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CIO Trend ReportInfo-Tech Research Group Inc. is a global leader in providing IT research and advice. Info-Tech’s products and services combine actionable insight and relevant advice with ready-to-use tools and templates that cover the full spectrum of IT concerns. © 1997-2018 Info-Tech Research Group Inc.

IntroductionHow can the business identify and seize relevant technology at the height of its promise?Make no mistake; in 2018 the CIO is a business partner. The pressure is on to move beyond supporting operations to become a driving force behind business growth. In the sea of emerging tech, you are the business' navigator. Do you know where your business needs to go?

Let business outcomes be your compass.A strategic direction is essential to making the right technological investments. Not every trend is worth pursuing, but missing the ones that are can be costly. An outcomes-focused approach gives you a framework to strategically evaluate emerging technology's alignment with your business’ direction. Use a business-outcomes-centered outlook to effectively separate opportunities from distractions.

Go from browsing to doing.Learn what is driving each trend and how it has evolved from previous years. Most importantly, use the business outcomes framework presented in this report to create the foundation for your adoption strategy. Determine which trends are worth your attention, chart an adoption course, and build a business case for your stakeholders.

— Info-Tech Business Vision Survey

A recent survey of over 20,000 IT and business executives concluded that innovation leadership is three times as important as it is perceived to be, in determining overall satisfaction with IT.

TREND REPORT 2018 / Info-Tech Research Group 2

This year introduces four key trends that draw their impact from both technological innovation and an alignment with key business outcomes.

Each trend represents the convergence of several previously trending technologies to enable new advances that are greater than the sum of their parts. Assessing these transformative technologies with an eye to their ability to drive business outcomes reveals their unprecedented opportunities for business impact.

Trends User-Facing AI

Blockchain 2.0

Robotics

Digital Twin

01

02

03

04

EXECUTIVE BRIEF


2018 Trends Opportunities to

Drive Business Outcomes

2017 Trends Strategic Priorities

The Digital Ecosystem

Immersive UXAutonomous Machines

Automated Cognition

Distributed Validation

Everything-as-a-Platform

Decentralized Making

Opportunitiesfor Business Impact

In 2018, your priority is to drive business outcomes through emerging technology.

Blockchain 2.0 Digital Twin Robotics User-Facing AI

EXECUTIVE BRIEF


Trend Summaries

User-Facing AI

01Robotics

02Digital Twin

The boom of IoT and Industry 4.0 has created an

abundance of data. So much so that an entire system can

be characterized, and the collected data used to create a real-time, living model – its digital twin. The opportunities for decentralized monitoring and predictive analytics are

truly extraordinary.

03Blockchain

2.0

The blockchain has outgrown bitcoin. Innovations are being

developed to tailor distributed ledger technology to specific use cases outside of cryptocurrency, creating

possibilities for scale, contract enforcement, and

returning data ownership to the individual.

04

EXECUTIVE BRIEF


Increasing robotic sophistication is allowing

machines to work with humans, but not replace them.

Emerging opportunities to augment human performance

means businesses can use technology to make the most

of their human capital.

Communication barriers between humans and

machines are coming down. Businesses can leverage this

emerging connection to automate basic customer service tasks, improving

experiences for customers and users alike.

User-Facing AI

“27% of consumers weren’t sure if their last customer service interaction was with a human or a chatbot.”

— PwC, "Bot.Me: A revolutionarypartnership"


EXECUTIVE BRIEF

Robotics

47% of jobs in the US could be replaced by robotics and other computerisation by 2034. 58% of CEOs intend to reduce headcount over the next 5 years as a result of robotics.

— PwC, "Pulse on robotics"


EXECUTIVE BRIEF

Digital Twin

Using digital twin technology to monitor and optimize wind turbine operation can boost energy production up to 20%, resulting in around $100 million in extra revenue over the life of a turbine.

— GE Renewable Energy, "A Breakdown of the Digital Wind Farm"


EXECUTIVE BRIEF

Blockchain 2.0

28% of CEOs in major US companies have spent $5 million or more in blockchain technology. An additional 25% of CEOs in major US companies expect to spent $5 million or more in blockchain technology in the coming calendar year.— Deloitte US, "Blockchain survey 2017"


EXECUTIVE BRIEF

All of these trends have the potential to transform not just the bottom line, but the business itself, changing its internal processes and external positioning within industry and society.

Several axes have emerged along which this transformation can take place. These axes are represented by five key business outcomes.


EXECUTIVE BRIEF

AutomationThe ability to be lean through the replacement of aspects of human-based organizational processes and activities with technology.

IntegrationThe ability of the technology in the trend to integrate with the technology of customers, partners, and suppliers.

ScaleThe ability for the product and/or service offering in the trend to quickly increase capacity.

IntelligenceThe ability for the trend technology to leverage organizational outputs to make processes smarter and more efficient.

ImpactThe ability of the trend to deliver a positive or negative social impact on user and customer experience.

Five Key Business Outcomes

Innovate Purposefully

EXECUTIVE BRIEF


What outcomes is your business hoping to achieve? Which trends have the most impact potential in these domains? Focus your efforts for the biggest return on investment.

Use outcomes-based thinking to zero-in on the trends that matter to your business. We scored each trend according to its potential for impact on each of the five key business outcomes. The resulting table should be your first strategic touchpoint.

Identify at a glance which trends are most relevant to your business' current direction. Cut through the deluge of information and get to action sooner.

User-Facing AI

Robotics

Digital Twin

Blockchain 2.0

How to read this report

Get current information

Description:• Each trend is introduced with a key point

summary and statistic, highlighting its growth and impact.

In 2018, technology is an opportunity to create lasting business impact.

TREND REPORT 2018 / Info-Tech Research Group

Business Outcomes:• We present five key domains of business

impact, and each trend's relevance to those domains.

Viewing trends through an outcomes-focused lens allows you to align innovative initiatives with key business objectives.

Case Study:• Each trend is illustrated by a case study

that examines how the trend was leveraged to achieve the desired business outcomes.

Every organization will approach the business outcomes in its own way. What does success look like for your business?

Resources & Recommendations:• We provide links to relevant Info-Tech

resources for each trend. We are constantly growing our toolkit so

that you can grow yours.

Evolution:• For each trend, we highlight the cutting

edge of what is new for 2018.

Technology doesn't stay still. Keep abreast of the latest developments to give yourself an edge in selecting the best tool for your purpose.

12

Evaluate strategically

Signals & Drivers:• We analyze the driving forces behind each

trend, and the way it is manifesting in different scenarios.

Understand the technological and societal changes that are driving each trend to determine whether they are relevant to your business.

Put theory into practice

Risk & Uncertainty:• We list the key risks and critical

unknowns that result from technological advancement.

No matter your organization's risk tolerance, awareness of the risk is always the first step. Learn what questions you should be asking.

EXECUTIVE BRIEF

Bibliography

EXECUTIVE BRIEF


CIO staff. "IT-business alignment (finally) gets real." State of the CIO. CIO.com. 24 Jan. 2018. Web.

Deloitte US. “Innovation: Blockchain survey 2017.” Deloitte United States. Web. Accessed 7 Feb. 2018.

GE Renewable Energy. "A Breakdown of the Digital Wind Farm." Web. Accessed 1 Feb. 2018.

KPMG. "CIO Survey 2017." Web. Accessed 24 Nov. 2017.

PwC. “Bot.Me: A revolutionary partnership.” Consumer Intelligence Series. Web. Accessed 25 Jan. 2018.

PwC. “CEO Agenda: Pulse on Robotics.” 2016. Web. Accessed 5 Jan. 2018.

Volans. “Breakthrough Business Models: Exponentially More Social, Lean, Integrated and Circular.” Web. Accessed 18 Jan. 2018.

User-Facing AIThe disappearing user interface

What is user-facing AI?

Imagine if launching a video conference were as simple as saying, "Please call the main boardroom.” The call would then automatically be put through by a virtual assistant running a natural language processing algorithm.

Artificial intelligence (AI) in user-facing scenarios refers to the automation of user- or customer-facing tasks. The end goal is two-fold: to decrease the burden on human support service providers while increasing user satisfaction.

This development comes at the junction of two previous trends: automated cognition (intelligent systems) and immersive UX. It goes beyond previous thinking of simplifying user interfaces to removing them altogether. Intelligent machines are learning to live in our ecosystem and speak our language, sometimes literally. AI is also reaching us using digital tools we already have, as with chatbotsinteracting over Facebook messenger to book flights or doctor’s appointments.

This will impact customer satisfaction as well as user efficiency within the organization.

— Capgemini Digital Transformation Institute, “Turning AI into concrete value: the successful implementers’ toolkit”

“75% of organizations using

AI enhance customer

satisfaction by more than

10%.”


What’s new in 2018?Previously, the focus surrounding human-computer interfaces was on digitizing the user's environment, creating a more immersive experience using technology: “This new immersed individual [was] using technology in increasingly complex and different ways" (CIO Trend Report 2017).

In 2018, immersive technology becomes intelligent. Artificial intelligence, which has excelled in cognitive analytics on the back end, comes to the forefront of user experience. User-facing technology is beginning to anticipate our needs and adjust to them automatically. We begin to engage with technology in the same way we engage with humans – through speech and natural language. Rather than simplifying the user interface, 2018 seeks to remove it altogether.

Customers and users both benefit from this change, which results in greater customer satisfaction and user efficiency, translating directly to benefits for the business.

USER-FACING AI: EVOLUTION


0

200

400

600

800

1000

1200

1400

1600

1800

2000

2015 2016 2017 2018 2019 2020 2021

Mill

ions

Estimated number of users of digital assistants worldwide

– Statista, “Digital Assistants -Always at Your Service”

“Worldwide AI revenue will grow from $643.7 million in 2016 to $36.8 billion by 2025.”

— Tractica, “Artificial Intelligence Revenue to Reach $36.8 Billion Worldwide by 2025”

USER-FACING AI: GROWTH


62

64

66

68

70

72

74

Reduced churn Reduced customercomplaints

Enhanced customersatisfaction

Perc

ent

Share of organizations implementing AI that observe more than 10 percentage point gain on the following

benefits

USER-FACING AI: IMPACT


– Capgemini Digital Transformation Institute, “Turning AI into concrete value: the successful implementers’ toolkit”

What Is Driving This Trend?

Advances in natural language processing, machine learning, and increasing user adoption of technological communication channels set the stage for AI to take on user-facing roles effectively.

At the forefront of this trend are concepts such as augmented reality, the smart home or office and the concept of “zero-UI.” Zero-UI refers to a shift in thinking around human-technology interfaces. Computers will now adapt to human ways of communication through natural language processing, rather than relying on us to learn to engage with their interfaces. Even the least tech-savvy user is now able to command state-of-the-art technology.

The concept of human-in-the-loop – the idea that AI will augment human capabilities rather than replace them – is shaping the development of user-facing AI. AI roles are constrained to automating the simple and repetitive, enabling human agents to devote more attention to critical and complex tasks.

“43% of millennials and 28%

of business execs would

pay a premium for a hybrid

service run by AI that offers

direct access to humans,

versus a human-only

service.”

USER-FACING AI: SIGNALS & DRIVERS


— PwC, “Bot.Me: A revolutionary partnership”

How does the trend score on the five key business outcomes?

USER-FACING AI: BUSINESS OUTCOMES SCORECARD

20TREND REPORT 2018 / Info-Tech Research Group

Spot-on

High

Medium

Low

To what extent does the trend allow the business to free up human capital through automation? Does it integrate with stakeholders’ existing technology? Is the technology able to quickly increase capacity? Can it learn from its own outputs? Will it deliver a strong social impact on user and customer experience?

Automation: Spot-onEmploying AI in user-facing scenarios has great potential for

automating repetitive human resource intensive work, freeing

up human capital for the highest value tasks.



Integration: HighThe exponential adoption of user-facing AI results from its ability to

make use of customers' existing means of communication, like voice

chat and popular instant messenger platforms. Businesses can

leverage this to reach customers through familiar venues, removing

a barrier to engagement with the business. Integration is further

streamlined by AI's ability to interface with both complex APIs and

end-user tools, creating the potential for a seamless interface

between systems and users.




Scale: HighPersonalization at scale – this is the promise of chatbots, virtual

assistants and related user-facing AI technology. It allows the

business to expand customer service without hiring more staff, and

therefore plays an important supporting role in maintaining customer

satisfaction as the business grows.

A word of caution: some customer support functions, especially if

they form the core services of a business, are typically too complex

to automate given the current state of AI. AI can't replace your entire

customer service team just yet.

Intelligence: MediumAutomating customer service tasks through AI allows for greater

capabilities to both collect and use large amounts of user data to

improve service delivery. Data quality is significantly impacted by

removing human error in data handling, forming a solid foundation

for analysis at scale through cognitive analytics.

Impact: Spot-onParadoxically, outsourcing tasks like call desk and appointment

scheduling to an AI can create a more human experience for the

end user. In many cases, these tasks have already been

outsourced to less flexible technology, like call queue software. By

bringing some of the human element back through human-like AI,

you get the next best thing to actually putting more humans on the

task, at a fraction of the cost. The result is greater user satisfaction,

both through better outcomes (shorter hold times) and a more

pleasant experience (more intuitive interface through voice, rather

than pressing keys).


USER-FACING AI: RISK & UNCERTAINTY


Risk Considerations

With AI’s ability to aggregate unprecedented amounts of user data, the need to protect data privacy grows ever greater. Risk further intensifies as communication shifts to commonly adopted platforms, such as instant message clients. Protections must be built in to ensure this new technology continues to comply with data privacy standards to maintain legal impunity and client trust.

In the case of interfacing with third-party platforms, it is critical to ensure the platform is capable of supporting the necessary levels of data protection for the type of data you are handling. This is especially true in fields such as healthcare, where communication over technological channels is often restricted to ensure confidentiality. As AI expands the range of platforms used for communication, platform creators and enterprise users alike will need to be judicious in selecting solutions capable of upholding appropriate data confidentiality standards.

Critical Uncertainties

The rapid development of AI and the speed of its adoption have created gaps in regulation surrounding data ownership. Although regulations are starting to emerge (e.g. GDPR), this space is still very much in flux, and legal provisions around data use will likely change over the next few years

Concerns of job loss have been somewhat mitigated by the concept of human-in-the-loop. This is the idea that AI will augment, rather than replace, human performance in most cases. However, some concerns remain that the rate of change could still outstrip the pace of job market recovery. A definitive conclusion will likely only emerge in practice.

Action• The client created a virtual reality game to ease children's stress

when going into medical procedures. The game combines emerging VR technology with a smart stress-reduction algorithm. The game’s AI automatically adjusts gameplay to the child's stress level, to ensure that at the end of play, stress levels are lower than at the start.

• The client engaged Info-Tech to develop a venture capital presentation for a go-to-market strategy, including selection of markets for initial entry.

Result• Over the course of the week-long engagement, the client gained

the ammunition necessary to put together a venture capital presentation for the healthcare market, as well as identify other markets for later expansion.

• The venture capital presentation was successful, securing an 8-figure amount and distribution partnerships.

• The project launch was a win, with adoption of the VR game complete or pending at over 20 hospitals.

Situation• Pre-procedure anxiety and stress are a major

concern in healthcare settings, particularly in the case of pediatric hospitals.

• Hospitals provide a variety of stress management services to patients, ranging from books and educational videos, to personalized sessions with counselors and social workers.

• The client was a company in the entertainment industry who wanted to improve children's hospital experiences using stress-reduction methods that would be easy to implement on a large scale.

Case StudyIndustry:

Healthcare

Desired business outcomes:

Social Impact, Scale

USER-FACING AI: CASE STUDY

24

Resources & Recommendations

Recommendations• Stay up to date regarding data privacy regulations in

your sector. In addition to maintaining compliance within your organization, watch for changes in vendors' service contracts regarding use and ownership of data.

• Consider the impact of automation on human performance and ensure any humans-in-the-loop maintain enough practice to keep their skills current.

USER-FACING AI: RESOURCES &

RECOMMENDATIONS


For Premium Members• Learn why chatbots are a quick win in healthcare• Strike the right balance of personalization with customer-

facing AI• Put a number on the business value of customer-facing

applications• Keep user data safe

Upcoming Research • Implement AI Into Your Manufacturing Process

Although tremendously exciting, the adoption of emerging

technologies is also risky and uncertain. Info-Tech provides research

and recommendations across industries to support a business-

outcome-driven approach that ensures you get the value from your

technology investments.

https://www.infotech.com/research/for-human-friendly-healthcare-hire-yourself-a-chatbot

https://www.infotech.com/research/ensure-your-customer-experience-is-awesome-not-off-putting

https://www.infotech.com/research/measuring-the-business-value-of-customer-facing-applications

https://www.infotech.com/research/secure-software-development-in-government

https://www.infotech.com/browse/industry-coverage

Bibliography

USER-FACING AI: BIBLIOGRAPHY


Biewald, Lukas. “Why human-in-the-loop computing is the future of machine learning.” Computerworld. 13 Nov. 2015. Web.

Borowski, Craig. “The Impact of Demographics on Live Chat Customer Service.” Software Advice, 6 Jan. 2015. Web.

Brooke, Sophia. “How Chatbots Will Shape the Future of Healthcare.” Chatbots Magazine, 23 Oct. 2017. Web.

Brownlee, John, et al. “What Is Zero UI? (And Why Is It Crucial To The Future Of Design?).” Co. Design, 2 July 2015. Web.

Capgemini Digital Transformation Institute. “Turning AI into concrete value: the successful implementers’ toolkit.” Capgemini. 2017. Web.

Credence Research. “Chatbots Market By Type (Stand-alone, Web-based), End User (Large, Small and Medium-sized Enterprises) - Growth, Share, Opportunities & Competitive Analysis, 2015 - 2022.” Credence Research, June 2016. Web.

Deloitte UK. “Adopting the power of conversational UX.” Deloitte, 2017. Web.

Devaney, Erik. “Infographic: Rise of the Chatbots.” Chatbots Magazine, 8 Sept. 2016. Web.

Engelbert, Cathy, and John Hagel III. “Fulfilling the Promise of AI Requires Rethinking the Nature of Work Itself.” Harvard Business Review, 18 Dec. 2017. Web.

Forani, Jonathan. “Toronto hospitals embrace virtual reality.” The Toronto Star, 20 Mar. 2017. Web.

Foye, Lauren. “Chatbot Conversations to deliver $8 billion in Cost savings by 2022.” Juniper Research Analyst Press. Web. Accessed 9 Jan. 2018.

Furness, Dyllan. “The chatbot will see you now: AI may play doctor in the future of healthcare.” Digital Trends, 7 Oct. 2016. Web.

George, Sharon. “How to Tell When Vendors Are Hyping AI Capabilities.” Smarter With Gartner, 13 Nov. 2017. Web.

Grenacher, Manuel. “Artificial Intelligence In Customer Service.” Flarrio, Web. Accessed 13 Dec. 2017.

Griffin, Anne. “Improving the Patient Waiting Room Experience: ChatbotsCould Be the Prescription We Need.” Medium, 18 May 2017. Web.

“Growth of Chatbots in Health Care Industry | Health Care Chatbots.” Dr. Hempel Digital Health Network, 24 June 2017. Web.

“Harnessing Your Data with ‘Human in the Loop.’” AI Business, 29 Aug. 2017. Web.

Husek, Stepan. “Chatbots: Let artificial intelligence speak for your business.” Deloitte Czech Republic. Web. Accessed 11 Dec. 2017.

Juniper Research. “AI-Powered Chatbots to Drive Dramatic Cost Savings in Healthcare, Saving $3.6 Billion by 2022.” Juniper Research Press Release. Web. Accessed 9 Jan. 2018.

Kerravala, Zeus. “5 use cases for AI in the workplace.” The Digital CIO, 16 Nov. 2017, Web.

Bibliography

USER-FACING AI: BIBLIOGRAPHY


Kessler, Sarah. “Automation can replace at least some work in almost all job sectors.” The Atlas, 8 Mar. 2017. Web.

Lardinois, Frederic. “Twilio study: most consumers now want to use messaging to interact with businesses.” TechCrunch, 12 Sept. 2016. Web. Accessed 5 Jan. 2018.

McKinsey & Company. “Artificial intelligence in health insurance.” McKinsey & Company, Sept. 2017. Web.

Olivi, Giangiacomo and Gareth Stokes of DLA Piper. “Data protection: patient confidentiality in the age of AI.” Lexology, 6 Oct. 2017. Web. Accessed 10 Jan. 2018.

Oracle. “Can Virtual Experiences Replace Reality?” Oracle, 2016. Web.

PwC. “Bot.Me: A revolutionary partnership.” PwC, 2017. Accessed 25 Jan. 2018.

Reddy, Trips. “The code of ethics for AI and chatbots that every brand should follow.” IBM blogs, Watson. 15 Oct. 2017. Web. Accessed 21 Nov. 2017.

Richter, Felix. “Digital Assistants - Always at Your Service.” Statista Infographics, Web. 26 Aug. 2016. Web. Accessed 11 Feb. 2018.

Rosenthal, Vivian. “Here’s Why Chat Bots Are So Important To Your Business.” Forbes, 2 Aug. 2016. Web. Accessed 9 Jan. 2018.

“Saint Elizabeth Health Care tests AI chatbot that supports caregivers.” Canadian Healthcare Technology, 30 Oct. 2017. Web. Accessed 5 Jan. 2018.

Siwicki, Bill. “AI chatbots might be the money-savers hospitals are looking for.” Healthcare IT News, 18 Sept. 2017. Web.

Solar, Rod. “Healthcare Chatbots Using Artificial Intelligence Likely to Replace Your Telephone Receptionist or Medical Secretary.” LiveseySolar, 16 May 2017. Web.

The Tincture Collective. “A Reality Check on Mobile Mental Health Apps with Dr. John Torous—The 5Q.” Tincture, 20 June 2016. Web.

Tractica. “Artificial Intelligence Revenue to Reach $36.8 Billion Worldwide by 2025.” Tractica. 25 Aug. 2016. Web. Accessed 8 Jan. 2018.

van Loon, Ronald. “Enterprise AI needs high data quality to succeed.” ReadWrite, 9 Oct. 2017. Web.

Wallace, Nick. “EU’s Right to Explanation: A Harmful Restriction on Artificial Intelligence.” TechZone360, 25 Jan. 2017. Web. Accessed 10 Jan. 2018.

Robotics Factory floor to the living room

What is robotics?The goal of robotics is to create process-focused intelligent automation, incorporating artificial intelligence and machine learning algorithms. Robotics encompasses both robotic process automation (RPA), i.e. the automation of virtual or clerical processes using software “taskbots,” and robotic automation of physical tasks.

The aim is to replace humans in a variety of repetitive, rule-based, or dangerous tasks. These tasks can refer to business processes like employee onboarding or processing accounts payable, or physical tasks like lifting heavy loads, inventory management, or entering dangerous environments. Although the aim is to substitute human effort on a task level, at the job level the goal is more to augment human performance, a concept known as “human-in-the-loop.”

The intent is to make human workers more efficient, safer, and more engaged by automating part of the work. An example of this would be employing a machine-learning system, like Watson, to read radiological images and make recommendations to a human radiologist, who manually reviews complex cases and signs off on the final determination.

— McKinsey & Company, “Where machines could replace humans—and where they can’t (yet)”

“We showed that currently

demonstrated technologies

could automate 45 percent

of the activities people are

paid to perform and that

about 60 percent of all

occupations could see 30

percent or more of their

activities automated. “


ROBOTICS: EVOLUTION


— Cynthia Breazeal, NOVA ScienceNOWdocumentary series on PBS

“If you look at the field of

robotics today, you can say that

robots have been in the

deepest oceans, they’ve been to

Mars, you know? They’ve been

all these places, but now they’re

just starting to come into your

living. Your living room is the

final frontier for robots.”

What’s new in 2018?Robotics is the convergence and evolution of two trends previously covered by Info-Tech: autonomous machines and automated cognition. Autonomous machines represents another industrial revolution, where humans can stop performing undesirable activities. Monotonous activities that require repetitive and extreme physical exertion can be done by robots. Automated cognition and RPA speak to an extension of the human mind. Ever increasing data sets require the outsourcing of certain computational processes to machines that can better respond to them.

Robots in 2018 are no longer machines that perform rote structured tasks or calculations – they are evolving to perform in dynamic environments. Robots are moving from working in isolation to working with humans. Robots are shifting from programmed to learned behavior through artificial intelligence (AI) and machine learning (ML).

In short, robots have crossed into the final frontier – our living rooms and our workplaces. Working, interacting, and living with robots has become all but an inevitability.

“The global market for RPA Software and Services is expected to grow to $1.2 billion by 2021 at a compound annual growth rate of 36%. The direct services market includes implementation and consulting services focused on building RPA capabilities within an organization.”

— Phil Fersht, “Enterprise Automation and AI will reach $10 billion in 2018 to engineer the OneOffice”

ROBOTICS: GROWTH


“RPA is a promising new development in business automation that offers a potential ROI of 30–200 percent—in the first year.”

— McKinsey & Company, ”The next acronym you need to know about: RPA (robotic process automation)”

ROBOTICS: IMPACT



Advances in artificial intelligence, machine learning,

internet of things, sensors, and natural language

processing are bringing robots into everyday life.

Evolution in these different domains of technology has

allowed robotics to become dynamic, human-facing,

and economical.

Compounding these technological advances are the

economic benefits that RPA can bring to organizations.

Employees are faced with an abundance of data and

increased complexity. Cost reduction, error avoidance,

quality of work improvements, and time returned to

employees are some of the most commonly cited

reasons organizations are pursuing investments in

RPA. — CiGen RPA, “Security Risks in Robotic Process Automation (RPA): How You Can Prevent Them”

“3Gem Research ran a survey on 250 heads of department in the US and the UK, in various sectors such as business services, finance, banking and manufacturing. According to the respondents, ‘productivity and 24/7 availability ranked 1st and 2nd highest in terms of the benefits (62% and 61% respectively), followed by 58.4% of respondents agreeing ‘the end of repetitive work’ as a top benefit.’”

ROBOTICS: SIGNALS & DRIVERS



ROBOTICS: BUSINESS OUTCOMES SCORECARD



Spot-on

High

Medium

Low



Automation: HighThey key benefit of robotics is its ability to automate mundane tasks

and move humans toward tasks that produce higher value. When line

of business managers were asked to name the biggest benefits of

robotics, 24/7 availability and increased productivity topped the list.

Despite a high level of automation, the technology will not be ready to

automate dynamic roles in the near future (CiGen RPA).


Integration: MediumRobots are becoming more dynamic than ever before. Yet the ability

for robots to interact with the machines of suppliers and consumers

is still far away. There are issues with standardization because all

systems involved in the process must be compatible. It goes beyond

basic connectivity between systems, such as software, and it will

take time for players along an industry vertical to align.



Intelligence: HighThe technological advances that have brought robots into our

everyday lives are a result of increasing robot intelligence. Machine

learning and artificial intelligence are becoming more advanced each

year, allowing an increased percentage of robots in the workforce to

learn and improve from experience. This experience will likely still be

confined to simple tasks in the near future.

Impact: Spot-onThere are great social implications for RPA. On one hand, the robots

promise to liberate individuals from mundane tasks, so that they can

focus on high-value, mentally stimulating activities. Robots can also

cause great pain. In the near future, many human workers may be

completely replaced by robots. It is predicted by 2025 that there will be

5.25 robots per 1,000 human workers. This will contribute to 3.4 million

lost jobs (McRae).


Scale: MediumWe will see the mass proliferation of robots in every facet of life within

the next 3 years. Cobots, robots that collaborate with humans to

complete tasks, now sell for an average of $30,000. By 2020, that price

will be $15,000, less than the price of most cars. The issue will not be

supply, but rather demand, in that robots may not provide the exact fit

organizations or customers are looking for (PwC, “Five ways robots are

going mainstream”).

ROBOTICS: RISK & UNCERTAINTY


Risk Considerations

Robots cannot easily adapt to small changes in a certain process. A change in a drop-down menu or the way data is entered can cause significant data corruption. At this point, the ability of a robot to recognize these small changes and make corresponding adjustments pales in comparison to that of a human. Changes to upstream and downstream steps in a process can easily disrupt a robot and result in heavy spending. For example, new regulations requiring minor changes to an application form could necessitate reconfiguration for all robots involved.

The scripts that program robots to perform a specific action should be treated like software code. Scripts should be designed using industry-standard methodologies that focus on reuse and abstractions. They should also be versioned and properly logged so that quality assurance processes can be executed against them. This will help organizations avoid the nightmare that may ensue if scripts are not designed for reuse and robots must be removed from business processes each time a small change is made to a process.


RPA implementation is nine times more expensive than the robots themselves. Uncertainties around enterprise architecture constraints and IT security concerns can easily drive costs up. We also don’t know how the current workforce will respond to an RPA implementation. If change management is conducted poorly, employees may get the sense that they are being replaced by robots (Deckard).

Action

• Infosys BPM was hired to assess opportunities for automation to improve the delivery of service for the HR function. Infosys studied each process and analyzed the steps in detail to determine the suitability of RPA. It categorized the level of RPA suitability into five groups: Very High, High, Medium, Low, and Nil.

• Suitability for RPA was determined by looking at processes by their volume, their average handling time, and risk of error. Infosys automated several processes identified during the analysis.

• An example of an automated process was the generation of offer letters for new employees. The process was a series of steps that had to be adhered to perfectly to ensure both accuracy and compliance to regulations. The process required 15 minutes per new employee because of the manual steps involved. The entire process was automated and processing time was reduced by 90% without compromising adherence to procedure and regulations.

Result

• When all the processes that were suitable for RPA were enhanced with automation, the HR function achieved significant monetary and time savings. There was a 70% reduction in manual effort, 55% average improvement in processing time, and $680,000 in net savings.

Situation

• Infosys BPM worked with a multinational corporation (MNC) to implement robotic process automation (RPA) in its human resources function.

• The HR function at the MNC handled a variety of responsibilities. Some of these included talent acquisition, talent administration, talent development, employee lifecycle management, employee experience, compensation, and benefits support.

• The client grew rapidly in recent years, and the HR function found it difficult to process an increasing volume of transactions. Processing these transactions demanded both speed to meet recipient demands and high attention to detail.

Case StudyIndustry:

Professional Services


Automation

ROBOTICS: CASE STUDY

Source: Infosys BPM Case Studies38


Recommendations• Change management must focus on the how RPA

can enhance the work experience of current employees.

• Manage scripts for robots like software code. Use industry-standard methodologies that focus on reuse and abstractions.

• Map out processes that involve RPA and robots so that when changes are made to downstream or upstream steps, implications can be easily determined.

ROBOTICS: RESOURCES &

RECOMMENDATIONS


For Premium Members• Know why it is time for insurance to learn through direct

adoption of autonomous machines• Enable your manufacturing crystal ball to predict and

prevent downtime in manufacturing robots• Prepare your organization for the automation that is

coming• Learn about the benefits that chatbots can bring to banking

Upcoming Research • Implement AI Into Your Manufacturing Process






https://www.infotech.com/research/it-is-time-for-insurance-to-learn-through-direct-adoption-of-autonomous-machines

https://www.infotech.com/research/enable-your-manufacturing-crystal-ball

https://www.infotech.com/research/automation-is-coming-this-is-how-you-and-your-organization-can-prepare-for-it

https://www.infotech.com/research/checking-accounts-chatbots-and-service-desk-optimization-in-banking


Bibliography

ROBOTICS: BIBLIOGRAPHY


Breazeal, Cynthia. NOVA ScienceNOW Documentary Series Transcript. November 21, 2006. PBS. Web. Accessed 22 Feb. 2018.

Chui, Michael, James Manyika, and Mehdi Miremadi. “Where machines could replace humans—-and where they can’t (yet).” McKinsey & Company. July 2016. Web. Accessed 22 Feb. 2018.

CiGen RPA. “Security Risks in Robotic Process Automation (RPA): How You Can Prevent Them.” Medium, 22 Nov. 2017. Web.

DeBrusk, Chris. “Five Robotic Process Automation Risks to Avoid.” MIT Sloan Management Review, 24 Oct. 2017. Web. Accessed 6 Feb. 2018.

Deckard, Mina. “RPA Implementation Anxieties? You’re Not Alone.” UiPath. 28 Sept. 2017. Web. Accessed 6 Feb. 2018.

Fersht, Phil. “Enterprise Automation and AI will reach $10 billion in 2018 to engineer the OneOffice.” Horses for Sources, 4 Nov. 2017. Web.

Infosys BPM. “Robotic Process Automation (RPA) simplifies HR processes for a global MNC.” Robotics Process Automation Case Studies. Infosys. Web. Accessed 6 Feb. 2018.

Kalakota, Ravi. “Robotic Process Automation and Analytics.” DZone.com, 26 Mar. 2016. Web. Accessed 6 Feb. 2018.

Knoll, Christian et al. “Robotic Process Automation – Robots conquer business processes in back offices.” Capgemini. 2016. Web. Accessed 6 Feb. 2018.

Lhuer, Xavier. “The next acronym you need to know about: RPA (robotic process automation).” McKinsey & Company. Dec. 2016. Web. Accessed 6 Feb. 2018.

McRae, Mike. “Unsettling New Statistics Reveal Just How Quickly Robots Can Replace Human Workers.” ScienceAlert, 31 Mar. 2017. Web. Accessed 6 Feb. 2018.

Morphy, Erika. “Will the Real Robotic Process Automation Please Stand Up?” CMSWire.com, 7 Dec. 2017. Web. Accessed 6 Feb. 2018.

Overby, Stephanie. “How robotic process automation threatens workers today.” CIO, 5 Jan. 2016. Web.

PwC. “Five ways robots are going mainstream.” Next In Tech, 22 Apr. 2017. Web.

Digital TwinA living model

What is a digital twin?When an expensive component of a critical mechanical system fails, operations can be seriously impacted. Work stops, a replacement must be ordered, and a technician scheduled. If only you could know two weeks in advance when this critical part would fail. What if the part itself could tell you?

Digital twin refers to the creation of digital models of real-life objects using data from sensors on the objects themselves. More than a simulation, a digital twin is a living model. It allows the user to inspect an object or physical system remotely, or interact with it in a sandbox environment.

The digital twin comes as a natural extension of the Industry 4.0 movement, at the convergence of increased IoT adoption, better and cheaper sensors, and exponential growth in computing power. These advances have allowed simulations and physics models to move from the design phase to monitoring, and even to predictive analytics.

The digital twin removes reliance on physical proximity and introduces the possibility of predictive analytics through simulation. The applications span multiple industries, from optimizing transportation routes, to monitoring performance in manufacturing, to a surgeon digitally exploring a copy of a patient's heart anatomy to prepare for the surgery.

— Colin J. Parris, VP of GE Software Research, GE Global Research

“A digital twin is a living

model that drives a

business outcome, and this

model gets real-time

operational and

environmental data and

constantly updates itself.”


What’s new in 2018?The digital twin is a technology that has been slowly coming into influence in the world of IoT and the digitized factory. The idea is not new – at its most basic, a computer-aided design image used to produce a physical object can be called a digital twin. The idea driving a revolution, however, is the reversal of this data flow, from physical object back into the model, allowing the object to be monitored and interacted with in a sandbox environment.

At the cutting edge of digital twin is the move from monitoring to prediction and optimization. Growing computing power is allowing for sophisticated analytics and simulations to be performed, allowing businesses to predict failure events and schedule maintenance. These data persist beyond the lifetime of the physical object – to inform the design of the next generation.

A fleet of digital twins, operating in concert, allows for the benefits to extend to the system level. Businesses can not only predict and mitigate failure at the part level, but also optimize physical asset use and allocation so that the efficiency of the system as a whole is increased. System-level optimization will produce the biggest impact of this trend in the near future.

DIGITAL TWIN: EVOLUTION


— Dimitri Volkmann

"It becomes a learning system.

The more you relate past and

present data and the more you

analyze it, the more knowledge

you have, and you can redeploy

that.

Even when you decommission

a valuable asset, you have all

the data and intelligence of its

whole lifetime, which you can

use to find patterns for the next

generation you're designing.“

“By 2020, 30% of G2000 companies will be using data from digital twins of IoT connected products and assets to improve product innovation success rates and organizational productivity, achieving gains of up to 25%.”

— Turner and MacGillivray, "IDC FutureScape: Worldwide IoT 2018 Predictions"

DIGITAL TWIN: GROWTH


“Optimizing operations using a digital twin can increase the efficiency of a power plant by 1.5%. This, in turn, can lead to significant reductions in carbon dioxide emissions.”

— Aucotec, “How Digital Twinning Makes Plants More Productive and Efficient”

DIGITAL TWIN: IMPACT



Digital twin is a consequence of exponential digitization in the Industry 4.0 movement. The proliferation of inexpensive sensors has enabled the capture of enormous amounts of data. Increasing computing power and growing adoption of cloud-based infrastructure has enabled us to work with these data sets effectively.

The economic power of digital twin is in its scale. Applying the optimization learned from one object to the entire fleet allows efficiency gains and cost savings to scale, resulting in large gains on the bottom line.

Increasing globalization of processes, from manufacturing to medicine, has created a need for decentralization and cloud-based accessibility. Digital twin fills this need by removing the reliance on physical proximity to the original physical object, enabling many functions to be performed remotely. A wealth of data combined with a sophisticated physics model of an object allows us to interact with the digital twin remotely, and ask questions with the same freedom we would if we had the object in hand.

— Aucotec, “3 Industries Being Transformed by Digital Twins”

“Last year, GE Renewable

Energy signed a 5-year

contract with two aging

wind farms in Japan with

the goal of boosting annual

energy production by 2%

and 5%. Even at 2%, the

technology is expected to

increase revenue by up to

$650,000 over the life of the

project.”

DIGITAL TWIN: SIGNALS & DRIVERS



DIGITA TWIN: BUSINESS OUTCOMES SCORECARD



Spot-on

High

Medium

Low

DIGITAL TWIN: BUSINESS OUTCOMES SCORECARD


Integration: Spot-onThe prevalence of multiple proprietary standards creates issues in the

sharing and therefore interpretation of data. The digital twin has the

potential to solve this by bringing data to a digital space in a workable

format, and where access can be controlled through APIs. This

impacts both analytical capabilities and the potential to integrate and

share data across systems. Should a business export its data, the

digital twin makes this a more valuable endeavor.


Automation: LowDigital twin can be used for automation, but in many cases, it

should not be. Although it is possible to automate control of a

physical part through its digital twin, currently this option demands

tight control, certification, and risk assessments. In many cases,

other technologies are able to perform automation better, at least

at the current state of technological development.

DIGITAL TWIN: BUSINESS OUTCOMES SCORECARD


Scale: HighThe maximum potential of the digital twin is realized at scale.

Lessons learned from one implementation can be applied to all

objects of that type. When you move from optimizing individual

components to optimizing systems, profit and savings become

exponential, feeding into business growth. Decentralization, enabled

by remote access to a digital twin, removes location-related

constraints around staffing and access, facilitating business

processes, and when interacting with a digital twin can replace a

destructive interaction with its physical counterpart, resources are

saved as well.


Intelligence: Spot-onA digital twin captures the data produced in the course of regular

operation with the goal of optimizing at the part and system levels. In

a manufacturing context, this can be used to optimize the process

itself. Currently, this is not automatic – a skilled person is still

required to make the determination – but the versatility of a digital

representation of an object and the ability to run simulations without

altering the functionality of the real system make this person's job

much easier.

Impact: MediumDigital twinning can render certain low-skill jobs redundant, and this

effect on human capital must be considered in implementing the

technology. However, the positive impact of improved operations on

customers, e.g. increased efficiency in power generation, cannot be

ignored.

DIGITAL TWIN: RISK & UNCERTAINTY


Risk Considerations

Increasing integration of data carries many benefits but also renders the system more vulnerable to attack. This is a risk worth taking, in light of the benefits, but measures must be taken to mitigate the risks. Potential risks to be on guard against are:

• Data theft – digital twin data falling into the wrong hands.

• Identity management – pairing a physical object with another object's digital twin, accidentally or maliciously.

• Data spoofing – malicious attack that creates false data.

The good news is that development of security protections has accompanied digital twin development. The digital ghost is a monitoring system with the sole purpose of detecting irregularities within a digital twin's data, indicative of tampering. The digital twin's sophistications come into play, as detection is done both on the basis of typical values and by calculating whether the observed values are possible given the physics of the system.


The amount of data captured by a digital twin creates tremendous value, but for whom? There are many stakeholders, from the original manufacturer of the part, to its current owners/operator, to the company contracted to service it. All these entities play some part in generating the data, and the coming years will see disputes over how data should be divided along this value chain.

Action• GE provides remote maintenance and diagnostic services for

airlines through digital twin technology.

• By incorporating the wealth of data generated by each engine into its digital twin, it is possible to track real-time wear patterns, predict when failure will occur, and re-route the engine to a less taxing flight schedule to extend its service life before the maintenance window.

• GE builds a fleet of digital twins to correspond to the physical fleet of engines. This enables the use of predictive analytics and simulations on a system level to determine optimal flight distribution. The result is maximized efficiency not just for a given engine, but for the entire fleet.

Result• Using a digital twin to detect anomalous functioning predicts

potential failure 15-30 days in advance.

• Predictive analytics used to estimate the lifespan of parts saves $44 million in maintenance costs.

• $10 million in savings results from optimizing engine flight routes with respect to maintenance schedules and service locations.

Situation• Jet engines experience differential wear

depending on factors such as weather, flight duration, locale, and even pilot flight style.

• Maintenance is costly, but so is unexpected failure and downtime. Optimization of engine use and service-window timing is essential to maximize ROI.

• Airlines are looking for a data-driven approach to optimize operations.

Case StudyIndustry:

Aviation


Intelligence, Scale

DIGITAL TWIN: CASE STUDY

Source: GE Predix Technology Brief51


Recommendations• Even if you don’t know what you will do with the data,

start capturing it from day one. • Be aware that other stakeholders will be doing the

same. Be on the lookout for data ownership and API clauses in contracts, and get ready to negotiate shared ownership and monetization.

DIGITAL TWIN: RESOURCES &

RECOMMENDATIONS


For Premium Members• Develop a culture of innovation in your organization• Build a case for radical disruption in manufacturing• Identify IoT quick wins to build a solid foundation for digital

twinning• Learn how IoT is laying the foundation of smart cities• Use IoT to make chemicals manufacturing smarter






https://www.infotech.com/research/a-culture-of-innovation-in-manufacturing

https://www.infotech.com/research/continuous-improvement-may-not-be-good-enough

https://www.infotech.com/research/get-started-with-internet-of-things-with-a-quick-win-pilot

https://www.infotech.com/research/urbanization-and-the-internet-of-things-laying-the-foundation-for-smart-cities

https://www.infotech.com/research/a-new-compound-is-forming-with-the-internet-of-things-and-chemicals-manufacturing


Bibliography

DIGITAL TWIN: BIBLIOGRAPHY


Aucotec. “3 Industries Being Transformed by Digital Twins.” Aucotec Blog, 28 Aug. 2017. Web.

Aucotec. “How Digital Twinning Makes Plants More Productive and Efficient.” Aucotec Blog, 19 July 2017. Web.

Biba, Erin. “The jet engines with ‘digital twins.’” BBC Autos, 14 Feb. 2017. Web.

Bouchard, Jerome. “Digital Twins: Identical, But Different.” Oliver Wyman, Sept. 2016. Web.

Briodagh, Ken. “IoT Time Podcast S.3 Ep. 3 GE Digital Twin.” IoT Evolution World. 17 Jan. 2018. Web. Accessed 29 Jan. 2018.

Buntz, Brian. “GE Exec on Predix Platform, Digital Twins and Diversity.” IoT Institute, 30 Jan. 2018. Web..

“Digital twins - rise of the digital twin in Industrial IoT and Industry 4.0.” i-SCOOP. Web. Accessed 22 Nov. 2017.

Dignan, Larry. “GE aims to replicate Digital Twin success with security-focused Digital Ghost.” ZDNet, 24 Mar. 2017. Web. Accessed 29 Jan. 2018.

GE. “Digital Twins: The Bridge Between Industrial Assets and the Digital World.” GE Digital Blog, 30 June 2017. Web.

GE. “Digital Twin At Work: The Technology That’s Changing Industry.” GE Digital Blog, 16 Dec. 2016. Web.

GE. “Digital Twin.” Predix Technology Brief, vol. 1, Feb. 2017. Predix. Web.

GE. “GE Digital Twin: Analytic Engine for the Digital Power Plant.” GE Power Digital Solutions, 2016. Web.

Geissbauer, Reinhard, et al. “Digital Factories 2020: Shaping the future of manufacturing.” PwC, Apr. 2017. Web.

Grieves, Michael and John Vickers. “Digital Twin: Mitigating Unpredictable, Undesirable Emergent Behavior in Complex Systems.” Transdisciplinary Perspectives on Complex Systems, Springer, 2017, pp. 85–113.

Grieves, Michael and John Vickers. “Digital Twin: Mitigating Unpredictable, Undesirable Emergent Behavior in Complex Systems (Excerpt).” Web. Accessed 18 Jan. 2018.

Gutierrez, Carlo and Alex Khizhniak. “Digital Twins for Aerospace: Better Fleet Reliability and Performance.” Altoros, 3 Aug. 2017. Web.

Hamilton, Dean. “Seeing double: why IoT digital twins will change the face of manufacturing.” Network World, 25 Aug. 2017. Web.

Honrubia, Mario. “Industrial IoT is booming thanks to a drop in Sensor Prices.” Ennomotive, 17 Aug. 2017. Web.

Kimpel, Nathan. “Digital twin technology is shaping the future of connectivity.” Certification Magazine, 9 Jan. 2018. Web.

Maravich, John Nash. “Digital Twins or Digital Doppelgangers?” ndustrial.io Blog, 8 Aug. 2017. Web.

Bibliography

DIGITAL TWIN: BIBLIOGRAPHY


Miller, Ron. “Cheaper Sensors Will Fuel The Age Of Smart Everything.” TechCrunch, 10 Mar. 2015. Web. Accessed 29 Jan. 2018.

Parris, Colin. “How A 10-Minute Conversation With A Machine Saved $12 Million.” GE Reports, 17 Jan. 2017. Web.

Pettey, Christy. “Prepare for the Impact of Digital Twins.” Smarter With Gartner, 18 Sept. 2017. Web.

Rao, Anand. “Digital twins beyond the industrials.” PwC Next In Tech, 13 Feb. 2017. Web.

Shetty. “How to Use Digital Twins in Your IoT Strategy.” Smarter With Gartner, 8 June 2017. Web.

Stackpole, Beth. “Digital Twin Spawns Automation Efficiencies.” Automation World, 6 June 2017. Web. Accessed 8 Feb. 2018.

Stöcker, Carsten. “Implementing First Industry 4.0 Use Cases with DAG Tangle—Machine Tagging for Digital Twins.” Medium, 24 June 2017. Web.

Tam, Miguel. “The Democratization of the Digital Twin.” Propel, 23 Aug. 2017. Web.

Turner, Vernon, Carrie MacGillivray and Patrick Gorman. “Connecting the IoT: The Road to Success.” IDC Infographic. Web. Accessed 25 Jan. 2018.

Turner, Vernon and Carrie MacGillivray. “IDC FutureScape: Worldwide IoT 2018 Predictions.” IDC. 2017. Web.

Volkmann, Dimitri. “The Rise of Digital Twins.” LinkedIn, 7 Nov. 2016. Web. Accessed 20 Jan. 2018.

Wired Brand Lab. “Digital Twin: Bridging the physical-digital divide.” IBM Internet of Things Blog, 1 Nov. 2017. Web.

Blockchain 2.0The technology beyond the cryptocurrency hype

What is blockchain 2.0?Blockchain is a distributed computing principle that removes reliance on

a single master copy of a digital record by keeping a "distributed ledger" –

multiple duplications of a record, all stored on different devices.

This is a fundamental departure from traditional approaches that rely on

keeping a single central master record and protecting it using restricted

user permissions. It goes beyond cryptocurrency. The technology

underlying it – blockchain – is what is truly valuable. Blockchain's value

is in its universality. It can be applied to almost any situation that calls for

keeping a secure record. Examples include shipment tracking, recording

asset ownership, and legal contracts.

Other capabilities beyond the distributed ledger are being explored and

added to the blockchain universe. Smart contracts and proof of stake are

the new frontier for blockchain. These innovations add new capabilities to

blockchain technology and enhance the applicability of the distributed

ledger.

— Larry Summers, US Former Treasury Secretary (quoted in Guarda)

“I’m reasonably confident…

that the blockchain will

change a great deal of

financial practice and

exchange 40 years from

now. Blockchain and all

that followed from it will

figure more prominently in

that story than will bitcoin.”


What’s new in 2018?Previously, the focus of blockchain was its ability to provide distributed validation. The blockchain refers to a distributed ledger that augments dispersed consensus building. Consensus is built by sharing a transaction with a distributed network of computers that run algorithms independently to verify that the transaction has occurred. Once a transaction has been confirmed by the network, a “block” of data is added to the chain. After additional blocks are added, it becomes nearly impossible to change or remove.

Blockchain technology has evolved and experts are experimenting with additional applications to enhance its capabilities. Smart contracts and proof of stake, a new method to validate transactions on the blockchain, are two particularly exciting enhancements.

Experts are working to overcome challenges with scalability on blockchain network transactions. Smart contracts are contracts written in computer code that enable automatic execution of the contract once a set of conditions is met. Wide-scale implementation of smart contracts will allow for increased decentralization, lessen contract disputes, and enhance privacy (Gupta).

BLOCKCHAIN 2.0: EVOLUTION


— Deloitte US, “Blockchain survey 2017”

“42% of executives believe

blockchain will disrupt their

industry. 55% of executives say

they will lose competitiveness if

they do not adopt.”

“The global blockchain market size is expected to grow to USD 7,683.7 million by 2022, at a Compound Annual Growth Rate (CAGR) of 79.6%.”— Business Wire, "Global Blockchain Market 2017-2022“

*These numbers represent the underlying technology that supports cryptocurrencies, blockchain. This does not include the value of cryptocurrencies.

BLOCKCHAIN 2.0: GROWTH


“20 percent of central banks will be using Blockchain technology by 2019, and 40 percent will have active Blockchain applications within a decade.”

— Cambridge Centre for Alternative Finance, referenced in Buck

BLOCKCHAIN 2.0: IMPACT



Proof of Stake

Proof of work (PoW) is the current method by which most public blockchains reward

individuals for validating transactions and adding "blocks" to the blockchain. PoW

involves solving a computational puzzle; the group (miner) that solves the puzzle first will

receive the rewards. Mining requires a great deal of computing power, and as more

miners try to solve the puzzle, electricity consumption increases.

Given that profitability is a function of the electricity cost, mining has ignited a race to

secure the cheapest power possible. Some miners are cutting corners, resorting to low-

cost coal or hydroelectric generators, and siphoning from power plants. A bitcoin mine

has been reported to emit the same amount of carbon dioxide as a Boeing 747. Mining is

becoming environmentally hazardous, and the rate of power consumption is growing

unsustainable. As of December 2017, Bitcoin mining power consumption was equivalent

to the power consumption of the country of Serbia (Irfan).

Proof of stake (PoS) is a new way to validate transactions on a public blockchain that will

mitigate the adverse impacts of PoW. Miners will still exist, but will be limited to mining

their "stake" in any transaction. For example, a miner owning 3% of bitcoins will only be

able to receive 3% of the validation reward. This lessens competition for increasing

computational power in the race to obtain a validation reward. Validation rewards will be

spread across the different miners based on their "stake“ (Momoh).

— Malmo, “One Bitcoin Transaction Now Uses as Much Energy as Your House in a Week”

“As of November 2017, Bitcoin

miners used 215 kilowatt

hours to validate one

transaction. The average

American household

consumes 901 kilowatt hours

per month.”

BLOCKCHAIN 2.0: SIGNALS & DRIVERS


Smart Contracts

Smart contracts are contracts that can be executed automatically once certain

conditions have been met, and they have the potential to deliver several key benefits.

Smart contracts facilitate the exchange of assets, including money, property, and shares,

without the use of costly intermediaries. Each year, $150 billion US worth of crude oil

transactions are disputed. Information is easily lost through processes that involve

multiple parties, across great geographic distances, requiring the tracking of thousands

of distinct assets (e.g. barrels of oil). Compare this to a smart contract that can be set up

to transfer funds automatically upon receipt of the barrels of oil. The transaction can

include tokens representing the underlying asset (e.g. a barrel of oil), issued by a trusted

authority for the needs of the participating companies. The tokens would remain digitally

attached to their underlying asset throughout the supply chain. Once the transaction is

complete, the smart contract is triggered and tokens change hands (Cann).

Smart contracts protect a party's anonymity, only revealing the information necessary to

complete the transaction. In 2017, 55% of individuals surveyed stated that they declined

to buy items online because of reservations about how third parties would use their

identities. Likewise, 82% stated that they would not be comfortable with the sale of their

data to third parties in exchange for speed, convenience, product range, home delivery, or

pricing comparisons. Smart contracts can be coded to provide an avenue to share only

the necessary information, alleviating consumer concerns (KPMG).

— Panetta, “Why Blockchain’s Smart Contracts Aren’t Ready for the Business World”

It is estimated “that by 2022,

ratified unbundled (that is,

defined impact) smart

contracts will be in use by

more than 25% of global

organizations.”

BLOCKCHAIN 2.0: SIGNALS & DRIVERS



BLOCKCHAIN 2.0: BUSINESS OUTCOMES SCORECARD



Spot-on

High

Medium

Low



Integration: Spot-onBlockchain is best suited for organizations with complex value chains

and multiple partners, and those wishing to improve data consistency.

Blockchain's major benefits integrate disparate systems and

resources. By providing a distributed ledger, blockchain gives each

partner in the chain access to an up-to-date copy of the data. Data will

no longer go unverified across separate systems.


Automation: HighDistributed ledger technology and smart contracts enable a level of

automation in numerous industries and across numerous

processes. These technologies enhance automation through the

elimination of intermediaries and record disputes. Time is also

saved from auditing records by the distributed ledger. Automation

will be further enhanced when blockchain converges with other

technologies such as AI, robotics, and internet of things.

63



Scale: MediumCurrent blockchain technology providers and cryptocurrencies that

leverage blockchain technology are not equal to the scalability of

traditional providers. Bitcoin can provide 6 transactions per second,

Ethereum can provide 20 transactions per second, and Visa can

provide 1,667 transactions per second. There are blockchain

networks with the same scalability as traditional providers, but each

can only transact a specific process (Steemit).


Intelligence: LowThere are no current instances of blockchain technology leveraging

past transactions to optimize future transactions without the

assistance of human analysis. As applications of blockchain increase,

this could be a field for future development.

Impact: Spot-onAt its core, blockchain provides a digital mechanism for transparently

recording and viewing any transaction ever made on a ledger. It

operates through a decentralized computing network with a record of

transactions that cannot be hacked or altered. While the internet

serves as an information exchange, blockchain offers a “value

exchange.” The highest value will be achieved in parts of the world

where trust of centralized institutions is low. Blockchain's

decentralization and immutability holds centralized institutions

accountable for their records and enables people to exchange value

without intermediaries.

64

BLOCKCHAIN 2.0: RISK & UNCERTAINTY


Risk Considerations

Proof of Stake

While proof of stake (PoS) is a promising answer to the power consumption

limits of proof of work, it is not without a downside. Perhaps most alarmingly,

PoS creates a situation where the rich get richer.

PoS rests on the concept that each validating user will receive a reward equal to

the amount of currency they have. If PoS were used by the bitcoin blockchain,

an individual owning 3% of bitcoin would receive 3% of the reward. Each

validator grows their share in the total pool of currency by the amount they

currently own. This means that those who start with less currency will have a

hard time catching up.


Proof of Stake

PoS could decimate the up-and-coming

cryptocurrency mining industry, rendering

mining rigs obsolete. Mining companies that

have invested billions of dollars in this

specialized hardware may not recover. This

could lead to serious fluctuations in the

pricing of cryptocurrencies, and in turn affect

the economy as a whole.

BLOCKCHAIN 2.0: RISK & UNCERTAINTY


Risk Considerations

Smart Contracts

Smart contracts that have been written flawlessly promise significant

benefit, but the technology is immature. Smart contracts execute based on

written code, and flaws in this code can be exploited with devastating

financial repercussions for users. The fact that actions executed by the

smart contract are immutable only compound these risks. The only proven

way to alleviate the damage caused by these code flaws is to have the

majority stakeholders in the blockchain network intervene. This was

demonstrated with Ethereum's DAO hack.


Smart Contracts

There is no means of ensuring that the code in

smart contracts is flawless, and errors in even a

single line of code can be disastrous. Reversal

of damages caused by contracts is ad hoc, and

at the discretion of the majority stakeholders in

a public blockchain. Losses that result from

contract code flaws should be treated as

definite and irreversible.

Situation• “The DAO” is the name of a particular DAO, conceived of and programmed by

the team behind German start-up Slock.it – a company building “smart locks” that let people share their things (cars, boats, apartments) in a decentralized version of Airbnb.

• The DAO launched with a 28-day funding window. It became the largest crowdfunding in history, raising over $150 million. This was the equivalent of 12.7 million ether.

• During the crowdsale, several people expressed concerns that the code was vulnerable to attack (Siegel).

Action• An attacker managed to drain more than 3.6 million ether into a “child DAO” that

had the same structure as The DAO. The code of the smart contract itself is meant to be the ultimate arbiter of "the deal" it represents, and any flaws in the code can allow for funds to be stolen with the invested parties unable to do anything to stop the hackers.

• Two solutions were proposed to resolve the issue: One was a soft fork. This installs a “switch” in the basic Ethereum code that prevents the movement of any ether out of the DAO or its children. The second was a hard fork. It asked the miners to completely unwind the theft and return all ether to The DAO, where it could be redeemed by token holders automatically, thereby ending The DAO (Madeira).

Result• The vast majority of people (89%) voted for the hard fork, and it was approved

by Ether holders.

• The investors were only able to recover their funds with the cryptocurrency equivalent of a central bank bailout from the Ethereum Foundation. This attack demonstrates the serious nature of smart contract risks, and the cost required to respond to an attack.

Background

The Ethereum network runs a blockchain that allows people to exchange tokens of value, called ether. Ethereum also allows people to write smart contracts and input them onto the network.

DAO stands for decentralized autonomous organization. Its goal is to codify the rules and decision making of an organization. This eliminates the need for documents and people in governance, creating a structure with decentralized control.

Here’s how it works:• A group of people writes the smart contracts (programs)

that will run the organization.

• There is an initial funding period, when people add funds to the DAO by purchasing tokens that represent ownership. DAOs created on Ethereum collect ether from investors and distribute DAO tokens. Sometimes, this is called a crowdsale, or an initial coin offering (ICO).

• When the funding period is over, the DAO begins to operate.

• People can then make proposals to the DAO on how to spend the money, and the members who have bought in can vote to approve these proposals (Siegel).

Case Study (1/2)

Industry:

Technology


Automation

BLOCKCHAIN 2.0: CASE STUDY

Risks of Smart Contracts

67

Action• The Estonian government partnered with Guardtime, a company specializing in

blockchain for government security. The government deployed a blockchain called "KSI" through its networks.

• The Estonian government has worked with Guardtime to store and secure all of the country's health records on the blockchain. Every update to healthcare records and every instance of access to healthcare records is now registered in the blockchain (Williams-Grut).

• Using blockchain, the Estonian government has created the Electronic Coordination System for Draft Legislation. Every law drafted since February 2003 has been uploaded onto the system. Readers can now view submitted legislation and see status and changes made to legislation in one location.

Result• Healthcare records are stored on the blockchain, making it impossible for

government, doctors, and hackers to change or tamper with a citizen’s record. Citizens can also sue if they discover their records have been accessed without a just reason.

• Blockchain technology contributed to Estonia achieving the record for second-fastest court proceedings in Europe. Interpreting laws is easier when the most up-to-date laws are accessible in one place, saving valuable time. Blockchain technology also helps ensure that involved parties can only access the information they are entitled to, and can validate who sees what information and when (e-Estonia).

Situation

• In 2007, Estonia experienced a cyberattack across most of the country’s critical government information technology infrastructure. The attack crippled dozens of government sites and jeopardized countless document records.

• At the time of attack, Estonia was one of the most "wired" countries in the world. The attack prompted Estonia to look for ways to prevent future attacks.

• A digital society is by its nature exposed to cyber-attacks. Since the 2007 attacks, Estonia has invested in blockchain technology to ensure government data integrity and protect it against threats (Davis).

Case Study (2/2)

Industry:

Government


Impact, Automation

BLOCKCHAIN 2.0: CASE STUDY

Blockchain in Government

68


Recommendations• Set up smart contracts in non-critical processes first or re-

use existing smart contracts that have been tried and proven.

• Uncover what business processes in your organization may be automated with smart contracts. Focus on processes that require multiple parties.

• For organizations that leverage distributed applications, ICOs, or work with vendors building distributed applications on a public blockchain, keep an eye on the PoS shift. Any unforeseen issues that occur with the shift to PoS can impact vendors that work with these public blockchains. If your organization works with these vendors, this can impact your business.

BLOCKCHAIN 2.0: RESOURCES &

RECOMMENDATIONS


For Premium Members• Learn about blockchain basics and underpinning blockchain

technology. • Explore Blockchain: Foundational Technology of the Future

to understand the disruptive nature of blockchain. • Explore Blockchain in Oil and Gas






https://www.infotech.com/research/blockchain-basics

https://www.infotech.com/research/blockchain-foundational-technology-of-the-future

https://www.infotech.com/research/explore-blockchain-in-oil-and-gas


Bibliography

BLOCKCHAIN 2.0: BIBLIOGRAPHY


Allen, Eddie. “The profound impact of blockchain integration.” IBM IT Infrastructure Blog, 8 June 2017. Web.

Berke, Allison. “How Safe Are Blockchains? It Depends.” Harvard Business Review, 7 Mar. 2017. Web.

Buck, Jon. “Central Banks and Govts Are Pro-Blockchain, 80% Consider Centralized Cryptocurrency.” Cointelegraph, 23 Sept. 2017. Web. Accessed 6 Feb. 2018.

Business Wire. “Global Blockchain Market 2017-2022 - Focus on Payments, Exchanges, Smart Contracts, Documentation, Digital Identity, Supply Chain Management, and GRC Management - Research and Markets.” Business Wire. 8 Jan. 2018. Web.

Cann, Geoffry and Emily Catmur. “Blockchain: Overview of the potential applications for the oil and gas market and the related taxation implications.” Deloitte. April 2017. Web. Accessed 7 Feb. 2018.

Crypto Central. “Bitcoin + SegWit, Ethereum, Dash and Ripple vs Visa and PayPal – Transactions per Second.” Steemit, 7 July 2017. Web.

Davis, Joshua. “Hackers Take Down the Most Wired Country in Europe.” WIRED. 21 Aug. 2007. Web. Accessed 6 Feb. 2018.

Desjardins, Jeff. “The Power of Smart Contracts on the Blockchain.” Infographic from Etherparty. Visual Capitalist, 24 Oct. 2017. Web.

Deloitte US. “Innovation: blockchain survey 2017.” Deloitte United States, 2017. Web. Accessed 22 Feb. 2018.

e-Estonia. “Blockchain – security control for government registers.” Estonia Digital Society. Web. Accessed 6 Feb. 2018.

e-Estonia. “KSI Blockchain.” Estonia Digital Society. Web. Accessed 6 Feb. 2018.

Finley, Klint. “A $50 Million Hack Just Showed That The DAO Was All Too Human.” WIRED, 18 June 2016. Web. Accessed 6 Feb. 2018.

Greenfield, Robert. “Vulnerability: Proof of Work vs. Proof of Stake.” Medium, 24 Aug. 2017. Web.

Guarda, Dinis. “12 Bitcoin and Blockchain Thoughts and Quotes You Need to Read.” Intelligent Head Quarters, 14 May 2016. Web.

Gupta, Vinay, “A Brief History of Blockchain.” Harvard Business Review. 28 Feb. 2017. Web. Accessed 6 Feb. 2018.

Irfan, Umair. “Bitcoin’s price spike is driving an extraordinary surge in energy use.” Vox, 2 Dec. 2017. Web.

KPMG. “Companies that fail to see privacy as a business priority risk crossing the ‘creepy line.’ KPMG, 6 Nov. 2016. Web.

Lamb, Paul. “Transforming the Social Sector: Bitcoin and Blockchain for Good.” Huffington Post, 19 Sept. 2017. Web.

Bibliography

BLOCKCHAIN 2.0: BIBLIOGRAPHY


Madeira, Antonio. “The DAO, The Hack, The Soft Fork and The Hard Fork.” CryptoCompare. 26 July 2016. Web. Accessed 6 Feb. 2018.

Malmo, Christopher. “One Bitcoin Transaction Now Uses as Much Energy as Your House in a Week.” Motherboard, 1 Nov. 2017.

Marvin, Rob. “Blockchain in 2017: The Year of Smart Contracts.” PCMag. 12 Dec. 2016. Web. Accessed 6 Feb. 2018.

Momoh, Osi. “Proof of Stake (PoS).” Investopedia, 3 May 2017. Web.

Panetta, Kasey. “Why Blockchain’s Smart Contracts Aren’t Ready for the Business World.” Smarter With Gartner, 26 June 2017. Web.

Pirbhai, Raza. “Tech for Good: The Social Impact of Blockchain.” Ananas Blog, 6 Dec. 2017. Web.

“Proof of Work vs Proof of Stake: Basic Mining Guide.” Blockgeeks, 15 Mar. 2017. Web.

Siegel, David. “Understanding The DAO Attack.” CoinDesk, 25 June 2016. Web.

silent.screamer. “Is Proof of Stake really the future for bitcoin and altcoins mining?” Steemit, 10 Jan. 2017. Web.

Williams-Grut, Oscar. “Estonia is using the technology behind bitcoin to secure 1 million health records.” Business Insider, 3 Mar. 2016. Accessed 6 Feb. 2018.

Contributors

2018 CIO TRENDS


Tom AndriolaCIOUniversity of California

Tom brings over 25 years of experience as a global business and technology executive. Those years have been spent in a variety of roles ranging from a business transformation leader for a multi-billion dollar enterprise to a global CIO with staff around the world to being employee #1 of a new business.

Ken BaineyFormer CIOAlberta Government

Ken is a retired senior IT professional with 35 years of industry experience. He has functioned in the roles of CIO, senior performance manager, enterprise/systems architect, and IT management consultant at many organizations in Canada and the United States. He has leadership experience in performance management and implementing numerous business application systems in private, public, and academic sectors. Ken is a researcher, speaker, lecturer and author of two highly acclaimed textbooks on IT project management and IT performance management.

Rui DongAngel Investor, Blockchain Advisor, Speaker

Rui writes about the blockchain industry from the perspective of an investor, focusing on cutting through the hype to underlying technological transformations. He has a diverse background spanning actuarial science, psychology, and full track web development. He is a successful portfolio fund manager, focusing on cryptocurrency.

Contributors

2018 CIO TRENDS


Dean HamiltonGeneral Manager, Service Enablement Business UnitAccelerite

Dean is an engineer, serial entrepreneur, and technology executive with over 30 years of innovation experience. Dean has led successful technology innovation efforts in the areas of next-generation networking, cloud orchestration, machine-to-machine communications, internet of things, and enterprise network security, in both large public companies and venture-backed start-ups.

Jas KhehraCo-FounderEspresso Claims

Jas Khehra is the Co-Founder of Espresso Claims, a start-up looking to help foster further innovation in the insurance industry. He holds a Master's in International Business from Hult International Business School, where he spent time in San Francisco and the UAE implementing market penetration strategies for start-ups. He is part of Cloud Security Alliance (San Francisco Chapter) currently as a research and contributor to blockchain use cases within the health sector.

Christopher MalmoFreelance Reporter and Communications Officer,BC Financial Institutions Commission

Christopher Malmo is a freelance reporter and communications officer at the BC Financial Institutions Commission. He has been covering blockchain technology, digital and trade policy, and virtual reality for Motherboard since 2013. In 2015, Chris was the first reporter to publish a story in a mainstream publication about bitcoin's extraordinary energy consumption, and has since written updates examining Ethereum energy use and a comparison of gold mining and bitcoin mining's energy footprints.

Contributors

2018 CIO TRENDS


Wayne SadinChief Information & Digital OfficerAffinitas Life

Wayne is an experienced executive who assesses complex IT and business environments, then develops tactical and strategic plans to transform IT into a strategic asset. Wayne has experience managing rapid growth and changes in business strategy and technology.

Shane SaundersonPhD student, Human-robot interaction, University of TorontoFormer VP, IC/Things at Idea Couture

A veteran of the start-up space, Shane has a background in product design, mobile robotics, connected devices, and automation. Shane holds an MBA in Technology and Innovation from the Ted Rogers School of Management at Ryerson University in Toronto and a B. Eng., Mechanical from McGill University in Montreal.

Elton TuckerIT Architect and Strategist

Elton has over 20 years’ experience in IT, including ITIL and operations, infrastructure design, project management, enterprise architecture, cloud strategy, team leadership, and executive management.

Contributors

2018 CIO TRENDS


Jean-Philippe VergneAssociate Professor of StrategyIvey Business School, Western University

Dr. Vergne's research focuses on organization theory and strategy, with expertise in cryptocurrency, blockchain, and FinTech. He is the founding coordinator of the Crypto Capitalism Center and the co-Director of the Scotiabank Digital Banking Lab at Ivey Business School. He has co-authored a book entitled The Pirate Organization: Lessons from the Fringes of Capitalism, published with Harvard Business Review Press, and regularly speaks at major conferences, including Google Zeitgeist, TEDx, and South by Southwest Interactive. You can find him on Twitter @PirateOrg.

Dimitri VolkmannIndustry Expert in Business Data and (Industrial) IoT

Dimitri is a Products and Markets Executive with 25+ years of expertise in Information Technology, and specifically on how to build strategy and drive product management and product marketing teams to bring technology products to market successfully. He is considered a leader in enterprise applications platforms, enterprise collaboration and social software, software as a service, cloud computing, and digital twin technologies.

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