startup-ecosystem-mapping-report

Why is digital technology important?
CONTEXT
SOCIAL IMPACT OF TECHNOLOGY
Information and communications technology is pervasive
and soon to be ubiquitous. New technologies that evolved
from the cumulative innovations of the past 80 years have
dramatically changed the way people create, consume
and communicate - transforming societies and economies
at unprecedented rates.
While the process of innovation is never ending, the
development of the first transistor, microprocessor and
computer in the late 40s initiated a wave of computing
innovation. It brought the first satellite in 1957, the
linking of computers into large-scale networks in 1969,
the first Japanese smartphones to achieve mass adoption
in 1999, and the first touch screen in 2007.
Of the 7b+ people on the planet, 5.5b watch TV, 2.7b use
the internet, 1 1.8b use smartphones, 2 and 1.7b use those
smartphones at least monthly. 3
In 1986 less than 1% of the world’s capacity to store
information was digital. In 2002 humanity was able to
store more information in digital than analog format –
launching the “digital age”. And by 2007 over 94% of
humanity’s knowledge was stored digitally. 4
Networked digital technology is being rapidly adopted
and will soon be ubiquitous. Somewhere during 2008
the number of connected electronic sensors on the planet
exceeded the number of people; this will have grown to
26b+ devices by 2020. 5
ECONOMIC IMPACT OF TECHNOLOGY
These innovations have facilitated an enormous new
capacity to create, capture, analyse, disseminate
information and release a flood of startups, many of
which are revolutionising production and distribution
systems on a global scale.
Outsourcing white-collar tasks to more efficient or
productive economies is now the norm, enabling
developing economies to provide services to developed
nations at scale and on demand.
When historians look back at the last 80 years they
will conclude we are living through a pivotal period
in humanity’s history. The question for Australia and
Queensland is whether they want to be creators of
technological innovation, or just simply consumers.
The largest companies of the last century were industrial
corporations, born of the industrial revolution in the
1800s: mass-production companies such as Ford,
Volkswagen, Toyota, GE, Bayer; and the suppliers of raw
materials such as Exxon, Shell, BP and BHP.
But over the recent decades computer, software and
now internet companies such as Apple, Google, IBM,
Microsoft and Facebook have been vying with more
traditional corporations to lead the pack. PwC’s 2014
report on the Global Top 100 Companies by Market
Capitalisation showed that Technology and Financials
are the leading sectors to have grown market cap in the
Top 100 (+149% and +136% respectively) - driven by
innovation and recovery from the financial crisis. 6
Apple – the largest by market cap – having almost
quadrupled in value during the past five years.
And this is just the beginning. In the coming decades
virtually every industry can expect to face disruptions
rivalling those of the industrial revolution. Some
industries will face extinction; new sectors will be
created; and others are being transformed beyond
recognition.
In 2013, in reference to the long-term economic
potential of technology, US Federal Reserve chairman
Ben Bernanke stated:
“Some would say that we are still in the early days of the
IT revolution... even as the basic technologies improve,
the commercial applications of these technologies have
arguably thus far only scratched the surface.” 7
CREATIVE DESTRUCTION
During the early 20th century economist Joseph
Schumpeter observed that the most significant advances
in economies are often accompanied by a process
of “creative destruction” which shifts profit pools,
rearranges industry structures, and replaces incumbent
businesses. This process is often driven by technological
innovation at the hands of entrepreneurs.
According to IBIS World’s white-paper A Snapshot
of Australia’s Digital Future to 2050, 15 different
industry sub-sectors face extinction due to factors such
as size, international competitiveness, the potential for
displacement, and technology.
“Casualties may include: newspaper, magazine,
book and directory publishing – substituted by their
online versions; radio, free-to-air TV and cable TV
broadcasting – absorbed into internet distribution; and
video rental.” 8
Entrepreneurs, policymakers and societies need to be
at the forefront exploiting these new technologies to
maintain national competitive advantage and global
relevance.
Entrepreneurs need to understand how markets might be
eroded or enhanced by emerging technologies a decade
from now; how technologies might bring new customers
or force them to fight for existing ones. Policymakers
and regulators need to decide how to invest in new
forms of education and infrastructure; protect the rights
and privacy of citizens; and create an environment in
which citizens can continue to prosper even as emerging
technologies disrupt their lives.
McKinsey’s 2013 report Disruptive Technologies:
Advances That Will Transform Life, Business, And
The Global Economy identified the top 12 disruptive
technologies that have the greatest potential for economic
impact and disruption by 2025. They estimated the
potential economic impact that each technology would
have by 2025 and concluded that these 12 technologies
alone had “the potential to drive direct economic impact
in the order of $US 14 trillion to $US 33 trillion per year
in 2025.” 9
TOP 12 DISRUPTIVE TECHNOLOGIES
GLOBAL ECONOMIC IMPACT IN 2025 ($T)
Mobile Internet
Automation of knowledge work
The Internet of Things
Cloud technology
Advanced robotics
Autonomous and near- autonomous vehicles
Next-generation genomics
Energy storage
3D printing
Advanced materials
Advanced oil and gas exploration and recovery
Renewable energy
DIGITAL DISRUPTION IN AUSTRALIA
3.7-10.8
5.2-6.7
2.7-6.2
1.7-6.2
1.7-4.5
0.2-1.9
0.7-1.6
0.1-0.6
0.2-0.6
0.2-0.5
0.1-0.5
0.2-0.3
Seven of the twelve disruptive technologies fall within
the purview of the digital startup companies outlined
within this report: Mobile Internet, Automation of
Knowledge Work, The Internet of Things, Cloud
Technology, Advanced Robotics, Autonomous Vehicles
and 3D Printing.
It should be noted that when McKinsey refers to
economic disruption, this economic potential should
not be equated with market sizes for these technologies;
it could be captured as consumer surplus as well as in
new revenue and GDP growth. McKinsey also mentions
that in the case of Internet-based technologies, value has
tended to shift to consumers; as much as two-thirds of the
value created by new Internet offerings has been captured
as consumer surplus. However, they conclude that:
“It is impossible to predict all the ways in which
technologies will be applied; the value created in 2025
could be far larger than what we estimate here.” 9
Assuming an Australian GDP growth is 3% and
McKinsey’s estimates of the potential economic
impact of these 7 digital technologies along with their
distribution of the impact on Developed economies is
applied, it results in an annual economic impact on the
Australian economy in 2025 of $497b - from these 7
digital technologies alone.
To put that into perspective: 22% of Australia’s GDP in
2025 will be disrupted from the application of these 7
digital technologies alone.
GLOBAL ECONOMIC IMPACT IN 2025 ($US TRILLION) 14 7