Davos
The deep social and business tensions created by the growing importance of digital technologies is a major theme at Davos this year. The speed and depth of the connected world is transforming how people manage their lives, but also how companies operate and governments define public policy.
People are struggling to define the corporate dangers and opportunities, and others are looking at how societies in different parts of the world are using the new technologies with very different effects, and how all this changes what people want in their laws.
Two very different fringe meetings yesterday offered clear insights on how companies are handling the digital world.
Chinese espionage
Eric Schmidt, the executive chairman of Google, surprised his audience when he said that 80 percent of illegal digital access to private websites is organized industrial espionage by the Chinese.
“They are very good at it, and they are trawling the world looking for useful technologies that they can steal and replicate in China. It is major issue that will have to be addressed,” said Schmidt.
He also spoke of the benefits of the post-Snowden debate in the US on privacy, pointing out that before the mass leaking of government information, there were rumours that government spying was happening, but they were never substantiated and therefore no-one could take action.
“At least now we are having the proper debate. President Obama has issued some new guidelines in his speech this week, and he appears to be sincere about them,” said Schmidt.
Schmidt summarised the required answers in three steps. First, the government should tell people what it is doing. Second, the actions should be appropriate to the use. And thirdly, the actions should be doing some good. Schmidt was confident that oversight is now underway and that these issues will get resolved.
But he added that the privacy debate is a luxury that is only important in democracies. The vast majority of the world is run by autocratic and despotic governments, he said, and in these societies people expect to be spied on by their government and have little hope of privacy.
In that situation, people want access to the internet far more than they worry about privacy, and their being connected is a much greater benefit than their loosing some privacy, Schmidt said.
Looking ahead, he was hopeful of the global spread of free access to information. He said that Google and others have encrypted their data stores to make them much more secure, regardless of regulation. And that this level of encryption means that in the future even the most rigorous censorship of the internet will fail as the encryption technology will defeat the censors, he said with particular reference to China.
Hybrid power
At the Bain and Company breakfast, Clayton Christensen, the professor of business administration at Harvard Business School, and Darrel Rigby of Bain and Co spoke of the importance of using hybrid technologies as companies try to get their timing right as they manage their inevitable transitions in technology.
They both spoke of the growing power of the digital economy, but argued strongly that companies should not jump to embrace their digital opportunities and abandon their traditional physical businesses. Most companies will need to run both digital and physical businesses side by side and the real trick is the allow each to strengthen the other, and to recognize that different markets need different answers.
Rigby gave the example of the US retailer Sears which moved too fast into online retailing while letting their traditional stores fail. The result is that the company does not have enough income to take advantage of its online opportunities.
Christensen gave the example of the electric car, which is a product that cannot deliver what consumers want. “Who wants to buy a car that cannot go fast and cannot travel the full distance,” he said. “This is why the hybrid is doing so well, as electric technology slowly develops and is supported by traditional petrol engines”.
He said this was exactly what happened when shipping switched from sail to steam. The first steam ships on the early 1800s were only for the inland waterways as they were developed on the Hudson River in the US. Crossing the Atlantic was thought to be much too dangerous, so sail dominated ocean boats and steam the inland waterway until the hybrid sail/steam ships of the late 1800s started running across the Atlantic for more than 30 years until steam finally took over completely.
The point both speakers were making was that hybrid technologies and strategies are important during transitions, and that this hybrid period can run for a very long time, even in the digital age with its very fast changes.
