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DX and IoT In Energy, Insurance, and Entertainment
Thu, 27 Apr 2017
This past week I visited several customers in different business verticals. One was an energy and power company, another was an insurance company and the others were in media and entertainment. A common theme in all these meetings was digital transformation and the disruption it is causing in all these sectors. The disruption was not so much about the technology, but more about the disruption in their business models by new startups in their industry. Each meeting also provided insight into the value of IoT
Energy and Power
In the energy and power vertical, the old centralized model of a huge, capital intensive, energy generation plant with a huge transmission grid located far from their consumers is giving way to a distributed model where energy is being generated from renewable sources close to the consumer in micro grids. Many of these large energy generation plants are being used at a fraction of their capacity making it difficult to generate revenue for established power companies. While renewable sources of energy like solar and wind are clean, they are subject to the vagaries of weather, and need new technologies around IoT, big data, and predictive analytics to provide reliable power. With deregulation new competitors are entering the utility business. Some municipalities are setting up their own mini-grids sharing power generated from solar panels on residences and businesses. While power companies may have installed smart meters to reduce the cost of meter readers, they have not yet tapped the real potential of that connection into the home to manage home devices. See how Hitachi is working with Island of Maui in the state of Hawaii, to Solve Energy Problems in Hawaii Hitachi's Smart Grid Demonstration Project by connecting residential solar panels with wind farms and electric vehicles.
In the insurance business there are many new opportunities which has given rise to a new class of Fintechs, that are classified as Insurtechs.
Like their banking counterparts, many of the insurance companies are partnering with these Insurtech companies to drive innovation. The particular company that I visited had just created a unit to drive digital innovation across its businesses and their CIO was promoted to head up this unit as the Chief Technology Innovation Officer. The group is tasked with identifying emerging customer segments; leveraging data and analytics; and helping the company’s distribution partners innovate and strategically grow their businesses. They are already partnering with several Insurtech companies. They also are subject to many regulations including GDPR, which I covered in a previous post. Insurance companies are also connecting with IoT. Real-time data from embedded sensors in a wide range of internet-connected devices like automobiles and Fitbits, along with advanced analytics, will allow insurers to offer many new and enhanced products and services. Read this link to see how Hitachi is creating new IoT driven Insurance services that can reform insurance services from being reactive, responding to accidents and other incidents after the fact, to proactive, which provides services in advance.
Media and Entertainment
The media entertainment business is also undergoing a massive change. Twenty years ago the definition of broadcast and entertainment was very simple. Content came from the establishment and sent in one direction. Today’s social and video networks are changing the entire business model of content, publishers, broadcasting, entertainment, news, advertising and digital rights. The online and mobile ecosystem also changes how content reaches viewers, and on-demand viewing has made the fixed, mediated schedule of linear programming seem obsolete. For example, to deliver contextual advertising you need to truly understand your audience. This starts with combining a lot of different data: Information about your viewer, demographics, etc; their viewing patterns; and metadata about the content they are viewing. This data comes from many sources, in different formats, and delivery mechanisms. A data integration tool like Pentaho will help to provide market insights, operational insight and risk insights.
The infrastructure is also undergoing major changes Streaming video completely bypasses the traditional video-aggregation and distribution models around broadcast networks, cable, and satellite—disrupting long-standing value chains and dedicated infrastructure (for example, broadcast towers, cable lines, and satellites) that have historically been critical to the television industry. Hitachi also has vertical expertise which can help with solutions on the operational side. MediaCorp Pte Ltd, Singapore's leading media company overcomes transmission challenges using Digital Microwave Link from Hitachi.
An IoT Approach to Digital Transformation
In each of these business there was a very heavy IT focus on data integration and analytics. But there was also a need for OT focus as well when it comes to transforming the business model. This is where Hitachi has an advantage with its expertise in IT and OT and the capability to integrate this into IoT. While I just met with three different verticals, I expect that the same would be applicable in other verticals.
Who is being disrupted by the Fintechs?
Thu, 20 Apr 2017
In the past I have blogged about Fintech companies that are disrupting the financial markets, by offering banking services with more consumer efficiency, lower costs, and greater speed than traditional financial companies. Fintechs have been a catalyst for traditional banks to search for solutions to automate their services in order to compete. In fact, financial companies are embracing the fintechs and the real competition is with technology companies!
In an Interview with Digital News Asia, Sopnendu Mohanty, chief fintech officer at the Monetary Authority of Singapore (MAS) is quoted:
“When people talk about fintech, the natural understanding is a technology company doing banking, That’s the classic definition of fintech, but the reality is something different – 80% of fintech [startups] … are actually helping banks to digitize, challenging current processes and technology. They are actually disrupting the large tech players in a way that the banks’ technology expenses are getting smaller, while they are getting better customer services,”
“What is visible to consumers is the disruption to financial services, but the real disruption is happening to the IBMs of the world,” said MAS’ Sopnendu…. “Fintech companies have not exactly created new financial products, they are still moving money from A to B, they are still lending money, a classic banking product,” he said.
“What has changed is the distribution process and customer experience through technology and architecture.”
A CIO of a bank in Asia showed me a mobile app that they developed to apply for loans. It was very easy to use. However, processing the loan still took over a week because the back end systems were still the same. There are a number of fintech companies that could process that loan application in a few days at lower cost, and make it available in smaller amounts to a farmer or a pedi-cab driver whom the larger banks could not afford to service.
Banks have one major problem to overcome. How do they disengage from the legacy technology upon which they have built all their core processes, in order to adopt the agile fintech technologies and architectures? Many remember the painful, drawn out process of converting their core financial systems from monolithic mainframes to open systems. There are many banks that still use mainframes for legacy apps.
The way that the banks transitioned from mainframes to open systems required a bi-modal approach, modernizing their mode 1 core systems while transitioning to the new mode 2 architectures. Some out sourced that transition. The same approaches are needed today and fintechs can help the banks retain their customers during this transition.
Another element in this transition are the regulators and there is a class of fintech called regtechs, who are applying some of the same technologies to automate compliance with regulations. Machine learning, biometrics and the interpretation of social media and other unstructured data are some of the technologies being applied by these startups.
Technology vendors must become proficient in these technologies and move beyond that to AI, block chain, and IoT. In addition, they must provide technology that can bridge and integrate the mode 1 with mode 2 infrastructure, data, and information. Tools like converged and hyper-converged platforms, object stores with content intelligence, and ETL (Extract, Translate, and Load) automation.
Technology companies should not be looking at each other for competition, they need to be looking at the Fintechs, and understanding how they have innovated in bringing business and technology together.
Hitachi established a Fintech lab in Santa Clara last year to work with customers and partners and was a founding member of the open source Hyperledger project started in December 2015 to support open source blockchain distributed ledgers and related tools. Our work on the Lumada IoT platform will also help us to compete in new technology areas like AI.