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THE FUTURE OF TECHNOLOGY More machines than people Peter Cochrane Chief Technologist BT Collier 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 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 have to do everything. . . From village. . . To city. . . You can afford to specialis/ze. . .

Town city From people centric business. . . national global To machine & network Town city From people centric business. . . national global To machine & network Centric business. . . Global

We seek clarity & truth. . . Clarity …mostly they are orthogonal. . . We seek clarity & truth. . . Clarity …mostly they are orthogonal. . . Truth

If it were only this simple. . . e es c r of n If it were only this simple. . . e es c r of n r tu r Variables u So Markets

Productivity 100 Productivity 80 70 60 40 BW Chip 20 0 SW Productivity 100 Productivity 80 70 60 40 BW Chip 20 0 SW

Axiomatic…. • • • Bandwidth is free Distance is irrelevant Time has no meaning 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/ infrastructure IP PSTN Data Over Voice Net 1999 2009 Voice The Future Outlook Traffic/ infrastructure IP PSTN Data Over Voice Net 1999 2009 Voice Over Data Net

Internet & Telephone Connections Global Connections 10 B 1 B Phone Lines 0. 1 Internet & Telephone Connections Global Connections 10 B 1 B Phone Lines 0. 1 B 10 M Internet Connections 1 M Mobile Phones 0. 1 M 10 k 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 Collective/Company +IQ Constructive Contribution -IQ Best Case Number of Smart People - Dumb Company Collective/Company +IQ Constructive Contribution -IQ Best Case Number of People n Deconstructive Contribution Worst Case

Business & Market Time Iff Reaction time << Market time Success Reaction time >> Business & Market Time Iff Reaction time << Market time Success Reaction time >> Market time Failure

No measurement, no visibility…. . . no control and. . . Sales Channel Demand. No measurement, no visibility…. . . no control and. . . Sales Channel Demand. . . heavy losses. . $ Consumer Demand Supply Planned Launch Actual Launch End of Line

EU Ecommerce by Technology 600 500 400 TV Mobile 300 200 100 0 PC EU Ecommerce by Technology 600 500 400 TV Mobile 300 200 100 0 PC

A 5 GIP Computer v Book Keeper US$ 10, 000, 000 1, 000, 000 A 5 GIP Computer v Book Keeper US$ 10, 000, 000 1, 000, 000 100, 000 Computer 10, 000 1, 000 100, 000 10, 000 Book keeper 1, 000 10 1 1970 1975 1980 1985 1990 1995 2000

Value $ Movie Release Value of bits. . . Sequel Launched Time Becomes a Value $ Movie Release Value of bits. . . Sequel Launched Time Becomes a Classic

Concept to Customer Cost Bad Product Support Research Development Delivery Production Concepts Freedom Focus Concept to Customer Cost Bad Product Support Research Development Delivery Production Concepts Freedom Focus Innovation Objectivity Innovation Timescales Constraints Focus Objectivity Formalism Timescales Good Product Support Time Constraints Control Processes Formalism Competition Life Cycle

Concept to Customer Levels of Hierarchy Cost . com Bad Product Support Research Development Concept to Customer Levels of Hierarchy Cost . com Bad Product Support Research Development Delivery Production Concepts Good Product. com Support Time

World GDP growth rate is declining 8% 6% 4% 2% 0% 73 75 77 World GDP growth rate is declining 8% 6% 4% 2% 0% 73 75 77 79 81 Source: IMF, JP Morgan, The Economist 83 85 87 89 91 93 95 97 99

Equity-Value/Employee $ . com Time to Market-React Business Spectrum time . com Equity-Value/Employee $ . com Time to Market-React Business Spectrum time . com

Established Wisdom Hardware Software Network Applications Convergence? ? I don’t think so…. Established Wisdom Hardware Software Network Applications Convergence? ? I don’t think so….

Net Platform Evolution The Net Net Platform Evolution The Net

Company Evolution People-less Corps Personal assistant software Logistics company - Genie Virtual co-operative - 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 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 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 It is also about…Perception • • • Brand Quality Timeliness Trust Delivery Taking the pain away

Route to customer…. • Media • Telephone • Mobile Phone • PCs + WAPs 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 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 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 they want. . • When Customer’s don’t want choice. . . • They 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 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 Time is the enemy. . . Letter Weeks Telegram Telex Days Analogue Fax Digital Fax Email Hours Eworking Minutes Seconds Ecommerce 50 s 60 s 70 s 80 s 90 s 00 s 10 s

The ‘S’ Curve Technology $ time The ‘S’ Curve Technology $ time

The ‘S’ Curve Technology $ Product 1 time The ‘S’ Curve Technology $ Product 1 time

The ‘S’ Curve Technology $ Product 2 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 $ Product 3 Product 2 Product 1 time

The ‘S’ Curve Technology $ Optical Fibre Coax Pairs Open Lines time The ‘S’ Curve Technology $ Optical Fibre Coax Pairs Open Lines time

The ‘S’ Curve Continuum Technology $ DVD CD Cassette Tape time The ‘S’ Curve Continuum Technology $ DVD CD Cassette Tape time

Moore’s Wall ICn Log Scale IC 5 3 D ICs Molecular Quantum Genetic Biological Moore’s Wall ICn Log Scale IC 5 3 D ICs Molecular Quantum Genetic Biological Optical Computing IC 4 IC 3 IC 2 IC 1 Transistor Thermionic Tube 1915 46 59 2010 2025

# Transistors/Chip 11 10 10 10 8 10 x 9 7 10 10 6 # Transistors/Chip 11 10 10 10 8 10 x 9 7 10 10 6 Logic Memory x x x 5 10 4 10 3 1980 1990 2000

BIT STORAGE DENSITY BIT STORAGE DENSITY

ENERGY PER LOGIC FUNCTION ENERGY PER LOGIC FUNCTION

UK 14 Year Olds 2000 Mobile Phone Owners Girls = 38% Boys = 28% 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 Virtual + E Business • • • Death of geography Death of distance Fluctuating assets Information intensive Infinite & Chaotic Bits rule the atoms

New Company Value Faster & Faster Wealth Generation US$Bn 100 90 80 70 60 New Company Value Faster & Faster Wealth Generation US$Bn 100 90 80 70 60 50 40 30 20 10 0 Internet 1 2 3 4 5 6 Year 7 PC 8 9 10

UK SMS Messages 99 300 250 200 Millions 150 100 50 0 Jan Feb UK SMS Messages 99 300 250 200 Millions 150 100 50 0 Jan Feb Mar. Apr. May. Jun Jul Aug. Sep Oct Nov. Dec

How many friends do you have…. . . how many people do you know? How many friends do you have…. . . how many people do you know? Separation 0 1 2 3 4 5 6 => => People You Know 30 900 27, 000 810, 000 24, 300, 000 729, 000 21, 870, 000 => => 300 90, 000 27, 000 8, 100, 000

Manufacture Distribution R E T A I L Recycle Raw Materials Ecosystem Trash Consumer Manufacture Distribution R E T A I L Recycle Raw Materials Ecosystem Trash Consumer

Raw Materials Recycle B-B Manufacture Distribution B-B Ecosystem Trash C-B C-C B-C Consumer R Raw Materials Recycle B-B Manufacture Distribution B-B Ecosystem Trash C-B C-C B-C Consumer R E T A I L

Business Spectrum Market Change Time Company Change Time 10 Acquisition & Growth 1 Take Business Spectrum Market Change Time Company Change Time 10 Acquisition & Growth 1 Take Over 0 Bankrupt 0 1 2 Time Years 3

Value. . . Value Bits Atoms Abundance Value. . . Value Bits Atoms Abundance

The value of atoms…per kg $90 k Pentium III Chips $25 k Viagra $10 The value of atoms…per kg $90 k Pentium III Chips $25 k Viagra $10 k Gold $4. 3 k Hermes Scarf $3. 9 k Palm V $2. 1 k 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 1000 Price US $/kg 10, 000

The old marketplace…. . . the customer view. . . Broadcast Newspapers Stores, Oil, The old marketplace…. . . the customer view. . . Broadcast Newspapers Stores, Oil, Gas, Power, Food, Banks, Insurance, Government Few 1 Many N

The internet marketplace…. . . customer view. . . Broadcast Newspapers Stores, Oil, Gas, The internet marketplace…. . . customer view. . . Broadcast Newspapers Stores, Oil, Gas, Power, Food, Banks, Insurance, Government Many 1 N 1

The internet marketplace… …actuality. . . Many to One to Many The internet marketplace… …actuality. . . Many to One to Many

Fitness Function flexibility x speed x vision Fitness = experience Experience is only useful 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 Exp Growth - Modes . com Atoms Dominated Limited Market Low Margin Market Space Exp Growth - Modes . com Atoms Dominated Limited Market Low Margin Nokia Fed. Ex IBM Dell TI Amazon Ebay Yahoo e. Trade e. Bank e. Bookers Kmart Ford Oil AA Banks ISPs Telcos Cable Linear Growth Market High Margin . com Bit Dominated

Grades of FREE. . . Free as we used to understand it Free after 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 Cyberspace Suburbs Community network peak Villages Global Cities - influence density City Geographic World Cyberspace Suburbs Community network peak Villages Global presence

From the few to the many. . . Concentrated Expertise & Skill Distributed Ignorance From the few to the many. . . Concentrated Expertise & Skill Distributed Ignorance Technology Telephone Computing Copiers Printing Operators Mainframe Corp Centre Hot Metal Dial & Buttons PC Office Xerox Offset/Laser Jet

Distributed ignorance wins! Concentrated Expertise & Skill Distributed Ignorance Ability to Compete Technology $ Distributed ignorance wins! Concentrated Expertise & Skill Distributed Ignorance Ability to Compete Technology $ ~N 2 N

Where is the energy. . . Internalised Externalised Technology Centralised Control - Hierarchy Inflexible Where is the energy. . . Internalised Externalised Technology Centralised Control - Hierarchy Inflexible & Ponderous Dispersed - Chaotic Adaptable Fleet of Foot

The Rules Have Changed • • • Inversion Exponentiation Self organising self optimising Mass 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 Work is…. . . not a place . . . it is an activity

What have we done? • • Downsized Reorganised Challenged everything Change the culture. . What have we done? • • Downsized Reorganised Challenged 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 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 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 A Two Class Society $ Those who spend a lot of money to save time

How did all this happen? How did all this happen?

Internet Hosts (Log Scale) 10, 000 1, 000 100, 000 Hosts 10, 000 100 Internet Hosts (Log Scale) 10, 000 1, 000 100, 000 Hosts 10, 000 100 1985 1990 1995 2000 Date

Internet Hosts (Linear Scale) 8 M 7 M 6 M Hosts 5 M 4 Internet Hosts (Linear Scale) 8 M 7 M 6 M Hosts 5 M 4 M 3 M 2 M 1 M 1980 1985 1990 1995 2000 Date

More machines than people More machines than people

More Barbie Dolls. . . on line. . . …than Americans More Barbie Dolls. . . on line. . . …than Americans

Machines Overtake Mankind 100 % Network Traffic 75 Mankind 50 6 Bn Machines 25 Machines Overtake Mankind 100 % Network Traffic 75 Mankind 50 6 Bn Machines 25 20 Bn 0 1985 1990 1995 2000 2005 2010 2015

Customer Engagement Time Carbon High One on One Outlet Cost System Silicon Limited Call Customer Engagement Time Carbon High One on One Outlet Cost System Silicon Limited Call Centre Availability Net Low High

People - Revenue Mismatch CUSTOMERS INCOME 5% 30% 20% 75% 30% 75% Where we People - Revenue Mismatch CUSTOMERS INCOME 5% 30% 20% 75% 30% 75% Where we are now. . . PEOPLE 5%

People - Revenue Mismatch CUSTOMERS INCOME PEOPLE 5% 30% 75% 20% 30% 20% 75% People - Revenue Mismatch CUSTOMERS INCOME PEOPLE 5% 30% 75% 20% 30% 20% 75% 30% 5% Where you’d like to be, but. . .

People - Revenue Mismatch PEOPLE 5% 5% 75% 20% 20% 75% Machine 75% CUSTOMERS People - Revenue Mismatch PEOPLE 5% 5% 75% 20% 20% 75% Machine 75% CUSTOMERS 5% MACHINE Technology to the rescue. . .

Speech recognition is tough…. • Let us pray • Let us spray • Lettuce Speech recognition is tough…. • Let us pray • Let us spray • Lettuce spray

The Future is Chaos! 2000 s 1980 s Hierarchical Structured Telegraph Telephone Self- Organised The Future is Chaos! 2000 s 1980 s Hierarchical Structured Telegraph Telephone Self- Organised and Chaotic Internet ? Intranets

Everything will be in Cyberspace covered by a hierarchy of computers! Cell Continent Body Everything will be in Cyberspace covered by a hierarchy of computers! Cell Continent Body Home Region Car Campus World Building 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 100 A connected world is chaotic…. 200 150 Net visitors come in packs…. Active 100 Site Visitors 50 0 00. 00 Peter Cochrane 06. 00 12. 00 Hour of the Day 18. 00 24. 00

We could all be a bank. . . Ordering and delivery Merchant Customer Internet We could all be a bank. . . Ordering and delivery Merchant Customer Internet Billing Existing mechanis ms Submit and confirm payment Clearing Card Issuer Card Acquirer

money = bits 100111010001111100111000111100000001111100111 000100111010001111100111000111100000001111100111011 1000111110011100011110000000111110000001 1010001111100111000111100000001111100111 1000111110011100011110000000111110000000 001110100011111001110001111000000011111001110 01000111110011100011110000000111110011110100011111001110001111000000011111 1010001111100111000111100000001111100110 001110100011111001110001111000000011111001110 000100111010001111100111000111100000001111100 money = bits 100111010001111100111000111100000001111100111 000100111010001111100111000111100000001111100111011 1000111110011100011110000000111110000001 1010001111100111000111100000001111100111 1000111110011100011110000000111110000000 001110100011111001110001111000000011111001110 01000111110011100011110000000111110011110100011111001110001111000000011111 1010001111100111000111100000001111100110 001110100011111001110001111000000011111001110 000100111010001111100111000111100000001111100

Law of Diminishing Returns $1. 07 $0. 68 Average cost of retail banking transaction Law of Diminishing Returns $1. 07 $0. 68 Average cost of retail banking transaction $0. 27 $0. 10 Branch Telephone ATM Internet No. . Branch. . Employees. . Infrastructure

Printed Transponder MIT Media Lab Printed Transponder MIT Media Lab

If time = money. . . then so does position Positioning systems will become If time = money. . . then so does position Positioning systems will become as essential as communication networks in the future economy

Soon ~2 cm Soon ~2 cm

A multimedia world. . in transition. . Copper to glass Radio + Satellite + 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! PARASITIC NETWORKS Zero infrastructure!

PARASITIC NETWORKS Zero infrastructure! PARASITIC NETWORKS Zero infrastructure!

Sooner or later. . . a carrier will come in range. . . Sooner or later. . . a carrier will come in range. . .

Sooner or later. . . a carrier will come in range. . . Sooner or later. . . a carrier will come in range. . .

Sooner or later. . . a carrier will come in range. . . Sooner or later. . . a carrier will come in range. . .

Sooner or later. . . a carrier will come in range. . . Sooner or later. . . a carrier will come in range. . .

Sooner or later. . . a carrier will come in range. . . Sooner or later. . . a carrier will come in range. . .

Does a freeway become an optical fibre? Does a freeway become an optical fibre?

Mobile FM TV Opportunity Mobile FM TV Opportunity

Net Spectrum Economy 100% Telephone Hierarchy Control 0% Random Static Internet Bursty Traffic Resilience Net Spectrum Economy 100% Telephone Hierarchy Control 0% Random Static Internet Bursty Traffic Resilience Latency Flexibility Reliability Parasitic Scalability 0% Chaotic Mobile

Focus Marketing Evolution 1 Adaptive Targeted Direct Mass All Make & Sell Marketing Evolution Focus Marketing Evolution 1 Adaptive Targeted Direct Mass All Make & Sell Marketing Evolution Sense &Respond

Evolution of Platforms WAPs Business Platforms Packaged Application Value Application Servers Dynamic Page Engines Evolution of Platforms WAPs Business Platforms Packaged Application Value 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 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 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 - 1 st generation Learning Engines Evolution of Platforms - Basic customer profiles Value - 1 st 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 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 Evolution of Platforms - Customer profile database - Simple reporting Value - Focused e-marketing Packaged 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 Business Value learning engines - Evolution of Platforms - Integrated customer profiling, analysis and Business Value learning engines - 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, WAPs analysis and learning Business Value - User Evolution of Platforms - Mobile profiling, WAPs analysis and learning Business Value - User controls Platforms Packaged Application personalization Application Servers Dynamic Page Engines CGI Scripts Static HTML 94 95 96 97 98 99 00 01

Business savings. . . Airline Banking Bill Payment Tickets Traditional System $8 $1. 08 Business savings. . . Airline Banking Bill Payment Tickets Traditional System $8 $1. 08 $2. 22 to $3. 32 $0. 54 $1. 2 to $2. 2 $1 $0. 13 $0. 65 to $1. 10 $200 -$350 $0. 20 to $0. 50 87% 89% 67 -71% 50% 97 -98% Telephone-based Internet-based Savings Percentage Term Life Software Insurance Distribution Policy $400 -$700 $15. 00 $5. 00 On-line procurement >30%. . .

At a modest estimate e. Commerce can. . . Remove $2, 000 Bn of At a modest estimate e. Commerce can. . . Remove $2, 000 Bn of marketing & sales costs in the global market

e. Business value creation. . . Cut Costs e. Business has to focus on e. Business value creation. . . Cut Costs e. Business has to focus on all 3 benefits Grow Revenues Build Community

Extended view. . . Cut Costs e. Business has to focus on all 3 Extended view. . . Cut Costs e. Business has to focus on all 3 benefits Information Grow Influence Revenues Relationships Networks Access Speed Build Community

Markets are being. . . disintermediated Distribution Customer Retail Customer Services Customer Retail Services Markets are being. . . disintermediated Distribution Customer Retail Customer Services Customer Retail Services Customer Wholesale Retail Services Wholesale Manufacture 20 th Century Manufacture Customised Manufacture 21 st Century

Trust is a key issue limiting adoption… …but it is an age thing… Language Trust is a key issue limiting adoption… …but it is an age thing… Language Training Lack of skills Cost 1% 3% 7% 9% Implementation difficulty 10% Lack of knowledge 10% Technology resistance 10% Customers not connected Security worries 24% 25%

In the world of bits…. . …. massive intermediation Distribution Yahoo Amazon Services Customer In the world of bits…. . …. massive intermediation Distribution Yahoo Amazon Services Customer Virgin Tesco Dixons Ebay Today Tomorrow? peter. cochrane@bt. com

In the world of bits…. . …. massive intermediation Distribution Services Customer Can your In the world of bits…. . …. massive intermediation Distribution Services Customer Can your Yahoo Company Virgin & Tesco Amazon “friends” Dixons do all this? Ebay The day after? ? peter. cochrane@bt. com

Too Complex & Too Flakey • 39% of shoppers failed - sites were too Too Complex & Too Flakey • 39% of shoppers failed - sites were too complex Estimated Loss =>$24 billion/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 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. ” 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 Biz. Rate Survey 99

Customer Reaction & Experience • Based on accomplishing goals quickly/easily • Site experiences shaped 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: 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

Relationships Business Company Other Avatar Colleagues Co Customers Contacts Team Cyberfriends Net Self friends Relationships Business Company Other Avatar Colleagues Co Customers Contacts Team Cyberfriends Net Self friends Local Family Friends society Neighbors Clubs Geographic Net Community community nets Personal

Business Modes Past Face to Face B to C B to B C to Business Modes Past Face to Face B to C B to B C to C Present Faceless Future Local Remote & National Virtual & Global Local Remote International Virtual & Global Local Distributed & Regional Virtual & Global Screen to Screen

Past Face to Face B to C B to B C to C BCM Past Face to Face B to C B to B C to C BCM Present Faceless Local Remote & National Virtual & Global Local Remote International Virtual & Global Local Distributed & Regional Virtual & Global N/A Future Screen to Screen

Adults Active in Start-Ups Finland Japan France Denmark Germany UK Italy Israel Canada US 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 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 $x. M Web Users Forrester Research 99 USA On-Line Shopping Revenues $x. M Web Users Forrester Research 99

Toys and e. Toys? ? Sales Net earnings Market value $11 bn $376 m Toys and e. Toys? ? Sales Net earnings Market value $11 bn $376 m $6 bn Sales: Net earnings: Market value $30 m - $29 m $?

Business to Business - Old Support Sales Marketing Production R&D Business to Business - Old Support Sales Marketing Production R&D

Business to Business - New Support Sales Marketing Production R&D R&D Not all companies Business to Business - New Support Sales Marketing Production R&D R&D Not all companies do everything Most have now virtualised and outsourced to create a huge B-B marketplace B-B is a network activity and a vital e. Commerce activity

Business to Customer - Old Support Sales Marketing Production R&D Customers Business to Customer - Old Support Sales Marketing Production R&D Customers

Business to Customer - New Support Sales Marketing Production R&D Customers Business to Customer - New Support Sales Marketing Production R&D Customers

Business to Customer - Future Support Customers Customer Sales Customer Marketing Customers Customer Production Business to Customer - Future Support Customers Customer Sales Customer Marketing Customers Customer Production R&D Customers Customer

Technology Driven Exponentiation Long term demand Cost to users Technology Costs Short term demand Technology Driven Exponentiation Long term demand Cost to users Technology Costs Short term demand

Customer Driven Exponentiation Long term demand/income Short term demand = constant Customer signs up Customer Driven Exponentiation Long term demand/income Short term demand = constant Customer signs up others for a % 2 n 3 Product Cost 1 n-1 4 n-2 Actual Perceived

e. Mail & degrees of separation. . . Separation 0 Number of people you e. Mail & degrees of separation. . . Separation 0 Number of people you know and can email 1 2 3 4 5 6 7 10 102 103 104 105 106 107 108 102 104 106 108 1010 103 106 109 104 108 Population an individual can influence

Importance Management thinking…? Reengineering Professionalising management Product policy Functionali sation Alfred Sloan Efficiency Strategy Importance Management thinking…? Reengineering Professionalising management Product policy Functionali sation Alfred Sloan Efficiency Strategy Financial controls Adam Smith Organisation 200 years Invisible Chaos 1930 Frederick Taylor 1940 Peter Drucker 1950 Tony Athos 1960 Quality Multi -business unit Michael Porter 1970 Hammer & Champy 1980 Emergent Economy All ? ? 1990 Visible Chaos

Knowledge is power. . . • Gutenburg broke the monopoly of the monks • 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 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 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 – 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 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 - Y 2 K

If we ran a company. . Cost/Price/Unit Company Utilisation Get the utilisation up. . 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 Utilisation Cost/Price/Unit Co We had better not stove pipe. . . Cost/Price/Unit Co Co Utilisation Cost/Price/Unit Co Co Co Utilisation Co Co Utilisation

We would have to do this. . . Co Co Co Co We would have to do this. . . Co Co Co Co

Mutually exclusive. . . Process Definition Control Hierarchy Adaptable - Fleet of Foot Mutually exclusive. . . Process Definition Control Hierarchy Adaptable - Fleet of Foot

Centralise or Decentralise? 100% Centralised 100% Decentralised Optimal Decision Distance Lack of adaptability +flexibility Centralise or Decentralise? 100% Centralised 100% Decentralised Optimal Decision Distance Lack of adaptability +flexibility & long response Processes investment inefficiency plant cost time cost CEO Office Decision Distance from CEO Office 100% Control Organisation Outer Edge 100% Chaos

AI Will Penetrate the Symbolic Barrier Investment Banking Global Competition Downsizing Outsourcing Unbundling Specialisation AI Will Penetrate the Symbolic Barrier Investment Banking Global Competition Downsizing Outsourcing Unbundling Specialisation Global Partnering Legal Profession Media Medicine Education Finance Telecommunications Manufacturing Chemicals NUMERIC PROCESSING Insurance Brokerage Accounting SYMBOLIC PROCESSING The Symbolic Barrier + Regulatory Barriers

Guiding Principles • Engineer exponentiation • Go for the customers customer l Embrace self Guiding Principles • Engineer exponentiation • Go for the customers customer l Embrace self organising chaos l Invert the values of the past l Virtualis/ze organisations l Create shareholder value l Be fast to Market

Nothing much has changed…. 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 Thank You www. labs. bt. com/people/cochrane

Who survives? Not the strongest Not the most intelligent Those most responsive to change Who survives? Not the strongest Not the most intelligent Those most responsive to change Charles Darwin