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1 APR 2019

Building trust in digitisation of real assets — not just a technology issue

Will-Myles-RICS

Will Myles

Regional Managing Director, Asia Pacific

Singapore

RICS

There are more connected devices in the world today than there are humans.

We are seeing a revolution in connectivity in our physical world that extends far beyond smartphones, electric grids and public infrastructure. IoT will see widespread application on an industrial scale to everything from fridges to farming to healthcare. Gartner research estimates that there will be upwards of 20 billion connected devices by the end of 2020.

IoT's transformative potential lies in overcoming the key issues of consistency, scalability, privacy, reliability and ultimately, trust in connecting our physical and digital worlds. Blockchain technology has the potential to act as key enabling infrastructure for IoT, tracking billions of connected devices, harvesting and co-ordinating information and processing transactions.

Applying blockchain technology in the IoT operating environment, which consists of fragmented data silos, provides the security and transparency required to build a commonly shared platform that is safe, secure and smart.

Hype vs revolution

While it is widely understood that our economy is going through a transformation – the fourth industrial revolution – digital progress does not always seem to match the digital hype.

It is true that technology is giving us access to more data than ever before – and ever-improving computing power enables us to analyse that data, real-time, and in innovative ways.

There are plenty of benefits for this - more timely decision-making, improving efficiencies, optimising assets over their life time, improving financial margins, improving health and safety, and most importantly, improving the human experience.

There are also plenty of reasons why the transformation is happening slower than some would like; the early-stage experimental evolutionary nature of the technologies, the complexities of bringing multi-stakeholder environments together, the risk-averse nature of market incumbents as well as lack of clarity on what success looks like. There is certainly no lack of investment in trying.

Mapping real assets onto their virtual twins

A key component of this transformation is improving the digital representation of the real world, whether it is tangible (an asset or person) or intangible (a process or organisation). Digital twins are digital simulations of assets, processes or entire businesses that provide information and insights on performance. Gartner's Top 10strategic technology trends for 2019 include digital twins and blockchain, which require digitisation (tokenisation in the case of blockchain) of some, or in the utopian ideal, all of the attributes of an asset.

"Mind the gap"

I'm not focusing on the digital asset or technology itself here, but rather on the need to address the inherent risks by virtue of the gap between the digital attributes of the virtual asset, and the real attributes of the physical asset to which it refers.

In the case of a digital twin, the virtual twin is only as good as the sensors sourcing the data; the representativeness and accuracy of that data, the computing power to analyse that data, the robustness of the enabling communication network, and so forth. The key point is that a digital twin is an approximation – the virtual twin can never be a perfect mirror of the real twin – there will always be a real-virtual gap. Anyone who has used a BIM (building information modelling) model for the operation of an asset, will know that it is an imperfect representation of the underlying asset.

In the case of blockchain, the shared nature of the data, the consensus mechanisms for data acceptance and the layered time-stamping nature of the technology lead to assertions of the blockchain being "immutable" and therefore "trustless". Again, the issue is not with the data itself – but what happens when a gap emerges between the real asset and its tokenised attributes – for instance, if the real asset changes subsequent to its capture on the blockchain. There have been many high-profile incidents associated with blockchain, many of which can be characterised as 'outside the blockchain' events.

These gaps may result from ignorance, negligence, deliberate manipulation, poor standards, or insufficiently robust work processes – but they do mean that there is an element of doubt associated with the digital representation of an asset. If there is a gap between virtual and real, then this could lead to poor decisions, financial losses, or even physical injuries.

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Trust as the final building block

Gaining confidence in the digital representation is not just a technology problem - it is a professionalism problem. The case is already well made for ethics to sit at the heart of digital transformation, but ethics is only the front door to the wider concept of professionalism. The professions of the 19th century evolved to foster trust and protect the public interest during the great transformation of the industrial revolution to guide those carrying out "unseen" professional services. As a result, across many sectors, it is well established today that qualified professionals must act ethically, be competent, commit to certain standards, and be subject to the oversight of a professional body acting in the public interest.

Professionalism applies to physical assets – such as buildings – their design, their construction and their operations. For users to trust safety and performance, buildings need to achieve certain standards, and be designed and constructed by competent professionals.

Professionalism equally applies to intangible services – such as the valuation of assets – again, for users to trust the valuation, they need to know that certain standards have been met, that the valuer is qualified and their independence trusted.

As we break new ground in the digitisation of assets – again professionalism must underpin the process if the public is to have confidence in these emerging applications of technology – whether its the digital twin or tokenised asset.

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There is a need for standards on how assets are digitised, demonstrated competency and commitment to ethical behaviour by professionals, and third-party oversight by an impartial professional body. The profession needs to determine the scope, design and operation of the digital representation of the asset, what "inputs" are required, how "outputs" should be interpreted and ultimately, how narrow the "gap" must be between the physical and digital.

Driving trust through global professional standards

Just as asset valuations are created at a certain time, under certain circumstances, with a specific objective, the same is true of the digital representation of an asset–created for a purpose with a defined scope– it needs to be transparent to users what those limitations are. There are plenty of factors that need to be addressed for digitisation of assets to truly reflect and underpin the wider economy; technological, social, ethical, legal and regulatory. However, progress in this important enabling field will be held back if the "trust" factor is not addressed.

It's up to today's practitioners – engaging with the right stakeholders – to define today how the sector should professionalise for tomorrow. Developing digital asset assurance will not only serve the public interest but help the market to develop – by injecting trust during a time of change and uncertainty. It cannot be achieved in a functional silo, but requires holistic thinking, a collaborative outlook, and clarity around expected outcomes. The model for achieving this already exists via global coalitions of professional bodies working towards a common aim.

RICS, as a global professional body for the built environment, is actively facilitating the process of ensuring internationally-consistent and globally-accepted standards across both tangible and intangible asset classes. Driving widespread industry adoption of IoT and blockchain technologies requires complex integrations of people, spaces and things. To address the issues of digital data consistency, RICS is developing a suite of data standards that work in parallel with our international professional and technical standards to ensure the quality and consistency of data.

For 150 years, RICS has worked tirelessly towards establishing and regulating international standards in valuation, measurement and ethics, evolving with the times to build market certainty and confidence in the built environment. The time is now right for the industry to come together to create professional assurance around the digital representation of the physical world.

This article was first published in APAC CIO Outlook magazine — Blockchain Technology Special

Will-Myles-RICS

Will Myles

Regional Managing Director, Asia Pacific

Singapore

RICS

Will is passionate about the internationalisation of standards in the built environment and the benefits that this will bring to an increasingly globally connected world. Previously Managing Director for Bahrain and Kuwait for WS Atkins plc, Will led the organisation through a period of significant change. Prior to this, he established a management consulting arm for Atkins in the Middle East and has held business development and project management roles in East Asia and Oceania.

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