driving toward digital prosperitynew “general purpose technologies” drive change most...
TRANSCRIPT
Driving Toward Driving Toward Digital ProsperityDigital Prosperity
Dr. Robert AtkinsonDr. Robert AtkinsonPresident President
Information Technology and Innovation FoundationInformation Technology and Innovation Foundation
Presentation at the Presentation at the Gateway to Innovation ConferenceGateway to Innovation ConferenceSt. Louis, MOSt. Louis, MO
April 30, 2008April 30, 2008
TodayToday’’s Presentations Presentation
The Power of the IT RevolutionThe Power of the IT Revolution
IT and the Productivity TurnaroundIT and the Productivity Turnaround
Five Big TrendsFive Big Trends
Why IT is Important and What Regions Can Why IT is Important and What Regions Can Do To Support ItDo To Support It
New New ““General Purpose TechnologiesGeneral Purpose Technologies”” Drive ChangeDrive Change
Most innovations comes in incremental improvements, with modest Most innovations comes in incremental improvements, with modest changes in products and processes.changes in products and processes.
But approximately every half century a new technology system But approximately every half century a new technology system emerges that impacts virtually everything:emerges that impacts virtually everything:
what we produce, what we produce, how we produce it, how we produce it, how we organize and manage production, how we organize and manage production, the location of productive activity, the location of productive activity, the infrastructure needed, the infrastructure needed, the laws required concerning issues as property rights and permithe laws required concerning issues as property rights and permitted forms of business tted forms of business organisation.organisation.
Since the midSince the mid--1990s IT has been the engine of change and growth.1990s IT has been the engine of change and growth.
General Purpose Technologies Go General Purpose Technologies Go Through PhasesThrough Phases
When the GPT begins life, it is usually in a crude form When the GPT begins life, it is usually in a crude form that is only slowly improved and adapted.that is only slowly improved and adapted.
Later in its evolution, when it is becoming well Later in its evolution, when it is becoming well developed, its efficiency rises quickly and its use rapidly developed, its efficiency rises quickly and its use rapidly and broadly proliferates.and broadly proliferates.
Eventually physical limits are approached, causing gains Eventually physical limits are approached, causing gains in efficiency to slow and adoption rates to slow as all in efficiency to slow and adoption rates to slow as all available applications are used.available applications are used.
We went from thisWe went from this……
To this.To this.
We Went From ThisWe Went From This……..
To this.To this.
GPTGPT’’s Have 3 Main Characteristicss Have 3 Main Characteristics
1.1. They undergo rapid price declinesThey undergo rapid price declinesand performance improvements.and performance improvements.
Moore’s Law Has Not Slowed Down(Transistor Growth in Intel Computer Processor Chips)
MooreMoore’’s Law Means that s Law Means that Computing Power is Almost FreeComputing Power is Almost Free
$480
$2
$0 $100 $200 $300 $400 $500 $600
1978
2003
MicrosoftMicrosoft’’s free s free WindowWindow’’s Live Hotmail s Live Hotmail email service provides 5 email service provides 5 GB of storage for GB of storage for subscribers. It would subscribers. It would cost Microsoft almost cost Microsoft almost $100 million for each $100 million for each subscriber if they used subscriber if they used 1975 storage technology.1975 storage technology.
(Intel processing costs in $ per MIPS)
GPTGPT’’s Have 3 Main Characteristicss Have 3 Main Characteristics
1.1. They undergo rapid price declines They undergo rapid price declines and performance improvements.and performance improvements.
2.2. They are pervasive.They are pervasive.
Computing Used to be ScarceComputing Used to be Scarce
Now IT is EverywhereNow IT is Everywhere(70% of computer chips don(70% of computer chips don’’t go into computers)t go into computers)
• GPS to show where it is.
• Microwave sensors to measure the flow of the cotton.
• RFID tag inserted into each bundle to let processors know precise origin of the bundle.
• Wireless data communications.
• The computing power of 8 PC’s.
The new John Deere Cotton Harvester : John Deere & Co. CEO Bob Lane says he doesn’t make tractors but rather “sophisticated mobile information factories.”
IT is a Growing Share of Capital InvestmentIT is a Growing Share of Capital Investment
But Sectors Differ in Their IT InvestmentBut Sectors Differ in Their IT Investment
02468
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ail
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uf
Logi
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ansp
ort
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are
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ities
Ban
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Source: Information Week, October 27, 2007
GPTGPT’’s Have 3 Main Characteristicss Have 3 Main Characteristics
1.1. They undergo rapid price declines They undergo rapid price declines and performance improvements.and performance improvements.
2.2. They are pervasive.They are pervasive.
33.. They make it easy to invent and produce They make it easy to invent and produce new products, processes and business new products, processes and business modelsmodels..
IT Underpins InnovationIT Underpins Innovation
Business modelsBusiness models: Wal: Wal--MartMart’’s supply chain; s supply chain; AmazonAmazon’’s long tail; iTunes and the decline bricks s long tail; iTunes and the decline bricks and mortar music stores; etc.and mortar music stores; etc.
Processes: self-service; mass customization;supply-chain integration; collaborative design; etc.
Products/Services: hybrid cars; transportationtelematics; human genome; etc.
IT Drives GrowthIT Drives Growth
Better ToolsBetter Tools
Have Always Driven Have Always Driven
Economic GrowthEconomic Growth
Better Better ITIT ToolsTools
Drive Drive
TodayToday’’ss
Economic GrowthEconomic Growth
IT Drives Productivity GrowthIT Drives Productivity Growth(U.S. annual labor productivity growth)(U.S. annual labor productivity growth)
Productivity Turnaround Has Been Productivity Turnaround Has Been Powered by ITPowered by IT
Oliner and Sichel found that the use and production of computersOliner and Sichel found that the use and production of computerswere responsible for 0.92 percentage points of the 0.89 percentawere responsible for 0.92 percentage points of the 0.89 percentage ge point increase in labor productivity growth rates between 96point increase in labor productivity growth rates between 96--2001 and 2001 and 9191--95.95.
The OECD found that IT (production and use) was responsible for The OECD found that IT (production and use) was responsible for 109 percent of the growth in labor productivity from 1996 to 200109 percent of the growth in labor productivity from 1996 to 2002.2.
Similar effects in nations like Australia, Canada, Finland, FranSimilar effects in nations like Australia, Canada, Finland, France, ce, Finland, Germany, Korea, Japan, the Netherlands and Switzerland.Finland, Germany, Korea, Japan, the Netherlands and Switzerland.
IT IT DoesDoes Matter:Matter:IT is Correlated with Higher Productivity IT is Correlated with Higher Productivity and and ProfitsProfits
On average, for every dollar invested in IT, market valuation of a firm rises by over $10 (Brynjolfsson, Hitt, and Yang, 2002).
But ItBut It’’s Not Just What You Invest, Its Not Just What You Invest, It’’s How s How You Invest and What You Do With ITYou Invest and What You Do With IT
U.S. firms in the UK get 3 times more U.S. firms in the UK get 3 times more productivity benefit from IT than do similar productivity benefit from IT than do similar UK firms. And over 80 percent of this UK firms. And over 80 percent of this advantage is related to better use of IT.advantage is related to better use of IT.
U.S. firms had more flexible HR policies.U.S. firms had more flexible HR policies.
U.S. firms devolved more IT authority to U.S. firms devolved more IT authority to lower levels.lower levels.
The ITThe IT--Engine Is Not Likely to Run Out of Engine Is Not Likely to Run Out of Gas Anytime SoonGas Anytime Soon
The core technologies (memory, processors, storage, sensors, displays, and communication) continue to get better, faster, cheaper, and easier to use, enabling new applications to be introduced on a regular basis.
Many sectors, including manufacturing have not fully tapped the potential of e-transformation.
Application use is growing, by business and consumers and has not matured.
5 Trends5 Trends
1) Everything That Can Be Digitized Will Be1) Everything That Can Be Digitized Will Be
IT improvements: voice recognition, visual IT improvements: voice recognition, visual recognition, SOA.recognition, SOA.
Adoption: Broadband, ubiquitous computing, Adoption: Broadband, ubiquitous computing, ee--gov, egov, e--commerce.commerce.
Sectors adoption (e.g., health care)Sectors adoption (e.g., health care)
Atoms to bits: EAtoms to bits: E--tickets; Etickets; E--cash; Ecash; E--forms; Eforms; E--music, movies, books; Emusic, movies, books; E--banking.banking.
(Source: Canadian Imaging Trade Association (2006). (Source: Canadian Imaging Trade Association (2006). ““Industry Data,Industry Data,””http://www.citacanada.ca/News/industry.htmhttp://www.citacanada.ca/News/industry.htm.).)
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
2001 2002 2003 2004 2005
Digital Film
Film Cameras vs. Digital Cameras
2) The Rise of the Internet of Things 2) The Rise of the Internet of Things
Location services will be a Location services will be a next big thing (GPS next big thing (GPS enabled cell phones to enabled cell phones to grow from 153 million grow from 153 million today to 590 million in today to 590 million in 2011.)2011.)
Powered by IPV6: Powered by IPV6: Enough to give multiple IP Enough to give multiple IP addresses to every grain of addresses to every grain of sand on the planetsand on the planet
3) Mass Customization is Replacing 3) Mass Customization is Replacing Mass ProductionMass Production
IT enables much of the IT enables much of the economy to be more economy to be more customized: customized:
DellDell’’s "builds "build--toto--order" order" model. model.
Architectural Skylight Architectural Skylight Company uses CAD to Company uses CAD to automate the production automate the production of windows to architectsof windows to architects''specifications.specifications.
““PandoraPandora”” lets users lets users create their own webcreate their own web--radio station.radio station.
4) Innovation is Becoming 4) Innovation is Becoming More CollaborativeMore Collaborative
Firms are shifting from a model in which they operated as silos Firms are shifting from a model in which they operated as silos separated from each other separated from each other to networked firms linked to suppliers, customers, other organizto networked firms linked to suppliers, customers, other organizations like universities, ations like universities, and even competitors. and even competitors.
New and cheaper information and telecommunication tools (grid coNew and cheaper information and telecommunication tools (grid computing; IM; mputing; IM; telepresence; desktop collaboration tools) make collaboration eatelepresence; desktop collaboration tools) make collaboration easier.sier.
IBMIBM’’s Online Innovation Jam That Attracted More Than 37,000 Posts.s Online Innovation Jam That Attracted More Than 37,000 Posts.
InnocentiveInnocentive’’s Online Portal In Which Problems Posed By Business Are Outsourcs Online Portal In Which Problems Posed By Business Are Outsourced ed To The General Community For A Reward.To The General Community For A Reward.
Boeing Designed Its Dreamliner In a Real Time Global CollaboratiBoeing Designed Its Dreamliner In a Real Time Global Collaborative Effort.ve Effort.
Why Should Regions Care About IT?Why Should Regions Care About IT?
Manufacturing Jobs Are No Longer the Engine of Manufacturing Jobs Are No Longer the Engine of Regional GrowthRegional Growth
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Manuf actur ing Jobs
• Manufacturing jobs peaked in 1979.
• Since 2000, manufacturing jobs have declined by 3.1 million.
• The number of major manufacturing relocations and expansions have fallen 40 percent in last decade.
• Higher productivity will mean manufacturing will continue to decline as a share of employment.
Biggest Job Losers Among Traded Biggest Job Losers Among Traded Sectors: 1998 to 2006Sectors: 1998 to 2006
-600
-500
-400
-300
-200
-100
0
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ills
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arel
Com
pute
r /Ele
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Jobs
(tho
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Source: U.S. DOL, Bureau of Labor Statistics, "Current Employment Statistics, Customized Tables" (BLS, 2007), <www.bls.gov/ces/>.
Biggest Job Gainers Among Traded Sectors: Biggest Job Gainers Among Traded Sectors: 1998 to 20061998 to 2006
0
50
100
150
200
250
300
350
Mem
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Org
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Source: U.S. DOL, Bureau of Labor Statistics, "Current Employment Statistics, Customized Tables" (BLS, 2007), <www.bls.gov/ces/>.
Percentage Change in U.S. Employment: Percentage Change in U.S. Employment: Manufacturing and Tech/IT, 2004Manufacturing and Tech/IT, 2004--20072007
-0.060
-0.040
-0.020
0.000
0.020
0.040
0.060
0.080
Manufacturing Tech/IT
Total Change in U.S. Employment: Total Change in U.S. Employment: Manufacturing and Tech/IT, 2004Manufacturing and Tech/IT, 2004--20072007
-600000
-400000
-200000
0
200000
400000
Manuf Tech/IT
ITIT--Based Regional Economies Based Regional Economies Perform Better Perform Better
Cities with a Greater Share of IT Jobs Cities with a Greater Share of IT Jobs See Faster Growth in IncomeSee Faster Growth in Income
Information Sector
05
10At
tain
men
t Gro
wth
(199
0-20
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.1 .2 .3 .4 .5
Information Sector as % Total Earnings
Manufacturing
05
10At
tain
men
t Gro
wth
(199
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0 .05 .1 .15 .2 .25
% Employment In Manufacturing
1
.8
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(PM
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Presence of Digital Economy Factors
.6
Metropolitan Economies with Stronger Metropolitan Economies with Stronger ““Digital Digital EconomiesEconomies””, Had Faster Wage Growth, Had Faster Wage Growth
Grand Rapids, MI
Rochester, NY
San Diego, CA
Austin, TX
IT/Tech Provide Higher Wage JobsIT/Tech Provide Higher Wage Jobs
$32,850$32,850$38,930$38,930$65,290$65,290St. Louis St. Louis MetroMetro
$42,400$42,400$79,500$79,500United StatesUnited States
Production Production JobsJobs
All JobsAll JobsTech/ITTech/IT
So Where is St. Louis?So Where is St. Louis?
Information Technology JobsInformation Technology Jobs
2007 Rank: 15
Change 2002 to 2007: +5
The St. Louis Metro Region has a Larger Share The St. Louis Metro Region has a Larger Share of Computer Occupations than the Nation, and of Computer Occupations than the Nation, and
Lower Share of Production Occupations.Lower Share of Production Occupations.
00.20.40.60.8
11.21.4
Computer Production
What Can Regions Do?What Can Regions Do?
Decide Which Path You Are OnDecide Which Path You Are On
Discourage IT SpinDiscourage IT Spin--offs offs and Entrepreneurshipand Entrepreneurship
Discourage Employee Discourage Employee Movement Between FirmsMovement Between Firms
No Special Focus on ITNo Special Focus on IT
Spur IT SpinSpur IT Spin--offs and offs and EntrepreneurshipEntrepreneurship
Support IT Employee Support IT Employee Movement Between FirmsMovement Between Firms
Target Recruitment Efforts, Target Recruitment Efforts, Especially on Intensive ITEspecially on Intensive IT--Using Establishments Using Establishments
You DonYou Don’’t Have To Be Silicon Valley t Have To Be Silicon Valley to Succeed in ITto Succeed in IT
•• HoustonHouston•• Lexington, KYLexington, KY•• Madison, WIMadison, WI•• MinneapolisMinneapolis--St. PaulSt. Paul•• Orange County, CAOrange County, CA•• Phoenix, AZPhoenix, AZ
•• Portland, ORPortland, OR•• Sacramento, CASacramento, CA•• Melbourne, FLMelbourne, FL•• Portland, MEPortland, ME•• Salt Lake City, Salt Lake City, •• Tucson, AZTucson, AZ
Spur IT Use by CitizensSpur IT Use by Citizens
Work to expand digital literacy. Work to expand digital literacy.
Support broadband rollout (cities should Support broadband rollout (cities should facilitate access to rights of way; minimize facilitate access to rights of way; minimize taxation of broadband, limit regulation of taxation of broadband, limit regulation of broadband services, such as VOIP).broadband services, such as VOIP).
Spur IT Use By OrganizationsSpur IT Use By Organizations
Expand IT skills. Expand IT skills. Firms adopting higher levels of IT use more skilled labor,
Drive eDrive e--government innovation to become a leadinggovernment innovation to become a leading--edge region in the use of IT in all sectors (government, edge region in the use of IT in all sectors (government, transportation, health care, education, etc.)transportation, health care, education, etc.)
Support organizations (public, private and nonSupport organizations (public, private and non--profit) profit) learning from one another on IT usage.learning from one another on IT usage.
Foster venture, seed and angel capital for ITFoster venture, seed and angel capital for IT--based based startups.startups.
Spur IT Industry DevelopmentSpur IT Industry Development
Support university IT and computer science Support university IT and computer science programs.programs.
Facilitate interFacilitate inter--firm learning in part by firm learning in part by supporting IT supporting IT cluster initiatives (e.g., Atlanta, Seattle, Washington, DC)
DonDon’’t do the wrong things (like Marylandt do the wrong things (like Maryland’’s s tax of computer services).tax of computer services).
