Transcript The Information and Services Economy a.k.a. Business

The Information and Services Economy
a.k.a.
Business Architecture and Services Science
IS210, Week 7.5
Profs Bob Glushko & Anno Saxenian
UC Berkeley School of Information
Fall 2006
Today’s agenda
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Why innovate?
What is innovation?
What is innovation in services?
Organizing for innovation
 Open innovation
 Democratizing innovation
 Creation nets
Why innovate?
Because the world is flat . . .
& competition is inevitable, sooner or later.
=> shorter product cycles, more innovators,
more knowledgeable customers, much
greater access to information
This is globalization 3.0
Globalization 1.0 1492-1800
Nations globalize for resources & imperial conquest
Globalization 2.0 1800-2000
Companies globalize for markets & labor
Globalization 3.0 2000-??
Individuals & small groups globalize: connecting all
of the world’s knowledge pools together
Thomas Friedman The World is Flat: A Brief History of the
Twenty-First Century NY: 2005: Farrar, Straus and Giroux
The ten forces that flattened the world
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8/9/95- Yahoo! IPO
Work flow software
Open-sourcing
Outsourcing
Offshoring
Supply-chaining
Insourcing
In-forming
11/9/89- fall of Berlin wall
The steroids
The triple convergence
The net result: creation of a global, web-enabled
playing field that allows for multiple forms of
collaboration—the sharing of knowledge and
work—in real time, without regard for geography,
distance, or, in the near future, even language
We have “new players, a new global playing field,
and new processes and habits for horizontal
collaboration”
What is innovation?
Innovate (L. innovatus) to make changes, to do something
in a new way; first use as transitive verb in English,
1548.
Three steps to innovation:
1. Invention
2. Adoption
3. Implementation
Services innovation
Two kinds of services innovation:
1. Improve services productivity
2. Develop new service models
Service productivity lags behind manufacturing productivity
In 2003 (Indexed to 100 in 1997)
manufacturing productivity: 219
grocery retail, wholesale, merchandise stores: 141
commercial banking: 102
Improving services productivity
 Eliminate or raise efficiency of labor
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Self-service
Interactive voice response
Automatic provisioning
Converged networks (distribution channels)
Wireless communications
New Service Models
 Create new services or deliver services
in new places
1. Remote delivery (e.g. telemedicine)
2. Service-enhanced products
3. Coproduction of value
Organizing for industrial innovation
Closed innovation: successful innovation
requires control, internally-focused R&D with
clear firm boundaries, virtuous cycles of
reinvestment
e.g. Bell Labs, GE lab, etc.
Open innovation: combines external and internal
R&D into architectures and systems whose
requirements are defined by a business model,
blurs boundaries of firm research
e.g. Silicon Valley, Hollywood, P&G
Comparing closed v. open innovation
Closed innovation
 All smart people in the
field work for us
 To profit from R&D must
discover, develop & ship
 We can get to market first
if we innovate
 First company to market
with innovation will win
 If we create most and
best ideas in industry,
we’ll win
 We must control our IP
Open innovation
 There are smart people
outside & inside
 External R&D can create
value alongside internal
 We need not originate
research to benefit from it
 Building better business
model more important
than first to market
 We win if we make best
use of internal & external
 We can profit from others’
use of our IP and benefit
from theirs when
appropriate
Democratizing innovation
User-centered innovation offers great advantages over
traditional manufacturer-centered innovation (concentrates
innovation support resources on just a few pre-selected
potential innovators)
Users can develop exactly what they want, enhances
motivation
Users need not develop everything they need; they can
benefit from innovations developed and freely shared with
others
Why are users’ abilities to develop high-quality new products
and services themselves increasing so fast?
Toward democratization of design
 New, increasingly capable and steadily cheaper tools for
innovation that require less skill and training to use =>
increased design capability
 Improving tools for communication make it easier for
user-innovators to gain access to rich libraries of
modifiable innovations and components that have been
placed in the public domain =>enhances design
possibilities
 Today users design sophisticated new products,
services, music and art
 Open source software movement as key example
User-centered v. mfg-centric innovation
 Manufacturing-centric innovation: economies of scale
 User-centered innovation: economies of scope (due to
heterogeneous information and resources in user
communities)
 Manufacturers must integrate themselves into usercentric innovation model
 Provide custom production or “foundry” services to users:
faster, better, cheaper;
 produce user-developed innovations commercially;
 they can sell product-development platforms or sell other
complementary products
 For information products, no manufacturer is required &
general distribution occurs mainly through communities
Creation nets
 “Networks of creation” in which hundreds or
thousands of participants from diverse institutions
collaborate to create new knowledge, learn from one
another, and appropriate and build on one another’s
work—under guidance of a network organizer.
Rather than protecting and hoarding knowledge, offer
to others to gain access to broader knowledge flows.
Opportunity to jointly create new knowledge and
deliver innovations to market by collaborating closely
with diverse people/institutions
Not joint ventures or arms-length technology
licensing, but long-term, interactive relationships with
networks of suppliers, customers, specialists, even
amateurs
A process creation net
e.g. Taiwan’s original-design manufacturers (ODM)
relationships: laptops or cell phones involve myriad
highly specialized component and subsystem vendors
from different business ecosystems (disk drives in
S’pore, lens designers in Japan, semiconductor
designers in Taiwan, software engineers in
Bangalore.)
Network organizer as gatekeeper, selects partners,
defines informal participation protocols (dispute
resolution, performance measurement) and defines
clear performance milestones yet allows joint learning
Coordination challenges
Three primary challenges in creation process:
1. Accessing and developing highly distributed talent
2. Providing appropriate contexts for participants to come
together and collaborate to experiment, tinker, and
innovate (least actively managed)
3. Effectively integrating the creations of diverse
participants into shared releases (most actively
managed)
Central importance of performance requirements and
feedback loops to insure continuous improvement
Product development
An iterative problem-solving (trial and error) process
DESIGN
BUILD
RUN
ANALYZE
Product development in new era
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Rapid movement from concept to prototype (rapid
prototyping)
Define early and frequent rounds of performance tests
to learn quickly and adapt designs
Establish broad-based communications mechanisms
to share performance data
“Managers must move their focus beyond narrow
efficiency gains …and embrace the possibilites that
uncertainty creates.” J.S. Brown & J. Hagel (2006)