post 2008 innovation economy (old version)

Innovation Economy: Resist the hype but don¡¯t ignore the realities Dr. Jimmy Schwarzkopf Research Fellow STKI jimmy@stki.info 1

‫‪WIKIPEDIA‬‬ ‫‪STKI‬‬ ‫מתוך ויקיפדיה האנציקלופדיה החופשית‬ ‫חברת‬ ‫היא חברת ייעוץ בתחום מערכות מידע בישראל המפעילה צוות‬ ‫של אנליסטים לקוחות החברה כוללים בנקים חברות ביטוח‬ ‫משרדי ממשלה חברות היי טק ותעשייה חברות טלקום ועוד‬ ‫ד ר ג ימי חיים שוורצקוף ביצע את‬ ‫באמצע שנות ה‬ ‫המחקר הראשון מסוגו אודות שוק טכנולוגיית המידע בישראל‬ ‫המחקר הכה גלים בשוק הישראלי ונתן‬ ‫עבור חברת‬ ‫תמונת מצב קונקרטית בשוק שהיה עד אותה עת בלתי ממופה‬ ‫הקים את חברת‬ ‫ד ר שוורצקוף המשיך בחקר השוק ובשנת‬ ‫ששימשה כנציגות בישראל של חברת‬ ‫העולמית במסגרת החברה המשיך ד ר‬ ‫שוורצקוף לפרסם מחקרי שוק בתחום באופן קבוע וכן לספק‬ ‫נרכשה‬ ‫ייעוץ לחברות והארגונים המובילים בשוק בשנת‬ ‫העולמית על ידי חברת גרטנר וד ר שוורצקוף‬ ‫והאנליסטים המשיכו בפעילותם בישראל תחת השם‬ ‫‪All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info‬‬

This presentation is dangerous.... It will make people think • I do not predict because.. • Innovation • Important books/authors • Open source • Cloud computing • Neo-nomads • METAweb • Virtual Worlds

If I could have predicted this ?? “When the network becomes as fast as the processor, the computer hollows out and spreads across the network.” – Eric Schmidt, did in 1993 All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info

So: I cannot “predict” any one in particular but…..

Exponential Growth in logarithmic plot 15 www.KurzweilAI.net

16 www.KurzweilAI.net

Economic progress takes place by overlapping surges DRIVEN BY SUCCESSIVE TECHNOLOGICAL REVOLUTIONS Technological progress Time 40-60 years All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info

THOMAS KUHN: Paradigm Shift • we do not advance in steady, even progress but in a series of peaceful interludes punctuated by violent revolutions, • each conceptual world view is replaced by another PARADIGM SHIFT: 1. A change in world view that calls everything you know into question 2. Paradigm Shift Rate is now doubling every decade All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info

TWO DIFFERENT PERIODS IN EACH GREAT SURGE Degree INSTALLATION PERIOD Turning DEPLOYMENT PERIOD Point of diffusion of the Institutional recomposition and role shift technological revolution We Are Here Reaping of growth ‘Creative and social benefits destruction’ from the prevailing Paradigm shift paradigm big-bang Next big-bang Time 2O - 30 years ??? 2O - 30 years All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info

THE 4 MODELS OF GROWTH ESTABLISHED UNDER THE PREVIOUS (MASS PRODUCTION) PARADIGM • Soviet socialism • Fascism (National Socialism) • Keynesian (social) democracy • State Developmentalism (in Third World) All compatible with the centralising and homogenising principles of the mass production (and mass consumption) paradigm All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info

Paradigm Shift = Disruptive Technologies “Disruptive technologies Disruptive technology.. It's have enabled a larger trivial technology that population of less disrupts the business skilled or less wealthy model of the leading people to do things in a company, and that’s what more convenient, lower makes it so hard.” cost setting which Andy Grove, Intel historically could only be done by specialists in less convenient, higher cost settings.” Prof. Clayton Christensen All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info

Technologies that have experienced disruptive shifts: • Film chemical based photography – digital photography • Integrated PC manufacturing (IBM) – Modular PC manufacturing (Dell) • Centralized copy center (Xerox) – desktop workgroup photocopying(Canon) • In home vacuum tube radios (RCA) – portable transistor radios (Sony) • Department store full service retailing (JC Penney) – Big box discount retailing (Walmart) • Full service networked airlines (TWA, United) – Low cost point to point airlines (Southwest) • Drawing based animation (Disney) – Digital animation (Pixar) All Rights Reserved @STKI Moshav Bnei Zion, Israel +972 9 74 444 74 www.stki.info

Characteristics of disruptive technologies 1.Current customers of established firms are not interested in the technology 2.Profit margins associated with the technology are much lower than existing technology All Rights Reserved @STKI Moshav Bnei Zion, Israel +972 9 74 444 74 www.stki.info

Disruptive technologies • Introduction of the IBM Mainframe ( 1960’s) • Introduction of the Apple II (1978), IBM PC (1981), TCP/IP (1980’s), C/S Architectures (1980’s), SUN workstations (1980’s), Internet (1990’s) • Open Source (2002); Introduction of XML-based Composite Applications (2006), Service Oriented Architectures (2005), Virtualized Infrastructures (2004), Web2/internet 2 (2007), Cloud Computing (2008), METAweb (2008) All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info

NEW TECHNOLOGIES COME WRAPPED IN THE OLD . .. The first automobiles still looked like horse carriages One of the early automobiles 1898 …AND SO DO NEW INSTITUTIONS including production and consumption habits and norms All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info Reproduction: L. De Vries. 1972

Global Innovation Index Dr. Soumitra Dutta 6 SWITZERLAND 7 SINGAPORE 18 ISRAEL * INSEAD Professor 19 SOUTH KOREA 8 CANADA GLOBAL 9 NETHERLANDS 20 ICELAND I N N O VAT I O N 10 HONG KONG 3 0 K U WA I T INDEX 11 DENMARK Your Text here Your Text here which places: 12 SWEDEN 1 US 13 FINLAND * Because of 2 GERMANY 14 UAE HUMAN CAPITAL 3 UK 15 BELGIUM 4 JAPAN 16 LUXEMBOURG 5 FRANCE 17 AUSTRALIA All Rights Reserved @STKI Moshav Bnei Zion, Israel +972 9 74 444 74 www.stki.info 36

Resilience: Not only the ability to recover from a change or shock. Resilience: Not only the capacity of people to cope with change, stress or All Rights Reserved 2008@STKI Moshav Bnei catastrophe. Zion, Israel +972 9 790 7000 www.stki.info 39

RESILIENCE: The rate at which any system IT RESILIANCE: returns to a single steady state following a system perturbation. The ability to provide an acceptable level of service in the face of faults and challenges to normal operation. All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 40

Stress / resilience in the genes ? 4Stress/ resilience: • Brain releases serotonin • Kills off neurons if not metabolized 4MAOA gene with 5HTT: • Handles better stress and resilience Your Text here Your Text here • Produces molecules better at synthesizing serotonin 41 All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info

The future is really only an innovation problem How do we find the future we prefer? Innovation is the ability to move from the existing to the preferred All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info

Innovation versus Creativity Vision Desired Innovation Future is the engine that drives transformation.. Present Default Future All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info

“I’m an inventor. I became interested in long term trends because an invention has to Ray Kurzweil make sense in the world in which it is finished, not the world in which it is started.” -

Innovation IS strategy: from BUILD to CREATE Red Ocean Strategy Blue Ocean Strategy Compete in existing market space. Create uncontested market space. Beat the competition. Make the competition irrelevant. The New Economic Age Exploit existing demand. Create and capture new demand. Make the value-cost trade-off. Break the value-cost trade-off. Align the whole system of a firm’s Align the whole system of a firm’s activities with its strategic choice of activities in pursuit of differentiation or low cost. differentiation and low cost. All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 48

THE POWER OF BEING CONNECTED CONSUMER 2.0 Co-Creators Control Cash The birth of Generation C Communicate Connected Creativity Content Creative Class Conversation Community Channel Consumer 2.0 51

Books of the 1980-90s -” No institution can possibly survive if it needs geniuses or supermen to manage it. It must be organized in such a way as to be able to get along under a leadership composed of average human beings”- Your Text here Your Text here “It is the means by which [organizations] create value- producing resources or endows existing resources with enhanced potential for creating value” “The customer rarely buys what the company thinks it is selling him” All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 53

BOOK OF THE 1990’s • Introduced the business world to rethinking operations. • Demonstrated how process redesign can yield breakthroughs in performance Plus 10,000 rebuttals • Put the word \"reengineering\" And 20+ books into the English language. All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info

Book of 2005 • Thomas Friedman – 3 billion people (consumers & producers) entered the world economies • Eastern Europe (ie: Rumania) • Asia (ie: China, India) – Now we have a “new” economy: • Interconnected (fiber everywhere) • Standardized (Open Source) • Supply Chains Management • Out-sourcing, In-sourcing, Off-shoring • Info sourcing All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info

Book of 2008 • Stephen Baker introduces us to the mathematical wizards who are digging through our data to decode us as patients, shoppers, voters, potential terrorists—even lovers. • translate the complexity of highly intelligent knowledge workers into the same types of equations and algorithms that are used to fine-tune shipping, sales and other BI applications. All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info

Moving from PRODUCT to a SERVICE ? • Represents a change in BUSINESS MODEL ? • Represents a “disruptive” change ? YES CLOUD COMPUTING and SOA are basically new “disruptive” ways of delivering IT All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info

Wisdom of Clouds : \"cloud computing\" 4What's revolutionary is not cloud computing itself but how the pieces have come together to make doing business in the cloud seem increasingly like an economic inevitability 4Cloud Your Text here is a simple concept: computing Your Text here • Software and services are delivered over the Web and through a browser. • No servers or client software to install. • Available anytime, anywhere, from any device connecting to the Internet All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 61

What is Cloud Computing? 1. data and services reside in massively scalable data centers 2. accessed from any connected devices over the internet. Web 2.0- enabled PCs, Businesses, 4+ billion phones by 2010 TVs, etc. from startups All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info to enterprises

Cloud Computing Architecture Apache Virtual Virtual Virtual Virtual Machine Machine Machine Machine Monitoring Agent Open Source Linux with Xen Data Center – 64 bit X86 Virtualized Infrastructure based on Open Source Linux & Xen Monitoring Provisioning Baremetal & Xen VM Monitoring Provisioning Application Server DBMS Manager Management Stack All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info

Cloud Computing Modularity Desktop as a service Software as a service (standard applications) Platform as a service (custom applications) Infrastructure as a service (compute, storage, network) All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info

Which road should we take ? Alice came to a fork in the road. “Which road do I take?” she asked. “Where do you want to go?” responded the Cheshire cat. “I don’t know” Alice answered. “Then” said the cat, “it doesn’t matter”. Lewis Carroll, Alice in Wonderland All Rights Reserved @STKI Moshav Bnei Zion, Israel +972 9 74 444 74 www.stki.info 68

Defining the new world

Access Proliferation • Video games • Radio • Satellite Radio • Email • DVD • TiVo (Starhub PVR) • XBox LIVE • Ring Tones • Video On-Demand • Websites • TV • Newspapers • IM • Blogs • Podcasting • Search • Magazines • Cell Phone Source: Darwin Day Conference, Google

The Peopleware Ecosystem Identity Management WCM Composite App. Wireless Security Framework SSO Application Servers Expertise Location EAI & Mgmt. Collaboration Web Services Peopleware BAM BPM Directory E-Forms/Workflow E-Learning Search Development Tools Business Intelligence DM Knowledge Mgmt. All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info

Neo-nomads : new Bedouins flourishing in the coffeehouses of central Israel • A new breed of worker, fueled by caffeine and using the tools of modern technology • They are typically armed with laptops and cell phones, paying for their office space and Internet access by buying coffee and muffins • This neo-nomads see themselves changing the nature of the workplace, if not the world at large. All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info

Nomad Worker (2008) vs. Paris Existentialist (1950s) 4Tel-Aviv geek with earphones and laptop in Arcaffe (2008) • simultaneously cramming for exams, napping, instant- messaging, researching, reading and discussing, listening to music, browsing and e-mailing Your Text here Your Text here 4Paris existentialist watching the world go by at the café Les Deux Magots (1950s) • puffing a Gitane, napping and jotting down notes about being and nothingness All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 76

OLDENBURG: how infrastructure… 4Time is primarily spent in : • First (home) place: isolated • Second (work) place: isolated • Third places : neutral public space to connect and establish bonds. 4Big Changes now: Your Text here Your Text here • Between 1990-2006: people went to anonymous locations such as malls • Starting in 2007: good third place makes admission free or cheap (the price of a cup of coffee), offers comforts, is within walking distance and draws a group of regulars. All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 77

Infrastructures influence work • infrastructure makes it possible for people to work where they want, when they want, how they want • SIX abilities needed: 1. Design – Beauty and uniqueness 2. Story – More than mere facts 3. Symphony – Seeing the big picture 4. Empathy – Understanding others 5. Play - Enjoyment 6. Meaning – Fulfillment All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 78

2007: the year of my discovery • “SACRED ORDER OF THE EXTERNAL MIND” I could outsource mental tasks Life is a math problem and I have a calculator • MAGIC OF THE INFORMATION AGE Not that it allows us to know more It really allows us to know less All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 79

An example: my romantic attachment to my “GPS” GPS • EXTERNALIZE GEOGRAPHIC INFORMATION FROM MY BRAIN • OUTSOURCE MAP READING SKILLS • ALLOW CALCULATION OF DRIVE TIME All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 80

I have outsourced part of my life to external cognitive servants: • No longer need a • Musical taste: memory – ITunes – Google – Yahoo • Books and others: – Wikipedia – Amazon • Personal Information • Social Capital – Smartphone tells me – LinkedIn about birthdays, phones, addresses – Xing – Facebook All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 82

Jimmy’s Touch Points Blog Sites Music Sites Reads his friend’s postings Reads up on new cd releases Movie Sites Downloads Songs Buys tickets online Sports Sites Gets the latest updates on favorite teams Gaming Sites Looks for information Checks scores about Nascar games Google.com Searches for “what’s cool”

“A Pattern Language”, Christopher Alexander 4Each pattern describes a problem that occurs over and over again in our environment 4Then describes the core of the solution to that problem, in such a way that you canhere this solution a million Your Text here Your Text use times over Without ever doing it the same way twice All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 86

Banks YOUtube Business Average person: Insurance Slideshare Simulations 10-15 intimate Travel Blogs Training 150 social “Amazon” Newspapers Second Life 500-1500 weak “e-bay” WIKIPEDIA Sales links Transaction Sites Multimedia Sites Game Sites Social Sites Websites can no longer be islands Users want bridges elsewhere All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 88

A powerful global conversation has begun • Through the Internet, people are discovering and inventing new ways to share relevant knowledge with blinding speed. • Networked markets are beginning to self-organize faster than the companies that have traditionally served them. • As a direct result and thanks to the web, markets are becoming better informed, smarter, and more demanding of qualities missing from most business organizations. • markets are getting smarter and getting smarter faster than most companies All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 89

Companies wake up !!!!!!! 4Customers are: • writing about products on blogs JOSH BERNOFF CHARLENE LI • recutting commercials on YouTube • defining companies on Wikipedia • ganging up in social networking sites like Text here Your Facebook Your Text here 4MOST COMPANIES SEE IT AS A THREAT All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 90

METAweb METAweb phenomenon (fi-nom-uh-non) -noun 1. a rare or significant fact or event in the web that happened in 2007 2. something that is impressive or extraordinary that happened in 2007 All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 92

Google versus ??? 4Humanity emits the data (words, pictures, clicks, and searches are the raw material) 4Handful of cloud-wielding Internet giants like Google, Yahoo! or Amazon.com transform the info into insights, services, and, ultimately, revenue. Your Text here Your Text here All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 94

Cloud Computing A. IBM Introduces 'Blue Cloud' Computing CIO Today - Nov 15 2007 B. IBM, EU Launch RESERVOIR Research Initiative for Cloud Computing IT News Online - Feb 7 2008 C. Google and Salesforce.com in cloud computing deal Siliconrepublic.com - Apr 14 2008 All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 96

Google 10 years of innovation Core Search Ads Monetization Communications Collaboration ? 1995 1998 2000 2003 2004 2005 2007 ? All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 98

Google ad

Open for Business

Internet2: 2.4 Gbps plumbing 109

Leveraging the Web for Measureable Business Results • Gone are the days when merely having an online presence was a business breakthrough. • Today's companies MUST leverage the power of the Web if they're to gain and maintain a competitive advantage. All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 110

In 2010: all new WEB experience 4Soon each website will become a 3 dimensional room that can be experienced alone or with friends Your Text here Your Text here All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 111

Create your own virtual space Chat and interact with your friends in rooms you design Express yourself Customize your avatar and stream personal photos and video Add your room to your site Invite your friends to chat and help decorate All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info

Second Life is the biggest virtual world • 40,000 concurrency (at any time) Million Square Meters of • 450,000 active users (last 7 days) Second Life Land • 1.4 m active users (last 2 months) • 10.6 m total accounts • 2 m assets created per day • 35 TB of user-created data • 800,000 unique items sold or traded per month • 500 events per day • 15 m concurrent scripts Total User • 10 Gbps peak bandwidth Hours (millions) Source: Linden Lab Source: http://secondlife.com/whatis/economy-graphs 116

Currency: Linden$ • LindeX exchange operated by US$ Spent by Users Linden Lab (in Millions) – Buy: USD $.30 transaction fee – Sell: 3.5% transaction fee • Monetary policy 270 L$ =$1 USD US $ Exchanged on Lindex (in Millions)

Economy • Reuters • Banking and credit • Stock markets – SL Capital Exchange (US, 20 listings) – World Stock Exchange (Australia, 15 listings) – VSTEX (Italy, 7 listings) – Ancapex (US, 3 listings)

Advisory/Analyst firms We hope that during 2009 STKI will be present there and will have it’s first SUMMIT H&R Block Island KAWG&F (Baltimore MD CPA firm), CPA Island BDO Stoy Accenture Hayward Island

Business IBM Preen Motorati Preen Principal: Cisco SpokesAvatar: Aimee Weber caLLie cLine Dr. Dobbs Life 2.0 Conference Best Buy’s H&R Block 120 Geek Squad

Academia, museums, non-profits Princeton Art Gallery Science Friday International Computer History American Cancer 121 Spaceflight Museum Museum Society Relay for Life

Government, politics and collective action US Congress – hot topic US Congress legislation European Campaign HQs Davos protest Community All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info

METAweb REVOLUTION 4The real, long-term change is just beginning to be felt, and anyone thinking about our economic future should consider this: • access to information is a democratizing force • makes it inexpensive and easy to collaborate and share information. Your Text here Your Text here • even the smallest companies can now have as big a presence online as a multinational corporation The revolution may have started in a garage in California but it has already crossed every border moving as freely around the globe as a cloud All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 123

post 2008 innovation economy (old version)

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