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					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
         Success
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

				
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