Capturing Value from The Next 10 Billion Devices

Capturing Value From The Next 10 Billion DevicesPaul R Brody Vice President & Global Industry Leader, Electronics

Our Discussion Today

Entering A New Era In Mobile & Social Computing

The Next Battleground: Distributed, Autonomous Internet of Things

The Shape of Business Models To Come

Writing The Rules of The Next Marketplace

You can see the computer age everywhere but in the productivity statistics.

Robert Solow, 1987

Computers spread through enterprises throughout the 1970s and 1980s even as productivity growth stalled

0

5,625

11,250

16,875

22,500

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

IBM PC Apple II Macintosh Amiga Atari 400/800Atari ST C 64 TRS-80 NeXT PETOther

PC Platform Volumes, 1980-‐1990 jeremyreimer.com

0%

1%

1%

2%

3%

1970s 1980s 1990s

GPD Per Capita Growth, G7 OECD

http://jeremyreimer.com

The 1980s saw intense battles to define the shape of the computing world as multiple Personal Computer ecosystems battled for market supremacy

0%

25%

50%

75%

100%

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

Mac Amiga PC C64 Apple IIAtari ST Other

PC Platform Market Share, 1980-‐1990 jeremyreimer.com


Though personal computers seemed to be everywhere, the reality is that we had only just started to really consume computing power

PC Platform Volumes, 1975-‐2010 jeremyreimer.com

PC “Wins”


The reality is that only after standards had been established and scale achieved did volumes really start to expand enormously

0

100,000

200,000

300,000

400,000

1975 1979 1983 1987 1991 1995 1999 2003 2007

IBM PCApple IIMacintoshAll OthersPC Platform

Volumes, 1975-‐2010 jeremyreimer.com

PC “Wins”


It was only then that economists could start to see a significant increase in productivity growth from the rapid expansion of the personal computer

US Productivity Growth, 1960-‐2007 Total Factor Productivity, Average Annual Percentage !Information Technology & US Productivity Growth, Jorgenson, Ho, & Samuels

-‐0.1%

0%

0.1%

0.2%

0.3%

0.4%

1960-‐2007 2000-‐2007

IT Producing IT Intensive Non-‐IT Intensive

In the PC industry, the market development era had to be completed before we could see the value of scale and productivity

Perfect The Product

Build The Ecosystem

Establish Control Points

Market Development Era

IBM PC 5150

Cut Costs & Grow Scale

Focus on Value Creation

Refine User Experience

Scale & Productivity Era

Dell scaled up PC business with Build To Order

The mobile industry today is where the PC industry was in 1990: just out of the first battles for market-‐share and into the period of scaling up

0%

25%

50%

75%

100%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Symbian WindowsPalm BlackberryAndroid iPhoneLinux Others

Smartphone Platform Market Share & Shipments, 2000-‐2012 jeremyreimer.com


The mobile industry today is where the PC industry was in 1990: just out of the first battles for market-‐share and into the period of scaling up

0

150

300

450

600

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Symbian WinMobilePalmOS BlackberryAndroid iPhoneLinux Others

Smartphone Platform Market Share & Shipments, 2000-‐2012 jeremyreimer.com


Social networks are also consolidating into a small group of very big players

June 2009

Image cc From Vincenzo Cosenza, vincos.it

http://vincos.it

Social networks are also consolidating into a small group of very big players

December 2013

Image cc From Vincenzo Cosenza, vincos.it

http://vincos.it

Though the volumes may seem large, only about 20% of the world population have mobile phones or are connected through social networks. We’re just getting started.

Perfect The Product

Build The Ecosystem

Establish Control Points

Market Development Era

The T-‐Mobile G1: First Android Phone

Cut Costs & Grow Scale

Focus on Value Creation

Refine User Experience

Scale & Productivity Era

The Smartisan T1 Android Phone

For industry participants, the implications are clear as well: time to shift your approach from designing business models and ecosystems to enabling productivity

Development Era Scaling Era

• Attempted social network -‐ Ping • Added new services like books, music, video and apps

• Product line extensions • Shift towards fashion and marketing

• Attempted extensions with Smart TV apps, music store & movie store

• Flood market with offerings

• Close non-‐performing areas • Simplify product line • Use scale to drive out cost

• Consulting offerings • Customized solutions • Research-‐led engagements

• High volume product offerings • $7 billion in scaling investment • Product-‐led engagements with clients

Those who cannot remember the past are condemned to repeat it.

George Santayana, 1906

Even as social & mobile enter the era of scale, we are still trying to define the universe of options and capabilities in the Internet of Things era

Smart CitiesSmart Infrastructure

Connected Home

Medical Wearables

Smart Watches

However the market evolves, it will likely be shaped by a set of technologies now emerging and converging with each other

Software Defined Supply Chain

Analytics & Cognitive ComputingDistributed Computing

How to manufacture billions of smart devices easily and effectively in small quantities and in a highly customized way.

How to turn data into useful insight and, from there, into recommendations for action.

Computing power will be everywhere. We must find a way to harness it to keep the cost and complexity of managing the IOT feasible.

The combination of 3D printing with related digital manufacturing technologies is reshaping the global supply chain

3 D P R I N T I N GO P E N S O U R C EINTELLIGENT ROBOTICS

3D printing (aka Additive Manufacturing) is the most critical of these new technologies

$0.00

$0.08

$0.15

$0.23

$0.30

2013 2018 2023

COST PER UNIT VOLUME PRINTED!$/CUBIC CM - BLENDED AVERAGE

-79%-92%

Over the next 10 years, 3D printing will become 92% cheaper than today.

This technology will shift from being a tool for prototyping to one of mass manufacturing.

Using these new manufacturing technologies, the required scale to produce a product efficiently is up to 90% lower than current manufacturing methodologies

90%LESS VOLUME

REQUIRED

0

25

50

75

100

2012 Traditional 2017 Digital 2022 Digital

1725

100

3

29

100

1724

100

2

24

100

AGGREGATE NORMALIZED!MINIMUM ECONOMIC SCALE

The net result is a much more flexible, responsive supply chain

HARDWARE CONSTRAINED

BUILD A MOLD OR CAST

HARDWIRE PRODUCTION LINE

DEVELOP EMBEDDED CHIP

SOFTWARE DEFINED

PRINT PARTS DIRECTLY BY SOFTWARE

RECONFIGURE ASSEMBLY THROUGH SOFTWARE

DIGITAL CONTROLS USING SOFTWARE

When you use a supply chain that is built on 3D printing, the results are dramatic

Software Defined Supply Chain - 2012Case Example:!!

To manufacture efficiently, you need the scale that comes from covering a whole market in the traditional model



By 2017, 3D printing and robotic assembly make it simple and easy enough to start manufacturing regionally.



By 2022, we forecast that most mew manufacturing capacity will be shifting back towards a localized model

Cognitive computing will allow us to blend unstructured information with structured data

Unstructured data like medical papers give guidelines:

Structured data from systems shows an individual patient:

What is the right course of treatment?

Without cognitive computing -‐ a kind of electronic common sense -‐ we will be overwhelmed with the complexity and data required to manage smart devices

Very stylish

Not nearly smart enough

Thanks to Moore’s law, it will soon be cheaper and easier to put a fully powered system on chip platform into even the simplest systems than to customize an embedded chip

Full ARM SoC as powerful as many cell phones with 2GB of RAM.

Boots when connected. Runs Mac OS Core (XNU)

Receives MPEG stream and converts it to HDMI output.

The Apple Lightning to HDMI Connector

Source: ExtremeTech.com report on Apple lightning HDMI connector cable, retrieved March 2013

http://ExtremeTech.com

Significant recent advances in the software of distributed computing mean that we may soon be able to harness and use that computing power that will be everywhere

Billions of Devices

Millions of Locations

Terabytes of storage & bandwidth

The cloud is moving out of your data center and into your doorknob.

Image Flickr Creative Commons License

The solution to harnessing all this distributed computing power is now visible: BitCoin

Traditional banks are built on private, centralized systems:

There is one central ledger for accounts, identities, and transactions.

Account owners

Bank balances

Transaction records

New Transactions

In Bitcoin, the central functions are distributed to all the participants in the system:

Thanks to cheap computing power and clever process design, BitCoin enables truly distributed transaction processing.

Every user has access to their own copy of the entire transaction ledger in a long file called the BLOCK CHAIN:

BitCoin is built on the concept of distributed consensus -‐ all participants can see all the transactions and many participants verify the work of each transaction

Transactions are confirmed by CONSENSUS

Multiple ecosystem participants check on each transaction to provide REDUNDANT VERIFICATION

No single point of failure

No need to trust all the participants

Take away the financial component of BitCoin and you have a powerful decentralized computing system that can be used for all kinds of systems

Take Bitcoin and remove the financial component

You a have powerful distributed transaction processing system

Account owners

Bank balances

Transaction records

Any transaction-intensive processing activity

Transaction processing engines are the foundation of many key technology systems:

Travel Resrvations

Billing Systems

Health Records

Social Media

Device Data

Documents

Both old… And new…

Case Example: GitChain project marries distributed computing and software development in a single scalable platform

GitHub: A Centralized S/W Development System GitChain: A Decentralized S/W Development System

•Same basic features as GitHub •Better local performance with slow networks •Better security & redundancy

•Check In / Check out software to develop •Share and copy code with other developers •Build a social network through professional work

Though relatively young and immature, BitCoin is growing a rate reminiscent of past platforms like Facebook and Twitter

0

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

BitCoin NYSE Twitter Facebook

Transactions Per Day!Various Online ServicesStandard Scale!As of April 2014

1

100

10,000

1,000,000

100,000,000

10,000,000,000

BitCoin NYSE Twitter Facebook

Transactions Per Day!Various Online ServicesLog Scale!As of April 2014

0

22,500

45,000

67,500

90,000

2009

2010

2011

2012

2013

2014

BitCoin Transactions Per Day!Overall Growth TrendStandard Scale!As of April 2014

The combination of these technologies will allow us to build, scale up, and manage networks of billions of devices



The future is already here. It’s just not very evenly distributed.

William Gibson

Our research suggests too many companies are trying to build a smart-‐phone ecosystem based on apps and subscriptions and that may not be realistic

No Apps

No Subscription

No Problem

The web made digital services easy to search, use, and purchase

DISCOVER

USE

PAY

Online Payment icon (cc) by Slawek Jurczyk from the Noun Project

With physical beacons and connected devices, search and discovery, usage, and payment will become just as simple in real life as online

DISCOVER

USE

PAY

Technology companies are creating the devices necessary to instrument, use and pay for services and asset usage

DISCOVER

USE

PAY

The power of Internet of Things will be to increase the leverage from physical assets and to create new, digital markets for physical goods and services

Unlocking Capacity

Creating New Markets

Reducing Risk

Improving Efficiency

Creating New Value

Services like UBER capture unused capacity and make it available through an online

Drivers and customers can both see the marketplace:

Analytics tells drivers where to find customers:

UBER (and similar services) are using data to bring LIQUIDITY to markets:

The results are striking in terms of economic value created:

Sources: Uber, New York Taxi & Limousine Commission, Boston Taxi Commission, UBER fares based on UberX

Today, average Taxi utilization is relatively low:

55%

UBER fares are lower than regular taxi prices

-‐18%

…but Uber drives report higher incomes:

+22%

The speed and scale with which Uber has grown as spawned a wave of investment:

The number of new digital online services that do this is growing enormously:

UBER (and similar services) are using data to bring LIQUIDITY to markets:

Just 550 Employees Estimated $1bn in revenue $10bn Valuation

He who has the gold, makes the rules.

Unknown

If we want to see some real battles, we should take a look at the fights going on between existing industry leaders and disruptive attackers using the Internet of Things

Car Sharing

Apartment Sharing

Recent Regulatory Battles Over Market Disruption

Despite dominating existing industries, incumbents (so far) seem to be losing the battle against market disruptions

Products come and go.

Systems last longer.

Relationships endure.

It’s important for our economic growth that innovators win these regulatory battles

US Productivity Growth, 1960-‐2007 Total Factor Productivity, Average Annual Percentage Information Technology & US Productivity Growth, Jorgenson, Ho, & Samuels

-‐0.075%

0%

0.075%

0.15%

0.225%

0.3%

1960-‐2007

IT Producing IT IntensiveNon-‐IT Intensive

IT Intensive Industries IT Share of CapEx

Securities contracts & investments 85%Air transportation 68%Professional Services 63%Broadcasting and telecom 57%Educational services 55%Newspaper & book publishers 55%Management of companies 54%Administrative and support services 50%Water transportation 48%Machinery 34%Federal General government 30%Retail Trade 16%

The list of industries that have yet to really be transformed by IT and to leverage IT is enormous, and it is the biggest area of opportunity for the Internet of Things

Non-IT Intensive Industries IT Share of CapEx

Farms 1%Real estate 1%Oil and gas extraction 3%Accommodation 7%Utilities 7%Amusements and recreation 8%Electrical equipment appliances 11%Federal Government enterprises 11%Ambulatory health care services 12%Fabricated metal products 14%Motion picture and sound recording 14%Warehousing and storage 14%

Smart Planting Technology

RFID wrist bands at DisneyLand

3D printed solid objects

Smart containers & warehouses

Smart hotel rooms & door locks

Electronic Medical Records

When it comes to transforming our economy, we’ve only just gotten started

48% 50%

2%

IT ProducingIT IntensiveNon-‐IT Intensive

44%53%

3%

Economic Share IT Producing, Intensive & Non-‐Intensive Industries !Share of Total Economic Output, Information Technology & US Productivity Growth, Jorgenson, Ho, & Samuels

1960-‐1995 Average 2000-‐2007 Average

Paul R BrodyLinkedIn.com/In/PBrody

@pbrody

Twitter & Weibo: @pbrody

Capturing Value from The Next 10 Billion Devices

Technology

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