Archive for the ‘Technology Public Policy’ Category

In this Insights at the Edge of Government Analysis Flash, we look at regional expansion opportunities for MENA ridesharing firms. There are an estimated 10 million + ridesharing users in the wider MENA region now with ridesharing firms, as we have written about before, providing economic opportunities for nearly 500,000 individuals.

Version 2.0 of ridesharing competition in the Arab region will be in more diverse countries currently dominated by local startups

We looked into the potential countries where MENA ridesharing firms are likely to secure the next million 10 million + users. With more than 3.5 million ridesharing users, Iran may become a particular focus. A renewed focus on some of the large North African markets and more intense focus on some of GCC markets, such as Oman, Bahrain, Kuwait, which have moved slower on embracing the sharing economy, is also likely. We area also starting to see MENA ridesharing firms deploying their technologies in a broader range of use cases involving food delivery and courier services.

In the lead up to participating in the Arabian Business Digital Forum, Wes Schwalje, Chief Operating Officer of Tahseen Consulting, sat down with Arabian Business to discuss the Arab region’s quickly growing digital economy and how regional businesses can prepare for a digital future.

Arabian Business: In a world where everything is digitized, businesses need to pursue innovation to disrupt their own business model before the competition does. How are you seeing this happen in this region?

Schwalje: In order to answer this question, we must first define how we measure innovation. If we use company spending on R&D as a proxy for innovation, the UAE ranks 22nd in the world and the highest in the Arab World according to the World Economic Forum Global Competitiveness Report. So the UAE is a good bellwether for how the digital economy is disrupting incumbents in the region and how incumbent firms are investing to avoid disruption.

The Abu Dhabi Innovation Index and Innovation Survey, which was conducted in 2014, sheds a bit more light on the kinds of firms and sectors that are spending the most on R&D and innovation. This research shows that only very large firms, primarily in the oil and gas, manufacturing, and business services, are really investing in R&D and innovation. However, when we scratch the surface a bit more, we see that the majority of these firms are allocating their R&D funds to acquiring machinery, equipment, and software. It seems more likely that industry incumbents are spending on R&D to secure their current market positions rather than investing in R&D because they want to grow by developing new products. So when we say innovation in the Arab World, for the most part this still means acquisition of technologies from abroad by large companies.

This raises a very important question for the region – what about the other 90% of firms in Arab economies that are SMEs? How are they innovating? If we look at the Global Entrepreneurship Monitor surveys from the UAE, only 2.3% of businesses in the UAE have tech-based business models. Low rates of technology infusion in SMEs are quite consistent across the region. In many Arab economies, including the UAE, the majority of SMEs operate in sectors where innovation is less of a competitive factor. So a key issue that Arab nations are struggling with now is how do we make our SMEs more innovative?

Arabian Business: Customers have been spoiled by the likes of Amazon and Apple, and now expect every organization to deliver products and services swiftly and with a seamless user experience. How can non-tech companies meet these expectations?

Schwalje: Given the industrial structure in the region, a better question might be, how can SMEs compete with larger incumbent competitors at the national, regional, and international levels? In my opinion, technology-based digital disruption is one competitive strategy but is not always the answer. Tahseen Consulting’s research on effective competitive strategies in the region shows that non-tech companies can compete by pursuing a number of paths to competitive advantage including

  • Embracing being an underdog – whatever industry you are in view the best in class competitor as the company you need to beat
  • Dominating a niche that is untapped
  • Outperforming in areas where flexibility and agility are advantageous
  • Delivering more personal customer experiences

Arabian Business: Data is king in the new digital world, how important is it for companies to be collecting and analyzing customer data? How well do companies in the region really ‘know’ their customer?

Schwalje: It is absolutely critical for companies, big and small, to be collecting and analyzing customer data. And one of the most interesting applications I think is in pricing. Dubai is a testing ground for dynamic pricing – companies and government agencies are using dynamic pricing to maximize revenues and smooth demand. In the UAE in particular, I am very excited to see how things evolve with the application of AI in dynamic pricing strategies due to the stratified structure of the labor market and wage level differences. Right now many people are familiar with peak pricing due to the popularity of ridesharing technology companies. But there are a whole host of other dynamic pricing strategies that can be leveraged by companies with better customer data such as segmented pricing, time-based pricing, service time pricing, advanced pricing, and bulk pricing.

Arabian Business: Few established companies are ready to face the implications of digital change. Do you think they really realize how fast the change needs to happen, or how transformational it needs to be?

Schwalje: There are several reasons why established companies have not embraced the digital economy in our region

  • Market structures that lack competition
  • Governments are both a regulator and operator or key shareholder in several industries
  • Public policies that establish unnecessarily high barriers to entry for technology-driven upstarts
  • Digital skills gap
  • Fear of the unknown – how will automation affect impact jobs?

Internationally there is this looming black cloud proposition that businesses need to pursue innovation out of fear of being disrupted by the competition, but perhaps companies are a bit isolated from this in our region. I think larger companies do realize that they need to change, but I would argue that some companies are isolated a bit from the sort of competition which would really force them into an innovate or perish scenario. For example, how is it that Dubai only had online grocery delivery in 2013 when the first online grocery store in the US IPOed 21 years earlier? Why did it take us 2 decades to make this change?

Arabian Business: If you could offer advice to companies here in the region, what concrete steps should they take to pave the way for a digital future?

Schwalje: As a region we need to transition from innovation acquirers to innovation originators. When companies are asked what stands in the way of innovation, the top answers we consistently hear are the market is dominated by established enterprises and innovation costs are too high .To fix this I think there are two key areas of focus: We need a serious regional dialogue about competition policy that promotes technological innovation, price competition, and consumer choice. We also need a concerted effort by governments in the region to provide funding to help SMEs research, develop and commercialize new technologies, and accelerate the adoption and adaptation of these technologies – this perhaps could be funded by countries across the region through micro surcharges like the Innovation Dirham. But these surcharges must be linked to tangible results and the funds must trickle down to SMEs.

In a brief interview with Alicia Buller for Gulf Marketing Review, Tahseen Consulting’s Wes Schwalje talks about how GCC retailers are using AI and VR to create more immersive, customer-centric sale experiences to redefine the regional shopping experience.

When will we see AI/VR in shops and malls in the GCC? 

We already seeing some pioneering uses of artificial intelligence in retail in the GCC by larger companies. A notable example is Mashreq Bank which has estimated it will reduce its headcount by 10% in the next year due to its investment in AI. Emirates NBD has introduced an artificial intelligence humanoid robot to greet and understand customer needs at select branches. Aramex launched an AI-enabled bilingual chatbot on Facebook Messenger. And the Dubai Electricity and Water Authority became the first government entity to launch an online bilingual chatbot. So we are already seeing early adoption of AI by innovative, large companies and government agencies in the GCC. Future use cases will grow to include a broader range of manufacturing, logistics, and customer service applications as well as reach smaller retailers which are already looking towards larger early adopters for ideas.

We are also seeing early adoption of VR in the GCC as well as other countries in the Arab World. For example, Facebook’s first VR grant in the Arab World was awarded to MO4 Network which has launched an incubation program for VR developers in Egypt and a VR lab for aspiring entrepreneurs. In this case, you see Egypt as a first mover which is reflective of its emergence as competing regional technology hub. In the GCC, Etihad was one of the first movers with its award winning VR film that enabled potential customers to experience a flight in an A380 plane. In 2016, Kalimat Group published the region’s first VR book which enables children to learn about the late Sheikh Zayed bin Sultan Al Nahyan. VR is very quickly being adopted in the GCC and Arab region across diverse retail sectors including travel, public service delivery, healthcare, education, and traditional retail,.

How could it transform customer experience in the GCC?

The GCC retail customer experience is ready for disruption, and, as one of the premier shopping destinations in the world, GCC retailers and consumers will likely play a key role in defining the retail store of the future. In the near term, we will see GCC retailers starting to implement AI solutions for customer segmentation, enhance online shopping experiences, and facilitate customer purchases. We will also see more GCC retailers using VR in virtual showrooms which enable customers to experience retailers’ offerings without actually visiting stores. AI and VR enables retailers to use the shopping experience itself to facilitate purchasing decisions, derive insights to provide personalized shopping experiences, and implement social commerce strategies. In the near future, we will witness GCC retailers beginning to make their mark on global retail by transitioning from innovation acquirers to innovation originators.

In this Insights at the Edge of Government Analysis Flash, we look at the impact of the sharing economy on the short-term rental market in the MENA. Based on the number of Airbnb hosts across the region, Turkey, Morocco, and the UAE are the biggest regional markets for online platforms that link property owners with short-term lessees. However, the total number of Airbnb hosts in the entire MENA region is similar in size to the number of Airbnb hosts in London alone. The MENA is a key potential expansion market where sensible sharing economy regulation and partnerships between cities and technology companies can mean significant benefits for local communities and businesses that promote large scale national economic opportunity generation.

Airbnb has ≈ 40,000 hosts in the broader MENA

In this Insights at the Edge of Government Analysis Flash, we look at the unprecedented level of economic opportunities for MENA youth created by ridesharing companies. In Egypt, Pakistan, and Saudi Arabia alone, ridesharing firms have catalyzed 200,000+ economic opportunities. These opportunities, which have been created over the last 4 years, now exceed the workforce of the largest regional public sector employers as well as the expected job creation impact of many of the region’s in progress mega projects.

In previous blog posts, we have written about how sensible regulation of the sharing economy has the potential to contribute significantly to the MENA’s socio-economic development. Some countries, like Saudi Arabia, are getting sharing economy regulation right, while other MENA countries remain focused on more traditional policies to attract inward foreign direct investment flows for mega projects to create high skill, high wage jobs in knowledge-based industries and protect industry incumbents. Based on this analysis, technology-driven business models in the sharing economy have the potential to be a key tool for MENA governments to complement active labor market policies and large scale national economic opportunity generation strategies.

MENA ridesharing firms provide 300,000+ youth economic opportunities

In a brief interview with Abu Dhabi Chamber of Commerce and Industry, Tahseen Consulting’s Wes Schwalje talks about Abu Dhabi’s race to become a global FinTech hub. This race is not just about superlative bragging rights, though Abu Dhabi Global Market’s Reglab is the first FinTech regulatory sandbox and framework in the MENA region. The economic stakes are real and significant with FinTech having the potential to become a key pillar of the Arab World’s socio-economic development.

Abu Dhabi Chamber of Commerce and Industry: Why is Abu Dhabi so attractive to FinTech companies?

Schwalje: In 2016, the Financial Services Regulatory Authority published a consultation paper seeking industry views on a FinTech legislative framework. This consultation led to Abu Dhabi Global Market establishing the Arab World’s first FinTech regulatory regime and regulatory laboratory. The initiative follows in the footsteps of similar competing FinTech regulatory sandboxes in countries such as UK, Singapore, Hong Kong, and Australia which are all vying to become FinTech hubs. These cities are all providing a safe space for FinTech businesses to test innovative products, services, and business models without having to initially comply with more traditional legal and regulatory requirements for the financial services sector.

The more recent commitment Abu Dhabi has shown to embracing FinTech as well as its traditional role as a strong player in the regional financial services sector make it a very attractive base for more established financial institutions exploring Fintech as well as startups experimenting with innovative financial products or services. The embrace of FinTech in the UAE is an evolution of the initial vision to position the country and its constituent Emirates as a unified international financial services hub offering a full spectrum of financial services comparable to other leading global financial centers. Abu Dhabi provides the regulatory framework, safe space to innovate, strong government support, and commitment to a long-term vision that financial services companies look for when it comes to pushing the innovation frontier. Additionally, there are several regional factors which make Abu Dhabi attractive. Though estimates vary significantly, the unbanked population in the Arab World is estimated at upwards of 80%. Traditional commercial banks continue to dominate lending with weak service provision for small and medium sized businesses which make up more than 90% of most Arab economies. Estimated at $7 billion, e-commerce across the Arab World is booming with a youthful, technology embracing demographic which are first movers when it comes to embracing technological innovation.

Abu Dhabi Chamber of Commerce and Industry: How could FinTech help improve the Middle East and Abu Dhabi?

Schwalje: It is not clear at this time what the full range of possible use cases for FinTech will be in the region, but a few macro trends are emerging based on the startups in region and competitive pivots of more established financial services firms. The payments industry is becoming more competitive with FinTech players challenging traditional payment firms’ intermediary role by offering more direct, faster, and cheaper services. We are seeing significant innovation in mobile wallets, crypto-currencies, and block chain technology as well as mobile banking surging. Digital and mobile-based payments will likely replace traditional card-based payments and make some traditional payment channels like ATMs and point of sale technologies obsolete. Block chain-driven payment infrastructure, which Dubai is pioneering, have the potential to significantly reduce payment processing costs. Web-based insurance aggregators are challenging the dominance of more traditional market players. We will see the increased use of big data by financial institutions to more effectively serve SMEs and previously unbanked populations with tailored deposit and lending facilities. Online platforms have already caught on as an alternate funding platform for entrepreneurs seeking early-stage finance to counter the lack of risk capital and commercial loan options for startups and SMEs in the region. Right now we are at very interesting stage in the evolution of FinTech regionally in which there remains significant big addressable markets that are currently untapped.

In a brief interview for Computer Weekly, Tahseen Consulting’s Wes Schwalje talks about the future of IoT and the need for regional stakeholders to get a lot more serious about personal data privacy and connected device security.

Computer Weekly: Which GCC sectors could benefit most from IoT – and why?

Schwalje: Due to the concentration of economic activity in the GCC in a handful of sectors such as the extractive industries, manufacturing, government services, construction, and utilities we will likely see a concerted effort to disrupt and digitally transform these traditional industries with IoT. Specific sub sectors of focus will likely be oil and gas, petrochemicals, aviation, and, pharmaceuticals as well as government services such as healthcare, education, and utilities. In these traditional sectors, industry incumbents will either take on new roles or be displaced by new industry structures due to digital disruption. A good example of this adaptation in the private sector to avoid digital disruption is Mashreq Bank’s recent announcement about its new digital only spin-off unit. In terms of government services, several GCC governments are deploying IoT as part of smart city initiatives to enhance government service provision, we are seeing interesting connected healthcare pilots emerging like telehealth systems in Saudi Arabia, and there is a significant push to leverage IoT to address transport challenges regionally. At the same time, increasing economic diversification in the GCC, driven primarily by growth in the services sector, is likely to lead to innovative IoT applications in emerging services sectors such as transport and logistics, telecommunications, financial services, and tourism. In the very near future, IoT will become a key aspect of GCC economic diversification strategies and ultimately global and regional competitiveness.

Computer Weekly: How might life in the GCC look different in ten years, due to IoT technology?

Schwalje: The data gained from IoT is the foundation for a range of emerging technologies such as machine learning, robotics, automation, 3D printing, artificial intelligence, and augmented. For this reason, we will see a significant uptake of IoT over the next decade. Data is quickly becoming vital to the profitability and success of GCC businesses as well as enhanced efficiency and effectiveness of government service delivery. In terms of specific applications of IoT, we are likely to see smart asset monitoring, employee tracking, energy consumption monitoring, product usage and monitoring, business process automation, smart security, and wide area control systems. While the potential of IoT in the GCC is promising, more effective, consumer-oriented laws and regulations on data in the GCC and throughout the Arab World are needed to address how data can be obtained and used, how long data can be kept, and limits on access by third or other government related-parties. A modern, harmonized GCC data protection framework is a critical requirement to maximize the benefits of the IoT.