Infrastructure CEOs are saying all the right things about technology and disruption. Yet our data suggests that most infrastructure players are struggling to keep pace with technological change. What is holding them back?
The world is in a state of constant disruption. And, according to infrastructure CEOs, that’s good news. Indeed, in a recent global survey of infrastructure CEOs conducted by KPMG International, 96 percent of respondents said they see disruption as more of an opportunity than a threat. If that’s the case, then ‘opportunity’ is about to become abundant in the sector.
Our survey suggests that most infrastructure organizations are already well on the road to transformation. Most – 87 percent – say they expect their digital transformation investments to start paying off within the next three years. Six percent say they are already implementing artificial intelligence into their core processes.
Although, if we dig a little deeper, it starts to look like infrastructure organizations may not be as prepared as that headline response would suggest. Seventy-two percent of the CEOs in our survey admit they are already finding the lead times to transformation overwhelming. And they are more likely than not to say they are struggling to run parallel digital and non-digital processes.
The fact that older, more established infrastructure players are struggling to adapt to the pace of change is not surprising. Infrastructure is, after all, about physical assets with long lifespans.. Versus other industries where digitization resulted in the complete destruction of traditional models (such as the music or book industry), the impact of technology has been somewhat slow to come to the infrastructure sector.
I’m also not convinced that CEOs are feeling much pressure for technological change from their stakeholders or boards. A traditional approach to infrastructure asset ownership is to sweat the asset as long as possible. Unless customer pressure forces investment, for example in wifi-connectivity along railway corridors, the incentive on boards is to spend as little as possible and maintain the asset as it was first conceived.
The problem is that disruptive change is now coming to the infrastructure sector. Ride-sharing apps are already impacting public transport. Rapid advances in battery storage technology is challenging the commercial structure of electricity networks. . It doesn’t take much imagination to see some of the more immediate impacts that new technologies such as drones, autonomous vehicles, distributed power generation, virtual reality and hyperloops could have on once-established infrastructure models.
At the same time, consumer expectations and demands of their infrastructure providers are rapidly changing. Some players (those in more monopolistic positions) will see customer satisfaction sag if they are not able to respond to their demands for improved technology. Some may see themselves eclipsed by new upstarts with innovative technologies that see opportunity in under-served customer markets. Others, however, will seize upon the opportunity to deliver what customers (and, therefore stakeholders) really want: infrastructure that improves their economic prosperity and quality of life.