1

Smart Villages and Smart CitiesA Service Science perspectiveA Service Science perspective

Presentation at the Global Asia InstituteGlobal Asia Institute

On February14 2011 at NUS SingaporeOn February14, 2011 at NUS, Singapore

N. ViswanadhamIndian School of Business Hyderabad 500032, India

Contents• State of Service sector in India

– Education Vs GDP

Th STERM F k A h f i• The STERM Framework: An approach  for  service system design

• STERM Framework to build a Smart Village– Case Study: Pochampally village

• STERM Framework to build a Smart City – Food Security : To Serve 100M Urban  Poor

• Conclusion: India needs to Usher in the Third Service Revolution 

N.Viswanadham 2

2

State of Service sector in India

3N.Viswanadham

Shares of Agriculture, Industry and Services in India

Agriculture (17.5%)Agriculture (17.5%) Industry (20%) Services (62.5%) (2009 )

4N.Viswanadham

3

Size of Service Activities in Three Groups ( % of GDP)

Retail and wholesale trade, transport and storage, public administration and defense

Education, health, hotels and restaurants

Financial , computer, business, legal telecom, and technical services

5N.Viswanadham

Unique characteristics of India’s Service sector Growth

• The service sector picked up the  decline in the share of agriculture  in GDP, i.e., from 32 % in 1990 to 17.5 % in 2009, while manufacturing sector’s share has remained the same. 

• The rising share of services in GDP and trade, has not created corresponding rise in the share of employment.– Jobless growth of service sector and no increase in manufacturing raises 

doubts about its long run sustainability. 

– Some services have grown fast in terms of their share in GDP (e.g., software and telecom). Some are only provided by MNCs (Accounting, Management consulting) and Some are provided to companies in the developing countries.

– Service content in Manufacturing has increased due to modularization and globalization Some argue that Growth of the service sector is simply disguisedglobalization.Some argue that Growth of the service sector is simply disguised manufacturing activity or book keeping puzzle (Research is manufacturing when in‐house and a service when outsourced)

• This sector is plagued with Inefficiencies in the Design, Planning and Execution and Project delays, High levels of Corruption and Counterfeit. Radical Change needed  since  60% of the GDP is accounted by services

6N.Viswanadham

4

Percent of Global GDP vs Percent of  Top 500 Univ.

N.Viswanadham 7

US has 30.3 % of top‐500 Universities and has 23.3 % of global GDP and 4.5% of world’s population . India has 17% of the population, 2% of the global GDP and 0.4% of the global 500 Universities 

The STERM Framework

8N.Viswanadham

5

Innovations that are creating Block Buster Industries in Recent Times

• Blockbuster products: Nano, Video Games, Cell phones, Search engines, IPod, Wikipedia– New technology solutions to redesign of services (water, power, 

gas, construction, banks, education) to be intelligent and smart, e‐mail, e‐retail, Face book(social networking)

– New Business models: Containerization,  Outsourcing, BPOs, FDI, Sell direct, e‐retail, ATMs, Clouds, Orchestration, e‐bay, Face book, PPP, Financial aggregation

• Creating New industrial Clusters, Special economic zones (China), New Universities, Power

• New Logistics and IT Infrastructure: Linking Ports and• New Logistics and IT Infrastructure: Linking Ports and airports into the global transportation network (Singapore, Hong Kong)

• Government regulations: Process patent, Deregulation of Telecom & Airlines, VAT, Green, Free trade agreements, SEZs, PPP, WTO, New labor laws, etc

N.Viswanadham 9

Institutions

The Basic Ecosystem

Delivery Services Infrastructure

Resources

Service Chains

Investment ClimateCoEvolution, Conflict, Risk Propagation 

6

Virtuous Co‐evolution

• Modularization of products and services lead to outsourcing to low cost countries. 

• Countries started liberalizing their economies and reducing the tariffs further encourage outsourcing. g g– The logistics content in manufacturing has increased by about 50%. 

• Ports, Airports have been developed to enable transport of people and also freight of raw materials as well as intermediate goods . – Trade facilitation and other innovations have helped the rapid processing 

of goods transfer across the borders.– The Internet has enabled error free secure communication among 

partnerspartners• The demand for natural resources has tremendously increased 

and mines and oil have become treasures. •• Contract Manufacturers &  Third party logistics providers have Contract Manufacturers &  Third party logistics providers have 

proliferated proliferated 

GSNs can also be Risk Transmission & Amplification Channels 

• Credit crunch affects trade finance and hence trade volumes. 

– Prices for letters of credit increased in 2008 and 2009  & trade‐related loans were charged higher interest rates

– Preference to source from domestic suppliers during downturns because of trust or financing problems &  greater trust or financing problems &  greater protectionist policiesprotectionist policies

• Global supply chains that reacted “just in time” to the collapse in demand  resulting in synchronized  fall in trade volumes  from all countries.  – A sharper drawdown of firms’ 

inventories– Greater protectionist policies– A larger decline in trade of goods, 

which make up the bulk of world trade, relative to services,

N.Viswanadham

7

The Five STERM forces• Science research generates new and or improved products• New Technologies (Internet, Search, Solar) emerge at a rapid pace• New Engineeringmaterials and designs come out every day• Globalization brings new challenges of following Regulations and policies

f l h d d l hof several countries the intermediate products visits. Regulations such asClimate change require attention

• New Management techniques and business models such as outsourcing,sell direct, supply hubs are invented to face competition and enablegrowth.

• Some of the service networks were built several decades ago. Newdesigns, technologies and management models should be used toupgrade the existing ones and in building the new ones. This requiresprocess orientation , modularization, standardization, use of IT and sensornetworks. R & D in this area would be highly remunerative.

• Given the government regulations, the investment climate and thevertical space, the company has to tread carefully with right products,services, planning strategies such as location and partnership decisionsand business models to succeed.

N.Viswanadham 13

Wider Innovation Policy Needed• Traditional science policy is rooted in a ‘linear model’ : scientific 

discovery & invention followed by commercialization in the form of new products and processes.

• A Wider innovation Framework should include both the new to the market as well as new to the world innovations

• Innovations  in Management (like Outsourcing)  and Institutions (Social, Policy ,Regulation and Governance)need to be incorporated

• Innovations  due to convergence (Finance with Mobile)as well as co‐evolution (Globalization of services) need to be explainable using the f kframework 

• Science, Technology, Engineering, Regulations & Policy, Management (STERM) contribute to innovations in services and determine the sector’s competitiveness

14N.Viswanadham

8

Applying STERM Framework to build a Smart Village 

15N.Viswanadham

Motivation for the Study• Of India’s 610 districts, the National Rural Employment Guarantee Act has a list of 200 

backward districts. Similarly, out of India’s 600,000 villages, around 125,000 are truly backward.

• Currently, there is lot of public spending to improve the infrastructure, water and it ti i th Th G t b t ki ibilit f lifti thsanitation in these areas. The Government by taking responsibility for uplifting the 

rural and the economically poorer regions.

• All these efforts are disparate, fragmented and piecemeal and not much improvement has been achieved in most of the villages.

• On the other hand, the villages themselves are a powerhouse of large pool of man power. About 700 M people in India live in villages and at least half of them are below 25 years of age. 

• Availability of this rapidly expanding pool of young workers could and should be a major advantage for India’s economy if the new generation of workers is healthy and educated. The government should address social infrastructure (housing, health care, schools, colleges and universities) and  labor markets for all categories of people primarily those who are educated up to  middle school or less.

There is a  need for Smart Villages

9

Smart Village Design Using STERM Framework

• A Smart Village is a bundle of dozens of services delivered effectively to the residents and businesses indelivered effectively to the residents and businesses in an efficient manner. These services could be location specific depending on the demography of the village and occupations of the residents. 

• This requires strategy, integrated planning and aboveall monitoring and execution of the activities usingappropriate governance models.pp p g

17N.Viswanadham

Design of a  Village:  Investment Climate

• Investment climate of a village  is  the policy, institutional, and behavioral environment that influences the returns and risks of  an investment. 

• The investment climate of villages differs depending upon the significant occupation of the village and its natural resources. 

• The primary occupation of the villagers can be farming, aqua culture, working for industries such as apparel or leather goods or doll making. 

• The village can be a tourist location, pilgrimage centre, or a l f h lplace of historical importance etc. Mines, Forests, Ocean 

shores or River banks can be part of the natural environs of the village. 

10

Bus, Truck Transportation

Se

Village PanchayatCitizen Groups,

NGOs

Institutions

State Government(Collector, Revenue Officer)

Regulations

Water Energy & Power

Land ResourcesLand records

Smart VillageEcosystem

Food Courts

p

IT and Mobile Networks

ervice Delivery Technolog

& M

echanisms

e‐kiosks, Spoken Web

ffi b d i

Procurement, Warehousing & Marketing for  of 

Agricultural and SMEsResources

Healthcare & e‐health records at district level 

Human ResourcesUID

Financial Resources,Post Office

Agri Resources(Seeds, Fertilizers, 

Equipment)

Water, Energy & Power Resources

gies 

Post office based services(Online ticket booking, 

retail, etc) Service  Chains

Water Purification, Distribution

Affordable Housing

Vocational training

Primary  Education

Rural Employment 

Schemes(NREGS)Retail Farming

SMEs (microfinance)

High school & other Educational Institutions 

at district level

19N.Viswanadham

Gandhiji's Views on Village Development 

• The best, quickest and most efficient way is to build up from the bottom . . . Every village has to become a self‐sufficient republic. This does not require brave resolutions. It requires brave, corporate, intelligent work. . .  (Harijan, 18‐1‐1922)

• If we interpret brave as entrepreneurial and risk taking attitude, corporate to mean meeting t t i l d bj ti i t lli t ith ITstrategic goals and objectives, intelligent with IT enabled governance models, called smart nowadays, we implement Mahatma’s vision.

N.Viswanadham 20

11

GRIP 

• Governance

• Risk Analysis

• Innovations 

• Performance Management

Government

Industry CEOs

Village Panchayat

Funding Agencies

Advisory Board

Governance Model

Business Development

Manager Utilities

Manager Local 

Services

Manager Employment Developmen

t

Executive Director

Water Power

Affordable Housing

Health care

RetailWaste Disposal

Transportation

Education

Rural Schemes

SMEs

Vocational 

Training

Post Office

12

Risks

• Failures in the supply chain due to lack of communication & management expertise 

• Weak Infrastructure and resultant Operational• Weak Infrastructure  and resultant Operational inefficiencies

• Delays in the availability of resources from Govt. and other FIIs

• Inertia in adapting to anything new due to lack of awareness and education among the villagers

• Exploitation by political parties, corruption and mismanagement of funds

Strategy Themes for Self Sufficient Republic

Enhance Living Conditions

Improve Investment Climate

Enhance Job Security

Connectivity with other Villages and 

Cities

Promote Entrepreneurship

Balanced Score Card :Smart Village PerformanceBalanced Score Card :Smart Village Performance

Customer Reliable Service Delivery

Connectivity with outside world

Customer Perspective

Improve Growth Outlook

Skill Development, Ensure Job Security 

Attract Business Funding

Integrate SMEsinto Global Value 

Chain

Financial Accountability Perspective

Promote Business Mix (Industries 

SMEs, Agriculture)Revenue Model

Upgrade utility services

Improve Supply Chain Connectivity 

Using ICT

Standardize  Processes, Improve 

Productivity 

Internal ProcessesPerspective

Growth Oriented Strategy 

Formulation

Enhance Primary Education

Provide Vocational Training 

Learning And GrowthPerspective

Provide Employment Opportunities

Encourage Entrepreneurship

13

Examples of Smart Villages

• ISB Campus ‐ operational

• GIFT – Smart Village under construction 

• Housing communities by Real Estate developers 

• LAVAS near Pune

• Sri City near Chennai

Case Study

P h ll ill• Pochampally village

Pochampally Village• Pochampally is a village 40kms outside of Hyderabad, India.

• Called Bhoodan Pochampally.  Acharya Vinobha Bhave

started Bhoodan Movement (Land Donation) from this village.

• Famous for Pochampally ikkat tie‐and‐dye weave art , 

Occupation Number of Families

Weaving 1448

Sari Shop Owners

102

Agriculture 402

Toddy Tapping 109

Washing 93

Fishing 79

Won IP Rights in the Geographical Indications Category

(Equivalent of a Copyright or Trademark ).

• Pochampally is one of UNDPs 36 rural tourism sites, and is also supported by rural tourism scheme of the Ministry of Tourism. 

• Pochampally does more than $22 Million annual business in terms of yarn sales, purchase of handloom products and sales.

– The marketing is done  through the cooperative society and APCO, the master weavers and the business houses in Pochampally.

Basket Weaving

28

business houses in Pochampally.

– Pochampally weavers association are selling their products online through  pochampally.com.

– The products reach the market though various channels operated by  Middlemen.

• It is close to recreation places like Ramoji Film City, Mount Opera

• Though there are vocation training institutes like Swamy Ramananda Thirtha Rural Institute (SRTRI) near Pochampally, they do not cater majorly to the weaving community at Pochampally strategically.

14

Bus Truck Transportation

Se

Village PanchayatCitizen Groups,Self Help Groups, 

NGOs

Institutions

Ministries  of Textiles, Chemicals and fertilizers, 

Trade

Trade Regulations, Labor laws, Textile policies

Apparel Park, Technology up‐gradation schemes

Water Energy & Power

Cotton, Silk and Fabric Resources

Smart Village PochampallyEcosystemProcurement, Warehousing 

& Marketing for SMEs

Bus, Truck Transportation

Power looms, Computer aided design

ervice Delivery Technolog

& M

echanisms

e‐ shopping, 

IT and Mobile NetworksResources

Healthcare & e‐health records at district level 

Human ResourcesUID

Financial Resources,Post Office

Market Research and Domain Specific research 

Water, Energy & Power Resources

gies e‐kiosks, Spoken Web

Service  Chains

Water Defluoridation

Affordable Housing, education 

Vocational training

Utilities, Healthcare

Rural Employment 

Schemes(NREGS)

Retail, Handicrafts Tourism

SMEs (microfinance)

High school & other Educational Institutions 

at district level

Recommendations from Ecosystem

• Though Pochampally is claimed as one of the model villages by thetourism department, our analysis finds that there is no strategicgrowth orientation.

• Current focus is on Sarees and local markets but their competencies• Current focus is on Sarees and local markets but their competenciesare in design. Should focus on other Dresses: men, Women andChildren (both Indian & Foreign) and link into the global value chain.

• Protecting the heritage, the occupation and skill of weavingpochampally sarees by training people in other villages andencouraging more innovation rather than keeping it in house

• Vocational training of the latest advances in design and weaving  automation and environmentally friendly techniquesautomation  and environmentally friendly techniques

•• Governance follows classical Governance follows classical PanchayatPanchayat model  supported  by model  supported  by Government and UN agencies and is not entrepreneurial & this Government and UN agencies and is not entrepreneurial & this needs to  changeneeds to  change

15

Applying STERM Framework to build a Smart City

29N.Viswanadham

The Largest Urban Migration in History

• Each week, nearly one‐and‐a‐half‐million people move to cities, almost all in developing markets

• More than 70 million people are crossing the threshold to the middle class each year, all in emerging economies. 

• By the end of the decade (2020), roughly 40 % of the world’s population will be  middle‐class (20% today). 

• Urban poor require food, housing and other facilitiesp q , g• To tap these new markets, organizations must reinvent business models, innovate new products and services and Build smart cities

30N.Viswanadham

16

Municipal Corporations

Regulators & Policy Makers

Transportation Ser

Citizen Groups,Social Activists, 

NGOs

Land Resources,Land Records

Institutions

Central /State Governments

Business Organizations

Food Courts

IT and Communication Networks

Smart CityEcosystem

rvice Delivery Technologi

& M

echanisms

Resources

e‐kiosks, e‐Retail

Infrastructureroads, airports, rail

Human ResourcesUID

Financial Resources

Business Development Industrial Clusters 

Water, Power, Energy Resources

Distribution Centers

Service Chains

es Call CentersUniversities & Research 

Institutions 

Water Network

Power Network

Public Transportation

Sewage, garbage treatment

Healthcare, Emergency Services

RetailFood 

Security 

Education,Entrepreneurship

Housing SecurityJuly16,2010 31

N.Viswanadham

Food Security : To Serve 100M Urban  PoorFood Security : To Serve 100M Urban  Poor

Vocational Training using Government programs 

Kitchen

Mid Day Meals

Households

Consumers 

Processed Food 

Products

Meat & Diary

PDS

Distribution Center

Distribution Center

KitchenHawkers

Meat & Diary Products Distribution 

Center

IT Backbone  on Cloud IT Backbone  on Cloud 

17

Municipality & Ration shops

Citizen Groups,NGOs

Institutions

Regulations – APMC act, Min Support Price, Ration cards

Quality Control & Hygiene 

Se

Logistics  & Transportation service providers Farmers & Land 

Hawker Manufacturers

Food SecurityEcosystem

ervice Delivery Technolog

& M

echanisms

Schools & Food Courts

Cloud :Data records and Audit

Communication &  IT service providers

Hawker carts  with GPS and Sensor Networks

Resources

Water, Energy & Power Resources

Food processing Industry & Dairy Clusters

Human Resources

Govt., Banks, Micro Finance 

Resources

gies Vocational Training 

Service  Chains

PDS, Meat , Dairy Fruits and Vegetables

ConsumerKitchensDistribution Centers

HawkersSchools

Food courts

Food research Labs 

Vehicles for Food Transport  

Industry CEOs/Technology 

Officers

Restaurant Chains

Government

City Governance Advisory Board

Governance of Food Security System

Manager Sourcing

Business Development

Executive Director

Quality Control Board

DataMonitoring & ExecutionCall Center

Stakeholders

M

Manager Services

PDSMeat

Diary Vegetables and Fruits

Manager Distribution

Hawkers School

Food Courts Transporta

tion

Manager Food 

Preparation

Warehouses

Kitchens

Food Processing

ICT Hygiene, Quality

Waste Management

Vocational Training

18

India needs to Usher in the Third Service Revolution 

• The first service revolution was led by growth in the standard of living and the retail sector. 

• The second one was driven by globalization and outsourcing, where the talents are diverted to improve the service and manufacturing sectors in the western countries.

• We need the third service revolution which concentrates on Indian services, manufacturing and agriculture with the following agenda. – Streamline  and upgrade the service chains using modern technologies– Strategically deregulate the service sector while encouraging the firms to co‐

evolve.– Initiate education, research and entrepreneurial programs in service sector 

innovation– Re‐innovate manufacturing and agriculture using recent advances in servicesRe innovate  manufacturing and agriculture using recent advances in services– Improve the investment climate for Foreign trade– Plan and Build integrated service systems or systems of systems  such as smart 

Cities, SEZs, Villages• Develop Services Systems Theory  with predictive and governance models 

for better operations and execution.

N.Viswanadham 35