We live in a new industrial revolution: Europe has difficulties to embrace new business models

Here is an interview I did before the "Liechtenstein Congress on Sustainable Development and Responsible Investing 2012" with Steffen Klatt, that turned into a very interesting conversation about the current situation and ICT's role. The original is here

Europe risks being sidelined by emerging countries when it comes to the connected economy, says Dennis Pamlin, one of the main experts in Green Information and Communication Technology (ICT). Western economies tend to see problems ahead, rather than chances. Emerging countries may take the lead in monetising the opportunities that come with networks.

What is green about Green ICT apart from replacing an old computer with a more efficient one?

Dennis Pamlin: There is the greening of ICT on the one side. This is, among others, about the energy efficiency of the equipment, which stands for some 2 per cent of the world’s CO2 emissions. And there is on the other side greening with ICT. That is about using ICT and the fact that we now live in a connected society to drive down the other 98 per cent of CO2 emissions.

So Green ICT is a much wider concept than just the energy efficiency of our equipment?

We in the West live in a problem-driven world. When we say we want to “green” something, then we see it as a problem to solve. But actually we should talk about services to provide. This is about new chances. We live in a new industrial revolution. We had one around steel and fossil fuels. Now we live in a connected society which is based on knowledge and how we interpret things. We actually do not know what we are shaping and what will eventually come out of this revolution. That is exciting.

Where does this new industrial revolution now stand?

We stand at a turning point. For the last twenty years we have built up the infrastructure, the basic capacity to make the old society smarter. Now we are looking at what we have in front of us. Look at the way we distribute information. Everybody can create a pdf today and everybody else can read it. From a user’s perspective it looks similar to how he has read documents before. But if you look behind it, it is totally different. Who makes money out of it and what is the incentive of people to participate? This has totally changed. An ebook today is a database where you can see what other people are reading. In the old industry a few people controlled what was distributed. Now everybody can do it – even if the old guys would like to keep it the old way.

Where does the money for change come from?

On the one hand you have the new phenomenon of open source like Linux or Wikipedia. If you get the framework right, a number of people, each doing quite a little, can create something enormous. So part of the answer is that people bring passion back to action. They can spend some of their money earned in the old economy and some of their spare time and their passion on the new economy. This is nothing new: somebody invests money to create something new. On the other hand ICT can help us measuring what we really want and communicate new opportunities. Until now we are measuring what people spend in the old centralised economy. Like that we only looked at the monetised part of the system. By creating new things that the old economy did not identify as valuable people can now fund such things using crowd financing, where very many pay very small amounts to make sure that new things can be developed. Just look at Kiva (platform for microfinance, stk) and Kickstarter (platform for financing creative projects, stk) as example of the opportunity a connected economy provided. I have one project my-self in Sweden for ‘what should be heard now’ to allow groups that are new and not given a voice to develop new ideas and projects. Thirdly some of the principles we are using in the current system are no longer valid. In the industrial economy I needed the resources for myself and the more that have the same the worse the situation becomes, cars is a good example. A connected world does not necessarily need more resources and the value increase when more people use it, video conference equipment is usual example.

Why? Is the connected society green by nature?

To some extent, yes. We can use the same equipment for different things. We can use computers as a publishing tool, to call other people or to do our online banking. ICT is a catalyst. It can help create this new, smart society. But ICT is mainly a catalyst that accelerate things, and it can help speed up the old and resource-intensive society, too. Today we see both trends. Look at travelling. On the one hand you have video conferencing and teleworking, so that people travel less. On the other hand you have new functions which make travelling more efficient, so that people travel even more around using GPS and web booking of flights.

Who are the drivers of change?

There are no specific stakeholders. Any new economy is about networks. If you really want to create something new, you need knowledge from different sectors. Change-makers are part of new clusters. But the old system keeps people in the old world. This starts with politics: there are ministries of transport, for instance, not ministries of mobility. This means that highways are not planned together with broadband connection. We need to move from organising ourselves around old ways of providing service to a situation where we focus on what we actually need. Which country will be the first that have a ministry of mobility (both physical and virtual)?.

Does it take a revolution to change that?

New clusters do not develop gradually. You see developing different parts of a possible cluster, and then all of a sudden they come together. From outside it might look like a revolution. But from inside it came more naturally.

Where are the epicentres of this change?

If you take the technological side, it is San Francisco and other old innovation hubs like Tokyo. But if you look at actual business models, then they tend to be developed in emerging countries.

Why?

They have less of a vested interest in the old economy. So it is easier for them to see things in a different way. They are open to new things. Secondly, governments in emerging countries need to think more about resource efficiency – not so much out of ecological reasons, but because of national security. China is the only country I’m aware of which includes the cost of military protection into the oil costs when they plan for long-term investment. That might be the reason why they lead much of the development and implementation of renewable energy. We in the West tend to forget that for every barrel of oil there is the need to militarily protect the infrastructure. So renewables and decentralised solutions are already cheaper, we have just not created enough transparency.

Is there enough freedom in a country like China to allow the free flow of innovation?

In terms of the old economy: no. But with microblogging and internet playing such a vital role, it is hard for the old structure to control the flow of information. Moreover, in China the internal flow of information for innovation is almost encouraged. People have the mindset of change. Here in the West many people are almost afraid of change. This is the biggest stumbling block to embracing innovation, especially in Europe. We cling to the old things.

Is Europe a lost case?

Absolutely not. Europe has an absolutely impressive history of freedom of speech and innovation. People in the US, India and China have difficulties thinking outside their national box. In Europe people think in levels: their city, their region, their country, Europe, then the world. Europeans, given the right circumstances, have a good chance to play a role in this global change. But they are hindered by the huge, vested interest. Europe has difficulties to embrace new business models.

How can new business models be built?

The biggest shift is from product to service. People who today provide fridges should start providing fresh food because this is what people really need in their kitchen. A next step could be that the companies producing fridges should rent them out instead of selling them. This would allow them to see when it is most cost-efficient to change them and introduce new technology. Today we have a suboptimal economy because people buy products, but not necessarily the services they need. Next these companies could provide other solutions to provide food an help distribute locally produced fresh food as part of their business model. Amazon.com is a concrete example of where service had led to innovation. First they realised that they could provide better reading opportunity by provider more options if they sold books on the internet, and then they realised that they actually sold the joy of reading, which is not necessarily linked to the printed copy. So they introduced the e-reader. The technology was already there. Sony had already for a decade. But Amazon developed a business model around that.

You were talking about a new industrial revolution. Has the change just begun?

We are actually in the middle of this revolution even if many people in Europe are talking as if it is in front of us. Such a perspective results in investment that is destroying the planet and push Europe into a situation where there will be war and conflicts around natural resource. The change is happening all around us we just need to open our eyes. We are lucky to live in one of what might be the biggest transformation on human history with the number of converging trends. There is almost nothing we cannot do, but with such powerful tools comes a great responsibility and it is time to wake up in order for us to be able enjoy the opportunities.