Green Econometrics: Important Trends To Watch In 2021

Digital Transformation Becomes The Top Priority

by Charlie McHenry, COO, Co-Founder

The pandemic, and to a lesser extent, global climate change are accelerating digital transformation in business, industry, agencies and non-governmental organizations. This transformation is also a transition – to a new way of doing business on all levels; to a new way of looking at the impact and footprint of our business and personal activities; and to a new normal, that is not likely to look a lot like what we’re used to. This coming year will see a number of existing trends accelerate, and new developments which will underlie and drive major changes in business and operational models. 

This report will look at a number of industry sectors, as well as the impact of digital transformation on the public sector. In depth reports on each of these sectors are available by yearly subscription for $950 by request. 

We have to start somewhere, so let’s take a look at the rather dramatic and emblematic transformation now taking place in the automobile/truck manufacturing sector. 

Traditional automotive giants realized some time ago that they had to transform themselves, and rather quickly, into “mobility” companies. Pressed by the rise of Tesla, all industry players are now looking at an electric vehicle (EV) future – and the multiple ramifications of that massive disruption. But the transition we expect is about much more than EVs.

Positioning themselves as mobility platforms means that companies that once manufactured vehicles are now obliged to think out of the box, and for most that has meant expanding their model and partnering with new collaborators. It’s now as much about Silicon Valley and the Korean tech giants as the Motor City. It is the age of software-defined mobility, and that fact has significantly disrupted the industry. Software-defined mobility refers to an end-to-end system that relies on apps and mobile devices – paired with onboard vehicle computers – to locate, schedule, track and share transportation resources while managing those resources to extract the greatest value from their use. That will include the vast amount of valuable data gathered in the process.  

Recognizing this trend, five years ago GM announced a partnership with Korea’s LG Industries to collaborate on components for a full line of EVs. In January, at virtual CES 2021, GM revealed a new logo featuring graphics that emphasize their EV future, along with plans for new EV models. At this same event, GM surprised analysts by also unveiling a eVTOL air taxi – because total mobility is about more than just on road travel. Then FORD announced that they will no longer produce fossil fuel based vehicles after 2035. The transition is gaining traction and momentum. Elon Musk’s “HyperLoop” tech also promises to provide new alternatives to traditional transportation and mobility schemes.

In yet another example of this out-of-the-box collaboration, Hyundai and Apple are said to be working on a partnership, expected to be formalized in March 2021, to produce the market’s first “Apple Car”. Boundaries are changing and independent sectors of the economy are realigning into new configurations. We expect to see air taxi products from a number of car makers turned mobility platforms, as well as from Airbus and Boeing. 

Another value gained from mobility and autonomous driving (AD) is that AD upends the value of the vehicle. With AD the vehicle transforms from a depreciating asset towards a productive asset as cash flow can be generated from time of use sharing. These days mobility means a lot more than a car, truck or bus. Industry giants are looking to configure end-to-end solutions for travel/transportation – to be the total platform, accessible from your mobile device at your convenience. 

That begs the question: what role will traditional airlines have in this new model? From our point of view, their independent existence is questionable at this point. We expect most if not all of the existing airline giants to end up as subsidiary components of larger mobility platforms; just as we expect the well-known car companies of today to morph into those larger mobility platforms. 

Next, consider the education market. The pandemic has accelerated distance learning, and the top-heavy, slow-to-adapt higher education system is beginning to look very out-of-date, ready to crumble. We expect digital transformation to upend the existing model for higher ed, and to also influence high school and technical education models. In-person education will utilize artificial intelligence (AI) and machine learning (ML) to personalize education, and to make indoor classroom and laboratory spaces safer and more efficient. Digital transformation promises to make education more engaging, more tailored to the personal needs of students, and easier to deliver over a variety of platforms and locations. 

Health care delivery systems have also been impacted in very disruptive ways by the pandemic, and in more ways than you might expect. Sure, hospitals have been overwhelmed, but their operational models have also been called into question. Digital transformation is now a mandate, both for making the delivery of services more efficient and for extending and expanding the reach of service coverage. The application of analytics with Internet of Things sensors will enable hospitals to gather, process and act on more data than ever before. That will, in turns, make hospital and clinic environments and processes more efficient. 

Telemedicine is now established as a viable alternative to in-person office visits, and urgent care centers have emerged as convenient alternatives to expensive hospital ER care. Robotic surgery is enabling top surgical talent to perform procedures hundreds or thousands of miles away. We see significant changes in our current healthcare delivery system on the immediate horizon. 

Retail, of course, has been forever changed. The pandemic has accelerated the already existing trend toward online retail that Amazon initiated. Many traditional retail outlets have relied over the years on a measure of impulse buying once customers are in the store. In fact, the interior design of some large department stores is specifically tailored to force customers through isles of merchandise to enhance impulse buying. But with digital shopping and curbside pickup, this dependable piece of the overall revenue picture has vanished. Historic retail giant, Macy’s, just this week announced the firm is closing all of its brick-and-mortar stores. The digital transformation has altered the way most of us shop, and ravaged large- and small-town main streets in the process. 

Another sector transforming itself in dramatic ways is banking and finance. Fintech is redefining what it means to be a bank, making the old model with its brick-and-mortar bastions of finance give way to ATM’s, mobile devices, electronic wallets and direct transfer apps. Soon, we predict, these services will gobble up financial and retirement planning apps so that an end-to-end, cradle-to-the-grave platform can be created. 

Traditional real estate services are giving way to online search, appraise and purchase platforms that are changing the way agents are practicing. We see online platforms like Zillow gaining in use, relevance and popularity as the digital transformation of the real estate industry continues at pace. This changes forever the role of the independent realtor as well as the way homes will be bought and sold going forward.

The greater labor market is also undergoing generational change, as borders melt away and highly educated candidates from third world nations now find themselves with many more remote work opportunities than before the digital age and pandemic. We believe that temp and gig work is here to stay, with labor today often stringing together side-gigs to make rent. The acceleration of manufacturing and service robotics is also impacting the labor market. 

Digital transformation continues to change the way we govern, impacting everything from voting to how we spend taxpayer dollars with enhanced accountability. That trend will continue and accelerate. We expect 2021 to see a raft of new government efficiency mandates and subsidies. For example, the expenditure of Medicare dollars will soon be tied to recipients meeting specific Key Performance Indicators (KPIs). We expect measurement- and analytics-based contract awards to be the rule, rather than the exception. In an age where governments are having to deal with substantial citizen discontent, accountability has become even more important in retaining constituent trust. Though it will happen in stages, digital transformation will make the government more transparent, responsive and accountable at all levels in our opinion.