Competing in a service economy 20120913 v1

IBM University Programs worldwide, accelerating regional development (IBM Upward)

Competing in a Service Economy

IBM SSME Centennial Icon of Progress
IBM Smarter Planet

Dr. James (“Jim”) C. Spohrer, spohrer@us.ibm.com
Innovation Champion and Director IBM UPward
(University Programs worldwide, accelerating regional development)

SwedBank Breakfast Talk
Thursday September 13, 2012

© 2012 IBM Corporation

IBM Almaden Research Center, Silicon Valley/San Jose, CA

2 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation

Today’s Talk
 Growth of Service Economy

 Leading Through Connections
– IBM CEO Survey 2012

 Smarter Planet
– Connecting with Cities & Their Universities Nano-Bio-Info-Cogno
– Regional Economic Development & QoL

 People and Change
– Beyond just one perspective
– Need T-shaped people (depth, breadth)
– Pi-shaped people (deep in two areas, breadth)
– M-shaped people (deep in three areas, breadth)
– ….
– True “trans-disciplinarians” – multiple perspectives


Economic Shift in National Economies
World’s Large Labor Forces US shift to service jobs
A = Agriculture, G = Goods, S = Service
2010
2010

Nation Labor A G S 40yr Service
% WW % % % Growth (A) Agriculture:
Value from
China 25.7 49 22 29 142%
harvesting nature

India 14.4 60 17 23 35%
(G) Goods:
U.S. 5.1 1 23 76 23% Value from
making products
Indonesia 3.5 45 16 39 34%
(S) Service:
Brazil 3.0 20 14 Daryl Pereira/Sunnyvale/IBM@IBMUS,
66 61% Value from
IT augmented workers in smarter systems
Russia 2.4 10 21 69 64% that create benefits for customers
and sustainably improve quality of life.
Japan 2.2 5 28 67 45%

Nigeria 1.6 70 10 20 19%

Bangladesh 2.1 63 11 26 37%

Germany 1.4 3 33 64 42%

NationMaster.com, International Labor Organization
Note: Pakistan, Vietnam, and Mexico now larger LF than Germany


Growth of Service Revenue at IBM
2010 Pretax Income Mix Revenue Growth by Segment
SYSTEMS
(AND FINANCING)
100

Revenue ($B)
SOFTWARE

80 Services
17%
44% 60
40 Software
39% 20 Systems
0
SERVICES
82
88
94
98

10
04
06
07
08
09
20
19
19
19
19
20
20
20
20
20
Year
IBM Annual Reports
What do IBM Service Professionals Do? Run IT & enterprise systems for customers,
help Transform customer processes to best practices, and Innovate with customers.

Sweden: Global Brands (0.1/1.25/2.2)


United States: Global Brands (4.5/26/30)


1700+ face-to-face interviews

Regions Sectors Performance

North America Communications Outperformers
Western Europe Distribution Peer Performers
Japan Financial Services Underperformers
Australia / New Zealand Industrial
Growth Markets Public
9 © 2012 IBM Corporation

External forces impacting the organization

2004 2006 2008 2010 2012
1 1 1 1 1 Technology factors

2 2 2 2 2 People skills

3 3 3 3 3 Market factors

4 4 4 4 4 Macro-economic factors

5 5 5 5 5 Regulatory concerns

6 6 6 6 6 Globalization

7 7 7 7 7 Socio-economic factors

8 8 8 8 8 Environmental issues

9 9 9 9 9 Geopolitical factors

Technology is driving organizational change more
than ever before


CEOs create economic value by cultivating
connections within and across three domains

Organizational openness introduces
new opportunities to create value
through employee collaboration

Differentiate through better
data access, insight and
translation into actions

Partner for innovation, disrupt, and
derive revenue from new sources

Outperformers are twice as good at deriving value
from data

Underperformers Drawing insights from
Outperformers information

26% %
Access to data
54%
108 more

26% %
Insights from data
54%
108 more

31% %
Translate into actions
57%
84 more


So, how do you win the race to gather and
convert data into customer insight and action?

 Look outside to complete the view
Let “big data” reveal the
 Connect pieces into profiles
customer you never knew  Empower staff with predictive analysis

 Listen at an individual level
Listen lavishly, respond
 Capture what employees see and hear
with focus  Respond with relevance and speed

 Mobile “changes everything”
Be where your customers
 Blend the physical and digital
expect you to be  Offer value that stands out


Example: Leading Through Connections with…
Universities Collaborate with IBM Research to Design
Watson for the Grand Challenge of Jeopardy !

Assisted in the development of the Open Pioneered an online natural language
Advancement of Question-Answering question answering system called START,
Initiative (OAQA) architecture and which provided the ability to answer questions
methodology with high precision using information from
semi-structured and structured information
repositories

 Provided technological advancement
enabling a computing system to remember the Worked to extend the
full interaction, rather than treating every Worked on a visualization component to capabilities of Watson, with a
question like the first one - simulating a real visually explain to external audiences the focus on extensive common
dialogue massively parallel analytics skills it takes for sense knowledge
the Watson computing system to break down
a question and formulate a rapid and accurate
response to rival a human brain

Explored advanced machine learning
techniques along with rich text
representations based on syntactic and
semantic structures for the Watson’s Focused on large-scale
Worked on information information extraction,
optimization
retrieval and text search parsing, and knowledge
technologies inference technologies

http://w3.ibm.com/news/w3news/top_stories/2011/02/chq_watson_wrapup.html


What does IBM do?


Most people say, “IBM makes computers”


What IBM really does is help build a Smarter Planet…
Smarter = System of systems that work better together
Service = Applying knowledge to co-create value


The need and opportunity exists…
 Big Four Crises
– Financial
– Healthcare
– Education
– Government


Smarter Planet = Improve Quality-of-Life

INSTRUMENTED INTERCONNECTED INTELLIGENT
We now have the ability People, systems and We can respond to changes
to measure, sense and objects can communicate quickly and accurately,
see the exact condition and interact with each and get better results
of practically everything. other in entirely new ways. by predicting and optimizing
for future events.
PRODUCTS IT NETWORKS COMMUNICATIONS

WORKFORCE SUPPLY CHAIN TRANSPORTATION BUILDINGS


California Human Development Report 2011:
Measuring quality-of-life….

http://www.measureofamerica.org/docs/APortraitOfCA.pdf

What improves Quality-of-Life? Service System Innovations
* = US Labor % in 2009.

A. Systems that focus on flow of things that humans need (~15%*) 20/10/10
1. Transportation & supply chain
2/7/4
2. Water & waste recycling/Climate & Environment 2/1/1
7/6/1
3. Food & products manufacturing
1/1/0
4. Energy & electricity grid/Clean Tech
5/17/27
5. Information and Communication Technologies (ICT access)
B. Systems that focus on human activity and development (~70%*)
1/0/2
6. Buildings & construction (smart spaces) (5%*)
24/24/1
7. Retail & hospitality/Media & entertainment/Tourism & sports (23%*)
2/20/24
7/10/3
8. Banking & finance/Business & consulting (wealthy) (21%*)
9. Healthcare & family life (healthy) (10%*) 5/2/2

10. Education & work life/Professions & entrepreneurship (wise) (9%*)
3/3/1
C. Systems that focus on human governance - security and opportunity (~15%*) 0/0/0
11. Cities & security for families and professionals (property tax)
1/2/2
12. States/regions & commercial development opportunities/investments (sales tax)
13. Nations/NGOs & citizens rights/rules/incentives/policies/laws (income tax) 0/19/0

Quality of Life = Quality of Service + Quality of Jobs + Quality of Investment-Opportunities
“61 Service Design 2010 (Japan) / 75 Service Marketing 2010 (Portugal)/78 Service-Oriented Computing 2010 (US)”


T-shaped professionals
depth & breadth

Many cultures
Many disciplines
Many systems
(understanding & communications)

BREADTH

Deep in one discipline

Deep in one system
Deep in one culture
DEPTH

(analytic thinking & problem solving)

23

Two Generations of Change: Past & Future

Born: 1988 Born: 2012
Graduated College: 2011 Enters College: 2030


2030 Transportation: Self-driving cars

Steve Mahan:
Test “Driver”


2030 Water


2030 Manufacturing

Ryan Chin:
Urban Mobility


2030 Energy


2030 ICT


2030 Buildings: Recycled to be stronger, safer, cleaner

China Broad Group:
30 Stories in 15 Days


2030 Retail & Hospitality


2030 Finance & Business


2030 Health


2030 Education: Watch one, do one, teach one…


2030 Government

Four measures

 Innovativeness

 Equity
– Improve
weakest
link

 Sustainability

 Resiliency


2030 and Beyond…. Government


A Framework for Global Civil Society

 Daniel Patrick Moynihan said nearly 50 years ago: "If you want to
build a world class city, build a great university and wait 200
years." His insight is true today – except yesterday's 200 years
has become twenty. More than ever, universities will generate and
sustain the world’s idea capitals and, as vital creators,
incubators, connectors, and channels of thought and
understanding, they will provide a framework for global civil
society.
– John Sexton, President NYU


In Conclusion: Two Books To Help Us All Prepare To Change


Thank-You! Questions?

“Instrumented, Interconnected, Intelligent – Let’s build a Smarter Planet.” – IBM
“If we are going to build a smarter planet, let’s start by building smarter cities” – CityForward.org
“Universities are major employers in cities and key to urban sustainability.” – Coalition of USU
“Cities learning from cities learning from cities.” – Fundacion Metropoli
“The future is already here… It is just not evenly distributed.” – Gibson
“The best way to predict the future is to create it/invent it.” – Moliere/Kay
“Real-world problems may not/refuse to respect discipline boundaries.” – Popper/Spohrer
“Today’s problems may come from yesterday’s solutions.” – Senge
“History is a race between education and catastrophe.” – H.G. Wells
“The future is born in universities.” – Kurilov
“Think global, act local.” – Geddes

Dr. James (“Jim”) C. Spohrer
Innovation Champion &
Director, IBM University Programs worldwide accelerating regional development (IBM UPward)
spohrer@us.ibm.com


IBM’s Leadership Change

IBM has 426,000
employees worldwide
2011 Financials
22% of IBM’s revenue
 Revenue - $ 106.9B
in Growth Market
countries; growing at  Net Income - $ 15.9B
11% in 2011  EPS - $ 13.44
 Net Cash - $16.6B More than 40% of IBM’s
workforce conducts business
away from an office

55% of IBM’s Workforce
IBM operates in 170 is New to the company in
countries around the globe the last 5 years
Number 1 in patent
generation for 19
100 Years of Business consecutive years ;
& Innovation in 2011 6,180 US patents
awarded in 2011 The Smartest Machine On Earth
9 time winner of the 5 Nobel
President’s National Laureates
Medal of Technology
& Innovation - latest “Let’s Build a Smarter
award for Blue Gene Planet"
Supercomputer


The New Normal: Smarter Systems

Service Systems: Stakeholders & Resources
1. People
2. Technology
3. Shared Information
4. Organizations
Computational System connected by win-win value propositions
Smarter Technology Smarter Buildings, Universities, Cities
Requires investment roadmap Requires investment roadmap

University: Four Missions
Nation

 Knowledge State/Province
– 1. Transfer (Teaching) City/Metro
For-profits U-BEE
– 2. Creation (Research)
Job Creator/Sustainer
– 3. Application (Benefits) Cultural & University
Hospital
Medical
Conference College
• Commerce/Entrepreneurship Hotels K-12
Research

• Governance/Policymaking
Worker Family
– 4. Re-Integration (Challenge) Non-profits (professional) (household)

• Innovativeness, Equity
• Sustainability, Resilience

 Nested, Networked Holistic Service Systems
– Flows
Third Mission (Apply to Create Value)
– Development is about U-BEEs =
– Governance University-Based
Entrepreneurial Ecosystems


Regional Competitiveness and U-BEEs:
Where imagined possible worlds become observable real worlds
http://www.service-science.info/archives/1056

Innovations Nation
Universities/ “The future is already
State/Province here (at universities),
Regions City/Region
Calculus (Cambridge/UK)
For-profits
it is just not evenly
Physics (Cambridge/UK) U-BEE
Computer Science (Columbia/NY) distributed.”
Microsoft (Harvard/WA) Job Creator/Sustainer
Yahoo (Stanford/CA) Hospital
Cultural & University
Google (Stanford/CA) Medical
Conference College
Facebook (Harvard/CA) Research
Hotels K-12
“The best way to
Non-profits Worker
(professional)
Family
(household)
predict the future
is to (inspire the next
generation of students
to) build it better.”

U-BEEs = University-Based Entrepreneurial Ecosystems, City Within City

Cities: land-population-energy-carbon

Carlo Ratti:
Senseable Cities


Measuring Impact

 SSME: IBM Icon of Progress & IBM Research Outstanding Accomplishment
– Internal 10x return: CBM, IDG, SDM Pricing & Costing, BIW COBRA, SIMPLE, IoFT, Fringe, VCR
• Key was tools to model customers & IBM better
• Also tools to shift routine physical, mental, interactional & identify synergistic new ventures
• Alignment with Smarter Planet & Analytics (instrumented, interconnected, intelligent)
• Alignment with Smarter Cities, Smarter Campus, Smarter Buildings (Holistic Service Systems)
– External: More than $1B in national investments in Service Innovation activities
– External: Increase conferences, journals, and publications
– External: Service Science SIGs in Professional Associations
– External: Course & Program Guidelines for T-shaped Professionals, 500+ institutions
– External: National Service Science Institutions, Books & Case Studies (Open Services Innovation)

 Service Research, a Portfolio Approach
– 1. Improve existing offerings (value propositions that can move the needle on KPI’s)
– 2. Create new offerings (for old and new customers)
– 3. Improve outcomes insourcing, outsourcing, acquisitions, divestitures (interconnect-fission-fusion)
– 4. For all three of the above, improve customer/partner capabilities (ratchet each other up)
– 5. For all four of the above, increase patents and service IP assets (some donated to open forums)
– 6. For all five of the above, increase publications and body-of-knowledge (professional associations)


Who I am
 Director IBM Global University Programs since 2009
– Global team works with 5000 university world wide (http://www.ibm.com/university)
– Research (Awards), Readiness (Skills), Recruiting, Revenue, Responsibility
– Transform “IBM on Campus” brand awareness (“Smarter Planet/Smarter Cities”)
– Create “Urban Service System” Research Centers & U-BEEs
 Founding Director of IBM's first Service Research group from 2003-2009
– Almaden Research Center, San Jose, CA
– 10x ROI with four IBM outstanding and eleven accomplishment awards
– Improve existing offerings, create new, portfolio synergies, partners, patents, publications
– I know/work with service research pioneers from many academic disciplines
• I advocate for Service Science, Management, Engineering, and Design (SSME+D)
– Short-term: Curriculum (T-shaped people, deep in an existing discipline)
– Long-term: New transdiscipline and profession (awaiting CAD tool)
• I advocate for SRII (“one of the founding fathers”)
• Co-editor of the “Handbook of Service Science” (Springer 2010)
 Other background (late 90’s and before)
– Founding CTO of IBM’s Venture Capital Relations group in Silicon Valley
– Apple Computer’s (Distinguished Engineer Scientist and Technologist) award (90’s)
– Ph.D. Computer Science/Artificial Intelligence from Yale University (80’s)
– B.S. in Physics from MIT (70’s)


What is the future? We can imagine many possibilities…

Kurzweilai.net

Competing in a service economy 20120913 v1

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