As technological capabilities continue to increase, individuals, businesses, and communities must recognize the elevated role innovation plays in day-to-day life. But more importantly, as major, global mega trends emerge, innovation stands out as both a common theme and driving force behind their existence, making it a key consideration for business strategy and public policy moving forward.
“My worry is if we don’t have that global perspective, no matter how well we think through the local parts of what we want to do in terms of innovation or business … we won’t necessarily get it right,” the Honourable Kevin G. Lynch, Vice Chair at BMO Group, said during his presentation, Context, Context, Context – Global Mega Trends are Reshaping the Innovation Space, at Volta’s second annual Innovate Atlantic Conference.
“I think really smart innovators have a global perspective and a very local perspective … Everybody today has got to actually think globally, act differently, and build from a very strong local base,” he said.
There are six transformative mega trends that deserve more holistic attention, Lynch stated; they include a looming US-China Cold War, the Fourth Industrial Revolution, populism, splinternets, climate change and extreme weather, as well as the aging of societies.
“Innovation is one of the common elements through them; they are essentially the core drivers of disruption today. The reason why that’s important is because innovation thrives in periods of disruption. It gives you a chance to do things differently,” Lynch said.
Each trend provides significant, notable opportunities and challenges we must recognize and consider, as society adapts to the rapid growth and development of the modern technologies that are shaping our world. Below, we break down the trends and share Lynch’s insights.
The United States-China Cold War
Mega trends are only really mega trends if they create pivot points, or make a visible difference, and US-China relations over the years are riddled with inflexion points leading to a US-China Cold War. Though, Lynch said, it will be driven by tensions that are quite different than the Cold War between the former USSR and the United States.
“It’s very much going to be focused on trade and technology – that’s important to understand. How it’s going to play out, nobody knows,” Lynch said. “To think that technology is not going to be part of it misses the point.”
According to Lynch, the rise of globalization in the early 2000s played a significant role in the increased tensions between the two countries. In 2001, when China joined the World Trade Organization (WTO), they agreed to significantly harsher conditions than other developed nations, which conflicted with the country’s previous economic strategies. Though, globally it was perceived as an enormous multilateral achievement, because their service sector became more liberalized and foreign investment was permitted.
“International economic co-operation has brought about this defining moment in the history of the multilateral trading system,” Mike Moore, WTO Director-General, said at the conclusion of the meeting of the Working Party on China’s Accession, as noted in a press release issued back in September 2001. “With China’s membership, the WTO will take a major step towards becoming a truly world organization. The near-universal acceptance of its rules-based system will serve a pivotal role in underpinning global economic co-operation.”
Of note, and not mentioned in Lynch’s presentation, before joining the WTO, in 2000, US Congress formalized trade relations with China, giving them “PNTR”- permanent, normal trade relations status, shifting international supply chains and altering the economies of both countries.
Jumping ahead a few years to 2007, there was an unprecedented surge in information technologies around the world (infotech); Apple iPhone hit the market, Github and Facebook launched their platforms, Google introduced Android phones and purchased YouTube, and that same year, IBM Watson launched.
“Most of the digital infrastructure was commercialized in one year,” Lynch said, adding that part of the reason its impact wasn’t as evident at the time, was because the global financial crisis happened the following year, driving the idea of populism, devastating the livelihood of families, and destroying global confidence in capitalism.
“The global financial crisis … actually shocked western countries in terms of their system, and it had an even bigger impact in Asia – which is – it was the end of them looking up to the western model,” he said.
In 2018, Lynch said, US-China trade tensions really escalated. In many ways, that’s when the United States and China started disputing how to regulate infotech, with both countries viewing technology and innovation as the key to global dominance. This brings us to the events of today, with ongoing tariff threats and a looming infotech war, altering the innovation space.
“Just looking at the debates on Huawei, is just an example on 5G; you can see that it’s not just an innovation and technology issue, it’s becoming a strategic issue,” Lynch said. “So I think innovators have to understand that context, it’s going to be a little bit more disruptive than before.”
The 4th Industrial Revolution
Traditionally, industrial revolutions are driven by one or two new technologies or tools that radically transform modern societies, and the developments from those inventions span decades.
The First Industrial Revolution, which began in the late 1700s, was driven by the creation of the steam engine and shifted manufacturing processes. The second was driven by science, the mass production of goods and the increased interconnectedness of people. The third focused on the rise of digital technology, and the fourth, Lynch argued, is and will be driven by technology and innovation – something we’re experiencing today.
“We’ve been going through tech change since the First Industrial Revolution,” Lynch said. “What is unique about this are three aspects – one is its speed. The rate and pace of the disruption is extraordinary. Two, the scale, and three, the scope.”
Previous Industrial Revolutions were driven by one or two technologies, but now, there are multiple technologies being created that stand alone, but also interact with each other; this is creating huge transformations in how humans function.
Major tech transformers on the horizon include artificial intelligence and advanced robotics, 3D printing, blockchain and distributed ledgers, Internet of Things, nano materials, quantum computing technologies, space technologies, neurotechnologies and geo-engineering, virtual and augmented realities, and energy storage, according to Lynch.
Harnessing the potential for these innovations – like integrating 3D printing and manufacturing methods and processes, for example – and mitigating the disruptive downsides – like artificial intelligence replacing workers – will be integral to economic growth and social stability.
Lynch also referenced findings from a joint initiative between MIT and the Organization for Economic Co-operation and Development.
“[They] have identified the top 25 infotechnologies that are transforming the world that are currently being developed. Of those 25, they looked at the five countries that are dominating copyright patents,” he said. The five countries that account for 70 to 100 per cent of all the copyrights and patents in those technologies include the United States, China, Japan, Korea and Taiwan.
“We have to make sure that Canada is a player in that,” Lynch said. Where Canada does have a presence in the top five, is in quantum computing and artificial intelligence, and that poses a real opportunity for our country to become a global leader.
Lynch also noted that most Canadians – roughly 80 per cent – purchase goods online, but only 20 per cent of the country’s firms sell online.
“That actually means that most of e-commerce is satisfied by imports from the United States, and that is not a really smart business strategy because you’ve got a population that’s actually ahead of the way a lot of Canadian companies are selling,” he said. “There’s a huge arbitrage opportunity for innovators out there to actually help close that gap. It just shows what the possibility is.”
Populist rhetoric is driven by fear, and the mantra is often centred around distrust – in the systems and institutions that shape the way we live, work and play in modern society. Growing trust deficits, according to Lynch, are a “heady brew,” and disruption caused by tech and innovation can feed into it if impacts or benefits are not shared appropriately.
As part of his presentation, Lynch shared the Edelman Global Trust Barometer, the firm’s annual trust and credibility survey that combines research and analytics. The graphic is shown below.
“It’s fascinating because it looks at public trust in four institutions: government, business, media, and civil societies – that’s a fair bit of our infrastructure,” he said. noting that in most of the western countries, less than 50 per cent of the population trusts the institutions. Canada’s ranking, on the other hand, is fairly neutral.
As previously noted, the opportunity for disruption caused by technology – may – despite best intentions – have negative repercussions such as job loss or displacement.
“My worry … [for] community, business and government is, unless we get our act together on training, education and skilling, technological change through which will cause job location and can actually be a leading risk factor in terms of populism,” Lynch said.
The world is more connected now than ever before, thanks to the Internet and modern technology. Coupled with that, is the unprecedented boost in technology, creating massive amounts of data in association with products/services.
Lynch noted that when he was in school, the production function was a result of putting capital and labour together, and that would give you your product.
“Today, it’s data, talent and capital, and capital is intangible as much as anything else – that’s probably one of the biggest changes in how we produce things that’s ever happened,” he said, adding we’ve spent the last 100 years figuring out the laws and rights around labour and capital, and now that conversation will shift again, toward data and how it’s used.
“What we’re just starting on is, what are the rights of data, data owners and data holders … and how do we figure this out through regulation, law, and what have you, is going to be hugely differentiating,” he said. He noted there are debates going on around the world, and Europe is emerging as a leader.
The conversation and regulations around data rights will need to address privacy, security, ownership, and transparency on usage – and there will be significant trade offs when these rules are set that will alter the way we approach innovation.
“Is it national regulation, or is it global regulation? Interesting choice. One gives you sovereignty and one gives you a global marketplace,” Lynch said. “Is it data localization? In other words, we insist that the data has to be located in the Halifax Regional Municipality, or Nova Scotia, or Canada – or we don’t really care?”
Lynch said that there is a great opportunity for Canada to get ahead of the curve in making decisions on data collection and usage.
“One of the risks … is that it’s not clear that every country is going to come to the same answer and so we’re going to have – I think – in the future, some of the non-tariff trade barriers to digital trade and digital activity are going to be how countries align on these,” he said. “We’ve got to be really careful.”
Climate Change and Extreme Weather
Temperatures are rising; weather is becoming increasingly unpredictable, and the way we all – not just innovators – approach the world is changing in response to climate change. Policies, regulations and goals are being set around the world, to try to slow – and where possible, reverse – its impact.
“Anybody that was [in Atlantic Canada] during Hurricane Dorian gets a sense of how weather is much more unpredictable and much more violent than it’s been in the past,” Lynch said.
He noted that there are significant, associated economic and social costs and risks that come with climate change, and innovators can play a crucial role in our path forward.
“Technology and innovation can have a much more, enormous role to play in terms of mitigation and adaptation,” he said. “It’s not going to change the policy, necessarily, but it is going to mitigate the impacts on it.”
He also spoke more broadly about the country’s opportunity to create a ‘Can-tech’ brand, and noted that all of the necessary pieces are in place to emerge as a tech leader. Whether it’s with climate change at the forefront, or simply technology in general, it will take a collaborative effort to thrive.
“We’ve got some really good, and really growing innovation superclusters; we’ve got one here in the Atlantic,’ he said. “We’ve got strong, research universities – and a number of them in the area. We’ve got a deep pool of diverse talent, who come to Canada because of the job opportunities, and the research potential, but also because of the values.
“This is a world where values are starting to be differentiators, just like trust, frankly, and that’s one of Canada’s strengths.”
He also noted that Canada is rich in natural resources, providing a real opportunity to leverage the assets we have and make an impact globally.
“We don’t apply innovation to [natural resources] enough,” he said.
The Aging of Societies
Baby boomers are getting older, and as a result, a very large portion of Canada’s population will be leaving the workforce. This will, inevitably, impact the country’s health care system, posing serious social and economic challenges.
“Canada now has more people 65 and older than it does 15 and under, and that’s the first time in our history,” Lynch said, before asking rhetorically, “How do we handle that?”
This is an issue that countries around the world are experiencing; the United States will be in the same position as Canada in a few years, and the bulk of Japan’s population has been over 65 for the past decade.
“It strikes me that the scope for innovation to make a difference, whether it’s for health care, helping an elderly person or what have you, is an untapped area and an area where Canada can potentially be a leader,” Lynch said. “We have a reality, which is going to change a lot of our economy and society … and innovation can be one of those crucial things.”
Part of that solution and a piece that feeds into this, and a few other trends, is that jobs are being lost due to technological advancements and it will be integral that we continue to re-engage the workforce to keep more people working to drive productivity.
“There are 18-million employed Canadians today,” he said, adding that 12 per cent of jobs are at risk of being eliminated over the next 10 years because the nature of the role is going to change.
“Take 12 per cent of that [18-million], and that’s a couple million jobs,” Lynch said.
“It just flags the point that we have to be better at educating kids in the system now, to have the skills for future jobs. We’ve got to be much better at training and re-skilling and re-training, so that in a sense we continually re-employ them.”
After sharing the six mega trends that are and will be reshaping the innovation space, Lynch concluded his presentation by stating, “as we think about and want to grow our innovation capacity, we’ve got to make sure that the public understands that this is crucial for them and their kids, as well as it’s really important for you innovators.”