Artificial intelligence.  How to Make Deep Tech Work for Your Business

Artificial intelligence. How to Make Deep Tech Work for Your Business

In early 2020, when scientists rushed to develop a vaccine against the SARS-CoV-2 coronavirus that causes COVID-19, it seemed like a long shot indeed. The fastest measles vaccine ever developed was back in the 1960s, taking 48 months. However, just nine months later, in December 2020, US pharmaceutical giant Pfizer and German deep-tech startup BioNTech developed the first COVID-19 vaccine, validating the use of new mRNA-based vaccine technology.

The first studies on DNA vaccines began 25 years ago, and the science of RNA vaccines has also been developing for more than 15 years. One result was mRNA technology, which required the convergence of advances in synthetic biology, nanotechnology, and artificial intelligence, and transformed the science and business of vaccines. Last year, Pfizer brought in about $37 billion in sales from the COVID-19 vaccine, making it one of the most profitable products in the company’s history.

Like Pfizer and Moderna in pharmaceuticals, several corporations in other industries such as Tesla in automobiles, Bayer in agrochemicals, BASF in specialty chemicals, Deere in agricultural machinery, and Goodyear in rubber in the field, rely on deep technologies. Deep Tech, as we call it, is a problem-solving approach to tackling big, hairy, bold and wicked challenges by combining new physical technologies such as advanced material sciences with sophisticated digital technologies such as AI and soon, quantum calculations. .

Deep Tech is coming to the fore because of the pressing need for businesses to develop new products faster than ever before; develop sustainable products and processes; and become more future-oriented. Deep Tech can create enormous value and will provide companies with new sources of advantage. In fact, Deep Tech will disrupt incumbents in almost every industry. This is because the products and processes that will emerge from these technologies are transformative, creating new industries or fundamentally changing existing ones.

Early prototypes of Deep Tech-based products are already available. For example, the use of drones, 3-D printers, and syn-bio kits is proliferating, while No Code/Low Code tools are making AI more accessible. They open up more ways in which companies can combine emerging technologies and drive more innovation. Not surprisingly, incubators and accelerators have sprung up around the world to facilitate their development. Not only are more Deep Tech startups being created today, but they are launching successful innovations faster than ever before.

For CEOs of incumbent companies, relying on a wait-and-see strategy is risky. They need to urgently find ways to take advantage of Deep Tech’s potential before their organizations are disrupted by them, just as digital technologies and start-ups disrupted business in the recent past. However, unlike digital disruption, the physical-digital nature of Deep Tech presents a golden opportunity for incumbents to shape the evolution of these technologies and use them to their advantage.

Established giants can help Deep Tech startups scale their products, which can be particularly difficult and costly for physical products, by leveraging their expertise in engineering and manufacturing scale and providing market access. And because incumbent countries are already at the center of global networks, they can also help navigate government regulations and influence their suppliers and distributors to transition to an infrastructure that supports new processes and products. Doing so would unlock enormous value, as exemplified by the Pfizer-BioNTech case.

Most incumbents will find that Deep Tech initially presents two tough challenges. For one, it is not easy to spot or assess the business opportunities that new technologies will create. Second, it is equally difficult to develop and implement Deep Tech-based solutions and applications, which typically require participation and catalysis with collective action ecosystems. To manage the twin challenges of Deep Tech, CEOs should keep three starting points in mind.

Backcasting:

Despite its complexity, conventional technology forecasting produces linear predictions and fuzzy thinking; it doesn’t take into account how technologies change and overlap. As a result, most forecasts underestimate the speed at which technologies will evolve and when businesses will be able to use them. That’s why companies should use “backcasting,” a method described by John Robinson of the University of Waterloo in the late 1980s.

Instead of following the development of multiple technologies, business would do better to start by focusing on the world’s greatest needs and pressing problems, identifying the lingering conflicts and trade-offs that have so far prevented them from being resolved. They must then define a desired future in which these issues will be resolved, and work again to identify the technologies and combinations of technologies that will make the solutions possible and commercially viable. Backcasting helps companies understand both short-term and long-term technological changes, making it ideal for Deep Tech management.

For example, the Anglo-American think tank Rethink X has used a framework of technological disruption based on backcasting to highlight the implications of creating a sustainable world. The analysis shows that technological changes in the energy, transportation and food sectors driven by a combination of just eight emerging technologies could eliminate more than 90% of net greenhouse gas emissions in 15 years. The same technologies will also make carbon removal costs affordable, so more disruptive technologies may not be necessary in the medium term.

Measuring change

When companies evaluate the business opportunities that deep technologies will open, they must consider the scope of the changes they will bring. This will be determined by the complexity of the technology and the ability of the business to scale solutions based on it. As Arnulf Grubler, head of the International Institute for Applied Systems Analysis in Austria, and his co-authors argued six years ago, new technologies can bring about four levels of change. They can:

1. Improve an existing product. For example, sustainable biodegradable plastic can replace conventional plastic packaging.

2. Improve the existing system. Paints infused with nanomaterials and a smart home system powered by artificial intelligence can, for example, dramatically change homes.

3. Convert system. The development of the hydrogen-powered vehicle ecosystem, from hydrogen production to charging stations, could transform urban mobility.

4. Transform the system of systems. The development of treatment technology that transforms current water supply and management systems will also change how water-consuming industries such as agriculture, alcohol, beverages, paper and sugar work.

Figuring out which of the four levels of change is most likely to result will help companies better assess market sizes as well as growth trajectories. When BCG recently estimated the market size of Deep Tech solutions in nine sustainability-related industries, for example, it found that while technological improvements in existing value chains would generate more than $123 billion in additional revenue annually, those that led to systemic change would create 20 times more. Or $2.7 trillion a year.

Development of ecosystems

Few companies already have in-house all the technology and capabilities needed to implement Deep Tech. They need to gain the support of technology-related ecosystems that extend from academics and university departments to investors and governments to develop these competencies. The types of connections that result will depend on business capabilities as well as the maturity of the ecosystem.

Several types of collaborations are likely to be created. Some incumbents will obviously team up with start-ups to develop new products or processes, as Bayer did in 2017 by forming a joint venture with Ginkgo Bioworks to synthesize microbes that would allow plants to produce their own fertilizers. Others will orchestrate systemic change, which is what Hyundai Motor Group is trying to do in mobility by working with several Deep Tech startups. Others may focus on nurturing deep technologies to mature, such as Sweden’s SSAB (formerly Swedish Steel), Vattenfal and Finland’s LKAB, in efforts to expand sustainable steelmaking, where fossil-free electricity and green hydrogen replace coking coal. .

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Deep technology was impossible yesterday, barely feasible today, and could soon become so pervasive and influential that it’s hard to remember life without it, says Michigan State University’s Joshua Siegel. The future is likely to belong to companies that don’t just follow Deep Tech, but invest in its development and drive its adoption by engaging with ecosystems, forcing competitors to play a losing strategy to catch up.

Read more Fortune: Francois Candelon’s columns.

It’s Francois Candelon Managing Director and Senior Partner at BCG and Global Director of the BCG Henderson Institute.
Maxim Corto is a BCG Program Leader and BCG Henderson Institute Ambassador.
Antoine Gurevich is a managing director and senior partner at BCG.
John Paschkewitz is a partner and associate director at BCG.
Vinit Patel is a program leader at BCG and an ambassador for the BCG Henderson Institute.

Some of the companies featured in this column are former or current clients of BCG.

Opinions expressed in Fortune.com comments are solely the views of their authors and do not necessarily reflect the opinions or beliefs of Fortune.

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