I spent the first week of June in Chile, my fourth visit in the last five years. I was there at the invitation of Fernando Flores, President of the National Innovation Council for Competitiveness, to assist in the Modernization of the State initiative, one of the major projects in the administration of Chile’s President Sebastian Piñera.
The Modernization of the State initiative is being led by Rafael Ariztia under the General Ministry of the Presidency. It has four major objectives:
- Improve in the overall services that the government provides to all its users
- More effective and efficient government institutions
- Improve the effectiveness of government employees
- Facilitate the decentralization of the country
I first met Fernando Flores during a trip to Chile in August of 2006 to attend an international conference. He was a Senator then, a position he held from March of 2002 until he was appointed by President Piñera to his present position in March of 2010. We discovered that we had a lot of common interests and have since become friends. I continued to meet with him during subsequent visits to Chile. He knew about my strong interests in cloud computing, and last year I invited him to a briefing on the subject in IBM’s headquarters in Armonk, New York.
Flores has been very involved in the Modernization of the State initiative, both because of his position as president of the Innovation Council as well as his personal expertise in technology and management. He holds a Ph D from UC Berkeley, has worked extensively in the fields of organizational leadership and human cognition, and written a number of books, including Understanding Computers and Cognition: a New Foundation for Design and Building Trust: in Business, Politics, Relationships and Life.
Flores feels that cloud computing has a major role to play in helping to achieve the objectives of the Modernization initiative. We talked about his ideas earlier this year, which I thought were right on the mark. He later invited me to assist in these efforts by coming to Chile for meetings with Rafael Ariztia and the key groups woking on the initiative, as well as to give a seminar explaining cloud computing and its potential to Chilean government officials.
In the first part of the talk, I observed that while historical transformations like the ones we are going through are usually caused by the advent of major disruptive technologies, the key transformations have nothing to do with the technology itself, but with the impact of the technology on business, government, society and our personal lives.
Digital technologies are now causing such a historical transformation. They are to our present era what steam power was to the advent of the Industrial Revolution in the late 1800s. In particular, I believe that the explosive growth of the Internet in the mid 1990s is the key catalyst propelling us from the industrial age of the past couple of centuries to a new kind of information-based economy and knowledge-based society.
Next, I wanted to explain cloud computing. I have done this many times in the last several years in seminars at universities, technical conferences and business meetings. But, how do you best bring across the promise of cloud computing to an audience consisting primarily of non-technical government officials in the Chilean presidential palace?
Given that everyone is very familiar with the Internet, I chose to position cloud computing in the context of the evolution of the Internet and the major capabilities it has enabled over the years.
Communications via e-mail, and access to information using the World Wide Web, are the two main capabilities that made the Internet so popular in the mid 1990s. A few years later came e-business, - the widespread use of the Internet in companies, governments and other institutions, - which enabled the rise of online commerce. In the early 2000s we saw the rise of Web 2.0 and of a variety of social media applications.
Then a few years ago came another major disruptive innovation, namely the widespread use of intelligent mobile devices, especially smartphones, but also e-books and tablets. In addition, smart sensors are being embedded into myriads of things in the physical world, like cars, appliances, medical equipment, cameras, roadways, oil pipelines and electric grids. All these smart devices need access not only to information and communications, but increasingly to many different kinds of services and apps.
Where do all those services and apps used by the huge number of smart mobile devices and sensors come from? There must be computers someplace out there, to which the devices and sensors are connected via broadband wireless networks. Those computers in the ether, is what we call the cloud. We know they are out there, but we have no idea, nor do we usually care, where they are. As The Economist wrote in an excellent special report on cloud computing in October of 2008:
“Now [computers] are evaporating altogether and becoming accessible from anywhere . . . [Computing] is becoming more centralised again as some of the activity moves into data centres. But more importantly, it is turning into what has come to be called a cloud, or collections of clouds. Computing power will become more and more disembodied and will be consumed where and when it is needed . . . It will undoubtedly transform the information technology (IT) industry, but it will also profoundly change the way people work and companies operate. It will allow digital technology to penetrate every nook and cranny of the economy and of society, . . .”
Cloud computing is the name we have all settled on for this new computing model. Cloud infrastructures connect very large numbers of personal mobile devices, sensors, PCs, laptops and terminals, to powerful computers and storage devices in big data centers, providing them with services, apps and information of all sorts over the Internet and broadband wireless networks.
I told the audience at La Moneda that if they only remember one thing from my talk, it should be that cloud computing is essentially the Internet of services.
Why is this such a big deal? Because services constitute by far the largest sector in the GDP of most countries around the world, almost 80% in the US, over 60% in Germany, Spain, Brazil and Mexico, and over 50% in Chile. In particular, given that the key role of government is to provide services to its citizens, a capability like cloud computing that leverages technology to improve the way services are produced and consumed has the potential to significantly improve the productivity of government and the quality of the services it delivers to citizens.
I finished my talk by giving examples of the use of cloud computing in two key areas I am closely involved in my work: Smarter Cities with IBM and Mobile Digital Money and Global Digital Payments with Citigroup. They both offer governments the ability to reach every one of their citizens, not just those that are better off economically and can afford access to computers.
That’s because the digital divide, - the gap in access to digital technologies among people of different economic means, - is much smaller with mobile phones than it has been with PC’s and broadband Internet. There are already over 5 billion mobile phones around the world. In some countries, including Chile, mobile phone penetration levels have passed the 100% marks. While today, only a fraction of those phones in the world qualify as smartphones, I would expect that in a few years mobile devices that only makes phone calls will be increasingly rare. Most everyone will have a mobile device capable of supporting Internet access and smart applications.
There is increasing evidence that mobile communications can have a positive impact on the economic and social growth in developing markets. A recent study by the World Bank concluded that “. . . a ten percent increase in mobile penetration leads to a 1 percent increase in low-medium income GDP.”
“According to a model developed by Bell Labs and the World Economic Forum, with the right combination of actions and investment, we can accelerate the impact of mobility by as much as 36%, measured in GDP. The model predicts how mobile policies, applications, technology, and economics can impact the future. The team found that while mobile broadband is a good thing for economic and social growth, when we combine it with the right applications it gets even better.”
“Mobility is about a lot more than being able to move around with a phone. It is about giving people access to services, information and markets. To health, to education, to finance. In short its about giving people the ability to do more.”
I still remember the conversations I had with then Senator Flores when we met five years ago. He raised a number of important questions. Can a relatively small country like Chile, with only 16 million people, compete successfully in the world's increasingly global economy? How can the Chilean economy move beyond its reliance on natural resources - e.g., mining (especially copper), forestry, fishing, agriculture and wine - and establish an innovation economy based on talent? What should the government do to foster the development of such an innovation economy?
He believed that the crux of the answers, in Chile and other countries, revolves around the role of government in fostering innovation and competitiveness, and in the proper balance of efforts and investment between the public and private sectors. As long as a small country has the proper talent, investments and infrastructure it can be a successful participant in the world's global economy. This is evident in Sweden, Israel, Singapore, Taiwan and New Zealand, among others.
To do so requires a well thought out strategy, since small countries can only become world-class players by selecting the niches where they will focus their efforts and investments, becoming part of the global networks of expertise in the chosen areas, and creating strong export markets.
Five years ago, he thought that Chile was not quite in the position to be internationally competitive because it did not yet have such a focused development strategy and lacked the necessary entrepreneurial business experience. But, he felt that the country was on the verge and had a number of important strengths. It is a stable democracy, has a market economy, and strongly supports free trade agreements. It has the resources to enable it to invest in the future.
Chile also has considerable technical and management expertise, which was demonstrated in the dramatic rescue of the Chilean miners last October. Chile showed the world what can be accomplished when highly talented people come together for a common objective. It was one of the best examples I have ever seen of collaborative innovation at a global scale between governments, business and academia.
The future of the state is one of the most important and complex issues facing countries around the world. Everyone is looking for innovative approaches to make governments significantly more productive and to make it possible for all their citizens to have access to high quality services at affordable costs.
Chile’s Modernization of the State efforts seems to be one of the most focused and best organized I have seen. It has the potential to be one of the most successful such projects, and to perhaps serve as a model for others to follow. This is truly one of our toughest and most important challenges in the years ahead, not only for Chile, but for countries around the world.