025. “The critical infrastructure components and simplifies the is aging and Governor Cuomo is manufacturing of battery packs by championingNew York state’suse of designing supercell modules that click newenergy technologytocomplement together.Think of its technology “as existingcapabilities or open up whole LEGO blocks of energy” that allow new approaches to meet its current manufacturers to choose the shape, and future energy demands,” says sizeand densityofbattery packs,while Lampe-Önnerud. making them safer and more cost- Cost-effective andsafebattery-powered effective, says Lampe-Önnerud, who storage systems will be the key to has 20 years of experience in the sector. better use of hydropower and Cutting the cost of the battery could widespread adoption of solar power, be amajor boost to electric vehicle she says.Tomake suchsystems work, adoption. By 2025, China’s leaders the grid itself as well as homes and want 20%ofthe cars sold every year, offices will requiresafe, cost-effective about seven million, to be plug-in energy storage systems. “In the future hybrids or battery-powered, according if you own acar you will charge it at to news reports. And Europe, with home during the night, drive it to the backing of the European work and hook it up so that if the Commission, is racing to set up aviable office buildingneeds extrapower,for industrial battery sectortomeet growing example, you can sell achunk of what demand for electric vehicles as the you stored,” she says. bloc’s automakers mostly depend on J.L.S.

—P.39 ENERGY

Solving Gridlock —Morethan 80 large utilitiesand petroleumcompanies arebackinganambitious sector-specific blockchain initiative spearheaded by aWorld EconomicForum TechnologyPioneer.

By Chris O’Brien

Renewable power advocatesare optimistic thatblockchain for the Forum’s System InitiativeonShaping the Future of Energy.«The technology could play acrucial role in both transforming the energy industry innovation that does happen is capital and time intensive. The risk associated and promoting the use of more sustainable resources. Those expectations with energy innovation is quite high for the private sector,which is why out- will be put to the test this summer when an ambitiousenergy-sector blockchain of -the-boxideas like thispublic-private co-investment instrument need to initiativewill be launched.The project is beingoverseen by the Energy Web be explored.” Foundation(EWF), anon-profitthat was co-founded in 2017 by Berlin-based blockchain startup Grid Singularity,a2018 World Economic Forum Technology Pioneer,and U.S.-basedclean power advocate Rocky Mountain Institute. Creating ASingle, Open-Source Platform The goalistocreate aneutral infrastructure thatwillenable awide range The challenges are many.Existing energy grids around the world are seen of blockchain-enabled applications for the energyindustry, andinthe process as too inflexible,and lacking functionssuch as the ability to capture and unlease the full power of alternativesources of powerbyfacilitating their track data throughout the network.These grids were designed to deliver addition into the energy grid. electricitygeneratedbylarge power plants, most likely fueled by coal or The EWFsays it hopesthat the energy blockchain will eventually reinvent natural gas, and deliver it reliably to customers. Adding new sources of power the way all power is generated, traded,and distributed.The energy-sector such as wind or solar to the grid can be acostly,multi-year process. blockchain initiative is “one of the building blocks needed to get us to a At the same time, the endpointsofthese grids are rapidly changing. Smaller higher use of renewables,” says Grid Singularity CEO and Founder Ana generation sources such as residentialsolarpanels arecreating excess energy. Trbovich. “This technology requires everyone to rethinkeverything they are Consumption consumption patterns are evolving thanks the growth of smart doing in energy markets.” Even as the alarm bells about the pace of global homes and electric vehicles charging. And the expanding use of smart meters warming grows louder,thereismountingconcern that effortstomove toward is enabling the capture and tracking of moredata around usage. more sustainableforms of energy are proceeding too slowly.The Forum is To endindustrygridlock, advocates say blockchain can make adding new trying to accelerate development of disruptive energy technologies by facilitating power sourcesaseasy as connecting aWi-Fi router,while offering greater conversations between governments, power companies, and environmental transparency into every step of the power distribution process and more advocates. And it has proposedtobridge the investment gap throughinnovative flexibility as consumption habits change.Founded in 2016, GridSingularity financing mechanisms,suchasaco-investment fund aimed at backing promising was one of the blockchain startups that saw an opportunity in the energy projets which it hopes will reach $1 billion. market. But Trbovich says too much of the focus wasondirect applications. The Forum sees blockchain infrastructure as having the potential to catalyze She feltitwas critical to address the infrastructure that would allow the many industry efforts. (see the interview on pagex) sectortoleverageblockchain’s full potential. “The underlying layer is more “If you compare innovationinthe energy sector to innovation in areas like important,” she says. “The core layerforms an important part of the puzzle.” AI (artificial intelligence), theyget far more investment and far more talent That led to the creation of the EWF.The idea is to establish aneutral player than does the sustainable energy sector,” says Harsh Vijay Singh, project lead that can bring together different actorsaround asingle, open-source platform,

P.40 — Blockchain could make adding new power sources as easy as connecting aWi-Fi router.

including incumbent utilities, gridoperators, and environmental groups. The optimize their operations while enabling new revenue-generation power platform offers acommon protocol for things like how digital energy certificates sources. Eventually such ablockchain platform could enable more direct are designedand recognized.Thesedigital certificates can be attachedto energy microtransactions, bypassing established industry players, and units of power,allowing, for example, ahomeowner to move from just potentially even eliminating their roles. receivingadiscountfrom theirutility to sellingand trading their own power The technology GridSingularity is developing eases energy trading on the to other end users. Likewise, someone chargingtheir car could confirm that blockchain by simulating the environment of atransaction grid, allowing thepower they used was generated using asolar power panel on someone’s corporations,energy researchers, and otherstotest different scenarios and home in another region. Suchcertificatescouldbetracked and validated via services in ablockchain environment, in preparation for aradically different the distributed ledgers that underlie blockchain. future. Today’s giants are trying to understand what their role may be. “It Berlin-based Share&Charge, astartup that is building adecentralized protocol will transform many of these businesses,” Trbovich says. “Many energy for electric vehicle charging, plans to do just that. The foundation is using companies are realizing they are becoming IT companies. And they will the EWFinfrastructure to build out apeer-to-peer charging point system have to provide different services. So theyare looking for different business which bridges together automakers, charging stations, and power consumption. models.” As promising as blockchain seems plenty of stumbling blocks Share&Charge CEO Dietrich Sümmermannsays blockchain’s transparency remain. Its implementation industry-wide requires regulatory reforms, as helps build trust with different players, allowing users to make authenticated the rules for who can trade energy can vary across nations. And the Forum payments and have access to more charging stations. The company is currently remains concerned that too manyenergy innovation projects never get past running apilot project with Volkswagen, asign it says, that larger players the pilot stage. are moving pastinitial exploratory projects towards bigger commitments. But Jon Creyts, managingdirector of the Rocky MountainInstitute, believes “Large corporations now have their own dedicated blockchain exports,” blockchain has already had abig impact by forcing incumbent players to Sümmermann says. “The hype about blockchain is over.Now the question move faster and invest. Because it’s possible now to look afew years ahead is ‘What is the exact use case? We need to cross the chasm from the blockchain and imagine how tech companies like Amazon, Google, and Microsoft could expert to the operations people. It needs time to prove its efficiencies and enter energy markets running on blockchain, today’s dominant players advantages.” realize their positions are more vulnerable than they appeared just afew years ago.“I think blockchain is important here because it has it has taken an industry that typically moves at the speed of infrastructure deployments Industry Buy-In and forced it to grapple with changing the entire system based on the speed EWF has attracted big interest from corporate players, raising about $20 of software development,” says Creyts. “And the fact that you can start million in financial support and counting among its more than 80 members shifting whole market structures and think about adding large numbers of large utilities and petroleum companies such as France’s Engie, U.S.-based assets on the demand side overnight securely can lead to amassive disruption PG&E, and Shell. Trbovich says such incumbents believe blockchain could in the way the overall system runs.”

—P.41 CYBERSECURITY

Cybersecurity Scenarios for 2025 —Things could getawhole lotworsesoleaders in Davoswill be encouragedtomake solving the massive talent shortage and fostering greater collaboration across companiesand bordersapriority

By Chris O’Brien

Inthefaceofunrelentingcyberattacks,it’shardforanygovernment orbusinesstolookpasttheendofeachdayastheybattletokeeptheirsystems safe. But if they wanttogain an advantageoverthe badguys,securityexperts say it’s imperative that leaders find away to think about long-term strategy. Twocategories in particular call for deeper,moresystematic thinking: solving the massive talent shortage and learning how to fostergreater collaboration, across companies and borders. Failing to address these structural problems Control Association, projected in an annual report last April that there would will all but ensure that an increasingly connected planet will remain extremely be aglobal shortage of 2million cybersecurity experts in 2019. Despite vulnerable to state-sponsored hackers and digital crime syndicates who are growing pay andmarketing efforts,there simply aren’t enough people entering growing more formidable by the day,say experts.“I’m totally sympathetic to university or training programstoplugthisgap,Webernotes. “Weneed 2 the fact that when there’s acrisis, it’s hard to take abreath and think about million people, like yesterday,” Weber says. “And for all the talk of digital what’s over the horizon,” says Steven Weber,faculty director at the Center destroying jobs, here is an example of digital creating jobs we can’t fill.” for Long Term Cybersecurity (CLTC), at theUniversity of California in Berkeley. “But it’s essential to do that. If all we’re doing is reacting and chasing the latest attack then the offense has the advantage. And the offense only has to win The Thrill of the Hunt once, whereas the defense has to win all the time.” Weber wants to see companies and governments make afundamental shift Weber and his colleagues will present the latest version of the center’s report in the way they market such career opportunities to make them sexier.“It’s on “Cybersecurity Scenarios for 2025 Project” at the World Economic Forum’s still being marketed as, ‘Hey,there are 2million unfilled jobs.’ But what we 2019 Annual Meeting in Davos, Switzerland, January22-25. should be emphasizing is thatthis is the mostexciting job you couldpossibly To stimulate long-term thinkingthe reportasks leaderstoimaginescenarios: have. It’s the thrill of the hunt. It’s an ongoing chess match. Right now, What kind of chaos and security risks would ensue if black markets and security is still seen as this geeky,technical, detailed-oriented, accountant- criminals embracequantumcomputing faster thancompanies and national like job.”Bythe same measure, companies need to shift the way they talk governments? What if machine learning and artificial intelligence spark a about cybersecurity and roleslikethe Chief Information SecurityOfficer tidal wave of false or manipulated digital identities? And what if the evolution (CISO).These are stillseen as expenses, and as people whose job it is to of technology leads to an irreversible lack of trust in networks and digital tell leaders all the things they can’t do because they are too risky.Instead, tools? security should be cast as astrategic advantage, and an enabler of new The CLTC isn’t necessarily projecting any of those things will come to pass. products and services. “A CISO should be saying, ‘Wehave ahigher level of Rather,the goal is to map out some tangible scenarios to spark more systematic security thenour competitor,and so we can go out and build these things thinking. “Whenyou’re losing the game,you can run fasterand keep doing thatthey can’t because they can’t guarantee the security and privacy of their the same thing,” Weber says. “Or you can devote some resources to thinking customer’s data,’” Weber says. about what the landscape will look like three years from now and try to get The global talent shortageisalso abig agenda item for the Forum, which in front of it.” One of the areas that calls for such structural thinking is the last year createdthe GlobalCentre for Cybersecurity in an effort to foster alarmingshortfall in people trainedfor cybersecurityjobs. Non-profittechnology greater collaboration and strategic thinking. At the center’s first annual association ISACA, previously known as theInformation Systems Audit and gathering last November,members issued astatement, noting: “Chief

P.42 —THE INNOVATOR says. “Sometimes you have one person copying stuff from one computer in one room and inputting it into acomputer in another room,” he says. “Applying new artificial intelligence solutions, blockchain and other tools can get more bounce out of each person.” Butnoneofthisisgoing to happen unless law enforcement, governments andindustry find ways to cooperate and share information and strategies. Bad actorstake advantage of the divisionsthat exist today,Coleman says. information security officers, government and law enforcement officials He is optimistic that there is finally movement toward cooperation, and an from 26 countries identified the lack of asufficiently large and diverse talent opportunity as the sense of urgencyaround cybersecurityincreases. Coleman pool as amajor challenge to improve cybersecurity across sectors.” points to the “Charter of Trust” that was developed by Siemens last year to Nick Coleman, IBM’s head of cyber intelligence and regulatory risk, is also lay our principles for cooperation. The document was announced at the amember of the Forum’s Global Future Council on Cyber Security.He’s Munich SecurityConferenceinFebruary 2018 and signed by corporates optimistic about some of the existing efforts to encourage young people to such as IBM, Atos, Airbus and Daimler.“Hedging the all-encompassing pursue tech careers, such as IBM’s P-TECH program, and aU.K. program impact of digitalization and cybersecurityand creatingaholistic basis of that launched in 2016 with supportfrom IBM that trainsmilitary veterans trust can’t be achieved by asingle company or entity; it must be the result for cybersecurity jobs. But these, and other programs like the National of close collaborations on all levels,” it reads. Initiativefor Cybersecurity Careers and Studies (NICCS) createdbythe U.S. Coleman says one key goal for the Forum this year is to continue building government in 2013, are too scattered to have enough impact, Coleman on such momentum. says. Instead, theseinitiatives need to be coordinated andlook acrossborders “Whetherwe’re talkingabout skills or response, we have to be as agile as for talent. we can,” Coleman says. “Because candidly,the actors that are perpetrating In addition, governments andcompanies need to make greater use of artificial the cybersecurity attacks are increasingly connected and increasingly agile. intelligence to create solutions that can scale and adapt quickly,while allowing People recognize at least that this is not something one company or one the people they do havetobeused more efficiently and effectively, Coleman country can solve, and that’s encouraging.”

CUJO AI QUINTESSENCELABS CYBER SECURITY UNITED STATES AUSTRALIA TECH STARTUPS WHAT IT DOES : Named a2018World WHAT IT DOES : Named a2018 World TO WATCH EconomicForum Technology Pioneer, Economic Forum Technology Pioneer, Cujo AI provides cybersecurity and QuintessenceLabs is developing device management softwarefor cybersecurity solutions for the era of network operators. quantum computing.

https://www.getcujo.com/ https://www.quintessencelabs.com/

—P.43 COMPUTING

easy task. The looming computing revolution offers ahost of fantastic- soundingtechnologies that seem to be straight out of an episode of Star What’s Next In Trek. Understandingthe differences, andthe implications fortheir risks and potential, can seem daunting. Here are afew of the breakthrough computing standards makingthe biggest Computing noise: —Quantum: Basically,this refers to computing on amolecular level. —Governments and businessleadersneed Where current silicon systems compute on abinary state (1 or 0, on or to prepare forashifttoamultiplicity of technologies off,openorclosed), quantum computing canexist in multiple states that areexponentiallymore powerful simultaneously,dramaticallyincreasingthe ability to handle complex calculations. By Chris O’Brien —Photonic: Rather than using electrical signals,this architecture flashes beams of light that can travel far faster through aseries of sensors and lenses, enabling more powerful computing thatisquicker,uses less power,and is less expensive. —Neuromorphic: Designed to mimic the working of the humanbrain, these chip-based systems include acomplex array of building blocks, sometimes more than 100,000, referred to as neurons. —Biological: Cells, which already efficiently store remarkable amounts of information, can be programmedtomonitor the body’sactivity or measureimpactoftherapy. Whilebiological computing targetsbiomedical applications, the others canbeused to drive artificial intelligenceand machine learning applications. Whiletechnologiesusing today’s architecture are already impacting some fields,researchers saythe new architectures will extendthe scopeof disruption exponentially. There is agrowing consensus among computer scientists and Rita Singh, head of research at the Department of Informatics at Carnegie futurists that today’s fundamental computer architecture is in its twilight Mellon University,says even if it’s not obvious how,leaders in every sector years.The capability of asilicon-basedchip system, shooting electric currents should start thinking about how AI could disrupt their industry.She says through binary gates, has been pushed about as far as it can go. the ability to collaborate, share and interact will become pervasive. So, the racetofind asuccessor and keep thetech revolution steaming ahead “Everything is going to get more and more interrelated,” Singh says. “This is in full swing. Tech giants likeIBM,Microsoft andGoogle are investing technology is going to be embeddedinnon-computing fields, which is going heavily in developing next-generation systems. Corporate leaders at places to be linked very tightly with other fields around us. That will result in like Airbus and Volkswagen are experimenting to better understand the collaborationsbetween sectors that never would have collaborated before.” potential. What comes next is aworld of many computing systems, rather Leaders should start thinking about the implications for business or society than one, thatco-exist, are exponentially more powerful and astoundingly from unprecedented abilities to collect and analyze data. It could mean their complex. future business models will look quite different from those used today.“With The emergence of next-generation computing technologies from quantum the advent of machine learning and AI techniques, data is potentially the to neuromorphic,photonic and more, which represents an estimated market most valuable resource that the information technology team can bring to value of over $8 billion, or nearly 25% growth by 2024, will be atopic at the business,” saysKirk Bresniker,chief architectatHewlett Packard Labs the World Economic Forum’sannual meetinginDavos January22-25. A and amemberofthe WorldEconomic Forum’sGlobal FutureCouncil on session will explore how government and business players should prepare Computing. “The data being thrown off the systems will finally be analyzed for ashiftfrom acomputing monoculture to amultiplicity in digital infrastructure. for its economic potential. And thatcould be amuch more vital and interesting Precise timelines for any one of thesebreakthrough technologies areunclear economic resourcethanthe underlying system.”Bresniker says the seeming but experts say they are coming faster than most people realize. And so it’s complexity of this new world is one of the thrilling elements of this looming time to prepare. “I think if people don’t have aview of what’s coming then transformation and shouldn’t create anxiety.“As we look forward, there does nowisabsolutely the time to get that view,” says Jeremy O’Brien, CEO PsiQ, not seem to be asingle technologythat is goingtoemergeasthe technology,” aquantum computing startup basedinSiliconValley.“And like allemerging says Bresniker.“This opensusupfor much more diverse solutions and is technologies it’s importanttodisentangle the hype from reality.” That’s no actually healthier for the ecosystem overall. It will promote more vigor and

P.44 —THE INNOVATOR It is difficult to predict precisely when these futuristic computing technologies will be implemented but experts say the time to start preparing for this shift is now.

more innovation.” The goal is to makethe technology disappear,putting million in venture capital. The challenge is that there remains some fairly the focus on applications and benefits. That’s how Nick Harris, CEO of basic physics issues to solve. And because the architecture marks acompletely Lightmatter, is approaching development of the company’sphotonic computing radical break from the past, users potentially havetolearn or re-learn entirely system. Based on his research at the Massachusetts Institute of Technology, differently methods of developing for quantum computers. Lightmatter hasraised $11 million in venture capital funding and is close Still, O’Brien and his team at PsiQ believe theymay havesolved thequantum to releasing its first commercial product targeting data centers and other puzzle by using amethod that involves photonic technology to create a high-performance computingoperations. more stableenvironment. O’Brienissoconvinced of the potential thathe By adding Lightmatter’s photonicsystem,these operations will be able to took aleave from his post as director of the Centre for Quantum Photonics massivelyincrease computing power using machines that are only afraction at the University of Bristol to launch PsiQ, which remains in stealth mode. of the size and use far less power. That additional horsepower is expected While other quantum computersare boasting of 50 to 100 qubits, PsiQ is to go along way to enabling farmorecomplex AI computations. “It’sseamless,” finishing work on a1million qubits system. As with other new forms of he says. “Itrunsonthe same softwarepeopleuse todayfor machine learning. computing, this scale allows the machines to tackle problems that are simply There’s not some fundamentally new type of computing you have to learn. out of reach for today’s computers, such as modeling the full detail of a We’re puttinginalot of efforttomakethis plugand play.”While photonic molecule or optimizing huge numbers of autonomous vehicles. computingoffers adramatic acceleration, quantum advocates argue their “Even if Moore’s law were to continue for centuries, and we somehow turn technology is potentially more transformative. Publicly at least, it certainly everysiliconatom on the planet into acomputer and figured out howto has gottenmore hype and more attention from big players. In December bring in another star to generate enough energy to power all of it, you still 2017, IBMannouncedIBM Q, aprogram that lets corporate partners and couldn’t solvethese largeinstances of problems,”O’Brien says. “That’s where research institutions have access to the company’s onlinequantum computing Ifeel like quantum computing is really in acategory of its own.” systemsothey can experimentwithit. In early January,IBM unveiledits There is asense that the world is on the cusp of an amazing new era propelled first commercially availablequantum computer.That follows Canadian by computers, says Harris. “This feels kind of like the moment when the company D-Wave Systems, which had been one of the only companies selling transistorwas invented,” he says.“Ifeel like this is really big in terms of commercially available quantum computers, having raised almost $200 amomentinhistory.”

—P.45 EUROPEAN INNOVATION

during the Forum’s annualmeeting in Davos, Switzerland on January 22- Harnessing 25.“In addition to mitigating issues and catchingup, Europe will need to develop its own, more ambitious innovation model, anchored in its strengths.” The foundations of this model are ten fundamental building blocks for European Innovation the competitiveness of Europe’sinnovation ecosystem which are outlined in the report.These include apan-European approach; corporate start-up —The World Economic ForumDigitalEurope collaboration; innovation funding; enabled government and public institutions; initiative hopes to put the building blocksinplace to help data access and protection; entrepreneurialtalent, digital education, the Continent become a globalleader. reskillingand upskilling, genderdiversity; digital infrastructure and interoperabilityand harmonized legislation and standards. One of Europe’s big handicaps is that it does not have any of the large platform companies that in recentyears have come to dominate the technology worldand capture large revenue shares. (Seethe coverstory on page 6).Tocompete globally,Europe needs to scale.The Digital Europeinitiative has come up with four catalysts it hopes could help Europe achieve scale by “supercharging” across all tenbuilding blocks: —Creating cross-sectorinnovation strategiesand platforms for high- potential industries, including regulatory sandboxes for experimentation, and cumulative funding of €80 billiontoeliminate the R&Dfunding gapwiththe U.S. *Leadingongoverance for data accessand trustby fostering secure platformsthat make transparentwhich data are shared and when, and that allows citizens to change access rights for data sets. —Boosting talent pools through initiatives such as doublingthe number of female techentrepreneurs. —Doubling the share of digital innovationrequirements in tendersfor Europe’s €2trillion annual public procurementspend. Large players from Asia and North America are leveraging digital Three flagshipprojectsare being considered forlaunchin2019, the report platforms to grab market share from establishedcompanies. Europe is lagging says. One is aEuropean Sovereign Wealth Fund that could leverage private in thedigital transformation of industries key to itssuccess in the Fourth fundingsources fromacross Europe,including institutional money,such IndustrialRevolution. It is also behind in investment in new technologies, as pension funds, and issue debt.Its keyobjective could be to provide suchasartificial intelligence,where it captured only 11% of global corporate scale-up capitalfor start-ups and for cross-sectoral,cross-border integration investment andventure capital in 2016 compared to 50% in theUnited projects with multipleindustrialplayers. Statesand 39% in China. Creating aForumCentre ForThe Fourth Industrial Revolution for Europe The potential to becomeaglobal innovation leaderisthere.But to move to drivepublic-sector digitization, standardization and citizen-centered forward the building blocksneed to be put in place.That’s the mission of data access is another option as is the creation of aWomen Entrepreneurship theWorldEconomicForum’sDigitalEurope initiative,whichisbeing Network to increase the diversityoftalent. supported by the Forum System Initiative on Shaping the Future of Digital Economy and Society.The Digital Europe projectisacollaborative effort Overcoming Challenges of the World Economic Forum and McKinsey. The report says action is needed because Europe cannot realistically hope The Digital Europe team has spent the last year consulting with entrepreneurs, to outcompete the United States and China on their terms because investors, corporate and public figures and representatives from academia —Its marketsare more fragmented, making it hardertooffer thesame across Europe to tryand create acommonvision, identify actionareas, scale. and develop concrete suggestions to make Europeaninnovationecosystems —Itlacks deep-pocketed tech giants to fund the next wave of innovation more successful, and identify an innovation model thatwillallow it to —Its citizen-focused regulatory stances and mindsets can’t sow the radical effectively competewithother regions. disruption of business models. “Europe needs anew ambition: to compete for global innovation leadership,” —Its governmance structures,makeheavypublic investmentand other saysaDigital Europe project report on thetopic,which will be released intervention moredifficult or slowerthan,for example,inChina.

P.46 —THE INNOVATOR TEN YEARS AGO SOFTBANK HAD THE FUNDSTOFINANCE EUROPE’S SHAREOF THE CURRENT TOP 30 TECH COMPANIES INVESTMENT IN THE TOP 20 GLOBALDIGITAL PLATFORMS

= SOFTBANK VISION FUND TOTAL $100 BILLION $67 BILLION INVESTED TOTAL INVESTED IN THE TOP 30 TECH STARTUPS CAPITAL

1.98% EU X DJI SEA LYFT LEAP UBER SLACK LUFAX STRIPE PAYTM HOUZZ XIAOMI KARMA ELE.ME ONLINE AIRBNB FINACE) SPOTIFY SPACE CHUXING FLIPKART WEWORK PALANTIR DROPBOX SNAPDEAL PINTEREST THERANOS AN MAGIC DIDI OCILA THERAPEUTICS CREDIT TECHNOLOGIES) (S COMMUNICATIONS ZHONG MEITUAN-DIANPING (ANI SOFI INTARCIA ONE97 CABS OLA

Source: Lakestar analysis Source: Lakestar analysis

Catalyzing Strengths ForEurope to haveachance for success in becoming aworld leader in in Europe –ashaveothers such as Zalando and Delivery Hero. “The digital it will need to catalyze its own strengths.The reportliststhese as flywheel has finally gotten moving,” says Hommels. However, he notes ahighlyskilled population, includinginscience,technology, engineering that Europefalls short whenitcomes to investmentsincrucial digital and mathematics (STEM), ahistory of collaboration and standard-setting; infrastructure companies like Amazon, Apple, Google andMicrosoft. an industrial base that is leading in manufacturing and service sectors and The biggest 25 digital platforms whichare not publicly listed raised €67 thefact that it hasmany market leaders among its small and medium billion in thelasteightyears and Europe represents less than 2% of the sized businesses. cap table. (Seethe charts). “WeasaContinent represent around 20% of Lakestarventure capital firm founderKlaus Hommels, one of Europe’s the global GDPand thereisalot of wealthinEurope so this is ridiculous,” best-known techinvestors and an earlybacker of Spotify, Facebook and saysHommels. “Funds like Softbank’s can easily finance thenext 20 most Skype, saysthereare other reasonstobebullishabout Europe. decisive companiesinthe next10years and have aroleinboth their cap Hommels, ascheduledspeaker and discussion leaderataplanned Digital table and corporate governance,” he says. Europesession in Davos,notesthatitwas 2011 beforemorethan ten He adds “it is very important that thenew industriesget decently funded European unicornswere created duringatwelve-monthperiod.But the in Europe so that we keepsome of those defining industries here ». numbersstarted to rise sharplythereafter, reaching more than 50 in 2016, Europe may have“lost the warfor B2C but on the B2Bside there is alot and69in2018. Thishas broadened anddeepened the ecosystem because to be won so there is an urgency for politicians, regulators and corporates it cre¬ates experiencedentrepreneurs whohave the confi¬dence to create to create afavorable framework aroundthe ecosystem we are building,” more newcompanies,hesays. Exit values are alsoincreasing as the Hommels says. European ecosystem matures. In theearly2000s, Skype’s exit value was the biggest to date at $3.2billion. Butsince then Spotify had a$30 billion exitand startups Adyen andFarfetch both created unicorns throughIPOs J.L.S.

—P.47 GENDER

professionalsof73%. AI skillsare important as theyare likelytohavea Mind The Gap big impactonalmost every industry. Theglobal gendergap in the AI workforce is three timeslarger thanother industry talent pools. Unless —Data suggestsiwill take 202 years to bring about efforts are made to get more womeninto AI professions,the workplace parity in the workplace.Aneworganization called Male gender gapcould increasefurther. Champions Of Change Tech Groupwant to change The analysis also suggests that, addition to beingoutnumberedthree to those metrics one, women in AI arelesslikely to be positionedinsenior roles or signal expertiseinhigh-profile, emerging AI skills. The LinkedIn data suggest that womenwith AI skills are morelikely to be employed as data analysts, researchers, information managers and teachers, whereas menare more likely to be employedassoftware engineers, heads of engineering, heads of IT and chief executives –more lucrative and seniorpositions. Given the depthofthe talentgender gapinAI, there is aclear need for proactivemeasures to prevent adeepeningofthe gender gap in other industrieswhere AI skills are in increasing demand. These include traditionally male-dominatedindustriessuchasmanufacturing, hardware andnetworking as well as software and IT services, as wellastraditionally female sectors such as non-profits, healthcare and education. “Industries must proactively hardwire gender parity in the future of work through effective training, reskillingand upskillinginterventions and tangible jobtransition pathways, whichwill be key to narrowingthese emerging gendergapsand reversingthe trendsweare seeingtoday,” Of allfunds raisedbyEuropean VC-backed companies in 2018, SaadiaZahidi, Headofthe Centre for the NewEconomy and Societyand some93% went to all-male founding teams,accordingtothe 2018 State Member of the Managing Board, World Economic Forum, said in astatement. of European Tech SurveyconductedbyEuropean venturecapital firm «It’s in their long-term interest because diversebusinesses perform better.” Atomico. It is partofamuch larger problem. The WorldEconomic Forum’sannual gendergap report shows that women are under-representedinall areas Male Leaders With The Power of thetechsector.Atthe current rate of change the data suggest thatit To Promote Change will take 108 years to close the overall gender gap and 202 years to bring Anew group, called the MaleChampions of Change GlobalTech Group, about parity in the workplace. Ensuring the full development and appropriate whichwas established in May 2018, will meet for the first time in Davos. deployment of half of the world’s total talent pool hasavastbearingon The scheduled participants, whichare from media, advertising, fintech the growth, competitiveness and future-readiness of economies and businesses and heavyindustry,reflecting thediversityofthe techsector (see the worldwide. The Global Gender Gap Report benchmarks 149 countries on list), have pledgedtoworktogether on genderequality withintheir their progress towards gender parityacross four thematicdimensions: organizationsand tryand changesystems thatperpetuateand entrench Economic Participation and Opportunity,Educational Attainment, Health inequality. and Survival,and PoliticalEmpowerment It is no surprise thenthat the The group will formally endorse itscharter-which outlines the guiding gendergap and how to fixitwill be amajor topic at theForum’s annual principles, mission and purposeofthe group –_and agreetothree priority meetinginDavos, Switzerland January 22-25. action areas to drive global gender equality change in thetechnology industry. The formation of the group is an initiative of ajoint venture AI: ANew Frontier In The Global Gender Gap between accelerateHER, agroup that is addressing the under-representation While the gender gap in science, technology,engineering and mathematics of women in the technology industry through events, strategy and innovation (STEM) is wellchronicled, new analysis the Forum conducted in collaboration and The Male Champions of Change Institute ,which has an established with LinkedIn points to aglaring gender gapthatisdeveloping among track record of drivingthis change model within anumber of male-dominated artificialintelligence (AI)professionals, where womenrepresentonly industries in Australia. 22% of the AI workforce. France hasagender gapwhen it comes to AI J.L.S.

P.48 —THE INNOVATOR WHENARE REGIONS LIKELYTOCLOSE THE ECONOMIC GENDERGAP ?

WORLD AVERAGE West Europe 61 Years South Asia 70 Years Latin Amercian and Carribean 74 Years Eastern Europe and Central Asia 124 Years Sub-Saharan Africa 136 Years Middle East and North Africa 153 Years North America 165 Years East Asia and the Pacific 171 Years

Worl Average 108Years

Source: World Economic Forum Global Gender Gap Report 2018

Members Of The Male Champions of Change Global 202 Tech Group scheduled to meet in Davos during the World Economic Forum’s annual meeting THE NUMBER OF YEARS IT WILL TAKE TO BRING ABOUT PARITY IN THE WORKPLACE AT THE CURRENT RATE OF CHANGE. —Tony HALL, Director General, BBC Federico Marchetti, CEO, Yoox Net-a-Porter

—Jonathan NEWHOUSE, Chairman &Chief Executive, Condé Nast International

—Rahmyn KRESS, CDO, Henkel and Founder, Henkelx

—Damian BRADFIELD, President &CMO, WeTransfer

—Brent HOBERMAN, Co-Founder &Chair, Founders Forum/ firstminute capital/ Founders Factory

—P.49 POUR NOS LECTEURS FRANCOPHONES

P.04 DISCUSSION TECH ÀDAVOS P.32 L’IA ET L’AVENIR DE LA MÉDECINE P.06 L’ÉCONOMIE DE PLATEFORME P.34 CONCEVOIR UNE STRATÉGIE D’IA POUR LES ENTREPRISES P.12 PL’EFFET RÉSEAU D’ALIBABA P.36 TOP 25 DES PIONNIERS DE LA TECH DU WORLD ECONOMIC FORUM PRÉSENTS ÀDAVOS P.14 ANT FINANCIAL : UNE SOCIÉTÉ DE SERVICES FINANCIERS À$150 MILLIARDS P.38 UNE PERCÉE CHARGÉE POUR LES VÉHICULES ÉLECTRIQUES ET LE STOCKAGE D’ÉNERGIE P.16 PING AN : LA SOCIÉTÉ D’ASSURANCE LA PLUS VALORISÉE DE LA TERRE P.40 COMMENT LA BLOCKCHAIN TRANSFORME LE RÉSEAU ÉLECTRIQUE P.18 KLÖCKNER ADOPTE LES PLATEFORMES DIGITALES P.42 LES SCÉNARIOS DE CYBER SÉCURITÉ EN 2025 P.22 LA NOUVELLE PLATEFORME DATA DE VATTENFALL P.44 COMMENT LES TECHNOLOGIES INFORMATIQUES P.24 UNE PLATEFORME DIGITALE POUR LES RÉGIMES DE RETRAITES IMPACTERONT L’AVENIR D’ENTREPRISES P.46 COMMENT CANALISER L’INNOVATION EUROPÉENNE P.26 OUVRIR UNE PORTE DIGITALE VERS L’AVENIR P.48 L’ÉGALITÉ DES GENRES :GRAND SUJET ÀDAVOS P.28 COMMENT HYPERLOOPTT UTILISE «LE POUVOIR DES MASSES» POUR SA STRATÉGIE ET SA TECHNOLOGIE P.30 ASTRAZENECA ET SON MODÈLE D’INNOVATION POUR LES GRANDES ENTREPRISES

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P.50 —THE INNOVATOR INTELLIGENTWELCOMETOTHE ERA OF CONNECTIVITY MWCBARCELONA.COM

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