Unlocking Growth with Digital

Welcome to the Digital Disruption panel live here in Davos. One of the key themes in Davos this year is the whole question of digital disruption. We've talked a lot about the macroeconomic situation but when you begin to look at some the structural issues in the global economy the whole way that digital is transforming markets, thinking about the new business models that have been created, all these all key trends that will be discussing here in Davos. And you only need to think about how fast smartphones have evolved and changed our lives since they came in 2007 to think about the pace and scale of change. I'm delighted to be joined by three panelists who are going to join the discussion and look at some of these key trends. So on my left is Antonio Simoes from HSBC. David Kirkpatrick who is the founder of Techononmy and author of The Facebook Effect, and over here we've got Paul Daugherty the CTO from Accenture and if you want to join this conversation because we're very keen to have you in the dialogue as well then look act the at Accenture label and the #digitaldisruption hashtag so it's "@Accenture" hashtag digital disruption if you want to be part on the panel pare of the discussion and join in with us. And so I wanna start with our panelists and really sort of get them to give us some feel about how significant this digital disruption is so if I talked to the three of you, David perhaps start and say how significant is digital disruption is it a fad? Is it something that's critical? Is here, is it now? How do you interpret what's going on. I think it's overwhelmingly significant it's really almost epochal if you think that the invention of the internet is tantamount to the invention of the telephone or electricity which i think are legitimate comparisons then what's happening with the digital disruption is in effect business finally adapting to the reality of an entirely new platform for global communication so that's big that's hard and it's very you know well underway. Good. And, Antonio, what do you think? I agree actually I think this is huge. You talked about smartphones earlier I was looking at checking mine and I read a statistic this morning that the average person checks the smartphone one hundred and fifty times on average. Too often. I guess I'm at the upper end. Clearly if you are thinking at the personal level I Paul and I are both wearing kind of, actually the three of us are wearing wearable displays as well but but actually the interesting point then actually I'm sure we'll get into this later is not only are we wearing it in my case I shared it with my family my partner, etc., but I share it with my personal trainer and at some point I hope I share this with my insurance company so I get a better deal out of it but it's that dynamic and I think we are at a tipping point at the moment and I agree a lot of the technology has been around for a long time. You think of mobile, you think of social. Their buzzword of novels. The Internet of everything. We have big data. We have the Cloud but I think this year in 2014 we'll see this tipping point of all of this coming together and ours has been business is reacting. I think we in financial services have reacted less than other industries. I think if you think of music which is at the extreme we are probably closer to supermarkets and groceries. We have not yet changed a lot. We at HSBC than a lot in terms of apps and stuff but I don't think we as the industry have yet really disrupted. We have not yet really embraced digital properly and I think this year is going to be really a tipping point for them. So Paul just build on that. You're a sort of technology specialist. You look at these trends. Are we heading to a tipping point in 2014? Yeah, I think tipping point is a good word for it and I put it in historical context. I position what we see now is where the fourth major wave of disruption that we've seen hit business and technology. The mainframe, the PC, and cloud server, the internet and now digital which is one of the things Antonio talk about. Social, mobile, analytics, cloud coming together and I think we are at a tipping point. I think it's early in the impact of this as we're just talking about the different industries it's hitting. Marisa Meyer in the digital panel also used the term tipping point. It's a tipping point in the way we live and work as we look to really leverage digital technology going forward. You can see it in some of the startups which I think is interesting to watch. Look at ways and Uber, and some of the start ups we focus on in terms of how they leverage the digital disruption. But I think it's also interesting now to look at what big companies can do to leverage it. Tesco is a great example. They mentioned grocers. Tesco in the UK is actually giving consumers tablet-style because they believe it's important control or influence a lot of the consumers digital behavior not just in store experience. But they're giving consumers a tablet to more broadly impact the consumer's digital experiences. It's that kind of thinking in big companies that will really mark the next edge, or the next side of the tipping point is when we see big companies embrace and drive digital. So David just picking up on that. It's very easy to talk about digital. We get all excited about the technologies. You've looked a lot at this. What do you think are the key insights from a business perspective about this digital disruption? How do you sort of think the business leaders need to be thinking about where digital is taking them? Well, first I would say my conviction unfortunately is that most business leaders don't think hard enough about this and are not sufficiently alarmed or excited about the potential and at Techonomy, my company, we talk about every leader must be a technologist and I mean that literally not the you have to go and get an engineering degree but you gotta stop being afraid of getting your hands dirty and not rely on your CIO and CTO to tell you what to do. You've got to engage because these changes are transformative. I mean if you look at Antonio's industry, the reason I think he's right, that has to adapt. Look at some of these companies like Square that's coming along with a whole new payment technology or Bitcoin even more radical. The landscape is being transformed by innovation and if the existing institutions don't adapt they are in big trouble, so you know, many of them are. I think some banks are adapting. Certainly some financial institutions. A surprising number of companies are doing smart things. But I think it's far easier to list many big and formerly smart companies that aren't doing enough. Antonio, from an HSBC point of view, how does this work and impact you as a business leader? It impacts us a lot. I couldn't agree more in terms of we all lead. I've run the business in the UK. So, I'm effectively managing all of our businesses particularly on the retail side-I think we all for me, the CEO, Don, we need to be heavily involved. I think the big change here for all of us is that we've been talking about customer centricity forever, right? But actually digital has changed this dynamic because switching costs are much, much lower. I live in the UK we now have seven day switching for current accounts. So if you're not happy with, ideally with one of our competitors, you can actually go online and we do have an app where you can actually sign up and you switch from that competitor to HSBC. So, that's the issue of competitiveness and lack of trust in banking which is the crisis. I was actually at the breakfast this morning. It's a crisis in a lot of industries. It is actually. But actually it's interesting because as you know at the bottom together with journalists and politicians. And actually interestingly the sector that's the most trusted is actually technology. So it's interesting that we have, we as banks if I can talk as a bank should use technology because customers do trust technology and actually that comes the across in this survey that we were seeing this morning. And actually if we can leverage that to rebuild some of that trust. I think it will be really important- maybe we can come back to some of the disruptive business models because I think there are a lot of interesting things that we are doing and other people are doing and we can explore that later but I think we need this is a key part of my job and a key part of everybody in my management team. We just hit a really key point in the dialogue there with David and Antonio that it's the business and technology-business and IT being separate doesn't work. in this new world anymore. The business and technology come together. The phrase we use is every business is a digital business which means the business and technology really fuse together as you look at your strategy going forward which is, I think, the same point you guys are making. When we're looking at this from a financial perspective, from a revenue and cost perspective. From a revenue perspective we want to save our customers better but a lot of the business models that you and others are exploring and we are exploring are also geared towards the cost side so sharing much more platforms across the industry that's something that should also reduce our costs and make us more efficient. And that's we as financial services again have done probably the most integrated industry of all and we haven't really shared in shared services which is something that simple and we'll need to collaborate much more to do that. That's a very interesting point Antonio, about the fact that a lot of digital seems to be on the cost-efficiency side and yet the real potential is very much in terms of how customer experience is going to be transformed. In terms of that journey, you mentioned earlier the fact that we talked about customers always have been at the center. How radical and transformational is this sort of new digital disruption in terms of the customer experience for someone like you as a bank. So it is, let's be very clear, very disruptive action. David mentioned some of the examples. Digital for other industries has taken away the intermediaries and we as a bank we are an intermediary what we do is we take deposits from you and we lend to you. We are an intermediary. So there is a real risk and I was actually at the lunch today with someone said I'd love to have my deposit with HSBC, which they did, which I am really grateful, but I want to have my credit from Max and I want to have my payments from someone else. So, the customer themselves are dis-intermediating us as a bank and there's a real risk there and I think what we need to do we need to embrace that that risk and that that disruption. The first peer to peer lending is the best example, right? If you lend to each other I don't need to do anything as a bank. Some of our competitors and you may have seen some news prevented their employees from participating in peer to peer lending. That's maybe the defensive way of doing it. I think the proactive... I wouldn't comment on a competitor... but the proactive way to do it is to embrace this action. Before coming to the panel I have a little sort of site where I post comments from for the employees and I said I'm coming to Davos and I'm speaking this panel, I got hundreds of comments because this is a really exciting topic and so we need to be more nimble. We have with 270,000 people globally. We need to be a more nimble organization, We actually hired someone from Google who is our chief technology officer from a digital perspective and he's already transforming a lot of what we doing in terms of being more nimble. But we need to get our employees on board because they are themselves really excited. I got hundreds of ideas I could spend three hours talking about them but because there is, it's an a topic that they want to talk about rather than compliance or all the other priorities that we have. Okay, so please join the conversation at hash tag digital disruption. I've got the first question coming in here. So Dave we're talking about the customer experience. I think people are really interested at what makes 2014 different? Is it because the maturity the technology? Or is it because people like Antonio got "wised-up" to the threats that technology may present? I think it's probably because the increasing maturity of the customer and the ability-increasingly customers are recognizing the power of mobile and digital and they're really basically demanding new ways of thinking about how to serve their needs and I would just you know what Antonio was saying was provocative. I think one of the key developments right now that's really exploding is the whole marketplace phenomenon so you have things like a Air B&B or Uber you know one is disrupting hotels another is disrupting transportation. Something even more radical as TaskRabbit which is basically for higher employment is really disrupting employment at a very basic level and you think about the implications of those kinds of businesses and the likelihood they will arise in more industries. It really represents the consumer essentially protecting the big company service model entirely. So if companies don't really step up their game consumers are gonna try to bypass them altogether. I think that's kind of a new possibility. I was going to say, the dangers when one spends all one's time thinking about disruption in the context of b2c businesses and consumers but is also a lot disruption coming in in terms of the, if you like, industrial internet if you look at the b2b businesses So I wondered wheter you want to just talk about it a little bit through the lens of industrial companies what are you seeing happen in particular in the b2b market? Bridging back to the question what's different in 2014 is I think we're hitting a tipping point in the number of connected devices. That allow you to do different things. All three of us are wearing here I mean that's telling. We didn't coordinate that. We're all going overboard. At Davos. Yeah, but there's a tipping point in devices, a tipping point in connected vehicles, a tipping point in machinery being connected that allows you to rethink the way you do things. So, on the consumer side we talk about experiences I think Antonio used the word experiences. Like Nest the company that the a took a thermostat and changed the way that a consumer deals with the environment at home and really developed into an experience for consumers. That's the power that all these new connected devices and how to leverage them. Then you take that into the industrial sector there's big problems you can solve by rethinking the value proposition and the experience. Take commercial aviation where there's the estimates are that 1 percent fuel efficiency savings is a thirty billion dollar value proposition for the industry. There's a tremendous. There's money to be made and a lot of money to be saved and more efficient travel less impact on the on the environment. And all by tackling those problems using the new technology, connected technology, analytics, real time information, that's available and it's really beyond the consumer and as I think of the value that can be created in the industrial internet could be many times greater than the value credit for the consumer. Sorry, go on. One example is building on something I said earlier, which is, I agree it's not just about the consumer so one thing we are doing on the payment side which ultimately is for, could be on the consumer side, but equally on the commercial corporate side we are creating this sort of joint platform for just joint launch something in a few weeks back on or actually, announced that we're going to launch something we'd all the banks and in the UK. It's called Zapp. For payments and actually that will be for businesses as well as people and that's partially a reaction to some of the disruption model. But, it's something that consumers really want but actually the collaboration is is a b2b collaboration-we at the banks are collaborating which is something probably we wouldn't have done if the digital disruption wasn't there. Well, the good thing despite the fact that the consumer is maturing it you know and going to post points there are enormous portfolio of new tools available to businesses as data storage has gotten so inexpensive and the quality of analytics has improved really almost exponentially in very recent times I think that's another radical transformation we're in the midst of is companies starting to realize the data they have is an incredible resource to understand the needs of their customers. The way to save money the way you know, you can compensate employees think about structuring their businesses et cetera et cetera and that's very disruptive but it's very optimistic piece of the current puzzle for big companies. Well, there's an interesting question from Alex in Germany who talks about the disruption in terms of corporate culture because we tend to think disruption in terms of the technologies that you can apply. What do you think is a panel about sort of corporate culture? How's corporate culture going to change? I know the banking sector's had lots of influences but if you just focus on digital dimension of that what does this sort of digital revolution mean in terms of what you need to do to change the culture to really be able to embrace it and take advantage of it? So, I think if there's one word I would use and I mentioned it earlier but is really important is that we need to be more nimble as not in our case a company but as as an industry also because clearly the innovation cycle is much much shorter than what we're used to doing. So if I gave the example of some other joined us from Google that's leading our digital efforts we have now digital centers of excellence where we are every quarter updating our apps and we are launching new new that's something that even to three years ago it to take me nine months to develop a product something new. So I think the disruption within a corporate culture is that we need to have different mindset that needs to be much much faster much much nimbler and actually banking is probably the most regulated industry and therefore its you're right it is difficult to or everything else we doing in changing culture which are much much bigger issues and but doing that it's a at the same time is becoming much more customer-centric and delivering things much faster so I think that that's a big, big change. I think it's becoming an article of faith among people who really pay close attention that the pace of change demands the company's tap innovation whatever they can find and that really means empowering the employee population in ways that most companies have historically been reluctant to do in it that implies a much flatter organizational structure where your willing to recognize and reward people wherever they are on your organization if they have good ideas and one of the interesting things about some of the greatest innovations that are coming out of even big companies right now is that they're coming from combinations of contributors that maybe in most cases would never have even been allowed to participate in the dialogue and that's, that's a great thing. And just to build on that because one of the observations it seems to me is that there are new forms of collaboration occurring as a result of this digital disruption. So, big companies, small companies, big companings, big companies How's corporate culture being changed by the fact you're just collaborating with different types of partners? I think you used the word nimble or agile-it has to be a key element the culture. Fail fast, ya know get ideas out there and learn from them quickly. Fail fast and keep the good ideas The other thing that I did to extend on David's idea is connecting the internal employees but also go back to marketplace idea earlier the corporate culture it's not just what comes from inside the complex Cagle let the marketplace for analytics the next on early it's incentive in exchange for innovation. Its TopCoder in exchange for IT solutions. I think a culture that embraces open innovation and external ideas in addition to the internal cultures is really essential to move at that pace in digital. Just to add maybe other industries were doing this but also partnering with our own customers and consumers because actually we've had this this old-fashioned idea one of the panel this morning was about focus groups and are you get a few to understand your consumers because the segment them, etc., that that's quite an old-fashioned idea actually partnering with the consumers themselves so that they themselves are telling us what they want to do in the same way that employees the example I was using is absolutely... it's a big ecosystem. Exactly. And actually trying to get consumers to actually shape propositions. We're launching something later this year which we're now testing with our own consumers to say how will that work. Maybe that sounds odd but for financial services we haven't done that much in the past. Please keep the questions coming. Hash tag digital disruption. Tom's got a question which i think is an interesting one because it talks about digital government and digital citizens and its success. Can digital be used to engage the wider electorate more during a term and perhaps we tend to think so much in business terms we forget about the impact digital can have in terms of governments. Again David have you seen sort of the the whole impact of digital on governments in the way that they're approaching and thinking about government services? Not nearly enough. I mean a lot of Americans have noted Obama got elected with a much more social inclusive approach that he actually has governed and I don't think he's used digital nearly enough I don't think they're that many members of the US federal government that that fully are tapping into this opportunity although the ones that do are really I think strengthening their electability. So it's a huge opportunity and I think it's widely accepted that these changes will change governance and even the nature of the nation-state ultimately as much as they change business. Paul, are you seeing anything? I agree with what David said on the pace of change. I think there's a great deal of opportunity yet to engage the digital citizen. We do a lot of thinking about in some markets there's real real great potential by leading digital technology more effectively for example in India the way they are using the unique ID ID system to more effectively channel aid to the right people so that eliminate corruption in the diversion of aid and get right aid to the right people at the right point in time we need it and its by lead to a lot of digital identification and digital services to get that aid to the right people and I think looking at technology in that lens will serve and provide the citizen with a better experience and probably more effectively meet their needs by providing the same services digitally. One of my big observations it seems to be that many emerging countries that want more if you like, digital government are actually trying to be more proactive in engaging their citizens in terms of what shape those services should take rather than more traditional governments which have tended just to sort of say we'll digitize just existing types of services which goes back a lot to, I think this issue about cost and efficiency versus actually being much more proactive how do we get the citizens engaged in the process much earlier in the in the way and i think that's a fundamental change that's taking place. Maybe one point to add there, I think the important point is responsiveness here in terms of if if I think about business but if I think about politics and society more generally there is a logical expectation that any of us that we would get a a response much quicker each time we have a query or each time we have a view as a citizen actually I see it from a business perspective actually. Luckily, we won an award last year as the sorta the best socially connected bank bank in the UK and the only reason why we won the award is because we respond very quickly to tweets or to to any of the tweets that we receive in our account or any comments and actually that's the only thing the main the main issue was responsiveness clearly you know whence all the banks responded the same rate then it's a quality of the responses that matter but I think the same applies to society more generally into politics and some of that responsiveness that maybe to your point Obama displayed in and before being elected that responsiveness is quite important I think even local politicians need to do that. You mentioned this trust research that was announced this morning one the other findings was that government is trust that much less than business and I would say one of the reasons is that business is way ahead of government in terms of being responsive to its customers. Government doesn't generally even know how to think of citizens as customers especially in the more developed countries as you pointed out. That's good so a question from Phillip in Washington. Obviously he's been impressed by the number of sort of high-tech gear gizmos that you're wearing but what he's basically saying is are we gonna see a lot more wearable tech? Obviously there's a lot of press recently about what's going on in Las Vegas So is that where things are going? We going to see more of that Paul? Technology is fashion. There's a lot of fashion to the technologist you think of a smartphone so much appeals to the users of smart phones, the apps on smartphones, the you know the different devices. I think design is is is is imperative to your getting the right experience that you wanna get to the consumer with the device. I think there's more more that to come. My son's got his snowboarding helmet that's got the heads up display in the goggles in the sound in his ears and you know it's it's becoming part of everything that we do. I couldn't agree more with that but I think it goes when even beyond that this whole quantified self moment before participating in is really going deeper into the medical community and there's a tech pioneer who is a participating in this year's Davos that actually makes a pill the you swallow the does medical measurements inside your gut and uses the chemical reaction in your stomach in order to generate the power to broadcast that out of your body and then dissolves in your stomach that's the kind of thing that nobody could have imagined until recently. There's so much progress happening because also that is then being measured with digital tools on the outside. Its one point they actually, it's interesting, I mentioned briefly my my own personal experience by the way I don't recommend sharing with all of your family because you got the calls of why have you slept only X number of hours at Davos. But, actually the important point if you can share it with insurance industry I mentioned earlier the same is true for smart cars. If in a smart car you can actually know if you're a good driver a bad driver you have an incentive to share that with insurance company or with your bank so I think and obviously there the medical industry is in their health care is a huge area. But in financial services I could definitely see us now collaborating much more technology companies in the way that we probably were again not doing two three even ten years ago when the Internet and other disruptive technologies came in. And I think we also see it alot with things like asset management where the ability to have picked up this place would you tell people to be much more efficient in terms the way they repair things. Another question coming in from London which is If you put your arm your hats on and sorta crystal balls The key question I guess a lot of people watching are interested to know is which industries do you think are going to get most disrupted by all this change in the digital world? Is it is a banking? Is it insurance or should we really be looking to asset based industries? Where which industries would you really point to for digital disruption? Maybe there's a short to medium term issue in there as well. I think it's hard to create a hierarchy because honestly there is really no limit to the disruption thats going on but if I were picking one it might not be an industry would be education that's partly because I want it to be disrupted so badly cuz I think it's failing society so abysmally. You know it's probably just a better pace that I think it can hit you know and will hit all the industries. An issue is they have a lot of digital content what to do. Financial services, publishing, you can see it hitting there more quickly because they're its easier to deploy and see some of the new business models take hold in those types of industries but it little things but quickly and we're seeing it in medical care and heavy you know industrial equipment in many areas move very fast as well. For banking if I within Financial Services get that in itself is a very broad church I think the consumer side will probably evolve a bit quicker and within that I would see the area of payment when we've seen already a lot of disruption. That will be be the most disrupted so in the immediate term but actually, the longer term view who knows right? When four years ago here at Davos nobody would have predicted not even the bracelets we're wearing let alone a lot of the other things that One of my favorite new technologies is square cash which is so brilliant because if someone sends you money all you have to do is accept it with your debit card and forever after you can then send people money without any for the registration or action and that is the kind of simplicity that is very disruptive. It's called frictionless... frictionless. We're getting close to work to wrapping up here so what I'd like to ask you is past as the World Economic Forum in Davos been disrupted digitally? Are you seeing any changes as a result of what's going on here and maybe just a combined that with one reflection for 2014 which you think that people listening would be would be really interested in so Antonio just starting with you sorta one reflection on this for 2014 one sort of thought about what you see the fact we're running the webcast it Davos is a first so that's a clear sign that digital is moving us on. My briefing notes this year with the plane on my iPad I kinda resisted printing them. I think you can definitely see and I wouldn't say that a lot of people here at Davos are the early adopters of technologies but some are some are not actually can see definitely Davos feels a bit more at digitally enabled than in previous years I think in terms of the sort 2014 point I ventured the that the tipping point kinda idea earlier that Marissa Mayers and others have mentioned we've been talking about tipping point for a very very long time but I think 2014 we will see particularly for our industry the competitors that are really making a difference and I think we will start to to see a divergence in terms of customer service customer satisfaction and ultimately market shares and performance. And I have to ask you this so if it is the tipping point how what are you gonna do different as a leader do you think in 2014 firms what your performance objectives which I'm not by the way what would be different in them do you think as a result of what what we've been talking about? I won't go too much into that but even last year everything about it that's actually been doing a lot of work digital is one about three global priorities for retail so and actually only have to repair it is actually it tells you how significant it is and actually it is one of the three big priorities in my scorecard so I will all make sure that that gets done. okay David? Well I think if you look at Davos the degree to which social media has been embraced here is stunning I used to feel that the digital economy and technology generally was underplayed in the discussions at Davos again going back to my point that leaders generally under appreciate the gravity of the transformation underway but I think Klaus Schwab and the forum have finally really recognized this is absolutely central to their constituencies and they have to help their participants really get it a lot more deeply than they have up to now the one opening sessions today was Marissa Mayer, Marc Benioff, John Chambers and the CEOs at the AT&T and BT that was a big big change to start out with something like that. And it was massively oversubscribed. Half as many people were outside the session. They should have had it in the biggest room. Paul? I'd echo what David and Antonio just said. That this is digital in the way that WEF is conducted in Davos here. A lot of social, a lot of technology involved and also a lot of technology in the discussion. A lot of the disruptors here, a great panel as you as you described in many others that are here representing digital. I'd say the change for 2014 I'd look to would be more the big organizations being on the front foot when we come out next year and talked with a lot of confidence about how their taking forward digital disruption into their organizations and their industries more so than we see this year which is still kinda early adopters. That's great and let me thank the panalist particularly for their insights on digital disruption. I think whether you're looking at it through the lens of how the customer experience is going to change or whether you're thinking about collaboration in the partners that you going to be working with in 2014 or just the whole sort of digital skills that need in businesses today around the backbone of your organization. All of these I think you're going to see dramatic changes as we go through 2014 we hope we've stimulated a little bit of a conversation a little bit of a dialogue if you want to keep the conversation going its hash tag digital disruption and thanks very much indeed for joining us. And thank you again to our panelists.