Forrester Predictions 2019 event highlights

Earlier this week, I attended the Forrester Predictions 2019 breakfast event in Sydney. During the 2-hour event, Forrester’s leading analysts presented the big changes they expect to take place in 2019, focusing on the following areas:

• Digital strategies
• Cybersecurity and risk
• Emerging technologies
• Customer experience

I’ve captured the key highlights and learnings from the event for investors, as well as included some commentary on how it might shape investing strategies in the coming year.

Digital Strategies

Research Director Michael Barnes spoke at length about the increasing importance the CIO role and that those who are not actively involved in every facet of the organisation need to “step up”. He also reminded everyone that digital transformation is never finished - it's a constant:

PREDICTION: Digital transformation morphs into focused transformation

According to Michael, “2019 will be a tough year”. Retail will be squeezed. It will be more difficult to get a loan. And budgets overall will be tighter. So “projects with no foreseeable ROI will be the first to go”. He cited Qantas recently closing its relatively new startup accelerator as an example.

It’s easy to get swept-up in the latest trend, and feel like you’re being left-out if you don’t partake. But the importance of ROI should come as no surprise -- especially to investors. At the end of the day, companies need to make money or else they can’t sustain themselves to do the fun, innovative stuff.

For investors, this is a good reminder to thoroughly research a company before deciding to invest in it. Looking at factors such as the P/E ratio can be a good start.

Cybersecurity and risk

Prior to joining Sharesight, I worked in the IT industry. I marketed cloud computing (back when it was still called “virtual hosting”), and helped launch Canada’s first Tier III data centre. I've been following the cybersecurity industry ever since, so I was particularly keen to hear this portion of the event.

Before jumping into her predictions, Principal Analyst on Security & Risk, Jinan Budge, shared some interesting cybersecurity stats:

• The costs of cybercrime is expected to be $61T by 2021
• 82% of Australian organisations plan on increasing their security spend over the next 12-24 months

PREDICTION: A botnet will generate revenue from fraud that rivals a Fortune 1000 business.

Jinan shared a few stories of botnets that have:

• Watched video advertising to earn $3-5M a day (equating to $1.8B p.a.)
• Stolen valid gift card numbers and resold them or used them to purchase goods (2017’s GiftGhostBotlogged captured 4M gift card balance requests per hour)
• Purchased limited edition sneakers online (the sneaker resale market is worth $1B while the bots cost a mere $10-$500 each)

PREDICTION: The US-China trade war will renew economic espionage against firms.

This should come as no surprise to anyone who follows the news, but Jinan noted that industries that are part of China’s current 5 year plan are especially vulnerable:

• New energy vehicles
• Next-generation IT
• Biotechnology
• New materials
• Aerospace
• Robotics
• Power equipment
• Agricultural machinery

PREDICTION: Attackers will infiltrate a high-net-worth individuals’ connected home devices.

There’s no question that IoT will bring increased risk. So this was not so much of a surprise but more of a reminder to stay vigilant. For example, whether or not you agree that Google Home devices are vulnerable to attack, there are still steps that their users should take to set up basic security on their networks. And regardless of what devices you use, you should enable 2FA wherever possible.

Beyond ensuring their security is up-to-snuff, investors might also want to look at ways to profit from cybersecurity and hacking. As the folks at Motley Fool have said: “as the bad guys become more advanced, the good guys have to stay one step ahead.” For this reason, I’ve personally allocated about 5% of my portfolio to the BetaShares HACK Global Cybersecurity ETF (ASX: HACK). It’s taken a bit of a hit with the recent market downturn, but I’m in it for the long term and I think the industry will only continue to grow.

Emerging technologies

Digital Business Analyst Zhi Ying Barry spoke at length about automation and AI.

PREDICTION : Automation and AI will drive increased operational efficiency

According to Zhi, 40% of firms will create automation centres in 2019. That’s a huge transformation. But while it’s easy to get swept-up in AI buzzwords, the reality is that even seemingly small improvements are having a huge impact on our lives. For example, here are a few automation features that I recently started using:

• Google Maps’ new commute feature ensures I take the best route to work
• Gmail’s new “Smart Compose” feature makes my email communications more efficient
• Uber Pool lets me share a ride with other passengers heading in a similar direction
• Sharesight automates my dividends and incorporates them into my total performance

While these features might not be as cool (or creepy) as the Boston Dynamics robot dog, their efficiencies will only keep growing to radically change the way we learn, work, and live.

Customer Experience

Senior CX Analyst, Ricardo Pasto, made the argument that companies have been focusing on “decorative CX” instead of really improving the actual customer experience. These were his main predictions:

PREDICTION: Companies will pull the price lever to make up for mediocre CX.

In the absence of good customer experience, it’s easy to just lower the price (or offer discounts to unhappy customers). But as Ricardo said, “Price wars will eat into profit margins and strain value chains.”

This point really stood-out for me, and it’s something to keep in mind, not just as a consumer, but also as an investor. Just looking at Uber as an example, you can see how a great customer experience was critical in them overtaking the taxi industry in such a short time. (For more info on how granular Uber gets with CX, check out this Freaknonomics podcast interview with Uber’s chief economist.)

PREDICTION: CX pros will focus on empowering employees and elevating the back-stage.

According to Ricardo, 50% of Australian business and technology decision makers are focusing on improving the employee experience (EX) in 2019. And he shared this great quote:

Again, this is another good point to keep in mind, both as a consumer and investor. Companies who consistently rank highly as “top places to work” are probably going to perform better in the long-term.

Final thoughts

While none of the predictions came as a huge surprise, they served as good reminders of what I should be focusing on personally at home and at work, as well as what qualities to look for in companies I’m looking to invest in. I hope you found this event round-up useful. Huge thanks to Forrester for inviting me along!

FURTHER READING

• Morningstar Individual Investor Conference highlights
• Sharesight + Macrovue event: investing in the global economy
• 5 books every investor must read

Important Disclaimer. We do not provide tax or investment advice. The buying of shares can be complex and varies by country. You should seek tax and investment advice specific to your situation before acting on any of the information in this article.