Smart Villages and Smart Cities. Presentation at the. OnFebruary14 February14, 2011at NUS, Singapore

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1 Smart Villages and Smart Cities A Service Science perspective Presentation at the Global Asia Institute OnFebruary14 February14, 2011at NUS, Singapore N. Viswanadham Indian School of Business Hyderabad , India Contents State of Service sector in India Education Vs GDP 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 2 1

2 State of Service sector in India 3 Shares of Agriculture, Industry and Services in India Agriculture (17.5%) Industry (20%) Services (62.5%) (2009 ) 4 2

3 Size of Service Activities in Three Groups ( % of GDP) Retail and wholesale trade, transport and storage, public administration and defense Financial, computer, business, legal telecom, and technical services Education, health, hotels and restaurants 5 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 sectoris 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 6 3

4 Percent of Global GDP vs Percent of Top 500 Univ. 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 7 The STERM Framework 8 4

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 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 9 The Basic Ecosystem Institutions Delivery Services Infrastructure Service Chains Investment Climate CoEvolution, Conflict, Risk Propagation 5

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. 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 partners The demand for natural resources has tremendously increased and mines and oil have become treasures. Contract Manufacturers & Third party logistics providers have 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 protectionist 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, 6

7 The Five STERM forces Science research generates new and or improved products New Technologies (Internet, Search, Solar) emerge at a rapid pace New Engineering materials and designs come out every day Globalization brings new challenges of following Regulations and policies of several countries the intermediate products visits. Regulations such as Climate change require attention New Management techniques and business models such as outsourcing, sell direct, supply hubs are invented to face competition and enable growth. Some of the service networks were built several decades ago. New designs, technologies and management models should be used to upgrade the existing ones and in building the new ones. This requires process orientation, modularization, standardization, use of IT and sensor networks. R & D in this area would be highly remunerative. Given the government regulations, the investment climate and the vertical space, the company has to tread carefully with right products, services, planning strategies such as location and partnership decisions and business models to succeed. 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 coevolution (Globalization of services) need to be explainable using the framework Science, Technology, Engineering, Regulations & Policy, Management (STERM) contribute to innovations in services and determine the sector s competitiveness 14 7

8 Applying STERM Framework to build a Smart Village 15 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 sanitation ti in these areas. The Government tby 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 8

9 Smart Village Design Using STERM Framework A Smart Village is a bundle of dozens of services delivered 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 above all monitoring and execution of the activities using appropriategovernance p models. 17 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 place of historical importance etc. Mines, Forests, Ocean shores or River banks can be part of the natural environs of the village. 9

10 State Government (Collector, Revenue Officer) Village Panchayat Regulations Citizen Groups, NGOs Institutions Land Land records Bus, Truck Transportation IT and Mobile Networks Procurement, Warehousing & Marketing for of Agricultural and SMEs Food Courts e kiosks, Spoken Web Post office based services (Online ticket booking, retail, etc) Se ervice Delivery Technolog gies & Mechanisms Smart Village Ecosystem Service Chains Water, Energy & Power Agri (Seeds, Fertilizers, Equipment) Healthcare & e health records at district level Human UID Financial, Post Office High school & other Educational Institutions at district level Water Purification, Distribution Affordable Housing Retail Rural Primary Employment Education Schemes(NREGS) Vocational training Farming SMEs (microfinance) 19 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, ) If we interpret brave as entrepreneurial and risk taking attitude, corporate to mean meeting strategic t goals and objectives, intelligent t with IT enabled governance models, called smart nowadays, we implement Mahatma s vision

11 GRIP Governance Risk Analysis Innovations Performance Management Governance Model Village Panchayat Funding Agencies Advisory Board Government Industry CEOs Business Development Executive Director Manager Utilities Manager Local Services Manager Employment Developmen t Water Power Health care Education Rural Schemes Vocation al Training Affordabl e Housing Transportatio n Waste Disposal Retail Post Office SMEs 11

12 Risks Failures in the supply chain due to lack of communication & management expertise 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 Balanced Score Card :Smart Village Performance Strategy Themes for Self Sufficient Republic Enhance Living Conditions Improve Investment Climate Enhance Job Security Promote Entrepreneurship Connectivity with other Villages and Cities Customer Perspective Reliable Service Delivery Connectivity with outside world Improve Growth Outlook Skill Development, Ensure Job Security Financial Accountability Perspective Attract Business Funding Integrate SMEs into Global Value Chain Promote Business Mix (Industries SMEs, Agriculture) Revenue Model Internal Processes Perspective Upgrade utility services Standardize Processes, Improve Productivity Improve Supply Chain Connectivity Using ICT Growth Oriented Strategy Formulation Learning And Growth Perspective Enhance Primary Education Provide Vocational Training Provide Employment Opportunities Encourage Entrepreneurship 12

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 Pochampallyvillage Pochampally Village Pochampally is a village 40kms outside of Hyderabad, India. Called Bhoodan Pochampally. AcharyaVinobha Bhave started Bhoodan Movement (Land Donation) from this village. Famous for Pochampally ikkat tie and dye weave art, Won IP Rights in the Geographical Indications Category (Equivalent of a Copyright or Trademark ). Occupation Number of Families Weaving 1448 Sari Shop 102 Owners Agriculture 402 Toddy Tapping 109 Washing 93 Fishing 79 Basket Weaving 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 inpochampally. 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 Ministries of Textiles, Chemicals and fertilizers, Trade Trade Regulations, Labor laws, Textile policies Apparel Park, Technology upgradation schemes Village Panchayat Citizen Groups, Self Help Groups, NGOs Institutions Cotton, Silk and Fabric Bus, Truck Transportation Power looms, Computer aided design IT and Mobile Networks Procurement, Warehousing & Marketing for SMEs e shopping, e kiosks, Spoken Web Se ervice Delivery Technolog gies & Mechanisms Smart Village Pochampally Ecosystem Service Chains Water, Energy & Power Market Research and Domain Specific research Healthcare & e health records at district level Human UID Financial, Post Office High school & other Educational Institutions at district level Water Defluoridation Vocational training Retail, Handicrafts Tourism SMEs (microfinance) Rural Employment Schemes(NREGS) Utilities, Healthcare Affordable Housing, education Recommendations from Ecosystem Though Pochampally is claimed as one of the model villages by the tourism department, our analysis finds that there is no strategic growth orientation. Current focus is on Sarees and local markets but their competencies are in design. Should focus on other Dresses: men, Women and Children (both Indian & Foreign) and link into the global value chain. Protecting the heritage, the occupation and skill of weaving pochampally sarees by training people in other villages and encouraging more innovation rather than keeping it in house Vocational training of the latest advances in design and weaving automation and environmentally friendly techniques Governance follows classical Panchayat model supported by Government and UN agencies and is not entrepreneurial & this needs to change 14

15 Applying STERM Framework to build a Smart City 29 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 facilities To tap these new markets, organizations must reinvent business models, innovate new products and services and Build smart cities 30 15

16 Regulators & Policy Makers Central /State Governments Municipal Corporations Citizen Groups, Social Activists, NGOs Business Organizations Transportation IT and Communication Networks Distribution Centers Food Courts e kiosks, e Retail Ser rvice Delivery Technologi & Mechanisms Institutions Smart City Ecosystem Land, Land Records Water, Power, Energy Business Development Industrial Clusters Infrastructure roads, airports, rail Human UID Financial Call Centers es Service Chains Universities & Research Institutions Healthcare, Retail Sewage, Water Power Public Housing Education, Emergency Food garbage Network July16,2010Network Transportation Security Entrepreneurship Services Security treatment 31 Food Security : To Serve 100M Urban Poor Vocational Training using Government programs Processed Food Products PDS Meat & Diary Products Distribution Center Distribution Center Distribution Center Kitchen Kitchen Households Mid Day Meals Hawkers C o n s u m e r s IT Backbone on Cloud 16

17 Regulations APMC act, Min Support Price, Ration cards Municipality & Ration shops Quality Control & Hygiene Citizen Groups, NGOs Logistics & Transportation service providers Communication & IT service providers Schools & Food Courts Cloud :Data records and Audit Hawker carts with GPS and Sensor Networks Vocational Training Se ervice Delivery Technolog gies & Mechanisms Institutions Food Security Ecosystem Service Chains Hawker Manufacturers Farmers & Land Water, Energy & Power Food processing Industry & Dairy Clusters Human Govt., Banks, Micro Finance Food research Labs Vehicles for Food Transport PDS, Meat, Dairy Fruits and Vegetables Distribution Centers Kitchens Hawkers Schools Food courts Consumer Governance of Food Security System Government City Governance Advisory Board Industry CEOs/Technology Officers Restaurant Chains Quality Control Board Executive Director Business Development Stakeholders Monitoring & Execution Call Center Data Manager Sourcing Manager Distribution Manager Food Preparation Manager Services Diary PDS Meat Vegetables and Fruits Hawkers Food Courts School Transporta tion Warehouses Food Processing Kitchens ICT Waste Manag ement Hygiene, Quality Vocational Training 17

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 coevolve. Initiate education, research and entrepreneurial programs in service sector innovation Re innovate manufacturing and agriculture using recent advancesin 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