Creating value in the digital economy Prof Mark Skilton  May 2014
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Creating value in the digital economy Prof Mark Skilton May 2014

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The concepts of digitization, the digital economy and digital architecture prafctices for value creation. The talk covers the following topics ...

The concepts of digitization, the digital economy and digital architecture prafctices for value creation. The talk covers the following topics
-Physical economy, digital economy and role of digital -ecosystems
-Multisided market platforms (MSPs)
-Open Platform 3.0TM
-Generative Platforms and Modular architecture
-Design Lessons

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Creating value in the digital economy Prof Mark Skilton  May 2014 Creating value in the digital economy Prof Mark Skilton May 2014 Presentation Transcript

  • Prof. Mark Skilton Professor of Practice, Information Systems Management Warwick Business School, UK m.r.skilton@warwick.ac.uk
  • Agenda Physical economy, digital economy and role of digital ecosystems Multisided market platforms (MSPs) Open Platform 3.0TM Generative Platforms and Modular architecture Design Lessons Prof Mark Skilton Copy right 2014 2
  • Physical Economy, Digital Economy and role of digital ecosystems 3 Physical Economy Digital Economy Digital Ecosystems Physical markets Companies, resources and services that contribute to GDP and Net worth The digital ecosystem is a described boundary of a market and business activity that is using connected technologies to enable a new kind of market and business performance and user experience Virtual resources and digital transactions in markets, Companies, resources and services that contribute to GDP and Net worth Prof Mark Skilton Copy right 2014
  • Multi-sided Market Platforms (MSP)s 4Prof Mark Skilton Copy right 2014 Many current academic research activities are focused on MSPs In principle MSPs provide an “environment” for economic , social exchange of products and services Industry Sectors Products and Services Types of Consumer and provider Groups, data , metadata and behaviors Types of Devices, Systems and Services MSP Types of governance, Auditors, Certification and Security assurance providers and services
  • Value, Worth and co-benefits Value The intrinsic monetary of an object, relationship or transaction e.g. a cup of tea is made up of a cup , tea, water (1) Worth The associated value between two or more parties for a object, relationship or transaction. E.g. A cup of Tea is a warm, soothing, pleasant drink (1) Something that may have value does not necessarily have worth Co-benefits The creating and association of shared or individual benefits from the inclusion and cooperation of two or more entities, parties (2) References: 1. Creating New Markets in the Digital Economy: Value and Worth http://www.amazon.co.uk/Creating-New-Markets-Digital-Economy/dp/1107627427/ref=sr_1_1?ie=UTF8&qid=1396527655&sr=8- 1&keywords=irene+ng 2. UN IPCC WGIII AR5 Climate Change Mitigation Report April 12 2014 http://www.ipcc.ch/report/ar5/wg3/ http://report.mitigation2014.org/spm/ipcc_wg3_ar5_summary-for-policymakers_approved.pdf 5Prof Mark Skilton Copy right 2014 Physical Economy and Digital Economy
  • Open Platform 3.0TM Value and Worth co-benefit Drivers 6Prof Mark Skilton Copy right 2014 Brands & Markets OP3Able to grow and drive Brand value Modularity & Tiers Value & Worth Able to architect and build trusted, reliable ecosystems of Products and Services across networks and technologies Able to access and address customer markets to grow and scale communities to monetize and create sustainable value
  • Enabling Devices, Communities to create Value-in-Context 7Prof Mark Skilton Copy right 2014 Brands & Markets OP3 Modularity & Tiers Value & Worth Industry Bodies e.g. Connected Car Cloud Platforms Mobile Device Platforms Supply chains Branded Services Telecoms Platforms Public Social Platforms Enterprise Collaboration Platforms Market Trading Platforms Digital Economies Digital Businesses Social and Data Behaviors Digital Value Networks Trusted Services Boundaryless Information Flow TM
  • Massive Scaling era 2015 -2035 8Prof Mark Skilton Copy right 2014
  • Massive internetwork era 9Prof Mark Skilton Copy right 2014
  • Generations of Platforming & modularity 10Prof Mark Skilton Copy right 2014 1980 1990 2000 2010 2020 2030 Platform 1.0 Platform 2.0 Platform 3.0 Cloud management Multi-Client – Multi-Server Multi-band Internetworking Mobile networking REST, API connectivity Long tail emergence Client – Server Virtualization Early Internetworking Large scale clustering Industrial Internet Ubiquitous sensors Internet of things Quantified Self Quantified life.. PC era Ultra large scale Data Virtual communities Crowd sourcing Multi-device, object Modular OS Distributed services Nested services Massive Scaling Internet Foundations Web services & PC era
  • The Industrial Internet era 2020.. Industry sectors, multi-disciplines and Internet of things (IoT) driving sustainability and climate economics Industry Sector targets ○ Energy Supply - generating and distribution ○ Transport ○ Buildings ○ “Industry” ○ Agriculture, Forestry and Other Land Use (AFOLU) ○ Human Settlements, Infrastructure and Spatial Planning ○ ICT - practices Greenpeace March 2014 Your Online World: #ClickClean or Dirty? http://www.greenpeace.org/usa/en/media-center/reports/clickingclean/ UN IPCC WGIII AR5 Climate Change Mitigation Report April 12 2014 http://www.ipcc.ch/report/ar5/wg3/ http://report.mitigation2014.org/spm/ipcc_wg3_ar5_summary-for-policymakers_approved.pdf 11Prof Mark Skilton Copy right 2014
  • Industrial Internet, the Quantified Self and the Quantified Life 12Prof Mark Skilton Copy right 2014 OP3 Sensors and Internet of Things … Industrial Internet Quantified Self, Quantified Life.. Crowd sourcing, funding , Open Innovation New mechanisms New information models New objects New Markets
  • Digitization in context 13Prof Mark Skilton Copy right 2014 Societal Level Organizational Level Object Level - Digital inclusion - Ethics and Privacy - Legality, trust, competition law - Shape of organization - Social organizations – formation & evolution - Reprogrammable, reflexive - Embedded - Augmented
  • Concepts of digital architecture 14Prof Mark Skilton Copy right 2014 Generative structure Temporality of design = Temporal sequencing and pace Subjective experience of time Source: Yoo 2014 Outcome Architecture Scenario “ Reduce X by 50% “ Change Architecture
  • Example: Apple iPhone Architecture & Modularity generativity 15Prof Mark Skilton Copy right 2014 June 29 2007 1st Gen Quad-band GSM with GPRS and Edge 2nd Gen July 11 2008 iPhone 3G “Obsolete” June 11 2013 3rd Gen 4th Gen 5th Gen 6th Gen 7th Gen 8th Gen iPhone 5C, 5S iPhone 6iPhone 5iPhone 4 dual-core 64-bit A7 processor TouchID Fingerprint higher-resolution 960×640 "Retina Display“ + Front facing VGA 5 M Rear facing + Record 720p 3G network A-GPS Location iPhone 4S Dual-core A5 Natural Language Siri 8 M Rear facing + Record 1080p Thinner, lighter, 4 inch Display dual-core A6 processor iPhone 3GS Faster CPU Record 480p iPhone 2G June 19 2009 June 24 2010 October 14 2011 September 21 2012 September 20 2013 September.. 2014 Memory 128MB 256MB 512 MB 1 GB LPDDR2 1 GB LPDDR3 OS 3.1.3 iOS 4.0 (Facetime) iOS 6.0 (Map..) iOS 7.0 GPU 150MHz 150 MHz 200 MHz 2-core 3-Core 4-Core (5S) iWatch? Started 2004 Development steered away from tablet to phone “Project Purple” 1000 employees Secret collab with Cingular Wireless (AT&T Mobility) Dev Cost Est $150 million over 30 months. 3-4 Yrs 3-4 Yrs
  • “Apple’s iPhone Revenue Exceeds All The Money Made By Microsoft And Amazon” Sept 2013 16Prof Mark Skilton Copy right 2014 Apple only has 7% of phone market (huge) (Steve Jobs said he would be happy with 1% ..) Phone brings in 60% Market profit ... A “ubiquitous Luxury” product $88.4 billion in annualized revenue … http://www.statista.com/statistics/263401/global-apple- iphone-sales-since-3rd-quarter-2007/ http://elitedaily.com/news/business/apples-iphone-revenue- exceeds-all-the-money-made-by-microsoft-and-amazon/ 5C, 5S 4S 5
  • iPhone if it were a company or Apple a country….. 17Prof Mark Skilton Copy right 2014 http://elitedaily.com/news/business/apples-iphone-revenue- exceeds-all-the-money-made-by-microsoft-and-amazon/ Apples cash reserve $147 Billion is 58th richest country Higher than Vietnam GDP. ( Australia + UK Reserves) Apple is 1st place most valuable Global Brand (interbrand)http://www.huffingtonpost.co.uk/2013/10/02/apples-cash-hoard- is-147-billion_n_4028576.html September 2013
  • Apple 2007 - 2013 18Prof Mark Skilton Copy right 2014 http://www.macrumors.com/2013/07/23/apple-reports-q3-2013- quarterly-results-6-9-billion-profit-on-35-3-billion-in-revenue/ http://en.wikipedia.org/wiki/File:Apple_revenue_breakdown_2007 Q4.svg
  • Innovation cycles of Architecture Generations and modularity 19Prof Mark Skilton Copy right 2014 Time Generations Core Architecture Adjustments Adjustments New Core Architecture Adjustments Adjustments Change Architecture Design evolves in a series of activities and events Temporality of Work Source: Yoo 2014 Communitization Communitization Co-value Creation
  • Platforming and modular Architecture In the Case of Apple there were platform and modular changes in Hardware and Software simultaneously that created several step changes to enable new scaling capabilities and generative performance. Many of these were baked into the Operating System updates to create architectural changes to enable these advances. Example: GPS location based services Touch and Movement sensors (for tactile use and gaming) Front and back cameras for video chat itunes music store (modular scaling and monetization) Apps Store ( “ “ ) Book store ( “ “ ) Siri natural language voice recognition This was a platform and modular architecture strategy working at hardware, software, OS and content and networking levels. 20Prof Mark Skilton Copy right 2014
  • Quantum Strategy of Apple 21Prof Mark Skilton Copy right 2014 http://www.wbs.ac.uk/news/quantum-strategy-at-apple-inc/Source: Heracleous 2013 “Apple has achieved its outstanding performance through effectively implementing an unconventional strategy: differentiation through innovation (along various dimensions that include serial, strategic and incremental innovation), with simultaneous intense levels of efficiency, leading to the lowest costs in its peer group.”
  • But is this sustainable in the future Internet of (All) Things ? Examples of partial contextual worth AMAZON dynamic Pricing The variability of prices is flexed depending on demand availability GOOGLE in-webpage dynamic Advertizing Contextual look-up and targeting APPLE integrated account and payment Consumer profiling and services UPS / Retail /providers integrated supply chain RFID, GPS Vendor Management Inventory All these are vertical value ecosystems – there is very little horizontal connectivity - NOT CONNECTED WORKSPACES 22Prof Mark Skilton Copy right 2014
  • The “Smart Hotel” 23Prof Mark Skilton Copy right 2014 Loyalty cards, services In room services Maintenance services Room facilities Reception services Room Cleaning Services Travel and Boking services Connections and Transport Rooms & Facilities Reordering and Brands
  • 24Prof Mark Skilton Copy right 2014
  • What is the impact of the Internet of (All) Things ? 25Prof Mark Skilton Copy right 2014 • Ethics, Privacy, Security, Trust, Rights ? o How to federate Identity to many ecosystems o How to assure services – the value of trust and assurance. THE CONTEXTUAL SELF • Value propositions? o TeleHealth o Lifestyles o Social preferences o Location proximity knowledge .. o Protection services o Medical services o Insurance services o Societal value o ….
  • Towards a connected society 26Prof Mark Skilton Copy right 2014 Mobility value Social value Big data value + + Sensors value +Cloud value + Machine Intelligence value + + THECONTEXTUALSELF Industrial Internet Connected Spaces Connected workspaces - objects, bodies, rooms - Transport, buildings, cities… Connected industries - Legislation, interoperability - Bandwidth, Governance
  • Connected spaces – augmented value 27Prof Mark Skilton Copy right 2014 Social Mobility Sensors Big data Cloud Machine Intelligence Digital Ecosystems value value value value value value
  • Digital Value reinforcement cycles 28Prof Mark Skilton Copy right 2014 Social Mobility Sensors Big data Cloud Machine Intelligence value value value valuevalue value Create co-presence Creates location context services Multiplicity access to apps & content Creates real time context and feedback responsiveness Creates multi sense rich event awareness “wearables” Creates “long tail” federated services Create Real Time Experiences & responses Augmented ML H2M experiences Access & connectivity Create data “memory” persistence & record Loyalty, Gaming behavior Provides uniqueness profiling Data quality insight Targeting advice Contextual data Creates insight Decision quality
  • Value contextualization 29Prof Mark Skilton Copy right 2014 Social Mobility Sensors Big data Cloud Social contextualization Presence contextualization Meaning & affectation contextualization Temporal event contextualization Machine Intelligence Capability access contextualization intelligence contextualization Digital Ecosystems
  • Digitization Changes physical to virtual properties of objects, places, events, locations, rooms, building, resources, relationships and environments. Digital objects have characteristics that do not exist inherently in physical objects can to reprogrammed, replicated, self-referential and reflexive Enables interoperable and portable contextualization Products and service experience can to “emulated” and “moved around” Creates contextualized value Can share experiences between participants that are not necessarily in the same physical space but can Value-in-use Value-in-context 30Prof Mark Skilton Copy right 2014
  • Contextual and out-of-contextual Non-contextual The product or service options and choice are not specifically contextualized to the consumer or mediator needs, wants, behaviors or situational preferences Contextual Offering contextual choices taking account of situational factors, needs, wants and behaviors Note: The Situational factors could be based on past, current or future predicted locational and relative outcomes 31Prof Mark Skilton Copy right 2014
  • Value creating outcomes Digitalization creates alignment between attributes and outcomes 32Prof Mark Skilton Copy right 2014 Attributes Price Speed Size Weight Connectivity e.g. wifi Ambience - Outcomes Enjoyment Socialized learned Gained Knowledge Saved time - - - C O N T E X T U A L I Z A T I O n
  • Platforming and modularity to enable Value Creating outcomes Digitalization creates alignment between attributes and outcomes 33Prof Mark Skilton Copy right 2014 Attributes Price Speed Size Weight Connectivity e.g. Wi-Fi Ambience - Outcomes Enjoyment Socialized learned Gained Knowledge Saved time - - - CONTEXTUALIZATION OUT-OF CONTEXTUALIZATION Commodification offers Personalization offers
  • Conclusion - Lessons in Digital design digitization has consequences – ethics, privacy, trust, competition, social & societal threats Paradox 1. Cost and Performance is by design Paradox 2. Privacy and monetization is a trade-off between consumers and providers Paradox 3. Need for connectivity but cost of operation scaling affordability 34Prof Mark Skilton Copy right 2014
  • Paradox 1. Cost and Performance is by design 35Prof Mark Skilton Copy right 2014 Technology Cost per Outcome Progressive technology innovations Price per unit of technology Cost to achieve Outcomes by Industry contexts Market Contexts Paradoxical Variation Scenario A Scenario B
  • Paradox 2. Privacy and monetization is a trade-off between consumers and providers 36Prof Mark Skilton Copy right 2014 Provider dominant Market Model External – Markets driven Your Data Self Monetization Mechanisms - Advertising - Links to merchandizing Out-of-context Search, Collection Aggregation Computation Collected and derived data Strong association Weak association context domain Personal Data Meta Data (Some Contextual) Value exchange Right to use my information? How I can use my information for my value (in-context) ? Right to be Forgotten?
  • Paradox 2. Privacy and monetization is a trade-off between consumers and providers 37Prof Mark Skilton Copy right 2014
  • Paradox 3. Need for connectivity but cost of operation scaling affordability 38Prof Mark Skilton Copy right 2014 O-DA (Trusted Assuredness , FACE (Open controlled Connectivity)
  • Conclusion - Lessons in Digital design Lesson 1. Understanding digital platforming and modularity can create monetization scaling Lesson 2. Digitization on contexts enables value-in- context Lesson 3. Digitization has the potential to reinvent any object and its value offering 39Prof Mark Skilton Copy right 2014