The Great Confusion: The Digital Economy Continues to Surprise
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The Great Confusion: The Digital Economy Continues to Surprise

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

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

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  • The title of this talk calls for a few explanations.First, I claim that digitalization is largely misunderstood and mismeasured, which leads to inappropriate decisions in business and in the public sector.Second, since digitalization breaks old industrial silos, reduces barriers to entry, as well as increases the ability of new business to scale up and to reach new markets, a continuous flow of challenges to existing businesses is a build-in feature of the digital economy.While we can learn something from history, and we can make plausible predictions regarding the future in all honestly, our collective ability to understand digital presence let alone the future is just not very good. By the time I’m done with this talk, at least this much will be obvious!My talk serves as a general introduction for the topic. The digital economy is quite complicated. By the time I’m done you will have a headache. Not to worry, I often have that effect on people. And that headache is also a sign of understanding the complexities with this issue.
  • *** BIG DATA ***Morescientific & statistical managementSuomessakin on kohkattu big datassa. Siitä ei ole keskusteltu, että tärkein seikka siinä on datan päälle rakentuva analytiikka. Sen avulla markkinointi, myynti ja jopa liikkeenjohto tieteellistyy. Enää ei tarvitse pohtia, kumpi puoli mainos-euroista menee hukkaan: läskit paljastuu ja leikataan pois.Idea: Siirrä management pointsi tänneExperiments, Google as many as 5000 going on at anygiventime (googleblue)BIG DATA: Insurance and Banking. The likes of Facebook and Google couldcompletelychange the landscape in personalinsurances
  • Think of ”Internet of Everything” as gluethatcombines the virtual and the realworld.Robotics: Hugeimprovements in the price-qualityratio. Bettersenses (sensors) and brains (software) open up new uses. A man-hour of a modernentrylevelindustrialrobot is nowapproaching a totalcostthat is equal to about 5 euros per hour. With thatcostexpandingusernotonly in Finland butalso in China. Three yearsago the chairman of the board of Foxconn, world’sbiggestcontractmanufacturer, claimedthatFoxconnwillby a millionrobots in threeyears; at thattimetheyhadaboutmillionemployees in China.
  • Atomien Mooren laki todeksi? (Joseph Flaherty)Kuinka (massa)räätälöidyksi maailma menee? Ei kuljetusta, varastointia tai viivettä – hyödyt?----Vaikuttaa ehkä kaikkeen valmistukseenDigit. ohjattua, täysautom. & uniikkia on demand
  • Digitaalisuus vaatii usein aika radikaalia oman bisneksen uudelleenajattelua. Yksi haaste on, että analogisilla euroilla on taipumus muuttua digitaalisiksi senteiksi. Esimerkiksi useimmat suomalaiset sanomalehdet koettavat kääntää nykymalliaan sellaisenaan digitaalisesti. Eipä onnistu. Toisaalta rohkenen väittää, että vaikkapa iltapäivälehdille painettu lehti on jo välttämätön paha, jonka pääfunktio on ohjata silmät nettiin, jossa ne oikeammat rahat tehdään.
  • Digitaalisuus vaatii usein aika radikaalia oman bisneksen uudelleenajattelua. Yksi haaste on, että analogisilla euroilla on taipumus muuttua digitaalisiksi senteiksi. Esimerkiksi useimmat suomalaiset sanomalehdet koettavat kääntää nykymalliaan sellaisenaan digitaalisesti. Eipä onnistu. Toisaalta rohkenen väittää, että vaikkapa iltapäivälehdille painettu lehti on jo välttämätön paha, jonka pääfunktio on ohjata silmät nettiin, jossa ne oikeammat rahat tehdään.

Transcript

  • 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)
  • 3. “ 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/
  • 4. 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/
  • 5. 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/
  • 6. picture
  • 7. 1011 0101 1100 0010 3D IoT Nexus of Forces
  • 8. 1 10 × ICT investment × Inv. Org & People Brynjolfsson& Hitt 2003. Computing Productivity: Firm-Level Evidence. Review of Economics and Statistics, 85, 793-808
  • 9. … 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
  • 10. Will we ever invent anything this useful again? Cover of the The Economist in 12 Jan. 2013 (modified)
  • 11. pic in ICT
  • 12. 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).
  • 13. I’ve seen the God… … or is it the Devil? January 2007 Photo: v.gd/D1ZYvo Note: iPad in 2010.
  • 14. Nexus of Forces & Tech Converge opened a huge unmapped & unconquered domain
  • 15. 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.
  • 16. Corporations Systems/hardware Specific solutions Digital evolution Consumers Content/Services Platforms/ecosystems Digital revolution (cf. legacy)    
  • 17. 1011 0101 1100 0010 Power
  • 18. 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.
  • 19. $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 $)
  • 20. 1011 0101 1100 0010 Big Data
  • 21. Volume Velocity Variability Nikulainen 2013. Big Data Revolution: What Is It? ETLA Brief 10. Yes & No
  • 22. The next two slides are directly based on the work of Mark Huberty
  • 23. … 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
  • 24. 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
  • 25. 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)
  • 26. 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)
  • 27. 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
  • 28. Infrastructure IaaS (processing, storing, managing ) Public Private Software PaaS/SaaS (web-based OSs & other apps)
  • 29. 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.
  • 30. The biggest implication: Reduction in the cost of entry particularly in the digital domain
  • 31. 3D IoT ×
  • 32. €3 €300 Special thanks to: Jukka Tuomi, Aalto Univ., BIT Research Centre
  • 33. Complexity & flexibility at no cost Solutions that are impossible with other techs No material waste (EADS/Airbus: 90% less of ti v.gd/ys7AeZ)
  • 34. $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.
  • 35. what
  • 36. Case: Media Corporation (which current has an emphasis on print publications)
  • 37. ” 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
  • 38. 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.
  • 39. 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
  • 40. “ 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
  • 41. The true bottleneck: Ability to see possibilities just beyond the horizon
  • 42. Thank You! Comments, remarks & discussion are more than welcomed: Petri.Rouvinen@ETLA.fi  +358–50–3673474