THE FUTURE OF TECHNOLOGY
More machines than people
Peter Cochrane
Chief Technologist BT
Collier Chair for The Public Understanding of Science & Technology
@Bristol UK
Industrial revolution…
A very low risk life
Survival by profession
Money eclipses everything
Communication is the essential
Innovation becomes property
Highly focused specialisation
Self sufficiency unnecessary
You have to
do everything...
From village...
To city...
You can afford
to specialis/ze...
Town From people
city centric business...
national
global
To machine Global
& network
Centric
business...
We seek clarity & truth...
Clarity
…mostly they are orthogonal...
Truth
If it were only this simple...
Variables
Markets
100 Productivity
80
Productivity
70
60 BW
40
Chip
20
0 SW
Axiomatic….
• Bandwidth is free
• Distance is irrelevant
• Time has no meaning
• Service is key
• Information & knowledge is
where the action is
The Future Outlook
Traffic/ IP
infrastructure
PSTN
1999 2009
Data Over Voice Over
Voice Net Data Net
Internet & Telephone Connections
10B
1B
Phone Lines
Global Connections
0.1B
10M Internet
Connections
1M
Mobile Phones
0.1M
10k
84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
YEAR
Smart People - Dumb Company
Constructive
+IQ Contribution
Collective/Company
Best Case
Number of People
n
Worst
Deconstructive Case
-IQ Contribution
Business & Market Time
Iff
Reaction time > Market time
Failure
No measurement, no visibility…
Sales Channel ...no control and...
Demand ...heavy losses..
$
Consumer
Demand
Supply
Planned Actual End of
Launch Launch Line
EU Ecommerce by Technology
600
TV
500
400
Mobile
300
200
100 PC
0
A 5GIP Computer v Book Keeper
US$
10,000,000,000
1,000,000,000
100,000,000
Computer
10,000,000
1,000,000
100,000
10,000
1,000 Book keeper
100
10
1
1970 1975 1980 1985 1990 1995 2000
Value $ Value of bits...
Movie Sequel Becomes
Release Launched Time a Classic
Concept to Customer
Cost
Bad Product
Research Support
Development Delivery
Production
Good Product
Support
Concepts
Time
Freedom Focus Constraints Constraints
Innovation Objectivity Focus Control
Innovation Objectivity Processes
Timescales Formalism Formalism
Timescales Competition
Life Cycle
Concept to Customer
Levels of
Hierarchy
Cost .com
Bad Product
Research Support
Development Delivery
Production
Good Product
.com
Support
Concepts
Time
World GDP growth rate is
8% declining
6%
4%
2%
0%
73 75 77 79 81 83 85 87 89 91 93 95 97 99
Source: IMF, JP Morgan, The Economist
Equity-Value/Employee
$
.com
Business Spectrum
.com
time
Time to Market-React
Established Wisdom
Hardware
Software
Network
Applications
Convergence??
I don’t think so….
Net Platform Evolution
The Net
Company Evolution
People-less Corps
Personal assistant software
Logistics company - Genie
Virtual co-operative - team + software
Virtual company - core mgt + project team
Traditional company - full time people
New Economy
• Knowledge is wealth
• Bigger ain't necessarily better
• More opportunities
• Fewer guarantees
• Everything happens faster
• Everything is exponential
• Demand comes in peaks
• ROI is bigger than ever before
• No rules?
The Rules Have Changed
• Inversion
• Exponentiation
• Self organising self optimising
• Mass personalisation
• Cost into an asset
• Shareholder value
It is also about…Perception
• Brand
• Quality
• Timeliness
• Trust
• Delivery
• Taking the pain away
Route to customer….
• Media
• Telephone
• Mobile Phone
• PCs + WAPs
• Appliances
• Transport
• Gas Stations
Every screen & device is an opportunity
Customer relationship….
Anticipating…….Delighting
Using information & knowledge to
Keep ahead of the game…solve the
Problem before the customer knows
They have one…..and then tell them?
Personalis/zation
• Access control and authentication
• User profiling and dynamic tracking
• Content management & classification
• Workflow, repository, delivery engines
• Event tracking and logging + learning
• Dynamic relationship management
• Merchandising
• Customer Service
Customer’s don’t want choice...
•They want want they want..
•When they want…
•Where they want…
•How they want…
•At the right price and quality...
•And in the right form/format...
The future of business is about...
•Sucking up…
•Serious sucking up…
•Instant gratification...
•Personalisation…
•Customisation…
•Taking the pain away…
•Its about time...
Time is the enemy...
Letter
Weeks
Telegram
Telex
Days
Analogue Fax
Digital Fax
Hours Email
Eworking
Minutes
Seconds Ecommerce
50s 60s 70s 80s 90s 00s 10s
The „S‟ Curve
Technology
$
time
The „S‟ Curve
Technology
$
Product 1
time
The „S‟ Curve
Technology
$
Product 2
Product 1
time
The „S‟ Curve
Technology
$ Product 3
Product 2
Product 1
time
The „S‟ Curve
Technology
$ Optical Fibre
Coax
Pairs
time
Open
Lines
The „S‟ Curve Continuum
Technology
$ DVD
CD
Cassette
Tape
time
Tape
Moore‟s Wall ICn
Log Scale IC5
3D ICs
IC4 Molecular
Quantum
IC3 Genetic
Biological
IC2 Optical
Computing
IC1
Transistor
Thermionic
Tube
1915 46 59 2010 2025
# Transistors/Chip
11
10
10
10
9 x
10
8 Logic x Memory
10
7 x
10
6 x
10
5
10
4
10
3
10
1980 1990 2000
BIT STORAGE DENSITY
ENERGY PER LOGIC FUNCTION
UK 14 Year Olds 2000
Mobile Phone Owners
Girls = 38%
Boys = 28%
In Bedroom
TV = 72%
PC = 61%
Virtual + E Business
• Death of geography
• Death of distance
• Fluctuating assets
• Information intensive
• Infinite & Chaotic
• Bits rule the atoms
Faster & Faster Wealth Generation
New Company Value
US$Bn
100
90
80
Internet PC
70
60
50
40
30
20
10
0
1 2 3 4 5 6 7 8 9 10
Year
UK SMS Messages 99
300
250
200
Millions
150
100
50
0
Jan Feb MarAprMayJun Jul AugSep Oct NovDec
How many friends do you have…
...how many people do you know?
Separation People You Know
0 => 30 => 300
1 => 900 => 90,000
2 => 27,000 => 27,000,000
3 => 810,000 => 8,100,000,000
4 => 24,300,000
5 => 729,000,000
6 => 21,870,000,000
Raw
Manufacture Distribution
Materials
R
E
Recycle
T
Ecosystem A
I
L
Trash Consumer
Trash Consumer
Raw
B-B B-B
B-B Manufacture Distribution
Materials
R
E
Recycle
T
Ecosystem A
I
L
Trash C-C B-C
Consumer
C-B
Trash Consumer
Business Spectrum
Market Change Time
Company Change Time
10 Acquisition
& Growth
1 Take Over
0 Bankrupt
0 1 2 3
Time Years
Value...
Value
Bits
Atoms
Abundance
The value of atoms…per kg
$90k Pentium III Chips
$25k Viagra
$10k Gold
$4.3k Hermes Scarf
$3.9k Palm V
$2.1k DVD
$230 20 Cigarettes
$90 Hardback Book
$40 Mercedes E Class
$15 Chevy 4 Door
$0.5 Hot Rolled Steel
0.1 1.0 10 100 1000 10,000
Price US $/kg
The old marketplace…
...the customer view...
Broadcast Few Many
Newspapers
Stores, Oil,
Gas, Power,
Food, Banks,
Insurance,
Government 1 N
The internet marketplace…
...customer view...
Broadcast Many 1
Newspapers
Stores, Oil,
Gas, Power,
Food, Banks,
Insurance,
Government N 1
The internet marketplace…
…actuality...
Many to Many
Many to One One to Many
Fitness Function
flexibility x speed x vision
Fitness = experience
Experience is only useful when the
Environment stays roughly the same,
but everything has just changed dramatically
Market Space
- Modes Exp Growth Market
High
Amazon Margin
Nokia Ebay
FedEx Yahoo
IBM eTrade
Dell eBank
TI eBookers
.com .com
Atoms Kmart Banks
Ford ISPs Bit
Dominated Oil Telcos Dominated
Limited AA Cable
Market
Low Margin Linear Growth
Grades of FREE...
Free as we used to understand it
Free after 100 gallons of petrol
Free after 7.00 pm
Free for $35/month
Free if you buy two
Free if you listen/view these adverts
Free if you buy my food…
100% Free!
Cities - influence density
City
Geographic
World Suburbs
Villages
Community
network
Cyberspace peak
Global presence
From the few to the many...
Concentrated Distributed
Expertise & Skill Ignorance
Technology
Telephone Operators Dial & Buttons
Computing Mainframe PC
Copiers Corp Centre Office Xerox
Printing Hot Metal Offset/Laser Jet
Distributed ignorance wins!
Concentrated Distributed
Expertise & Skill Ignorance
Technology
$
Ability to Compete
~N2
N
Where is the energy...
Internalised Externalised
Technology
Centralised Control - Hierarchy Dispersed - Chaotic
Inflexible & Ponderous Adaptable Fleet of Foot
The Rules Have Changed
• Inversion
• Exponentiation
• Self organising self optimising
• Mass personalisation
• Cost into an asset
• Shareholder value
Work is…
...not a place
...it is an activity
What have we done?
• Downsized
• Reorganised
• Challenged everything
• Changed everything
• Change the culture...weed out old minds
• Experimented with everything..…
• Outsourced a lot….
• Survived...so far...
Some Half Lives
-20 years Today +20 years
Employer 50 10 1
Job 15 5 0.5
Degree 20 7 1
A Two Class Society
$
Those who spend a lot of time to save money
A Two Class Society
Those who spend a lot of money to save time
How did all this happen?
Internet Hosts (Log Scale)
10,000,000
1,000,000
100,000
10,000
1,000
100
Date
1980 1985 1990 1995 2000
Internet Hosts (Linear Scale)
8M
7M
6M
5M
4M
3M
2M
1M
1980 1985 1990 1995 2000 Date
More machines
than
people
More Barbie Dolls...
...on line...
…than Americans
Machines Overtake Mankind
100
% Network Traffic
75
Mankind
50 6Bn Machines
Machines
25
20Bn
0
1980 1985 1990 1995 2000 2005 2010 2015
Customer Engagement
Time
One High
Carbon
on One
Outlet
System Cost
Net
Call
Centre Low
Silicon
Limited Availability High
People - Revenue Mismatch
CUSTOMERS INCOME PEOPLE
30%
5% 5%
20% 30% 20%
75% 30% 75%
Where we are now.....
People - Revenue Mismatch
CUSTOMERS INCOME PEOPLE
30% 75%
5%
20% 30% 20%
75% 5%
30%
Where you‟d like to be, but.....
People - Revenue Mismatch
PEOPLE
5% 5% 75%
20% 20% 20%
75% Machine 5%
75%
CUSTOMERS MACHINE
Technology to the rescue.....
Speech recognition is tough….
• Let us pray
• Let us spray
• Lettuce spray
The Future is Chaos!
1980s 2000s
Hierarchical Self- Organised
Structured and Chaotic
Telegraph Telephone Internet ? Intranets
Everything will be in Cyberspace
covered by a hierarchy of computers!
Cell
Body
Continent Home
Region Car
Building
Campus
World
Fractal Cyberspace: a network
of … networks of … platforms
Original by Gordon Bell 1998
A connected world is chaotic….
200
150 Net visitors come in packs….
Active
Site 100
Visitors
50
0
00.00 06.00 12.00 18.00 24.00
Hour of the Day
Peter Cochrane
We could all be a bank...
Ordering and
delivery
Merchant
Customer
Internet
Submit
Billing
and
Existing confirm
payment
mechanis
ms
Clearing
Card Card
Issuer Acquirer
money = bits
1001110100011111001100111000111100000001111100111
0001001110100011111001100111000111100000001111100
1110100011111001100111000111100000001111100111011
1000111110011001110001111000000011111001110000001
1010001111100110011100011110000000111110011100111
1000111110011001110001111000000011111001110000000
0011101000111110011001110001111000000011111001110
0100011111001100111000111100000001111100111011110
1111010001111100110011100011110000000111110011111
1010001111100110011100011110000000111110011100110
0011101000111110011001110001111000000011111001110
0001001110100011111001100111000111100000001111100
Law of Diminishing Returns
$1.07
Average cost of
retail banking
$0.68
transaction
$0.27
$0.10
Branch Telephone ATM Internet
No.. Branch..Employees..Infrastructure
Printed Transponder
MIT Media Lab
If time = money...
...then so does position
Positioning systems will become as essential as
communication networks in the future economy
Soon
~2cm
A multimedia world..in transition..
Copper to glass
Radio + Satellite + IR
Fixed to mobile
PARASITIC NETWORKS
Zero infrastructure!
PARASITIC NETWORKS
Zero infrastructure!
PARASITIC NETWORKS
Zero infrastructure!
Sooner or later...
...a carrier will come in range...
QuickTime™ and a
Photo - JPEG decompressor
are needed to see this picture.
Sooner or later...
...a carrier will come in range...
QuickTime™ and a
Photo - JPEG decompressor
are needed to see this picture.
Sooner or later...
...a carrier will come in range...
QuickTime™ and a
Photo - JPEG decompressor
are needed to see this picture.
Sooner or later...
...a carrier will come in range...
QuickTime™ and a
Photo - JPEG decompressor
are needed to see this picture.
Sooner or later...
...a carrier will come in range...
QuickTime™ and a
Photo - JPEG decompressor
are needed to see this picture.
Does a freeway become
an optical fibre?
FM Mobile Opportunity
TV
Economy
Net Spectrum
100%
100%
Telephone
Hierarchy Resilience
Control Internet Latency
Flexibility
Reliability
Parasitic Scalability
0% 0%
Random Bursty Chaotic
Static Mobile
Traffic
Focus
Marketing Evolution
1 Adaptive
Targeted
Direct
Mass
All
Make Marketing Evolution Sense
& Sell &Respond
Evolution of Platforms
WAPs
Value Business
Platforms
Packaged Application
Application Servers
Dynamic Page Engines
CGI Scripts
Static HTML
94 95 96 97 98 99 00 01
Evolution of Platforms
Value
- No personalized content and services
- Rudimentary hit counters & analysis
- No demand for ROI measurement
Static HTML
94 95 96 97 98 99 00 01
Evolution of Platforms
- Limited personalization
Value - No Common Gateway Interface
analysis tools
- Limited site analysis tools
CGI Scripts
Static HTML
94 95 96 97 98 99 00 01
Evolution of Platforms
- Basic customer profiles
Value
- 1st generation Learning Engines
- Maturing site analysis tools
- Demand for ROI measurement
Dynamic Page Engines
CGI Scripts
Static HTML
94 95 96 97 98 99 00 01
Evolution of Platforms
- Learning engines
- Integration of corporate and customer data
Value - Analysis tools with real-time data
- Increasing demand for ROI
Application Servers
Dynamic Page Engines
CGI Scripts
Static HTML
94 95 96 97 98 99 00 01
Evolution of Platforms
- Customer profile database
- Simple reporting
Value - Focused e-marketing
Packaged Application
Application Servers
Dynamic Page Engines
CGI Scripts
Static HTML
94 95 96 97 98 99 00 01
Evolution of Platforms
- Integrated customer
profiling, analysis and
Value learning engines Business
- Packaged Apps for Packaged Application
Platforms
profiling, analysis and
Application Servers
personalization
Dynamic Page Engines
CGI Scripts
Static HTML
94 95 96 97 98 99 00 01
Evolution of Platforms
- Mobile profiling,
analysis and learning WAPs
Value - User controls Business
personalization Platforms
Packaged Application
Application Servers
Dynamic Page Engines
CGI Scripts
Static HTML
94 95 96 97 98 99 00 01
Business savings...
Term Life
Airline Banking Bill Payment Insurance Software
Tickets Distribution
Policy
Traditional System $8 $1.08 $2.22 to $3.32 $400-$700 $15.00
Telephone-based $0.54 $1.2 to $2.2 $5.00
Internet-based $1 $0.13 $0.65 to $1.10 $200-$350 $0.20 to $0.50
Savings Percentage 87% 89% 67-71% 50% 97-98%
On-line procurement >30%...
At a modest estimate eCommerce can...
Remove $2,000Bn of marketing &
sales costs in the global market
eBusiness value creation...
Cut Grow
Costs Revenues
eBusiness has to
focus on all
3 benefits
Build
Community
Extended view...
Information
Cut Influence Grow
Costs Revenues
Relationships
Networks
eBusiness has to
focus on all Access
3 benefits Speed Build
Community
Markets are being...
...disintermediated
Distribution
Distribution
Customer Customer
Retail Retail
Customer
Services Services
Customer
Wholesale Wholesale
Retail
Services Services
Manufacture Manufacture
Wholesale
Customised
Manufacture Manufacture
20th Century 21st Century
Trust is a key issue limiting adoption…
…but it is an age thing…
Language 1%
Training 3%
Lack of skills 7%
Cost 9%
Implementation difficulty 10%
Lack of knowledge 10%
Technology resistance 10%
Customers not connected 24%
Security worries 25%
In the world of bits…..
….massive intermediation
Distribution
Yahoo Virgin
Tesco
Amazon
Services
Dixons
Customer Ebay
Today Tomorrow?
peter.cochrane@bt.com
In the world of bits…..
….massive intermediation
Distribution
Can your
Yahoo CompanyVirgin
& Tesco
Amazon
“friends” Dixons
Services
Customer do all this?
Ebay
The day after????
peter.cochrane@bt.com
Too Complex & Too Flakey
• 39% of shoppers failed - sites were too complex
Estimated Loss =>$24billion/year
• 56% of e-commerce search attempts failed
Estimated Loss => $3 billion/year
57% of online households research
products online before buying
Poor search experiences can cause
companies to lose offline sales
95% rated the importance of “Ease of
Ordering” as “High” or “Very High.”
Customers go online for convenience not
for flashy features, “compelling”
experiences, cross-media branding, etc
BizRate Survey 99
Customer Reaction & Experience
• Based on accomplishing goals quickly/easily
• Site experiences shaped customer reaction
• Reaction formed brand impression
• Online brand = customer experience
• Site brand is affected by visual appearance,
but the holistic experience creates the brand
Online the brand is the customer experience,
not the visual appearance
The Page Paradigm
On any given page, customers will do
one of two things:
• Click on something that appears to
take them closer to their goal
• OR click to escape
Business
Relationships
Company
Other Avatar
Co Colleagues
Customers Contacts
Team Cyber-
friends
Self Net
friends
Local Family Friends
society
Neighbors Clubs
Net
Geographic Community community Personal
nets
Business Modes
Past Present Future
Face to Face Faceless Screen to Screen
Remote Virtual
B to C Local
& National & Global
Remote Virtual
B to B Local International & Global
Distributed Virtual
C to C Local
& Regional & Global
Past Present Future
Face to Face Faceless Screen to Screen
Remote Virtual
B to C Local
& National & Global
Remote Virtual
B to B Local International & Global
Distributed Virtual
C to C Local
& Regional & Global
Virtual
BCM N/A N/A & Global
Adults Active in Start-Ups
Finland
Japan
France
Denmark
Germany
UK
Italy
Israel
Canada
US
0 2 4 6 8 10%
Stop Press!
% of US adults who read a newspaper
80%
70
60 Projected
50
40
1964 1970 1980 1990 2000 2015
Source: NAA Market and Business Analysis; Newsweek Projections
USA On-Line Shopping Revenues
$7,000 50%
45%
$6,000
40%
$5,000 35%
Web
$xM $4,000 30%
25%
Users
$3,000 20%
$2,000 15%
10%
$1,000
5%
$0 0%
1995 1996 1997 1998 1999 2000
Forrester Research 99
Toys and eToys??
Sales $11bn
Net earnings $376m
Market value $6bn
Sales: $30m
Net earnings: - $29m
Market value $?
Business to Business - Old
Support
Sales
Marketing
Production
R&D
Business to Business - New
Support Not all companies
Support
Support
Support
do everything
SalesSales
Sales Most have now
Sales
virtualised and
Marketing
Marketing
Marketing
outsourced to
Marketing create a huge B-B
Production
Production marketplace
Production
Production
R&D B-B is a network
R&D
R&D
R&D activity and a vital
eCommerce activity
Business to Customer - Old
Support
Sales
Marketing Customers
Production
R&D
Business to Customer - New
Support
Sales
Marketing Customers
Production
R&D
Business to Customer - Future
Customers
Support Customer
Customers
Sales Customer
Customers
Marketing Customers Customer
Customers
Production Customer
Customers
Customer
R&D
Technology Driven Exponentiation
Long term
demand
Cost to users Short
term
demand
Technology
Costs
Customer Driven Exponentiation
Long term
demand/income
Short term demand = constant
Customer signs up others for a %
1 n
Product Cost 2
Actual
n-1
3
Perceived
4 n-2
eMail & degrees of separation...
Separation
0 1 2 3 4 5 6 7
10 102 103 104 105 106 107 108
Number
of people 102 104 106 108 1010
you know
and can 103 106 109
email 104 108
Population an individual can influence
Management thinking…?
Importance
Reengineering
Product
Profession-
policy alising
management
Multi
-business Organisation
unit Efficiency Strategy
Functionali - Financial
Emergent
sation controls Economy
Adam Alfred Frederick Peter Tony Michael Hammer &
Champy All ??
Smith Sloan Taylor Drucker Athos Porter
200 years 1930 1940 1950 1960 1970 1980 1990
Invisible Chaos Visible Chaos
Knowledge is power...
• Gutenburg broke the monopoly of the monks
• Monks understood the power of knowledge
- they chained books to tables
- and sometimes to themselves
Managers could do this in the old business world
But now they cripple themselves & their company
Methods of Analysis
Human Judgement
– Hire a guru
– Form a committee
Statistical Modeling
– Fit a mathematical or statistical model
– Use learning algorithms
Synthesis
– Combine human insight and computer power
Human Judgement - Weakness
We did not evolve to make optimal decisions in
conditions of uncertainty, very high data rate - and
large potential loss.
Statistical Modelling- Weaknesses
– Non-stationarity
– Non-normality
– Structural change
– Insufficient data
– Data heterogeneity
Difficult to build and test Complex fundamental models
The End of The World?
• 1524 Nostradamus - Another Great Flood
• 1719 Bernoulli - Comet Collision
• 1947 Newborough - Monopolies End - War
• 1985 Brin - Nuclear Holocaust + Bio-War +
• 1990’s - Y2K
If we ran a company....
Cost/Price/Unit
Company
Utilisation
Get the utilisation up...
...get the costs down...
We had better not stove pipe...
Cost/Price/Unit
Co Co Co Co
Utilisation
Cost/Price/Unit
Co Co Co Co
Cost/Price/Unit Utilisation
Co Co Co Co
Cost/Price/Unit Utilisation
Co Co Co Co
Utilisation
We would have to do this...
Co Co Co Co
Co Co Co Co
Co Co Co Co
Co Co Co Co
Mutually exclusive...
Process
Definition
Control
Hierarchy
Adaptable - Fleet of Foot
Centralise or Decentralise?
100% 100%
Centralised Decentralised
Optimal
Lack of Processes
adaptability Decision investment
+flexibility Distance inefficiency
& long plant cost
response
time cost
CEO Organisation
Decision Distance from CEO Office
Office Outer Edge
100% Control 100% Chaos
AI Will Penetrate the Symbolic Barrier
Investment Banking
Global Competition
Downsizing Legal Profession
Outsourcing Media
Unbundling
Specialisation Medicine
Global Partnering
Education
Finance
Telecommunications Insurance Brokerage
Manufacturing
Chemicals Accounting
NUMERIC SYMBOLIC
PROCESSING PROCESSING
The Symbolic Barrier
+
Regulatory Barriers
Guiding Principles
• Engineer exponentiation
• Go for the customers customer
Embrace self organising chaos
Invert the values of the past
Virtualis/ze organisations
Create shareholder value
Be fast to Market
Nothing much has changed….
"Nothing is more difficult than to introduce a new
order. Because the innovator has for enemies all
those who have done well under the old conditions
and lukewarm defenders in those who may do well
under the new"
Nicolai Machiavelli, 1513 A.D.
Thank You
www.labs.bt.com/people/cochrane
Who survives?
Not the strongest
Not the most intelligent
Those most responsive to change
Charles Darwin