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Middleman (you and I) beware!

AI and Blockchain are contributing to a revolution of trust that has been in the making for a long time, writes ANDRIES BRINIK, CEO, Andile Solutions

AI and Blockchain are contributing to a revolution of trust that has been in the making for a long time…

There is a common goal, an elevated status pursued by an enormous number of professions.

Legal practitioners, accountants, financial consultants, private bankers, politicians, estate agents, management consultants, stock brokers, car salesmen, life coaches and headhunters (amongst others) all strive for the ultimate compliment: the title of “Trusted Advisor”.

This is a noble pursuit as it implies consistent and correct behaviour over a period of time. If considered carefully, you would find that it is a status that one can apply to any position in work and indeed life.

Why we need trust

Trust is a scarce and critical commodity. The bigger the interpersonal network that depends on it, the bigger the chance of it being broken.

Once there were telephone operators who patched in calls. Consider for a moment the complex job of this person – let’s call her Tant Toekie – connecting telephones in the community in 1939: “Two phones was easy”, she’d recall. “Only one patch possible. Five phones, ten patches, no problem. Twelve phones… O jinne! Even I couldn’t keep up some days, 66 patches and so much information.”

Robert Metcalfe, originator of the Ethernet protocol and founder of 3COM, captured Tant Toekie’s tribulations through Metcalfe’s Law: the value of a network is proportional to the square of the number of nodes. As a network grows, the value of being connected to it grows exponentially while the cost per user remains the same or even reduces. For every single new node, one doubles the value – expressed as connections – in the system.

This exponential ‘network effect’ places a huge amount of stress on any system. Middle men are the historic remedy for such stress. Such intermediaries act in the best interest of the end user and connecting that client to the best possible sources.

That’s the theory. But it’s imperfect. We have all been in that dreadful position when trust is broken. This is normally due to two factors: the withholding of relevant information and inconsistent behaviour that is not in line with the requisite best interest.

Trust then suffers when the truth is revealed. Maybe your financial advisor advised you on only the portfolio of investments where his commission was above a certain percentage, or maybe the car dealership did not really mean it when they said that they would always be there for you with the best possible service. Trust is built when we speak the truth and then consistently back it up through our actions.

The new trust

In the past ten years, we have seen the most violent change in the global business landscape yet. The global financial crisis generated a huge amount of broken trust. Accordingly, the market voted against the bankers, the ultimate form of intermediary. As Governments propped up the financial sector, taxpayers lost more and more trust and voted with their investments and spending. The impact has been profound, seeding mistrust around governments, globalisation and the free market.

And yet, the network is tranqualising Tant Toekie’s tongue through technological trust mechanisms. These include unbreakable security protocols, modern systems design with access control and authentication, encrypted data storage and so on. Recently, there was added a new poster child to this list, i.e. BlockChain or Distributed Ledger Technology. And there will be further development as exponential growth demands more innovation.

The impact of this effect is already very visible. Consider the following graph showing the change in the top ten companies in the world, shown in USD-denominated Market Capitalisation:

What distinguished the first column of companies? Most are disintermediating the middle man in different ways. They gun directly for the consumer and we trust them enough to connect to their ecosystems, which scale easily and across borders. Through the use of Artificial Intelligence, they learn about our behaviour and give contextual advice, directly.

This is a profound shift in business culture – and we’ve not yet truly experienced what new technologies such as blockchain can really do. It leads to the question: what industry will be spared the wrath of disintermediation? Read though my list of trusted advisor status seekers again. I can’t think of many…

Hope springs: Be sure to look out for the next installment of this five part series where I consider, in the true Christmas spirit, the three wise men and a revolutionary saviour that might just have a gift for all of us. If we are good, that is.

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Cybercrooks eye smart buildings

In countries like the United States, the growth of smart buildings is estimated to reach 16.6% by 2020 compared to 2014, although this expansion is not limited to the US but rather is taking place on a global scale.  This growth is largely due to the fact we live in a world increasingly permeated by technology, in which process automation and the search for energy efficiency contribute not only to sustainability, but also to cost reduction – a goal pursued in all industries, public and private alike. Naturally, the construction industry is no exception, says Carey van Vlaanderen, CEO at ESET South Africa.

Smart buildings use technology to control a wide range of variables within their respective environments with the aim of providing more comfort and contributing to the health and productivity of the people inside them. To do so, they use so-called Building Automation Systems (BAS).  With the arrival of the Internet of Things (IoT), smart buildings have redefined themselves. With the information they obtain from smart sensors, their technological equipment is used to analyse, predict, diagnose and maintain the various environments within them, as well as to automate processes and monitor numerous operational variables in real time. Ambient temperature, lighting, security cameras, elevators, parking and water management are just some of the automatable services currently supported by the technology.

To put the possibilities of this smart infrastructure into perspective, is the example of a smart building in Las Vegas where, two years ago, they decided to install a sophisticated automation system to control the use of the air conditioning (keeping in mind Las Vegas has a hot desert climate and very little rain), so it is turned on only when there are people present. This decision led to a saving of US$2 million during the first year after the smart system was installed, due to the reduction in energy consumption achieved by automating the process. Marriott Hotels implemented a similar system across the entire chain that is expected to generate an estimated US$9.9 million in energy savings.

Another example of automation through smart devices is that of a supermarket in the United Kingdom. The store installed a smart system in its parking lot that generates a kinetic energy from the movement of cars passing through it, and then uses that energy to power the checkouts.

At first glance, we may not see any security risk in these smart buildings.  It is likely, however, that at some point the entire smart network is connected to a single database, and that is where the risk is. Particularly if we consider that many IoT devices are manufactured by different suppliers, who may not have paid due attention to security considerations during their design and manufacturing process.

Possibility of a smart building being attacked

The risk of a security incident taking place in an intelligent building is linked to the motivations of cybercriminals, who mainly seek to achieve economic gain through their actions, as well as to impact and spread fear.

There are already some tools such as Shodan that allow anybody to discover vulnerable and/or unsecured IoT devices connected publicly to the internet. If you run a search using the tool, you can find thousands of building automation systems in its lists, complete with information that could be used by an attacker to compromise a device. In February 2019, around 35,000 building automation systems worldwide appeared in Shodan within public reach via the internet.

This means that someone could take control of a BAS after finding it through a search.  If, for example, a criminal used Shodan for building automation systems to attack, they will find IP addresses. If they copy those IP addresses into the address bar of a web browser, in many cases this will bring up an interface for gaining access, where they need to enter a username and password. If the password is a default password of if it can be cracked easily through a brute force attack, the attacker will gain access to the system monitoring panel, which contains information similar to the companies located in the smart building.

Once the attackers have access to this public information and can monitor, for example, how the air conditioning works, they could make a phone call pretending to be from the maintenance company and say they are going to send a technician. At the same time, the attackers could request remote access, which would give them access to the server and allow them to control the building. Once they have control, they could alter the building’s heating or air conditioning or adjust the way any of the other automated systems operate and then demand payment of a ransom in using a system that allow them to remain anonymous, such as cryptocurrency, in exchange for not shutting the building down.

Siegeware: a very real threat

Cybercriminals are already carrying out such attacks when they have the opportunity. This kind of attack is siegeware, or “the code-enabled ability to make a credible extortion demand based on digitally impaired building functionality”

In conclusion, the low cost of IoT devices for buildings and the advances of technology for building automation systems is leading to changes with an impact on security. This drive toward automation and the use of smart devices to gather data – in order to give a building’s users more comfort and to make more efficient use of resources such as energy – is also leading to increased security risks. As a result, the possibility of a cybercriminal launching a ransomware attack on asmart building is already a reality.

Considerations to keep in mind

There are a number of security considerations and requirements to keep in mind:

  • Review the devices’ security specifications and work on the basis of the ‘security by design’ concept
  • Set a suitable budget for security
  • Choose partners that have knowledge of security issues
  • Install software for managing vulnerabilities
  • Ensure cooperation between the different areas and/or departments

For operational issues:

  • Update the devices regularly
  • Implement a replacement plan for when devices’ support life cycles end
  • Exercise a precaution in respect of connected devices
  • Monitor connected devices

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How we can break out of the productivity/technology trap

The tyre industry is a microcosm of the dilemma in which South African manufacturers find themselves, writes JACQUES RIKHOTSO, MD at Bridgestone

Many of South Africa’s industries have been built on the back of abundant cheap labour. Mining is the obvious example, but the manufacturing sector has also been shaped by thefact of cheap labour. For many years, cheap labour was arguably a huge advantage, enabling us to become a world-leading mining country and also to create significant agricultural and manufacturing capabilities. But, in the end, it has had the unintended consequence stifling investment in equipment and masking a skills deficit that will be very hard to overcome.

To understand the dynamics, it’s as well to begin by reminding ourselves that productivity is, at the crudest level, the relationship between output and input. Humans are still the most important input contributors, and so labour costs are a significant factor in the productivityequation.

In South Africa and other developing economies, labour costs are low whereas in thedeveloped world, they are high. South African manufacturers (and miners and farmers) have thus typically used more people to produce the same amount of units than a European or American manufacturer would do, while still managing to compete on price and often on quality. However, the much more expensive labour costs in the developed world, while causing short-term pain, have always meant that the business case for investing in the latest technology to make those expensive humans even more productive has always been strong.

By contrast, the business case for investing in up-to-date equipment has been weak in South Africa. If more output was required, more people was typically a cheaper answer than better equipment. We have therefore remained a fairly labour-intensive market, which is good given our unemployment issues, but raises two specific and daunting challenges:

We need to make major investments in equipment. In my industry, I would venture to say we are 15-20 years behind developed countries when it comes to the deployment ofequipment. This was not too much of a problem for a long while because the old equipment was still cost-effective and could turn out the products needed at the right quality and price. However, tyre technology has now moved on to such an extent that the old machines simply are not capable of producing the new generation of products. Radiallised Agricultural/Underground Mining Sector Tyres and light weighted tyres for electric cars, for example, represent significant advances in tyre design. Current machinery cannot be adapted to produce either them; a substantial investment in new equipment will be necessary.

Another factor is that the industry dynamics have changed over the past few years. Theadvent of cheap, mass-produced tyres from the Far East means that in many instances, fleet owners are not retreading existing tyres but rather purchasing these cheap ones new. To compete, local tyre manufacturers need to move upwards on the Technology Cost Curve by investing in technology is less electricity-intensive, deploys minimum labour and requires maintenance in order to compete with high-volume producers.

The other consequence of competing with lower cost producers is the need to write down older retreading capacity and invest in more modern equipment.

Because our investment in equipment has been so low for so long, we are not talking about incremental investment but something much more significant in many areas at once.

This massive new wave of investment will not be restricted to manufacturing equipment. High-tech data-driven modern equipment associated with the Fourth Industrial Revolution will also require factory layouts to be revamped in order to accommodate new IT infrastructure and robotic capacity, as is already being used in the developed world.

This is essential if we are able to compete in the longer term.

We need to make major investments in skills, both at the corporate and national levels. Investments in new technology will create a need for a new generation of skilled operators. The new machines require totally different skills—hard-won dexterity with gears and levers is making way for skills on touchscreens, the ability to type and, crucially, to read and action screen-based instructions quickly. Sadly, many of the cadre of experienced operators will not be able to reskill and companies will need to give serious thought to their future.

However, in Bridgestone’s experience, the younger generation of operators often has thepotential for reskilling on modern machines, and we are already busy with that process.

Being part of a global group is a massive advantage, because our regions are all at different stages of industrial development, and some have undertaken a similar journey into the modern era. Our Japanese factories, in particular are industry leaders in tyre manufacture. We can therefore rely on previous experience and, most important of all, cansend key employees to acquire the necessary training and experience at one of our sister facilities. Such a person can then be used as a champion within the company, to train colleagues and promote new ways of working. In our experience, such an approach does work, but it takes time and effort.

South Africa’s status as a manufacturing country has been in the balance for some years thanks to our lack of investment in new technology, but there is no doubt that a strong manufacturing sector is critical in rebuilding in the economy. To re-ignite our manufacturing, we have to escape the technology/ production trap.

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