Anticipating disruption: Technology and infrastructure | KPMG | GLOBAL

Anticipating disruption: At the nexus of technology and infrastructure

Anticipating disruption: Technology and infrastructure

There's no question infrastructure is being disrupted, but, not every sector is the same.

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Let's separate the hype from reality.

We sat down with leading infrastructure gurus - Dr. Jim Hall, Director of the Environmental Change Institute at Oxford University; Dr. Rick Geddes, Professor, Department of Policy Analysis and Management at Cornell University; Darran Anderson, Director of Strategy and Innovation at the Texas Department of Transportation; and Shashi Verma, Chief Technology Officer at Transport for London - to find out how they think technology will influence the world of infrastructure.

You may be surprised at where they are placing their bets.

In which infrastructure sectors do you expect to see the greatest technological disruption?

Jim Hall: I would argue that the most remarkable changes over the past few years have been in the energy sector. We're already seeing price structures in renewables - offshore wind and solar in particular - become price competitive with fossil fuels and that represents a massive change in technology and economics. And, obviously, transport is on the cusp of significant disruption with the introduction of electric vehicles and driverless cars. But I also think that changes on the demand side are potentially disruptive, again most notably in energy and transport. The introduction of 5G telecoms services has been slower than anticipated, largely because demand simply isn't there yet.

Rick Geddes: Clearly, there is lots of innovation happening in the transportation sector. All of the big automakers are engaged in intense competition to develop and deliver greater levels of autonomy and safety in their vehicles. And there are lots of new technologies being tested and developed – such as vehicle-to-vehicle (V2V) communication and -- vehicle-infrastructure integration – that could accentuate the impact of these innovations. But technological disruption doesn’t always require big system change. There’s also a lot of innovation happening at the material level – new concretes and road surfaces, new bridge technologies, new coatings for water and sewage pipes, for example – that are also having a significant impact on the way we plan and deliver infrastructure. 

Darran Anderson: I think Rick is absolutely right. Technology can change the way people think about living and working; it can influence the way people interact on a daily basis. Transportation is definitely in an era of potentially revolutionary change in our future mobility options.  But I also look at it as a ‘system of systems’ where we can use transportation technology as one part to help improve the quality of life for our citizens, such as greater access for those with disabilities, or significant accident reductions. Right now, I’m focused on the technologies that form the backbone of all this – WiFi, 5G, DSRC, Internet of Things and analytics systems, for example, and their security and privacy needs.

Shashi Verma: I would agree. And I would add that, more often than not, it's the more mundane technological advances that have the greatest influence. Consider, for example, how the introduction of pneumatically controlled doors changed the efficiency of trains; rather than needing 8 employees to operate a 6-car train, you suddenly needed just two - a driver and a guard. Modern computer controlled signaling has allowed us to put many more trains through a tunnel than ever before. And the introduction of smart ticketing technologies (like the Oyster Card in London) has not only had a huge influence on revenue, it's also taken steps out of the customer journey which, in turn, increases our capacity.

How can infrastructure and government leaders prepare for disruption?

Darran Anderson: We need to recognize that we aren't going to compete with industry in developing these technologies. What we can do, however, is prepare to enable it. So one of our larger focus areas is around improving the way we share and use data. We need to think about how we can improve our data sets, reinforce security and drive increased integration to support not only the cars themselves, but also the auto manufacturers, traffic management systems and fleet operators, for example.

Rick Geddes: I would extend that idea out to the existing hard infrastructure, too. It might be little things like repainting the lines on the road so that autonomous cars can read them, filling in potholes and making sure that road signs are large and clear. At the same time, government will need to take the lead in the regulatory side of all of this. The big question is how you strike that balance between promoting innovation on one hand, and ensuring public safety and trust on the other.

Jim Hall: I think a lot of the decisions will come down to what government wants to achieve. If the local driversare around air quality, then you're probably going to see more rapid change in the electric vehicle and clean energy markets. If the main drivers are around affordability, you'll probably see more focus on encouraging technologies that reduce the cost of service delivery and lead to greater overall affordability. The first step, therefore, is to understand the drivers at play in your market.

Shashi Verma: I would argue that we need to separate hype from reality. There's lots of talk about revolutionary technology but some will take much longer to materialize… if they ever do. Certainly, there's lots of work and investment going into entirely new modes that, like hyperloop, will require a very big mental leap forward to achieve. Autonomous cars, on the other hand, follow some very well-understood fundamental principles that basically adapt our existing infrastructure to make the new technology feasible.

Will technology allow less developed nations to `leap frog' the centuries of investments made in the mature markets?

Darran Anderson: I believe we are already seeing that happen. In the developed markets, we're often limited by what we can do with our existing infrastructure and we are confined by our traditional view of how infrastructure operates. And that may be hampering the speed at which we create and adopt new technologies and solutions. I think many developing markets also enjoy a much more streamlined delivery process where clear government directives can help remove roadblocks and drive adoption, versus the mature markets where you often need to navigate many levels of government to reach a viable delivery solution.

Rick Geddes: I would agree with Darran. I suspect that, in a number of key areas, the mature markets will start to fall behind the developing world. In part, it comes down to the challenges Darran noted - getting different levels of government to work together around a common solution. At the same time, some of these markets may also enjoy significant advantages over places like the US. If you're building a hyperloop, for example, you'll probably want long, straight shots across level terrain. And you will want lots of sunshine to power the solar cells. You're more likely to find that in the Middle East than you are in the US North East.

Shashi Verma: I have no doubt that new cities can overcome some of the big concerns that may be slowing technology adoption in the more mature cities. But I also worry that the model of development that is being followed in many of the `new cities' largely ignores the lessons that were learned in the mature markets. At the end of the day, it's not the new technology that drives markets but rather the economic viability of that technology. It's one thing to talk about implementing new technologies at scale, but making the economics of that activity work is another thing altogether.

Jim Hall: When you balance the potential for economic growth against the lack of required infrastructure, it seems clear that the developing markets offer the greatest opportunity for disruption and technological advancement. But, at the same time, new technologies often bring with them new interdependencies, new regulation and new markets which creates a massive governance challenge. The big question is whether these markets can overcome those challenges to reap the rewards of the new technologies that are available to them.

 

If you had 100,000 bitcoins to invest into one technology today, where would you put your digital money?

Rick Geddes: That's a tough one. If you are looking for low-risk returns, you may want to steer away from those technologies that have already become ultra-competitive. It's difficult to know which company will win in the end. So my bet would probably be on things that help enable that future; developments in concrete, sensors and asphalt, for example. It may not be the headline grabbing stuff, but it's all absolutely central to enabling whatever technologies may win out in the future.

Jim Hall: If I look at the technologies that are attracting the most finance at Oxford these days, I'd probably put my bitcoins into machine learning and 3D printing. But the under-recognized outsider that I'd love to see receiving more attention is the trend towards a circular economy which is creating some fantastically innovative approaches to what would otherwise be rather staid areas like waste, sewage and water.

Shashi Verma: If I had to bet on a single technology area, it would probably be driverless cars. But I also think there's a lot of hype in the market and that delivering on the promise of full automation may be more difficult than anyone is letting on. If I could put the 100,000 bitcoins towards something socially productive, however, I'd probably want to invest it into ideas that encourage and support driverless cars; technologies that help manage congestion; and models that re-envision the current economics of transportation.

Darran Anderson: Like Rick and Jim, my focus would be on the technologies that underpin some of the big trends we are talking about. And, from my perspective, the biggest requirement for future technology adoption is going to be trust which, in turn, will require much better approaches to cyber security and the protection of data. So if I’m playing with house money, I’d probably put my investment into novel solutions like quantum computing or blockchain that may enable trust and deliver greater confidence to users.  I might also think demand for battery solutions will continue to grow for mobility and utility systems, as more countries seek less oil dependency and greener options.

 

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