Pace of change speeding up

Technology-driven change is all around but what is it and how will it affect you?

Data and artificial intelligence have unlocked potential – Bank of America Merrill Lynch.

Technology-driven change is all around but seldom do we stop to reflect on what it is or how it will affect us and the companies in which we invest. In a recent research report Bank of America Merrill Lynch suggests that over the next five years the world will transform at its fastest pace in human history.

It took nearly 80 years for telephones to become ubiquitous; for smartphones, it took less than a decade.

Driving this pace of change is the exponential growth in data, cheapening computing power and the rise of our global, connected world.

The first theme is big data and artificial intelligence.

“Currently very few companies are harvesting their data,” says Martyn Briggs at BoA Merrill Lynch. “But in discussion with our research teams, 80% of companies talk about the potential that is yet to be unlocked.”

The second trend is of electric vehicles and future mobility. By 2025 it’s estimated 20% of global cars sold will be electric or plug-in and the effects will ripple far beyond cars, oil, utilities and capital goods towards other sectors.

“For instance, we will see changes such as ride-hailing, car-sharing, multi-modal transport [car+bike+bus+train],” says Briggs. “Other impacts could be felt in sectors like real estate, due to the freeing-up of parking or filling station spaces.”

Sectors involved are automotive original equipment manufacturers, driving the change to electric, and the battery value chain, mining, utilities, software, and semiconductors.

Old energy (oil and gas) and carmakers that are slow to adapt risk disruption.

Society’s changing profile

Every second, five people enter the middle class, meaning the “bottom billions” are becoming a force to be reckoned with.

According to the Brookings Institution the middle class could expand faster in the next decade than at any other time in history.

Research shows 12% of the globe is exposed to extreme weather. “This translates into at least 60% of the population,” says Briggs. “This impacts water, waste, energy and emissions.”

If data is the fuel for these megatrends, 5G is the engine. “5G mobile networks will form the platform for billions of sensors and 30 billion connected devices,” says Briggs. “These will be at the forefront of the fourth industrial revolution and will play a vital role in climate change investments, energy efficiency, demographics, and consumer and behaviour trends.”

Fourth industrial revolution to be led by data, 5G

Sectors impacted

BoA Merrill Lynch is optimistic about the technology, e-commerce and payment sectors, while capital goods and consumer durables should also benefit over two to three years.

It is negative on apparel and general retail. “Consumers are moving towards e-commerce and fast fashion,” he says.

It is also negative on old media such as traditional advertising agencies and those disrupted by the likes of Netflix.

Traditional financial service companies and energy players could also face headwinds, while mining companies will face different opportunities and challenges.