DOR Futurecast

A Brief History of a Potential Future Presentation for DOR Future Cast Team Dr. Tony O’Driscoll Fuqua School of Business, Duke University

Introduction and Expectations Possible Futures Steep Factors Enterprise Response

Expectations: Spheres of Knowledge Insights Future Distruption STEEP Factors Business Response We’ve been working on this for a while now and we are more confused than ever. BUT we are confused at a higher level about more important things!

Tony’s Brief Bio 18 Years of industry experience in Telecom and High-Tech Industries: HW, SW, Services, Research, Learning Founding member of IBM’s Strategy and Change Consulting Practice Professor of the Practice at Duke’s Fuqua School of Business Teach in the areas of Strategic Management, Management of Innovation and Technology, Management Consulting and Services Management. Research focuses on impact of technology on business strategy and operational efficiency Consult with clients around the world on how to leverage technology to drive sustainable competitive advantage.

The Educator’s Dilemma My Vision My Reality

Meet another Fellow Educator: My Grandfather Michael O’Driscoll

Examining Change in my Grandfather’s Lifetime Transatlantic radio Electricity Radio networks Telephone system Automobiles Air travel Washing machines Television Global monetary system Interstate highway system High Rise buildings Electronic computers Space travel Satellite communications The Internet Global positioning system Cable television systems

Meet My Kids Aidan O’Driscoll Liam O’Driscoll

Change in my Kids Lifetime By the year 2010 the codified information base of the world is expected to double every ______ (2 minutes) 11 Hours Pair Up: Decide what to put in the box!

A Digital Divide of a Different Kind

A Digital Divide of a Different Kind Explosion of information Hyperinflation of time Accelerated pace of change Constancy in human cognitive ability Digital Divide 100y=20,000y

Future View: When Aidan is 27 and Liam is 24 By 2009 computers will disappear . Visual information will be written directly onto our retinas by devices in our eyeglasses or contact lenses. Going to a “website” will mean entering a virtual reality environment. By 2029 we will have billions of nanobots traveling through the capillaries of our brain communicating directly with our biological neurons. Nanobots will take up positions close to very interneuronal connection coming from all of our biological sensory receptors. When we want to experience NON-VIRTUAL reality, the nanobots will just stay still. If we want to experience virtual reality, they will suppress all input coming from the real senses and replace them with the appropriate signals Ray Kurzweil

Defining Virtual Worlds Sources: Business Week April 2006, The Economist. Living a Second Life, Sept. 28, 2006 Second Life is some unholy offspring of the movie The Matrix, the social networking site MySpace and the online marketplace eBay Business Week

Virtual World Economics Source: Joe Miller. Linden Lab Clearly of social activity migrates to synthetic worlds, economic activity will go there as well. The volume of annual trade in synthetic worlds already exceeds $2B Castranova

Describing MMORPGs Most MMORPGs offer players pre-fabricated or themed fantasy world The Economist

MMORPG Economics EverQuest EverQuest’s GDP made the virtual currency of Norrath the 77th largest country in the world – somewhere between Bulgaria and Russia World of WarCraft 8 Million WarCrafters Average = 20 Hours/Week Total WoW hours= 160Million It would take IBM’s entire workforce 12 weeks to match one week of WoW activity

Aidan and Liam: Tomorrow’s Virtual World Workers? I confidently predict my children (4 and 6) will end up working in one of these worlds. Hunter

A Paradigm Shattering Future View: Redux The way Kurzweil expressed it, at some point in time in the twenty-first century the standard personal computing device will have as much computing power as the human brain. Not long after that, it will have the computing power of all the human brains that have ever lived. One important use of all that power will be to upload brains and recreate consciousness inside silicon….. The place that I call “Game World” today, may develop into much more that a game in the near future. It may become just another place for the mind to be, a new and different earth. Castranova

Practical Application Discussion How will Synthetic Worlds Impact: Your Nation? Your State? Your Enterprise (DOR)? Your Life? (5 minutes) Discussion Questions

Value Progression A basic progression governs the evolution of management in all market economies: Fundamental properties of the universe are transformed into scientific understanding, then developed into new technologies which are applied to create products and services for business, which ultimately define our models of organization . Meyer and Davis Economic Value Add Time Science Technology Business Organization

Innovation Diffusion Source: IBM GIO 1.0

Organization Metamorphosis Infrastructure Business Technology Primary Asset Main Output Organization ? ? Agrarian Age (??-1760) Local Market Family Farm The Plow Land Food Products Family Structure Industrial Age (1760-1960) Steel, Railroads The Factory The Machine Capital Equipment Mechanical Products Bureaucracy Information Age (1960-2020) Computers, Internet The Corporation The Transistor Intellectual Capital Knowledge Products

Shrinking Paradigmatic Eras Source TomPeters.com

Welcome to the Molecular Economy Video Clip (Kurzweil and Venter) As the information economy matures, a new economic life cycle – the molecular economy – is reaching puberty. The two primary drivers are our understanding of the molecules that control chemical and biological functions and the super-minitaurization of manufacturing. Meyer and Davis

Compression and the Structural Divide America’s business problem is that it is entering the twenty-first century with companies designed during the nineteenth century to work well in the twentieth. Hammer

Four Phases across Four Economies Time Compression Between Ages Accelerated disruption of existing business/structure TBD TBD Bureaucracy Family Structure Organization TBD Corporation Factory Family Farm Business Genomics Nanotechnology Chips Software WWW Steam Electricity Seed/Feed Plow Technology Mollecular Science NanoScience Quantum Physics Newton’s Physics Laws of Nature Science Molecular Economy Information Economy Industrial Economy Agrarian Economy

Practical Application Discussion How will the Arrival of the Molecular Economy and the “Structural Divide” impact: Your Nation? Your State? Your Enterprise (DOR)? (5 minutes) Discussion Questions

Webvolution 3Di Web 2.0 Web 1.0 Access Participate Value Proposition Poster Children Find Share Collaborate Co-Create

Web 2.0: Definition and Diffusion Definition Diffusion

Web 2.0: Description and Application Web 2.0 is a set of economic, social and technology trends that collectively form the basis for the next generation of the internet – a more mature, distinctive medium characterized by user participation, openness, and network effects O’Reilly

Emergence of New Economic Platforms Reputation Platform (Sales) 3Di Web 2.0 Web 1.0 Access Participate Value Proposition Poster Children Platforms Find Access Platform (Transaction Fees) Search Platform (Advertising Fees) Commerce Platform (Sales) Participation Platform (Membership Fees) Referral Platform (Referral Fees) Alternate Currency Platform (Exchange Fees) Share Collaborate Co-Create Creation Platform (In-World Sales)

Web 2.0 Value Creation Platforms In 2005, eBay conducted 8 billion API-based web services transactions. O’Reilly

Ecosystem based Value Co-Creation McKenna This is more than open source, social networking, crowdsourcing, smart mobs, or the wisdom of crowds. We are talking about deep changes in the structure and modus operandi of the corporation and our economy based on new competitive principles such as openness, peering, sharing and acting globally Tapscott

Enterprise Perspective Deborah Wince-Smith President, Council on Competitiveness

A Billion One-Person Enterprises? Soon it may be time to redefine what we in the business world think of as “the enterprise.” Further, notions of “employer” and “employee” might become more and more antiquated as looser aggregations of collaborators form and disband on an opportunity-by opportunity basis. The future might consist of a billion one-person “enterprises” people who move frequently from project to project as their skills and focus shift. Sources: Global Innovation Outlook 2.0, 2006

The changing role of organization due to the need for innovation….. Source TomPeters.com

Practical Application Discussion How does the arrival of a Billion One Person Enterprises Impact: Your Nation? Your State? Your Enterprise (DOR)? Your Life? (5 minutes) Discussion Questions

Technological: New Rules for Information Economy

The “Always On” Pervasive Web There are more transistors produced per year than grains of rice and each rice grain can buy hundreds of transistors. Goodall (2002)

The Age of Smart Machines…..

From Physical Product to Information Services

Blurring the Lines Between Service and Product Anytime ATM Machines Real Time Intelligent Vending Machines Online PCS health Systems Interactive Sunbeam’s “Blanket with a Brain” Anyplace GM Onstar Service Learning Pandora Anticipating Amazon.Com Filtering Google Reader Customizing Levi’s Upgrading Software Intangibles Source: Blur The difference between products and services blurs to the point that the distinction is a trap. Winners in the Information Age will provide an offer that is both product and service simultaneously. Davis and Meyer Speed Connectivity O F F E R

A trip to the grocery store…. ……… .How different will our lives become in the “always-on” pervasive web era?

The Era of Entrepreneurial Capitalism 3Di Web 2.0 Web 1.0 Access Participate Value Proposition Poster Children Find Share Collaborate Co-Create Entrepreneurial Capitalism Enterprise Endeavor Employee Entrepreneur Control Resources Orchestrate Value Transfer Provide Products and Services Provide Value Transfer Platforms

….or possibly it’s demise? Source TomPeters.com

Practical Application Discussion How does the arrival of Entrepreneurial Capitalism impact: Your Nation? Your State? Your Enterprise (DOR)? Your Life? (5 minutes) Discussion Questions

Societal: Demographics and the Digital Divide 81% of the business population age 34 or younger are gamers 56 million are old enough to be employees 7 million are already managers in the current workforce Sources: Merrill Lynch 1999, Beck and Wade, Got Game., Prensky, Digital Game Based Learning The new generation is huge, 90 million people in the US alone. Already there are more of them around than there are baby boomers. Beck and Wade Digital Immigrants Digital Natives

Societal: Games and Gamers as they relate to business Our research shows that this new generation is very different from the boomers in ways that matter to the business. Beck and Wade They desire systematically different goals in life They have systematically different ways of working How they compete, fit into teams, take risks are all different in statistically verifiable ways They choose systematically different ways to learn Sources: Beck and Wade, Got Game, 2005

Technology has become so essential to corporations that expenditures have grown from 5% of capital spending in 1970 to almost 50% today Technology Expenditures as a Percentage of Capital Spending Source: Bureau of Economic Analysis, 2000 Technology has transformed our society and economy, having a profound impact on America’s corporations. Wyatt

Technological: New Laws for the Information Economy New Laws Moore’s Law: Every 18 months we observe a doubling of the processing power that can be purchased at a given cost. (This may not continue forever.) Metcalfe’s Law: The usefulness or utility of a network is proportional to the square of the number of users of the network. Coase’s Law of Diminishing Firms: Companies continue to grow until “the costs of organizing an extra transaction within the firm becomes equal to the costs of carrying on the same transaction by means of an exchange in the open market.” As transaction costs in the open market approach zero, so does the size of the firm. (predicts virtual organizations) The Law of Disruption or Second-Order Effects: Social, political and economic systems change incrementally, but technology changes exponentially Source: Unleashing the Killer App

Economic: Services Rule A Services Driven Economy…… Since 1950, employment in the manufacturing sector has fallen from nearly 40% of total employment to less than 18% currently, while the service sector employment has risen from less than 14% to more than 35 percent, essentially flip-flopping from where it had been in 1950. Merrill Lynch, 1999 … largely driven by technology positions requiring more skilled workers The demand skilled jobs, which reflects the dominance of technology in the service economy, has increased from 40% in 1950 to 85% in 2000. Linkage, 2001

Economic: The Global labor force migration towards services Top Ten Nations by Labor Force Size (about 50% of world labor in just 10 nations) A = Agriculture, G = Goods, S = Services >50% (S) services , >33% (S) services 2004 2004 United States The largest labor force migration in human history is underway, driven by urbanization, global communications, low cost labor, business growth, and technology innovation. (A) Agriculture: Value from harvesting nature (G) Goods: Value from making products (S) Services: Value from enhancing the capabilities of things (customizing, distributing, etc.) and interactions between things 44 64 33 3 1.4 Germany 30 26 11 63 2.2 Banglad. 30 20 10 70 2.2 Nigeria 40 70 25 5 2.4 Japan 38 65 23 12 2.5 Russia 20 53 24 23 3.0 Brazil 35 39 16 45 3.9 Indonesia 21 70 27 3 4.8 U.S. 28 23 17 60 17.0 India 191 35 15 50 21.0 China 25 yr % delta S % S % G % A % WW Labor Nation

Workforce Evolution Source TomPeters.com Source: Dan Pink, A Whole New Mind

The Industrial Age Work Paradigm Customer Service Operations Supply Chain Innovation Customer Chain Work Activity Focused on Efficiency, Productivity, and Quality Capital Labor Raw Materials Standardized Work Quality Productivity Efficiency Mechanical Product Physical Work Production Based Work

The Information Age Work Paradigm Customer Service Operations Supply Chain Innovation Customer Chain Work Activity Focused on Innovation, Creativity, and Problem Solving Knowledge Based Work Expert Professionals Relevant Information Socially Based Work Innovative Creative Emergent Problem Solution New Opportunity OFFER

Economic: Knowledge Work Usurps Physical Work Physical Work Intellectual Work Factor of Production Knowledge Producer Question Nothing Question Everything Repetitive Tasks Ongoing Challenges Do as you are told Determine what to do Segmented Work Holistic Work Direct Supervision Autonomy “ A Strong back” “A Strong Resume” Industrial Worker Knowledge Worker Source: Nuala Beck, 2000, IBM Analysis Industry Ratio Ag. Production (Crops) 1.77 Ag. Production (Livestock) 7.29 Steel Production 15.96 Auto Production 18.53 Aircraft Production 38.97 Computer Production 57.72 Physician Services 59.31 Legal Services 63.29 Computer Services 73.15 Professional Services 92.68

Economic: People are classified as a cost by accountants not an asset! Accountants value the desk more highly than the person sitting at it . Accounting takes a short-term view of the world. It does not recognize that people become more valuable over time. Jay Cross A Cost Accountant’s (exaggerated) view of the value of a Human Being It is no wonder that our current accounting systems are no longer suited to the business reality they attempt to codify. The value of talented, creative, innovative people shows up as salary cost in SG&A on the Balance Sheet Stephen Covey

Economic: The World is Flat The “ten flatteners” converged to create a web-enabled playing field for collaboration in real time. Three billion people in China, India, Russia, Eastern Europe and Latin America entered the global economy Vertical organizational silos converged to create new process horizontal collaboration. The Ten Flatteners Wireless access and VoIP The Steroids Search from Google, Yahoo, etc. Informing Wal-Mart’s speciality Supply-Chaining UPS takes over logistics Insourcing Collaboration Open-Sourcing Shift entire operation Offshoring Shift work and activities Outsourcing Java enterprise architecture Workflow Overinvestment in fiber optics Netscape IPO A global view appears Berlin Wall Falls

Economic: Low end jobs are becoming history in the US Source TomPeters.com Source TomPeters.com

Economic: Enter the Asian Tiger! Source TomPeters.com

Economic: China - A Giant Slumbers! Source TomPeters.com

Economic: More on Asia Source TomPeters.com

China: A New Factory every 26 Minutes Source TomPeters.com

India’s incredible strength in Software Source TomPeters.com

Today, Creativity is the source off sustained differentiation… Source: TomPeters.com

Environmental: China’s Power Needs

Environmental: Bird Flu Epidemic

Political: 2025 The New Superpowers Military Might Economic Might

Practical Application Discussion How will these STEEP factors impact: Your Nation? Your State? Your Enterprise (DOR)? Your Life? (5 minutes) Discussion Questions

Recommendation 1: Apply virtual communication tools to connect people from around the world Instant messaging Video conferencing Blogs Virtual worlds Voice over internet protocol (VOIP) E-mail Learn about the features, capabilities and appropriate use of different virtual communication channels Incorporate virtual communication tools into day-to-day work activities Leadership Development Actions Tools Organizational Impact Improved employee morale due to enhanced communication and vision-sharing from leadership Faster decision-making due to enhanced ability to communicate with experts in real-time Better recruitment success with young, ‘wired’ professionals (and gamers) +

Recommendation 2: Use collaborative spaces to gather knowledge, express ideas and concerns, and share passions Collaborative spaces Wikis Online communities Virtual worlds Blogs Develop a level of comfort in using collaborative spaces and tools Identify and champion the use of informal communities of strategic value to the organization Incorporate the use of collaborative spaces into major work efforts Improved project management and knowledge management through centralization and organization of explicit knowledge Increased teamwork and efficiency through use of online spaces for specific projects, meetings, or brainstorming sessions Increased visibility and flow of innovative ideas from all parts of the organization Increased ability to evaluate and gauge employee contribution Higher levels of morale and retention through the development of online communities of interest + Leadership Development Actions Tools Organizational Impact

Recommendation 3: Spend more time setting organizational context and communicating organization direction Video conferencing Multi-user interactive events Intranet sites Blogs Wikis E-mail Create, tailor, and communicate a corporate vision and strategy that resonates with a diverse set of employees Develop communication program to systematically deliver vision globally Develop feedback mechanism to evaluate program effectiveness Increased awareness of vision among very diverse global employee base Improved morale and retention of employees who understand where they fit within their company and where the company fits within the greater business world Increased sense of ownership and desire to contribute to vision from engaged employees Leadership Development Actions Tools Organizational Impact +

Recommendation 4: Leverage online tools to improve the visibility of formal and informal skills Personal employee spaces (Myspace) Expertise locators Skills management systems Tagging websites of common interest - folksonomies Enable employees to develop personal spaces that increase the transparency around employee skills, interests and availability Use portal data in conjunction with expertise locators and skill management systems to staff teams based on skills and availability Increased speed and effectiveness in staffing teams and projects Increased retention and motivation of top employees through true results- and expertise-driven staffing Greater ability to provide feedback on skill levels Leadership Development Actions Tools Organizational Impact +

Recommendation 5: Capture real-time information about dashboards Automated dashboards with real-time data feeds from: Expertise locators Skill management systems Employee portals Knowledge databases External and internal data and news feeds Identify business drivers and metrics that impact decision making Develop dashboard that reflects key metrics Improved speed and accuracy of world-wide decision-making through effective gathering and sharing of data Improved forecasting and planning capabilities based on most-recent and most-valuable global data available Improved risk-taking capacity through improved data management Increased visibility of trends and opportunities Leadership Development Actions Tools Organizational Impact +

Recommendation 6: Provide more frequent guidance and link to overall recognition systems Communication channels that can be used to promote new incentive systems Personal portals and organizational intranets that display achievements Look for opportunities to provide more frequent feedback on employee performance Develop spot recognition vehicles that can highlight desired behaviors/results in the short run Communicate and share recognition among team members Increased alignment between world-wide employee behavior and leadership goals Appreciation and reinforcement of leadership that provides clear expectations and then immediately responds when expectations are met through financial compensation, awards, or promotions Increased retention and morale from staff who feel valued by leadership Leadership Development Actions Tools Organizational Impact +

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DOR Futurecast