Building on insights from last year’s multiple discussions on the future of health, we have a special event taking place in Frankfurt on March 8th – looking at the future of surgery. 25 Experts from around the world are coming together to explore what will be the key shifts taking place in and around surgery over the next decade. We will be discussing changes in patient power, greater collaboration within theatre, key technologies that will potentially transform surgery, the role of robotics and systemic pressures from insurance, healthcare costs, regulation and changing cultural expectations. Hosted by Aesculap, this promises to be an excellent event with a host of new insights being shared. We have a great mix of people coming from many different fields of expertise – but still have space for a couple more so if you are interested do get in touch.

The Future of Payments – The Global Challenge

Commerce has always been defined as the interchange of goods and services for money. It still is, but the way commerce is conducted is in the middle of sweeping change. Merchants that anticipate these changes and prepare for them will win; others will struggle to survive.

Cash was invented in the 7th century and since then, broadly speaking, it has been the most common way to pay for the transfer of goods and services. Market places and shops have always been useful as central points to find products we need.  Shopkeepers have always played an important part in choosing the right transaction, providing valuable information about products and services and facilitating choice.  Over the last decade however these transaction stalwarts are being challenged because the retail payment process is undergoing a transformation.  As electronic payments get easier, is there a need for coins and notes? As the Internet gives the corner shop a global footprint, how will retailers respond to and support their new customers? And, logistics and supply chain issues aside, which payment options will ensure secure and efficient transactions?

The Future of Payments – Options and Possibilities

Starting with the cash debate. It’s true that developed countries are becoming ever less dependent on cash, as debit and credit cards, “virtual wallets” and other substitutes grow in popularity. In developing countries cash and bartering has been the prominent method of exchange particularly as the vast majority of people are unbanked. This however is changing; in Kenya, for example, over 80% of adults have a mobile money account[1].  Although electronic and mobile money systems are generally safe and effective methods of payment it is not all straight forward. Success of these systems depends on creating incremental value for consumers and merchants and changing behaviour. This is the reason that while there has been significant progress, 85% of global payment transactions are still made with cash[1].  So what is the future of cash? What electronic payment forms are likely to be successful in the future? If we really are heading for a cashless world then what would this mean for retailers?

It’s no surprise that, given the avalanche of technological innovation, retailers have had to extend the ways they accept payments, thinking of different ways to meet customer demand. There are myriad ways in which customers can now pay for their goods like e-shopping with a smartphone, laptop, tablet and even in store. “Omnichannel” is the current buzz word and is a multichannel approach to sales.  A key element of it is a consistent and integrated shopping experience across different channels such as a desktop or mobile device, by telephone or in a bricks and mortar store. Many brick-and-mortar retailers around the world including the likes of Walmart, Tesco, Target, and Best Buy have built an ecommerce presence to adapt to the new environment but perhaps more interestingly, even ecommerce giants like Amazon are now planning physical stores.   So is omnichannel just a buzz word? How important is the consistent shopping experience across channels? What is the future of physical stores? Can bricks keep pace with clicks or is it in fact the other way around?

These omni-channel options mean that retailers have to work hard to complete a sale.  Online or off line the challenge is the same, to provide a personal service but on a global scale; as the economist puts it despite a global market place retailers have to provide each customer with  “a single salesman with an unfailing memory and an uncanny intuition about their preferences”.  Few would argue that the judicial use of big data will help but although there is a lot of talk about its efficacy most of the opportunities big data can offer have yet to be fully exploited. The reality is that there are different chunks of data that are collected, stored and managed in multiple ways. On top of this much is still locked away, stuck on legacy systems that will take years to unpick.  Access to relevant information let along the crunching of it will take some doing. Big retailers like Walmart, Tesco, Target, and Best Buy are better positioned to leverage big data to tap the omnichannel trend. But what can smaller bricks and mortar stores do?

The point of interaction (POI), the moment where customers and merchants interact to complete the transaction has undergone significant change over the last decade and indications are that this will continue.  There are multiple ways to pay and we can expect the “can’t find my wallet” excuse to be a thing of the past as we increasingly grow used to mobile payments. Global standards such as EMV have added additional security, and many now think nothing of buying their coffee’s with a mobile phone thanks to innovations in Near Field Communication (NFC). Recently Apple Pay is looking to redefine the process again using biometrics and card tokenization. Holding a phone however is likely to remain just one of several widely accepted ways to pay but how the multiple options will combine to ensure a safe and convenient transaction method at the POI is a question that both merchants and customers are grappling with.

For retailers an age-old concern continues to niggle.  How can they offer value-add to their customers?  In a world of unprecedented information access customers are now better equipped to dictate what they want, what price they want to pay, when they want it, where they want it and from whom they want it. The buying process is no longer linear but ducks and dives from tablets to in-store to mobile via friends’ recommendations to the opinions of strangers then back to the computer again.  Retailers, striving to maintain an ongoing relationship with their customers, are faced with multiple ways to communicate and engage and can gather data from many sources.  Those who manage to connect to their customers can build a more detailed picture of who they are selling to than ever before.  The challenge for retailers is, in a world where social media drives commerce, how to build and retain loyalty and trust with their customers.

All the evidence suggests that the use of cash is in decline across the globe. The World Bank reports that there were 83 cash dispensers for every 100,000 adults in the US in 2008 but by 2012 there were only 68. The Federal Reserve Bank of San Francisco has also published a report showing that in America, the share of transactions using cash has fallen; between 1993 to 2013, although the American economy grew in real (inflation-adjusted) terms by 65%, notes of $50 or lower grew by just 19%.  In comparison to this share of debit and credit card payments increased by 20% in US in the 5 years starting 2006 based on analysis by MasterCard analysis.  There are several reasons for this. First, Cash takes time to get at, is riskier to carry, and by most estimates, cash costs society as much as 1.5% of GDP[1]. Second, merchants make fewer profits using cash. In fact when benefits of electronic payments such as driving greater customer satisfaction and loyalty for merchants over cash are considered, MasterCard’s research shows merchants can make $40K more in profits for $1MM in sales.

Third, Cash by comparison can be a hindrance to financial inclusion. Indeed in a recent study MasterCard found that electronic payments are an effective entry point for financial inclusion. With governments, international development agencies, academics and the private sector, making financial inclusion a priority on the agenda, it is likely we will see a significant portion of the 2.5 billion currently unbanked adults armed with electronic payments products in the future.  Over the next decade cash quite possibly will lose out to technology. And electronic payments are not confined to the developed world; in Kenya over 80% of adults—use a mobile-phone payment service called M-PESA that can also cater to business customers too.

Turning to the real world of bricks and mortar retail.  Retailers are finding it tough to keep up with their more nimble online counterparts.  First they have to contend with the costs of floor space but they also have to acknowledge that their customers have more choices and are more informed that they have ever been before.

How to manage cross border commerce is a big challenge.  Our research shows that since 2009, international visitor arrivals and spending have grown faster than real global GDP.  It also forecasts that cross-border visitors to the 10 leading destination cities will spend $136 billion during 2014. Even a 1 percent share of a leading market such as New York or London is near $200 million in annual revenue. Despite its size and strong growth, cross-border commerce is a challenging area.  When international travellers arrive, merchants sometimes have difficulty recognizing them, anticipating their needs and catering to them. Even worse, most merchants neither recognize the size of the cross-border opportunity nor understand their current share. Cross border spending is not a trivial issue and the challenge for the next decade is to build wider understanding of the opportunity and create ways in which retailers can better understand customers from abroad.

The Future of Payments – Proposed way forward

It is clear that omnichannel commerce is here to stay. MasterCard’s SpendingPulse report is showing that U.S. ecommerce is growing at double digits year-over-year as compared to total retail sales (ex-auto), which are growing in single digits. While stores may be becoming less important, they are not dead and are an integral part of the purchasing process; close to 20 billion people visited US malls in Nov and Dec in 2013[2].  Providing a consistent experience across channels will be critical; our research shows that spend by omnichannel customers, those who shops across more than one channel and value a consistent experience, is significantly higher than single-channel customers, those who shop via one channel across all verticals (Figure 1).

paymanets_fig1

Of course e-commerce is continually evolving but the biggest change may well happen in store. First stores will likely become smarter. Retailers currently don’t know who walks in the door so its difficult for them to provide a customized experience and individual offers. Beacon technology can solve this issue for stores.  With a larger range than NFC this technology has enormous potential for customers and retailers alike.  Widespread adoption of Beacon technology by stores and customers will make it quicker and easier for customers to access the information and products they are looking for, and for retailers to provide special offers or discounts to loyal shoppers. It may also provide retailers with invaluable insights about their customers’ shopping habits allowing them to make improvements to the store layout by identifying store flow, maintaining service standards and operations that will benefit everyone.

In ten years you may be able to expect to walk past a shop and your mobile will receive meaningful and personal notifications on discounts or deals that you are likely to buy based on your shopping preferences.  If you go inside you may be able to use your phone to pay with offers automatically applied. There may be other improvements. For example, checkout lines will likely become things of the past. By using mobile technology instead of a fixed till, customers will likely enjoy a much more personal experience. Pioneers in this include Apple, J C Penny and Nordstrom in the US but it will likely become a common phenomenon. Similarly, “order ahead” capabilities that allow customers to order and pay from their mobile phones before they even enter the store and generally speed up the sales process will likely become widespread.  Expect the food service industry to lead the way.

The second area of change will likely be in the way customers choose and buy goods.  It will likely be all about choice. You may be able to order online and pick up at the store, order at store and deliver online, get similar offers across channels and yet have the same payment options. The transformation between the virtual and the actual has already begun; in South Korea, Tesco has built virtual grocery stores on subway platforms that have a similar layout to actual stores. Customers can now do their grocery shopping during their daily commute using their mobile phones, pay online and have them delivered when they get home. Of course there are big variances in this depending on internet access and payments solutions like PayPal and Apple Pay are trying to provide a similar payment experience in other markets.

Looking at POI, Uber, which is in 40 countries, is a great example that is revolutionizing the way we think by actually embedding payments in the process and focusing on the customer experience. Another good example is PayByPhone that is revolutionizing paying for parking by focusing on the whole customer experience. No more grappling for coins or making trips to replenish the meter. PayByPhone lets you pay remotely from your mobile phone – even when you have left the car park and are on the train.   Look out for additional value added services like Bill pay and remittances that not only enhance the customer experience but also drive incremental revenue for retailers.  The key for retailers is to consider ways that digital payments can be used to enhance customer experience.  We expect many more digital payments applications in areas where cash currently dominates.  Vending machines are another example.

All of this is of course driven by the supposition that in the next ten years there will likely be a global acceptance of electronic payment products. We are nearly there; Square and iZettle’s mobile point-of-sale (mPos) solutions are demonstrating this by giving the small merchants who are the main driver of cash transactions the ability to accept electronic payments at affordable rates. Such is their success in fact, it is expected that by 2019 46% of POS terminals will be mPOS[3]. For the payment providers innovative ways of determining merchant credit risk, for example by using alternative data sources such as cell phone usage and bill payment receipts,  are critical to open the way for unbanked merchants, particularly those in developing economies where the majority may not have access to traditional banking facilities.

Security and trust are fundamental to the success of e-payments, the one supporting the other.  Given this we expect to see changes in two specific areas; customer authentication and the underlying infrastructure support for transactions.  In the future we expect multi-factor authentication will become the norm for most online and offline transactions.  This has already begun in the physical world think of EMV with chip and PIN which is now becoming a global payment standard.  The online transaction community is likely to follow particularly in Europe where the European commission is keen to add some regulatory pressure. In addition it seems clear that authentication itself will likely become more secure as biometric technology from hand geometry, via face recognition and fingerprints to iris recognition become more mainstream. It sounds a bit Hollywood but in ten years time it will likely be old hat. On top of this, although unsexy and unheralded, the all-important underlying infrastructure that supports transactions is expected to also become more secure. Consider the replacement of magnetic stripes with chips and use of card number tokenization for NFC transactions as illustrations of this shift.

Pay attention to two scenarios that demonstrate the dominance of social commerce. First, imagine Isabel, a 35-year-old professional. She opens her tablet. First stop is her homepage, from which she administers her universe. She has her favorite brands, her product wish list with the prices she’s prepared to pay (information she has shared with those same favorite brands) and an easy-to-manage dashboard defining what the outside world sees about her. Certain brands she trusts enough to share quite a lot about herself. These favorites, of course, know the most about Isabel, so that she can get exactly what she wants from them. Others aren’t as fortunate. They know only what Isabel wants to share with them — which isn’t much. If a brand is not on her list it won’t ever find out more, because she’s perfectly able and willing to control her digital information. In her digital life, she will “switch on” areas of interest and consider relevant offers.  She will also block out the untargeted, low-value offers and emails she receives all the time. Isabel, you see, values control and monetizes her personal data by the way she manages it. Isabel is a segment of one.

The second scenario takes the power shift to the customer a step further. This builds on the notion of the “Internet-of-things”, a scenario where household objects, fashion accessories and other objects can transmit data about themselves. For example, the water filter of your refrigerator may send a signal to your preferred suppliers when it its time to replace it with the supplier that satisfies the price point subsequently fulfilling the request. While it is too early to say which areas will be affected by this change, it is very likely that “things” in the home will be connected and be able to send and receive information in order to other “things”

Optimizing the intersection of digital payments and big data is critical for merchants to serve the new powerful customer. Data has become multichannel, multi sector, multifaceted and for retailers being able to understand the behaviour of their customers not to mention their fragmented media existence will likely provide a whole new level of understanding and opportunity. Take for example the recent experience of a retailer interested in reaching last-minute holiday shoppers in (for argument’s sake) the luxury sector. By analyzing aggregated purchasing behaviour, with last-minute holiday spending, the company was able to conduct a better, more targeted campaign as a result. The reward was a 31.7% lift over the performance of a control group.[1]

Cross-border commerce is growing faster than domestic commerce and so will likely become increasingly important and influential. In fact, based on McKinsey’s research, cross-border flow of goods, services and finance could increase three folds from $26 trillion in 2012 to $85 trillion in 2025 representing a 10% average growth rate. Innovations in digital payments and technology such as payment cards, eBay, and AliPay will fuel this by simplifying cross-border commerce.  Small businesses (SME’s) are likely to benefit significantly.  Consider that 90% of commercial sellers on eBay are SMEs who export to other countries vs. less than 25% of traditional SMEs[4].

Emerging economies are and will likely continue to be the main beneficiaries. China and India are the main drivers especially through trade with other emerging markets. Between 1990 and 2012 the share of trade of global goods between emerging markets quadrupled whereas between developed markets almost halved [4]. Similarly, share of trade of global goods between emerging and developed markets increased 40% during the same period [4].

Payment for transit by overseas travellers is one area of opportunity. Solutions like the one rolled out by London Underground that enables travelers to use their existing contactless bank cards (e.g., supporting MasterCard PayPass) without having to buy the local Oyster card are expected to continue to gain traction.

Merchants are also expected to become smarter about engaging cross-border customers using transactional data. As an example, many types of merchants – including airlines, hotel chains and luxury fashion brands – have established relationships with travelers through loyalty programmes. Analyzing the spending patterns of frequently traveling members of the program can help identify the merchant types with which members engage most often. This may uncover new partnership and ancillary revenue opportunities.

There will likely be several types of digital payments like payment cards, mobile money or digital wallets for different markets and applications. One area in payments that is likely to see significant transformation is low value payments (LVPs), everyday, high-frequency purchases for which cash is used (typically sub $10 transactions) and make-up the bulk of cash transactions today. Digitizing these will most likely require new payment solutions. It’s not simple.  Any payment solution must create equitable value for all parties to a transaction. And value is a confluence of factors such as faster checkout, sales increase, information, safety, not just a function of pricing. Existing payment solutions are successful because they arbitrate a wide range of stakeholders to ensure equitable distribution of value. Digitizing low-value payments will likely require the same approach to create new payment constructs/business models.

The Future of Payments – Impacts and Implications

Merchants should invest in key capabilities to position for the future. The first is big data. They need to start developing a big data strategy and develop a roadmap for the next 10 years. Big data will give merchants the opportunity to serve the increasingly powerful customer and enhance the retail store experience in order to create a truly omnichannel experience. The good news is that merchants don’t need to depend on in-house capabilities; there are third parties that can help making big data a reality for merchants big or small.

The second is POI and digital payments. Merchants need to assess the current usage of cash and develop a plan to reduce it. Perhaps the best way is to think about the end-to-end customer experience and assess what digital payments make business sense and how they may be integrated. There are more digital payments choices than ever before and they are only increasing, merchants are likely to find a solution that fits their needs.

Third, think about global expansion. In this digital world of AliBaba and eBay and digital payments like payments cards and AliPay, becoming global is much easier for all merchants big or small.

Online will be critical so invest in related capabilities. But go a step further, by thinking about it in the overall context of the omnichannel customer by focusing on a seamless experience across all channels.

We will see significantly less cash over the next ten years. Use of technology and big data will be more prevalent and will not be limited to large merchants or some industries.  Merchants will have to become more nimble and agile and continuously adapt their business as the environment has not been more dynamic before. Finally, new innovative players will continue to emerge across a range of functions including commerce, digital payments, big data and marketing; these will create both opportunities and threats for incumbent players.

Sources

[1] MasterCard Advisors Analysis, 2014

[2] Wall Street Journal, 2014

[3]Finextra,2014

[4] McKinsey, 2014

The Future of Travel – The Global Challenge

The travel and tourism industry is often described as the largest industry in the world. It accounts for 9% of world GDP, $1.3tn in exports and 6% of world trade across multiple sectors, including transport (aviation, rail, road and sea), accommodation, activities, food and drink. It is estimated that it creates about 120 million direct and 125 million indirect jobs and is closely linked to other sectors in domestic and international markets, such as the manufacturing industry, agriculture and the service sector.  In turn, these create broad multiplier effects for local and national economies.

In 2012, for the first time in history, the number of tourists crossing international borders in a single year reached over one billion. While just over 50% of these arrivals were from Europe, much of the demand is being fuelled by rising household incomes in emerging economies – not only the Brics (Brazil, Russia, India and China) but increasingly across the rest of south-east Asia and Latin America. In addition another five to six billion people travel in their own country every year. Technological innovations are fuelling this growth, and include developments in low cost air travel and the widespread use of increasingly sophisticated applications that aid online researching and booking travel.

Mass tourism was one of the great game-changers of the 20th century. Thomson Holidays ‘Sustainable Holiday Futures’ report explains: “Cheap flights meant travel was no longer the preserve of a wealthy elite, enabling millions of people to travel beyond their border and dramatically widening the horizons, tastes and expectations of an entire generation in the developed world.” Today I see the mobilisation of the middle classes in the Indian Subcontinent, Asia and South America as the game-changer for the early part of the 21st Century.

In general people like traveling and which is probably why the industry has remained resilient, adapting in the face of a range of challenges such as armed conflict (particularly the Gulf Wars) and disease (Sars, H1N1, Foot and Mouth, and more recently Ebola), earthquakes and other natural disasters. Looking ahead the future looks positive; for example international tourist arrivals worldwide are expected to increase by c. 3.3% a year to reach 1.8 billion by 2030 with the majority of market share tipping toward the emerging economies over this period.

Despite the positive trajectory the Thomson Future Holidays report warns that the challenges for the industry are formidable: “The dream of affordable travel for all is being obscured by climate change, future long-term projections of rising fuel prices and a growing awareness among consumers that sustainability and responsible travel are set to have an impact on how we understand, embrace and manage our holiday plans.” Given this, I see that there are broadly two main challenges ahead for the development of a robust travel and tourism industry: how to continue to grow further to deliver jobs, exports, economic growth and development, and in doing so, how to manage this sustainably.

The Future of Travel – Options and possibilities

Considering growth, perhaps the first issue to be addressed should be the balance between convenience and security with border controls coming under increasing strain as they deal with huge volumes of people travelling internationally at a time when fears around global security are high.

The World Economic Forum’s Global Agenda Council believes that “the bureaucratic hurdles that often accompany visa procurement such as long wait times, absence of local consular offices and excessive documentation requirements discourage travel, constraining visitor spending and the jobs and growth it generates”, and that “The largest delays are caused by antiquated visa processes and can be easily reduced through utilization of commonplace modern technology”. Improved visa facilitation in G20 countries, it says, could create between 940,000 – 5.1 million jobs and generate US$149 -206 billion in international tourist receipts by 2015. It says that shifting away from in-person interviews and consulate-based application system to online applications, video interviews and application processing software can reduce staffing costs and produce immediate returns en route to widespread adoption of e-Visas and a coordinated global travel facilitation system. It’s paper ‘Smart Travel: Unlocking Economic Growth and Development through Travel Facilitation’ proposes “a smart travel model and blueprint that could revolutionize the travel and tourism sector, much the way smartphones have transformed the telecommunications and media industries”.

Clearly the challenge is to make travel safer but at the same time more efficient. Innovations in travel facilitation is essential for growth so look out for different forms of frictionless travel – streamlining visa processes with the introduction of e-visas for example: “As the world becomes hyper-connected, circular and citizen-centric, the right legislative framework, innovative financing and partnership models are crucial to facilitate travel. This includes smart visas, smart infrastructure (i.e. smart airports) and skills.[1]

The notion of technology driven travel is not confined to border controls. Smart cards similar to those used for localized, multi-modal urban transport (such as the Oyster card in London and Tisséo smart card in Toulouse) will increasingly be used not just for local transport solutions and for booking accommodation, activities, food and drink, but also at the level of predicting personal choices in hotel rooms, such as smart showers that predict the temperature we prefer, and smart meters that optimise our use of energy, temperature control, and so on.

Beyond this, smart technology has revolutionized how we choose to travel. We are no longer dependent on the wisdom of our high street travel agent and prefer instead to make decisions based on the experience of online crowds from the likes of Trip Advisor. Browsers and indeed our browsing habits are becoming increasingly sophisticated allowing us to choose our journeys by cross-referencing and sharing ideas as well as influencing the buying choices of others.  Looking ahead expect searches to be even more refined, with users having greater control over whose opinion they seek.  Combine this with the increasing use of smart devices and it is clear that ensuring they stay ahead of technological innovation will be key to survival for many (from SMEs to the large corporates) across all sectors of the industry.

Regulation will continue to have a huge influence over the aviation and transport industry. The key regulatory challenges are likely to be Air Passenger Duty increases, compliance with the EU Emissions Trading Scheme (ETS) and volatile fuel prices. The effects of the deregulation of the European railways in 2010 that allowed open access (i.e. all railway operators can now compete on international routes, and private companies can now pick up passengers outside their home country and operate cross-border trains) have yet to be realised. It is hoped that it will lead to competitive pricing for tickets, more seats on more trains and increased variety of rail products and services. Perhaps the most significant improvement (and one that looks set to grow in the future) is the multi-modal approach to air and rail. Many large German airports, for instance, such as Frankfurt, Cologne and Dusseldorf, now have modern rail stations that allow air passengers to continue seamlessly by rail to many destinations. The Chinese have also already significantly invested in mass transit by rail. As fuel costs make conventional air travel more expensive, in some regions, rail travel may replace domestic and even intercontinental flights.

Given that the travel and tourism industry is a huge employer, the development of and tighter controls on employment rights are likely to be a significant factor in the future. It is worth noting in this regard that there are few NGOs lobbying the industry on human rights; the UK-based charity Tourism Concern is a small but vociferous organisation that campaigns for a variety of human rights issues, such as the right to water for local communities, displacement and land rights of indigenous people, and porter protection, while Survival International campaigns for the rights of tribal people worldwide. As the travel and tourism industry boom continues, it is likely there will be many more issues to contend with in this regard, particularly regarding the expansion of urban landscape into traditional land areas in Africa and the expansion of oil production and timber felling in the tropical rainforests of Southeast Asia and South America.

Tourism is an under utilized tool for socio-economic development. In general it has had a positive impact on local community empowerment, especially for women. There are other intangible assets, such as encouraging greater global connectivity and cultural understanding. Awareness of this is increasing and community based tourism is on the rise with a growing number of holiday makers eschewing the crowded beaches and all inclusive packages to enjoy a more authentic experience living in the culture rather than observing it from the outside. The demand for localized, personal experience will grow over the next decade.  As a result the travel and tourism industry is becoming increasingly aware of its social responsibility so look out for increasingly sustainable travel options. Over the next decade travellers will base their buying decisions not only around comfortable beds, leisure facilities or the proximity to cultural attractions, they will also be able to choose to stay in places where they know the staff are being treated well and the local economy is not being exploited.

Some in the industry are already changing their ways of working. Thomson Holidays (part of the TUI Group) reports that companies will increasingly be held to account over their commitment to issues of a more sustainable tourism industry. Jane Ashton, head of sustainable development at TUI Travel, said: “Our research shows that our customers want us to take care of sustainability issues for them. So our challenge is to influence destinations and hotels to supply an infrastructure that allows our customers to be more sustainable.”

Thomson Holidays also predict that during the next twenty years, UK travellers will agree to pay for their water on holiday; take ‘Tradecations’ – cooperating with radical plans by hotels and resorts to slash their carbon footprint in return for carbon reward points that can be traded for visits to local sites of interest, spa treatments or dinner and drinks; discover holiday super-hubs and aerovilles as a new integrated global rail and sail network replaces domestic and regional air travel. With regard to carbon quotas, it warns there is a “potential double-whammy for the travel industry with governments worldwide predicted to impose personal carbon quotas”. The British government’s plan to reduce carbon emissions by 80% by 2050 “would give UK citizens an annual carbon quota of just 3.1 tonnes per person”, so the report concludes: “Such low quotas will encourage families to carbon-comparison shop.”

When practiced responsibly, tourism can also be a tool for biodiversity conservation – many national parks and other protected areas would no longer be able to survive financially without large number of visitors, and there are an increasing number of examples where ecotourism has helped save individual species, such as the mountain gorilla in Rwanda and Orang Utan in Borneo. A census announced this week in India reports that tigers numbers are up 30% over the last four years, which is in part due to tourism’s influence on the understanding of the economic value of tigers; that they are worth more alive than dead.

Increased awareness of environmental issues (and the rise of the ‘green consumer’) has inevitably led to a growth in the interest in environmental travel. As far back as 2010, around 50% of Americans that traveled abroad were engaged in nature, culture or heritage tourism and research commissioned by Trip Advisor suggested that 71% of its members intended to make eco-friendly travel choices in the future. So, over the next ten years look out for continuous growth in travel focused on learning about, experiencing or positively affecting ecological conservation, economic development and local community improvements, cultural respect or human rights.

However, if poorly managed, tourism can be a double-edged sword, having a negative impact on local populations and their natural environment (including degradation of local environmental quality, water consumption and waste management) as well contributing to greenhouse gas emissions. Unchecked and unregulated, the continued growth of the industry will also have implications for areas of significant cultural and natural importance. Of the 1007 properties listed on UNESCO’s World Heritage List, 46 are identified as ‘in danger’, such as the Everglades in Florida, the Selous Game Reserve in Tanzania, the Rainforests of the Atsinanana in Madagascar and the Virunga National Park in the Democratic Republic of Congo. UNESCO includes “unchecked tourist development” on its list of challenges that it says pose threats to World Heritage Sites; the others are: armed conflict and war, earthquakes and other natural disasters, pollution, poaching, and uncontrolled urbanization. Regulators and law enforcement officers must address this.

Beyond everything climate change will undoubtedly affect the travel and tourism industry, both in terms of the regulation of greenhouse gas emissions and the effect on the tourist industry of destinations adapting to climate change, especially those regions that already are exposed to extreme weather, such as at the equator and the poles, as well as vulnerable island states, such as the Maldives and many Pacific Islands, and low-lying coastal areas of industrialised nations that are vulnerable to sea water rises. Tourism bears some responsibility for this currently accounting for 5% of global greenhouse gas emissions – approximately 4% from transportation (40% of those from air travel and 32% from car travel) and almost 1% from the accommodation sector. As demand for air travel is forecast to double by 2050, and carbon emissions from flights departing the UK alone are forecast to increase from 33.3 MtCO2 in 2011 to 47 MtCO2 by 2050 expect innovations in transport infrastructure to begin to mitigate the damage being done.

One of the other options for tackling aviation’s contribution to greenhouse gas emissions is the EU Emissions Trading Scheme – a market-based “cap and trade” mechanism whereby emissions are capped at a set overall limit but are tradeable. Another solution is to address the source of the emissions produced by aviation through use of future aircraft technology, better operational flying techniques and the development of sustainable fuels. ‘Sustainable Aviation’, an alliance of the UK’s airlines, airports, aerospace manufacturers and air navigation service providers, has produced a ‘CO2 Roadmap’, which it says could reduce the UK’s aviation emissions by up to 24% by 2050. It says the UK could have between 5 and 12 operational plants producing sustainable fuels by 2030, which could generate a Gross Value Added of up to £265 million in 2030 and support up to 3,400 direct jobs, and a further 1,000 jobs.

[1] World Economic Forum

The Future of Travel – Proposed Way Forward


Smart visas, indeed, smart ticketing in general for mass transit provides a tangible way forward in addressing some of the barriers to the seamless growth of cross border visitor numbers.

Given unpredictable fuel costs in a climate-challenged world, the future for the aviation industry must surely lie with greater efficiencies in the short term and with alternative fuels used in the future, even if a global emissions trading mechanism is put in place. The railways are likely to be the mid- to long-term solution for mass domestic transit, particularly linking to intercontinental airport hubs for leisure, work and shopping, especially in those countries with modern railway networks, such as China, Japan and the Middle East, but also across the high-speed networks of Europe.

Regarding World Heritage Sites already at risk from the sheer numbers of visitors, it has been suggested that charging a tourist levy for entry is one solution to limit the numbers, though critics have said this is elitist.

The Future of Travel – Impacts and Implications

It is uncertain how far climate change will impact destinations over the next 20 years, but it is highly likely that we will start to see the effects of a warming world in this time frame, especially in those destinations that already experience extreme weather, such as at the equator and the poles (as well as the Caribbean, the Mediterranean and Australia), where particularly water scarcity will impact on the tourism industry.

Companies will increasingly be accountable for their environmental and social impact, and demonstrate how close they come to providing a ‘net positive impact’ in the destination.

The Future of Work – The Global Challenge

The global challenge of work is two-fold. First, will automation, in its various forms, destroy jobs? And second, even if not, will workers be paid enough to sustain the global economic system? This is why the former US Treasury Secretary Larry Summers has said the problem of “good jobs” is the central problem of the richer economies.

The combination of economic stagnation, global competition and digital technology has created something of a social and public panic about work. We are losing “the race against the machine,” or reaching “the end of labor”. But there are two diverging stories about the future of work, one dystopian, one utopian, as Flipchart Rick has observed. On the one hand: it “will revolutionise the workplace … and enable us to have more fulfilled working lives.” And on the other: a future “of factories without people, of vanishing jobs, of a hollowed out labour market and … vast profits with few employees.”

Our present model of work is, broadly, a creature of the industrial revolution, dominated by the division of labour, the supervision of labour, and payment of workers for their time or their tasks. This includes so-called “new economy” models such as Uber, whose casualisation of its workforce would be recognised by any 19th or 20th century dock-worker. Some of the big shifts shaping work reinforce this model. Others are starting to reshape it, potentially marking the start of a transition beyond it.

To understand how this is likely to change over the next decade and beyond, we need to understand the global landscape of work. These are a shift towards services, the globalisation of supply chains, the growth of ubiquitous technology, an increased squeeze on resources, and a shift in social values towards well-being. These pull in different directions.

Globalisation and digitisation take you towards rawer forms of capitalism, whereas resources and values take you towards more inclusive versions. The way you deliver services depends on which model of these two that you prefer. The version of the story about the future of work you subscribe to tends to depend on your assumptions about how these drivers will play out.

The shift to services: The deep shift in the global economy is in the long-term rise of services to “become the dominant economic activity” (UNIDO, 2009). The economists Timmer and Akkus (2008) describe this as a “powerful historical pathway of structural transformation,” which every country follows.

One of the reasons for the long boom in living standards in the 20th century was because of the long boom in manufacturing, the dominant economic trend for much of the century. Productivity growth and economic growth tends to fall as services become dominant, and the influence of trades unions, which are effective in maintaining the value of wages, tends to decline.

The globalisation of the supply chain: Manufacturing is also tradable, meaning that it is open to export competition. The growth of the Asian economies, in particular China, has been extensively driven by manufacturing. Taking a long view, Asia’s share of world production almost doubled between 1970 to 2008, from 15.5% to 28.5%, at the expense of Europe and North America. (Unido, 2009). This growth was driven largely by the development of containerisation, not digital technology, because it transformed shipping costs.

But globalisation is reaching its limits. Wages in export sectors in both China and India are now relatively high (a pattern seen in other emerging economies in the past) and companies are moving their production closer to their markets, both anticipating rising transport costs and wanting to be able to respond more flexibly to demand.

The other effect of globalisation, of course, is an increase in migration: more than 500 million people globally now live in a country they weren’t born in. Economists generally agree that immigration is good for economies. Migrants tend to be younger, more enterprising, and economically active, and their effect on wages, economic growth and tax contributions is almost completely positive. However, in weak labour markets migration also tends to push down unskilled wages by increasing competition for such jobs; such competition is gamed by unscrupulous employers.

The growth of ubiquitous technology: There is a widespread fear that the rise of robots – or more exactly, a combination of computing power, algorithms and robotics – will destroy the labour market, even, possibly, the very idea of labour value. A widely publicised study by Oxford University academics Carl Benedikt Frey and Michael Osborne argued that for the United States jobs are at high risk of being automated in 47% of the conventional occupational classifications (Frey and Osborne, 2013). In The Second Machine Age, Erik Brynjolfsson and Andy McAfee suggest a reason: that computing power is capable of exponential growth in performance over time, and that we’re just at the start of that progression. If robotics did for blue-collar work, then artificial intelligence will do for white collar work.

This argument, however, tends to miss the fact that technological innovation, historically, has created new jobs, typically after a period of turbulent transition. In his analysis of the labour market, David Autor (2014) finds that between 1999 and 2007 “routine task-intensive” jobs were indeed largely removed by computerisation, while knowledge jobs (“abstract task-intensive”) tended to survive or increase where human knowledge was complemented by computers. “Manual task-intensive” jobs, at the less-skilled end of the market, were much less affected by computerisation, and demand for them seemed to be rising. Yet their wages fell. His explanation: labour supply for these jobs increased because of the collapse in demand for “routine task-intensive” jobs.

The squeeze on resources: Population and consumption pressures mean that we are breaching many of the natural planetary boundaries. For capitalism this is a new game: traditionally it has been able to use resources without worrying much about the consequences. And after a century of cheap energy, the long-run trend is up, despite the current downward blip in the oil price. In our recent Futures Company report The 21st Century Business, Jules Peck and I argue that this resource shift is changing the way that companies behave; we are moving to post-sustainability (socially, economically, and environmentally). An important element is a shift from consumers to citizens, among both customers and employees, where the overall impact of a business matters. An example: it’s argued that one of the reasons why McDonald’s sales are slumping among Millennials is that eating there is depressing, because of “the feeling that the people behind the counter, flipping burgers and taking orders, have dead-end jobs where they’re treated poorly.”

The shift to wellbeing: One of the long trends is a trend towards wellbeing, physical and psychological, individual and social. This complements one of the strong workplace trends: that significant competitive performance is typically produced only by empowered and engaged employees, who are intrinsically motivated to work for the business. This is true of lower-wage environments as well as higher-wage businesses.

Striking research by Zeynep Ton (2014) has found that companies such as Costco in the United States and Mercadona in Spain out-perform their sectors – by some margin – through a combination of better wages, significant investment in training, and appropriate technological investment to support staff. With such a “good jobs” strategy, increases in wages translate directly into far larger sales increases. High value work benefits individuals, businesses, as well as society as a whole.

The Future of Work – Options and Possibilities

The current discussion about the future of work seems to be monopolised by the version of the future in which technology destroys jobs. It has gained an air of inevitability, as if it is the only possible future. NESTA’s open minded report suggested that the “robots hypothesis” resonated because it connected “two powerful themes in popular culture: the rapid advance of IT, and the startling growth in inequality.” But there is a problem: it hasn’t happened before.

Indeed, the idea that investment in more productive technologies leads to unemployment is dismissed by economists as “the lump of labour fallacy.” In the past, investment in the new technologies has created new capacity and new wealth, which was re-invested to create more, higher value jobs. If this time is different, we need to understand why this is so.

There are candidates. Brynjolfsson and McAfee’s claim that digital technologies are different because they create exponential growth is one. Another is that companies can no longer draw on plentiful resources or cheap energy to drive new investment platforms. A third is that previous waves were driven by manufacturing, which generated new value through productivity gains and created the social conditions for trades unions.

However, it is also the case that this fear typically recurs after a crisis. It is not coincidence that Keynes wrote his famous essay on the challenge of technological unemployment just after the 1929 crash.

So it is also worth considering reasons why it might just be a phase. The economic historian Carlota Perez has a model of technological development that describes five long waves, or surges, since the Industrial Revolution. Each is around 50-60 years and follows an S-curve pattern; the last quarter of each is marked by saturated markets, diminishing investment opportunities and declining returns. The first part of the 20th century was dominated by the oil and auto surge; the latter part by ICT. The ICT wave is now reaching the turning point at which returns start to fall.

On this model, finance is looking for new opportunities, and although it is too early to say what the next platform will be, and we’re still 10-15 years away from it, it is possible to imagine that the next technological surge might be built around, say, a material such as graphene.

David Autor concludes that much of “the labor market woes” of the past decade are not down to computerisation, but to the financial crisis and reduced investment (starting with the dot.com collapse) and the impact of globalisation on labour markets. And he suggests that many middle-skill jobs will prove more resistant to unbundling than advertised; while computers can do specific tasks, turning collections of tasks into self-contained jobs, and then automating them, requires substantial investment. In the long run, people are both more flexible and cheaper.

One implication is that the question of the future of work may actually be about power in the labour market. This leads to broadly political interpretations of the future of working conditions, ranging from Guy Standing’s formulation of the fragile “precariat”, facing intermittent, insecure work, David Weil’s description of the “fissured workplace”, in which many functions are sub-contracted, and the rise of campaigns for the Living Wage. Perhaps the dividing line is best-expressed in Alex Payne’s widely circulated open letter to the tech venture capitalist Marc Andreesen: “You seem to think everyone’s worried about robots. But what everyone’s worried about is you, Marc. Not just you, but people like you. Robots aren’t at the levers of financial and political influence today, but folks like you sure are.”

The Future of Work – Proposed Way Forward

The way forward depends on how you prefer to read this bifurcation between the technologists and the sceptics. We don’t know which group is right: there are no future facts. But there are some observations that can help shape our perspectives on this.

The first is that these widely divergent views are a feature of this point in the technology cycle. The most the most excitable projections of the future of the car were seen at just this point on the oil and auto curve in the 1950s. The technology S-curve in Figure 1, based on the work of Carlota Perez, helps us to understand why. At this point, when the S-curve is at or approaching its second inflection point, people have been experiencing rapid technological change for the best part of two generations. The notion that “the only constant is change” has become a breathless platitude in the public discourse. So, the technologists’ perspective (point ’t’ in Figure 1) is a projection of this steep ramp. The sceptics note instead sign of falling returns and declining customer utility – and see a flattening of the line (point ’s). The gap is large, and one’s perspective on it is a matter of worldview, not evidence.

Figure 1

fig1

Source: Carlota Perez/ additional analysis by The Futures Company

Second, almost all business innovation and new business value is driven by the application of knowledge, and the way it is embedded in individuals, teams, and systems. The Futures Company has explored this in recent research with the Association of Finnish Work on the idea of ‘high value work.’ The important point here is that this is true of a whole range of knowledge, including knowledge of service and customers, and knowledge of culture and place, as well as technological knowledge. The most successful businesses use technology to complement and enhance this knowledge, not to replace it.

Third, the trend towards is a deep and powerful one. If Millennials express a desire for meaningful work, this is also true more broadly. We are on the cusp of a transition to a world where, as Hardin Tibbs (2011) has argued, half of the populations of Europe and the United States subscribe to post-modern values (drawing on Inglehart) of autonomy and diversity. The workplace will not escape this trend. One way in which this is expressed is in a transition from consumer or employee to citizen. Increasingly, anyone with any degree of choice in the labour market is choosing employees who recognise them as a whole person, not just as a unit of labour. The evidence suggests that the engagement that the employer gets in return (even, say, in retail) is a powerful driver of performance and profitability.

Fourth, the bargain that businesses struck in the 1980s and 1990s, as they enforced flexibility and “downsized” headcount, may turn out to be a Faustian pact. Shedding jobs and exerting tight control of labour markets increased short-run profits. But at the same time that same control squeezed out their sources of growth. And as both the OECD (Cingano, 2014) and the IMF (Ostry et al, 2014) have noted recently, wage inequality has been a further drag on economic growth. To regain growth, they are likely to have to increase wages and give back some control and power to their workforces.

My own best guess is that we are not headed for long-run technological unemployment. I have changed my mind about this over the past year as I have spent more time with the evidence.

The explanation that seems best to fit present state of work and labour markets is that it has been through a “perfect storm” of a globalised workforce, the deskilling of routine work (which was highly vulnerable to automation) and the shift of these workers into manual or service work, and aggressive deregulation of labour markets driven by a neoliberal political agenda.

The discourse around technological unemployment is not persuasive to me. The “abstract” jobs (using David Autor’s analysis above) will be complemented by technology, and so, in a different way, will be the manual jobs. Meanwhile, the projected gains from Artificial Intelligence and analytics are going to be harder to achieve than currently anticipated. As an example, big data gets less useful as the data sets get larger, and the driverless car, the poster child for the tech future, is a far tougher proposition than Google lets on. Meanwhile, these tech scenarios never seem to include the new jobs that will emerge as we understand better the potential of the technologies, other, sometimes, than as a panic about the possible speed of change.

But, and it is a big but, we’re only part of the way through the dislocation to work and to labour markets caused by this perfect storm. Things will not get better quickly.

The Future of Work – Impacts and Implications

Looking at the shorter-term impacts, then, it’s possible to see a range of approaches to this turbulence in the world of work. Government have options, largely about whether to intervene in labour markets to influence work outcomes, or not. But employers are also moving to new strategies not out of goodwill but through self-interest.

These options, highly simplified, are shown in the matrix (Figure 2), which contrasts laisser-faire approaches with interventionist approaches.

Figure 2

fig2

Source: Andrew Curry/The Futures Company

The race to the bottom: This laisser-faire option operates on the principle that labour market flexibility is the secret to increased employment in a globalised labour market. In practice, nearly all countries have increased flexibility and permitted more casualised work over the past decade – even somewhere with a strong tradition of labour protection such as Germany. The evidence increasingly suggests, however, that the pursuit of low value jobs leads to a vicious cycle of low productivity, low investment, low growth, and low tax and social contribution from business.

This policy approach also involves government subsidy to employers, as low-paid workers are supported by state payments. In the United States, a study showed that the fast food sector was effectively subsidised to the tune of $6 billion because its low paid workers were dependent on food stamps and subsidised housing. Increasingly this looks like a political choice that is no longer supported by economic evidence.

Enlightened self interest: It appears that employers who pay better and create better working environments do better financially. Walmart is a relevant case. Over the last decade, its share price has been broadly stagnant, while Costco has outperformed it “by a considerable margin”, in terms of sales, earnings or stock market returns. One reason: according to HBR, far lower staff turnover means knowledge is kept in the company – and drives customer engagement. Such employers also invest in technology to enhance the performance of their staff, using each to complement the other. The Spanish retailer Mercadona similarly invests heavily both in training and stock management systems.

Wages and labour performance are also becoming part of businesses’ reputational capital. See, for example, the increasing success of the UK Living Wage campaign in signing up large companies as “living wage employers”. The public sector can encourage this, for example by giving tax breaks or other forms of support to companies who deliver such commitments, and sharing evidence of business benefits.

Keeping the market honest: Turning to more interventionist approaches, the state can take the view that it wants to drive unscrupulous low-wage employers out of the market as a way of driving up standards and investment (because low-wage, employers are unlikely to commit to training, and have little incentive to invest in capital equipment, which reduces productivity.) This leads to approaches such as enforcing (and increasing) minimum wages, both through regulation and legal frameworks, and also through public procurement rules.

Such a policy complements the “enlightened self-interest” approach by removing free-riders from the market. Although conventional wisdom has argued in the past that minimum wage legislation costs jobs, this seems to be a weaker effect than claimed.

Re-imagining work: Much of our intervention in the labour market is driven by a view that it creates social goods, both from an economic perspective and also from a social perspective (over a long period studies have shown that worklessness produces adverse psychological and physical effects). But it is possible that such findings are linked to a set of “modernist” social values that are rapidly giving way to “post-materialist” values. Certainly, people with some income and a degree of social capital who do not have to work find worthwhile things to do, including volunteering. This is part of the argument for the Basic Income: that as we move to the “post-industrial” world envisioned by Daniel Bell, in which skills are more embodied in personal knowledge, that encouraging traditional work is no longer the only, or the best, way to get the social benefits from productive engagement.

The rise of the basic income: Until very recently, the idea of a basic income, a minimum sum paid to all people regardless of their work status, was right of the fringe of political discourse. But it has been moving rapidly towards the mainstream. The idea has deep roots:  George Bernard Shaw promoted it as “a vagabond’s wage” a century ago.

The analysis in this provocation helps to explain why. It is a policy idea that helps to improve outcomes whether the technologists or the sceptics turn out to be right. And in the meantime it helps to shore up economies, and individuals, that are struggling in the slow readjustment of labour markets.

If the “robots” hypothesis is right, we’ll need a basic income to make the economy work (markets need people who can afford to buy products). If the market power argument is right, then basic income keeps employers honest, by ensuring they have to pay good enough wages, in good enough conditions, to attract and keep their workers. One interesting side effect is that it would mean that our fundamental notions of the value of paid work could be about to shift, for the first time since the Industrial Revolution. A recurring feature of the ICT era has been that questions of power and politics have frequently been diagnosed as issues of technology. The future of work is just the same.

The Future of Water – The Global Challenge

Climate change, population growth and increased urbanization pose great challenges to the provision of water for human use. Since 1950 cities have increased their water usage fivefold, not only through population growth, but considerably through increased per capita demand.  Currently half of the world’s cities with more than 100,000 in habitants are situated in areas experiencing water scarcity[1].  To date neither governments nor businesses have done enough to prepare for this. Collectively we did not recognize the macro trends soon enough and so opportunities to counter water scarcity have been lost, infrastructure investments have been inadequate, and climate change adaption measures too local and often only reactive.

At the same time as access to water decreases, world energy consumption is projected to grow by 56% between 2010 and 2040. This matters because approximately 90% of global power generation is water intensive so a country’s energy mix has fundamental implications for its water industry. Water security has therefore become one of the most tangible and fastest growing social and economic challenges faced today.

So, how can we meet the water needs of the future? Will it be possible to provide equitable access to water and sanitation services when by 2030 the world will face a 40% global shortfall between forecast demand and available supply?[2] Can we make the water cycle respond to the challenges of climate change and energy need?  How can we do more with less water?

[1] Brian D. Richter, David Abell, Emily Bacha, Kate Brauman, Stavros Calos, Alex Cohn, Carlos Disla, Sarah Friedlander O’Brien, David Hodges, Scott Kaiser, Maria Loughran, Christina Mestre, Melissa Reardon, Emma Siegfried. Tapped out: how can cities secure their water future? Water Policy. 2013;(15):335–63
[2] World Economic Forum 2014

The Future of Water – Options and Possibilities

The UN has sagely noted that “water is the primary medium through which climate change impacts will be felt by humans, society and the environment” and accordingly climate change will necessitate improvements in water resilience systems in cities across the globe. Increasingly they will have to focus on local water sourcing, reuse and recycling in order to sustain their ever-expanding population. There are multiple ways in which efficiency can be improved not least through significant investments in green infrastructure, the adaption of smart technology and widespread public education which will help to manage water demand through a broader understanding about its natural process. Water is a key contributor to life. We need to be constantly reminding ourselves of this and take action.

Many countries are currently working to maintain and improve the quality of their sources.  About 96% of the earth’s total water supply is found in oceans and there is broad agreement that extensive use of desalination will be required to meet the needs of growing world population.  Worldwide desalination plants are producing over 323 million cubic metres of fresh water per day, however energy costs are currently the principal barrier to its greater use. The State of Singapore has innovative water technology, aiming, despite its size and population density, to become fully self-sufficient by 2061.  Plans include tripling its desalinated water supply by 2030, the large-scale collection of rainwater, and the collection of recycled water which, as well as the standard procedures, uses micro filtration processes, reverse osmosis and UV treatment to deliver potable water to its citizens. In short they are converting their city into a catchment and focusing on source diversity.

Elsewhere efficiencies will be improved by the use of intelligent robots, which will play a greater role in the inspection of infrastructure.  New materials, such as graphene, that are lighter, stronger, smarter and greener will also become more popular replacing traditional materials such as stainless steel pipes.

Growing concern for the environment and for public health means that water companies will be held to greater account for their environmental impact and water quality. A stronger emphasis on green infrastructure will support a trend for companies to transform from providing base utilities to creating a system of amenities that support the water cycle. An example of this can be found at the Illinois Institute of Technology. Rain gardens have been reutilized as communal meeting spaces, through-ways turned in to permeable walkways and three acres of new native plant communities with underground cisterns collect rainwater for future non potable reuse. Once all the changes are implemented the IIT predicts a 70 – 80% reduction of run-off into Chicago’s sewer system while making the collected non-potable water available for irrigation. Expect this repurposing of public spaces for multi-functionality for both amenity and wider sustainability purposes to be widely adopted.

Alongside making improvements to the infrastructure, there is a pressing need to do more with less water. Smart technology and big data will help. Changing public behavior is a huge challenge however.  Although there is widespread understanding that rising consumption of raw materials is both intensifying resource scarcity and increasing competition, most people, certainly in the developed world, live materialistic lifestyles resulting in high levels of waste.  In Australia for example, on average around 20 million tonnes of waste per year is thrown away at a value of AUD10.5 bn. Digital lifestyles can increasingly link consumer behavior to consumption and growing connectivity, utilizing the Internet of Things, will mean that it will be possible to monitor the consumption and cost of water in real time allowing consumers to understand their impacts and take action.

Data analytics can help build understanding on how to use the water cycle to respond to the challenges of climate change. It can also lead to increased scrutiny of water utilities and a better understanding of cost. Companies will therefore be able to integrate the true cost of water into their decision-making. In addition the availability of data provides an opportunity to educate customers about consumption. Publicity campaigns and a growing sense of urgency will nudge consumers to reduce consumption and should be used in partnership with economic levers that recognize the true value of water.

Growing populations and changes in diet mean that we need to produce more food. Water is a fundamental part of this process. In Australia, for example, the agricultural sector accounts for around 65% of total water consumption.  This could be greatly reduced if we could change consumer behaviour. It is estimated that Australians throw away AUD5.3bn of food waste every year. This is simultaneously wastewater. There is a real need to change this approach and developments in this sector will continue to have tangible knock on effects for the water supply industry and the natural environment from which this water is sourced.

Science will also have a key role in reducing the amount of water we use. Nano and biotechnology is a potential game-changer for the water industry, and can enable breakthrough products and technologies to tackle pressing global challenges such as reducing environmental footprints, using less and cleaner energy and decreasing water usage and waste generation. For example microorganisms are now being used to treat water that has been contaminated by hazardous materials. The global market for nanostructured product used in water treatment was worth an estimated USD1.4bn in 2010 and is expected to rise to USD2.1bn in 2015.[1]  Initial success in this area has also raised the possibility of the utility as a self-healing ecosystem.

Greater efficiency is the driving force for manufacturing companies where energy and water can be as much as 50% of the total manufacturing cost.  In the future expect more green manufacturing and increased co-operation when companies forge alliances across traditional boundaries, for example to share common costs. In the water industry this will manifest itself in knowledge sharing and contributions to joint research and development across catchment boundaries.  Through using resources more efficiently countries could also become more active trading partners; this would allow for more equal water redistribution amongst users. This could include a water balance concept similar to carbon emissions reduction strategies where water saved in one country offsets additional water use in another.

Looking ahead, users are likely to have to pay for the real cost of infrastructure. One short-term option is the financial recycling of assets and capital where old assets are sold or leased to fund the new. However, in the longer-term we will have to pay the true value for key resources. This shift could also lead to the greater application of the circular economy, which will help stretch resources through end of life recycling and reuse. More awareness will lead to increased scrutiny of water utilities and pricing of services as the widespread availability of data provides the opportunity to educate customers about consumption and managing resource use.  Looking through an international lens, water trading would allow for the efficient redistribution of water amongst users, so countries could become active trading partners. As the amount of water used in agriculture in arid regions is two to three times higher than in rain fed regions water trade could help save water on a global scale.

Once efficiencies and improvements are made, consideration should be given to the most cost effective way to provide access to basic services.  The fixed nature of water supply infrastructure and its history as an essential government supplied service gives rise to natural monopolies within supply areas. Governments need to ensure the pricing policy is appropriate to balance the essential need for water, the impacts on consumers (particularly those on lower incomes) and the requirements of the suppliers to remain financially viable.  To do this there should be better integration between urban water planning and urban development planning with considerations on limitation to green-field development.

Recognizing innovation opportunities for the future more and more companies are tapping into the public’s intellectual capital by crowdsourcing product ideas and solutions.  In exchange they are giving creative consumers a direct say in what gets developed, designed or manufactured. Crowd-funding added at around 270,000 jobs and injected more than US$65bn into the global economy by the end of 2014 with an expected industry growth of 92%.

[1] . Nanotechnology Now. Nanotechnology in Water Treatment. 2012; Available from: http://www.nanotech-now.com/news.cgi?story_id=45894

The Future of Water – Proposed Way Forward

Over the next ten years our waterways and other water sources will continue to suffer from over-extraction. This will continue to compromise the quality of the environment and the organisms it supports. In particular mining and other activities will continue to move into our water supply catchments affecting water quality and altering inflows. This will mean that we may be obliged to move water long distances in times of drought to services existing cities. In turn this could lead to increased GHG emissions at the very time when we are trying to reduce these.

We need to change this trajectory.   In doing so it is important that we reconnect ourselves with water in its pure elemental form. We should all be able to enjoy access to clean water, not just for drinking, but also for recreation and connection to nature. Putting water at the centre of the urban design process and re designing our cities and towns to respond positively to water is fundamental to ensuring a better understanding of the water cycle.  We need to develop better Green infrastructures – the networks of green and blue spaces such as parks, agriculture, woods, rivers and ponds in and around cities systems – that replicate nature and enable communities to connect with water.  The benefits include the reduction of flood risk, improved health and well being as well as providing a habitat for wildlife. Extensive green networks can be formed over time to create encompassing city ecosystems that can support the sustainable movement of people, rebuild biodiversity and provide substantial climate change adaption and resilience.

The focus should extend to solutions that do more with less: irrigation efficiency, automated farming techniques and demand management in our cities.  Smart infrastructure will help responding intelligently to changes in its environment to improve performance. Smart water networks could save the industry USD12.5bn a year.  In Israel, data analytic company TaKaDu takes information supplied by sensors and meters dotted around a water company’s supply network to build a sophisticated picture of how the network is performing.  It can spot anomalies in its behaviour from a small leak to a burst water main.

We should also start to re-think our traditional approach to drainage.  Working with natural site conditions for example, water, wastewater and storm water could be combined into one cycle. The AJ Lewis Centre for Environmental Studies ecologically treats and recycles wastewater within its buildings, integrating processes of wetland ecosystems with conventional procedures and in so doing recycling wastewater into reusable grey water.  While conventionally supplied water is used for drinking and hand washing, the recycled non-potable water is used in the Centre’s toilets and for landscape irrigation and recharging the wetland pond. Others should and are following suit.

A multitude of new tools are available to help us.  Alongside smart technology there are new biodegradable materials made from natural fibres that can provide greater resilience at less energy and lower cost. Beyond this, innovations will transform wastewater into a resource for energy generation and humidity into a source of drinking water.  We can see the beginnings of this already; consider, for example, the Israeli company, Water Gen, which has developed a device for extracting drinking water from air. Other advances including fog catchers, thick mesh nets that collect the water contained in fog, will soon be more widely adopted.[1]

We need increased investment in basic water and sanitation services both in new and the renewal of existing services.  Water treatment can come at a high price. The OECD has estimated that around USD50 trillion would be needed worldwide in the period to 2030 to satisfy the global demand for infrastructure[2]. However, accessing funding is an ever-present challenge.  In the US alone, if current trends continue, the investment needed by 2040 will amount to USD195bn and the funding gap will be USD144bn[3].  While most infrastructure investments are local, the sources of finance are increasingly global.

Beyond everything we must improve public understanding about the value of water and the services it provides. Globally public opinion still varies on the issue of climate change.  Better engagement with customers including education and information will have a large effect on calls to action around water. Education is fundamental to help the public to accept the need to reduce overall water use and to increase the use of wastewater for potable purposes. In particular city dwellers must learn to conserve more or utilize different sources of water such as storm water to provide for their needs, allowing potable water to be freed up to feed a growing population. Small adaptions by multiple individuals will make a difference.

[1] National Geographic. Fog Catchers Bring Water to Parched Villages. 2009; Available from: http://news.nationalgeographic.com/news/2009/07/090709-fog-catchers-peru-water-missions.html
[2] OECD. Infrastructure to 2030: Telecom, Land Transport, Water and Electricity. 2006; Available from: http://www.keepeek.com/Digital-AssetManagement/oecd/economics/infrastructure-to-2030_9789264023994-en#page4
[3] American Society of Civil Engineers. Failure to act: the economic impact of current investment trends in water and wastewater treatment infrastructure. 2011; Available from: http://www.asce.org/uploadedfiles/infrastructure/failure_to_act/asce%20water%20report%20final.pdf

The Future of Water – Impacts and Implications

In the future it is clear urban water utility companies must prepare to operate in a world which is expected to be utterly different from the one that we are experiencing today. It is necessary to acknowledge and prepare for this.

We know that there is a growing urban population; we know that the impact climate change is now taking effect and that the volatility in water supply can only be partially mitigated by improved efficiency.  We have yet to collectively decide how to address the problem.

Water is inter-twined with everything we do; energy, food, health and wellbeing, manufacturing are all dependent on its availability. At the very least we need to start a public conversation about its real role in our lives. We need to understand how people currently value water and then work with them so they understand its true value and all the services it provides.

Providing access to water is one of the greatest challenges we face and one of the defining moral and cultural issues facing the planet. To address it governments must develop national water strategies, businesses must consider the impact of water in their products, and individuals must change their behavior.  There should be investment in large scale recycling schemes, green infrastructure should have priority when planning new developments and renovating old: All this at a time of population growth and climate change. No one says it will be easy, but it is most certainly possible.

Introduction: Defining loyalty

Before discussing the challenges facing those of us who work in the ‘loyalty space’ in more depth, it is probably worth providing an overview of what the term means to us.

To us, loyalty is a particular way of thinking about the relationship between brands and consumers. It is about what happens beyond the moment of simple transactions, and the specific products being bought and sold; beyond even the sometimes powerful messages contained in advertising. Instead, loyalty describes the long-term relationship and value-exchanges between brands and their customers, of which those momentary transactions are just a part.

Of course the word ‘loyalty’ covers a range of emotions and behaviours that go far beyond just the commercial space including our relationships with family and friends, political parties, nation states, religions, football teams etc. In fact, the question “where do your ‘loyalties lie’?” is one which goes a long way toward the formation of our very self identity. And we are well aware that commercial or, dare I say it, brand loyalty lies at one end (perhaps the less invested end) of the human loyalty spectrum. Nevertheless, a person’s consumer loyalty does lie on the spectrum and can still involve similar kinds of emotional attachments and accompanying behaviours. The implication of this being that even when talking solely about the future of consumer loyalty, we should still be bearing in mind the future of loyalty more generally, and the evolving ways in which people will emotionally align themselves with different values, ideas and propositions.

The Future of Loyalty – The Global Challenge

Loyalty in the future will not be like loyalty in the past. This much we know. Where once simple equations ruled (the customer collects points, the customer saves), there is now a chaotic, multi-channel hubbub increasingly driven by fast transactions and instant gratification, and the need for brands to think more deeply about the emotional, less rational, drivers behind the kinds of loyalty behaviours that might once have been exemplified by your grandmother insisting on her monthly trip to the local department store.

For brands that aspire to create customer loyalty in this new disorderly world, there is a fundamental question: quite simply, what will ‘loyalty’ in the future be? Already the conversation has long since moved on from the traditional points and prizes models, through ideas of personalised loyalty experiences for individual loyal customers, and on to the challenge of customer and context -led customisation of loyalty experiences. But where will this conversation lead us? And where, in terms of a customer’s emotional relationship with a brand, will ‘loyalty’ begin and indeed, end?

The key drivers behind the evolutionary changes to the loyalty model have been technological of course, both in terms of our ability to collect and store more customer data, and in terms of communications platforms that allow consumers to talk to each other in the same spaces (social media and mobile platforms in particular) that also allow for real-time, in-context marketing and brand-consumer interactions. These new technologies have brought new possibilities, and theoretically at least, brands now have a dizzying array of tools with which to create new kinds of long and short term, emotional connections with their customers. But those same tools have also presaged a new kind of consumer, with new and distinct expectations, some of which look determinedly dis-loyal.

However, reports of the ‘death of loyalty’, evidenced by increasingly brand-fickle consumer behaviours, perhaps driven by consumers now being empowered by access to different choices and information, may be exaggerated. It is always worth remembering the two sides of the loyalty coin: on the one, those customer behaviours that look, for all intents and purposes, like loyalty; and on the other, the brand-created, customer experiences that are designed to drive those behaviours. Brands may have been mistaken in assuming that ‘loyalty’ behaviour was ever more than ephemeral, dependent on loyalty schemes with a specific shelf-life; but that does not mean that brands cannot seek to redefine loyalty experiences and find new ways to drive loyal behaviours. The challenge lies in understanding the consumer of the future, and their redefined needs and expectations.

Loyalty has actually always been about creating an exchange of value between brands and consumers and especially about the value brands can provide beyond the specific features of a product being bought and sold, creating an emotive loyalty. This is unlikely to change. But understanding what kinds of value are likely to be exchanged in the future is a challenge. We need to answer the question fast, since, in this age of digital engagement and interaction, in which one-way advertising messages are now only part of the picture, the consumer is empowered to quickly seek, find and even demand, gratification of his or her own personal needs. Brands will need to respond to this, or find that their once ‘loyal’ customers are enticed elsewhere. In particular they will need to start seriously addressing the ‘harder to quantify’ aspects of the value exchange, and reconcile the rational value exchange with the less rational emotional value exchange.

Let’s get down to the nitty gritty.

One of the tools that brands increasingly have at their disposal is data (or ‘big data’ to use the fashionable term).  We can now know a lot more about consumer behaviour at both the individual and group level. But we need to learn how to harness it, to make sense out of it, and to create beauty out of it. This challenge brings a number of attendant questions such as: how can we build data collection into business models? How can we know what the best or most relevant kinds of data are to collect? And of course, how can we use this data to create new kinds of loyalty experiences and value exchanges? Lurking ominously in the background there is also the question of to what extent consumers will allow us to collect and use their personal information, and what they will expect in return. The backlash is already beginning in some quarters, although the questions of whether there are generational differences in the value placed on personal information is an interesting one. Either way, it looks like, for brands, providing genuine value in new ways and making commitments to being honest and transparent look like inevitable first steps.

Assuming we answer some of these questions, we then face another immediate challenge: the ‘fat wallet’ problem. Given that data collection and storage is becoming ubiquitous, and the ability to contact and interact with customers is too, so there are more and more opportunities for brands to move in to the loyalty space and offer their own, unique, loyalty experiences. Banks, airlines and hotels are the traditional players in the space, but already we have seen multiple other entrants, not least of course, the likes of Google and Facebook, the very architects of many of the changes we are seeing in customer behaviour.

Consumers will increasingly face the literal and metaphorical problem of having a wallet (or purse) fat with loyalty cards. In this scenario, the value of loyalty may become diluted, the consumer may become overloaded, eventually disengaging from loyalty altogether, and brands will face an increasingly uphill struggle to remain ‘front of mind’, even when the value they offer is particularly relevant. One solution to this may be to start thinking away from ‘pro-active’ loyalty, in which the consumer must actively and consciously take part in a loyalty scheme (too many of these and wallets become fat), and on to more ‘passive loyalty’ models that demand less of the consumer. On the other hand, consumers may be happy to put up with fat wallets, in order to ‘smarten up’ their consumption patterns, using loyalty schemes strategically.

Behind these more broadly conceived challenges lie the questions and uncertainties surrounding the physical (or digital) mechanisms and infrastructure that will underpin loyalty experiences themselves. As already noted, technology has driven many of the changes we have already seen, and it is likely to in the future. We might for example see a proliferation of payment systems, or indeed a convergence. Loyalty currencies (points, air-miles etc.) might become instantly convertible and flexible enough to be used across contexts, and/or borders (a question which raises others around creating loyalty experiences that are relevant in different cultural contexts – are loyalty behaviours in China driven by the same set of value propositions?). The mobile wallet is a both a certainty and an uncertainty for those of us thinking about the future of loyalty. It may have little impact beyond changing the mechanism of payments, or the effects could be more profound.

Similarly, the channels for brand-consumer communication and interaction are likely to increase. Mobile is a certainty, but what about the so-called ‘internet of things’ or wearable technologies? Which inventions and innovations are the most likely to be adopted, and which will prove the most effective channels for the types of relationship-building that drive loyalty?

Associated with all this, comes the question of the impact of real-time, in-context feedback, interaction and marketing. Will the ability to make prices dynamic, rewards instant, and responses to consumer demands individually relevant, all mean that traditional, long-term, loyalty models become meaningless or (to use an excruciating pun) pointless? More likely perhaps is that short-term transactional consumer behaviours, and longer-term loyalty driven value exchanges are likely to co-exist, and it will be more a question of which consumers are looking for which type, and which sectors and brands can generate the different types of services to deliver to those different needs: providing mechanisms that address the relative simply needs of the instant transaction as well as addressing the more complex and diverse variables that go into shaping what makes a consumer loyal.

 

The Future of Loyalty – Options and Possibilities

As I have already hinted, there are a number of possibilities for the future of loyalty. Change is certain, but little else is. That said, there are some fundamentals upon which we can rely. Consumers will still shop, spend and almost certainly continue to look for value propositions beyond just the features offered by specific products. In other words, there is still likely to be a space for loyalty. The idea of ‘knowing your customer’ is also going to remain, albeit transformed into a new challenge defined by the tensions between the ubiquity (and inevitability) of having access to ever more customer data, the right to collect that data, how and where you can store or share it and the puzzle of what to do with it once you have it. Alongside this, the death of the traditional media model (if it is even still alive) will finally sink in; what are now considered novel channels of communication will become the norm.

These certainties are more than likely to lead to an enhanced role for high-quality data managers and analysts (or data management and analysis systems). They will lead to a period of re-definition, evolution and innovation in terms of the kinds of value exchanges and exchange mechanisms that define loyalty offers. They will lead to a different set of consumer expectations, perhaps to the point that brands will no longer be able to deliver to them on their own. Strategic brand alliances, designed to deliver sophisticated choice and content, to complex consumer needs, are likely to emerge.

Less certain are the changes that new technologies will bring; especially in terms of payment mechanisms, mobile wallets and communications technologies. We know that consumers will face choices in all of these areas, but which ones they will adopt en masse remains uncertain. Will consumers opt to keep personal information private, while expecting to be able to enjoy the benefits of dynamic prices and rewards from multiple brands in multiple contexts? Or will the increasing demand from consumers for relevancy and personalised content tip the balance in favour of greater sharing? Ultimately can brands manage to create sufficiently tempting, relevant offers and experiences utilising the tools at their disposal (by, for example, gamification, curating, understanding etc.) to hold the consumer’s attention and make them more willing to engage and invest? The only certainty here is that the consumer is likely to gain the upper-hand in terms of the power dynamic and principles such as ‘great customer service’ will no longer be a negotiable.

The Future of Loyalty – Proposed Way Forward

In practical terms, there are a number of ways forward. There is an immediate need to understand the changes that are being wrought on consumer needs and expectations.  Significant investment in consumer research and data management and analysis seems to be a no-brainer. These kinds of research will themselves have to be mindful of what we know is coming, and specifically aimed at solving the problems outlined already such as the question of how to understand ‘big data’ and make it useful; and how to analyse and explore the impacts of new technologies on attitudes and behaviour so as to feed directly into reformulations of truly customer-led value propositions.

In tandem with this, and utilising a method that has been made much easier by the very same technologies we have been discussing, is the need for brands to be unafraid of testing. We don’t know what will succeed in the future and what is in the market today that will fail, so brands face a dilemma: Continue to innovate and test a wide variety of solutions and technologies and see what works (which brings the risk of spreading your focus and investment too thin and failing with all); or pick your winning horse or horses, focus there, be successful, but be exposed when consumers grow tired of that platform and switch to something new.

As the pace of uptake of new solutions is increasing exponentially, especially in younger generations; it is ever harder to decide on the right strategy.  The savvy business will be prepared to fail in this environment, but also prepared to learn from that failure, just as much as they must be prepared to respond to successes quickly.

In terms of actively innovating, brands will need to explore different possibilities and be open to new models. Innovation might be encouraged through strategic alliances with unlikely bedfellows for example, perhaps from different sectors, or from clever acquisition, or investment in or promotion of (lean) start-ups or suppliers.

Above all though, brands must place the customer at the heart of business models. This is likely to involve creating new business models and organisational structures that allow for customer engagement and management to become a core function that cuts across traditional silos, and helps to focus entire businesses on the contextual needs and value opportunities for different audiences at different stages of a customer journey or experience.

The Future of Loyalty – Impacts and Implications

The implications of everything I have discussed are broad.

Consumers’ ideas of utility value and similarly expectations of loyalty are likely to move from a recognition of the value in standard and ‘always available’ loyalty propositions to dynamic, exciting, changing and variable experiences that are ‘here today’ and ‘gone tomorrow’. This will mean an increase in customer-driven engagement in order to see what is or isn’t available at any given moment, rather than the annual ‘collect, save, spend’ patterns. However, we must address exactly what kinds of emotional connections can be created between brands and consumers, and explore the levers that might brands might be able to pull to create them, that are not simply reliant on the rational economic levers of points, rewards and monetary value. In doing so, of course, we may discover that the irrational emotional connections are even more valuable than the rational economic ones that have so far dominated.

Finally, lying behind all of these discussions, and the fact of brands and consumers beginning to interact more frequently and directly, with more customer information sought, collected and utilised, we are also likely to see increases in external (governmental) intervention and the possibility of regional or national ‘balkanisation’ in terms of the different ways in which brand-consumer relationships are regulated. This could happen even as companies attempt to move against such trends by, for example, initiating cross platform integrations of customer management in which every brand touchpoint is connected (without recognition of borders) and actively collecting customer data.

In economic terms, the need for brands to have access to the resources (especially the technical resources) to take part in this new world of customer engagement may begin to crowd out smaller players, at least in the short term. And competition for loyalty is likely to mean squeezed margins even for the bigger players. In the coming years, brands will need to be disruptive in their thinking about loyalty, seeking new kinds of value proposition, exploring different models and redefining the very ways in which loyalty is conceived.

The Future of Learning – The Global Challenge

The main global challenges pertaining to learning are related to the curation, contextualisation and control of a rapidly increasing amount of data, information and learning content. As the O3B (‘other three billion’) initiatives make continuous efforts to provide internet connectivity to the world’s developing markets, there is going to be a definite shift in the use, makeup and function of the internet as its usership reaches unfathomable numbers. With this considerable expansion in connectivity, as well as the increase in widely available cheap devices at a time when 60% of online traffic is already on mobile, there is a going to be a tidal wave of content that is accessible all of the time, anywhere. As the ability to learn whatever, whenever continues to empower the individual learner, traditional learning content providers and distributors will face the challenge of repositioning themselves within the new ecosystem that is emerging.

For learners, everything they will need to know in order to progress in their chosen discipline will be available online, but it is going to be vital that there is a way of filtering and curating this overwhelming wealth of information in a way that is simple, intuitive and valuable. A learner needs to feel confident that the answers they are getting are accurate, up-to-date and the best input for meeting their needs.

With learning taking place across a vast range of content types and platforms another challenge will be providing an assessment and accreditation framework that is able to reflect the investment and aspirations of learners around the globe. The learning that takes place on a mobile device at the instigation of an inquisitive learner needs to have the same status as courses delivered in the traditional learning environments of schools and universities.

A key question that arises is whether virtual, online learning is able to replicate the powerfully immersive interactions that form the basis of face-to-face exchanges. Learning is grounded in the interplay of conversation, experience and meaning. Are applications and algorithms capable of creating meaningful and relevant learning opportunities that are based on actually understanding the learner and responding to their needs?

Furthermore, is the world in danger of losing the ability to ‘learn’ properly? With every answer to every question being only a touch screen away, does it mean that learners are only going to be threading together an uninterrupted sequence of hastily-consumed information chunks rather than internalising and applying their knowledge in ways that are personal to them? Or, conversely, is a new learning skill being developed as a result of the immense amount of information at our disposal? This skill could enable learners to locate, extract and apply precisely what they need, precisely when they need it, without having to wrack their memories for classes they took years previously. The words “I don’t know” would become redundant.

It is certain that learning material will no longer be delivered in discrete packets of content as with the print model. Instead, publishers and content creators will have all of their content available in the cloud for learners to access as and when they need to. Learning content will emulate the model of music streaming; rather than purchasing the music as a product, the listener pays for access. As such, a learner will be able to engage with valuable learning content as and when they need to without needing to subscribe to full courses or a full set of materials.

We would also predict that the flexibility and responsiveness of digital learning platforms and approaches will greatly influence the way that learning is promoted in traditional environments. As adaptive and personalised learning develops thanks to the considerable data that is being captured on the behaviours and abilities of learners, so too will classrooms and other physical learning spaces become less rigid and passive in their arrangement and use. In all levels of education, from reception to university, learning spaces will evolve into configurable, inductive interfaces that empower the learner to create an environment that works best for them. The ancient paradigm of a teacher-led learning approach as represented by rows of identical desks or chairs facing the same single point of reference at the front of the room will be replaced by a more fluid, collaborative pedagogical method.

Furthermore, we predict that there will be a movement away from a top-down, broadcast approach of learning to a hyper-collaborative global network consisting of learners, institutions and content providers. Larger entities will emerge within that network but there will no longer be any oligopolies in the learning sector. Well-established learning institutions will need to learn how to best position themselves within this new learning ecosystem.

It’s uncertain whether the adaptive learning technologies that are able to leverage the immense amount of data generated by and about each individual learner will be able to provide the same quality of learning that face-to-face instruction has done historically. An adaptive learning engine is able to identify what content a learner needs to cover in order to achieve predetermined objectives, for example, but can it help a learner discover for themselves what it is they need to learn in order to reach their own set of goals? Despite the personalisation that is provided through adaptive learning products there is still the challenge of maintaining the focus on the individual and their desires and ambitions when it comes to their learning.

It’s also uncertain how learning institutions and the hyper-collaborative network paradigm are going to exist in combination. It can be argued that there will remain a place and a use for institutions that implement a more deductive pedagogical approach, but how such institutions will communicate and contribute to the network of connected and highly-motivated learner/users is difficult to anticipate.

Furthermore, it’s not clear what the impact will be of the overwhelming amount of information that is going to going to be available once internet connectivity reaches the O3B markets and as mobile interactions continue to represent the lion’s share of internet traffic. How will learners be able to navigate and filter the overwhelming volume of material at their disposal in order to locate content that is directly going to be of benefit to them?

The Future of Learning – Proposed Way Forward

In the first instance, we would propose the implementation and integration of the ongoing assessment of the use of technology within traditional learning environments. It’s already apparent that technology is becoming embedded in classrooms and lecture theatres so it would seem to be a logical progression of that evolution to start observing how that tech is being used by the learners themselves. Educators could carry out regular review sessions with their students to gain an insight into how the learning tech and online resources is being leveraged in the attainment of identified learning goals. This could then contribute to a new model of adaptive curricula that are realised at the intersection of teacher and technology.

The deliberate observation of technology enabled learning would help to shift the attitudes towards educational technology to a more proactive and engaged one, as opposed to reactive and resistant. This phase of observation can be global as well as local, especially in the light of the O3B initiatives that are going to dramatically increase the number of people with access to the Internet. How are learners in India using their tablets compared to learners in Mexico, for example? Are learners gravitating towards similar sites or applications? What questions are being asked?

To complement this observation we would suggest that educators encourage their learners to source information from their own Personal Learning Networks (PLNs) and to also actively contribute themselves to requests from other individuals within their communities.

We would also propose a widespread use of adaptive learning technologies in conjunction with teacher-led enquiry. This would provide the learning technologies creators to learn from the application of their products and to further refine them. The out-of-hand rejection of such technologies will result in the delay of creating more advanced, more intuitive systems that are able to better meet the needs of the learner. In the meantime, it would also capture a enormous amount of quantitative data on how learners are interacting with technology and how they are engaging with their learning materials. This will in turn help to inform how learning content can be created.

The Future of Learning – Impacts and Implications

The impact of embracing adaptive learning and the encouragement of crowd-sourced learning solutions would help to radically change the culture surrounding learning and promote the shift from a top-down model to one of collaboration and exchange. There needs to be an alignment of learning potential and practice in order to allow the extensive benefits of learning technology to be realised. This requires the active participation of all parties within the learning space: educators, learners, content creators, publishers and tech developers. We would even go so far as to predict that there will be less and less distinction between those functions across the learning space as connectivity continues to improve.

The Future of Health – The Global Challenge

The healthcare and wellness industry is going to drive the world economy of the 21st century. Globally healthcare is already well over a $6 trillion industry. But, despite its size, it only addresses about 30 per cent of the world population; nearly 70 per cent is nowhere near receiving decent healthcare services. We need a revolution in order to service the entire market.

The major issue is primarily revolving healthcare. The world’s first heart surgery was done in Oslo in 1895 – well over a century ago. A hundred and twenty years later only 10% of the world’s population can afford it. We can and must do better. The future cannot be just an extension of the past. It must embrace new technology, implement innovative approaches and aim higher than people previously thought possible.

The 21st century will see a rapidly growing demand for healthcare, but this demand looks unlikely to be met in the way the past century was. For one thing, to treat the 21st century’s problems with a 20th century approach to healthcare would require an impossible number of doctors. For another, caring for the chronic diseases that are growing in prevalence are not what doctors are best at.

Before we explore the future challenges and options, we should however recognize that over recent years we have already achieved a good deal. Globally, on average, we have never been so healthy, wealthy and educated. Although there have been long-term improvements in health delivery and care, it is over the past few decades that progress has really started to build momentum. This has happened partly because advances in technology, public health and governance have all aligned, and partly because there has been shared understanding of what the big issues are and how to address them. As the IMF has highlighted, child death rates have fallen by more than 30%, with about three million children’s lives saved each year compared to 2000. Deaths from malaria have fallen by one quarter in the same period.

But, as the WHO points out, we still have major challenges to address:

  • The average annual rate of decline of women dying due to complications during pregnancy and childbirth is far below target to reach the Millennium Development Goal
  • While HIV infections have declined by 33% globally, sub-Saharan Africa still accounts for 70% of all new infections
  • Although the global tuberculosis mortality rate has fallen by 45% since 1990, multi-drug resistance TB continues to pose problems with an estimated 450,000 per year developing it.
  • In 2012 almost half the world’s population were still estimated to be at risk of malaria with Africa bearing 80% of new cases and 90% of associated deaths
  • Moreover, as the current e-bola pandemic in West Africa highlights, our ability to prevent such disease epidemics is limited, primarily due to low levels of public health in many key centres of major population.

Increasing access to affordable essential medicines is vitally important but several factors undermine availability in many countries. These include poor medicine supply and distribution, insufficient health facilities and staff, low investment in health and the high cost of many medicines.

Contrasting the world’s most developed healthcare market with that in India we can see many significant issues. US healthcare spend is spiraling upwards above 18% of GDP while in India, for example, the figure is just over 4% against a global average of 10%. Worldwide health spending is expected to increase by 5% next year. In India, where the government has now promised to introduce universal health insurance, spending is expected to rise by 18%.

While US life expectancy at birth is now around 80, in India we have just reached 67. Over the past thirty years, our infant mortality rates have dropped from 118 to 42 per 100,000 births compared to less than 5 in the US. In the US the prevailing market means that a healthy person can expect to spend $142,000 on out-of-pocket health expenses in the 20 years after turning 65. If they have a chronic disease this figure doubles and if they live until 90, they will need an extra $75,000. In the US there are 2.5 physicians per 10,000 population: in India we have 0.7.

The Future of Health – Options and Possibilities

Many in the ‘developed’ world are focused on the benefits of technology improving the effectiveness and the efficiency of healthcare. With many countries expecting to be spending up to a fifth of GDP on healthcare by 2050, the need for more effective use of resources is clear.

Certainly the potential to use information to drive for more personalised care may well open up access and raise quality while controlling costs. Especially in the pharmaceutical arena, personalized medicine and the prospect of customized therapies based on more sophisticated diagnostics is a major focus for many researchers and the opportunities for genetically orientated pharmacogentics are substantial. With most current medicines only working for 1 in 10 patients and many $1bn blockbuster cancer drugs effective with 25% of patients, the potential for bespoke treatments is significant. However, some see that, in the short term, these innovations will be primarily focused on the developed world’s more established healthcare markets and will take time to have global impact.

Tele-health, and especially ‘m-health’ has already shown great promise globally. Especially in sub-Saharan Africa and India but also elsewhere in Asia, the opportunity to use mobile as a platform for both curative and preventative healthcare has been attracting much attention from governments, entrepreneurs and the mobile networks alike. With real-time monitoring an increasing norm and the entrance of major global technology companies such as Apple and Google into the area of personal and remote monitoring, the potential is indeed significant. While the business model for preventative healthcare is yet to be fully defined, those such as McKinsey and the GSMA see this as a means of saving of $200bn a year just in treating chronic diseases across the OECD and BRIC countries.

Alongside these significant new platforms shifts there is also the need to improve access to effective treatment of fast rising chronic diseases. According to WHO figures, by 2020 major chronic diseases are expected to contribute to 73% of all deaths and 60% of the global disease burden. Moreover, 79% of the deaths attributed to these diseases will continue to occur in the developing countries. Addressing this requires both behavioural changes across many areas of society around consumption and exercise as well as structural change in the way healthcare and sick-care is provided. If we are going to stem the rising tide of chronic disease and deal with its consequences we need a far more integrated approach to wellness and healthcare that works across all societies and not just a select few. We need to integrate primary, secondary and tertiary prevention and health promotion across sectors and different disciplines.

The Future of Ageing – The Global Challenge

Advances in science and technology coupled with large-scale changes in health practices involving improved sanitation, water purification, and a host of lifestyle changes have led to dramatic increases in longevity in developed nations around the world. On a global scale, life expectancies in developed regions are continuing to rise in the 21st century and, although most people assume that there are biological limits on life span, so far there is little evidence that we are approaching them.[1] Because fertility declined across the same years that life expectancies increased, the distribution of age in the global population changed irrevocably. The once-universal pyramid shapes of age distributions of populations in the western world, with many young ones at the bottom narrowing to tiny peaks at the tops, are being rectangularized, reflecting the fact that most people, not just an exceptional few, are living into old age.

To the extent that the importance of ageing societies is recognized at all, anxiety is the typical response. Terms like “grey tsunami” imply that larger numbers of older citizens will become a drain on societies. Concern is warranted. The demographic changes underway are fundamentally altering virtually all aspects of life as we know it. Workforces are becoming older and more age diversified than ever in history. Families are having fewer children, yet four and five generations are alive at the same time. Education has come to predict well-being and even length of life, yet is unevenly distributed, creating heightened disparities across socioeconomic strata accentuating old age outcomes between rich and poor.

[1] Oeppen, J. and J. W. Vaupel: Broken limits to life expectancy. Science 296, 1029-1031 (2002).

The Future of Ageing – Options and Possibilities

To date, however, the concern has been largely misplaced, with the emphasis on aging as opposed to an emphasis on the cultures that surrounds very long lives. By culture, we are referring to the crucible that holds science, technology, and large scale behavioral practices and social norms. We maintain that the more serious problems concern antiquated social norms and the lack of cultural supports for people 50 and older, such as medical treatments for common diseases of old age and technologies and services that allow people to age in place, and social norms that encourage life-long participation in communities, families and workplaces. The culture that guides people through life today is a culture that evolved around shorter lives. The urgent challenge now is to create cultures that support people through ten and more decades of life.

Although predictions about the future are always perilous, we can comfortably predict that life will change and can change such that longer lives improve quality of life at all ages. Unfortunately to date we have been decidedly uncreative about ways to use added years of life. These years have been tacitly tacked on to the end of life, with old age the only stage in life that has gotten longer. Rather than move forward by happenstance, we need strategic thinking about how to best use added decades of life. Helping individuals and nations visualize, plan and prepare is essential in order to ensure that longer lives are high quality.

Changing the nature, timing and duration of work will be key. Individuals and societies must effectively finance very long lives and so far we are doing a poor job. Life expectancy at age 65 for the world’s population increased by roughly fifty percent from the 1950s to the present time, while the average age of retirement has remained relatively constant. [1] Between now and 2030, the number of people in developed countries over the “conventional” retirement age of 65 will increase by more than thirty percent. At the same time, the size of the conventional working-age population in developed countries is projected to decline by four percent. To the extent that nothing changes, the ratio of the working-age population to retirees will steadily decrease in the foreseeable future. Of course, these projections are based on the assumption that people continue to retire at relatively young ages. One obvious, although surprisingly ignored, way to address the challenges posed by the declining number and share of working-age population is to expand the workforce by increasing the workforce participation of older workers and, in some countries, women.

Increasingly, research findings suggest that this is feasible. A substantial majority of people 60 to 70 years of age report that they are physically able to work. A 2014 paper published in the Journal of Gerontology found that 85% of Americans aged 65-69 report no health-based limitations on paid work or housework.[2] Similar trends are evident in Europe. [3] To be sure, the numbers of disabled individuals has, and will continue to, increase in aging societies and it is extremely important to have policies that support people who cannot work. We maintain that the generosity of disability insurance should increase, yet we must recognize that chronological age is a poor predictor of the ability to work. Even at very advanced ages, substantial numbers of people are sufficiently healthy to contribute to workplaces. Societies that find ways to tap older peoples’ contributions will benefit greatly.

Although the idea of longer working lives often meets resistance, evidence for the benefits of work to individuals is growing. Arguably, the most obvious reason to work longer is the financial benefit. For many, retirement at age 65 is economically infeasible. In the words of Stanford economist John Shoven, “the reality is that few workers can fund a 30 year retirement with a 40 year career”.[4] Neither can societies. In recent years, it is becoming clear that remaining active and engaged in work is also associated with physical, socioemotional, and cognitive benefits. Studies of healthy aging suggest that older adults who are engaged have lower mortality rates, are less likely to experience various physical and mental illnesses, and are more likely to have a strong sense of identity and well-being.[5] Working longer also has protective effects against cognitive decline, [6] ostensibly by providing a mentally engaging environment where workers can “use it” so they don’t “lose it.” Research suggests that both paid and unpaid work are associated with enhanced well-being, delayed disability, decreased mortality risk, and onset of fewer diseases and associated functional impairments. [7],[8],[9],[10] New models of working longer can relieve some of the pressure to save large sums of money for extended periods of leisure. Importantly, working longer can mean working differently. Many workers would be happy to exchange decades-long retirements in old age for four day work weeks, regular time off for sabbaticals, retraining, and part-time work when children are young as well as at advanced ages as people fade into retirement.

[1] “Population Facts”, United Nations Department of Economic and Social Affairs, Population Division, December, 20-13

[2] Lowsky, Olshansky, Bhattacharya, Goldman, “Heterogeneity in Healthy Aging”, J Gerontol A Biol Sci Med Sci first published online November 17, 2013 doi:10.1093/gerona/glt162

[3] A. Börsch-Supan, Myths, Scientific Evidence and Economic Policy in an Aging World, J. Econ. Ageing, 1–2 (2013), pp. 3–15

[4] Ford, John Patrick. 2014. “How to support a 30-year retirement.” San Diego Source. http://www.sddt.com/Commentary/article.cfm?SourceCode=20141106tza&Commentary_ID=12&_t=How+to+support+a+30year+retirement#.VL6ykS6AyjI

[5] Rowe, John W. and Robert L. Kahn. 1998. Successful Aging. New York: Pantheon; Cohen, Sheldon. 2004. “Social Relationship and Health.” American Psychologist 59:676-684.

[6] Rohwedder, Susann and Robert J. Willis. 2010. “Mental Retirement.” Journal of Economic Perspectives. 24:119-138

[7] Rohwedder, Susann, and Robert J. Willis. 2010. “Mental Retirement.” Journal of Economic Perspectives, 24(1): 119-38.

[8] Carr DC, Komp K, editors. “Gerontology in the era of the third age: implications and next steps.” New York: Springer Publishers; 2011: 207-224

[9] Morrow-Howell N, Hinterlong J, Rozario PA, Tang F. “Effects of volunteering on the well-being of older adults.”   J Gerontol B Psychol Sci Soc Sci. 2003; 58B:S137–S145. Doi: 10.1093/geronb/58.3.S137

[10] Matz-Costa C, Besen E, James JB, Pitt-Catsouphes M. “Differential impact of multiple levels of productive activity engagement on psychological well-being in middle and later life.” The Gerontologist. 2012. Doi: 10.1093/geront/gns148

The Future of Ageing – Proposed Way Forward

From a societal perspective, there is a pressing need to make use of the human capital represented in older people. General knowledge and expertise increase with age, as do emotional stability and the motivation to invest in important activities. If appropriately utilized, older populations can benefit national and global economies. Yet the clarion call to workers today is about saving for increasingly long retirements, instead of actively planning to work longer. In the US, the responsibility for saving has shifted to the individual, reflecting the move from defined benefit plans to defined contribution plans. Unfortunately, the change has resulted in considerable undersaving for retirements. In a 2014 Retirement Confidence Survey, only 64% of all workers age 25 and older reported that they and their spouse had saved at all for retirement, a decrease from 75% in 2009. [1] Overall, 60% of workers report that they have less than $25,000 in total savings and investments, with over one third reporting less than $1,000 in total savings.[2] If appropriate steps are not taken, there could be catastrophic economic implications to both individuals and societies, as low retirement savings could lead to major strains on economies.

 

For those who have inadequate retirement savings, the most obvious solution is to work longer. This approach may hold benefits that extend beyond income to include better physical health and cognitive functioning. One major potential barrier, however, is that employers remain ambivalent about older workers. Currently, most employers’ view older workers as expensive and sometimes less productive than younger workers. Research findings increasingly suggest that the latter reflects stereotypes more than evidence. The productivity of workers tends to increase with age. This is especially true for knowledge workers, yet blue collar workers also can retain (and perhaps increase) productivity.[3] One study that measured the performance of more than 400 McDonald’s restaurants across the UK found that restaurants that employed mixed-age workforces, including workers age 60 and above, delivered an average increase of twenty percent in customer satisfaction levels compared to less age diverse workforces.[4] Moreover, there is a net benefit of intergenerational teams on workplace productivity, including a broader range of skills and experience across the workforce, increased mentorship opportunities and skills transfer, a reduction in turnover, and increased staff morale.[5],[6] Companies that adapt to older workers’ needs using cost-efficient measures such as flexible work arrangements, workplace modifications, and on-the-job training can benefit from age diversity in the workforce. [7] BMW’s older worker production line at Dingolfing is an example of how thoughtful design of blue-collar workplaces can support high levels of productivity in older workers. The company collaborated with its older production workers to tailor one of its most labor intensive manufacturing lines to an average worker age of 47. The resultant line reached its production goals with defect rate and worker absenteeism meeting or exceeding the levels achieved by “younger” lines.[8] The cost of older workers is a real issue for employers. By leveraging older workers as source of human capital, employers can better manage their talent, facilitate knowledge transfer to younger workers, and help older workers slowly phase into retirement. Offering bridge jobs or flexible work arrangements such as flex hours and part-time work will allow employers to retain the expertise of older workers while reducing costs.[9],[10]

[1] Employee Benefit Research Institute. 2014. “2014 Retirement Confidence Survey.” http://www.ebri.org/pdf/surveys/rcs/2014/RCS14.FS-6.Prep-Ret.Final.pdf

[2] Ibid.

[3] Burtless, G.(2013).The Impact of Population Aging and Delayed Retirement on Work-force Productivity. Tech. rep., Center for Retirement Research at Boston College.

[4] Department for Work and Pensions (UK). 2011. “Employing Older Worker Case Studies.” https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/142752/employing-older-workers-case-studies.pdf

[5] Ilmakunnas et al. “Diversity at the workplace: Whom does it benefit?” Helsinki School of Economics. http://www.eale.nl/conference2009/Programme/PapersC/add102508_wKXraqYSnk.pdf

[6] Department for Work and Pensions (UK). 2013. “Employing an Older Workforce, An Employer’s Guide to Today’s Multi-generational Workforce. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/142751/emplying-older-workers.pdf

[7] Brooks. 2014. “Productivity and Age.” Age UK.

http://www.50plusworks.com/downloads/Age%20and%20productivity%20briefing%20(March%202014).pdf

[8] Loch, C.H, Sting, F.J, Bauer, N, & Mauermann, H. (2010). How BMW Is Defusing the Demographic Time Bomb. Harvard Business Review, 88(3), 99–102. Retrieved from http://hdl.handle.net/1765/20802

[9] CIPD. 2012. “Managing a Healthy Ageing Workforce, A National Business Imperative.” http://www.cipd.co.uk/binaries/managing-a-healthy-ageing-workforce-a-national-business-imperative_2012.pdf

[10] Backes-Glenner & Veen. 2009. “The Impact of Aging and Age Diversity on Company Performance.” Institute for Strategy and Business Economics, University of Zurich. http://www.zora.uzh.ch/48541/1/Backes         Gellner_The_impact_of_aging_and_age_diversity_on_company_performance-V.pdf