The Fourth Industrial Revolution is rewriting the rules for business. And while this process has been painful for some, it's been a boon to those agile enough to adapt.
The ‘move fast and break things’ ethos that epitomized Silicon Valley business culture for much of the 21st century’s first decade has fundamentally changed the global economy. For evidence of this, look no further than the French start-up, Guppy, which was launched in late 2018 to dredge discarded electric rental scooters out of the River Seine. In just one day this past summer, Guppy workers fished more than 50 shared mobility devices out of the river. Now, Paris is regulating its scooter fleet.
Guppy’s story is an allegory for modern-day businesses operating in a world in which it seems all of the old rules are meant to be broken. A new generation of businesses has upended entire industries by removing middlemen, flouting conventional processes and leveraging connectivity and automation in ways that have forced incumbent business leaders, regulators and the global workforce to rethink everything they once believed to be sacred. But the changes have not come without consequences. Many of the companies that pioneered the go-go tech culture that produced these breakthroughs are now the poster children behind calls for increased regulation, and — in some cases — have caused significant collateral damage.
The World Economic Forum has dubbed this unique period in the evolution of business the Fourth Industrial Revolution — a moment in time when increased automation, artificial intelligence (AI) and continued technological disruption will fundamentally change the way we live, work and relate to one another. Accordingly, just as we have seen with previous business revolutions, there will be many intended and unintended consequences that come with each step forward on this journey. The challenge, of course, for those of us living, working and forging a path through this period of radical change is how to stay on the right side of history when the rules of engagement are changing so rapidly.
A great example of this very real-world challenge is playing out on the global stage in the area of digital taxation. France introduced a new digital tax this past July, which applies a 3% levy on revenues from digital services earned in France by companies with more than €25 million ($28 million) in French revenue and €750 million euros ($838 million) worldwide.
The one universal truth we continually see proven as we march through the early days of the Fourth Industrial Revolution is that start-ups and incumbents who have the agility to seize new technologies and scale rapidly to adopt new ways of doing things are the ones who thrive.
In introducing the new law, France has joined a group of 20 countries throughout Europe, including Austria, Belgium, the Czech Republic, Italy, Spain and the UK, that have either announced or published proposals to introduce digital services taxes. Now, the Organization for Economic Cooperation and Development (OECD) has gotten in on the act, with a new proposal to create an international framework to guide how and where these digital taxes should be implemented.
From a purely economic standpoint, there is some logic to these tax proposals. As ever-larger portions of our collective consumption are transmitted digitally, the idea of taxing these transactions based on the location in which they are consumed rather than the location where they originate is fairly logical. In practice, however, the idea of dozens of different nations enacting their own tax laws to capture revenue from multinational tech companies with locations all over the world is a recipe for massive conflict.
As a case in point, the Trump administration responded to France’s digital tax with the threat of a 100% tariff on French Champagne, cheese and other goods.
The global trade standoff was eventually averted, but the uncertainty still lingers for multinational technology companies who have been left juggling a global patchwork of new digital tax laws, potential government standoffs over said tax laws and the constant need to project future growth accurately while all of the inputs keep changing.
And that’s just one line item on the tax ledger. Add the barrage of new regulatory requirements coming from all corners, the constant development of new technologies and the mounting need for new skillsets to manage it all and the scale of the challenge starts to become clearer.
We’ve been on the front lines of this revolution at Thomson Reuters. Our core client base of tax and accounting and legal professionals have seen their industries fundamentally disrupted by new technology and rapid-fire regulatory change. For some, the process has been painful. For others, it has created huge opportunities. The difference between the two: agility.
In the field of law, for example, where the billable hour has been under pressure for decades and a steadily-growing crop of alternative legal service providers has entered the marketplace and made a considerable dent in the revenue streams of the establishment, the leading firms have been largely unaffected by the changes because they have evolved their businesses. That process includes everything from adopting the latest AI tools to make the legal research and discovery process more efficient, to offering specialized services to help clients manage the crush of new regulatory requirements they all face.
Across countless examples, the one universal truth we continually see proven as we march through the early days of the Fourth Industrial Revolution is that start-ups and incumbents who have the agility to seize new technologies and scale rapidly to adopt new ways of doing things are the ones who thrive – no matter what comes around the next corner.
Ultimately, the secret to thriving in an environment in which everyone appears to be moving fast and breaking things is not to break at all, but to stay flexible enough to bend when the rules of the game keep changing.
This article originally appeared on the World Economic Forum Annual Meeting website. You can also check out this video to learn more about the Forum’s Centre for the Fourth Industrial Revolution Network.