A talk at the "eMBA Forum 2014: Digital economy and digital marketing" at Turku School of Economics, Finland

1. The Great Confusion:
The Digital Economy
Continues to Surprise
Petri Rouvinen
CEO, Etlatieto Oy
eMBA Forum 2014: Digital economy and digital marketing
Turku School of Economics, OP-Pohjola Hall
12 March 2014, 9.45-

2. Source:WEF2012.
RethinkingPersonalData:StrengtheningTrust.WorldEconomicForum(withBostonConsulting)

4. “ 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/

5. 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/

6. 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/

7. picture

8. 1011
0101
1100
0010
3D
IoT
Nexus of Forces

9. 1
10
× ICT investment
× Inv. Org & People
Brynjolfsson& Hitt 2003. Computing Productivity: Firm-Level Evidence. Review of Economics and Statistics, 85, 793-808

12. … 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

13. Will we ever
invent anything this
useful again?
Cover of the The Economist in 12 Jan. 2013 (modified)

14. pic in ICT

15. 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).

16. I’ve seen the God…
… or is it the Devil?
January 2007
Photo: v.gd/D1ZYvo
Note: iPad in 2010.

17. Nexus of Forces & Tech Converge
opened a huge unmapped &
unconquered domain

18. It’s all about
coded info… …and ways to
monetize it
The main battles
are fought in digital
content & services
Source: The Economist (1 Dec. 2012). Technology Giants at War (Briefing): Another Game of Thrones. Vol. 405, No. 8813, Pp. 23-26.

19. Corporations
Systems/hardware
Specific solutions
Digital evolution
Consumers
Content/Services
Platforms/ecosystems
Digital revolution (cf. legacy)





20. 1011
0101
1100
0010 Power

21. Cost per Computation
1940 … … … … 2000
€100,000,000,000
€1
Source: Lehti, Rouvinen & Ylä-Anttila 2012, Suuri Hämmennys, Taloustieto (ETLA B 254), page 89.
Eachdot=Onecomputer/method.Inreal“today'smoney”prices.Source:Nordhaus/Yale.

22. $595 in 1982 (app. $1,500 in 2013 $) $300 in 2013
3,128 as powerful C64
$4.7million: cost of PS3 power in C64s (in 2013 $)

23. 1011
0101
1100
0010 Big Data

24. Volume
Velocity
Variability
Nikulainen 2013. Big Data Revolution: What Is It? ETLA Brief 10.
Yes
&
No

25. The next two slides are directly based on the work of
Mark Huberty

26. … 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

27. 3rd order biz model
Info  Eyeballs  Adds
2rd order biz model
Sell stuff (volume+profit)
1st order biz model
Specific input & output
Source: Mark Huberty

28. Management, marketing & sales
becomes more scientific across
business sectors
More can be experimented/tested &
good solutions may be replicated
Industries are born but more
importantly, old ones are
transformed (e.g., insurance)

30. 3.5
15.0
2013 2014
Series 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)

31. Cloud Computing
Accessing 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

32. Infrastructure
IaaS
(processing, storing, managing
)
Public Private
Software
PaaS/SaaS (web-based
OSs & other apps)

33. 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.

34. The biggest implication:
Reduction in the cost of
entry particularly in
the digital domain

35. 3D
IoT
×

36. €3 €300
Special thanks to: Jukka Tuomi, Aalto Univ., BIT Research Centre

37. Complexity & flexibility at no cost
Solutions that are impossible with other techs
No material waste (EADS/Airbus: 90% less of ti v.gd/ys7AeZ)

38. $1
$10
$100
$1,000
$10,000
1 piece 500 pcs 1000 p
Traditional:
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.

40. what

41. Case: Media Corporation
(which current has an emphasis on print publications)

42. ” 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

43. Newspaper Extinction Timeline
The 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.

45. Tech offers no benefit, if old habits do not die
Needed: 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

46. “ 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

47. The true bottleneck:
Ability to see
possibilities
just beyond
the horizon

48. Thank
You!
Comments, remarks & discussion
are more than welcomed:
Petri.Rouvinen@ETLA.fi
 +358–50–3673474