Connected world vision
We live in an increasingly connected world, a world in which everyone and everything transmits a signal. The confluence of sensors, 5G mobile, hybrid cloud and intelligent technology will transform companies, disrupt industries and enrich our daily digital lives. Intelligent systems derive insight from data. Low-latency edge computing systems enabled by 5G will transmit insight immediately and locally to where it matters most.
Mobile-first companies were the leading innovators in the previous technology generation. Data-first companies will have the starring role in the next generation. This is a significant opportunity: McKinsey has said that the Internet disrupted industries representing 15% of GDP, and the internet of things will disrupt the rest. Earlier data disruptors replaced their physical world analogues; digital books and music are two examples. In the next generation, data-first companies will use data to control the physical world.
A connected world offers unprecedented opportunity for innovation. Entrepreneurs may reimagine the future across industries that were previously beyond the scope of venture capital. Technology is morphing from enabling industries to disrupting them. Since the integrated circuit was first conceived in 1949, technology has helped companies gather, analyse and process data. Where IBM, Microsoft and SAP emerged as corporate allies, Amazon, Uber and others threaten industry incumbents.
In a connected world, corporate incumbents have a choice: to disrupt or to be disrupted. Companies that embrace a data-first world can deepen customer engagement, consolidate positions in their core business, and extend into new markets. Laggards risk disruption as data-first companies alter traditional value chains and value propositions with startling speed.
5G: Enabling the connected world
Fifth-generation mobile, or 5G, is the backbone for the connected world. While prior wireless generations primarily targeted consumers, 5G is a multipurpose standard with industry and enterprise as primary beneficiaries. 2G enabled wireless voice communications and messaging while 3G and 4G enabled the mobile internet. For the first time, 5G provides “industrial-grade wireless” with performance improvements across three dimensions: high transmission speeds, low latency, and high-density connectivity.
Enhanced mobile broadband targets peak wireless network speeds of 10 gigabits per second, delivering content ten times faster than 4G networks, while reducing latency to one millisecond and boosting reliability more than tenfold to “six-nines” (99.9999%). In addition, 5G permits denser networks by connecting over a million sensors and devices within a square kilometre. Together, these new 5G capabilities enable the internet of things at scale, as well as predictable network-based automation and control across industrial applications.
One of the key features of the 5G architecture is the ability to create end-to-end network slices, that is, the ability create multiple virtual networks customised to use-case-specific performance requirements. An office could get an “IT-grade wireless” slice that optimises for high bandwidth, while a factory’s “industrial-grade wireless” slice optimises for low latency and high reliability, enabling automated supervision of connected robots.
Cellular network generations typically go through 10-year cycles, starting with basic capabilities and progressing through higher functionality in subsequent releases. 5G is at the start of this cycle. During 2019, more than 50 operators launched commercial 5G networks. China Mobile alone plans to reach 70 million 5G connections by the end of 2020, according to “NGP Insights: The race to 5G?”.
The upcoming 3GPP Release 16, scheduled for commercial deployment in early 2021, focuses on industrial and enterprise specifications, while earlier 5G versions targeted consumer applications. Release 16 thus begins to deliver the full promise of 5G, unlocking network slicing, edge computing and low-latency access to edge applications. Applications follow infrastructure, so we expect industrial 5G use cases to become mainstream in three to five years.
5G applications: augmented intelligence
If 5G is the backbone, then sensors are the central nervous system, data the lifeblood and augmented intelligence the brain of the connected world. Mobile networks determine how content moves, how sensors connect and where compute capacity is allocated. The GSM Association (GSMA) projects sensor connections will increase from 9 billion in 2018 to 25 billion by 2025. Enterprises will account for 10 billion or 62% of the new connections, GSMA’s The Mobile Economy 2019 report says. IDC, in Data Age 2025: the Digitization of the World, predicts that global data will grow 530% to 175 zettabytes during this same period.
5G will create $1.2 to $2 trillion in economic value across the transportation, healthcare, retail and manufacturing sectors by 2030, according to McKinsey’s “Connected World: an evolution in connectivity beyond the 5G revolution”. The GSMA report anticipates $2.2 trillion in value will be derived across all sectors, of which 40% will come from industrial use cases.
The 5G Open Partner Program sponsored by NTT Docomo in Japan suggests myriad potential 5G uses. Over 3,000 companies have joined Docomo to develop 5G applications, the “Race to 5G report?” says. Here we highlight a few common 5G use cases that are being implemented globally.
> Smart mobility: Autonomous driving requires vehicle connectivity and low-latency edge computing capacity enabled by 5G. In a connected world, shared vehicles will predominate, increasing vehicle utilisation and alleviating congestion, which reduces commute times and yields greener cities. In logistics, 5G improves efficiency through enhanced supply-chain visibility and seamless multi-modal delivery.
> Intelligent enterprise: Artificial intelligence promises insight and reduced operating costs. Potential corporate benefits are substantial: McKinsey estimates that artificial intelligence and robotics could eliminate 50% of work requirements by 2055 (“Jobs lost, jobs gained: What the future of work will mean for jobs, skills, and wages”). While artificial intelligence garners more attention, we believe that augmented intelligence will have broader applicability. Augmented intelligence features human-in-the-loop applications that empower people and create new opportunities for workforces, according to Nokia chief technology officer Marcus Weldon’s “The Future X Network: a Bell Labs Perspective”.
> Industry 4.0: 5G ushers in a new era of industrial automation, as machine learning and robotics optimise production, according to Weldon’s “New Value Creation in the 5G Era”. Nokia has implemented 5G in its factory in Oulu, Finland, reducing operating costs by 32%, including 20% faster speeds in its automation line, 50% fewer defects, and 60% reduction in inventory lead time, according to senior principal, internet of things, strategy and development, Ellis Lindsay, at the Bosch Connected World conference. Machine-to-machine sensors are expected to comprise 70% of connected devices in the 5G era, according to McKinsey’s “Connected World” report, spurring 36% annual data growth in manufacturing, the highest in any sector, IDC says in its Data Age 2025 report.
> Healthcare: 5G supports telemedicine by enabling rapid transmission of large imaging files and reliable, real-time, remote patient monitoring. At the Austin Cancer Center, PET scanners generate up to 1 gigabyte of information per patient per study, according to AT&T Business in an article on improving patient experience using 5G. Other uses include network slicing for high-reliability ambulance applications, AI-powered tools for more accurate diagnoses, and task automation so that caregivers can spend more time with patients. Ericsson’s 5G healthcare report predicts that 5G will create a $76bn revenue opportunity in healthcare while reducing hospital costs by 16% in the next five years, according to AT&T Business.
> Augmented & virtual reality (AR/VR): 5G’s low-latency, high-reliability networks are essential for many AR/VR applications, according to Forbes. Korea Telecom has packaged AR/VR and video services with new 5G offerings and observed significantly higher uptake than with 4G, according to “The Race to 5G?”. Immersive gaming and industry are early adopters of AR/VR. Healthcare will use AR/VR to simulate complex medical scenarios and devise less invasive treatments. Industry will use AR/VR for complex maintenance and repair operations.
> Smart buildings: Buildings will source over 50% of new sensors in the 5G era, according to GSMA. 5G offers a single protocol to integrate disparate sensors and network capability to transmit signals through concrete and other materials that are impervious to earlier mobile generations, says PC Quest magazine. Intelligent lighting, thermometers, concierge services, safety and security are a few smart building applications.
Corporate venture and the connected world
A connected world offers opportunities both for incumbents and insurgents. Incumbents control data-rich repositories required for artificial intelligence solutions. Corporations have the reach to aggregate disparate data sources and the capital to consolidate markets. Yet insurgents can create new data sources, enabling new business models to disrupt industries with alarming speed.
Corporate venture capital intermediates the battle between incumbents and insurgents. The stakes have never been higher, as corporations must disrupt themselves or be disrupted. Corporate venture offers a window on technology, helping their corporate sponsors navigate turbulent waters in the times ahead. Investment offers a low-cost, flexible, early engagement model enabling corporations to gain market insight and explore strategic options. Investment deepens partner engagement, aligns interests for partnering success, and offers insight into new technologies and business models.
While corporate venture plays a vital role, requirements to execute successfully are significant. Technology innovation is global and more capital-intensive. The array of new technologies enabling the connected world is increasingly complex. Venture investing is a distinct skill outside the core competencies of most companies.
The connected world augurs well for corporate venture practitioners. Large technology firms with global reach can manage internal corporate venture activities. For the many industries impacted by the connected world but not technology natives, venture firms with expertise in partnering with corporations are emerging. In this sense, external corporate venture models may be another development engendered by the connected world.