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Deep tech is all about tapping into new innovations that could shake up the world around us. Boston Consulting Group’s Antoine Gourévitch looks at how it could tackle problems we haven’t imagined yet.
Throughout the pandemic, businesses accelerated the digitalisation of their consumer, supply chain and internal processes. It drove enterprises to find imaginative digital solutions so they could continue to service clients remotely. But this new corporate and economic climate requires new tactics and methods.
While new workplace technologies allow businesses to adapt to a digital environment, it’s safe to say that rapid innovation can create even more disruption. In fact, some technologies may change how people live and work and lead to new goods and services. And business executives can’t wait for these consequences to assess which innovations are most significant.
For example, businesses on the path to net zero have identified 30pc to 40pc of the potential savings, focusing primarily on waste reduction and resource reallocation. However, in order to achieve Scope 3 net-zero (emissions caused by the result of activities from assets not owned or controlled, but which occur along an organisations value chain), these businesses must identify the remaining 60pc to 70pc.
It is impossible until they completely revamp both their product and their business model. This will be greatly helped by the use of deep technology.
Just over half of businesses polled for the 2018 Digital Transformation Index had an optimistic view of the potential for technological disruption. However, a quarter said it felt like a major danger to their own lives. So, to what extent will we see firms in the future using cutting-edge technology?
Welcome to hyperreality
We are now approaching a new era beyond the hyperreal because of the ever-increasing advancements in digital technology. In this new age, human and machine are irrevocably intertwined in a bionic world where simulations of reality seem to be more real than reality itself.
Deep technologies are novel technologies that provide significant improvements over existing technologies. It is a new chapter in the history of innovation because they are focusing on fundamental issues, identifying physical constraints of industries that have not been solved for decades.
Deep-tech businesses such as Moderna, SpaceX and Blue Origin have already piqued the public’s interest. Thriving deep-tech businesses bring together a diverse set of capabilities (including scientists, engineers and entrepreneurs) to tackle a problem.
They often create whole new technologies since no current technology properly solves the challenge at hand. In certain cases, however, success is dependent on creating new uses for existing technology. Boom Supersonic, for example, is working on a supersonic jet that will only use technologies that have been tested and proven safe.
Successful deep-tech enterprises often have several complementing characteristics. They work at the crossroads of technology and the humanities. In fact, 96pc of deep-tech businesses use at least two technologies, and 66pc employ more than one sophisticated technology. Approximately 70pc of deep-tech businesses have patents on their innovations.
Moreover, deep technologies mostly create physical items rather than software. Indeed, 83pc of deep-tech start-ups are working on a tangible product. They are changing the innovation equation from bits to bits and atoms, bringing data and computer power to the physical world.
Deep-tech initiatives, which make up a very tiny proportion of all businesses, have a disproportionate influence because they tackle problems on a massive scale and because their work is both theoretical and applicable at the same time.
Sustainability and efficiency
Deep tech is growing for many reasons. One of the biggest and most immediate global movements is toward sustainable businesses. In many sectors, true sustainability – net-zero emissions – is impossible without new technology. Early adoption of a new technology trend can be lucrative – witness Tesla taking on electric vehicles or Pfizer, BioNTech and Moderna investing in RNA vaccines.
Competitors can’t wait to see if technologies or combinations produce high-impact applications. They’ll fall behind. Any business with big goals, like improving sustainability or resilience, must utilise deep-tech solutions. This includes companies that make or help make physical products, especially if they’ve made net-zero promises to customers and shareholders.
One example is construction and buildings, which contribute 38pc of global energy and process-related emissions. Materials and buildings account for 10pc of emissions and building energy for 28pc.
Deep tech could make building materials environmentally friendly, and finished buildings could save energy and fix themselves. Intelligent building systems using advanced sensors, smart materials, edge computing, and AI can reduce energy use. We must rethink our building systems for raw materials and parts and retrofit older homes and businesses to make these changes on a large scale.
The transportation sector is responsible for about 16pc of worldwide greenhouse gas emissions, with freight accounting for 30pc of the total, road vehicles accounting for 12pc, shipping contributing 2pc and aviation contributing 2pc. With the electrification and decarbonisation of transportation, as well as advances in artificial intelligence and self-driving cars, companies in the shipping and transportation industries will face both existential risks and huge opportunities for disruptive change.
Consider, for instance, what would happen if the value chains for logistics and transportation were separated from one another and rethought. Batteries, AI and sensors might bring about big changes in the transportation and logistics industries. Current crewed air, train and road (trucking) transportation may be changed into a more effective autonomous system. This might include electrified bikes and self-driving vehicles. The slow development of electric car charging stations and lack of success with drone delivery illustrate that adopting a new technology won’t cause a big change.
BCG’s deep-tech research was able to identify new income streams worth a total of $123bn when restricting analysis to just considering relatively straightforward technological replacements in pre-existing value chains (for example, replacing an internal combustion engine with a hybrid counterpart).
But when we factored in the observed systemic shifts in areas such as energy, transportation and the built environment, we discovered new income sources with a potential sum of up to $2.7trn.
Deep tech of the future
Deep tech offers far-reaching transformations. Because deep-tech innovation is both physical and digital, and because several technologies are converged to drive systemwide change, competitors have a stronger chance of becoming engaged early and determining how that change occurs.
Most significant advances will likely result from the convergence of multiple technologies that eliminate a barrier or resolve a longstanding trade-off. Underlying technologies are more accessible, available in more formats and growing quickly. Along with increased accessibility, business incubation and acceleration infrastructure are being built, which allows for quick experimentation. Certain businesses use interconnected technologies to remove obstacles and add value.
Covid-19 caused a lot of harm, but it showed how deep tech can solve a historic problem quickly, effectively and cheaply. Advanced science, engineering and design are used in deep tech. Matter and energy, computation and motion, and sense and motion are combined.
The climate crisis is another global issue. Deep tech could change things in an unforeseen way and could be the future solution to problems we can’t yet imagine.
Antoine Gourévitch is managing director and senior partner at Boston Consulting Group.
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