The World Of Technology: Innovation VS. Risk

The technology industry is proving out its resilience. As every industry responds to change and disruption, tech companies are being relied upon more than ever to accommodate remote work, food and supply access, health services, communication, connectivity and entertainment.

Innovation remains imperative. While it’s difficult to predict the near-term market and economic landscape, it’s clear that consumers and businesses will need new methods, ideas and approaches.

But breaking barriers can be risky—and costly. In the face of significant market volatility and global pressure, tech companies must flex their agility and continue their path to growth with a clear line of sight to their stakeholders.

Can tech leaders keep pace with the accelerated rate of change while effectively navigating an evolving threat landscape? To scale effectively long-term, tech leaders will need to consider the balance between innovation and risk holistically and with intent.

Here are a few hotbeds of innovative opportunity and some of the risks these pursuits may encounter.
 

BIG DATA 

Innovation

As more business goes digital, the volume of data being gathered is growing constantly. From a company’s on-premise systems to personal telecom and IoT devices and remote business-enablement software, the use of digital tools—and the data those tool aggregate—are growing every day. Companies that harness the power of that information by effectively managing their data can apply advanced analytics to draw meaningful insights and be better positioned to compete.

From a products and services standpoint, data management solutions are the critical half-step to successful storage, ethics, compliance and analysis. Data management and privacy-as-a-service can help companies maintain trust among users and regulators, while extracting value from their data.
 

Risk

Regardless of 2020 election results, data privacy regulations are on the agenda—in part pushed for by tech companies themselves. In fact, 50% of Tech CFOs surveyed in BDO’s 2020 Technology CFO Outlook Survey believe the industry needs to be more regulated.

Since the Facebook-Cambridge Analytics scandal arose, significant concerns have surfaced about the use of personal data for any number of purposes, from brand marketing and advertising, to political targeting, to intel for law enforcement.

The newly effective California Consumer Privacy Act (CCPA), along with Europe’s General Data Protection Regulation (GDPR), provides individuals ownership over their data, adding to the data governance and management obligations for tech companies.

Proposed track and trace methods to combat the spread of the coronavirus may be the new frontier in privacy issues. In any scenario, meeting and surpassing the demands of the various jurisdictions regulating data privacy will be essential for tech companies to rebuild and maintain consumer trust. After all, for most software companies, a fall in consumer trust in your products compared to those of your competitors can significantly impact revenue and market share in both the short and long term.

Outside of regulatory and trust considerations, prior to the pandemic, 29% of tech CFOs surveyed said a privacy breach was the top threat to their business. Targeting the critical data generated and stored by tech companies, cyber hacks will continue to plague the sector with increasing sophistication, potentially leading to greater losses and eroded trust—unless companies effectively mitigate the risk with ethical data management and security training.
 

Artificial Intelligence

Innovation

AI works to make sense of the vast amounts of data tech companies are generating. With the power to simplify the knowledge discovery process by aggregating and linking disparate data sources and analyzing it in real-time, AI can be a sharp competitive edge for the industry.

Simultaneously, AI is blurring industry lines, expanding the opportunities for tech innovation and partnerships. In healthcare, for instance, AI-based solutions turn medical tools into health monitoring devices and enable smartphones to work as diagnostic kits and radiology image readers.

AI is also increasingly being used to augment recruitment processes to address workforce concerns. From chatbots to interview scheduling and skill-matching, tech companies can look to AI for talent acquisition support.
 

Risk

There are unprecedented challenges spurred by AI, facial recognition and other emerging tech.

As a result of bad data or implicit bias on the part of software developers, human error can become concentrated once introduced into AI. These risks are heightened as tech companies face backlash for lack of diversity in their ranks, in addition to biased solutions. Algorithmic bias can cause severe damage to business operations and reputation.

Fear of machines replacing human-staffed positions also bears an existential concern. AI, unlike robotic process automation (RPA), is programmed not to be rules-based, but to refine its algorithm as it collects more and more data, essentially teaching itself and growing smarter over time.

Simultaneously, governance concerns resound. From weaponizing AI to hack systems, influencing political campaigns through deepfake videos or inadvertently revealing anonymized data through sorting and linking processes, industry leaders will need to demonstrate their strong ethics and realize they may be accountable for all potential uses of their tech.
 

Robotic Process Automation (RPA)

Innovation

Many CFOs report that managing an increasing volume of work and higher expectations is among their top personal challenges. RPA, a software-based solution, offers applications to handle repetitive and manual tasks. RPA can take over assignments including file management, form fulfillment, database entries, web scraping, calculations and statistics, among other rules-based programs.

By leveraging RPA, tech companies are positioned to redirect the focus of employees to more strategic work, further driving the business’ ability to innovate. RPA can also enable greater workforce value and talent retention by eliminating time-consuming, administrative work that professionals find burdensome or inefficient.
 

Risk

As increasing volumes of work and ballooning expectations lead to the adoption of RPA solutions, data security and privacy risks may be inadvertently introduced. Improper data use and automated access could lead to unintentional errors and liabilities, meaning RPA system adoption may require additional security controls.

Other risks of adopting RPA include: using incorrect source models when setting up the software, failing to meet data compliance obligations, pursuing unrealistic expectations, poor customer experience, applying improper shortcut settings, inadequate change management strategy and the failure to communicate blurring roles, duplicated efforts and a lack of integration.
 

5G

Innovation

Building the infrastructure and network of the fifth generation of mobile wireless communications—known as 5G—is the launching point for levelling up data transfer speeds and device connectivity. This means faster downloads and more mobile business operations with greater access to data-dense applications.

5G lays the groundwork for greater telecommunications coverage, which could power autonomous, driverless cars of the future, improve public transportation, provide essential healthcare technology and more, creating opportunities for tech-intersecting industries.
 

Risk

Continued geopolitical tensions, tightening borders, stringent intellectual property protections and trade limitations are top issues for the tech industry, especially as they relate to national security and innovation.

As China forges ahead with superior 5G telecommunications networks, American tech dominance comes under siege. The U.S. must catch up quickly without compromising the security of its networks.

5G infrastructure, which is set to “serve as the backbone for trillions of dollars’ worth of economic and industrial activity,” is facing restrictions in the U.S. due to security concerns around identified vulnerabilities that may serve as potential entry points for hackers.
 

Blockchain

Innovation

Digital ledger technology (DLT) promises greater data traceability, enhanced security and faster transaction times, which may be appealing to many tech companies and their clients, particularly with fewer transactions taking place face to face.

Fintech and banking start-ups are using blockchain to develop crypto-currencies and crypto applications, consequently eliminating the need for centralized financial intermediaries and offering customers access to decentralized digital assets.

At the same time, the entertainment sector is addressing creative ownership by tracking intellectual property rights through “chain-of-title” records, as well as smart contracts. Smart contracts—a means of streamlining and tracking payment records—also benefits digital advertisers, who can use the tech to fight fraud.
 

Risk

Blockchain and DLT’s untapped potential also illuminates this technology’s dark side: scalability, regulatory gray area due to an absence of standards, energy consumption costs, questionable network resilience and block integrity and data privacy considerations.

“Blockchain privacy poisoning” may be an especially significant threat to the integrity of this technology. Privacy poisoning refers to the insertion of personal data—an instance of an individual’s name along with any one of 29 additional confidential items—in the chain. Since a blockchain establishes a series of immutable records, meeting data privacy regulations may be particularly challenging.

There is a great deal of opportunity to unlock in blockchain technology, though there are still many variables left to be defined.

The longest bull market run in U.S. history has reached its finish line. As we enter the next cycle of the market and brace for continued uncertainty around the full and long-term impacts of COVID-19, tech companies need to be especially aware of their evolving risk environment. Innovation is essential, perhaps even more so in a challenged market, but tech companies will need to ensure a risk-based approach and responsible pursuit with any investment.

Digital Transformation: Building The Future of Construction

By Ian Shapiro, Adam Rouse and Malcolm Cohron

The construction industry is due for a digital renovation. Faced with challenges around project efficiencies, ongoing safety concerns and flat-lining labor productivity levels, the industry’s sluggish adoption of new technologies has reached an inflection point. Digital transformation requires changing processes and using new resources that harness the power of data to improve communication, efficiency, productivity and safety. This can position construction firms for profitable growth in a highly competitive industry, while also addressing workforce challenges.

The construction industry has a workforce that skews older, and as more baby boomers head toward retirement, the industry faces a labor shortage that’s poised to get worse.  According to the U.S. Bureau of Labor Statistics, there were about 300,000 construction job vacancies in June 2019, and the industry is expected to need 747,000 more workers by 2026. While the demand for skilled craftspeople has continually increased, fewer young people are entering the industry.

Potential recruits just don’t see construction as an attractive and viable career option, especially when other sectors are considered more tech-savvy and offer perks that appeal to millennial workers. To navigate these conditions and sharpen their competitive edge, construction companies need to adopt a bifurcated strategy: invest in new technologies to streamline operations and lower costs from blueprint to final product, and invest in the workforce through retraining initiatives and by bolstering the talent pipeline.


Addressing Old Challenges with New Technology

Graphic of digital business, digital process and digital backbone

Transforming construction means more than introducing modern technologies to the industry: Technology correctly incorporated has the effect of rippling through and improving interrelated processes. This requires assessing the current state of a business, strategizing for the future state and then mapping a journey to that future.
 
Digital transformation goes far beyond digitizing analog functions; it enables a fundamental shift in how a business operates so that it can compete in a digital world. Three key areas of transformation are ultimately enabled by end-user adoption: Digital Business enables growth, Digital Process improves efficiency and profitability and Digital Backbone securely facilitates usability for business needs.

Identifying and adopting valuable digital tools, data-enabled hardware and field software can provide a solid foundation for sustained growth. For example, using drones or unmanned aerial vehicles (UAVs) for aerial photography can help expedite a land survey and assist planning through digital imaging techniques, precise topographic mapping software and data analytics that inform building strategy. Continued UAV surveillance can also help secure the site and inspect for safety hazards or structural issues. When applied in conjunction with 3-D printing, automated equipment tracking and progress reporting, these innovative building techniques reduce the time, effort and cost involved in more traditional construction approaches.

In an industry that has been challenged by disruptions to the price of materials—including tariffs of 25% on steel and 10% on aluminum imposed in 2018—increasing efficiencies and reducing controllable costs are more important than ever. Innovative software can identify and quantify work tasks, reducing or eliminating extraneous work to help maximize time and minimize effort. Supply chain information can even be tracked in the cloud, increasing transparency and accuracy by collecting that data within a single platform. Digital tools not only support the project budgets and timelines, but also promote worker safety and sentiment.


Navigating Workforce Woes

Workforce challenges in construction abound. The industry has been contending with a lack of organized site management, miscommunications between the field and regional office and a downward trend in employee morale.

The flow of information from job site to regional office to corporate can be fragmented, delayed and incomplete. The amount of time it can take to input information into the system leads to lack of real-time visibility into a project’s progress, which can ultimately have an impact on cashflow. Integrating data can streamline communication and deliver more accurate information more quickly. Work in Progress (WIP) tools track work in real-time, making sense of data that can then be used to inform subsequent project plans. They also allow for more accurately designed scheduling with the appropriate amount of margin and risk tolerance built into project plans. Similarly, Building Information Modeling (BIM) can synthesize all essential aspects of a project’s input into a single plan with 3-D modeling, wherein contributors can stay in timely communication.

Digital transformation can also help attract younger workers to the industry by creating more jobs that require tech skills. U.S. News & World Report noted in 2018 that less than 10% of construction workers are younger than 25, while the median age is above 42 years old. Modernizing processes through increased adoption of technology can both create new jobs and future-proof the industry.

Technology also enables construction managers to standardize approaches across a project (or multiple projects), facilitating additional clarity in delegating responsibility and even safety. The IDC predicts 279 million wearables will be in use by the end of 2023, a technology that can be applied to increase site safety and monitor for productivity. For instance, sensors attached to workers’ clothing or hard hats can track signs of fatigue to prevent an accident, monitor body temperature to avoid hypothermia or heat exhaustion, send an alert through noise or vibration to indicate a hazard and provide supervisors with real-time information about the number and location of employees on site. 

For companies who can augment their capabilities now, successful digital adoption may reinforce their competitive capabilities and lay the foundation for a successful future. From project management tools that offer real-time communication, updates and project overviews, to cloud and mobile technology, advanced uses for GPS, robotics, drones and more, innovative applications of technology can fundamentally change the project design and development process. Digital transformation can be the means for the industry to navigate workforce issues, discover new efficiencies and build an integrated platform to reinvigorate growth for generations to come.



This article originally appeared in BDO, USA, LLP's "BDO Knows Alert" newsletter (December 2019). Copyright © 2019 BDO USA, LLP. All rights reserved. www.bdo.com

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