Digital Disruption: Article by Catherine Livingstone

This is an edited extract of BCA President Catherine Livingstone address at the National Press Club in Canberra.

It was published in The Australian Financial Review on 30 April 2015 under the title 'Mass digital connectivity is set to create a massive disruption.'

We have reached the point where a confluence of trends - digital disruption, shifts in the locus of economic power, globalisation and demographic change - each of which on their own would rank among the strongest economic forces the global economy has ever seen, is casting our world into a completely different reality.

At the heart of this disruption is connectivity. Mass connectivity. This connectivity has enabled human-generated data, and now machine-generated data, to flood through our global networks of fibre and copper. Combined with orders of magnitude increases in computing power, what and who it is possible to know is almost limitless. And in real time.

We thought that the connectivity enabled in the mid-90s by the fixed-line internet and browser technology was disruptive; that was before 2007, when the mobile internet became a reality with the first smartphone. But that is nothing compared with the disruption we will see with the advent of the "internet of things."

By 2030 there may be 50 billion devices connected to the internet, and the average home is expected to have more than 20 such devices.

So, why is connectivity so disruptive? Because innovation happens most powerfully at the interface. The more interfaces, the greater the potential for innovation; and the more connectivity, the more interfaces.

These interfaces can be human to human, human to machine, and now even machine to machine. Connectivity is changing the power relationships between consumers and companies; it is fragmenting supply chains and disrupting business models.

It is changing the nature of work and workplaces, and the shape of cities and urban environments. It is also opening up new possibilities and new frontiers of discovery. Let me give you some data points on trends enabled by mass connectivity:

●In America, 40 per cent of the work force is now freelancing through new business models such as Airbnb, Airtasker and Uber. So what is this doing to patterns of demand where income security is uncertain?

●Online markets are supplanting companies as an organising force - representing a material risk transfer to the individual. Uber does not own a single vehicle; Airbnb does not own a single bed.

●There is growing momentum in the sharing economy, as part of the broader theme of the so-called Circular Economy - this is good news for resource sustainability, but threatening for business models based on ever-growing consumption.

●Machines are now learning - advances in artificial intelligence and neural computing, combined with the connectivity possible through cloud computing, mean that machines can now be said to learn, and it turns out that they learn better together, which they can do in a connected cloud environment.

●Just last week, Google announced its search algorithm will prioritise "mobile friendly" websites when people search using their smartphone or tablet: desktop-only sites will still appear but ranked lower - what will this do to Australia's competitiveness when 66 per cent of the nation's websites are not optimised for mobile phones?

●Competitiveness, connectivity has enabled global supply chains, with 70 per cent of global trade now in intermediate goods and services and capital goods, not in finished goods - so while we were intent on preserving an automotive industry focused on producing finished vehicles, others recognised the opportunity in manufacturing components for supply into global niches.

My contention is that, given the disruption of a hyper-connected world, many of our policy settings are simply not fit for purpose. They have exceeded their design tolerance limits.