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BETTER FUTURES 2012


Contents

01 Introduction 02 Global Mega Trends • Hyper-Personalisation • Digital Everywhere • Networks of Trust/Social Communities • Demographics & Lifestyle Changes • Urbanization • Sustainability 03 Futures • Connected 4th Space • Intelligent Factories • On the Move • Designer Materials • Ownership Vs. Access • The Road to Zero • Electrifying Future • Our City, My Life • Smart Shipping 04 Definitions


01 Introduction

THE FUTURE IS WHAT YOU MAKE IT At Castrol we have always been pioneers pushing the boundaries of innovation and believers in acting today to create the technologies for a ‘frictionless tomorrow’. True to this commitment, Castrol have set up a new innovation unit, Castrol innoVentures, focused on step-out innovation and new business development beyond lubricants. Our objective is to create Castrol’s future by building businesses beyond today’s lubricants products. This will be achieved by focusing on the longer term needs of our customers and consumers and working with key partners to provide stepout solutions. We have invested in understanding more clearly the future trends that are impacting the world and the sectors in which we operate. We are astounded by the sheer pace of change and have summarised the key findings in the following ‘futures’ covering both broader ‘mega trends’ and ‘9 futures’ that are directly related to our world.

The futures are the result of a extensive work by Castrol innoVentures: We facilitated a number of workshops globally with Business leaders, OEM’s and industry experts, VCs as well as governments, civil authorities and leading academics to further understand what the future might look like for all of us. We received numerous, and often conflicting perspectives. At Castrol we have taken these view points and inputs to created the following perspectives on that the future might look like. We do not profess to be able to predict the future, but hope the trends & implications put forward will serve as rich mix of stimulus, that will allow us to develop a more informed perspective of what the future might holds in store. Happy reading. <<signature>> Roy Williamson


02 GLOBAL MEGA TRENDS “Well defined and existing trends, with no specfic end point that affect several futures. High longevity and not reversible overnight.”


02 Global Mega Trends

HYPER PERSONALIZATION The â&#x20AC;&#x2DC;Era of the Consumerâ&#x20AC;&#x2122;: Hyper-personalization takes off as consumers trade privacy for value, and more aspirational, demanding, and discerning consumers get personalized attention. Immediacy and convenience become the norm.


02 Global Mega Trends CHARACTERISTICS

SIGNALS FROM TODAY

IMPLICATIONS FOR TOMORROW

• Consumer demand real time, and personalized content and experience drives mass mobile. Want authenticity and instant gratification (e.g Amway China) • Ownership shifts as consumers increasing’ Don’t Want To Buy Stuff’ (fastcompany) • By 2020 over 90% of people will exchange their private info in return for the right value proposition (Hyperbox) • Degrees of Previously Unimaginable Precision in Targeting of Addressable Populations (e,g. locational & real time personalisation) • High demand for customization, especially with younger consumers who have a desire to stand out, and greater ability to compare and contrast products and services (e.g Nike, TOMS shoes) • Consumers go from active digitally to digitally active – social influencers more important than brands • F-Factor: Social networks mean consumers now lead the conversation (e.g communal rating)

• If you can’t provide the consumer with what she needs, where she wants and when she wants it … with the right CONTEXT – you become a COMMODITY! • High involvement purchases become hyper personalised, low involvement become commodities (automated buying process) • Consumers demand immediacy and convenience • Consumers demand access but not necessarily ownership (only own because you want to) • Personal data is the oil of the digital age • Era of retail is over; era of ‘commerce everywhere’ and ‘instant gratification’ • On- & offline must coexist: Without A Physical Presence, the Consumer is Unable to Enjoy a Full Emotional Connection to the Brand • Consumers are source agnostic – brand, digital or physical and expect seamless execution • Curation will be important, with emphasis on personalized products, not just “good products”


02 Global Mega Trends

DIGITAL EVERYWHERE The â&#x20AC;&#x2DC;Era of the Consumerâ&#x20AC;&#x2122;: Hyper-personalization takes off as consumers trade privacy for value, and more aspirational, demanding, and discerning consumers get personalized attention. Immediacy and convenience become the norm.


02 Global Mega Trends CHARACTERISTICS

SIGNALS FROM TODAY

IMPLICATIONS FOR TOMORROW

• Consumer demand real time, and personalized content and experience drives mass mobile. Want authenticity and instant gratification (e.g Amway China) • Ownership shifts as consumers increasing’ Don’t Want To Buy Stuff’ (fastcompany) • By 2020 over 90% of people will exchange their private info in return for the right value proposition (Hyperbox) • Degrees of Previously Unimaginable Precision in Targeting of Addressable Populations (e,g. locational & real time personalisation) • High demand for customization, especially with younger consumers who have a desire to stand out, and greater ability to compare and contrast products and services (e.g Nike, TOMS shoes) • Consumers go from active digitally to digitally active – social influencers more important than brands • F-Factor: Social networks mean consumers now lead the conversation (e.g communal rating)

• If you can’t provide the consumer with what she needs, where she wants and when she wants it … with the right CONTEXT – you become a COMMODITY! • High involvement purchases become hyper personalised, low involvement become commodities (automated buying process) • Consumers demand immediacy and convenience • Consumers demand access but not necessarily ownership (only own because you want to) • Personal data is the oil of the digital age • Era of retail is over; era of ‘commerce everywhere’ and ‘instant gratification’ • On- & offline must coexist: Without A Physical Presence, the Consumer is Unable to Enjoy a Full Emotional Connection to the Brand • Consumers are source agnostic – brand, digital or physical and expect seamless execution • Curation will be important, with emphasis on personalized products, not just “good products”


02 Global Mega Trends

NETWORKS OF TRUST The â&#x20AC;&#x2DC;Era of the Consumerâ&#x20AC;&#x2122;: Hyper-personalization takes off as consumers trade privacy for The age of SoLoMo: People are connected everywhere and networks, powered by digital technologies, based on common values, activities become the new sources of knowledge leading to democratization of information which no longer resides with chosen few, be it governments, individuals or manufacturers/ corporations.


02 Global Mega Trends CHARACTERISTICS

SIGNALS FROM TODAY

IMPLICATIONS FOR TOMORROW

• Facebook has over 900MM users • Arab Spring was led & spread via social platforms – power to enable regime change – Egypt, Tunisia, Libya… • Linkedin is the largest professionals community with 160MM users • Word of mouth is a key component of Marketing Plans • Role of social influencers – Lady Gaga has 10M+ twitter followers, 50MM+ facebook likes • Social media disasters such as Nestle Palm Oil issue, Domino’s health code, United’s broken Guitar • Very dynamic space to watch - Governments try to control Google (China) and Twitter. • Facebook stock falls as people question its ability to win on Mobile.

• Have a social media strategy based on the role we want it to play (eg awareness versus driving bonding) • Participate in Social Media & communities based on transparency & authenticity • Develop digital platforms that build engagement of brands with consumers – mobile based platforms are a must • Participate in the conversations rather than trying to direct/ guide them – Listen, Engage, Act • Role of Influencers is becoming critical – understand who are the key influencers in our categories engage with them • Winners & Losers will keep changing at a fast pace. Constant need to monitor environment and adapt fast.


02 Global Mega Trends

DEMOGRAPHICS & LIFESTYLE CHANGES Demographic shifts are changing global landscape with people living & working longer, urbanization happening at rapid pace in developing markets, emergence of mega cities and creation of wealth in markets such as China, India, Indonesia. While Europe & East Asia ages, South Asia, MEA is still young and will drive consumption of goods and services. US demographics continue to be a source of consumption.


02 Global Mega Trends CHARACTERISTICS

SIGNALS FROM TODAY

IMPLICATIONS FOR TOMORROW

• China is already the largest car market • By 2020, size of urban population in developing markets will surpass rural populations • In Europe retirement is at 65, with Spain & Germany increasing to 67 • A Domino’s pizza in Birmingham became the first to offer a total Halal menu– some cities in Europe have 30-40% of children with immigrant background • Over 1BN people live in shanty towns in urban cities • In Japan 70% of assets including real estate are owned by 50 year+ • Samsung introduces Jitterbug – a cell phone for Seniors

• Develop growth strategy for markets where the spending power will grow & future consumers are growing up – Asia, MEA. US continues to be source of affluent consumers and overall consumption as 15-64 yrs pop expected to grow 42% between 2000-2050 • Impact of urbanization on mobility needs will have key impact on our business, specially PCO consumption – need to identify new customers & services • Consumers have legacy from their home countries – important to have global brand footprints & have consideration for traditions & values • Older people will have specific needs and this needs to be addressed specially in WE & East Asia – they can be a source of incremental revenue rather than being not targeted


02 Global Mega Trends

URBANIZATION The growth of cities is expected to continue over the course of the next 20 years with changes in lifestyle and mobility expected.


02 Global Mega Trends CHARACTERISTICS

SIGNALS FROM TODAY

IMPLICATIONS FOR TOMORROW

• New drivetrain investments being made in large cities to speed new tech adoption (e.g. Electric Vehicles in China). • Lee Kuan Yew 2012 World City Prize: New York City. Cities raise the lifestyle and environment bar. • Growth in cities creates opportunities in rural areas as well: • The Smart Rural Community • People are falling out of love with cars (especially in cities). Mass transit and walking, cycling winning.

• Cities can and will change their infrastructure faster than rural areas. • Explore mass transit options (including hydraulic-powered systems): • Cities gain talent, investment, and economic activity vs. rural areas: • Survey: Gap between China’s rural and urban education levels huge • Enhanced vehicle Remote Monitoring and Analytics, for example, can help provide peace of mind to rural customers: • Health Care. • Transportation.


02 Global Mega Trends

SUSTAINABILITY As clarity regarding both climate change and chemical impact is enhanced by Big Data, we expect more informed consumers and a more sophisticated regulatory environment mobility expected.


02 Global Mega Trends CHARACTERISTICS

SIGNALS FROM TODAY

IMPLICATIONS FOR TOMORROW

• Consumers care about sustainability and are coming to expect it in their products: Shoppers consider product sustainability in buying decisions • CO2 impact re-enters the global consciousness (with data): • Regulatory agencies are gearing up to use Big Data for their policy revisions.

• Choices in energy products (including fuels and lubes) will need to demonstrate commitment to “best current sustainability performance” as well as product performance. • Product choices shift as CO2 impact data become commonplace. • Unexpected links between chemicals and hazards could arise from Computational Toxicology (High Throughput Regulatory analysis.


02 GLOBAL MEGA TRENDS “Well defined and existing trends, with no specfic end point that affect several futures. High longevity and not reversible overnight.”


03 Futures

CONNECTED FOURTH SPACE Consumers expect more from the time they spend in the car and develop closer emotional bonds as their car reflects more of them as individuals. Improved productivity through connectedness, edutainment, voice activated technology and bio-responsive telemetry are enablers.


03 Futures CHARACTERISTICS

SIGNALS FROM TODAY

IMPLICATIONS FOR TOMORROW

• The industry is conservative given the large amount of embedded capital, however, market forces, e.g. trade routes and transportation could force disruption • Slow steaming is here to stay. • Impeding emissions regulation and sustainability are guiding today’s choices. • Operational optimization using advanced analytics is gaining momentum and acceptance for ship trim and speed, hull maintenance, on- board maintenance, etc. • Fleet asset optimization determining which ships to use in which way for what routes is now • Large tanker, container and cargo ships are the most CO2 efficient way of transportation today • Triple E Class – 18,000 TEU – reality by 2013 • Transparency of cargo contents and security has given rise to numerous security and tracking systems available today

• New consumers double world trade, with Africa playing a major role, including as importer of protein / food / agriculture • Moving of ideas, goods, and services is more feasible and less costly than before • Future ships will include new materials, self loading, lube oil analysis, cargo protection, and flexible storage • Security – knowing will become more valuable – what / where is it from, how is it handled, when was it moved • Security concerns addressed in maritime through the use of sensors, networks, and operations control • Customers willing to pay more for secure, authentic, pure • Sustainability focus highlights ships as polluters


03 Futures

INTELLIGENT FACTORIES Increasing computing power, data availability and virtual design and manufacture combined with evolution of standards and technologies like 3D printing and adaptive machining provides for an exciting new set opportunities to help reach industry aims of zero loss and lights out manufacturing.


03 Futures CHARACTERISTICS

SIGNALS FROM TODAY

that converge on the holy grail of ‘lights out manufacturing’ where interventions and • Virtual manufacturing environment is now changes are made as needed to the processes becoming more a reality than ever with most without human intervention. major manufacturers either implementing or • Six-sigma and Lean has evolved to the concept of Zero Waste. Waste being any underutilized using today. • Paperless manufacturing: The concept of taking resource, whether it be material, capital or product development completely electronic human resources is taking hold solidly today. Now, paperless manufacturing is becoming a reality – and the real time transparency that accompanies it. • Adaptive and flexible manufacturing is taking shape in 5-axis machining, real-time adaptive tooling management, new machining & assembly techniques such as Blue ArcTM, EDM, adaptive robotics, nano-manufacturing, etc. • Additive Layer Manufacturing (3D printing) is poised to change manufacturing as we know it: Anyone can design then have it built, creating a democratization of design • The advent of truly ‘rootless’ manufacturing The +100 simultaneous material barrier (in one print) has been broken (Jul 2012) • Airbus has announced its concept 2050 plane, completely 3D printed (Jul 2012) • Major manufacturers are working today on predictive and adaptive technologies

IMPLICATIONS FOR TOMORROW • Design & build virtually with confidence before first brick is laid. • Efficiency, flexibility and transparency while ‘in-process’ • Automated adaptability of changing production parameters • 3D printing becomes mainstream, with new materials feeding its rise • Think it: Build it. Design anywhere and have it built anywhere • Truly ‘lights out’ manufacturing becomes a reality • Zero Loss Factory becomes critical to business sustainability and an economic differential advantage


03 Futures

ON THE MOVE The growth and evolution of freight transport enables the creation of mega-firms in this arena and is enabled by application of proximity and driving technologies. This allows, for instance, commercial vehicles â&#x20AC;&#x2DC;road trainsâ&#x20AC;&#x2122; or convoy to be formed, driven by a solo driver and the hub and spoke urban systems present opportunities in first mile/last mile.


03 Futures CHARACTERISTICS

SIGNALS FROM TODAY

IMPLICATIONS FOR TOMORROW

• Road trains are being trialled as a joint venture between seven European partners including Volvo Trucks funded by the EU under the moniker SARTRE (Safe Road Trains for the Environment). (Jun 2012) • Efforts are underway in the ISO to create a uniform standard for electronic container security • Several manufacturers, including American giants General Electric and IBM, have gone ahead to design electronic container security systems • Airsage provides real time traffic information Orange Business Services Provides Global Network to Shipping Industry Leader ZIM (May 2012) • Logistics companies already using real time fleet tracking and management tools. Automation and Data-Management Tools Seen Benefiting Fleets (Jun 2012) • Environmental impact of home delivery (calculated at 1/20 of typical supermarket visit in a car) • London buses use bar code reader on lamp posts to map real time position of fleet

• Transparency of cargo to provide increased security and speed of customs entry • Widespread use of platooning on major highways • Development of predictive traffic tools based on advanced pattern recognition software • Cities will have highly developed V2I and traffic management technologies in place • Home delivery will become the cheapest option as scale economies kick in and cities favour “greener” solutions


03 Futures

DESIGNER MATERIALS The discovery and production of new materials will revolutionise consumer products driving down cost, increasing energy efficiency and accessibility. Designer materials are enablers accelerating innovation across multiple platforms. Innovations are driven by academia, small start-up, applied and commercialised by multinationals


03 Futures CHARACTERISTICS

SIGNALS FROM TODAY

• While 3D printing, robotics, AI, and nanotechnology are all expected • As a fascinating two-dimensional carbon to dramatically change the manufacturing allotrope, graphene has triggered a ‘gold rush’ landscape over the next several years. 3D all over the scientific research areas especially printing is becoming available to the general public. since the Nobel Prize for Physics in 2010 • Fuel efficiency and low carbon emission IMPLICATIONS FOR TOMORROW regulations are playing a major role in raising global demand to incorporate lightweight composites to replace metal parts • Graphene research uncovers applications in in automotive components such as one-piece batteries, electronics, solar energy, and even desalination carbon fibre car wheels • Developments in composite materials allow • A new composite material was developed that can not only store and discharge electrical cost effective lightweight construction of everyday objects. Metal working is a thing of energy but which is strong and lightweight the past? enough to form part of a car’s structure • New materials allow the integration of • Thermal control of electronic components multiple functionalities which further reduce e.g. in vehicles using Phase Change Materials (PCM) is developed by PureTemp, Fraunhofer weight. and others. Lehigh University develops a PCM • Thermal efficiency becomes the next step in vehicle efficiency. Optimised engineering system for storage of solar energy. Cost and efficiency compared to water/glycol remain key solutions reduce weight while conserving • Membranes of increasingly sophistication find energy. • Increased selectivity and throughput make application in desalination, municipal waste membranes the first choice separation tool for. water and used engine oil treatment. • Future improvements and alternative coatings • ANS develop a surface coating methodology reduce the need for complex formulated is developed which ‘… makes cars and engine and gear box oils. trucks more fuel efficient, makes rock drills efficient waste stream treatments. last longer while the application is more cost • Will manufacturing outsourced to China over effective than DLC…’ the past decade return to the west with the advent of new manufacturing techniques?


03 Futures

OWNERSHIP Vs. ACCESS Will simple economics and convenience enabled by technology shift the balance from ownership to access as we prefer to rent than buy?


03 Futures CHARACTERISTICS

CASE FOR AUTO SHARING

CASE AGAINST AUTO SHARING

• Congestion and lifetime vehicle cost remain key drivers • New and established players enter - Herz/Thriifty; Enterprise;Sixt - Deutsche Bahn; Hyatt - Renault, Daimler; BMW - Auto-preneurs with passion • Youth drive habit - 53% millenials in US “like to try” • Politicians step in - Paris, Houston, Chicago • Investment increases - Eg Accel $10m investment 2011 • Geographic breadth –multi local - Zazcar Switz 1000th city scheme - landmark(??) - Eg Blabcar Italy/Spain - Zipcar 750k members; Cars2go: 100k • SOLOMO technology will drive convenience

• Slower than aniticpated growth - Still only 0.27% of US drivers - Zipcar stock slides 30% • Evidence of limited carbon benefit and millenials anyway motivated by $ - Users were previously low car users anyway • Automakers will see lower car sales • Insurance a key barrier and multi-local solutions needed - “Dings” are our major issue – relay rides • Peer-to-peer makes traditional investment model flaky • Consolidation to come


03 Futures

ROAD TO ZERO Governments, consumers, companies all get the environment thing. The mix of engaging the consumers, voters, and advances in technology means you can have quality and green, without the price premium. The logistics flow reflects this as ubiquitous connectivity, and total ecological transparency means every step of every product is known, tracked and fed back to consumers.


03 Futures CHARACTERISTICS

SIGNALS FROM TODAY

IMPLICATIONS FOR TOMORROW

• 80-60 rule: 80% of goods sourced within 60% of where you live • Factories making products are locally located, investing in production processes minimize waste, and building in cradle to cradle management including design for disassembly approaches • Land transport at a fleet level has switched to both optimized flow design and alternative drive trains • Increasing recognition of drivetrain diversity required for on road transportation, leading OEMs to share investment cost with ‘competitors’, (Toyota and BMW, BMW and Mercedes, Toyota and Ford) • Manufacturers and logistics providers see the cost of inaction to be greater than implementing green practices, as this is initially seen as source of value and differentiation, and later “tablestakes” to play • Focus on efficient shipping designs and new / alternative energy sources: Shipping companies are building in advanced scrubbing systems, exploring new hull designs and using more efficient slow shipping

• Opportunities to exploit the local manufacture tag, from made in USA to Made just down the road • Eco labels on all manufactured items similar to the labels on domestic appliances • Differentaition offers on logistics, paying more for slower, more environmentally friendly options • Power-train sources likely to be common across vehicle ranges, differentiation will be more difficult to achieve


03 Futures

ELECTRIFYING FUTURE The drive train is evolving with increasing hybridization, towards full electrification, driven by CO2 emission legislation, city emission zones and a drive to stimulate a new industry.


03 Futures CHARACTERISTICS

SIGNALS FROM TODAY

IMPLICATIONS FOR TOMORROW

• EU CO2 treatment of xEVs continue, driven by New industry stimulus • China EV Policy updated with specific EV and PHEV targets for 2015 and 2020 • OEMs refocused from BEV to Hybridisation, efficiencies improving • PHEV finding uptake in US, Hybrid Sales booming in US • EVs increasingly used for Car sharing schemes • More emphasize on innovation in controls for smarter and longer life battery life • Installation of Free charging points by majors new to automotive e.g. retail

• OEMs will continue to invest and develop/ launch EV and hybrid models • EV&PHEV penetration in China likely to happen >2015 with Chinese OEM xEV offers • Hybrid drive trains will be consolidated and optimized before 2020 • Hybrids are mainstream, PHEV could become mainstream • Potential accelerated uptake in this specific segment • More complexity in electric component management • New Non conventional competitors in “fuelling”


03 Futures

OUR CITY. MY LIFE â&#x20AC;&#x153;City statesâ&#x20AC;? provide distributed power and energy, with more localized manufacturing and trade. Urban multi-modal (mass / personal) transportation adapts to become seamless and sustainable. Dramatic improvements in mass transportation and smart mobile devices drives city consumers from cars to inter-nodal transport solutions that require new support networks.


03 Futures CHARACTERISTICS

SIGNALS FROM TODAY

IMPLICATIONS FOR TOMORROW

EU CO2 treatment of xEVs continue, driven by New industry stimulus China EV Policy updated with specific EV and PHEV targets for 2015 and 2020 OEMs refocused from BEV to Hybridisation, efficiencies improving PHEV finding uptake in US, Hybrid Sales booming in US EVs increasingly used for Car sharing schemes More emphasize on innovation in controls for smarter and longer life battery life Installation of Free charging points by majors new to automotive e.g. retail

OEMs will continue to invest and develop/launch EV and hybrid models EV&PHEV penetration in China likely to happen >2015 with Chinese OEM xEV offers Hybrid drive trains will be consolidated and optimized before 2020 Hybrids are mainstream, PHEV could become mainstream Potential accelerated uptake in this specific segment More complexity in electric component management New Non conventional competitors in â&#x20AC;&#x153;fuellingâ&#x20AC;?


03 Futures

SMART SHIPPING Shipping companies are focussed on fuel savings, operational optimization and meeting upcoming emissions standards with their existing assets, however, the changing world may force the industry to change more than it has planned â&#x20AC;&#x201C; which means opportunity for those looking to disrupt the status quo.


03 Futures CHARACTERISTICS

SIGNALS FROM TODAY

IMPLICATIONS FOR TOMORROW

• The industry is conservative given the large amount of embedded capital, however, market forces, e.g. trade routes and transportation could force disruption • Slow steaming is here to stay. • Impeding emissions regulation and sustainability are guiding today’s choices. • Operational optimization using advanced analytics is gaining momentum and acceptance for ship trim and speed, hull maintenance, on- board maintenance, etc. • Fleet asset optimization determining which ships to use in which way for what routes is now • Large tanker, container and cargo ships are the most CO2 efficient way of transportation today • Triple E Class – 18,000 TEU – reality by 2013 • Transparency of cargo contents and security has given rise to numerous security and tracking systems available today

• New consumers double world trade, with Africa playing a major role, including as importer of protein / food / agriculture • Moving of ideas, goods, and services is more feasible and less costly than before • Future ships will include new materials, self loading, lube oil analysis, cargo protection, and flexible storage • Security – knowing will become more valuable – what / where is it from, how is it handled, when was it moved • Security concerns addressed in maritime through the use of sensors, networks, and operations control • Customers willing to pay more for secure, authentic, pure • Sustainability focus highlights ships as polluters


The future is an exciting place for all of us. And the good news is we are working towards it, today. If you have an opinion on any of the 4 territories, or a brilliant insight or idea – or would simply like to find out more – we’d love to hear from you.



Better Futures