Transcript No Slide Title

Towards A Calculus for
Services Innovation
James M. Tien, PhD, DEng (h.c.), NAE
Distinguished Professor and Dean
College of Engineering, University of Miami
Educating Tomorrow's Technology Leaders for Career Success
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Outline
•
•
•
•
•
•
•
Pertinent Background
About Innovation
Strategic Development
Tactical Development
Operational Development
Services Innovation
Concluding Remarks
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Pertinent Background: U.S. Employment As of 2008
INDUSTRIES
EMPLOYMENT (M)
PERCENT of TOTAL
Utilities
1M
0.7%
Wholesale Trade
6
4.3
15
10.7
Transportation/Warehousing
5
3.6
Information
3
2.1
Financial Activities
8
5.7
18
12.9
3
2.1
Health Care/Social Assistance
16
11.4
Leisure/Hospitality
13
9.3
Other Services
6
4.3
Federal Government
3
2.1
20
14.3
117
83.6
Mining
1
0.7
Construction
7
5.0
13
9.3
2
1.4
23
16.4
140
100.0
Retail Trade
Professional/Business Services
Educational Services
State/Local Government
SERVICE SECTOR
Manufacturing
Agriculture (Forestry, Fishing)
GOODS SECTOR
TOTAL
Educating Tomorrow's Technology Leaders for Career Success
Pertinent Background: Traditional and Electronic Services
SERVICES ENTERPRISES
ISSUE
TRADITIONAL
ELECTRONIC
Co-Production Medium
Physical
Electronic
Labor Requirement
High
Low
Wage Level
Low
High
Self-Service Requirement
Low
High
Transaction Speed Requirement
Low
High
Computation Requirement
Medium
High
Data Sources
Multiple Homogeneous
Multiple Non-Homogeneous
Driver
Data-Driven
Information-Driven
Data Availability/Accuracy
Poor
Rich
Information Availability/Accuracy
Poor
Poor
Size
Economies of Scale
Economies of Expertise
Service Flexibility
Standard
Adaptive
Focus
Mass Production
Mass Customization
Decision Time Frame
Predetermined
Real-Time
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Pertinent Background: About Calculus
• An insightful tool for the analysis of motion
and change, based on the mathematical
concepts of derivative and integral
• Separately invented by Newton and Leibniz
• Focused on the rational workings of physical
and virtual systems
• Instrumental in the construction of bridges,
prediction of economic changes, derivation
of interplanetary travel paths, etc.
• Thus, a systematic calculus or process is
sought to understand the rational workings
of services innovation, a continuously
moving or evolving set of activities
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About Innovation: Invention Versus Innovation
• “Invention is a flower, innovation is a weed; that is, an original
idea can be brilliant, profound and compelling – but what
ultimately gives it power and influence is that it spreads [like a
weed]” – Robert Metcalfe, Ethernet/3Com
• Inventions are to be celebrated, but businesses must rely on
innovations to survive and grow; successful innovations are
those that spread in regard to reach, impact, and/or
commercial success
• Innovation does not necessarily depend on an invention (e.g.,
witness the thousands of commercial successes that are not
based on any invention); likewise, an invention does not
necessarily result in an innovation (e.g., witness the thousands
of patents that have never been commercialized)
• Innovation requires changes or recombination of people,
processes, products, including technologies, systems,
attitudes, values, cultures, enterprises, and organizational
structures
Educating Tomorrow's Technology Leaders for Career Success
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About Innovation : Top 20th Century Innovations
•
National Academy of Engineering's Top 20 Engineering Achievements in the
20th Century:
1. Electrification
11. Highways
2. Automobile
12. Spacecraft
3. Airplane
13. Internet
4. Water Supply and Distribution
14. Imaging
5. Electronics
15. Household Appliances
6. Radio and Television
16. Health Technologies
7. Agricultural Mechanization
17. Petroleum and Petrochemical Technologies
8. Computers
18. Laser and Fiber Optics
9. Telephone
19. Nuclear Technologies
10. Air Conditioning and Refrigeration
20. High-Performance Materials
•
Possible Additional Achievements in the Early 21st Century:
21. Information Technology
22. Nanotechnology (Nanomaterials, Nanotubes, Nanoelectronics)
23. "Technobiology" (New Drugs, DNA Chips, Bionic Parts, Exoskeletons)
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About Innovation : Top 25 Innovative Companies (1 of 2)
Survey Rank
Innovation Areas
Company
2008
2005
1
1
2
Process
Annualized
12/31/0412/31/07
Stock Return
Innovation Focus
Goods (G), Services (S)
Product
Business
Apple


83%
S: iPod, iTunes, Experience
8
Google


53%
S: Search Ad Clicks, Mash-Ups
3
14
Toyota


15%
G: Manufacturing, Value Chain
4
3
General
Electric


3%
S: Imagination, Courage
5
3
Microsoft
6
--
Tata Group
7
--
8


12%
S: Integration, Live



Private
G: Manufacturing, Value Chain
Nintendo


77%
S: Computer Games
9
Procter &
Gamble


12%
G: Intra-Collaboration
9
5
Sony
17%
G: High-Definition
10
9
Nokia


35%
S: Emerging Markets
11
16
Amazon


28%
S: Web Services
12
7
IBM


4%
S: Open Invention Network
13
--
Research In
Motion

51%
S: Black Berry, Wireless Email
14
20
BMW

11%
G: Competitive Designs





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About Innovation : Top 25 Innovative Companies (2 of 2)
Survey Rank
Innovation Areas
Company
Process
Business
Innovation Focus
Goods (G), Services (S)
2008
2005
15
--
HewlettPackard

35%
G: PCs, Printers, Ink
16
23
Honda

14%
G: Engineering, Beyond Auto
17
--
Disney
18
--
GM
19
--
Reliance
Industries
20
--
Boeing
21
--
Goldman
Sachs

22
2
3M

23
13
Wal-Mart
24
--
Target
25
--
Facebook

Product
Annualized
12/31/0412/31/07
Stock Return


7%
S: Entertainment


-11%
G: Hybrid Cars



94%
G: Textiles Etc.


21%
G: Light Material Planes
28%
S: Financial Services
3%
G: Post-It Pictures, Research
-2%
S: Supply Chain
0%
S: Discount Marketing
Private
S: Social Networking
Overall
14.3%
G: 11 (44%); S: 14 (56%)
Standard and Poor’s 1200 Global Index
11.1%





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About Innovation: Impact of Global Aging
Percent of Population
Aged 60 or Older
Working Age Persons Per
Age 65 or Older Person
2002
2050
2002
2050
Europe
20.0%
37.0%
3.9
1.8
North America
15.7%
27.1%
5.0
2.8
Asia (Japan)
8.6%
22.9%
11.1
3.9 (1.5)
Latin America
7.9%
22.1%
11.0
3.8
Africa
5.0%
10.0%
16.8
8.9
Regions
Educating Tomorrow's Technology Leaders for Career Success
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Strategic Development: 4 Customer Drivers and 3 Business Foci
Business Foci
Customer Drivers
(of Services
Innovation)
1. CreationFocused
2. SolutionFocused
3. CompetitionFocused
1. Collaboration
Social Networks
Minivans
HD-DVD Formats
2. Customization
Express Delivery
Degree Programs
PC Configurations
3. Integration
Snowboarding
Big Box Stores
Cell Phones
4. Adaptation
Mutual Funds
Home Videos
Discount Retail
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Strategic Development: An Experiential Strategy Canvas
Based on Kim and Mauborgne [2005]
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Strategic Development: 4-Stage Life Cycle
Provider
Competition
Customer Valuation
High
Minimum
Low
Medium
Medium
Low
Minimum
1. Innovation
2. Perturbation
3. Imitation
High
4. Commoditization
Educating Tomorrow's Technology Leaders for Career Success
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Tactical Development: 6 Business Principles
1.
2.
3.
4.
5.
6.
Reconstruct Market Boundaries: by i) looking across alternative
industries, ii) looking across strategic groups within an industry, iii)
redefining the industry’s buyer group, iv) looking across to
complementary service offerings, v) rethinking the functional-emotional
orientation of its industry, and vi) participating in shaping external
trends over time.
Focus on Big Picture, Not Numbers: by visualizing the innovative strategy
(i.e., as depicted in a strategy canvas) – through visual awakening, visual
exploration, visual strategy fair, and visual communication.
Reach Beyond Existing Demand: to non-customers, including i) soon-tobe non-customers who are waiting to leave the market, ii) refusing noncustomers who consciously choose not to be in the market, and iii)
unexplored non-customers who are in distant markets.
Get Strategic Sequence Right: by i) testing for exceptional customer
utility, ii) pricing for mass consumption, and iii) targeting cost by
subtracting desired profit margin from the appropriate price.
Overcome Organizational Hurdles: including i) the cognitive hurdle of
waking employees up to the need for a strategic shift (i.e., with “tipping
point” leadership), ii) the resource hurdle of recognizing that resources
are limited, iii) the motivation hurdle of acting in a timely manner, and iv)
the political hurdle of overcoming inertia.
Build Execution Into Strategy: by i) developing a fair process (through
engagement, explanation, and expectation), ii) changing attitudes to
garner greater trust and commitment, iii) modifying behavior to obtain
voluntary cooperation, and iv) executing the strategy that would exceed
expectations.
Kim and Mauborgne [2005]
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Tactical Development: 8 Technical Enablers
1.
Software Algorithm: Serves to Automate A
Service Process
2. Automation: By Electrification and By Computer
Chip (With Digitization)
3. Telecommunication: Computer Networks,
Wireless, Internet/Web 2.0
4. Collaboration: Another Form of Co-Production;
Across Disciplines, Specialties, Organizations
and Cultures; Collaborative Software; MySpace;
World of Warcraft; Twitter; Facebook
5. Standardization: Wi-Fi, Wi-Max, UPC, EPC/RFID
6. Customization: Partial (Assemble-To-Order),
Mass (Make-To-Order), Real Time
7. Organization: People, Technologies, Systems,
Attitudes, Values, Cultures, Structures
8. Globalization: Flat World
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Tactical Development: 6 Business Principles and 8 Technical Enablers
Business
Principles
[Kim and
Mauborgne, 2005]
1. Reconstruct
Market Boundaries
Technical Enablers [Tien, 2006]
1. Software
Algorithms
2. Automation
Bloomberg
(financial data
support)
2. Focus on Big
Picture, Not
Numbers
EFS (better
banking
speed)
3. Reach Beyond
Existing Demand
Apple
(selling
iPads on
the Web)
4. Get Strategic
Sequence Right
eBay (reliable
auction site)
Swatch
(new low
cost watch
designs)
3. Telecommunication
4. Collaboration
5. Standardization
6. Customization
7. OrgaNization
8. Globalization
CNN (an allnews, 24/7
television station)
Curves
(women
exercise
clubs)
Home Depot
(do-it-yourself
home
modifications)
NetJets
(partial jet
ownerships
)
QB House
(low cost
grooming)
Apple iTunes
(online songs)
Southwest
(airline travel
at car travel
cost)
Samsung
(new LCD
TVs, mobiles)
FedEx (an allexpress mail
service)
Pret A Manger
(fresh, fast
lunches)
JCDecaux
(outdoor
street
furniture
ads)
Cirque du Soleil
(another
circus-type
experience)
Ford Model T
(reliable,
durable)
HP (products
for equity
interest)
Starbucks (a
coffee house
experience)
NTTDoCoMo
(combined voice,
text, data, pics)
IKEA (low
cost designs
by partnering)
5. Overcome
Organizational
Hurdles
6. Build Execution
Into Strategy
NYPD
(tipping point
leadership by
Bratton)
“Lubber” (low
rate of failure
due to expert
system)
“Elco” (fair
process
facilitates
execution)
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Operational Development: Decision Making Framework
DATA
Operational
INFORMATION KNOWLEDGE
Tactical
Strategic
WISDOM
Systemic
Decision Making Range
 Data: Basic observation; measurements, transactions, etc.
 Information: Processed data; derivations, groupings, patterns, etc.
 Knowledge: Processed information plus experiences, beliefs, values, culture; explicit,
tacit/conscious, unconscious.
 Wisdom: Processed knowledge plus insight and assessment over time and space;
theories, etc.
 TODAY: We Are In A Data Rich, Information Poor (DRIP) – Not Knowledge – Economy
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Operational Development : Decision Informatics Paradigm
Multiple Data
Sources
Abstracted
Information
FUSION/ANALYSIS
Real-Time
Decision
MODELING
SYSTEMS ENGINEERING
• Disciplinary Core: 1) Data Fusion/Analysis; 2) Decision
Modeling; 3) Systems Engineering;
• Applications Core: 4) Global Services; 5) Global Manufacturing.
• Focus: A problem solving paradigm that is Decision-Driven (DD),
Information-Based (IB), Real-Time (RT), Continuously-Adaptive
(CA), Customer-Centric (CC), Computationally-Intensive (CI)
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Operational Development: Decision Informatics Methods
Disciplinary Core
Related Methods
•
Decision Foci
(Customer Drivers
of Services
Innovation )
•
•
•
•
Data Fusion/Analysis
•
•
•
•
•
Decision Modeling
•
•
Systems Engineering
•
•
•
•
Collaboration: self-serving, contributing, communicating, standardizing,
globalizing
Customization: profiling, personalizing
Integration: supply chaining, demand chaining, data warehousing,
systematizing
Adaptation: real-timing, automating, organizing, motivating
Statistics: non-homogeneous data fusion, fuzzy logic, neural networks,
biometrics
Mathematics: probability, classification, clustering, association, sequencing
Management Science: expectation management, yield management
Cognitive Science: visualization, cognition
Operations Research: optimization, simulation, prediction
Decision Science: game theory, risk analysis, dynamic pricing, Bayesian
networks
Computer Science: service-oriented architecture (SoA), XML, genetic
algorithms
Industrial Engineering: project management, scheduling, routing
Electrical Engineering: cybernetics, networks, pattern recognition
Human Machine Systems: human factors, cognitive ergonomics
Systems Performance: life-cycle, value chain
Systems Biology: predictive medicine, preventive medicine, personalized
medicine
Educating Tomorrow's Technology Leaders for Career Success
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Operational Development: Technologies and Attributes
Underlying Decision Attributes*
Enablers
Underpinning Technologies
DD
IB
RT
CA
CC
CI
Automation
Chips; Software; Information; Sensor






Telecommunication
Chips; Software; Information; Internet;
Wireless; Sensor






Collaboration
Chips; Software; Information;
Cognition; Visualization






Standardization
Chips; Software; Information;
Collaboration





Customization
Chips; Software; Information;
Telecommunication





Organization
Chips; Software; Information;
Telecommunication; Management





Globalization
Chips; Software; Information;
Telecommunication; Collaboration







*DD (Decision-Driven), IB (Information-Based), RT (Real-Time), CA (Continuously-Adaptive), CC
(Customer-Centric), CI (Computationally-Intensive)
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Services Innovation: An Integrated Process or Calculus
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Services Innovation: Example Innovations (1 of 3)
Example Innovations
Service Categories
Decision Attributes*
Primary
Driver
Primary
Enabler
D
D
I
B
R
T
C
A
C
C
C
I
Collaboration
Standardization






RFID (Supply Chain, Automated Checkout, P&G, Wal-Mart)
Customization
Automation






Travel Sites (Expedia, Orbitz, Travelocity, Travelzoo, Priceline)
Integration
Globalization






Integration
Standardization






Adaptation
Automation






Web Commerce (Amazon, eBay Express, Wal-Mart, ToysRUs)
Integration
Globalization






Real-Time Routing (JetBlue, UPS, FedEx, BostonCoach)
Adaptation
Customization






Location-Based Services (Traffic, Emergencies, Local Info)
Adaptation
Customization






Targeted Marketing (Amazon, Harrah’s, BMW, Wells Fargo)
Adaptation
Customization






Business Processes (Textron’s Streamlining, Nucor’s Incentives)
Adaptation
Organization






E-Health (Telemedicine, Diagnostic AmpliChips, Imaging)
Customization
Automation






Bionic Parts (Limbs, Heart, Lungs, Liver, Kidney, Eyes, Ears)
Customization
Automation






Health Reform (Mass’ Mandatory Insurance, Paperless,
Prevention)
Customization
Standardization






One-Stop Wellness Facility (Medical, Dental, Spa, Therapy)
Customization
Organization






Bioinformatics (Drugs, Genomics, Proteomics, Glycomics)
Adaptation
Automation






Trade, Transportation & Utilities
Web Trading (eBay, Green Energy Tags, E-Waste Recycling)
Intelligent Transportation Systems (Interoperability, Standards)
Payment Systems (PayPal/eBay, Peppercoin, Paystone, BitPass)
Professional & Business
Health Care
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Services Innovation: Example Innovations (2 of 3)
Example Innovations
Decision Attributes*
Primary
Driver
Primary
Enabler
D
D
I
B
R
T
C
A
C
C
C
I
Social Networking (MySpace, Craigslist, Visible Path)
Customization
Collaboration






Retail Tourism (Minneapolis’ Mall of America)
Customization
Organization






Experiential Venues (Starbucks, ESPN Zones, IMAX Theatres)
Customization
Organization






Virtual Environments (Second Life, World of Warcraft)
Customization
Collaboration






Simulated Environments (Dubai’s Ski Dome)
Customization
Organization






Smart Games (Sudoku, Brain Age, Big Brain Academy, IQ)
Adaptation
Automation






New Foci (Services Science, Innovation Engineering)
Integration
Organization






Online Degrees (U. of Phoenix, EArmyU, Florida Virtual School)
Adaptation
Globalization






E-Training (Certifications, Microsoft, Cisco, Kinko)
Adaptation
Globalization






E-Reference (WebMD, FindLaw, Britannica, Wikipedia)
Integration
Automation






Imaging (Airport Screening, Target Tracking, Predator Drone)
Integration
Automation






Security (CAPPS II, Biometrics, Coplink, Relationships Ident)
Integration
Automation






Research (GPS Profiling, AdHoc Networking, WMD Sensing)
Integration
Automation






Civil Service (Motivation, Morale, Retention, Recruitment)
Adaptation
Organization






National Counterterrorism Center (Email, Voice, Databases)
Integration
Automation






Service Categories
Leisure & Hospitality
Education
Government
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Services Innovation: Example Innovations (3 of 3)
Example Innovations
Service Categories
Decision Attributes*
Finance, Insurance & Real Estate
Primary
Driver
Primary
Enabler
D
D
I
B
R
T
C
A
C
C
C
I
Credit Ratings (TransUnion, Equifax, Experian)
Integration
Automation






Web Trading (Schwab, Fidelity, TD Ameritrade, ETFs)
Integration
Automation






Web Realty (zipRealty, HomeGain, LendingTree, Zillow)
Integration
Automation






Web Insurance (Insweb, Progressive’s Auto, Aon’s TechShield)
Integration
Automation






Wealth Care Investments (Portfolios Reflecting Life and Living)
Integration
Automation






Web Search (Google, Yahoo, AOL, MSN, Windows Live)
Integration
Customization






Voice Over Internet (Vonage, Skype, Comcast, Time Warner)
Collaboration
Telecomm.






Content Collaboration (Wikipedia, YouTube, Flickr)
Integration
Globalization






Software Collaboration (Red Hat, JBoss, MySQL)
Collaboration
Automation






Advanced Mobile Devices (PDAs, Satellite Radio, OnStar Autos)
Collaboration
Telecomm.






Assemble-to-Order (BMW, Dell, Whirlpool, FreshDirect)
Adaptation
Standardization






Made-to-Order (Siemen’s Hearing Aids, Fab Labs)
Adaptation
Automation






On-Demand (IBM, Microsoft Dynamics, Accenture)
Adaptation
Customization






E-Advertising (Display Banners, Search Ads/Clicks, Productions)
Customization
Automation
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




Brand Marketing (Tide, Always, Pampers, iPod, Intel Inside)
Customization
Standardization





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Information & Telecom
Other
*DD (Decision-Driven), IB (Information-Based), RT (Real-Time), CA (Continuously-Adaptive), CC (Customer-Centric), CI (Computationally-Intensive)
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Services Innovation: Strategic White Spaces or Blue Oceans
Business Foci
Customer Drivers
1. Creation-Focused
2. Solution-Focused
3. Competition-Focused
1. Collaboration
Web Learning
Expanded Second Life
Mobile Ads
2. Customization
Financial
Instruments
Authoritative Search
Privacy and Security
3. Integration
Wireless
Convergence
Motion Capturing
Services
Services Measurement
4. Adaptation
Disruption
Response
Anti-Innovation Abuses
Anti-Click Ads Fraud
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Concluding Remarks
• Services Innovation: Additional White Spaces/Blue Oceans
– Anti-virusing, Anti-spamming, Anti-phishing
– Anti-DRIPping: from Wikipedia to editor-vetted Citizendium;
from Google to Authoritative Google (AGoogle); from data to
peer-reviewed publications
– Safeguarding Rights to Privacy
– Protecting Against Attention Deficit Disorder
– Identifying a “knowledge-adjusted” GDP metric
– Innovation.corante.com/network: a blog of member (now 15)
blogs that aggregates top quality entries on innovation and
creativity with commentary from 2 knowledgeable editors
• Services Innovation: Potential Barriers
–
–
–
–
Lack of Standards
Lax Intellectual Property Rights
Too Much Central Planning
Aversion to Change and Collaboration
• Services Innovation: Trade-Offs
– Productivity Versus Security/Privacy
– Just-in-Time Versus Just-in-Case
– High-Probability, Low-Risk Versus Low-Probability, High-Risk
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