the great confusion: the digital economy continues to surprise
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A talk at the "eMBA Forum 2014: Digital economy and digital marketing" at Turku School of Economics, FinlandTRANSCRIPT
The Great Confusion: The Digital Economy Continues to Surprise
Petri RouvinenCEO, Etlatieto Oy
eMBA Forum 2014: Digital economy and digital marketingTurku School of Economics, OP-Pohjola Hall12 March 2014, 9.45-
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e.g.
“ Narrative Science can make an equity research analyst 20 to 100 times more productive by using computers to turn data into narrative that sounds like a person wrote it … ”http://www.forbes.com/sites/tomgroenfeldt/2013/09/05/lots-of-data-one-analyst-many-reports-narrative-science/
Hasbro suffers as action figures lose sheen in iPad era
http://www.news-press.us/hasbro-suffers-as-action-figures-lose-sheen-in-ipad-era/
GE’s Radical Software Helps Jet Engines Fix Themselves
http://www.wired.com/design/2013/10/three-design-trends-ges-using-to-make-software-for-jet-engines-and-wind-turbines/
Bigpicture
1011010111000010
3D
IoT
Nexus of Forces
110
× ICT investment× Inv. Org & People
Brynjolfsson& Hitt 2003. Computing Productivity: Firm-Level Evidence. Review of Economics and Statistics, 85, 793-808
… but digi is different Unlike steam/electricity, continues exponentially
Applicable/replicable/expandable across activities
Scarcity Abundance Scaling Winner-take-all The long tail, niches
Keen, volatile competition Bang-bang market outcomes
Will we everinvent anything
thisuseful again?
Cover of the The Economist in 12 Jan. 2013 (modified)
Bigpic in ICT
Towards Industry/Technology Convergence
Source: Hernesniemi, Lammi, Ylä-Anttila & Rouvinen (ed.) 1996.Advantage Finland: The Future of Finnish Industries.
Taloustieto (ETLA B 113, Sitra 149).
I’ve seen the God…
… or is it the Devil?
January 2007Photo: v.gd/D1ZYvoNote: iPad in 2010.
Nexus of Forces & Tech Converge opened a huge unmapped &
unconquered domain
It’s all about coded info… … and ways to
monetize it
The main battlesare fought in digitalcontent & services
Source: The Economist (1 Dec. 2012). Technology Giants at War (Briefing): Another Game of Thrones. Vol. 405, No. 8813, Pp. 23-26.
Corporations
Systems/hardware
Specific solutions
Digital evolution
Consumers
Content/Services
Platforms/ecosystems
Digital revolution (cf. legacy)
1011010111000010 Power
1850
1860
1870
1880
1890
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
2010
Cost per Computation
1940 … … … … 2000
€100,000,000,000
€1
Source: Lehti, Rouvinen & Ylä-Anttila 2012, Suuri Hämmennys, Taloustieto (ETLA B 254), page 89.
Eac
h do
t = O
ne c
ompu
ter/
met
hod.
In re
al “
toda
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mon
ey”
pric
es. S
ourc
e: N
ordh
aus/
Yale
.
$595 in 1982 (app. $1,500 in 2013 $) $300 in 20133,128 as powerful C64$4.7million: cost of PS3 power in C64s (in 2013 $)
1011010111000010 Big Data
VolumeVelocity Variability Nikulainen 2013. Big Data Revolution: What Is It? ETLA Brief 10.
Yes&
No
The next two slides are directly based on the work of
Mark Huberty
… Reality?
Digital exhaust (cf. McKinsey)
Overlaps & differences
New stuff, new spaces
Rough approximations
Assumptions …
N = All
Online = Offline
Today = Tomorrow
Behavioral understanding
→
→
→
→
→
Source: Mark Huberty
3rd order biz modelInfo Eyeballs Adds
2rd order biz modelSell stuff (volume+profit)
1st order biz modelSpecific input & output
Source: Mark Huberty
Management, marketing & salesbecomes more scientific acrossbusiness sectors
More can be experimented/tested & good solutions may be replicated
Industries are born but more importantly, old ones are transformed (e.g., insurance)
2013 2014
3.5
15.0Series 1
Mobile Google Searches Millions p.a., Finland Source: Kauppalehti
In 2013 Americans spent more time online on mobiles (vs desktops/laptops)
89% smartphone and 81% tablet online time within apps (source: Nielsen)
Cloud ComputingAccessing something
directly over the Internet
Richard Stallman (GNU founder): It’s stupidity ... that we’ve redefined cloud computing to include everything that we already do. http://goo.gl/PZ77
InfrastructureIaaS (processing, storing,
managing)
Public Private
SoftwarePaaS/SaaS (web-based
OSs & other apps)
An illusion of infinite computing resources on demand
Applications decoupled from physical infrastructure
Computing from a fixed to a variable cost
Source: Kushida, Murray & Zysman 2011. Cloud Computing and Implications for Public Policy. Journal of Industry, Competition and Trade.
The biggest implication:
Reduction in the cost of entry particularly in the digital domain
3D
IoT
×
€3 €300
Special thanks to: Jukka Tuomi, Aalto Univ., BIT Research Centre
Complexity & flexibility at no cost
Solutions that are impossible with other techs
No material waste (EADS/Airbus: 90% less of ti v.gd/ys7AeZ)
1 piece90 180 270 360 450 540 630 720 810 900 990$10
$100
$1,000
$10,000Traditional: 1st duck: $ 10,000.00 Next ones: $ .20
3D: 1st duck: $ 20 2nd duck: $ 20
... ...
Source: Anderson (2012). Makers: The New Industrial Revolution. Crown Business.
$
Sowhat?
Case: Media Corporation(which current has an emphasis on print publications)
” In my opinion this is our last round of formulating corporate strategy this way …
… Internet constantly fragments & alters our operating environment in ways that make it impossible to find sufficiently quiet waters to do the necessary ground work and then the strategy itself. ”
The Chief of Corporate Strategy of a large media corporation
0000–2020
2021–2025
2026–2030
2031–2035
2036–Viivoitetuilla alueilla sanomalehtien ennakoidaan kuolevan kaupungeista aikaisemmin kuin muilta alueilta
Newspaper Extinction TimelineThe year when printed newspapers are expected to be marginalized as sources of information
Lehti, Rouvinen & Ylä-Anttila 2012, Suuri Hämmennys: Työ ja tuotanto digitaalisessa murroksessa, Taloustieto (ETLA B 254).
Lineation indicates a time difference between rural & urban areas.
Tech offers no benefit, if old habits do not dieNeeded: Deep crisis of the old way; new entrants
Good news: Easier entry & smaller efficient scale
Bad news: Ever-intensifying market competition Modern markets best seen as an infinite # of niches rather than few masses
Ever-more complicated value creation & capture – towards an experimental/entrepreneurial economy
Increasing productivity differences (& unemployment?)Inequality & polarization among individuals & firms
“ This is a world on fast forward, a world of permanent technological revolution.
Countries like the UK and Germany will only succeed if we have a relentless drive for new ideas and innovations.”
UK Prime Minister David Cameron CeBIT 2014, Hannover, 9 March 2014
The true bottleneck: Ability to see possibilities just beyondthe horizon