“The speed, scale, and impact of the 4IR is predicted to be unlike any other. When you put that in the hands of a second generation of mobile-only consumers, you can expect that their demands are going to be very different from those of other generations.”
Renowned futurologist, technology evangelist and demographic specialist, Rocky Scopelliti, is a man on a mission.
As inaugural Director of Optus Business’ Affairs’ Centre for Industry 4.0, the telecommunications giant’s dedicated thought-leadership and future innovation team, Scopelliti, a latter-day polymath of modern enterprise, has made it his goal to guide Australian businesses through the next major phase of industrial development, popularly known as the ‘Fourth Industrial Revolution’ (4IR): a transformative era that will see the merging of physical systems (and people) with the cyber world.
With the release of Optus’ ground-breaking Enterprise 4.0 report, a comprehensive survey and analysis of Australian enterprises’ readiness for the next industrial revolution, Rocky Scopelliti spoke at length with FST Media on the seismic shift that 4IR innovations will bring to organisational processes and technologies, and transformative impact that this ‘Age of Convergence’ will have on the financial services sector.
FST Media: Your upcoming presentation at FST’s Future of Financial Services conference will explore the potential impact of the Fourth Industrial Revolution (4IR) on global industry. Walk us through what the 4IR means for enterprise and how it could transform today’s businesses.
Scopelliti: The key challenge for enterprises globally in the 4IR is to ‘adapt or be adapted’. According to the World Economic Forum, the speed, scale and impact of this revolution will be exponential, and we’re in the early beginnings of this revolution.
This revolution builds upon the current digital revolution, which was characterised by computer processing, the internet, and mobile technology. But it’s expected to give rise to the emergence of breakthrough technologies in areas such as artificial intelligence (AI), robotics, the internet of things (IoT), autonomous vehicles, quantum computing, blockchain and many other emerging technologies which will fundamentally change the scale and the speed with which we can expect disruption to occur.
FST Media: FSIs have made some tentative steps towards implementing blockchain and AI technologies. How can industry adapt, with minimal friction, to the 4IR and fully embrace the innovations born from it?
Scopelliti: We’re at the very early beginning of this revolution, and the reality is that we haven’t fully utilised everything the Third Industrial Revolution has had to offer in terms of computer processing, the internet, and mobile technology.
The 4IR will come onto us with much greater velocity, so the time is now to really optimise what the current digital revolution has to offer in terms of transformation as the key enabler, and to then make a fast start as these emerging technologies begin taking shape.
FST Media: How prepared are Australian FSIs to weather digital disruption of the 4IR?
Scopelliti: Optus business has just conducted the largest study of its kind to date in Australia looking at the question of how ready Australian enterprises are for ‘Industry 4.0’.
We’ve found that, when it comes to the 4IR, the age and size of organisations are not great predictors of success. In fact, enterprises of all ages are on an equal footing for their potential to perform exponentially. We found that their current focus is on maintaining their traditional business models, and this appeared to be true of both Australian enterprises and enterprises globally.
Australian executives are also acutely aware of the destructive impact of the 4IR, with the emergence of more powerful tech-savvy customers, autonomous and smart technologies, as well as new business and delivery models; they anticipate these forces will have the greatest impact on their industries in the coming five years. This has been critical in fostering the digital discord amongst Australian enterprises – many are not aligning their focus to what they believe will impact their organisation.
Australian businesses are underestimating the speed, scale, and impact of this next digital revolution, but their global counterparts are doing the same, and competition in this new industrial era will be terrestrial. This is important to consider as the competitive landscape of many industries will be based on a global footing, rather than necessarily a domestic footing.
FST Media: Back to your point about diminishing power of incumbency. Do you feel that the playing field will level out between traditional FSIs and their upstart challengers (among which include fintechs and big techs) as we approach this next industrial revolution?
Scopelliti: We’re seeing groups like Alibaba unfold a portfolio of lifestyle services that include financial services as part of the way people live their lives. This is an example of how the blurring of lines between industries entering physical forms and digital forms is becoming much more difficult to compete against.
FST Media: Will these big tech players, the Googles and the Amazons – with their considerable data generation, capture, and analytics capabilities – take a considerable advantage into this fast-evolving financial services market?
Scopelliti: It’s what you do with the data that matters. When you’ve got technologies, such as artificial intelligence (AI), APIs, algorithms and machine learning, these are very advanced emerging technologies that will rely on the quality of data to get the most from them.
From an analytics and data perspective, we’ve still got a long way to go to transform those capabilities to ensure they perform exponentially using those emerging technologies.
FST Media: Taking a step back home again, the Hayne Royal Commission into the Financial Services has clearly dealt a reputational blow to the industry. Do you feel with the advent of the 4IR, the financial services industry will be able to leverage digital innovations become better and more trusted service providers?
Scopelliti: When it comes to trust, our research found that 94 per cent of financial institutions ranked cyber and information security as the technology area predicted to have the greatest impact over the next three years. This is significantly greater than any other industry, so its clear FSIs understand better than most the catalyst that cyber and information security plays in the 4IR.
More than two-thirds of financial institutions ranked big data, analytics, algorithms, APIs and AI as having the greatest impact over the coming years, significantly greater than other sectors. What this suggests is that financial institutions are acutely aware of the risks that can emerge in these new and emerging technology areas, and for those reasons they’re experimenting accordingly but cautiously.
We see this in their approach to experimentation in areas like blockchain, for example, with the participation of Australian banks in many global consortiums for the advancement of the technology, as well as their early adoption of AI across a wide range of use-cases.
FST Media: Do you feel then that FSIs are inherently sensitive to customers’ concerns around data protection and privacy?
Scopelliti: Indeed. And if we think about this, we didn’t design our conventions of identity, privacy, and security from a digital perspective; we’ve reached that point in our digital evolution where we’re about to embark upon the next industrial revolution, so now is the right time for enterprises to really think about the relationship between the way businesses and people operate their digital lives and cyber and information security.
FST Media: You’ve just released your first book, Youthquake 4.0, which looks at the confluence of an emerging – and increasingly influential – Millennial cohort with the explosion of digital and social communication technologies. How do you feel the demands and expectations of Millennials and Gen Zs will continue to transform FSIs?
Scopelliti: Conversational technologies – fuelled by the behavioural change associated with Gen Z – will do to banking experiences what mobiles did in the hands of millennials.
The speed, scale, and impact of the 4IR is predicted to be unlike any other. When you put that in the hands of a second generation of mobile-only consumers, you can expect that their demands are going to be very different from those of other generations. And, with the augmentation of our physical and digital worlds, we’re now on the cusp of a completely different way of interacting, and conversational technologies are really leading the way on that.
But when you start augmenting virtual assistants with AI, you open the possibility of completely new and different frictionless experiences that will take us to that next level of expectation in the way that we experience financial services, and Gen Z will be the generation that will push that into its demand cycle.
FST Media: There is a sense among customers that a true omnichannel experience isn’t quite there yet with many banks and insurers. For example, customers may deal with several customer service representatives or online service portals on multiple occasions, and yet there is little or no ongoing record of their interactions with the company. What can FSIs do to ensure they deliver seamless, omnichannel experiences for their customers?
Scopelliti: What you have there is an expectation of personalisation – the institution should know that you might have an application for a product or service in flight; they should know that perhaps you’ve already made two or three enquiries through one channel. This is all about ‘markets of one’.
Where technology is taking us to is a place where we should be expecting much greater degrees of personalisation in the way we interact with organisations that play a frequent role in our lives, including financial services.
FST Media: Taking a more general look at the industry now in an age of continuous disruption, what do you consider the biggest digital transformation hurdle for FSIs today?
Scopelliti: Our research indicates that Australian enterprises have not reached their exponential performance optimisation to compete against this new breed of platform-based, data-intensive, ‘capital-lite’ organisations.
The most significant gaps we found were cultural, capability, and operational differences in the areas of data analytics, algorithms, automation of processes, experimentation, and risk-taking.
There is also a significant intolerance for failure when it comes to innovation and risk-taking; one in two executives from financial services reported to us that innovation is pursued in name only or it is a career-limiting. Whilst the aspirations may be there, enterprise digital strategies aren’t, and closing these gaps will require a re-balancing of investment strategic focus, which we found to be on maintaining the current traditional model as opposed to more transformational models.
FST Media: What single technology do you feel will have the most far-reaching impact on FSI as we transition into the 4IR?
Scopelliti: We’ve developed a blueprint that requires adapting to four key shifts in the way that the network economy has changed the way businesses work in the areas of multi-sided markets, hyper-scaled platforms, network marketplaces, and next-generation software-defined networks.
For financial institutions, they can leverage their technological capacity in the areas that they reported to us as having the greatest impact over the coming years – those being in data and algorithms, AI, and APIs – to create new economic value; but the catalyst will be in a robust cyber and information security foundation. This – together with a business design that’s predictive, self-learning, self-provisioning – will thrive in the Fourth Industrial Revolution, and for FSIs, they must leverage these emerging technologies, form the right partnerships to develop out their ecosystems.
FST Media: On that point of security, do you feel there’s an overwhelming security challenge that FSIs have yet to effectively address?
Scopelliti: The intensity of cyber-attacks is increasing. And with the exponential increase in the volume of data that is produced around the world, we can expect that this will continue unabated.
It was very pleasing to see the priority that financial institutions have put on this; these new and emerging technologies – such as IoT (internet of things), which is reported will connect upwards of 20 billion devices around the world in the coming years – will enable us to generate a lot more data.
That increase, however, brings new risks. It’s therefore critical and very encouraging see the priority that institutions are putting on getting that cyber information security foundation right.
FST Media: There is certainly a strong sense that IoT will be a critical ‘soft spot’ for security moving forward.
Scopelliti: Our blueprint proposes pushing security to the outer limits of the enterprise ecosystem in a way that helps enterprises defend and manage against risks that will come from not just people interacting with the institution, but also machine to machine.
We really need to think about the perimeter and boundary of our security when you’re operating in an ecosystem, as opposed to a linear-based model. We need to shift our way of thinking from ‘who do we trust’ to ‘what do we trust’. The ‘what’ in this 4IR is going to be everything from the data, the software, the hardware, the objects, the devices, the systems, the networks that are going to be connecting and injecting data and interactions with an institution.
FST Media: You mentioned Alibaba as big tech player that could have a significant influence on the financial services industry. Is there a particular model or digital innovator that FSIs could take lessons to improve their services?
Scopelliti: We now know the DNA of what makes up exponential organisations and our blueprint architecture recommends a business design that enables them to become platform-based, data-intensive, capital-lite, to go up against these exponential organisations, such as Alibaba and Amazon.
The traditional models of financial institutions today are capital intensive and labour intensive, and whilst they may be data rich, their ability to exploit that data and convert it into intelligence is not quite there yet. That model to which may of these transformations are aspiring to transform to.
FST Media: What simple process or technology do you feel FSIs could quickly implement to improve services for customers?
Scopelliti: In our research for Enterprise 4.0, we found that customer experience can be positively impacted just by improving the influence that the community and crowd have on an organisation, and its products and services. Only 17 per cent of financial services executives, for example, reported that their organisations are influenced by the community and crowd in terms of their products and services.
The second area is designing products and services that engage and convert the crowd – making interaction an integral part of your product design.
The third element is about designing products and services that become collaborative – only 6 per cent of financial services executives reported to us that their organisations, products, and services include a collaborative element.
In the evolution from omnichannel to ‘omni-digital’, and the way in which our interactions are changing, we want to be able to engage and interact with our products and services in completely new and different ways.
FST Media: Looking into the crystal ball, how do you foresee the financial services industry will look in 2030?
Scopelliti: Financial services will become more predictable, more interoperable, and more integrated into the way we live our lives and run our businesses. They’ll be living, evolving, and trusted ecosystems.
The category of technology of the 4IR is really going to be the catalyst for this. For example, I think AI will shift the way we look at the use of data for it to become much more predictive in our relationship between our financial institution and ourselves.
When we look at APIs we can expect that that will allow us to be much more interoperable when it comes to the way we create financial services relationships. Thinking about conversational technologies, they’ll become much more integrated in the way with which we communicate, live, and run our businesses. And then lastly, they’ll be living, our services will live with our lives and be integrated in the way we live our lives through trusted ecosystems.
Trust will be at the centre of the way we live our digital lives and financial institutions will have a primary role in that.
FST Media: Looking forward to your keynote presentation at the 2018 Future of Financial Services conference, what do you hope delegates can take away from your presentation?
I’m very excited to be part of the conference again this year and looking forward to presenting Enterprise 4.0, the blueprint for success in the Fourth Industrial Revolution – the largest study of its kind today. The report provides insights for Australian enterprises seeking to leverage emerging technologies and unlock new economic value.
I’m also quite excited about the Optus business trade exhibition that – for the first time in the FST conference history – will showcase how 5G will create new experiences for financial institutions customers and their employees, and how it will revolutionise the spaces and things that they operate within.