LOMA Interviews Dr. Canton in Emerging Technology: Shaping the Future
Futurist Dr. James Canton discusses the emerging trends and technologies that will shape the future of the insurance industry.
By Tammy J. McInturff
Resource recently talked with leading futurist, author and keynote speaker Dr. James Canton, CEO and Chairman of the Institute for Global Futures, www.GlobalFuturist.com, to get his insight on emerging technologies and how they will affect the industry and our future.
Canton is a renowned global futurist, social scientist and business advisor. He is the author of The Extreme Future: The Top Trends That Will Reshape the World for the Next 5, 10 and 20 Years and Technofutures: How Leading-Edge Innovations Will Transform Business in the 21st Century. An authority on future trends in innovation, Canton has been insightfully predicting future technology and business trends for over 30 years.
The Economy
The economy is on everyone’s mind right now. Many companies are tightening their belts and cutting their IT budgets while pondering how bad it is going to get. Resource asked Canton about his assessment of the current business environment and how the economy might affect emerging technologies. Surprisingly, Canton seemed optimistic about the economy and the potential for economic growth.
Resource: What is your assessment of the current business environment?
Canton: I think the current business environment may look challenging but there is much upside as well; especially for those who thrive in changing times. You cannot have opportunity without risk as we are experiencing today. U.S. Gross Domestic Product (GDP) is still growing at 3.3 percent. Global GDP is stronger than ever, over seven percent and much of that is due to the growth of the emerging market economies. This is very positive for the future. Growth is outstanding given all of the changes in the financial sector. In terms of globalization for the business sector there is tremendous new opportunity for expanding new markets, finding new customers and opening up new channels. For U.S. businesses the strength of the developing markets for globalization has outstanding growth potential—led by innovations that the U.S. has invented first. This presents a competitive advantage—of course it should—for business.
New technologies such as Web 2.0, new Internet and wireless technologies certainly are making for a global connected world. New technologies are also creating more efficiencies and productivities for businesses whether they are selling domestically or internationally. Over a third of real GDP is being driven by innovation industries and there are entirely new innovation industries that are creating new value as never before such as nanotechnology, biotech and certainly the next stages of wireless, business process transformation and IT innovations like cloud computing, pervasive connectivity and virtualization.
However, there are clearly challenges that we are facing in the financial sector in terms of the credit crunch but I don’t view these as cataclysmic. I view these as somewhat of the natural messy evolution of market capitalism and something that gets out of hand and gets corrected every five or seven years. Just think about it, you can go back as far as junk bonds, then you can look at the savings and loan crisis of the 1980s and 1990s, then we had the dot-com crisis and then the real estate bubble and now you’ve got what we have now which is of course the credit crisis. Every few years there seems to be a certain crisis that has a upside and a downside.
We call it a crisis but it is really the natural messy evolution of capitalism and now particularly global market capitalism. Experimentation and global innovation in market capitalism has led to massive wealth, growth, strong global GDP as well as dislocations in the global economy. Market capitalism, now embraced by most of the globe is not a precise science; it is a economic platform that is self-organizing and that requires innovative experimentation. The results have been mostly positive but not without some problems as we are facing now. This too will pass. So I think the prospects for long term are great, but in the short term we need to work out some of these clear challenges in the financial markets that create more risk than opportunity.
Resource: How do you think the current slowdown in the U.S. economy will impact emerging technologies and new
technology adoption?
Canton: The U.S. economy is fundamentally strong and resilient. There may be a recession and an uptrend in unemployment but growth will continue. I don’t think there is a massive slowdown in the U.S. economy right now as much as a perception of greater risk and fear. GDP is growing at 3.3 percent on a $14 trillion dollar economy. Germany’s GDP is about one percent; all of Europe has GDP that is lower than the U.S. The measure of the economy’s strength and robustness is growth. Our growth is at 3.3 percent; it is a full point plus over the Euro zone. Now when you compare us to China or India there is slowdown in growth that is going on and has and will affect us to a certain extent. But I don’t view it as a deep dislocation in the U.S. economy. There have been concerns that we are going to slip into a recession—this may occur but it will not be deep and certainly the Fed has signaled that. Recent actions by the U.S. and other nations globally to invest in the banking system is very smart and the right thing to do to inspire confidence.
Emerging IT Trends
Future technology trends and innovations will enable insurance companies to become more efficient and cost effective. IT is one of the driving forces behind competitive advantage in the marketplace. Resource asked Canton to identify the IT trends he sees coming in the near future and how these trends will affect the life insurance industry.
Resource: What global IT trends do you see coming in the next five years?
Canton: The most important trend I see coming in the next few years is the expansion of the global marketplace in terms of outsourced services. For U.S. Companies the expansion of Web 2.0, Internet connectivity, the addition of another half a billion to a billion people that will come online being connected to the global economy will be significant. Also, the fusion of globalization and technology will result in more efficient, cost effective supply chains as well as new markets driven by pervasive mobility and global connectivity of the Internet which will create a lot more seamless integration of markets, partner relationships, logistics, and a much more transparent exchange of trading.
Resource: What idea or product in terms of technology do you think is going to most impact the life
insurance industry?
Canton: The life insurance industry is obviously facing a lot of challenges in the current market environment. One of the future opportunities and key drivers for the life insurance industry is going to be life extension. We are fast approaching the time when we can begin to accurately predict and enhance people’s longevity through a combination of pharmaceuticals, life style management and eventually even medical devices. Personalized medicine is emerging. The consumer genomics marketplace is emerging. We are living in the emerging Post-Genomic society, where genomic information will be used to predict and promote health and life. We are living in an era where people will be living dramatically longer than ever before and the quality of their life will be much better. So we are going to see a redefinition of aging and life extension. We will use medicine and life insurance to reshape society for
enhanced human beings.
The second key change I see has to do with cancer. Predominately the two big risk factors that lead to mortality are cancer and cardiovascular disease. We have already begun to chip away at cardiovascular disease, although not enough people are taking advantage of cardiovascular therapy such as statins but that will begin to increase. In the future we are going to see more personalized medicine that will begin to help people manage cancer. Cancer will be a manageable disease as opposed to a killer in the near future. We will, with massive supercomputing and synthetic biology, better understand how to prevent and cure some cancers in our lifetime.
The third key driver of change for the life insurance industry is the mapping of an individual’s personal human genomes. Now companies like 23andMe are offering to sequence your personal genome and analyze it against the known 1,500 tests genetic tests for disease. When people begin to start taking advantage of this technology you are going to be able to map that to different kinds of new insurance products. So I think there will be tremendous new life and health insurance policies and products that can be structured based on these key drivers that will give value both to consumers and the life insurance industry; that leverage off of personal genomics.
Security Trends
Security remains a top concern for business and IT executives alike. It only takes one bad security breach to ruin a company’s reputation. Although, security remains high on most insurance companies’ lists of top priorities, Canton said that most insurance companies still aren’t doing enough to keep their data secure.
Resource: What new trends do you see coming in the future around security?
Canton: For security in a world where all data bases, networks, telecom banking, business databases will all be connected increasingly over wireless Internet platforms the challenges are going to be to balance privacy and confidentiality of data with proper legal transparency. Technology innovations are coming faster than security innovations. And the innovations that are available for security are not being adopted. So in the area of cyber hacking, for instance, identity theft is growing over 1,000 percent a year, which is just unacceptable. As more things get connected there will be more security breaches. So overall we have not done as well in business with adopting the technologies that can protect and secure our data as we should. Also, the innovations that are available in the area of security have not really delivered on protecting privacy and data.
The other areas in terms of security other than cyber are issues related to terrorism, crime and global risk. Often the new face of risk is the global criminal organizations that hijack data and sell it using all of he latest Internet innovations like auctions, video conferencing and even online payments. Companies are, for the most part, easy targets for this threat. Companies need to expand their ideas to create a more holistic risk landscape. Risk factors such as climate change, disasters and terrorism are risks that up until recently most businesses didn’t consider were part of their security profile but today they should be. We are going to see greater emphasis on business continuity planning. Most companies have some kind of a business continuity plan but quite frankly it is not really developed enough to be able to deal with potential issues such as climate changes, disasters or even emerging terrorism and crime. The areas of crime, particularly cybercrime, are going to require deeper collaboration between companies and authorities so that we can together work on dealing with these problems.
Resource: Do you think Insurance companies are doing enough to right now to meet security requirements?
Canton: No, I think the insurance industry as a whole could do more to take a lead in innovating in the area of security. There are a lot of new developments in security such as quantum encryption and quantum computing. There are individual insurance companies that are doing outstanding things to protect their data and secure their enterprise but too many more are not as actively investing in building threat scenarios and building the kind of firewalls and technology that they will need. Insurance companies need to be implementing security policies that will take into consideration asymmetric risks, like climate change, disasters and pandemics. We have one insurance client that has been very interested in the impact of pandemics because of the potential impact in their key markets. There is a lot more that companies could be doing to become more aware of and be able to actually even prevent security issues in the future.
Avoiding Pitfalls
What can you do to ensure that your company’s future is safe? In this tough economic environment that is a question that many companies are trying to answer. Canton discussed some of the biggest threats that companies are facing today and some of the biggest mistakes they are making.
Resource: In general, what do you see as the biggest threat right now to a company’s future?
Canton: There are three or four key threats. One of them is to not move fast enough at embracing new technologies that will make your operations both cost effective and more future ready. Companies need to be ready to meet the challenges of a vastly more hyper competitive environment where consumers have very high level expectations of companies innovating. So the first threat is not investing and leveraging innovative technologies such as Web 2.0, data mining, business intelligence or knowledge management. These are critical ways for companies to stay
competitive and to also be sustainable.
The second thing I don’t see that I would like to see more of is better appreciation for talent management.
The insurance industry, as in most industries worldwide, is global and the biggest issue is whether we will have the necessary people to be able to grow our enterprise at the key levels that we need. We are already suffering for depopulation. How we are going to acquire the talent we need to grow is an issue that every company should be planning for today whether it is succession management, mentoring, procurement or retention. These are critical issues because we are in a talent war.
The third threat to a company’s future has to do with being able to create products that are in sync with the changing demographics and financial needs of the population. There is a lot more room for creativity in this area. People will be living longer and therefore insurance companies should be providing more structured investments that
can address both long term health needs as well as investment needs for an aging population. The largest concen-tration of wealth on
the planet is with the baby boomers. We are going to have 78 million boomers potentially living an extra 10 to 15 years so they are going to need a whole range of new kinds of insurance products. These products are not really on the market today and they could be.
Resource: What is one of the biggest mistakes that you see companies making right now?
Canton: One of the biggest mistakes I see companies making right now is not listening enough to the customer in terms of how their world is changing and how to get in sync with their future vision of their world. The second mistake I see companies making is not paying enough attention to innovation. Innovation is not just the latest and greatest technology. Innovation is about the practical technologies that will help you become more agile, more on demand and be able to be out front in terms of competition.
Looking to the Future
If there is one constant in business it is change. Today, due to changing demographics and emerging technologies change in the marketplace is happening faster than ever before. Being agile is more critical than ever.
Canton discussed some of the changes we will be seeing in the next few years as well as how the CIO’s role will change.
Resource: Do you see the way we do business changing in the next five years? How?
Canton: I think the ways it will change is we will get smarter, more productive and more effective. We will be outsourcing more. Everything that is not core is going to get outsourced. And even the definition of what a core competency is for business will change. The smart businesses will be able to offer more value on pricing and more value in terms of service because they will be using outsourcing capabilities around the world. Also, products will be better designed to really fit the markets that you are going after.
Imagine an insurance company thinking and acting like Apple Inc. when it comes to designing products. It would be an interesting strategy for an insurance company to think about the implications for how it introduces design into its services and products the way Apple introduces them. There are ways the insurance industry could learn from other industries and best of breed leaders. There is actually a new kind of branding opportunity that may emerge. Also, I think that decisions that consumers are going to make are going to be made much more on which companies are both green and sustainable.
We are going to see a shift of consumers and how they buy. In a world where insurance products look like commodities to consumers increasingly they are going to want to know about the values of the companies that they are buying their products from. Today there is not as much visibility in the U.S. as there has been in Europe. I forecast that with over 95 percent of consumers viewing themselves as environmentalists the insurance sector particularly will have to start to embrace green strategies. Companies will have to embrace strategies that will send out a message that not only are they going to help insure you but they are also giving something back to make the planet a better place. We are beginning to see this with green IT in the tech center. Certainly consumer companies are concerned about this, such as the automobile industry, we are going to see this hit the financial service companies next.
Resource: Will the CIO’s role change over the next five years or 10 years?
Canton: I believe that more CIOs will out of necessity have to become more business justified in terms of their strategies. CIOs are going to have to understand the business in fundamental ways and make a case for technology investments that will drive value. In other words, they will be focusing on investments that will be able to drive growth, drive new value and find new markets. The CIO will have to become more market driven not just innovation driven. In fact I think we are at the edge of a major revolution in the way CIOs are going to operate. I don’t think there is a CIO today that can get his or her budget passed without a strong business strategy justification of what that technology is going to do to drive the enterprise.
Emerging Technologies
The insurance industry has a reputation for being slow to embrace new technologies. Whether you are an early-adopter or a laggard, knowing which technologies to watch is essential to staying competitive. Canton provided some insight into which emerging technologies will be changing the way the insurance industry does business in the future.
Resource: Have you been surprised by the lack of growth or resilience in any areas of technology?
Canton: I am surprised by the lack of innovative technology adoption by some companies. I have also been surprised by the decisions of some companies to pull back on their investments in technology which I think is mistake. When you cut back on technology investments you are creating a vacuum for your competitors to step in and grow their market on the back of your missed opportunity. So companies that are kind of looking at the potential slowdown of the economy, which I don’t think is wise, are holding back on technology investments such as business process transformation or upgrading from legacy to more Web centric platforms. I am surprised that there are some companies that still don’t understand that innovative, adaptive technologies are what is driving business value and what customers and consumers are expecting.
Resource: What is the biggest technology change or trend that you see coming for 2009?
Canton: For 2009, the biggest trend is going to be social networking, Web 2.0 and the explosive convergence of the multimedia Web. This convergence is actually going to emerge in 2009. We are going to have very fast networks that are tied to mobile platforms, rich media and video and this is going to become a very potent platform for companies to advertise and for people to share ideas. All of that is going to start happening and driving opportunities for globalization. This will open up entirely new marketplaces particularly in the developing world where business will be able to expand. And in the U.S. and developed nations this convergence of media will lead to entirely new products that just really don’t exist today.
Beyond 2009 I am tracking a major technological innovation called the Singularity and that is the time when supercomputing, artificial intelligence, biology and the future Internet referred to as the Metaverse may create a kind of artificial intelligence that may become even aware of itself. I am tracking the implications of this Singularity with a group of scientists from NASA, Google, Microsoft and IBM. We have all collectively decided that we need to track the emergence of super intelligence because of the potential implications it may have for our world.
Resource: What products or innovations will drive competitive advantage in the future?
Canton: In general, I think smart products that can be upgraded and adapted for more niches will drive competitive advantage in the future. Innovative companies will be focusing on smaller niches and have smaller production runs of products that can serve specific niches in the marketplace. It could also be products that are designed by the consumer. The consumer is going to have choices and maybe even design their own kinds of products whether they are financial service products, insurance products or even consumer products. I believe in a world where you are going to have things like nanotechnology which can basically make products on demand you are going to have a vast new kind of supply chain that is going to be much more on demand, agile, responsive and cost effective for making limited runs of products that consumers will also have a fundamental role in creating.
Resource: Do you think the cut backs in IT budgets will affect investments in green computing?
Canton: I don’t think they should. The message to insurance companies should be that you need to continue to invest in green technology but that may mean that you don’t need to do it by yourself, you just need to have better partners or vendors to outsource to. The issue with green computing is a different strategic issue. It is an issue of both increased productivity, cost effectiveness, being able to not sacrifice customer service and product quality while incorporating more green practices. It is a new holistic way of thinking and operating. We need both investments in innovation and we need green computing in order to meet the needs of both the future organization as well as the future needs of consumers.
Resource: Do you think social networking Web sites will play a role in how we do business in the future?
Will social networking Web sites change how we do business?
Canton: Social networking sites already play a role in how we do business. In the future they will be a fundamental part of the new reality. Social networking sites like Facebook, Twitter or Flickr will play a part and particularly Wikis will play a part. I could foresee an insurance Wiki where I’m bartering, trading and auctioning different features of my policy with other people’s policies and actually I’m able to trade on my policy. There is a fantastic new future of opportunity for insurance companies by leveraging off of social networks. These sites will enable insurance companies to understand better how to serve the consumer and also put into the hands of consumers different kinds of mechanisms that can allow them to increase the value of their own insurance assets.
Resource: What role do you see robots playing in our future? What area or industry will they have the
most impact?
Canton: Robots will play an important role both in the home and in the industry. We are going to see domestic robots that play a variety of roles. Today we have robots like the Roomba that clean up the house. Tomorrow we will have robots that are companions for people and that take care of people with certain disabilities. Robots will help with everything in the home from security to cooking. In the industrial sector we are going to have robots building just about every consumer device. There are over 50,000 robots today that are building everything from cars to refrigerators around the world, tomorrow robots will be building robots. We are going to see more mobile, autonomous intelligence that will both be fighting wars, taking care of the aged, as well as being companions for people that are interested in the companionship of a form of a robot called an android that will look, feel and maybe even smell like human beings.
Advice for IT Professionals
Today, being an IT professional in the life insurance industry is more challenging than ever before. Innovations and new technologies are coming faster than ever, while IT budgets are getting cut. Trying to find the best solutions to help the business run more effectively and efficiently is no easy task. Canton offered some advice for the IT professional in the life insurance industry.
Resource: Do you have any advice for the IT professional in the life insurance industry?
Canton: I would suggest that the IT professionals in the insurance industry take into consideration how to articulate what the key technologies are that will drive business value. First, IT professionals need to have a good understanding of what the current business strategy of the company is and really get clear on that. Many companies themselves are getting clear on that. Then IT executives need to think about how they can bring new value from championing investments in IT. Some of those investments may be outsourced solutions and some may be in house developments but the whole notion of driving future business value is the critical challenge facing IT professionals today. In order for IT professionals to convince the business it needs a new solution they first have to understand what the business strategy is and how it relates to the products and services.
IT professionals need to be asking how do we create an organization that is future ready? How do we create an organization that will speak to the needs of the consumer not just today but tomorrow? What can IT do today to drive those opportunities to create and sustain that future value? I think that is the ticket for IT. I see IT professionals needing to be at the table, actually crafting business strategy with a much longer view towards the future rather than just having short term responsiveness to internal customers.