The changing landscape of disruptive technologies Global technology innovation hubs kpmg.com/techinnovation The changing landscape of disruptive technologies 2017 I Contents: 1 Foreword 2 G lobal growth of a tenacious tech innovation ecosystem 8 Innovation management insights 13 Tech innovation country perspectives 14 Australia 22 Korea 15 Canada 23 Russia 16 China 24 Singapore 17 Germany 25 S outh Africa 18 India 26 Taiwan 19 Ireland 27 U nited Kingdom 20 Israel 28 U nited 21 Japan States 30 Conclusion 32 Survey demographics and methodology 34 About KPMG © 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Foreword KPMG member firms recognize As in prior years, we include insights from our annual The spread of tech innovation development is survey of more than 800 global technology leaders being fueled by growing ecosystems as technology the importance of innovation including start-up entrepreneurs and FORTUNE 500 innovation has permeated all industries. Technology to the technology industry and executives. The 2017 publication is issued in two continues to enable an unprecedented rise in parts, featuring the following topics: creativity, across the world, to solve business the global economy as a whole. problems and develop new markets in ways never KPMG’s publication series, The Part 1 | Global technology innovation hubs thought possible. At the same time, the success of showcases the rise of new ecosystems of Silicon Valley’s entrepreneurial culture continues to changing landscape of disruptive incubators, accelerators, and venture capital incentivize countries, all over the world, to become technologies, now in its fifth alongside government incentives across the leading technology innovation hubs. Some countries world. In this section, we unfold the cities and are accomplishing their objective to become a year, provides perspectives about countries that are making significant strides in leading innovation hub, while others continue to face technology innovation trends, innovation development and provide 15 country macroeconomic and infrastructure challenges. top barriers to commercialize perspectives. With stakes so high to compete in Now more than ever, companies across a broad a global technology industry ecosystem, we also array of industries are being impacted by the rapid innovation, and insight into examine the global leadership views on innovation pace of change in digital arenas. Global and cross- technology innovation leading management. industry collaborations and partnerships are key to staying ahead, as is learning how to embrace change practices. Part 2 | Disruptive technology trends and barriers in a nimble way to avoid the status quo for fear of to commercialize emerging technologies. In this failure or uncertainty. issue, to be released in April, we examine the emerging technologies with the most potential to We hope you find this publication insightful, and we disrupt industries and transform business models. welcome your suggestions for the next edition. We also assess the monetization opportunities of these disruptors and adoption challenges by region and industry. Tim Zanni Global and U.S. Technology Sector Leader Chair of Global and U.S. TMT Line of Business, KPMG, LLP © 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. The changing landscape of disruptive technologies 2017 1 No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Global growth of a tenacious tech innovation ecosystem United States and China show most promise for disruptive breakthroughs Many countries realize innovation investment is critical to increase economic growth. The investment, development, and adoption of new technologies continues to spread out from the Silicon Valley epicenter to tech hubs around the world. As tech innovations unfold, China is stacking up prior year. China continues to make rapid gains to the United States as a leading force. Global as the country moves from manufacturing to an tech industry leaders indicated, in KPMG’s tech innovation powerhouse led by its large mobile and innovation survey, the United States and China are digitally advanced consumer and enterprise base. the world’s dominant tech epicenters—with the Visionary entrepreneurial leaders such as Jack Ma of greatest potential to develop disruptive technology Alibaba have become known and respected globally. breakthroughs that will have a global impact. Chinese tech titans, Baidu, Alibaba, Tencent, and others, are entering overseas markets, and are The strong showing for these two mega-powers earmarking leading start-ups for acquisition and is relatively consistent with earlier KPMG surveys, investment. although this year’s poll reflects a slight uptick for China—25 percent compared with 23 percent the 2 The changing landscape of disruptive technologies 2017 ©© 22001177 KKPPMMGG IInntteerrnnaattiioonnaall CCooooppeerraattiivvee ((““KKPPMMGG IInntteerrnnaattiioonnaall””)),, aa SSwwiissss eennttiittyy.. MMeemmbbeerr fifirrmmss ooff tthhee KKPPMMGG nneettwwoorrkk ooff iinnddeeppeennddeenntt fifirrmmss aarree aafffifilliiaatteedd wwiitthh KKPPMMGG IInntteerrnnaattiioonnaall.. KKPPMMGG IInntteerrnnaattiioonnaall pprroovviiddeess nnoo cclliieenntt sseerrvviicceess.. NNoo mmeemmbbeerr fifirrmm hhaass aannyy aauutthhoorriittyy ttoo oobblliiggaattee oorr bbiinndd KKPPMMGG IInntteerrnnaattiioonnaall oorr aannyy ootthheerr mmeemmbbeerr fifirrmm vviiss--àà--vviiss tthhiirrdd ppaarrttiieess,, nnoorr ddooeess KKPPMMGG IInntteerrnnaattiioonnaall hhaavvee aannyy ssuucchh aauutthhoorriittyy ttoo oobblliiggaattee oorr bbiinndd aannyy mmeemmbbeerr fifirrmm.. AAllll rriigghhttss rreesseerrvveedd.. The results reflect a small decline for the United development of products and services that can The United Kingdom jumped significantly in the States—26 percent forecast it as having the most break through in developed and emerging markets. global rankings. As many as 10 percent of the survey potential for leading edge advances, down from respondents selected this country for developing On this scale, India places third globally for the 29 percent a year ago. This slip does not reflect a potential technology breakthroughs compared with second year in a row. India’s mobile-first generation declining status for U.S. tech leadership but rather the only 4 percent the prior year. Government initiatives and its reliance on local business models are helping expansion of innovation across several geographies in such as Innovate U.K. are focused on driving and India to progress. India is home to nine start-ups increasingly developed digitalized markets. accelerating innovation by investing in small high- valued at more than $1 billion. More and more start- growth companies in key market sectors and Accordingly, India and the United Kingdom are seen ups are targeting the domestic Indian market as providing access to cutting edge technologies. by respondents as progressing with innovative tech businesses shift from serving global markets with hubs of their own, showing progress in the outsourcing. The results skew by regional responses, showing some nationalistic bias. Which country shows the most promise for disruptive Responses by region and country: technology breakthroughs that will have a global impact? NORTH AMERICA ASIA EMEA 46% 35% 22% Nearly half Respondents EMEA tech United States 26% named from Asia leaders the United selected selected the States as the China most U.K. at 22%, innovation often (35 ahead of China 25% center leader. China only percent). The United States China (18%), and behind the drew an 18 percent response drew a mere 13 percent U.S. (27%). from U.S. and Canadian India 11% respondents. United Kingdom 10% 49%UNITED STATES 59% CHINA Among those polled in the Those in China rated their U.S., national favoritism own market exceptionally Partial list of countries shown. Percentages do not sum to 100%. is even more pronounced high, at 59 percent, while Source: KPMG Technology Innovation Survey, November 2016 with 49 percent singling out the United States drew the United States. only 9 percent. Source: KPMG Technology Innovation Survey, November 2016 © 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. The changing landscape of disruptive technologies 2017 3 No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Innovation hubs Shanghai seen as biggest up and coming leader Technology innovation In addition to Silicon Valley/San Francisco, which three cities around the world will be seen is spreading globally, as a leading technology innovation hub over the next four years? fed by government initiatives, venture Shanghai, China New York, U.S. Tokyo, Japan Beijing, China London, UK capital, corporate strategic investment, universities and incubators. Many cities 1 2 3 3 5 want to be recognized as a leading global technology innovation hub. The survey revealed numerous up and comers. 6 6 6 9 9 Washington, U.S. Berlin, Germany Chicago, U.S. Tel Aviv, Israel Boston, U.S. Respondents could enter up to three cities. Partial list of cities shown. Source: KPMG Technology Innovation Survey, November 2016 4 The changing landscape of disruptive technologies 2017 © 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Innovation hubs CHINA JAPAN GERMANY SHANGHAI was selected as the leading hub with TOKYO ranks high again in this year’s survey, BERLIN was selected by 10 percent of those a 26 percent showing contrasted with 21 percent picked by 21 percent as the strong electronics and polled this year up from 5 percent a year ago. for the capital city, Beijing. While last year it was at robotics leader gets ready to host the 2020 Summer The capital city has developed into one of the 17 percent, this year Shanghai is ranked first overall Olympics. One of the world’s most futuristic and world’s leading innovation hubs with a dynamic in the survey as a future tech leader with its strong sophisticated cities, the Tokyo government is entrepreneurial culture. A highly skilled and well- regional position in financial markets and numerous investing $330 million over the next five years to educated workforce boosts Berlin’s status as high-tech parks in Pudong. Shanghai is bound produce hydrogen and fuel cell-powered vehicles one of the most promising cities for innovation. to remain among the world’s leading innovation ready in time for the games. It is also aiming to bring Government-led digital agendas that support hubs given its growing base of digital media and 8K high-definition broadcasts to the mass consumer investment in IT security and nationwide high-speed entertainment companies and a more pleasurable market by then. Japan, home to a robust robotics Internet reinforce it. lifestyle and favorable climate that can draw top market, is additionally laying plans to get self- talent. Beijing continues to be regarded as a top driving taxis on the street in time for the Olympics. ISRAEL leading tech hub ranking third. Shenzhen places 13th Moreover, Japan is looking to expand its high-speed with a 7 percent nod as this southern city moves magnetic levitation (maglev) trains nationally, and TEL AVIV drew a 9 percent response in Israel’s up fast, as hardware innovations increasingly play to overseas markets. The new Japanese maglev thriving techie ecosystem. A “smart city” initiative an important role in China’s traditional high-tech became the fastest train in the world after traveling has made Tel Aviv the start-up city in the start-up manufacturing strengths. at 374 miles per hour (603 kilometers per hour) last nation of Israel. Tel Aviv’s start-up hubs and lifestyle October. combine to draw high-tech, life sciences, and design UNITED STATES professionals to the city. Israel’s growing support for UNITED KINGDOM start-ups from both local and international investors NEW YORK CITY’s Silicon Alley, named by 23 give it an edge as a creative and entrepreneurial percent, up from 19 percent previously, is churning LONDON has become a leading hub for tech capital. out start-ups in digital media and e-commerce investment, attracting significantly more money than while tech titans such as Google have set up bases any other major European city in 2016, according in Manhattan. In the United States, several more to a report released in February 2017 by London cities are gaining on Silicon Valley’s stature as a & Partners, the Mayor of London’s promotional tech hub. Washington, D.C. was also highlighted company. This research also showed the United as a next start-up capital with a large concentration Kingdom’s technology sector drew more investment of highly educated workers building a foundation than that of any other European country in 2016. for a growing startup ecosystem. The U.S. capital London is a major hub for big data, fintech, and a city was seen by 10 percent of those surveyed as a variety of digital technologies. strong tech innovation hub contender. Chicago and Boston were also selected in the top 10. © 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. The changing landscape of disruptive technologies 2017 5 No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Innovation visionaries The minds behind the most innovative companies in the world Global tech industry leaders identified Elon Musk as the top innovation visionary in KPMG’s survey, by more than double the percentage a year earlier. Elon Musk is universally known as a visionary leader and entrepreneur, whose achievements with electric-powered car Tesla Motors, high-speed transportation system Hyperloop, and space exploration project SpaceX are setting new standards in innovation and transformation. Apple’s leader Tim Cook placed second; his high marks reflect respect for his job Who is the top of leading Apple’s financial results and social responsibility, amongst many other #1 person emerging Elon Musk successful areas. Among U.S. respondents, Cook unseated Musk for the lead. as a global Jack Ma, the founder of Chinese tech conglomerate Alibaba, placed third with 8 technology percent; up from 4 percent in the prior year’s survey. Ma has built Alibaba into an #2 e-commerce leader that has expanded into several sectors including payments, innovation Tim Cook messaging, cloud, and logistics. In Asia, Ma came in first with 12 percent and in visionary? China, he led with 20 percent. Jack Ma, #3 At Google, the recent restructure to fuel innovation was reflected in the positive Larry Page, findings for its leadership. Google co-founder Larry Page, now in a leadership Sundar Pichai role at Alphabet, and Google’s CEO Sundar Pichai are tied for third place. Respondents in Asia gave higher marks for Sundar Pichai of Google, Satya #6 Satya Nadella Nadella of Microsoft, and Kwon Oh-hyun of Samsung. In India, Pichai ranked highest. Bill Gates, #7 Mark Zuckerberg Partial list of visionaries shown. Respondents could enter one name. Source: KPMG Technology Innovation Survey, November 2016 6 The changing landscape of disruptive technologies 2017 © 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Innovative companies Google retains the lead In parallel with high marks for Google’s leadership, one in IBM came in fourth place with 7 percent. In 2016 the company earned a five respondents perceive Google as the leading company, record 8,088 U.S. patents, partly as a result of IBM’s commitment to artificial intelligence and predictive analytics. IBM is the only company to have ever globally, that is spearheading technology innovation. exceeded over 8,000 U.S. patent grants during a single year, which many see as Apple continues its tradition of being a top innovation leader, although a slightly a metric of innovation. less percentage named the inventive brand as tops this year, 15 percent Amazon continues to show it is possible for an established player to beat the compared with 18 percent a year ago. “innovator’s dilemma” and lead the next wave of change. Amazon and Tesla Microsoft ranked third this year with 12 percent, the same place as the prior tied in the fifth place. SpaceX and China’s Alibaba moved higher in the list, year. Innovations and investments in emerging technologies such as augmented with 4 percent each, placing 7th on the list. reality and cloud-based artificial intelligence services, to name a few, continue to position the company as a key player. Which company #1 is the leader Google in driving technology #2 innovation? Apple #3 Microsoft #4 IBM Amazon, #5 Tesla Motors Partial list of companies shown. Respondents could enter one company. Source: KPMG Technology Innovation Survey, November 2016 © 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. The changing landscape of disruptive technologies 2017 7 No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Innovation management insights Technology leaders of the future need to keep up with and outpace multiple geographic market forces to a much higher degree than in the past. Ultimately it is all about innovation and creating the road map to drive value and monetize new business models resulting from disruptive technologies. 8 The changing landscape of disruptive technologies 2017 © 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.