The innovator #12

#12–January 2020
Special Edition for the World Economic Forum’s Annual
Meeting in Davos
FIGHTING
BACKHow Corporates
And Governments Can Succeed In
The Digital Economy
NEW BUSINESS MODELS
A SURVIVAL GUIDE FOR
LEADERS IN THE DIGITAL
AGE
BUILDING CYBER
RESILIENCE

LETTER
FROM
The editor
In our third annual
special edition around
the World Economic
Forum’s annual meeting
in Davos we tell you
about new business
models and approaches
that can help companies
and governments thrive
in the digital age, and
highlight incumbents
who are starting to make some headway. We also give
you a glimpse of what’s to come: quantum computing is
expected to give us the ability to turn on a new teles-
cope into nature, and in the longer term revolutionize
drug design, portfolio optimization in finance and risk
analysis for insurance companies.
I will be moderating sessions on quantum computing
and cybersecurity in Davos as well as one which will
explore whether there is an opportunity to redefine the
carbon economy.
As every company is beginning to realize improving the
bottom line can no longer be the only goal. Businesses
need to reflect the values of their customers and do
their part to help the world achieve the U.N.’s Sustai-
nable Development Goals.
In keeping with that Zeitgeist the Davos Manifesto 2020
will underpin this year’s meeting. This document builds
on the original Davos Manifesto of 1973, which set out
for the first time the stakeholder concept that bu-
sinesses should serve the interests of all society rather
than simply their shareholders.
Jennifer L. Schenker
Editor-In-Chief, The Innovator
P.04
P.12
P.14
P.16
P.18
P.22
P.26
P.28
P.32
P.36
How Corporates Are Combating Super Apps
Digital Leader’s Survival Guide
Helping European Corporates Punch Their Weight
Central Bankers Embrace CBDCs
Reshaping Global Trade For The Digital Age
How Trafigura Put Its Cybersecurity To The Test
Protecting Critical Infrastructure From Cyber Attacks
The Death Of Passwords
Quantum Computing’s Potential
How AI-Powered Knowledge Aggregation Could Help Cure
Alzheimer’s Disease
TABLE
OF
Contents
The Davos Manifesto 2020 provides a vision for
stakeholder capitalism that touches on a range of im-
portant issues of our time, including fair taxation, zero
tolerance for corruption, executive pay and respect for
human rights.
Building on the Manifesto 2020, this year’s program
focuses on achieving maximum impact on the Forum’s
platform for public-private cooperation across six core
areas of activity: Ecology, Economy, Society, Industry,
Technology and Geopolitics. More than 160 individual
initiatives, each capable of delivering system-wide trans-
formation, are active on the Forum platform. Significant
advances in a number of these, especially in the fields of
responsible business, the environment and social mobi-
lity, are expected to be confirmed during the meeting.
Initiatives to be launched at the Annual Meeting in-
cludes one that aims to plant one trillion trees over the
next decade and another to equip one billion people
with the necessary skills in the age of the Fourth Indus-
trial Revolution.
Our readers can access the key takeaways from this
year’s annual meeting in our January 24th newsletter. If
you haven’t already subscribed to our weekly newsletter
you can do so through our website at www.innovator.
news. We pledge to do our best to give you 20/20 vision
not just on what went on in Davos but to keep you up-
dated weekly on the most important digital transforma-
tion trends throughout 2020.

4 5
Grab, a South East Asian ride-sharing app active in eight
countries, has rapidly added financial services such as digi-
tal payments, rewards, lending and insurance, on-demand
services like food delivery, grocery delivery and
package delivery as well as hotel bookings, on-demand
video, a ticketing platform and health services to the list of
its offerings. Now it is preparing its next move: obtaining
a full banking license in Singapore in partnership with
telecom operator Singtel.
“With over 70 % of the region unbanked or underban-
ked there is tremendous opportunity for us to grow our
presence in payments and financial services in order to
improve financial inclusion in Southeast Asia,” says Hooi
Ling, co-founder of Grab, which operates in 339 cities,
has a $14 billion valuation and boasts that it has added
$5.8 billion to Southeast Asia’s economy. Since Grab’s
founding in Malaysia in 2012 it has helped over 1.7 million
micro-entrepreneurs open their first bank accounts, she
says, noting that “our financial services business is now the
only platform to have access to e-money licenses across all
six major markets.”
Super apps like Grab, along with WeChat, Alipay, Go-Jek,
Paytm, Kakao, Line in Japan, or Rappi in South America,
are examples of the platform business model on steroids
and are especially applicable for mobile-first markets.
Facebook, Amazon, Google, Microsoft, Apple incorpo-
rated the platform business model years ago and, along
with Tencent and Alibaba are the most valuable companies
in the world, having taken over this position from the
banks, oil companies and industrial conglomerates.
Grab is just one example of how challenges to established
companies are increasingly coming from unexpected
places. Along with Grab and Ant Financial, an Alibaba
spin-off, applicants for full banking licenses in Singapore
include a platform play led by gaming hardware com-
pany Razr, which has teamed up with a local supermarket
operator, an insurance business, an Internet company and
a regional wholesale marketplace for cars with the aim of
creating a bank for millennials.
Boundaries between industries have been blurring for
some time. But few would have guessed just a short time
ago that a ride-sharing firm or a gaming company could
become a bank. The providers of super apps can come
from anywhere as long as they do a good job identifying
pain points, provide great customer service, add on
adjacent offers within the same app, and do it seamlessly
across geographies and industries. “Today if you smartly
combine established and emerging technologies with a
data-driven and customer-centric approach organizations
have a major opportunity for exponential growth,” says
Cristian Citu, the World Economic Forum’s Digital Trans-
formation Lead.
More than 80 organizations are participating in the Fo-
rum’s Digital Platforms and Ecosystems executive working
group, part of the Forum’s Digital Economy and New Value
Creation platform, to learn about super apps and emerging
business models in geographies as diverse as South Ameri-
ca, Africa and Southeast Asia.
COVER STORY
Fighting Back
How Corporates Are Combating Super Apps
BY JENNIFER L.SCHENKER
Grab was one of the star
attractions at the Forum’s Digital
Platforms executive workshop
in Singapore last July and Grab
CEO Anthony Tan and co-foun-
der Ling are both invited to the
Forum’s annual meeting in Davos
this year.
Thriving in the digital economy is top
on executives’ minds and some are making bold moves to
fight back. Examples include Sberbank in Russia, which is
investing heavily in an ambitious integrated ecosystem of
platform ventures across multiple adjacent verticals (see
the separate story), Reliance Industries in India (see the
separate story), China Merchant Bank (see the separate
story) and retailer Magalu in Brazil, which is turning into an
open platform business and growing its valuation like cra-
zy, notes Simon Torrance, a member of the Forum’s Digital
Platforms & Ecosystems Executive Working Group.
Some established companies are considering breaking
away from platforms controlled by tech giants. Ikea just
announced that it will no longer work with Amazon and is
rumored to be building its own platform.
Others are partnering with challenger platforms.
Berkshire Hathaway and JP Morgan have formed a joint
venture in healthcare with Amazon while ICBC - the wor-
ld’s largest bank in terms of assets – has partnered with
China’s Alibaba and its spin-off Ant Financial.
In Europe, companies ranging from Klockner, a distributor
of steel and metal products, to energy com-
pany Vattenfall are trying to build marketplaces
of their own. Henkel, a 144-year-old German
conglomerate, has launched HenkelX, an
open innovation platform that seeks to help Eu-
ropean companies be competitive in the platform
economy. Europe is also home to Fightback, a new
movement that aims to enable business leaders to leverage
platform business models, digital ventures and the special
skills of tech entrepreneurs (see the story)
But it is still early days. Most companies have still not
figured out how to turn themselves into platforms or figure
out how to work with existing ones.
At the Platform Economy Summit in September, an annual
conference in Frankfurt on business model transformation
for incumbents, successive panels of leaders from Europe’s
chemicals, industrial manufacturing, financial services and
automotive sectors, bemoaned the lack of true commit-
ment to and breakthrough impact from digital investments
and the fundamental human challenges they faced in
turning around their supertankers, says Torrance, the or-
ganizer of the conference and a senior advisor on business
model transformation. Many said they felt like they were
running fast just to stay still, but not making any major
progress. “They increasingly recognize that they lack key
capabilities that the ‘new, digital incumbents’, who have
taken over their crowns as the world’s most powerful
organizations with the most effective business models,
have developed, says Torrance. “Their leaders have found
COVER STORY

7
it difficult to apply the habits of high performance to their
position in a fast digitizing world: clarity of vision, ambi-
tion, energy, productivity, influence, necessity, courage.
They are trapped by out of date organizational structures,
IT, product development methods, metrics, and find it
harder and harder to attract the best talent.”
Too often, he says, incumbents are resorting to keeping
shareholders happy with share buy-backs and dividends,
rather than investing in business model innovation and
growth. “The good news is that incumbents have assets
that are extremely valuable, if only they can be leveraged
in new ways: customer bases, supplier relationships,
trusted brands, cashflow,” he says. “My experience is
that there are plenty of opportunities for incumbents to
generate new growth and value, especially in complex
industries where their domain knowledge and relationships
are so deeply embedded... But they must be willing to
fightback against old ways of thinking and acting.”
Opportunities
In many major industries such as consumer electronics,
transport, advertising, entertainment and retail ‘challenger’
tech companies such as Apple, Uber, Google, Netflix and
Alibaba have become the dominant incumbent, but not
in finance... yet. Tech companies, entrepreneurs and VCs
are eyeing up this $22 trillion global market right now, and
fintech innovation is rife.
According to a recent study by Google, Temasek and Bain
& Company, almost 40% of Singaporeans are underserved
by their banks, notes Grab. “Similar to our work in trans-
port, we have taken it as our mission to make financial and
banking services just as accessible to them as transport -
all from the palm of their hand,” says a spokesperson.
Grab says it believes the value proposition of digital banks
is clear: Southeast Asia is significantly underbanked, but
mobile penetration is high. Digital banks offer an opportu-
nity to build a mobile-only platform offering deposits,
loans, asset management and insurance that is well regu-
lated for consumer protection, without being constrained
by the need to establish a large physical branch network.
“Today our focus is on the Singapore license application,
but we always remain open to opportunities in other
markets as they become available,” says a company
spokeswoman. The risk for traditional banks and insurance
companies is that, unless they start to make bolder moves
right now, they become unprofitable legacy utilities with
slowly eroding impact on the role and function of money,
says Torrance.
Research by the London Business School and University of
Oxford supports that thesis. “Our study of the rise of super
app platforms has revealed that its success hinges on a
new source of firm value that is increasingly valuable in the
age of the Fourth Industrial Revolution: payments data,”
says Nina Teng, a Doctoral Researcher. “It’s important
for incumbents to consider who will own and control this
payments data when deciding whether to create their own
platform or to partner with an existing one; in addition to
being mindful of the great responsibility that comes with
data ownership with respect to safeguarding consumer
data privacy and protection.”
All these developments create even stronger imperatives
for traditional banks and financial institutions to create
bolder platform strategies, says Torrance.
“If you look at Return on Equity (RoE) scenarios for
incumbent banks, it’s not looking rosy,” says Torrance. “If
digitization continues to bite, and more new entrants like
challenger banks, fintechs, hyperscale platforms and super
apps nibble away at the most profitable parts of their bu-
siness, then you could see a slide into very unsustainable
commercial positions. Even if interest rates rise, the global
economy warms up and the banks get super efficient - and
that’s a lot to ask - we’re looking at tiny RoE growth.”
The only way forward to new growth and value is for banks
to think beyond traditional banking with a three-part plat-
form and ecosystem strategy, he says. The first step is to
COVER STORY
Grab, a South East Asian super app, started out as
a ride-hailing app before branching out into finan-
cial services. Sberbank, Russia’s largest financial
institution, is doing the reverse.
In November, Sberbank completed a joint venture
partnership with Mail.Ru with co-investment of
up to $1 billion in the food delivery and ride-hailing
businesses Delivery Club and CitiMobil. The two
companies also announced a separate partnership
to “boost the development of the digital economy
and AI-powered products in Russia.”
Sberbank also extended its reach into the dri-
verless vehicle market through a joint venture with
Cognitive Technologies, an established player in
the software industry that develops driver assistan-
ce systems based on artificial intelligence.
And, the bank is branching out into technology
services. In 2019 it launched Sber Cloud, a cloud
solutions marketplace that targets corporate
clients ranging from SMEs to large enterprises.
In a presentation to investors the state-owned
bank claims its ever-expanding tech-lead digital
ecosystem can now meet most of people’s non-fi-
nancial needs, including e-commerce, education,
entertainment and medical services. And like the
so-called super apps, it is using these offerings as
a way of onboarding customers and cross-selling
products.
Although Sberbank has a higher return on equity
than most banks worldwide (23% compared to an
average 8%), relying on pure banking services as a
business model is no longer an option as margins
are shrinking in the sector worldwide, says David
Rafalovsky, Sberbank’s Chief Technology Officer.
“In contemplating our future we decided that an
ecosystem business model that leverages the
strength of our brand and tech know-how would
allow us to offer new and unique products to our
120 million + customers.”
The difference between a holding company and
an ecosystem is that in an ecosystem you “have a
business glue and a technology glue and the indivi-
dual components work seamlessly together,” says
Rafalovsky. One example of that is to
offer a single sign-off for everything from banking
services to food delivery or a doctor’s appoint-
ment. “We have roughly 30 services that glue
these systems together and that is what makes the
ecosystem more sticky,” he says. “The objective is
to make people want to stay and use our services.”
Today Sberbank’s digital ecosystem services
contribute only about 1% to 2% of Sberbank’s ove-
rall revenues but “it is rapidly growing and it is on
the way to becoming a significant contributor to
our bottom line,” he says.
J.L.S.
Sberbank’s
Platform Play

8
top management in place to enable them to adapt quickly
to disruptive innovations—whether it means to collaborate
or compete with, or even undermine, new entrants.”
Success Factors
Established companies in theory have the resources, the
might and access to the customers but what keeps them
back is their culture and lack of customer orientation,
says Michael Jacobides, the Sir Donald Gordon Chair of
Entrepreneurship & Innovation at London Business School,
where he is Professor of Strategy. “They are more focused
on functioning product lines which makes them less
well suited to seize opportunities that are based on real
customer needs. There is nothing in terms of business cal-
culus that keeps them back. It is their inability to see the
opportunities and even more so their inability to mount an
effective response and to put into place the right organiza-
tional structure to make sure that it happens.”
The more successful ecosystems are orchestrated by an
established market share leader, says Jacobides. These
leaders are best positioned to attract partners with the
right skills and funding. The idea of starting a digital
ecosystem might seem strange to some large incumbent
players, who are used to going it alone but it’s better for
them to try and shape the new digital landscape, he says,
especially if they have advantages that rivals just can’t
match, most notably a strong user base. Research Jaco-
bides conducted with consultancy BCG shows that 83% of
digital ecosystems involve partners from more than three
industries and 53% from more than five. The research
showed that the more partners an ecosystem has, and the
more industries they come from, the better that ecosystem
will fare. While the average ecosystem has 27 partners,
the most successful digital ecosystems have about 40,
according to their research. The most successful also cut
embed their financial services within other platforms – es-
sentially a new approach to distribution. Then, banks need
to create much more vibrant marketplaces for banking and
non-banking services, to help retain customers by adding
more value. The third step to create new platform-based
ventures in ‘white space’ areas beyond banking. “This
is about accessing new customers in new ways,” says
Torrance. “If you can connect the dots between all three
parts, then you can leverage much more data, play a
stronger role in the digital economy, and create a path to
RoE growth and shareholder value.”
Sberbank is one of a relatively few banks that have de-
cided to invest wholeheartedly in a dynamic platform and
ecosystem approach (see the story) “It’s a good example
of integrating bold platform thinking into an overall
growth strategy,” says Torrance. “Sberbank is already one
of the best RoE performers in the world, but they are not
complacent. They have anticipated the threats of disinter-
mediation and are now executing at pace a platform-ins-
pired business model renewal.”
Stepping Up The Pace
But all too often incumbents from banking, transport and
retail sectors have been too slow to act. Some have even
allowed new entrants to take the driver seat, with their
support. “Incumbents were well aware of disruptive
innovations introduced by startups early on when these
upstarts were just emerging in the industry and had a low
market valuation,” says Teng, referring to her research at
the London Business School and University of Oxford. “By
the time the incumbents decided to invest in these inno-
vative startups several years later, they had to pay a steep
premium for partnering with startups that had become
unicorns.
The lesson here is that incumbents should be prepared to
have the right organizational structure and support from
COVER STORY
Energy and
petrochemicals
conglomerate
Reliance Indus-
tries, India’s most
valuable com-
pany by market
revenue, has
created a plat-
form for all of its
digital businesses
in order to better
combat interlo-
pers for control of the Indian market.
“This new Company will be a truly transformatio-
nal and disruptive digital services platform,”
Mukesh Ambani, Reliance Industries’ Chairman
and Managing Director, said in a press statement
announcing the unit’s launch. “It will bring together
India’s number one connectivity platform, leading
digital app ecosystem and world’s best tech capa-
bilities.” Reliance Industries is credited with having
transformed the digital eco-system in India, cata-
pulting the country from 155th rank in broadband
penetration to the first rank in mobile data
consumption within a span of less than three years
by building out a high-speed fiber optic network
and slashing prices on data plans. It is the second
largest singlecountry operator globally and says it
is trending towards half a billion customers, with
net additions of 8 million to 10 million per month.
Ambani said the new spin-out, Jio Platforms,
will roll-in the Jio Infocomm infrastructure and
focus on digital services in healthcare, education,
agriculture, commerce, government-to-citizen
services, gaming and manufacturing sector among
others...
Part of the plan is to win market share in India’s
burgeoning e-commerce sector. To that end,
Reliance Industries has started testing its online
shopping portal, JioMart, to challenge e-com-
merce giant Amazon and Walmart’s Flipkart Online
Services. Reliance Retail serves more than 3.5
million customers each week through its nearly
10,000 physical stores in more than 6,500 Indian
cities and towns. JioMart, plans to offer more than
50,000 grocery products and free home delivery.
Ambani said his goal is to “completely transform”
India’s mom-and-pop stores which account for
the majority of the nation’s retail sector by linking
producers, traders, small merchants, consumer
brands and consumers.
In an interview with The Innovator, John Cham-
bers, the former CEO and Chairman of Cisco
Systems, who is now working closely with Indian
Prime Minister Narendra Modi on the country’s
digitalization, says Reliance Industries is well-posi-
tioned to succeed with its new digital platform
«Ambani has built out the most advanced architec-
ture in the world for digitization, says Chambers.
“He clearly got it. [He saw that] voice will be free,
then data will be free and then video will be free.
He kept ahead of those trends and all the competi-
tors not willing to take the huge risk that he took.
He spent billions and billions of dollars of equip-
ment and now he is the leader in this market with
the best network in the world, much more complex
and capable than the U.S. networks are.»
Chambers predicts that Ambani will test the new
technology transitions and leverage those. «He will
do it in an ecosystem environment where he brings
together the small companies, to compete against
the big companies, and enable them in ways that
others can not,» says Chambers. He takes risks,
again and again and again. He’s done the same
thing in the petrochemical market. So, if you look
at Reliance, they’ve reinvented themselves on so
many fronts, and out of all the companies in Asia,
I’d put them at the very top in terms of reinventing
themselves.» Chambers says he thinks Ambani is
brave for going up against the biggest technology
challengers while taking on the traditional players.
«I think he is a great example,» says Chambers.
«It starts with a leader, a clear vision, using techno-
logy, getting the transitions right, understanding
the trends that will occur, and that changes the
game. That’s how you gain market share. There is
no incremental thinking here. This is all out-of-the
box, exponential thinking. This is all disruptive.»
J.L.S.
Reliance Industries
Strikes Back

11
across a great number of industries and have advanced in
a lot of different countries. Their analysis shows that 90%
of ecosystems involve participants from more than five
countries, and 77% of ecosystems span developed and
emerging markets. The orchestrator of a winning ecosys-
tem must successfully manage dozens of partners, across
multiple industries and countries, and different types of
relationships, says Jacobides.
Grab is doing just that. It has partnered with Toyota, Hyun-
dai, Booking Holdings, Microsoft, Mastercard and national
champions and industry leaders such as Singtel, Thailand’s
Central Group and Malaysia’s Maybank, and the Philip-
pines’ SM Group. Some, like Toyota, opted to invest. The
Japanese automaker bought a $1 billion stake in Grab in
June 2018. Grab says each partnership has its own unique
benefits. “The interest of our partners demonstrates the
great opportunity they see in Southeast Asia, as well as
Grab’s ability to capture it,” says a company spokesperson.
The super app’s ability to forge such partnerships allows it
to scale at speed and bring a broader set of services and
an even better user experience to its platform, strengthe-
ning its network effect.
Financial services expert Chris Skinner scoured
the world to find the most innovative banks while
researching his new book, Doing Digital, which is
scheduled to be published in February. He settled
on five. China Merchants Bank (CMB) was among
them.
CMB started as a technology-led bank in the
1980s, was one of the first to offer Internet banking
in China and describes itself today as a “fintech
bank”. It has more recently created a tech-led
digital ecosystem that customers can use to do
everything from getting typhoon alerts to making
a dentist appointment, a move that is benefiting its
financial services products and its bottom line.
In “Doing Digital” Skinner recounts how CMB got
where it is today. The bank has 1,830 branches and
over 136 million retail customers. As far back as
1993, it realized that it had too few physical outlets
to compete with large state-owned banks. So,
it decided to develop e-banking to expand its
business. CMB, in the early stage of development,
selected technology as its differentiated competi-
tiveness, and it was the pioneer in issuing debit
cards in China. Then, in 1996, it completed the re-
tail e-banking service system of online banking and
telephone centers. It launched its ‘Mobile Priority’
service in 2015 so as to transfer all kinds of banking
services to its apps.
Today, the number of monthly active users of CMB
apps has exceeded 81 million, the book says. More
than 70% of its wealth management product sales
and over 50 % of consumer finance activities are
conducted through CMB’s apps. The apps can also
be used for taking the subway and bus, ordering
food, booking movie tickets and using government
services. Some 26% of traffic of the CMB app ser-
ving debit card customers and 46% of the flow of
the CMB Life App for credit card customers come
from these non-financial service offerings.
CMB Customers can view about 1.6 billion pages
via its mobile banking service, which the bank says
helps it to accumulate a lot of customer behavior
data, according to Skinner’s book. In the book
CMB says it set up more than 3,000 customer
categories and over 220 personalized recommen-
dation models by integrating customer account
transactions and customer information. Every day
it provides customers with more than 200 million
personalized advertisements via mobile banking,
with a response rate of 1.04 %, equivalent to crea-
ting two million sales opportunities for the bank.
While most banks are still lagging behind when it
comes to adopting new business models
“China Merchants Bank has been smarter and a
lot more focused, concentrating on offering the
best banking service through digital technology
and data mining and creating a digital ecosystem
that serve the needs of its customer base,” says
Professor Ben Shenglin, Dean of Zhejiang Univer-
sity International Business School and Academy of
Internet Finance, China.
J.L.S.
How China Merchant Bank
Is Leveraging The Platform
Economy
Incumbents need to decide what is in it for them and be
clear about whether it makes sense to partner with super
apps like Grab or start their own platform. “Ask yourself
what value do you think you can add? Where do we play?
What is the role we want to undertake? Who do we
want to combine with? Is it likely that our organization is
decentralized enough to take the right decision?” advises
Jacobides. “Delegation of authority is an important issue.
What is the organizational structure that will allow – not as
a PR exercise – real value to be added? The challenge is to
develop a strategy, understand what the key questions are
and build in the right way for the organization.”
J.L.S.
COVER STORY

12 13
Digital Leader’s
Survival Guide
Five key steps to renew your business model
and compete effectively in future
COVER STORY ACOVER STORY
Simon Torrance
Senior Advisor, Business Model Transformation and Co-Author of
FIGHTBACK - how to win in the digital economy with platforms,
ventures and entrepreneurs, a new book being launched in Davos. The
digital leaders survival guide tips are an edited extract from FightBack
and based on the RENEW concept created by Torrance for his New
Growth Playbook (www.newgrowthplaybook.com). Torrance advises
boards and leadership teams on business model transformation,
platform strategy and digital ventures. He is a member of the World
Economic Forum’s Digital Platforms & Ecosystems executive working
group and co-founder and Chair of the Platform Economy Summit, an
annual global conference that explores new business models.
BIOGRAPHY
Reset how you think about sources of growth and value.
«If ever there was an industry ripe for disruption... it’s every industry»
1. The way you think determines how you act, which determines what you get in terms of performance. This is where
leaders need to start.
2. Re-educate yourself and your teams on the types of business models that perform best in a digital economy. Without
this, you won’t make the breakthroughs that will unleash your growth potential.
3. At the same time, optimize every aspect of the current business, including decision-making, with software and data
intelligence.
Envision new ecosystems and your role within them.
«If you don’t have a platform strategy, you don’t have a strategy»
1. McKinsey has forecast that 30% of global economic activity will be mediated by platforms within new ecosystems in five
years’ time. What ecosystems will you be operating in and which could you orchestrate?
2. You’ll need a very different approach to market analysis to understand the new opportunities and threats.
3. What types of platform strategy do you need to be successful in this different world? There are ten different types. Work
through them to find which would suit you best.
Nontraditional approaches to capital allocation
«Put your money where the money is»
1. Capital allocation is the most effective way of translating strategy into action. Share buy-backs and ‘innovation theatre’
won’t move the needle. It’s time to be bold.
2. Invest in the business models that can make the difference; don’t just digitize existing out-of-date business models.
3. Create a portfolio of digital investments and platform-based ventures. Be sure they are strategically relevant, not
armslength investments. Allocate 10% of your budget to them.
Execute with entrepreneurs, within an ambidextrous organization
«Tech entrepreneurs are your biggest untapped resource»
1. It’s time to start co-creating with proven tech entrepreneurs – the best people to work with to execute new business
models.
2. Build an ‘ambidextrous organization’: a separate ‘Fast-Track the Future’ business unit, reporting to the CEO, with new
people, skills, metrics and incentives. Attract entrepreneurs to lead your digital ventures and incentivize them with equity.
3. Create a governance model to bridge the gap between the core business and the Fast-Track the Future unit. Ensure the
latter drives demand for your core business and use it to transfer learning.
Widen your appeal and wow your customers
«Leverage others to serve your customers better»
1. The most customer-centric businesses on earth leverage others to serve their customers. You needn’t own all the assets.
Think of all those third-party developers and merchants supplying Apple’s App Store and Alibaba’s platforms.
2. Reconceive yourself as orchestrating an ecosystem of innovation, not just as a supplier of products and services.
3. Incentivize others to work with and through you. The most important third parties to leverage are entrepreneurs and
developers – your key resource to create new growth and value.

14 15
Helping European
Corporates Punch
Their Weight In The
Digital Era
Q: In the Fightback book you and
your co-author note that fewer than
20% of the investments in digitization
made by large companies in Europe
and in the U.S. have had any positive
impact on financial performance
once the cost of capital is taken into
account. Why do you think this is the
case?
FS: On the whole, their initiatives
have been limited to incremental
modernization of the core business,
rather than radical transformation.
The main problems include a rate of
adjustment that is too slow, the false
assumption that adopting a range of
digital tools and interfaces will be
enough to put things right and the
failure to match digital initiatives with
the necessary cultural and business
model changes.
Q: The book talks a lot about the
platform business model and its
power to leverage new technologies,
economic and social trends and the
hidden value of the abundant and
detailed data they generate. Why
haven’t more traditional companies
adopted this model?
FS: The big opportunity for the incu-
mbent leaders in almost every sector
is the possibility of creating a hybrid
business that successfully exploits
both existing strengths, physical
assets and
human
skills and
expertise, and
the networks,
platforms and
technologies
that the digital
revolution
is making
available. The
problem, of
course, for the
incumbent
businesses is
that they just
can’t throw the
cards up n the
air, walk
away from
their traditional sources of revenue
and profit and bet the farm on their
ability to pull it off and create an
equally profitable and durable digital
platform business from scratch. And
it’s not that easy to make the kind
of change that Apple, Amazon and
Microsoft did and build the platform
model into your strategy. Our research
shows that while there’s plenty of
awareness, interest and experimen-
tation, only 2% of established com-
panies have effectively incorporated
a platform strategy into their overall
plans for the future. So, there is a long
way to go.
Q:Europe seems
to be further
behind than the
U.S. and China.
How can Euro-
pean companies
fight back?
FS: We have
seen substantial
parts of
the European
economy lag
behind because
of an inability or
unwillingness to
see that yester-
day’s success
offers no
guarantees for
tomorrow. The stage is set for a digital
recession, home-grown and self-inflic-
ted, caused by the hubris that has
led our nations to ignore the radical
impact of digital transformation. But
if the digital revolution poses threats
it also offers solutions. Europe has
some 2000 world-leading specialist
companies, with the advanced skills
and knowledge to potentially lead the
way once they have grasped digital.
We are seeing some signs – especially
in recent months – of a new European
determination to take the actions and
make the investments that will be
needed.
COVER STORY
Q: How can the Fightback movement
help?
FS: Fightback is a true call to action,
to fight back against inertia and the
old way of doing business. Instead, we
want to enable business leaders to use
the digital economy to their advantage
by leveraging three powerful strategic
tools – platform business models, digi-
tal ventures and the special skills of
tech entrepreneurs. Fightback is also
about sharing the best practices of
global entrepreneurs, academics and
corporate and digital leaders to actual-
ly get going. The movement brings
everyone together in order to identify
the biggest topics and challenges
and then closely cooperate to take
joint action: which solutions, platforms
and ventures can be used to effec-
tively fight back.
Q: What is the relationship between
FoundersLane and Fightback?
FS: FoundersLane and Fightback are
connected by a shared purpose. The
Fightback movement pursues the
overall mission, and the book explains
the reason why we have started Foun-
dersLane: It provides the foundation
for the daily operations and business
there.
Established companies and govern-
ments have amazing but untapped
assets and our entrepreneurs have
Felix Staeritz
co-author of Fightback: How To Win In The Digital Economy With
Platforms, Ventures and Entrepreneurs, a new book being launched
in Davos, is a serial entrepreneur, investor and adviser. After building
several successful companies from scratch, and ultimately, to IPO,
he co-founded FoundersLane, the founders driven corporate venture
builder, which helps corporate clients such as Sweden’s Vattenfall and
Germany’s Trumpf create new entities with the help of experienced
entrepreneurs. Staeritz is a board member of the World Economic
Forum’s Digital Leaders group and the initiator of Fightback a new
movement which aims to bring together decision-makers to reshape
the world for a sustainable, digitally-enabled future.
BIOGRAPHY
make the investments that will be
needed. broad experience in plat-
forms and ventures. Examples include
Vattenfall, one of Europe’s largest
producers of electricity and heat.
FoundersLane connected them with
entrepreneurs who helped them set
up a decentralized, large-scale solar
analytics business to generate expo-
nential growth. We are also helping
Trumpf, a German high tech company,
transform into an integrated provider
of hardware, software and services.
I am a very purpose- oriented guy
and I believe hybrid models that pair
entrepreneurs with big companies are
very necessary. This approach – and
our movement – is for companies
that don’t want to just think about
the future but to act upon it and seize
opportunities offered by Digitization.
Q: How do interested companies join
the Fightback movement?
FS: Our movement is just as dynamic
as digitization, so this is the right time
to join Fightback, gaining valuable
insights in order to benefit from digital
change. As a first step, on Fightback.
com, you can learn about the latest
developments and join online. Al-
though we are starting with Europe,
the movement is open to established
companies based elsewhere. Our goal
is to scale the movement in 2020.

16 17
Central Bankers
Convene In Davos
To Discuss Digital
Money
The introduction of a government-backed retail digital currency is
predicted within the next five years
COVER STORY
“Central banks are responding to the reality that digital
currencies, either privately or publicly-issued, will be
an unavoidable part of the global monetary system, the
report says. It is in central banks’ best interest that they are
neither left behind nor displaced.”
The Forum sees its role as helping central banks to decide
how to best respond and remain relevant in a digital age.
“There is a demand and a perception from institutions and
consumers to look into systems that will make things more
efficient but really more fair,” says Sheila Warren, the Fo-
rum’s head of blockchain and distributed ledger. “There is
a lot of concern about the traditional banking and financial
system. There is a perception that it is rigged in favor of
certain kind of payers and the barriers to entry are very
hard to overcome. These are real problems and there is a
sense of a potential here that CBDCs could help level that
playing field and I think that is compelling. If there is a way
to do that that is not seen as overly risky why wouldn’t you
take a look?”
Challenges And Opportunities
The OMFIF report says policy makers and regulators can’t
afford to sit on the fence. Libra and cryptocurrencies such
as bitcoin give individuals the ability to store, spend and
move value en masse without relying on fiat currency.
“It is a direct challenge to the sovereignty of the state
and financial stability,” Philip Middleton, OMFIF’s Deputy
Chairman, said in an interview with The Innovator.
The Libra announcement highlights the opportunity avai-
During the World Economic Forum’s annual meeting in
Davos central bankers from around the world will meet
for breakfast with Forum Founder and Executive Chair-
man Klaus Schwab to discuss government-backed digital
currencies.
The Forum has convened this global community from
both emerging and developed economies to exchange
best practice and learn about how CBDCs work. CBDCs,
short for central bank digital currencies, are digitalized
instruments issued by a central bank that can serve as an
electronic extension of a form of cash.
Facebook’s announcement of Libra, a privately-issued
stablecoin that could challenge the traditional global re-
serve currency system, has helped move CBDCs to the top
of central banks’ agendas.
The challenge of privately-issued digital currencies is not
the only factor driving the discussion of CBDCs. Compe-
tition-driven innovations in cross-border transfers, mi-
cropayments and new payments instrument offerings are
profoundly affecting the way people pay, save and transfer
value. The application of these new technologies to
financial services and the desire of monetary authorities to
address perceived weaknesses in payments infrastructures
are rapidly combining to transform the prospects of central
bank digital currencies from a theoretical abstraction to a
practical proposition, according to a 2019 report on retail
CBDCs by the Official Monetary and Financial Institutions
Forum (OMFIF), an independent forum for central banking,
economic policy and public investment.
lable to central banks to address the failures in existing
payments systems for consumers, understand how digital
currencies may address these shortcomings, and take the
initiative to deliver their own digital currencies, according
to the OMFIF report.
One potential advantage of CBDCs is that they can in-
crease government seigniorage – the revenue generated
by monetary authorities through the process of money
creation – in the face of declining use of cash by redu-
cing distribution and management costs, according to
the report. These savings would be especially helpful for
emerging markets, where low financial inclusion hinders
growth. Since CBDCs can integrate national identity,
they could reduce the cost of remittance by alleviating
concerns about money laundering and terrorist financing.
These improvements in the reach and stability of money,
along with potential digital features that enable negative
interest rates and smart contracts, could dramatically
enhance monetary policy implementation.
“There is a strong incentive for governments to get rid of
cash and move to a fully digital payment system,” says
Middleton. “It is a lot cheaper and it does make the exer-
cise of monetary policy easier.”
It is likely a fiat retail digital currency will be introduced
within the next five years, either as a complement to or as
a substitute for notes and coins, according to the report.
“It is improbable that the first such issuance will come
from a G20 central bank; it is considerably more likely to
be launched in a smaller and less complex economy in
response to a specific policy objective and use case,” says
Middleton.
The move may be fueled by a desire to improving the
overall effectiveness and resilience of a national payments
system by reducing the prevalence of cash, says the
report. Alternatively, it could be associated with extending
financial inclusion; reducing the size of the dark economy;
countering financial crime; or for a specific purpose, such
as transforming the cross-border transmission of migrant
worker remittances.
Which central bank will be first out of the gate is an open
question. Press reports that China is ready to issue its own
CBDC have so far proven unfounded.
While in most instances, the development of CBDCs is
most likely going to be nationally driven, OMFIF predicts
that increasing co-operation and collaboration between
monetary authorities is likely to become the norm.
OMFIF also expects extensive private-public sector
partnerships to emerge, with the private sector providing
or running technology, infrastructure and operations for
central banks on an outsourced or collaborative basis.
Its report predicts that there will be a growing number
of studies, use cases and pilot programs as both sectors
“explore, design and test the art of the possible and desi-
rable.”
J.L.S.

18 19
Reshaping
Global Trade
Internet platforms that facilitate financial interactions,
capture data and physically help move goods are playing
an increasingly larger role in global trade, directly impac-
ting and even competing with countries. So much so that
Sangeet Paul Choudary, a member of the World Economic
Forum’s Digital Platforms & Ecosystems group, calls plat-
form- led trade “one of the defining shifts of our time.”
As platforms such as Alibaba and Ant Financial create an
electronic silk road and benefit from winner-takes-all
scenarios, governments risk losing control over global
trade. “Platforms like Alibaba can drive the growth of small
and medium-sized businesses and financial inclusion for a
third-party country and have direct bearing on its develop-
ment,” says Choudary. “This gives these platforms
incredible negotiating power. It also raises geopolitical
concerns, especially when the platforms are closely moni-
tored by the home-country government.”
Governments in India, Singapore and elsewhere are busy
devising plans to combat the growing power of such
platforms by either banding together to use public goods
to create a common financial services infrastructure or by
developing separate government-as-a-platform strategies,
says Choudary, a platform business model expert and the
author of an upcoming Forum white paper on the topic.
Digitalizing Trade And Logistics
E-commerce marketplaces have already enabled signifi-
cant cross-border flows by aggregating huge selections
and making pricing and comparisons more transparent.
says a new McKinsey Institute report entitled Globalization
in Transition: The Future of Trade and Value Chains.
It cites Alibaba’s AliResearch projects that cross-border
B2C e-commerce sales will reach approximately $1 trillion
by 2020. B2B e-commerce could be five or six times as
large. While many of those transactions may substitute for
traditional offline trade flows, e-commerce could still spur
some $1.3 trillion to $2.1 trillion in incremental trade by
2030, boosting trade in manufactured goods by 6% to 10%.
Alibaba is positioning itself to grab a big percentage of
that trade by operating as a vehicle for public-private coo-
peration that can incubate eTrade rules and foster a more
effective and efficient policy and business environment for
cross border B2B and B2C electronic trade. The Chinese
company’s Electronic World Trade Platform (eWTP), which
was conceived by Albaba founder Jack Ma and launched
in 2016, aims to help small and medium sized enterprises
(SMEs) participate in global trade without investing in
their own supply chains by easing “global purchase, global
sales, global payment and global logistics.” It already
COVER STORY
How Countries Can Combat The Growing Power Of
Internet Giants
operates or is building logistic hubs in Malaysia, Rwanda,
Ethiopia and Belgium.
According to a survey conducted by the World Trade Or-
ganization and the Organization for Economic Cooperation
and Development (OECD) on SMEs’ access to cross border
trade, the major challenges they face include access to
information about export opportunities, access to trade
finance and logistics costs. Cross border eTrade is proving
to be a game changer for SMEs to participate in global
value chains. It creates direct access to international
customers and highly efficient digitalized flows of pro-
ducts, data and money. Many institutions which previously
focused on global trade are working to facilitate eTrade.
But there is no forum to bring together these disparate
efforts around eTrade, nor to bring the perspectives of
the diverse sets of private and public constituencies, e.g.
SMEs, regulatory entities, vendors, consumer associations,
industry associations, business intermediary organizations,
and enable these parties to assess existing regulations and
best practices, and incubate and advocate rules to foster
eTrade.
At a 2016 meeting of the G20 eWTP offered to step into
the breach and incubate rules for the development of
eTrade in terms of industry standards and rules, simplifi-
cation of regulations and customs processes, evolution of
consumer protection, lowering of tariffs, harmonization of
taxation, development of internet and logistics infrastruc-
ture, facilitation of flow of goods, finance and data.
EWTP said it “will identify and share best practices, for ins-
tance around the development of efficient infrastructures
such as cross-border eTrade hubs and experiment zones,
smart logistics, credit payment, and technical assistance
for emerging markets, with a view to influencing policy
making and promoting inclusive eTrade.”
A Shift In The Balance Of Power
While digitalizing trade will improve efficiency and help
SMEs it is also giving the Chinese Internet giant unprece-
dented power over global trade. “In Africa or in countries
like the Philippines or Pakistan they don’t have infrastruc-
ture to facilitate SMEs and plug into the global economy,
Alibaba offers infrastructure -in-a-box to help them exploit
their potential,” says Choudary. While Alibaba is digitali-
zing trade and logistics at cost or even for free, Ant Finan-
cial, which got its start powering Alibaba’s e-commerce
platform and was later spun-out as a separate business,
is taking much bolder steps to dominate payment wallets
in almost every major country in Asia, Latin America and
ACOVER STORY

20 21
“Widespread coopera-
tion on public goods and
standards development
can help countries work
together to create a more
inclusive platform eco-
nomy, without becoming
overtly dependant on the
infrastructure offered by
private firms.”
Africa. “The strategy is to invest in payment wallets and
ecommerce companies across the globe and invest on the
condition that the investee companies move their tech
to the Alibaba Cloud,” he says. Meanwhile, Ant Financial
is approaching banks in emerging markets to help them
expand their business and target the unbanked population.
“It promises them something they could not do themsel-
ves – expand the potential customer base by targeting the
cash economy and help with the digital transformation of
the bank by offering a whole suite of AI capabilities for
credit scoring of the unbanked population,” he says.
The end result is that a growing list of clients around the
world are sharing the same back-end infrastructure for
everything from fraud mitigation to e-commerce and
banking, with payment wallets being built on top of the
Alibaba Cloud, allowing the Chinese Internet giant to
amass better and better datasets, he says. “The big picture
is the top payments wallets and banks are using the same
credit scoring models and are increasingly dependent on
one company at the backend. The end goal is to create a
common standard for financial services and trade backed
by the world’s best credit scoring model,” says Choudary,
“And as these platforms get bigger we may see control
points over trade shift from political countries to digital
platforms.”
Creating Digital Public Goods
So how can governments regain control? India has deve-
loped one approach. IndiaStack is a set of APIs that allows
governments, businesses, startups and developers to
utilise a unique open source digital Infrastructure which
is treated as a public good.
The Open API team at the Indian Software Product Indus-
try Roundtable (iSPIRT) has been a pro-bono partner in
the development. As of 2019, the services that IndiaStack
offers are proving identity, completing KYC, making digital
payments, signing documents digitally and sharing of data.
Morocco is now working on using the IndiaStack to intro-
duce the common infrastructure necessary to enable an
open source financial services ecosystem, says Choudary.
Meanwhile, with the encouragement of UN Secretary-Ge-
neral Antonio Guterres; Norway, Sierra Leone, UNICEF
and iSPIRT are collaborating closely with other stakehol-
ders to in a group called the Digital Public Goods Alliance
to implement a UN recommendation that a platform be
created for “sharing digital public goods, engaging talent
and pooling data sets, in a manner that respects privacy,
in areas related to attaining the SDGs”, such as financial
inclusion.
The group’s guiding principle is that software, content and
data must be possible to use independently of any particu-
lar vendor to be considered as digital public goods.
COVER STORY
Government As a Platform
In a 2018 article he co-authored, Choudary proposed a
government-as-a-platform approach that Singapore could
use to establish itself as a hub for digital trade.
The approach, which Choudary says could be adopted
by other governments, involves first using technologies
like blockchain to help SMEs to conduct digital business
securely, and seek new business partners and distributors,
while managing a common audit trail. Once the success
of the SME trade platform is demonstrated, the country
could open its platform technology, know-how and pro-
cesses to emerging economies that are seeking to boost
digital SME trade but don’t want to become over-reliant on
commercial platforms such as Amazon and Alibaba. When
multiple countries start using the same platform, they start
subscribing to the same data standards, leading to greater
cooperation and interoperability among them.
In order to create the right control points and be a hub for
digital trade, countries that want to become digital hubs
must invest in creating unique intellectural property that
other countries using the SME trade platform find va-
luable. To gain competitive advantage, a country needs to
create and control unique IP that adds value to users of the
SME trade platform.
By creating regulatory sandboxes, countries like Singapore
and Switzerland are already encouraging innovation in
fintech and could use these as a value-add plug-ins to SME
trade platform. Examples include developing a data-driven
credit scoring system that could be used to extend trade
financing to SMEs based on their trade activity data gathe-
red on the platform. As more countries use the platform,
other IP creators could find it more attractive to create IP
for this platform, owing to the higher demand.
This growing IP, in turn, is likely to lead to greater usage of
the platform, amplifying the network effect and positio-
ning a country that moves to do this as the central and
most powerful point for processing digital trade data from
participating countries, making it a hub for digital trade.
A country that turns itself into a platform for digital trade,
could also leverage its neutral position to create a free
data port that positions it as a neutral country for proces-
sing global trade data.
A free data port would allow data from other countries to
be stored and processed in a country like Singapore, but
in accordance with their individual country-specific data
jurisdictions.
Singapore is in the early phases of developing a country-
as-a-platform model. Choudary is meanwhile also working
with other countries, encouraging governments to consi-
der adopting the model. There is an opportunity to counter
the power of Internet platforms. Governments just need to
seize it, he says.
J.L.S
The country as a platform model
AI CAPABILITIES
(NATIONAL AI
STRATEGY)
STANDARDS
DEVELOPMENT AND
MULTILATERAL
AGREEMENTS
DIGITAL PUBLIC
GOODS
COUNTRY AS
A PLATEFORM
COVER STORY

22 23
How Trafigura Put Its
Cyber Security
To The Test
The global commodities trading firm replicated the NotPetya worm,
strengthened it and then unleashed it on its production environment
to assess its ability to fight back
Mark Swift was sitting in his third floor
office at global commodities trading
firm Trafigura in the Mayfair district
of London’s West End when he first
started hearing reports about Not-
Petya, a computer worm attack. The
worm rapidly spread around the world
in June, 2017, crippling multinational
companies including global shipping
company Maersk, pharmaceutical
giant Merck, FedEx’s European subsi-
diary TNT Express, French construc-
tion company Saint-Gobain, food
producer Mondelez, and manufacturer
Reckitt Benckiser, among others,
causing an estimated $10 billion + in
damages.
“It was clear there was a major pro-
blem; we got a very early understan-
ding that something was going on that
was much more significant than the
usual ransomware but no one had a
clear picture of what was happening,”
says Swift, Trafigura’s Chief Informa-
tion Security Officer. “There was a
huge amount of confusion and quite
a bit of angst. It was incredible that
so many companies were being hit at
the same time and extremely worrying
because you can’t defend against what
you don’t understand.”
Swift’s job it is to ensure the company
can effectively play defense against
cyberattacks. Trafigura manages more
than $54 billion in assets and moves
over $170 billion per annum of commo-
dities around the world by ship, barge,
truck, rail and pipeline.
While Swift believed the company was
reasonably safe he could not quantify
the risk. “The questions I kept asking
myself is how does the worm get in,
how does it move and would our de-
fenses hold out?” he says.
“The difficult thing is you don’t have a
way to test. Working on assumptions
is not a good way to be measuring
your defenses.”
There was only one way to be sure:
do the unthinkable. With the help of
NCC Group, a global firm specializing
in cybersecurity and risk mitigation,
Swift hatched a plan to replicate the
Notpetya worm, strengthen it, and
then unleash it on the company’s
production environment, with the full
support of the CEO and the board.
The audacious move was deemed
to be an acceptable risk because
Trafigura had standardized the way it
exercises cyber hygiene, something
the World Economic Forum’s Centre
For Cybersecurity has been encoura-
ging companies to do.
Swift, a speaker at The World Econo-
mic Forum’s Centre For Cybersecu-
rity’s annual meeting in Geneva last
November, agreed to an interview
with The Innovator in the hopes that
Trafigura’s experience will help other
large enterprises better prepare their
cyber defense.
CYBER SECURITY
Deconstrucing NotPetya
It was one of Trafigura’s lead engineers
that first suggested testing how well
the company’s defenses would stand
up to the NotPetya worm under
controlled circumstances. Swift liked
the idea and approached NCC Group.
They struck an agreement: If the cy-
bersecurity firm could help develop
a replica of the worm Trafigura would
test it and- if all went well – NCC
could use the case as a reference to
sell the service to other big corporate
clients.
Oliver Whitehouse, NCC Group’s
Global Chief Technology Officer,
remembers the first discussion about
replicating Notpetya with Swift, whom
he has known for 20 years. “We were
coming off a busy summer in the U.K.
We had two major worms, the last of
which was NotPetya. Mark [Swift] was
getting questions from his chief execu-
tive about whether it would have an
impact on Trafigura. Mark could just
say ‘we think our controls would limit
the impact’ but it was very much a
theory and he could offer no definitive
assurance. When he outlined that he
would like to run this test to quantify
the risk I told him ‘we can do that.’
I had the confidence that we could
replicate NotPetya by deconstructing
it and then reconstructing it,” says
Whitehouse.
Swift’s team and NCC Group started
the work in November of 2017. “We
decided to rewrite the worm so we
knew exactly what every line of code
did,” says Swift. “We discovered a co-
ding mistake in the way it moved and
stole tokens and the way it scanned. It
wasn’t as efficient in moving as it mi-
ght have been so we corrected those
mistakes to make it even stronger.”
The team also installed kill switches
to ensure the worm didn’t proliferate
outside of Trafigura’s network and ac-
cidently infect suppliers and partners.
The process was supposed to take
three months but took a year.
“The complex bit was having the
confidence that the controls would
work and that it would not go awry
and be disruptive,” says Whitehouse.
“ We worked on the principle that if
there was any doubt the first instruc-
tion was to shut itself down, ensuring
that it would only spread to computer
networks directly under Trafigura’s
control. There were key systems in the
industrial operations technology in
areas such as mining and fuel termi-
nals that had to be excluded but all the
corporate assets could be included.
Then we built in various other safe-
guards, such as the rate at which
it could propagate so it would not
overload the system. We did three full
environment tests before we even got
near the production and were confi-
dent that the controls could do what
they said they are going to do.”
Getting Sign-Off
Getting the company’s leadership to
sign-off was an important part of the
process. Trafigura stores and delivers
the commodities it trades, which
includes approximately six million
barrels of oil a day. In order to buy the
assets that it later trades it has establi-
shed access to credit from 155 banks.
It has to manage credit risks, legal
risks, IT risks and liquidity risks and
all of these risks are integrally linked.
“We are a high volume, low margin bu-
siness,” explains Christophe Salmon,
Trafigura’s Chief Financial Officer.
“Our business is based on arbitrage,
we fight for the last cent per barrel.
Any basis point matters in terms of
protection of our margins. If the inte-
grity of our system was compromised
it would have consequences in being
able to conduct our business and in
ACYBER SECURITY

24 25
the daily reporting to our financial partners,”, a factor that
could impact Trafigura’s access to both credit and its liqui-
dity. “This was why, in discussing with Mark, testing the
strength and integrity of our system – and identifying any
potential vulnerabilities – was so important,” says Salmon.
Unleashing The Worm
On November 8th, 2018 the worm was unleashed. Swift,
together with Trafigura’s lead engineer, Whitehouse and an
NCC Group developer huddled around a group of compu-
ter screens. “We looked at each other and said ‘should
we run it?’, remembers Swift. “I paused for a moment and
wondered ‘What on earth am I doing?’ before giving the
green light. And then we waited for the havoc to begin.”
Thirty minutes went by. Nothing happened. Then the worm
found its way in through an unpatched computer in
Switzerland and exploited that entry to gain privileges. At
that point the team thought it would spread like wildfire.
But to their surprise it didn’t, due to a security configu-
ration Trafigura had made that they had not fully appre-
ciated. So the team launched different scenarios, purpo-
sely infecting different ‘patient zeros’ increasingly notching
up the level of exposure. Eventually a misconfiguration in
a software development network lit the fuse and the worm
started to spread aggressively throughout the develop-
ment environment, moving from machine to machine and
location to location. “We tracked the various ways the
worm jumped between systems and were able to create a
good map and a good understanding of its speed and its
ferociousness,” Whitehouse says.
The value of the test data can’t be overstated, he says.
Trafigura used it to make adjustments to its network.
“This one configuration change by Trafigura significantly
disrupts the speed at which worms can propagate even if
they
can access highly privileged systems,” says Whitehouse. To
Swift’s great relief unleashing the worm in this controlled
manner had no operational impact on the business. None
of the company’s computer users noticed a thing.
CYBER SECURITY
“I paused for a moment
and wondered
‘What on earth am I
doing?’ before giving
the green light. And
then we waited for the
havoc to begin.”
Key Takeaways
NCC Group is eager to run similar tests for other big
corporates but so far there have been no other takers. Al-
though a number of big companies have expressed interest
in doing so they have had trouble getting internal sign-off.
Whitehouse says that often organizations think they have a
picture of what their computer networks look like. Howe-
ver, 99% of the time this does not reflect reality. Knowing
who is connected is one of the first things a company has
to do to ensure its cyber security. The map needs to be
accurate “at any point in any week,” he says. “When I ask
what is on their network, who is responsible for it, what
each device does and what business operation it underpins
they look at me quizzically and say they don’t know. If you
don’t know then you don’t know what your risk is. You have
to understand the material risks before you can unleash
tests like Trafigura’s.”
Swift agrees. “One of the reasons why we were more
capable of running this was we know where the edge of
our network boundary is,” he says. “You have to fundamen-
tally understand how many machines you have and where
they are to be able to sign off on something like this. We
spend a lot of time standardizing our environment because
we believe you need to do things to standard and enforce
things to standard.”
One of the key takeaways from the test was that having
hard data and being able to really measure risk is key,
says Swift. Trafigura thought that being 99.9% compliant
in some areas was good enough. It was not. “So now we
understand that and if anybody says we are being overly
cautious we can demonstrate why we need to do what
we do. We believe it is worthwhile to get better at testing
and measuring the effectiveness of security in our internal
network, but is only worth doing if you also have an appe-
tite to introduce major controls.”
Swift says he has no illusions. Controls or no controls the
attacks will keep coming. The next worm, the next virus,
is likely to be more virulent. And no matter how good its
cyber defense is, Trafigura – like any other company on the
planet – will have to continue to be vigilant in the never-
ending battle to keep its systems safe.
J.L.S.

Negotiates off-take
agreements with oil
producers, refiners,
mining companies and
smaleters. It owns mines
and smelters and ivnests
in logistics that improve
market access for its
suppliers.
It stores petroleum
products at owned and
third-party tankage.
It stores metals and
minerals at terminals
and third party-owned
facilities.
It moves commodities by
barge, truck, rail, pipeline
and vessel in support of
its core trading activities
and for third parties.
It blends physical
commodities to
regional, market and
owner specifications
in strategically located
terminals and warehouses
around the world.
SOURCE STORE BLEND DELIVER
WHAT TRAFIGURA DOES

26 27
En Garde
The World Economic Forum is helping providers of
critical infrastructure defend against cyber attacks
It’s every company’s nightmare: the IT system is infected
by trojan malware or ransomware, causing millions of dol-
lars in lost business or reputational damage.
The problem is magnified for electricity companies or air-
lines because risks could have cascading effects, potential-
ly resulting in major economic losses, industrial disruption
and, in some cases, human casualties.
The Forum’s Centre for Cybersecurity is helping providers
of critical infrastructure by convening communities of
different industries such as electricity and aviation to de-
fine the most salient challenges and systemic risks, strate-
gic approaches that could mitigate them, and increase the
level of cyber resilience across the various ecosystems,
says Georges de Moura, Head of Industry Solutions at
the World Economic Forum’s Centre for Cybersecurity.
Collaboration is more important than ever because new
technologies in the Fourth Industrial Revolution offer both
opportunities and greater risks. Physical and digital things
are becoming increasingly connected, from critical in-
frastructure assets to people and data, by harnessing tech-
nologies such as biometrics, artificial intelligence, machine
learning, and the Internet of Things, says de Moura.
The power system is one the most complex and critical
infrastructure since any major impact to the electricity
grid could generate massive blackouts and have disastrous
financial and societal consequences. For example, a winter
blackout in mainland France for just six hours would result
in losses of over €1.5 billion, according to a simulation
cited in a Forum report.
Complicating matters is that the electricity sector has
some unique challenges, says Rosa Kariger, Global Chief
Information Security Officer (CISO) at electricity firm
Iberdrola and the co-chair of the Forum’s electricity sector
cyber resilience community.
Among them is the complexity of the ecosystem, which
includes highly interdependent infrastructures operated
by retailers, distributors and generators. As the sector
becomes more decentralized an increasing number of new
actors – iincluding homeowners who are able to produce
and sell electricity directly – are entering the ecosystem.
“Our security is dependent on the weakest link,” says Ka-
riger. “This is not about our data. This is about protecting
our assets and continuity of an essential service to society..
The highly interdependent and increasingly complex na-
ture of our industry makes it necessary to address cyberse-
curity beyond the boundaries of our own companies.”
Fragmented company practices and government regula-
tions make it difficult to have a global and harmonized
approach.
The same is true in other industries, which is why the Fo-
rum envisages to use this pilot with the electricity sector to
templatize the approach and scale across other industries,
De Moura says.
At the annual meeting in Davos in 2019 the Forum electri-
city working group on cyber security presented a guide for
board members of electricity companies.
During the past year the Forum’s Cyber Resilience commu-
nity has been focusing on influencing organizational
change by promoting the effective implementation of
the board principles for cyber resilience in the electricity
ecosystem published in Feb. 2019; enabling dialogue on
policy between industry and policy makers to support a
more streamlined approach; and improving supply chain
resilience by establishing common expectations regarding
cybersecurity roles and responsibilities between the diffe-
rent actors of the industry’s value chain.
“It is crucial for all stakeholders in the value chain to
embrace a collaborative and risk informed cybersecurity
approach to adapt and ensure a secure ecosystem,” says
de Moura.
“We cannot do it alone as it takes an ecosystem to address
cyber risks,” says Christophe Blassiau, CISO and head of
digital security at Schneider Electric and a member of the
Forum electricity cyber resilience community. “The indus-
try needs to collaborate.”
The Forum’s ability “to bridge all of these parties and the
regulators and political and geographical differences is
fairly unique,” says Floris Van Den Dool, Managing Direc-
tor, Information Security Services, Europe, Africa and Latin
America at Accenture, a founding partner of the Centre for
Cybersecurity and anchor partner of the Cyber Resilience
in Electricity program. “The trick is figuring out how to get
everyone mobilized.”
J.L.S
During Davos 2020 The Forum plans to convey the
message that it is the responsibility of all public
and corporate leaders to take ownership of the
challenge to ensure global cybersecurity and
digital trust.
Board and C-Suite members need to gain a better
understanding of the cyber risks to which their
organization is exposed and of the degree of the
organization’s cyber readiness. Leaders may need
to rethink organizational structures and gover-
nance to enable a better cybersecurity posture.
Both public and private organizations need to
improve their cyber crisis management, develop
holistic response and recovery plans, including a
crisis communication strategy, to limit economic,
reputational and legal consequences. Global coo-
peration across the public and the private sectors
is vital. Among the dimensions to be prioritized are
information-sharing, business cooperation with
law enforcement agencies, and skills and capacity
development, particularly in emerging economies.
And, the Forum plans to tell leaders that innovation
in cybersecurity and rapidly evolving technologies,
such as AI, identity management and quantum
computing, call for greater investment to stay
ahead of cybercriminals who are adopting those
technologies even faster and to their advantage.
The World Economic Forum’s
Top 10 Messages On Cyber
Security In Davos
CYBER SECURITY

28 29
The Death
of Passwords
New Forms Of Secure Authentication Are Key But What Happens If
Our Biometrics Get Hacked?
Passwordless authentication is the
next big breakthrough in secure digital
communication.
That news will make consumers and
employees who have trouble remem-
bering multiple passwords happy.
Companies are also likely to welcome
the change because the average glo-
bal cost of a data breach in 2019 was
$3.92 million – a 1.5% increase from
the year before. According to the 2019
Data Breach Investigations Report,
80% of hacking-related breaches
involved compromised and weak
credentials, and 29% of all breaches,
regardless of attack type, involved the
use of stolen passwords.
But the technologies that are replacing
passwords have vulnerabilities of their
own. What happens, for example, if
our biometrics get hacked? That is the
title of a panel discussion at the annual
meeting of the World Economic Forum
in Davos this year that will include exe-
cutives from Walmart and Facebook
and be moderated by The Innovator’s
Editor-in-Chief Jennifer l. Schenker.
The Forum is releasing a white paper
during the conference that outlines
some crucial issues that need to be
resolved to ensure passwordless au-
thentication is truly secure and factors
in privacy, sustainability, user expe-
rience, scalability and inclusiveness.
“We need to put the word out there
that there is a need to gather a com-
munity of CEOs and leaders around
the topic of implementing a more
secure means of authentication and to
do so sooner rather than later,” says
Adrien Ogee, lead for technology and
innovation at the World Economic
Forum’s Centre for Cyber-security.
Why now?
To stay competitive corporates across
industries are increasingly building,
buying or joining digital platforms (see
the cover story of our Davos issue).
Authentication systems are the first
contact customers have with digital
platforms and ease of use is a compe-
titive differentiator, notes the white
paper. Passwordless authentication
can potentially significantly improve
user experience and give platform
businesses ubiquitous authentication
at a fraction of the cost, allowing for
cross-platform interoperability and
multinational expansion and increase
security by seriously hindering the
ability of criminals to access and
CYBER SECURITY
"There is a need
to gather a com-
munity of CEOs
and leaders
around the topic
of implementing
a more secure
means of au-
thentication and
to do so sooner
rather than
later."
ACYBER SECURITY
exfiltrate data, says the white paper. It concludes that
from a risk management perspective transitioning to
passwordless authentication could allow companies to cut
the budgets associated with their breach risk exposure by
4/5, translating into lower cyber insurance premiums.
Another plus is that passwordless authentication makes it
easier to comply with international regulations, which
is key to expanding digital businesses across
geographies.
“Many companies are already moving down this path,”
says Kelly Bissell, Accenture’s Senior Managing Director
and Global Lead of Security. “This will give confidence to
other companies, including banks and retailors, to imple-
ment passwordless authentication. I see a wave coming to
stronger security. We are at the early stages but I believe it
will pick up very quickly.”
Technology Options
A range of technology alternatives to passwords are
already available.
Biometrics
Recent technological advances in smartphone cameras
and machine-learning models mean facial recognition
and document scanning can now be used to verify people
remotely and at scale. By using biometrics, such as face
scans, as an authenticator, users no longer need to asso-
ciate a password with their account.
Hardware Keys
Extra security with hardware keys is another approach
to passwordless authentication. Security keys come in a
variety of form factors ranging from a small USB, NFC or
Bluetooth device to something built into a user’s mobile
phone that can securely authenticate when they need to
sign into a new device. These approaches require that the
device be physically and locally present when authentica-
tion happens.
QR Codes
Complex, animated QR codes can also be used to authen-
ticate without passwords. Users logging in scan a QR code
with a smart device to bind the session to their user iden-
tity. A confirmation message is then displayed in an
app on the device verifying the authentication and a bio-
metric scan is triggered on the device, confirming that the
users are who they say they are. At that point, an authenti-
cated session is passed to any relying party and the user is
logged in.
Zero-Knowledge Proofs
Zero-knowledge proofs (ZKP), provides yet another
alternative. A ZKP authentication process can transform a
password into a complex and unique abstract string, like a
Rubik’s cube with a completely random pattern.
The abstraction is transferred to a server and
stored, allowing authentication of users in such a way
that a password never leaves the user’s device
or browser.

30 31
The FIDO Open Standard
The FIDO Alliance, an open industry association has created
open standards for passwordless authentication to online
and mobile services. Its most prevalent standard, FIDO2, was
developed with the World Wide Web Consortium (W3C) and
became a web standard in March 2019. Such authentication
leverages public-key cryptography, i.e. a public key that can
be shared with anyone, and the associated private key that is
held by the owner securely within the ‘authenticator’ on their
device such as a mobile phone, a computer or a security key.
When users authenticate to a site supporting FIDO, they first
verify their identity or their presence with a simple action,
such as scanning a fingerprint or touching a security device.
Then, the website and the user’s authenticator conduct a
challenge-response to verify that the user is in possession of
the correct private key. Each service uses a unique key pair,
and the private key never leaves the user’s device.
Proceed With Caution
While these new technology alternatives to passwords are
promising there is a need to proceed with caution, says
Bissell. “I am eager for the introduction of the passwordless
era but I also know that with every new innovation comes
things we didn’t think about. If biometric technologies such
as facial recognition and fingerprinting are comprised it is not
like having your password hacked. I can’t choose another one.
I am who I am. I am a little worried about that. Some security
experts are saying ‘let’s jump right in.’ I say ‘let’s go’ but let’s
be very cautious and thoughtful about the way we do this and
not deploy without testing innovation and having compensa-
ting controls.”
What should companies be thinking about when considering
a move to passwordless authentication?
“The technology teams, business leaders, and even regulators
need to understand that this is different from what they are
used to with passwords and they really need to be aware that
new technologies like biometrics need to be protected diffe-
rently than passwords,” says Bissell. Companies should factor
in the geographical spread of their customers because juris-
diction matters as privacy and security rules differ not just by
region but in some cases by country. They also need to think
about how and when they want to phase in the new technolo-
gies, recognizing that passwordless authentication might
have to - at least temporarily - co-exist with legacy systems.
“You should understand how this may impact the user expe-
rience,” he says. “I suggest companies work out all the kinks
internally and get it right before using it with customers. And
when you get it right, test it by attacking the new solution as
bad actors would. Remember, just because you think you got
it right doesn’t mean you actually got it right.”
J.L.S.
CYBER SECURITY

32 33
Quantum
Computing’s
Potential
The technology’s impact on business will be discussed at the World
Economic Forum’s annual meeting in Davos
Builds quantum computers and
the superconducting quantum
processors that power them.
Its quantum computers are avai-
lable to users through Amazon
Braket, an Amazon Web Services
solution that allows researchers
and developers to begin expe-
rimenting with computers from
quantum hardware providers in a
single place.
rigetti.com
Named a 2018 World Economic
Forum Technology Pioneer, it
is developing cybersecurity
solutions for the era of quantum
computing.
quintessencelabs.com
WHAT IT DOES
STARTUPS
TO
WATCH
WHAT IT DOES
In October Google and NASA an-
nounced that they have achieved
‘quantum supremacy’, i.e. the ability
of quantum computers to perform
certain tasks that a classical compu-
ter simply cannot do in a reasonable
timeframe. They claimed that their
quantum computer solved a problem
in 200 seconds that would take the
world’s fastest supercomputer 10,000
years.
While critics say the problem that
was solved was without any practical
merits or implications, the Google
experiment demonstrated the huge
potential of quantum computing,
a form of computing that taps into
COMPUTING
RIGETTI COMPUTING QUINTESSENCELABS
UNITED STATES AUSTRALIA
Developing a unique IP that aims
to make quantum processors of
much better quality by reducing
the number of physical qubits
needed to build powerful quan-
tum computers.
meetiqm.com
Building a general purpose sili-
con photonic quantum computer.
PsiQ believes it can harness pho-
tonics to build a commercially
viable quantum computer much
sooner than competitors using
more common approaches.
psiquantum.com
Produces ion-trap quantum pro-
cessors, and offers access to its
quantum computers via a cloud
service. AQT supports both
Cirq and Qiskit, the two most
prominent quantum computing
programming languages.
aqt.eu
WHAT IT DOES WHAT IT DOES WHAT IT DOES
the unusual behavior of atomic and
sub-atomic particles to perform far
more complex calculations at a mas-
sively increased speed compared to
today’s computers.
Some companies, like German auto
manufacturer Volkswagen, are already
cooperating with Google and D-Wave
Systems, a Canadian quantum compu-
ting pioneer, to use the technology to
try and handle large optimization is-
sues, such as simultaneously charting
the best route for vehicles in cities like
Beijing and Lisbon, a puzzle that would
be too tough for normal computers.
If industry pundits are right the best is
yet to come. Productivity gains by end
users of quantum computing, in the
form of both cost savings and revenue
opportunities, are expected to surpass
$450 billion annually, within the next
couple of decades, according to aMay
2019 study by Boston Consulting
Group. A precipitous breakthrough in
the technology could happen at any
time, warns the study, so companies
should start experimenting now.
IQM PSIQ AQT (Alpine Quantum Technologies)
FINLAND UNITED STATES AUSTRIA
COMPUTING
“When we talk about material
design, drug design, portfolio
optimization in finance and risk
analysis for insurance com-
panies, these are areas where
there are strong indications
that quantum computers will
revolutionize the market.”
A view of the quantum computing technology being
developed by Austria’s AQT.

34 35COMPUTING
“Since quantum computing is a step-
change technology with substantial
barriers to adoption early movers will
seize a large share of the total value,
as laggards struggle with integration,
talent, and IP,” the report says.
Such projections are provoking
anxiety. No company wants to fall
behind when a technology shift trans-
forms industry. Yet, there are enough
unknowns about quantum computing
and enough fundamental scientific
riddles to solve that no one can say
for certain when it might be ready to
make an impact.
So how will quantum computing
change business? Which sectors will
be impacted first? What should every
executive know about the technology
and what should they be doing to
prepare? Participants in a panel on
the potential of quantum computing
at the World Ecnomic Forum’s annual
meeting in Davos, January 21-24, mo-
derated by The Innvoator’s Editor-in-
Chief Jennifer L. Schenker, will try
and answer those questions.
The first impact of quantum compu-
ting capabilities is likely to be felt in
the businesses that are dependent on
simulation of quantum mechanical
processes, such as materials, chemi-
cals and scientific research, says
panelist Scott Aaronson, a theoretical
computer scientist and David J. Bruton
Jr. Centennial Professor of Computer
Science at the University of Texas at
Austin.
That alone will likely have a monumen-
tal impact on society. “Think of it as
the ability to turn on a new telescope
into nature,” he says. But businesses
need to manage their expectations
says panelist Chad Rigetti, CEO of
Rigetti Computing, a California-based
company that designs and fabricates
quantum chips, integrates them with a
controlling architecture, and develops
software for programmers to use to
build algorithms. “The potential of
quantum computing is significant but
there are major challenges to un-
locking its value,” he says.
That’s a point of view shared by most
in the industry. Quantum computing’s
impact on machine learning and
optimization in the short term is more
speculative, but possible, says Davide
Venturelli, who manages Science Ope-
rations for Universities Space Research
Association activities at the Quantum
Artificial Intelligence Laboratory
located at NASA’s Ames Research
Center. “As of now the world has still
to invent an algorithm that would be
worth using in current challenges in
finance, logistics, data science,” he
says. “However, there is a grounded
optimism that when we will have ac-
cess to more and more sophisticated
quantum computers empirical
research in the next five years will en-
able scientists to invent non-rigorous
methods that will have qualitatively
different features with respect to the
best known algorithms and possibly a
compelling speedup.”
Technology Bottlenecks
The main bottleneck to quantum
computing today is hardware, says
Ekatrina Almasque, a partner at ven-
ture capital firm OpenOcean, which
participated in a $13 million invest-
ment into Finnish quantum computing
company IQM last July. While
pioneers in quantum computing such
as IBM and D-Wave Systems provide
software companies with cloud access
to their data centers for early testing
of narrow use cases, the cost of
using these machines in a commercial
environment remains prohibitive, she
Says. “What we need is some hard-
ware that works and that costs less so
that we have enough qubits to solve
real problems like drug discovery.”
Even if hardware is available, a sui-
table software based on algorithms
that offer a speed-up compared to
classical algorithms needs to be
developed for specific applications.
“Neither can impact existing industry
without the other,” says Thomas
Monz, Co-founder and CEO of Aus-
trian quantum computing company
AQT. That said, “quantum computing
promises to have an extreme impact
on any business that’s limited by
classical computing capabilities where
we have quantum algorithms and
hardware that offer an advantage,” he
says. “This means the resolution on a
video will not change due to quantum
computers, this is already fairly effi-
cient. But when we talk about material
design, drug design, portfolio optimi-
zation in finance and risk analysis for
insurance companies these are areas
where there are strong indications that
quantum computers will revolutionize
the market.”
How Companies Should Prepare
There won’t be a shift. Quantum com-
puting resources will be seamlessly in-
tegrated on the cloud and made avai-
lable transparently when needed, says
Venturelli. If the business is related to
chemistry or material science it might
make sense to hire specialists, setup
partnerships with quantum compu-
ting manufacturers and top research
groups to steer the entire community
towards the correct questions and
problems that might have a chance to
be addressed by quantum computing
in the short term. If the business is
a perspective enduser further out in
the future the best way for executives
to prepare is to make sure that their
technical team leaders are not fooled
by the hype and understand the state
of art as it progresses, he says. Ven-
turelli recommends focusing more on
hardware and theory than on software.
“If the core business strongly relies on
computational performance then it mi-
ght be worth it to have an internal task
force experimenting with the concepts
or funding academia or specialized
startups on spot projects in order to
gain some timing advantage against
competitors in detecting opportuni-
ties,” he says. “But it is important
to recognize that this is still science
research and we are likely years away
from having production value.”
AQT’s Monz also recommends compa-
nies create internal teams that receive
training on the potential of quantum
computing in their sector, figure out
who is developing a full application for
challenges in that field and then do a
proof of concept trial. “This will essen-
tially give you internal know-how on
quantum computing, in combination
with a proof-of-concept realization
that both explains the underlying diffe-
rences to classical computing but also
shows the real state-of-the-art,” he
says. “Follow and extend on this initial
proof-of-concept once a year and you
can be sure not to miss out.”
J.L.S.
D-Wave System’s 2000Q system. Enterprises can get started learning how to code their early quantum applications using the
Canadian quantum computing pioneer’s quantum cloud service and begin to incorporate the technology into their workflows.

36 37
How AI-Powered
Knowledge
Aggregation Could
Help Find A Cure For
Alzheimer’s
Privacy-preserving federated learning could overcome a big
stumbling block: data-sharing friction
Over the last two decades the biotech
industry has conducted over 156
clinical trials and spent hundreds of
billions of dollars on the discovery and
testing of these drugs, and yet, not
one clinically impactful drug has been
brought to market in that time.
There is no cure and no treatment to
slow down a disease, which in the U.S.
alone is expected to impact 16 million
people by 2050, generating $1.2 tril-
lion in medical and hospice care costs.
“The economic impact of this disease
is mind-boggling,” says Barak Berko-
witz, co-founder of this project. He is
also the Director of Operations and
Strategy at the MIT Media Lab where
he came in contact with the power
of federated learning systems. It is
estimated that in the U.S. more than 16
million Americans provide unpaid care
for people with Alzheimer’s or other
dementias. That is almost 10% of the
working age population. “Alzheimer’s
is a growing global catastrophe tied
to aging in a world that is aging and
the scale of the catastrophe is right up
there with climate change,” he says.
Careful evaluations of key research in-
sights driven by data, most notably the
recent announcement of the revival of
a drug developed by U.S. drug com-
pany Biogen called Aducanumab, offer
some hope. “This possible break-
through raises many questions,” says
Berkowitz, “One of the most pressing
is whether there are more meaningful
insights hidden in the failed drug trial
data.”
One of the most valuable assets
created by these trials is the data col-
lected. While there has been progress,
the vast majority of this data has yet
to be shared or, more importantly,
aggregated, Berkowitz says. Data ag-
gregation could turn one hundred fifty
relatively small data sets into a truly
massive data asset of more than one
hundred and fifty thousand subjects.
“There is a robust scientific basis
for believing this aggregated data
could provide meaningful insights
into these trials, reasons for failures,
missed efficacy, and possibly clinically
meaningful treatments,” he says. also
significant forces slowing or stopping
such in-depth data sharing. Chief
among them are privacy concerns and
competition issues.
Berkowitz will be in Davos during the
annual meeting of the World Econo-
mic Forum January 21-24 to recruit
potential partners in a new federation
that seeks to overcome these hurdles
by removing data sharing from the
equation. The federation is seeking
firms that have conducted clinical
trials focused on Alzheimer’s and
those that specialize in helping artifi-
cial intelligence (AI) filter out “noise”,
i.e. extraneous information. MIT’s
Connected Science Group will serve
as a data trustee to the federation,
which means it will be responsible for
making sure the AI is not doing things
or passing data it should not.
HEALTH
«It is time to try
new approaches
to stop this
slow-moving
epidemic.»
How AI Could Help
The new federation will harvest insights from AIs that run
locally on each dataset, explains Berkowitz. After local
analysis, generated knowledge- not data- are aggregated
from each AI into a combined set of findings that could
both uncover previously weak signals and inform further
areas of inquiry and treatment.
“What we are talking about is privacy-preserving federated
learning,” he says. “Now we can say to drug companies
‘you do not need to share your data.’ An AI can sit on your
local server and analyze the data and simply share the
insights that come from that analysis.”
Sharing research insights is a principle that has been used
for the critical advancement of science for decades, at
scientific conferences and congresses, leading to new
understandings of disease and new areas of inquiry. “It is
not just listening to reports, but the discussions that they
stimulate, that make congresses so valuable,” says Ber-
kowitz. In the same way, new technologies enable AIs to
share their insights with other AIs in a secure mode. “No AI
sees raw data, so it can not be shared. Instead, the AIs col-
lect correlations and other data signals they may ascertain,
and these signals then create knowledge. The knowledge
is then aggregated from multiple AIs and is combined to
amplify or muffle these signals,” says Berkowitz. “This
methodology can remove noise, improve confidence, and
uncover new areas of exploration without ever sharing
sensitive and proprietary raw data. “
By iterating a few times, the AI that has aggregated
knowledge can dig into these signals and gain greater
clarity. “In this system, the consistency of data becomes
less of an issue. We aggregate the generated knowledge,
not the data. Noise can be filtered out, and we can turn
the data from two decades of research into knowledge
that, when aggregated, will lead to clinically meaningful
insights,” Berkowitz says.
The federation will work on encrypted data eliminating
critical privacy concerns; the AI will focus on local data
servers, so raw data never leaves its owner’s site; aggre-
gate insights to amplify weak signals and identify new
correlations and correct for small-sampling bias.
Members of the federation gain value in three critical
ways, says Berkowitz. The federation will share insights
related solely to a specific trial on a proprietary basis with
the data creator. It will share generated insights around
the data creator. It will share generated insights around
obvious key questions with all federation members. And
all Federation members can interrogate the aggregated
Computer illustration of a broken brain’s neural network represented by lines and dots. Some areas are not connected,
depicting dementia and Alzheimer’s disease.

39
knowledge with proprietary questions whose answers are
shared exclusively with the integrator.
All these services will be provided free of charge to Alzhei-
mer’s federation members and will serve as a key proof of
concept for this.
Berkowitz says he thinks it will be a compelling proposition
to biotech companies working on Alzheimer’s drugs. Take
the case of Biogen. Initial trials of its drug Aducanumab
failed when it was judged to be futile” and the trials were
stopped, causing Biogen’s stock to drop and costing it over
$20 billion in market cap. Then new data surfaced, which
when added into the drug trial data, indicated that the
drug could actually work. The company had a discussion
with the U.S. Food & Drug Administration (FDA) and is
soon submitting the drug for approval, causing its stock
to rise. Biogen then reported the findings of its study at
conference and its stock soared yet again. “The reason for
the massive swings in valuation is that the data shows they
might have a drug that works a little bit on Alzheimer’s,
which has nearly immeasurable economic value,” says
Berkowitz. “The other thing they proved is that there is
interesting data in the drug trial base.”
There is a huge data store that is locked up that has very
meaningful insights on what could be effective treatments,
says Berkowitz. “We are aiming to recruit significant
neurological disease biotech companies to share insights
to accelerate treatments for this horrible and stubborn-
ly untreatable disease. With an insight federation, the
opportunities far outweigh the risks. It is time to try new
approaches to stop this slow-moving epidemic.”
J.L.S
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