Hyper-scalable Business Logic -

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1 Hyper-scalable Business Logic - Text Text Recipes to H2H business Tatu Koljonen EIT Digital Node Director Finland Automation Summit, Västerås - September 3, 2015

2 Source: IBM, development in the USA NEXT BIG THING: SERVICE INDUSTRY (A) Agriculture: Value from harvesting nature BOOM Boom: Digitalization of services! (G) Goods: Value from making products (S) Services: Value from enhancing the capabilities of things (customizing, distributing, etc.) and interactions between things

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4 New Business Logic In search for business that scales (marginal return wrt. resources increases) 1. Services - do not scale 2. Products - scale according to logistics 3. Products + service - scale according to logistics 4. Digital services & products, hyper-scalable according to Metcalfe s law

5 Characteristics of Hyper-scalable Business The winner takes it really all Revenues and profit order of magnitude more than in the traditional scalable business (>10 M vs. >1M /a/person) Creations of global (natural) monopolies Quicker rice and fall A cult more than a war, a tribe more than subjects Instigating the people, Heart-to-Heart business, Memes Technology Regulation and legal framework for digital economy still missing Digital single market

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8 Europe has Digital Agenda, but US Companies dominate Digital Economy

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10 Role of IoT I 3, identity, interaction, inference Internet of Things (IoT) is a set of products, services and processes that virtualizes the real-world things for digital processing. Depending on the instance, the digital representation of the real world can be very simple or extremely complex, very local or globally orchestrated. The sources of information can be anything from tags, sensors, embedded systems, existing databases to human agencies. An essential ingredient is scalable connectivity, locally and globally.

11 Recipies for Hyperscalable Business What competition? Winning the Metcalfe s law on your side Jobs and growth? Global champions + strong local clusters of trust Winning strategies? Niche dominance + radical adjacency Platform & ecosystem fight Service dominant logic gaining value from the usage

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13 Market Adoption Readiness Levels (MARL) TRL: traditional, relies only on maturity of technology. "market adoption readiness levels : fast changing and disruptive IoT environment needs the assessment of three major parameters: users (adoption / feedback), business models, societal aspects data (generated by the system and user interactions) and the assessment of risk. This cycle can be described as involving an early "deployment" followed by "engagement" of prospective users leading to "test / feedback" of users which if positive has a multiplying effect. Continuous re-iterations of this cycle results in evolving to a tipping point scaling-up

14 Open innovation 2.0: Battle of global ecosystems + local clusters of trust

15 Source: Economist - Nov 21st 2012 from The World In 2013 print edition In the platform and ecosystem game winner takes it all timing is critical Industry Cloudy Fair Sunny Automotive Banking Defense Energy Entertainment Food and farming Health care Infrastructure Insurance and asset management IT Hardware IT services and software Media Metals and mining Pharmaceuticals Property Retailing Telecoms Travel and tourism = previous year and change direction

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18 Strategic Risks in Smart, Connected Products 1. Adding functionality that customers don t want to pay for. 2. Underestimating security and privacy risks. 3. Failing to anticipate new competitive threats. 4. Waiting too long to get started. 5. Overestimating internal capabilities. Source HBR.ORG

19 Fight for unicorns

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21 Which country is the unicorn champ?

22 Cumulative value of European unicorns ($bn)

23 Trusted European ICT ecosystem Building on excellent partners

24 Breeding Entrepreneurial Skills Our Schools deliver the talents needed to grow Europe # Students (total, cumulative) # Students (total, cumulative) 1000 Data Science 160 Eindhoven Digital Media Technology 140 Sophia- Antipolis 700 Service Design & Engineering 120 Trento (planned) Security & Privacy Distributed Systems & Services (- -> Cloud Computing and Services) Internet Technology & Architectures Embedded Systems Human Computer Interaction & Design (planned) Stockholm Rennes Paris Helsinki Budapest

25 Growing CLCs sustain a vibrant ecosystem. London (since 2014) Stockholm (since 2010, expanded in 2015) Helsinki (move to Open Innovation House in 2012) Berlin (since 2011, expanded in 2015) Eindhoven (moved to new CLC at High Tech Campus in 2014) Munich (since 2013) Rennes (since 2012) Paris (since 2010) Budapest (since 2012) Sophia-Antipolis (since 2014) Milan (since 2014) Trento (since 2012, expansions in 2013 and 2014) Madrid (since 2013)

26 Europe s Key Assets - The foundations for a new deal-making paradigm Leading education system, especially in engineering and digital technologies Recognized research institutions and corporates High standard of living : a premium client base for new technologies Excellent infrastructures (telecom, transport, electricity, ) EU population : 503m, almost twice the American population (320m) Cultural diversity : sources of creativity The national differences (languages, regulations, ) represent a high barrier to entry for non-eu companies EU cannot challenge US investors model solely through equity financing Agility and creativity across EU states will be key to succeed 26

27 Uberization of work Everybody can be a Taxi driver Uber Hotel owner AirB&B Journalist uploading a cat video Middle class jobs disappear No lifelong employment, not even a payroll

28 New ways of distributing wealth How to turn the extreme productivity of some to benefits for the others? What is the taxation system for sharing economy? Is the blockchain technology of cryptocurrencies the building block for new fiscal innovation?

29 Conclusions (1/2) Digitalization is changing the way of doing business Hyper-scalable business logic Extreme wealth aggregation Fight for unicorns. Mostly consumer oriented. Digitalization is changing the future of Jobs Uberization of work: Uber, AirB&B No life long jobs / maybe even no payroll Digitalization is changing the ways of distributing wealth Taxation in global digital economy, What is the taxation system for the sharing economy?

30 Conclusions (2/2) EU role in developing digital skills Digital skills mandatory in primary and secondary education Established life long digital learning as the standard (also through exploiting digital technology, MOOCs) EU role in stimulating digital entrepreneurship Fight for platforms and ecosystems Renew the EU Higher Education: Humboldt 2.0 EU role in driving digital innovation Put more R&D resources behind Innovation hubs Create a true single Digital Market

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