technology driven change in economies, industries, firms...

USKarmarkar © 2014 BIT2014Auckland/1

Technology Driven Change in Economies, Industries, Firms, & Jobs

Uday Karmarkar Director, The UCLA BIT Project

Distinguished Professor, LA Times Professor of Technology and StrategyUCLA Anderson School of Management

The 2014 Global BIT ConferenceTechnology Enabled Business Models

March 27-28, 2014; The University of Auckland, Auckland NZ


The UCLA Business and Information Technologies (BIT) Research Project

Global research network of leading research institutions in 15 countries Global survey of technology impact on

business (in 12 countries, six languages) GNP/Labor/Trade studies of economic

evolution by country (five countries) Technologies, Business Issues and

Sector Studies (several countries) Comparative studies of technology use

and business practices across countries


UCLA BIT Global Research Network

IAE, Buenos Aires, Argentina

PUC, Santiago, Chile CINTEL, Bogota,

Colombia Innovation Institute, Zagreb

Croatia ESMT and Humboldt

University, Berlin Germany University of Athens,

Athens Greece SDA Bocconi, Milano,

Politecnico di Torino Italy

U.of Malaya, Malaysia

Korea U Business School, Seoul, Korea

U.of Auckland, New Zealand

ISCTE, Lisbon, Portugal

ESAN, Lima, Peru

IESE, Barcelona, Spain

U.of Lugano, Switzerland

National Sun YatSen U, Kaohsiung, Taiwan


Picturing the Economy

Products Services

Material

Information

Steel, CementAutomotive

Consumer Goods

ComputersBooks, Magazines

Data basesMusic CD’s

TransportationRetailing

Construction

TelecommunicationsFinancial ServicesNews/Information

Consulting

Delivery Form

End product


US GNP Breakdown (2007)

Apte, Karmarkar, Nath, “The Information Economy: Value and Jobs” (2012)

Services

Material

Information

10.2%

5.3%

29.6%

54.9%

15.5% 84.5%

60.2%

39.8%

Products


The S. Korean Economy (2005)

19%

50%

20%

11%

PRODUCT SERVICE

31% 69%

61%

39%

MATERIAL

INFORMATION

Choi, Rhim, Park, “New Business Models in the Information Economy”, BIT Korea


The Italian Economy (1995-2009)

1995 Prodotti Servizi

Tangibili 31% 42%

Intangibili 2% 25%


Tangibili 19% 41%

Intangibili 4% 36%


Tangibili 16% 40%

Intangibili 4% 40%

Baglieri, Zambolin, “The Future of Services”

56%

44%

80%20%


The Chilean Economy 2003

Sergio Godoy, et al., “La empresa chilena en la economía de la información”, BIT Chile 2007


New Zealand GDP Trends


New Zealand GDP


2008 2009 2009 %Finance & Business Services 36,228 36,793 27.6%

Manufacturing 18,597 17,612 13.2%

Personal & Comm Services 15,504 15,947 11.9%

Transport & Communication 14,304 14,334 10.7%

Retail, Hotels, Restaurants 10,410 10,042 7.5%

Wholesale Trade 10,523 9,973 7.5%

Govt Admin & Defence 6,374 6,673 5.0%

Agriculture 6,472 6,310 4.7%

Construction 6,592 6,010 4.5%

Fishing, Forestry, Mining 3,419 3,335 2.5%

Electricity Gas & Water 2,509 2,522 1.9%

GDP 135,367 133,486 100.0%Primary Industries 10,051 9,801 7.3%

Goods Producing Industries 27,833 26,305 19.7%

Services Industries 92,898 93,504 70.0%

New Zealand Treasury: http://www.treasury.govt.nz/

New Zealand GDP by Sector (mm NZD)


US Employment, Number of Jobs (2007)

Non-Information


Information

Services

7.5%

3%

44.5%

45%

14% 86%

48%

53%

Products


US Wage Bill Distribution (2007)


Information

Services

Non-Information6.4%

4.3%

36.8%

52.5%

10.7% 89.3%

56.8%

43.2%

Products


US Average Relative Wage Rates (2007)

Information

Services

Non-Information 59

100

58

82

Products



Causes of Economic Evolution

Reasons for the trends (Baumol)• High productivity growth in manufacturing and

low productivity growth in services• Changes in GDP, employment, wage shares

Now, a new technology driven dynamic• The “industrialization” of services• The growth of service productivity, competition• The impact on jobs and employment• Globalization of information and service chains• Massive change in many industry sectors


Service Industrialization Unlike industrialization of manufacturing Different path for scale, power, standardization Standardization of process via ICT

• Automation of data management and processing• Component and object based software• Low cost “logistics” through telecommunications• Distributed processing

Now migrating up to modularization of business processes, multi-tier service “chains”

And to modularization of businesses, industries With similar consequences for productivity,

globalization, competition, innovation


Service Industrialization Looks a bit like manufacturing in the 60’s,70’s

• Automation• Out-sourcing, virtualization• Off-shore sourcing • Process reengineering• New processes and new services• Operations shifting (in the service chain)

• Self service (shift processes to consumers)

Supported by • Network logistics, B2B services (cloud,

platforms, SaaS, IaaS), distributed work


Vast Consequences

Economies: GNP, jobs, wages, trade, investment, income inequality

Sectors: globalization, reach, lateral bundling, vertical de-integration, modularization, commoditization

Companies: virtualization, distribution, platform strategies, new processes, front office automation, re-organization

Jobs: redefined work, automation, new jobs, shadow work, global workforce


Biggest impact: Info intensive services

Financial Services (banks, insurance) Software and IT enabled services Business Services Business data management Publishing, entertainment/media Telecommunications Education Government


All Sectors Affected Health care: diagnostics, EHR, telemedicine

Manufacturing: management, systems, factory automation, sensor data, CIM, virtual plants

Supply Chains, Distribution, Retailing: Asset & vehicle tracking, RFID, eCommerce, package tracking, monitoring, self service,

Internet of Things, smart systems, home robots

Industrialized organizations: CRM, data and content management, IS services, enterprise planning, business processes, transactions, accounting and costing, HR management, distributed and virtual organizations


Info-intensive Businesses

Technology (hardware,software) affects all layers

New services appear to serve businesses

These changes affect economics of processes

Business tradeoffs change, sectors re-structure

One important consequence is “convergence”

Base Infrastructure

Infrastructure Services

Information Products Information Services

Information Chains

B2B B2B B2CB2C


Converged Logistics (forward links)

Create

Process

Store

TransportServer

Distribute

OS

/Bro

wse

r

Screens

ServicesCapture

Assemble

Appliances

Content


Convergence in Info Chains

Cannot happen in physical (supply or service) chains and systems

Physical chains (steel and wood) may partially substitute, but cannot converge

Commonality in form, tools, process, use can extend to entire chains and sectors

Technologies also allow for new structural forms, markets, services


Example: Consumer Imaging

Capture Film, Camera Digital camera

Transport Film Disk, card

Process Photofinisher Software, PC

Archive Photo album Digital Media

Transport Mail photo Online or batch

Display Photo Screen, print













Film-based Digital


Vertical De-integration Economics of media (film, paper, CD’s)

the major reason for vertical integration• High fixed costs of production• Media served multiple functions • Linked production, distribution and use• Proprietary technologies (photochemicals)

Now: digital = media-less • Simple loss-less, cost-less interfaces between

stages, low cost transport, storage• Functional decoupling, process independence• Common technologies across different chains,

sectors (convergence)


Lateral or Horizontal Dominance

Store

Transport Distribute

OS

/Bro

wse

r

Process

Store

TransportServer

Store

Transport

Services Appliances


Short Circuits: Direct to Customer

Process

Store

Transport Distribute

OS

/Bro

wse

r

Screens

eMarkets

Assemble

Appliances


Back to Barter: Community Exchanges

Process

Store

Transport

AssembleServer

Screens

Exchange


Apple: Content Store and Appliances

Create

Process

Store

TransportServer

Distribute

OS

/Bro

wse

rCapture

Assemble

AppliancesContent

ContentStore

Appliances

Screens


Apple becomes a consumer products company(3Q Revenue Breakdown 2006-2011 %ages)


Who Wins? Basic hardware or simple B2B services?

• Overcapacity, commoditized

Consumer service platforms: the new brands

• eBay, Amazon, Google, Yahoo, iMode

Telecom: big but not so profitable

• Need to learn how to bundle (iMode)

Screens and appliances near the head and in the home

• Apple, Samsung (Nokia? Sony? Google?)

Operating systems or Browsers?

• The fight continues


Most Visited Websites

Image Credit: Oxford Internet Institute, Dr. Mark Graham, Stefano De Sabbata


Most Visited (English) Websites eBiz MBA Ranking; Number of Unique Monthly Visits

1 Google 1,100,000,000

2 YouTube 1,000,000,000

3 Facebook 900,000,000

4 Yahoo! 750,000,000

5 Amazon 500,000,000

6 Wikipedia 475,000,000

7 eBay 350,000,000

8 Twitter 290,000,000

9 Bing 285,000,000

10 MSN 280,000,000

11 Microsoft 275,000,000

12 LinkedIn 250,000,000

13 WordPress 240,000,000

14 Pinterest 150,000,000

15 Ask 145,000,000



Platform Player Market Caps (2013)

Apple: $507 Bn

Google: $373 Bn

Microsoft: $313 Bn

Samsung: $196 Bn

AT&T: $186 Bn

Amazon: $185 Bn

Vodaphone:$189 Bn

Samsung: $ 174 Bn

Disney: $131Bn

Ebay: $ 70Bn

NTT DoCoMo: $67 Bn

Baidu: $58 Bn

Facebook: $56 Bn

Twitter: $ 52 Bn

Yahoo: $ 37 Bn

Sony: $ 17 Bn



Newspapers


Information Services

Content based (entertainment)

Transaction (financial, ecommerce)

Functional (search, GPS, email)

Market and exchange (YouTube, eBay, craigslist, Amazon, Groupon)

Social Communication and Networking (Facebook, LinkedIn)


Diagnostic Imaging

Machine

SCAN

Radiologist

Interpret

Clerk

Transcribe

ImageArchive

CustomerQueue

Report

To Physician

Customer

Tape

Technologist


Decoupled Processes

Machine

SCAN

Radiologist

Interpret

Clerk

Transcribe

ImageArchive

Customer Queue

To Physician

Customer

Tape

Technologist

Report


Industrializing Service Chains

Outsourcing of scans – being done

Outsourcing of diagnosis – being done

Automation of diagnosis? Coming

Off shore diagnosis? Starting

Off shore, outsourced transcription – done

Digital distributed archiving

Loss of specialization? Referring physicians can read the images


Takeaways

The Information Economy

Industrialization and Productivity

De-integration of info intensive sectors

Emergence of platforms, bundling

Everything as a service

Appliances: still evolving (wearables)

OS, browsers, apps: shifting balance

Organizations, jobs, changing evolving


BIT Research Volumes


technology driven change in economies, industries, firms...

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