United States

Looking ahead at tomorrow's internet

Expect disruption to continue, and be aware of the killer B's

INSIGHT ARTICLE  | 

October is national cybersecurity awareness month, a time our federal government uses to remind both individuals and organizations of the importance of protecting themselves from identity theft, hacking and other online threats.

It’s also a good time to take a step back from our daily use of the internet and consider how this extraordinary network may evolve over the next few years. While no one can predict with absolute certainty what the future holds for the internet, we can make some educated forecasts about where some of today’s emerging trends may lead.

Two key transformative events that have affected the internet is the always-on availability of high speed internet (4G, WiFi) along with the shrinking of compute power (iPhone, laptops). What used to take days or weeks now takes minutes or seconds, thanks to internet connectivity. Whole industries have disappeared seemingly overnight, thanks to internet connectivity. And entirely new businesses have been created from scratch, thanks to internet connectivity.

In my view, the internet is disruptive because it eliminates inefficiencies.

Learn from the sharing economy

The whole sharing economy—where individuals rent out their homes and use their own cars to give other people rides—is one of the most disruptive trends to emerge in the internet economy. Suddenly, anyone who wants to make money off their two biggest assets—their home and their car—can do so through the power of the internet, which matches people who need short-term housing and transportation with others who can provide them with those services.

Is this trend hurting existing businesses? No doubt. But at the same time, individual home rentals and ride-hailing services are creating economic opportunities for millions of people around the world. And they are doing so by eliminating inefficiencies in the existing hospitality and transportation industries.

I’m not saying that this trend is good or bad. It exists, and it was inevitable. If the companies that developed the software applications, or apps, that facilitate these transactions did not create them, another one would have done so.

Organizations need to prepare for disruption by doing everything they can to identify and eliminate inefficiencies in their processes, and prepare for the day when something else supplants their old way of doing what they do—before an app enters your industry. This means paying attention to small competitors who may become big competitors, and taking a step back when optimizing your processes to think about new ways to run a process. Uber didn’t optimize an existing process but created an entirely new way to provide transportation. You should start thinking like that.

It’s all about data

Another trend that will continue to grow in importance is how organizations use the data they collect through the internet.

Today, people marvel at the ability to control the lights at home through programmable apps on their mobile phones. That’s the internet of things at its most basic level, in action. Before long, people won’t be able to take five steps outside their homes without a company knowing that fact and using that data to market to you or make business decisions about you.

According to Gartner, Inc., 8.4 billion connected things will be in use worldwide by the end of this year. The research firm projects that the number of connected things will reach 20.4 billion by 2020.1

What can—and should—organizations do with all the data they collect from the internet of things? From a business standpoint, how can manufacturers, retailers, hospitals and other entities use data to improve the products and services they offer? And how can they assure consumers that they are protecting the information they hold from illegal use? Questions like these will become even more critical for management and boards to answer.

Here come the killer B’s

Perhaps one of the most significant developments affecting the future of the internet—and everyone who uses it—are what I call the killer B’s: bitcoin and blockchain.

Cryptocurrencies like bitcoin—which offer users both security and anonymity—are quickly gaining acceptance around the world. Cryptocurrency transactions are immutable—once they are completed, they cannot be reversed. And when coupled with the secure decentralized ledger that blockchain technology offers, they provide users a medium of exchange that has few equals.

A number of major companies have launched blockchain initiatives to track shipments of cargo from manufacturer to distributor to retailer, trace food products to their source in times of contamination, and create smart contracts that execute provisions automatically using workflow and scanning technology.

Cook County in Illinois, for example, has launched a pilot program using bitcoin and blockchain to track and transfer real-estate property titles and other public records with greater security than existing methods can afford.2

How big are the killer B’s? Fortune recently devoted a cover article to the subject, and has launched a blog called The Ledger that promises to follow all major developments involving cryptocurrencies and blockchain.

Bitcoin and blockchain have the potential to be game-changing forces in virtually all industries. Organizations that have not yet explored how they might apply these two factors to their use of the internet should do so soon. It’s not that you have to adopt or implement these technologies, but to understand how they will potentially disrupt your business processes.

What does the future hold for middle market companies?

How will blockchain affect middle market companies in the years to come?

Many middle market firms are suppliers to large national and international corporations, which are already discovering the advantages that secure, decentralized ledgers can provide to their businesses. One thing is clear: blockchain will eradicate many process inefficiencies that currently contribute to financial concepts like float and profitability, driving margins down to record lows.

Consider the example of a beverage manufacturer that sells millions of cans and bottled soda to one of the big-box retailers. Today, the retailer tells the manufacturer to make deliveries on or about a certain date. The big-box customer bears the risks and costs of early and late deliveries.

However, with a blockchain in place, the retailer’s delivery requirements become more demanding—and more costly to the supplier. The retailer can say to the supplier, “If you deliver your product a day late, we're going to fine you, and if you deliver it a day early, we're going to charge you a warehousing fee.” Now the risks and costs shift to the supplier.

That’s not to say that blockchain will only work against middle market companies. Suppliers that implement systems that enable them to deliver products on time can gain an advantage over their competitors. In addition, middle market firms that create blockchain-powered smart contracts with their own vendors to enable them enter in the contracts that would not otherwise be feasible.

Blockchain is changing the rules of the game. Middle market companies need to learn those rules and make them work to their advantage.


ENDNOTES

1"Gartner Says 8.4 Billion Connected "Things" Will Be in Use In 2017, Up 31 Percent From 2016" (Feb. 7, 2017), Gartner
2Schulman, J. "How Bitcoin Could Prevent Real Estate Fraud in Cook County" (Dec. 9, 2017), Chicago Real Estate

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