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A new era for man and machine

Artificial intelligence and other high-tech innovations are reshaping today’s industries and we’re on the verge of a new industrial revolution.

TEXT: Jan Hökerberg
15 JUNE, 2018

Imagine you would like to get a loan and then you go to the bank just to find out that it is only managed by robots?

Science fiction? Not really. China Construction Bank, the nation’s second biggest lender, has opened a branch in Shanghai only managed by robots and relying on pure technology, including facial recognition, artificial intelligence (AI) and virtual reality (VR).

Or could you think of going to a convenience store and just grab what you need and go? No queues and no checkout. No staff in the store.

Well, it’s already here. Cashier-less stores have recently opened in both China and the US where customers can enter showing a quick response (QR) code and then shop for what they need or even have a meal. Sensors recognise the goods and the customers pay on their way out using mobile banking such as AliPay or WeChat Pay.

We are on the verge of a new evolutionary chapter in the history of man and machine. The arrival of AI, big data, Internet of Things, autonomous vehicles, facial recognition, 3D printing, sensors, blockchain, VR, augmented reality (AR), cloud computing, drones, robots and much more will not only change the way we live and work but also change a large number of industries.

IBM’s supercomputer Watson made headlines in 2011 when it defeated several multiple-times US champions in the classic game show Jeopardy. Seven years later, Watson can do much more than that. It is probably, today, the best cancer diagnostician in the world, helping doctors identify treatment options for cancer patients that humans have failed to see.

There are even speculations that in the near future AI will even be able to solve the riddle of cancer itself.

In the summer of 2017, China unveiled a plan to become the world leader in artificial intelligence by 2030, challenging the United States in its dominance of the technology. China is already making progress. Digitalisation is the key word. Artificial intelligence is another.

China already has a 42 per cent share of global e-commerce transactions, processing 11 times more mobile payments than the United States, according to the global consultancy McKinsey & Company.

China is also home to one-third of all the world’s unicorns, or technology startups valued at more than US$1 billion.

The Chinese government has even introduced a textbook, called Fundamentals of Artificial Intelligence, to 40 secondary schools, according to the South China Morning Post. It describes the history of AI and how the technology can be applied in areas such as facial recognition, autonomous driving and public security.

The book was published at the request of the government after it asked the country’s education policy makers to include AI courses in primary and secondary schools.

In April 2017, Baidu – the Chinese tech giant – was able use its facial recognition technology to find a 33-year-old Chinese man in Fujian province 27 years after he was abducted and reunited him with his biological parents in Chongqing.

That is just one example of how far Baidu has come in its research and development in AI. Facial recognition technology is also tested at airports for passenger identification and Baidu believes that, in the near future, facial recognition could replace boarding passes.

Baidu is the operator of China’s biggest search engine and has access to real-time search data from 700 million internet users in China. By using big data, AI and cloud services it can analyse individual users preferences and sell them to marketers.

The company’s former chief scientist Andrew Ng, who also has a background at Google, has said that we are on our way to entering a new industrial revolution and that “artificial intelligence is the new electricity”.

Tomas Larsson is director of Kairos Future’s ChinaLab in Shanghai, which is closely following all the new technology trends. He says: “There is a lot of talk about AI right now, and AI will definitely change a lot, but there are other important things happening in several areas as well, for example in materials such as plastics. Only 10 per cent today are recycled, some 40 per cent go to landfills and a third end up in the sea.

“In this area, there is much going on – for example research into biodegradable plastics that decompose naturally in the environment and will be much less harmful than traditional plastics,” he says.

Larsson believes that many industries will see great changes: “We will see solutions within the energy sector that will be cheaper than today’s energy. Smart farming will give us better food. The fifth generation of wireless networks (5G) is on its way and it will mean that we can do so much more when the connections are so much faster and everything can be saved in the cloud.

“I can’t really think of one single industry that will not change radically over the next 10 years,” he concludes.

I can’t really think of one single industry that will not change radically over the next 10 years.”

Tomas Larsson, Kairos Future

2030

The year when China aims to be the world leader in artificial intelligence.

Another area is generative design. Designers or engineers input design parameters, such as materials, size, weight, strength, manufacturing methods and cost, into generative design software and the software explores, with the help of AI, all the possible combinations of a solution, quickly generating hundreds or even thousands of design options. Such new products can then be produced by 3D printing.

“Instead of human beings designing products there will be computers that do it with the help of AI and will find new types of designs that a human designer could possibly never had invented,” Larsson says.

“We have to get used to the idea that objects in the future may not look the same as the ones we are used to now,” he adds.

3D printing is definitely a technology that will have plenty of impact in the coming decade. Once 3D printers go mainstream, consumers will be able to select and manufacture the items they want, reducing the need to ship the item to them. This also brings custom design into play, allowing consumers to personalise an item like clothing or jewellery, then print it out immediately.

“3D printing will have a very big impact on a number of industries. We’ve already seen it in a number of sectors, such as consumer electronics and healthcare, but I think it will touch every sector at some point in the future. I’ve been to some closed-door sessions about 3D printing and what I’ve seen so far indicates that the future for this technology could be limitless,” says Kevin Rogers, head of the Elanders Group’s print and packaging operations in Asia (see also pages 16-17).

I’ve been to some closed-door sessions about 3D printing and what I’ve seen so far indicates that the future for this technology could be limitless.”
Kevin Rogers, Elanders

The healthcare sector accounts for 10-15 per cent of the GDP in most developed countries. It is an industry in transition, in which health technology apps and big data are transforming the industry.
People will be able to use health trackers, much more advanced than the fitness devices we see today, which can count the number of steps and monitor the heart rate. Tomorrow’s devices will be able to track, through sensors, glucose levels and signs of cancer.

This could allow medical professionals to focus less on diagnosis and more on finding the best solutions for treatment.

“There are, however, big risks if people let their apps do the diagnoses,” says Larsson. “Wrong data could come up that will make people worry. It is also a risk that traditional actors, such as public hospitals, will be more marginalised while private players will get more control, which could lead to important information being lost to research.”

Educational technology, or edtech, is one of the fastest growing industries in the world, according to Jannie Jeppesen, CEO of Swedish Edtech Industry, an independent non-profit industry association with some 70 member companies.

“Sweden is in the forefront compared to other countries when it comes to digitalisation of the educational system, but the educational system is still only at an early stage of the development, a kind of 1.0 version,” she says (see separate article).

Digitalisation has opened up a wide range of opportunities for education systems worldwide. It paves the way for new learning experiences and provides innovative ways to achieve core goals. Already today, many schools are using cloud-based technology, so that students can easily save their assignments, share them more easily and securely store them on the cloud.

There are many benefits to educational technology. It will make teaching easier through audio-visual presentations, it will be easier to track the students’ progress, and so on. The new technologies could also mean that more students around the world can get easier access to qualified education, for example through distance learning.

Within the financial sector there has, in recent years, been a boom in financial technology, or fintech, applications. The fintech industry is thriving globally with a large number of startups involved in the process but also several of the world’s leading banks.

Fintech companies utilise technology that is widely available, from payment apps to more complex software applications that include artificial intelligence and big data.

Fintech is not a new phenomenon. It has been around in one form or another virtually as long as the financial services sector has. However, over the past decade fintech has evolved to disrupt and reshape commerce, payments, investment, asset management, insurance, clearance and settlement of securities and even money itself, with cryptocurrencies such as bitcoin and its distributed ledger blockchain.

“Customers now expect seamless digital on-boarding, rapid loan approvals, and free person-to-person payments – all innovations that fintech has made popular. And while they may not dominate the industry today, fintech has succeeded as both standalone businesses and vital links in the financial services value chain,” according to a report by Deloitte and the World Economic Forum (WEB).

Artificial intelligence is the new electricity.”
Andrew Ng, co-founder of Coursera and former chief scientist at Baidu

The retail industry is also going through big changes. Here, as in most sectors, new technologies are leading the way, in a race between China and the US.

In January this year, US-based Amazon, after long delays, finally opened its first unmanned Amazon Go grocery store in Seattle. The store concept utilises several technologies, including computer vision, deep-learning algorithms and sensor fusion to automate much of the purchase, checkout, and payment steps associated with a retail transaction.

However, in July, 2017, Chinese e-commerce giant Alibaba had already opened its first cashier-free retail store, Tao Café, in Hangzhou. As with Amazon Go, customers can enter the store after obtaining a machine-readable QR code entry ticket through their Taobao account and going through the facial recognition system at the store.

Customers can not only dine in the café, but also purchase various products both physically in the store and online by using interactive screens at each table. Customers pay automatically as they exit through the checkout sensor door. There are no queues at the cashier and no need for cash or even mobile payments.

Several other unmanned convenience stores have also emerged in China, such as the French retailer Auchan’s BingoBox stores in Beijing and Shanghai.

The concept is part of what has been described as “New Retail” by Jack Ma, founder of Alibaba. It is the transformation of traditional retail into a seamless experience between the online and offline world.

“Pure e-commerce will be reduced to a traditional business and replaced by the concept of New Retail – the integration of online, offline, logistics and data across a single value chain,” Jack Ma predicted at an investor briefing in 2016.

“New Retail is an area where development is taking place so fast and where the big players in China are pushing it forward,” says Larsson of Kairos Future.

“Alibaba invented the term but then the other players are moving in quickly. Jingdong [JD.com] is talking about borderless retail, while Suning calls it smart retail. New Retail is a big experimental workshop for finding new ways of creating value in retail and more efficiently building new things around the customer.”

Felicia Lindoff is the co-founder of the Sino-Swedish Innovation & Entrepreneurship Centre in Beijing. She believes that the e-commerce market will continue to develop and change:

“It is already a mature industry and it’s all digitalised. When this it is integrated with features such as virtual reality (VR) and augmented reality (AR), we will see many new ways of shopping.” (see separate article)

Larsson believes that “China will be at the forefront in many businesses that combine hardware with internet-based business models. China already has half of the world market in smartphones. Most industries in the future will see a strong Chinese champion as one of the market leaders. Today, China is an experimental workshop for Internet-based business models,” he says.

Pure e-commerce will be reduced to a traditional business and replaced by the concept of New Retail – the integration of online, offline, logistics and data across a single value chain.”

Jack Ma, founder of Alibaba

The sharing economy is also reshaping and challenging traditional industries. In the past few years, consumers have embraced services such as Airbnb and Uber. The sharing economy will probably continue to spread into other markets or industries, such as services in which people may be able to offer or trade skills with each other.

“The difference between what in the West is called sharing economy and in China where it’s called a rental economy is quite important. The sharing economy was, at least in the beginning, a peer-to-peer phenomenon that shared underutilised resources. In China, there are companies that have these resources and find new ways to use them,” says Larsson.

“Mobike and Ofo have realised that they earn considerable amounts of money on some bikes and users but less money on other bikes and users. So at night time they use trucks to move all these bikes around to put them where they are more likely to be used. All this is done using computerised information about the bikes and the customers.

“Another area in China is that you can charge your phone for one yuan per hour while you’re eating. But there have been backlashes too. An umbrella sharing system was launched, in which you could rent an umbrella for one yuan per hour, but 300,000 umbrellas were stolen in just a few days,” says Larsson.

In the fashion industry, there are some new startups now renting out clothes that are too expensive to buy for most people.

“We will see the same thing with cars. For daily transportation needs, more people will pay for usage – that is for getting from A to B in an autonomous vehicle, instead of buying a car. This will also mean that we will see new kinds of cities. They will be more quiet, more efficient and will have less traffic jams. We can even imagine offices and schools that use autonomous driving by organising lessons with people in a vehicle,” Larsson says.

There are of course not only winners in this race – there are also losers.

“The pace is so fast at the moment. And the biggest companies are normally the ones who that will be the last to change. Today, I wouldn’t invest in the traditional fossil-fuel industry, for example,” Larsson says.

“The big threats are not from these companies’ traditional competitors, they come from totally new players. In this game, we will see many winners and losers. Winners are the ones that can adjust to the new rules of game. But this is not just about one-off change, but about changing to new things all the time,” he says.

“Those that cannot adjust and those who think they can still continue to live on old merits, they will probably be the big losers.”

Schools are taking it to the next level

Even if many schools around the world are already digitalised, the growth of educational technology applications could revolutionise the day-to-day work for students, teachers and school administrators.

Digitalisation in schools is nothing new, since many schools worldwide have worked with computers and tablets as educational tools for a number of years. However, today a large number of startups and other companies around the world – not least in Sweden – are using educational technology, or simply edtech, to provide solutions that can revolutionise teaching platforms in the future.

“Sweden is in the forefront compared to other countries when it comes to digitalisation of the educational system, but the education system is still only at an early stage of the development, a kind of 1.0 version,” says Jannie Jeppesen, CEO of Swedish Edtech Industry, an independent non-profit industry association with some 70 member companies.

“Schools in Sweden have had Wi-Fi for quite some time and we have a high ratio of computers per student. However, with artificial intelligence (AI) and other technology trends, it is time for the Swedish educational system to move to the next level,” she says.

Sweden is in the forefront compared to other countries when it comes to digitalisation of the educational system, but the education system is still only at an early stage of the development, a kind of 1.0 version.”

Jannie Jeppesen, Swedish Edtech Industry

Edtech is one of the fastest growing industries in the world and, according to Jeppesen, the number of applications has even surpassed those within financial technology, or fintech.

The members of Swedish Edtech Industry vary from AI startups to established global companies such as Microsoft but also traditional Swedish educational giants such as Liber, Natur & Kultur and Gleerups, as well as companies like Tieto and IST, which offer services for system administration – for example to handle student schedules, school buses, assessment reports and so on.

The Swedish Edtech Industry is only a one-year-old association and when they decided to send a delegation abroad for the first time, they chose Hong Kong. This was in conjunction with the Business of Design Week in Hong Kong in December 2017, to which Sweden also sent a design delegation, led by the Swedish Prince Carl Philip.

“We could see in our conversations with educational people in Hong Kong that we have similar challenges but different strengths,” says Jeppesen.

“In Sweden, we are good at soft skills, which means cooperation, creative solutions and entrepreneurship. But we have lost our position in knowledge results, such as the Programme for International Student Assessment (PISA) tests, where Hong Kong is very strong. They have challenges with creating talents with innovative ideas, but they are speeding up, already talking about AI literacy,” she says.

The Swedish delegation also visited Shenzhen, a city that has been dubbed a challenger to Silicon Valley.

“We were in Shenzhen for two days and their speed of innovation was really an eye-opener for us,” says Jeppesen.

The Swedish edtech delegation found out from its visit to hong Kong that Sweden and hong Kong have similar challenges but different strengths.
The delegation also visited Shenzhen and the city’s speed of innovation was a real eye-opener for the Swedes.

During the visit to Hong Kong, the Swedish Edtech Industry signed an agreement with Hong Kong Education City, which is a wholly-owned Hong Kong government organisation that has a mission to enable to better adapt to changing curriculum initiatives through technology.

“The agreement means that our member companies will be able to test their technology in Hong Kong public schools. If it works out well, it could become a regular platform in Hong Kong schools,” Jeppesen says.

Public schools in Hong Kong are in general far behind when it comes to digitalisation and new solutions. Most things are done manually, including system administration, tests and homework.

A platform for innovation

Swedish SMEs need to understand that doing business in China is not the same as doing business in Europe, says Felicia Lindoff, co-founder of the Sino-Swedish Innovation & Entrepreneurship Centre in Beijing.

As co-founder and chief operating officer of the Sino-Swedish Innovation & Entrepreneurship Centre (SSIEC) in Beijing, Felicia Lindoff works actively with several Swedish tech startups that are interested in testing their products on the gigantic Chinese market.

Lindoff, who first came to China in 2007, has a background in Chinese language studies in Ningbo, running a retail business in Kunming, when she was importing clothes from South Korea, and having worked as a corporate social responsibility (CSR) programme officer at the Embassy of Sweden in Beijing. She has also founded a Scandinavian interior design studio called North of North and she is a member of SwedCham China’s board of directors.

The idea to start an entrepreneurship centre in China for Swedish companies came up when she met Zhang Ling, who founded the Sweden Alumni Network in China (SANC) some years ago. It is the biggest Swedish alumni network outside of Sweden.

“We realised that there aren’t many platforms in China where Swedish small- and medium-sized enterprises (SMEs) can get assistance for entering Chinese markets so, in 2016, we decided to start SSIEC,” says Lindoff.

They received backing from Zhongguancun Yonghe Hangxing Science Park, which provides a comprehensive variety of resources and also SSIEC’s facilities. Zhongguancun – which has been dubbed China’s Silicon Valley and hosts tens of thousands of tech companies, among them Baidu and Lenovo – is providing SSIEC with important resources such as guidance of local policies, funding and other necessary support SMEs need when entering the Chinese market.

The centre has also built a network of advisers, of whom many are SANC alumni.

“Our customers have different reasons for approaching us,” says Lindoff. “Some just need more information about the China market for their products while others are open for attracting investors and entering joint ventures.”

Some Swedish tech startups are already world leaders in their niches but to have a good product is not enough to be successful in China.

“In China, you have to be flexible and open-minded. Swedish SMEs need to understand that doing business in China is not the same as doing business in Europe. China has another business culture and other business models,” says Lindoff.

“The Chinese are adaptive, they are quick to test new technology, they challenge the ways things are being done and everything moves very fast. Look for example at the market for e-commerce. Today, everyone has Alipay and WeChat Pay and when you order something it will be delivered within an hour,” she says.

She believes that the e-commerce market will continue to develop and change: “It is already a mature industry and it’s all digitalised. When this is integrated with features such as virtual reality (VR) and augmented reality (AR) we will see many new ways of shopping.”

The Chinese are adaptive, they are quick to test new technology, they challenge the ways things are being done and everything moves very fast.”

Felicia Lindoff, Sino-Swedish Innovation & Entrepreneurship Centre