The narrative of successful companies is ever-changing. The length of time the average company stayed on the Dow Jones Industrials list is roughly half what it was 50 – 60 years ago, and the tenure continues to decline. Time plows forward, as does the related technology. The rate of acceleration of the technology continues to increase, primarily based on the well-articulated thesis of the combinatorial elements of technology articulated in the book “The Second Machine Age” by Erik Brynjolfsson and Andrew McAfee. Said differently, the leap from 1960 to 1990 was less than the leap from 1990 to 2005, and less than the leap from 2005 to 2015, and so on. Companies know they need to adapt to digital transformation and recognize that other existential forces cannot be ignored, especially climate change. In contemplation of these rather broad market forces, here are five fundamental observations worth considering.
Let’s start with a preliminary comment for context. IoT, as a term, is falling out of favor. The reason for this is a much longer discussion but suffice it to say the massive hype around IoT from 2012 to 2014 has been overshadowed by a preponderance of pilots and prototypes and a lack of enterprise-grade production systems. That said, the enterprise-grade systems are out there more and more, but the image of IoT is less than what it might have been under a different and better trajectory. Another parallel consideration is the market shift from focusing on technology to focusing on outcomes. The bifurcation of information technology and operational technology is collapsing into a singular view of an organization’s strategic technology direction, often centered on results instead of the technology stack. Technology remains essential, but the context has changed. It’s time to embrace the future, which is not turning back. We are progressively and unmistakably moving to a hyper-connected world. In looking and thinking forward, we see an existential shift to cyber-physical systems. The best move is to embrace it.
Cyber-physical systems allow us to understand the state of our infrastructure better. From paper factories to power plants and buildings to bridges, cyber-physical systems provide a baseline of trusted data by which we can act. Trusted data provides a greater and more granular view of the truth, free (essentially) of conjecture.
The existence of the cyber-physical baseline represents a threat to the industry. Threats to industrial companies come in the form of tighter regulatory guidelines as governments worldwide recognize the danger of climate change, the need to act, and the evolving ability to measure such compliance more effectively. It’s like asking someone if they feel clammy or hot and taking their answer at face value vs. the ability to measure their temperature accurately and efficiently in 2 seconds from three feet away. The data doesn’t lie. The implications ran far and wide. There will continue to be economically-compromised organizations based on the requirement for such compliance. Understandably, such industries will work to avoid or push back against such regulatory measures and compliance requirements. Their economic well-being is at stake.
The existence of the baseline represents an opportunity for industry and society. With the above observations in mind, pushing against the overall market forces will likely be no more effective than going against the onset of colder weather in the winter or airfares rising before and after Thanksgiving. It’s a clear direction. However, in this case, it is a clear opportunity as well. There is ample evidence to suggest that using cyber-physical systems increases worker safety, reduces energy costs, and creates more effective supply chains. It can boost industrial operational efficiency. It provides the framework by which organizations of all types can progressively move towards decentralized, distributed systems with a higher level of adaptability and resiliency.
Moreover, the same companies that are naturally the archenemy of climate-related constraints (heavily tied to carbon extraction), like energy companies and especially oil companies, are making huge bets on climate-friendly initiatives. Lastly, from a societal standpoint, we see a new form of capitalism beyond quarterly earnings to a more thoughtful and longer-term view of companies’ strategic goals through the emergence of ESG (Environmental, Social, and Corporate Governance) investing. These considerations are increasingly anchored to the data created by cyber-physical systems. This data becomes the truth that binds the aspirations to the actions and results.
Climate change is real, and more and more people, institutions, and corporations not only get this but are acting on it. This is evident in:
- Where and how new insurance policies are being written (or not written).
- Where companies are allocating innovation capital.
- The changing nature of large commercial fleets and the corresponding electrification of infrastructure modernization.
It is equally apparent in how government and education are adapting to both cultural shifts and regulatory policies associated with climate change. The percentage of the population hanging on to climate change is a hoax is thankfully diminishing, along with a declining number of countries worldwide failing to embrace it.
Underpinning the growing global awareness of climate change is the corresponding increase in our ability to measure. We can measure air and water quality and the impacts of carbon extraction. What we can measure today dwarfs what we could yesterday but will be a fraction of what we can measure tomorrow. Trusted data will allow us to adapt progressively more equitable, more adaptable, more secure, more stable, and certainly more resilient. This will be good for industrial organizations and society. We should be able to spot the leaders of tomorrow by those leaning in heavily today and by doing what is possible in adapting to tomorrow.