Irving Wladawsky-Berger

A New Style of Work

About a year ago I wrote a blog on the post retirement phase of my life.  Tom Foremski, a journalist blogger and friend who reports on the business and culture of innovation in Silicon Valley Watcher, wrote an interesting comment in my blog:

“In some ways, I see your post-retirement life as being somewhat futuristic, in that it will be the way many people will be working in the future.  It's what I call an "atomic" model - collaborating with others on specific tasks/projects and then dissolving those collaborations as you work with others on different projects. In some ways, this is the way Hollywood has been working for decades.  And it's also one that I increasingly see in Silicon Valley.”

“It's a model that increases individual productivity and also organizational productivity because you bring in consultants/experts for specific tasks.  Why have them sitting around on salaries in-between projects?”

“You've retired from the old style of working and you are now pioneering the new style of working :)”

Tom himself made such a transition when in 2004 he left his position as the Silicon Valley reporter for the Financial Times to found Silicon Valley Watcher, one of the first journalists to leave a position with a major newspapers to make a living as a journalist blogger.

I have been very intrigued with this new distributed work phase of my career, where I am associated with several institutions instead of one primary one, as was the case when I worked full time at IBM until I retired in May of 2007 after 37 years with the company.  In particular, I have thought a lot about the role of the Web and related technologies as key enablers of such a distributed style of work.  

Fixing the US Jobs Problem

Last week, I wrote about the recent work of Michael Spence, professor of economics at NYU’s Stern School of Business, professor and dean emeritus at the Stanford Graduate School of Business, and the recipient of the 2001 Nobel Prize in economics. 

In The Evolving Structure of the American Economy and the Employment Challenge, which was published in March of this year by the Council on Foreign Relations, Professor Spence and co-author Sandile Hlatshwayo, examined the impact of globalization over the last twenty years.  They divided the economy into two segments: tradable and nontradable.  They then looked at the trends in each segment by analyzing data from 1990 to 2008 from the US Bureau of Labor Statistics and the Bureau of Economic Analysis.  Their analysis uncovered a tale of two very different economies. 

The tradable sector includes those parts of the economy most subject to global competition from foreign companies and suppliers, - e.g., manufacturing, energy, back-office services.  It significantly improved its value added per job or productivity, but had negligible incremental employment, primarily because a growing number of jobs have been moving offshore.  The nontradable sector, which includes those parts of the economy which must be produced and consumed locally, - e.g., government, health care, construction, - had virtually all the job growth during this period but significantly lower value-added.

As they wrote in the Executive Summary, the employment picture does not look good over the next several years, perhaps longer:

“Given the prospect of slowing employment growth in nontradables and rising competitive pressure on tradables, major employment problems in the near future are a certainty.  Even if the nontradable sector is able to continue to absorb the growth in the labor force, pressure on wages and salaries will be downward, and consequences for income distribution unavoidable.”

“To create jobs, contain inequality, and reduce the U.S. current-account deficit, the scope of the export sector will need to expand.  That will mean restoring and creating U.S. competitiveness in an expanded set of activities via heightened investment in human capital, technology, and hard and soft infrastructure. The challenge is how to do it most effectively.”

The Modernization of the State

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.

IBM's Centennial

IBM is turning 100 years old on June 16.  The company is commemorating its 100th anniversary with a year-long set of activities around the world.  It is using the opportunity to reach out to many of its constituents in business, government and academia and engage with them in a variety of celebratory events, such as seminars and conferences.  In addition, IBM Chairman Sam Palmisano is inviting all members of its extended family - employees, partners, retirees, families and friends - to pledge at least eight hours of community service during 2011.

If you look at the fast changing IT industry, it is hard enough to find companies that have survived thirty years, let alone one hundred.  It is even harder to find a company that has survived this long, is in great competitive shape and continues to be among the leaders in its industry.  So, as The Economist observed in 1100100 [100 in binary] and Counting in its June 9, 2011 issue:      

“The firm’s centenary is an occasion to reflect on many things digital, but one question stands out: why is IBM still alive and thriving after so long, in an industry characterised perhaps more than any other by innovation and change?  This is not just of interest to business historians.  As IBM enters its second century in good health, far younger IT giants, such as Cisco Systems, Intel, Microsoft and Nokia, are grappling with market shifts that threaten to make them much less relevant.”

Money Doesn't Necessarily Buy Competitive Advantage

Just about every company will tell you that innovation is one of its highest priorities.  How can you tell if the company truly means it, or if it's mostly wishful thinking or marketing hype?  We can see if the company is putting its money where its mouth is by measuring how much it spends on innovation relative to other companies in its industry.  But, this is much easier said than done.  There is no consensus as to which budget line items to include in measuring innovation spending.  So, as often happens, people will try to use a well defined, concrete line item as a proxy for estimating the measurement they are really after.

Research and development is often used as such a proxy for innovation.  Many assume that since both R&D and innovation are supposed to translate into competitive advantage, looking at how much companies spend on R&D equates to how serious they are about innovation.  But, as Michael Schrage, a Research Fellow in MIT’s Center for Digital Business wrote in an FT article in November of 2005:

“Any policymaker, chief executive or innovation champion who relies on R&D intensity and R&D budgets as a meaningful or usable metric to assess global competitiveness virtually guarantees shoddy analysis and distorted decisions.  Few things reveal less about a company's ability to innovate cost-effectively than its R&D budget.  Just ask General Motors.  No company in the world has spent more on R&D over the past 25 years.  Yet, somehow, GM's market share has declined.”

“The simple fact,” he later added, “is that R&D spending - whether in euros, dollars or as a percentage of sales - is an input, not a measure of efficiency, effectiveness or productivity.  Ingenuity, invention and innovation are rarely functions of budgetary investment.”

The New Entrepreneurship: Back to the Roots of the American Dream

The latest figures from the Bureau of Labor Statistics show that the US unemployment rate continues to hover around 9%.  Gallup’s measurements are somewhat higher at 9.2%.  When you add to the unemployment rate the percentage of Americans working part time but wanting full time work, you get an underemployment rate of 19.1%. 

The current period of high unemployment is the longest since the Great Depression.  There have been a number of ups and downs in the economy over the past sixty years.  But while unemployment went up during the down periods, within a relatively short time, the economy improved and the unemployment rates started to go down once, usually below 5%. 

Our current downturn seems fundamentally different from the recessions of past decades.  The continuing high rate of unemployment may well be due to a fundamental restructuring of society as we transition from the industrial economy of the past couple of centuries to an information-based economy.  As a result, many of the jobs lost in the downturn are not coming back as we have known them.

While the overall economy has started to recover, we are actually in a fairly unique situation: a jobless recovery.  Business conditions have significantly improved in the US while unemployment remains high.

Reflections on the Transition to an Information Society

In the 1920s, Russian economist Nikolai Kondratiev observed that capitalist economies go through long term cycles of booms and depressions every 50 years or so.  These economic cycles became known as Kondratiev Waves.  More recently, Carlota Perez expanded on Kondratiev’s work, describing the central role of technological revolutions, disruptive innovations, and financial and production capital in these economic cycles.

Perez identified five such technology-based revolutions and economic cycles since the onset of the Industrial Revolution in 1771, the first one being the age of machines, factories and canals.  This was followed by the age of steam and coal, iron and railways starting in 1829; steel, electricity and heavy engineering in 1875; the age of oil, the automobile, and mass production in 1908; and our present age of digital technologies, information and telecommunications which Perez pegs as starting in 1971.

In each of these cycles, unrealistic expectations in the new disruptive technologies led to over-investments in new companies.  This eventually turned into unsustainable speculation, causing a financial bubble, which eventually crashed and resulted in a period of economic stagnation. 

In the past four cycles, once the impact of the financial bubble and economic stagnation worked themselves out, a golden age of innovation and production followed, where new paradigms based on the new technologies significantly transformed the economy and just about every single industry, as well as re-shaping the institutions of society, and the nature of work, government and even people’s personal lives.

But now,  given our jobless recovery and continuing slow growing economy in the US, we are pondering whether we are once more at the onset of a new golden age of innovation, or at the beginning of something different which will become known as The Great Stagnation.  While I am hopeful that technology, innovation and globalization will eventually lead to all kinds of new jobs, a much improved economy and a higher standard of living, none of us really knows which of these two scenarios will prevail in the future.

The 2011 Tapia Conference Celebrating Diversity in Computing

Last week I participated in the 2011 Richard Tapia Celebration of Diversity in Computing Conference which took place in San Francisco, where I had the honor to give the Ken Kennedy Distinguished Lecture.

The Tapia Celebration of Diversity in Computing conference is quite unique.  It is aptly named, being the most diverse conference in computing anywhere.  This year, 53% of the participants were female, 47% male.  About 40% were African American, 26% Hispanic, 20% White (non-Hispanic) and 8% Asian.  One third were undergraduate students, one third were graduate students and the rest were professionals from industry and academia. 

They came from a wide-range of places, including historically-black colleges and hispanic serving institutions as well as places like Berkeley, Georgia Tech, Rice, UCLA, and so on.  One of its key objectives is to reassure the students that computing is the right career path for them, help them overcome any potential feelings of isolation by being in an environment with many others just like them, - regardless of their ethnicity or gender, - and increase their dedication to complete their degrees.

The Community Library in Our Emerging Knowledge Economy

In early March, I participated in a presentation and discussion on The Community Library in the 21st Century along with Maxine Bleiweis, the director of the Westport Public Library. 

Libraries have been an integral part of civilization from our earliest history, including ancient Mesopotamia, Egypt, Greece and Rome.  Greek and Roman scholars came to their libraries to discuss issues and learn from each other.

Free, open public libraries were first established in communities across the UK and the US in the second half of the 19th century.  Along with the rise of public schools during the same period, they were an important part of the transition from the agricultural to the emerging industrial economy which required a more literate, better educated work force.  

From the 1880s through the 1920s, almost 1700 public libraries were built in the US, through the philanthropic efforts of industrialist Andrew Carnegie.  His Carnegie Library Grants promoted community libraries for self-education, which was particularly important during a time when the US was absorbing large numbers of immigrants from around the world.

A Time of Institutional Recomposition

There is little question that our economy, our society and just about all our institutions are going through major structural changes mostly caused by the digital technology revolution that has been all around us for the past several decades.  Such technology-based structural changes are not new.  In her 2002 book Technological Revolutions and Financial Capital:  The Dynamics of Bubbles and Golden Ages, scholar and writer Carlota Perez puts our own turbulent times into a clear, historical perspective.

According to Perez, over the past couple of centuries, we have had a technology revolution every 40 - 60 years, starting with the Industrial Revolution in 1771, which was characterized by the emergence of machines, factories and canals.  This was followed by the age of steam and coal, iron and railways which started in 1829; steel and heavy engineering (electrical, chemical, civil and naval) starting in 1875; and the age of the automobile in 1908.  Our present information technology and telecommunications age, whose starting point Perez pegs at 1971, is the fifth such major revolution in that span.

To better understand the dynamics of a technology revolution, we should split it into two different periods, each lasting 20 - 30 years.  The installation period is the time of creative destruction, when new technologies emerge from the lab into the marketplace, entrepreneurs start many new businesses based on these new technologies, and venture capitalists encourage experimentation with new business models and speculation in new money-making schemes.  Inevitably, this all leads to the kind of financial bubble and crash we are all quite familiar with from our recent experiences.

After the crash, comes the deployment period, the time of institutional recomposition.  The now well accepted technologies become the norm.  New paradigms emerge for guiding innovation and for determining winners and losers in the marketplace.  Over time, these new paradigms significantly transform the economy and everything around it, as well as re-shaping social behavior and the institutions of society.

The Co-Evolution of Humans and our Tools

Tools have played a critical role in human evolution for a very, very long time.  As the Tools entry in Wikipedia observes: 

“Tools are the most important items that the ancient humans used to climb to the top of the food chain; by inventing tools, they were able to accomplish tasks that human bodies could not, such as using a spear or bow and arrow to kill prey, since their teeth were not sharp enough to pierce many animals' skins . . . The transition from stone to metal tools roughly coincided with the development of agriculture around the 4th millennium BC.  Mechanical devices experienced a major expansion in their use in the Middle Ages with the systematic employment of new energy sources: water (waterwheels) and wind (windmills). . . Machine tools occasioned a surge in producing new tools in the industrial revolution.  Advocates of nanotechnology expect a similar surge as tools become microscopic in size.”

Beyond extending our physical capabilities, tools have played a major role in the evolution of our brain and mental powers:  “Using tools has been interpreted as a sign of intelligence, and it has been theorized that tool use may have stimulated certain aspects of human evolution - most notably the continued expansion of the human brain.”

Sleepovers, Collective Intelligence and Related Subjects

Amy Chua is an American born, ethnic Chinese professor at the Yale Law School.  She recently wrote a book, Battle Hymn of the Tiger Mother about her efforts to give her two daughters a traditional, strict Chinese upbringing.  She also published an article on January 8 in the Wall Street Journal, Why Chinese Mothers are Superior, summarizing her parenting philosophy:

“A lot of people wonder how Chinese parents raise such stereotypically successful kids.  They wonder what these parents do to produce so many math whizzes and music prodigies, what it's like inside the family, and whether they could do it too.  Well, I can tell them, because I've done it.  Here are some things my daughters, Sophia and Louisa, were never allowed to do: attend a sleepover; have a playdate; be in a school play; complain about not being in a school play; watch TV or play computer games; choose their own extracurricular activities; get any grade less than an A; not be the No. 1 student in every subject except gym and drama; play any instrument other than the piano or violin; not play the piano or violin.”

Professor Chua’s book and WSJ article attracted a lot of attention, with people arguing the pros and cons of the demanding Eastern parenting model with its emphasis on achievement, versus the permissive Western model that many would say emphasizes self-esteem instead of actual accomplishments.  Then, on January 17, NY Times columnist David Brooks jumped into the fray with his own take on the controversy in an OpEd with the provocative title: Amy Chua is a Wimp.

Brooks said that he had received many e-mails denouncing Chua’s strict parenting methods.  Her article and book play right into America’s fear of national decline, in particular the fear of being economically left behind by the much harder working Chinese.  But then he writes about Chua:  “I believe she’s coddling her children.  She’s protecting them from the most intellectually demanding activities because she doesn’t understand what’s cognitively difficult and what isn’t.”

From e-business to Social Business

At the beginning of February I participated in a Social Business Industries Symposium sponsored by IBM in Orlando.  Social business is an initiative that IBM launched last November, along with new products and services that combine social networking with advanced analytics capabilities to help organizations build trusted relationships and make better and faster decisions.

What is a social business?  In the past few years, the term has been used to mean “a non-loss, non-dividend company designed to address a social objective,” - a new kind of capitalism to serve humanities most pressing needs, pioneered by Nobel Peace Prize winner Muhammed Yunus and others.
  
But with the rise of social media, another major use of social business has emerged.  IBM’s basic definition is short and simple:  A Social Business embraces networks of people to create business value.

Why Is Civil Discourse So Important - Yet So Difficult

In his remarks at the memorial service for the victims of the Tucson shooting, President Obama urged us to be more civil in our dealings with each other:

“The loss of these wonderful people should make every one of us strive to be better.  To be better in our private lives, to be better friends and neighbors and coworkers and parents.  And if, as has been discussed in recent days, their death helps usher in more civility in our public discourse, let us remember it is not because a simple lack of civility caused this tragedy - it did not - but rather because only a more civil and honest public discourse can help us face up to the challenges of our nation in a way that would make them proud.”

Why is civil discourse so difficult?  This is a very important question, dealing with the very essence of being human.  I think of it as a Darwinian-kind of question.  As this provocative Economist article – “Why we are, as we are” - from December of 2008 observed:  “For a Darwinian, life is about two things: survival and reproduction.”

Humans are social animals, and like all such animals, we are ill-equipped to survive on our own.  Our social impulses cause us to naturally gravitate toward forming communities to help us get the necessary survival strengths from each other.  But our evolution - or at least our history - has also channeled these social impulses into forms that are tribal.  That is, we affiliate with our own kind and against the others.

Innovation in an Age of Austerity

On December 7 I participated in an Innovation Summit sponsored by the UK Innovation Research Centre (UK-IRC) at the University of Cambridge.  The UK-IRC is “a collaborative initiative for cutting-edge research and knowledge exchange activities on how innovation can make businesses more competitive, improve public services delivery and help the UK meet the social, environmental and economic challenges it faces.”  It is a joint venture between the Imperial College Business School and the Centre for Business Research in Cambridge.

The topic for this year’s annual Summit was Re-thinking the Impact of Innovation.  Its objective was to assess the economic impact of innovation activities by examining the experiences and best practices in the public and private sector.  Alan Hughes, director of the UK-IRC and professor of enterprise studies in Cambridge’s Judge Business School, gave an introductory address whose title said it all - Re-thinking Impact: Public and Private R&D in an Age of Austerity. 

Given the current economic conditions in the UK, the US and a number of other countries, there is increased pressure to develop effective methods to measure the impact of research and innovation investments on the economy.  He raised a number of critical questions.  How do you best measure such an impact - at an individual project; at a larger group like a lab, department or university; or at the national level?  Will such economic measurements lead to an over-emphasis on some disciplines at the expense of others?  Would it lead to greater pressure to meet short term goals rather than long term objectives?  And, how do you best predict the future impact of disruptive, new ideas?  Four different panels then proceeded to address these challenging questions through the day.

Smarter Cities Santiago

On November 23 I participated in IBM’s Smarter Cities Forum in Santiago, Chile.  The event brought together over 100 government, business and academic leaders from all parts of Chile, as well as many others from North America and Europe.  The Forum was hosted by IBM’s Chairman and CEO Sam Palmisano.

Why Santiago?  In his opening remarks, Sam answered this question: 

“Santiago is representative of the new urban future, both its opportunities and its challenges, that faces our planet.  In the early part of the twentieth century, Santiago had 500,000 inhabitants.  Today it has more than 5 million - or more than one-third of the nation’s total population.  This population growth has also translated into making Santiago the financial and commercial center of the country.  The metropolitan region generates 45 percent of GDP and nearly 50 percent of total household income in Chile.”

This is my third visit to the city in the last four years.  I can personally attest that Santiago is a great city, a medium sized truly global city, and  one of Latin America’s most modern metropolitan areas.  It has an extensive public transportation and highway system, an impressive high-rise architecture, great hotels and restaurants, excellent universities and a large skills base.

Along with the rest of Chile, the city enjoys a dynamic market-oriented economy, a democratic government, a positive investment environment and a high level of global trade.  It is not difficult to understand why Sam would pick Santiago as the first city in Latin America in which to personally host a Smarter Cities event.

The US Constitution: A Pantheon of (Sometimes Conflicting) Values

I recently saw a reference to a speech given at Harvard’s commencement in May of this year by David Souter.  Justice Souter served in the US Supreme Court from 1990 until he stepped down in June of 2009.  He was appointed by President George H. W. Bush and was expected to be a conservative-leaning justice, but over time he moved toward the center and was part of the more moderate-liberal wing of the court.

The Harvard commencement address is truly a lesson on why our short and relatively simple US Constitution, drafted more than 200 years ago, continues to be such a powerful document when properly interpreted and applied in our very different and continuously changing society.  I will quote extensively from his speech because I could not possibly come up with words as powerful and eloquent as his, but I urge you to read it here.

In simple language, Justice Souter explains why originalism, textualism and similar legal principles based on using the Constitution only to establish the fair reading or original meaning of its authors without imposing any additional interpretations just plainly do not work.  He directly addresses the “criticism that the court is making up the law, that the court is announcing constitutional rules that cannot be found in the Constitution, and that the court is engaging in activism to extend civil liberties.”

Reflections on the Mood of the Country

The US national mood seems to be going through wild swings every few years, as evidenced by the results of our recent elections.  After the 2004 elections, we were talking about the coming Republican hegemony.  Not only was President George Bush re-elected, but Republicans enjoyed comfortable majorities in both the House (231 - 200) and Senate (55 - 44).  This Republican hegemony lasted but two years, as the Democrats gained control of the House and Senate in 2006.

Then in 2008 we started talking about a whole new hegemony.  Barack Obama became President and the Democrats gained large majorities in the House (257 - 178) and Senate (60 - 40).  Once more, long term predictions turned out to be short lived.  Our just concluded 2010 wave election saw the Republicans re-gain control of the House (239 - 188), as well as gain 6 seats in the Senate and 9 governorships.

What’s going on out there?  According to CNN exit polls, the parties retained their base.  92% of registered Democrats and 95% of Republicans voted for their respective party candidate in the 2010 House races.  The figures were similar in the 2006 and 2008 elections when around 90% voted for House candidates of their own party. 

But when you look at independent voters unaffiliated with either party, the picture is radically different.  These same CNN polls show that in the 2006 House elections, independents voted 57% for Democrats and 39% for Republicans.  In 2010, the figures were just about reversed.  Independents voted 56% for Republican house candidates and 38% for Democrats.  These are really big swings.  Given that independents were more than a quarter of all voters in these elections, it totally explains why the Democrats took the House in 2006 and then lost it in 2010.

The MIT Systems Thinking Conference

I recently participated in MIT’s 2010 Systems Thinking Conference for Contemporary Challenges.  This annual conference is sponsored by Systems Design and Management (SDM) - an interdisciplinary program between MIT’s School of Engineering and Sloan School of Management.  The SDM program aims to provide mid-career professionals with a systems perspective that will help them address and solve large-scale, global, complex challenges.  Most of the students in the classes I have taught at MIT are enrolled in SDM.

The Systems Thinking Conference is intended to showcase innovative ways of addressing complex challenges, in particular, how to integrate technology, management and social sciences to successfully solve very tough problems.  The agenda included sessions on sustainability and urban systems, health care and services.  The talks covered a wide range of subjects, from the global development of Boeing’s 787 to the home of the future.  I was co-organizer of the session on service systems, gave a talk on Technology and Innovation in the Service Economy and moderated a panel with the other speakers in the session.

John Sterman - professor in MIT’s Sloan School of Management and director of the Systems Dynamics Group - gave a very interesting talk: A Banquet of Consequences: Systems Thinking and Modeling for Climate Policy.  The title of his talk is based on a quote by Scottish writer Robert Louis Stevenson: Everybody, soon or late, sits down to a banquet of consequences.

Lessons from the Rescue of the Chilean Miners

I first visited Chile about 25 years ago, and have continued to do so from time to time, most recently in September of 2009 when I went to Santiago to join in the celebration of the 80th anniversary of IBM Chile.  I will return in a few weeks to participate in the Smarter Cities meeting that IBM is holding in Santiago on November 23.  Over the years, I have met, worked closely with, and established personal connections with a fair number of people in the country.

This personal connection added an extra dimension to my interest in the rescue of the 33 Chilean miners, although the rescue story has been so compelling that I am not sure anything extra was needed to capture my attention.  Along with a large portion of the world, I was transfixed by the rescue of the miners. Would everything work as planned?  What if something went horribly wrong as we were all watching on live television?  Disaster movies have taught us that just as you become confident and relaxed, things start going haywire.  Would that happen here?

Thankfully, everything went smoothly.  There was indeed a lot of drama, but it was all provided by the emotional reunion of the miners with their families as each reached the surface, as well as by the warm welcome they each received from everyone present, including Chilean president Sebastian Piñera and mining minister Laurence Golborne.  We held our breaths from the time the first miner, Florencio Ávalos started his ascent right before midnight (Chile time) on October 12, to the time the last one reached the surface less that 24 hours later, Luis Alberto Urzúa, their shift supervisor and overall leader.

A lot of the attention is now likely to focus on how the miners and their families deal with their new celebrity status and potential financial rewards.  Everyone agrees that while their fame may be lucrative, it will also be stressful.  There will be lots of opportunities for public appearances, press and TV interviews, and possible book and film deals.  Some will undoubtedly find their new fame too stressful and will yearn for their simpler lives as miners.

Can New York Remain the World's Media Capital?

Over the past two years, SUNY’s Levin Institute hosted a series of panel discussions to explore the state of innovation in New York City.  Innovate New York - Envisioning an Inventive City was jointly sponsored by the Levin Institute, the New York Academy of Sciences and the Sloan Foundation.  Its basic premise was:

“New York is a global city, a diverse blend of culture, vitality, and extraordinary talent.  But the wealth of science and technology talent and innovation is less apparent, at least in the form of a thriving technology economy.”  The Innovate New York series aimed to discuss “where New York stands relative to its competitors, and to identify approaches that could capitalize on New York's strengths, shore up its weaknesses, and plant it firmly on the map as a capital of innovation.”  Panel discussions were held in a variety of areas, including finance, media, services, life sciences, arts, and culture.

I personally participated in a couple of the panel discussions, and in my role as Senior Fellow at the Levin Institute, was involved in helping to organize the series. 

The Sloan Foundation has agreed to renew its sponsorship of Innovate New York, this time focused on one industry, - media and communications, - which will enable us to explore the topic in considerable more depth.

Reinventing Relationships

On September 16, I will join the IBM Lotus team in an event in New York City - Reinventing Relationships.  The event will explore how the Web, collaboration and social software "will transform - actually reinvent - how organizations relate to their customers, partners, employees and citizens through more compelling experiences.”

Once upon a time, new technologies were first deployed in large institutions - enterprises, universities and research labs, the military and civilian government agencies, - from which they eventually trickled down to the rest of the economy as their prices and complexity dropped.  Forty years ago, for example, the computer industry consisted primarily of expensive mainframes and supercomputers that only larger institutions could afford to buy and operate.

But, this trickle-down approach to technology diffusion dramatically reversed itself with the advent of inexpensive technologies, especially digital technologies.  As a result of the incredible advances in digital components and personal computing over the past thirty years, many new innovations are first emerging in consumer markets and among communities of experimental users, from which they eventually trickle-up into the worlds of business and government applications.  Besides personal computing, we have seen such consumer and user-driven innovations in cellular and smartphones, game players, Linux, and perhaps most prominently, with all kinds of innovations around the Internet and World Wide Web.

The Urgent Need for Innovation in Job Creation

An August 7 New York Times article, Jobless and Staying that Way observed that the current period of high US unemployment - 9.5% percent as of July 2010, more than twice the unemployment rate around the same time three years ago - is the longest since the Great Depression: “Nearly half the 14.6 million unemployed have been out of work for more than six months, a level not seen since the Depression.”

In the past sixty years, we have had a number of ups and downs in the economy.  While unemployment goes up during the down periods, it does not last long.  Within a relatively short time the economy improves and unemployment rates start to go down once more, usually to a rate below 5%.  As a result, the American safety net has been built on the assumption that unemployment would be short term, unlike the more generous safety nets in most European countries, where unemployment is generally higher.

But our current downturn might be fundamentally different from the recessions of recent decades.  In addition to an economic downturn, we may be experiencing a fundamental reshaping of the economy, driven, at least in part, by advances in information technologies, which have led to a resurgence in US labor productivity as well as an increasingly integrated global economy.

IT, Productivity and Organizational Capital

As the US recovers from the financial crisis, economic policies that encourage capital investment and job creation must be our top near-term priorities.  But, to achieve long term economic growth, as well as gains in our standard of living, the US must also focus on innovation and productivity growth. 

US labor productivity - “the amount of goods and services that a laborer produces in a given amount of time” - grew at only 1.5% between 1973 and 1995.  This period of slow productivity coincided with the rapid growth in the use of computers in business, giving rise to the Solow productivity paradox, in reference to Robert Solow's 1987 quip: “You can see the computer age everywhere but in the productivity statistics.”

But, starting in the mid 1990s, US labor productivity surged to over 2.5%.  In an analysis of US labor productivity over the previous fifty years, Harvard economist Dale Jorgenson and his collaborators concluded that “the pessimism of the computer productivity paradox gave way to near-universal belief in a productivity resurgence led by information technology in the late 1990s.”

This IT-based productivity resurgence has continued, except for a short period that reflects the declining IT investment right after the bursting of the dot-com bubble, and the maturing of the global economic expansion in 2005 and 2006.  Even as economic growth has lagged in 2009 and 2010, productivity growth has remained robust.

This productivity growth was led by IT producing companies during the dot-com bubble years of the 1990s, e.g., developers of semiconductors, hardware and software.  But since 2001, the productivity growth has been led by IT-using industries, especially those industries that are intensive users of IT, like retail trade, scientific and technical services and financial services.  Given their fast declining prices, these companies have been able to acquire and deploy significantly more information technologies across all their operations.

In a recently published book, Wired for Innovation: How Information Technology is Reshaping the Economy, Erik Brynjolfsson and Adam Saunders explore the links between the current wave of IT-based business innovation and the productivity resurgence in the U.S. economy.  Erik Brynjolfsson is professor in MIT’s Sloan School of Management and Director of the MIT Center for Digital Business.  Adam Saunders is lecturer at the Wharton School of the University of Pennsylvania, as well as a doctorate candidate at MIT’s Sloan School.

Reflections on the “Post-Retirement” Phase of My Life

In June of 2007, I retired from IBM, where I had worked ever since completing my studies at the University of Chicago in 1970.  A number of friends and colleagues who are themselves contemplating retirement have asked me about my experiences.  So, let me please share what the first three years of my post-retirement life have been like.

I am no longer working full time in any one institution, but I also did not retire in the sense of not working at all.  I am still quite involved in a number of matters related to technology and business, but I am now doing so by working part-time with a few different institutions.  Roughly speaking, two thirds of my work is spent consulting on innovation and technical strategy, primarily with IBM and Citigroup, but now and then with other companies as well.  A quarter of my time is spent with universities, primarily MIT, Imperial College and SUNY’s Levin Institute.  The remaining time is spent in various other activities, including boards and government panels.

After 37 years of working full time for one company, I very much enjoy this new phase which I think of as distributed work, - being associated with several institutions instead of one primary one.  I particularly like the fact that I am now able to spend much more time with universities, in addition to continuing to be involved in business.  At this stage in my life, it feels right for me to have one foot in the private sector and one in academia, while also advising government as appropriate. 

This kind of flexible, distributed work model is one that I believe we will increasingly see, not just in the post-retirement phase of one’s career, as is the case with me, but throughout the careers of many so-called knowledge workers, that is, those “individuals who are valued for their ability to interpret information within a specific subject area,” - in analysis, design, research, strategy and development.

IT in the Age of the Cloud

IT is undergoing its biggest changes since the advent of client/server computing in the 1980s.  These changes are being driven by many factors, chief amongst them the emergence of a different model of computing, - cloud computing.  We are entering the Age of the Cloud.

For the IT industry, a new computing model is a very big deal.  In the fifty years or so since there has been an IT industry, this would be only the third such model, centralized and client-server computing being the two previous ones.  Not surprisingly, there are lots of discussions underway on the implications of this major transition to all aspects of the industry, from the technology and education requirements to the future roles of the corporate IT functions and the CIO position.

I recently came across a very interesting study on The Future of Corporate IT by The Corporate Executive Board, a consulting firm that provides research and analysis to business executives and professionals around the world.

The Executive Board study investigated the five-year outlook for corporate IT.  It interviewed and surveyed hundreds of IT and business leaders.  Its overall conclusion is that fundamental changes, already underway, will take place in how the IT function is organized and managed: 

“The IT function of 2015 will bear little resemblance to its current state.  Many activities will devolve to business units, be consolidated with other central functions such as HR and Finance, or be externally sourced.  Fewer than 25% of employees currently within IT will remain, while CIOs face the choice of expanding to lead a business shared service group, or seeing their position shrink to managing technology delivery . . . This study argues that the changes will be rapid, permanent, and radical.  We have advocated for a decade that IT leaders become demand shapers, not order takers.  Similarly, we now recommend that IT leaders devote the time, energy, and resources to actively shape the coming transition.”

Growing Up in a Complex World

Several weeks ago IBM released its 2010 Global CEO Study.  This is IBM’s fourth and largest CEO study since 2004, based on more than 1,500 face-to-face interviews with CEOs and senior public leaders from more than 60 countries.

I wrote about the CEO study in this recent blog.  The primary challenge emerging out of the CEO conversations was complexity - the fact that CEOs now operate in a world that is substantially more volatile, uncertain and complex.  They feel that incremental changes are no longer sufficient because the world is operating in fundamentally different ways.  The study concluded that Standout organizations - those that have been able to deliver good business results despite the recent economic downturn - feel much more prepared to capitalize on complexity by focusing on three key areas:  embodying creative leadership, reinventing customer relationships and operational dexterity.

On June 14, IBM released a companion to the CEO study, this time focusing on the views of young people, members of what is often referred to as the Millennial Generation or Generation Y.  Inheriting a Complex World: Future Leaders Envision Sharing the Planet invited graduate and undergraduate students to participate in a Web-based survey between October 2009 and January 2010.  More than 3,600 responses were received from students in more than 40 countries.  They were pretty evenly split between undergraduates and graduate students, as well as between emerging and mature markets.  More than two thirds were between 20 and 25 years old.

The 2010 IBM Global CEO Study

IBM recently released the 2010 Global CEO Study.  This is IBM’s fourth biennial CEO study since 2004.  It is also the largest.  For the 2010 study, IBM held more than 1,500 face-to-face interviews with private sector CEOs (80%) and senior public sector leaders (20%) from 33 different industries spread over sixty countries.

In the  past three studies, CEOs consistently said that coping with change was their most pressing challenge. This time around, the primary challenge emerging out of the CEO conversations was pretty clear: complexity.  “CEOs told us they operate in a world that is substantially more volatile, uncertain and complex.  Many shared the view that incremental changes are no longer sufficient in a world that is operating in fundamentally different ways.”

Given the realities of globalization, disruptive innovation, and profound changes across technology, markets and society, it should not be surprising that CEOs and their companies must now navigate a highly volatile and unpredictable business environment.  Nearly 80% of CEOs expect the business environment to grow significantly more complex over time, but less than half believe that their organizations are equipped to deal with it successfully.  This gives rise to what the report refers to as a Complexity Gap, that is, the difference between the expected complexity and the extent to which CEOs feel well prepared to manage it.

Customer-Centric Capitalism

What is the primary responsibility of a business?  Renowned management professor and writer Peter Drucker gave a succinct answer to this question in his 1954 book The Practice of Management:  “A company's primary responsibility is to serve its customers . . . Profit is not the primary goal, but rather an essential condition for the company's continued existence.”

For the last thirty years, maximizing shareholder value has replaced customer value as the key objective of many companies.  But, a number of experts are now raising questions about this widespread business practice and the extreme preoccupation with short term profits that inevitably results from putting shareholders over customers. 

A 2006 study co-sponsored by the Business Roundtable and the CFA Institute  concluded that: “the obsession with short-term results by investors, asset management firms, and corporate managers collectively leads to the unintended consequences of destroying long-term value, which decreases market efficiency, reduces investment returns, and impedes efforts to strengthen corporate governance.”  It is quite possible that this short-term oriented business culture was a leading cause of our global financial crisis.

The issue of shareholder versus customer value was the subject of a recent excellent article in the Harvard Business Review: The Age of Customer Capitalism, written by Roger Martin, dean of the Rotman School of Management at the University of Toronto.

The Power of Pull

Last summer, John Seely Brown (JSB), John Hagel and Lang Davison published the results of a major research project they have been conducting at Deloitte’s Center for the Edge.  The Big Shift, as they called the project, refers to the long-term transformations in the global business environment over the past several decades that have been primarily, but not exclusively, caused by the remarkable advances in digital technologies over that period.

Their research uncovered a number of major, somewhat paradoxical findings.  For example, the return on assets (ROA) of US companies, - a general indicator of profitability, -  has been progressively falling and is now almost one quarter its 1965 levels.  But, labor productivity has been steadily rising, and is now nearly double what it was in 1965.  Where have the benefits of these productivity gains gone?  Certainly not the bottom line of companies which have seen their profitability drop so much during the same period.

To help them make sense of their various findings, the Deloitte research team came up with 25 different metrics which taken together helped them understand the rate and magnitude of the long-term changes they kept uncovering.  The result is The Shift Index, an extensive report that explains each of the 25 metrics, as well as their overall ideas and methodologies.

Now they have turned their attention from analysis to prescription.  What should we be doing to cope with the growing performance pressures being experienced by individuals and institutions?  To answer this question, JSB, Hagel and Davison have written The Power of Pull: how small moves, smartly made, can set big things in motion, which is being published this coming week.

Business Management and Holistic, Critical Thinking

In early January I read an excellent article in the New York Times - Multicultural Business Theory.  At B-School?.  The article was about the efforts of Roger Martin, the dean of the Rotman School of Management at the University of Toronto, to transform business education.

About a decade ago, Professor Martin began advocating “what was then a radical idea in business education: that students needed to learn how to think critically and creatively every bit as much as they needed to learn finance or accounting.  More specifically, they needed to learn how to approach problems from many perspectives and to combine various approaches to find innovative solutions.”

“Learning how to think critically - how to imaginatively frame questions and consider multiple perspectives - has historically been associated with a liberal arts education, not a business school curriculum, so this change represents something of a tectonic shift for business school leaders.  Mr. Martin even describes his goal as a kind of liberal arts M.B.A.  ‘The liberal arts desire,’ he says, is to produce ‘holistic thinkers who think broadly and make these important moral decisions.  I have the same goal.’”

Martin’s ideas may have been radical ten years ago.  “But even before the financial upheaval last year, business executives operating in a fast-changing, global market were beginning to realize the value of managers who could think more nimbly across multiple frameworks, cultures and disciplines.  The financial crisis underscored those concerns - at business schools and in the business world itself.”

The “Professionalization” of Service-based Industries

I spent several days in mid-February at Imperial College in London.  I was a speaker and panel member at an event sponsored by Design London, the multi-disciplinary innovation initiative between the Royal College of Art and the Imperial College engineering and business schools.  The event - The STEM of Service Experience, - focused on the role of Science, Technology, Engineering and Math (STEM) on innovation in services. 

The following day I conducted a seminar on Technology and Innovation in the Service Economy with doctorate candidates in the Business School.  We had very stimulating discussions on the impact of STEM on service-based organizations, in particular, how increased access to information and sophisticated analysis and modeling tools can help managers make better business decisions, especially those concerning highly complex problems. 

One of the students raised the question of whether, as service-based industries have better information and tools at their disposal, we should expect their management to become more professional in the way they make decisions, much as has been the case with engineering as it matured as a discipline over the decades.

It was a very intriguing question that has stayed in my mind since.  What does it mean for a company and its management to be more professional?  How is professionalism related to the scientific and technology underpinnings of the company, as well as to its use of information, analysis and modeling tools?

Disruptive Innovations and Organizational Change

Over the last few years I have given a number of seminars on Technology-based Business Transformation.  In these seminars, I examine how companies can leverage disruptive innovations to go after new business opportunities or to significantly transform themselves.  Often, the transformations are needed because the business is in crisis, such as happened to IBM in the early 1990s or is the case with a number of media companies today. 

The seminars are generally organized into three section.  The first two focus on strategy formulation and execution respectively.  The last section deals with the organizational and cultural issues involved in going through such a major transformation.

Many companies fail to adequately embrace a disruptive innovation not because they did not develop the right strategy, but because the strategy was essentially rejected by the organization, and was thus doomed to fail from its very beginning.  The culture of the institution was not able to stretch enough to be able to implement the needed changes.  This happens even when the very survival of the organization is at stake.  It is as if a kind of institutional depression has set in.  

We sometimes forget that disruptive innovations are indeed disruptive, not only in the marketplace but also for individuals and organizations.  Much as we often talk about embracing change as a positive experience, change is in fact very difficult, even painful for many people.  You are asking them to move into unknown, perhaps even unchartered territory.  What will be the impact on their jobs?  Do they have the required skills for whatever is ahead?  How well will they personally do in the new environment?

JumpStart NYC: Talent in Transition

As we well know, many talented people have lost their jobs as a result of our ongoing Great Recession, - the worst financial crisis we have lived through since the 1930s.  The US unemployment rate has doubled from 5% in December of 2007 to 10% in December of 2009.  The number is significantly higher, about one out of every six workers, when taking into account underemployed and discouraged workers who have had no success in finding a full time position.

Hopefully, the economy will soon improve and unemployment rates will start to come down.  But in the meantime, it is very important to offer those who got laid off as a result of the deteriorating economy as much help as possible in exploring and finding job opportunities.

In New York City, the crisis hit hardest in the financial services sector.  There are now over four hundred thousand unemployed city residents, many of them as a result of layoffs on Wall Street.  About a year ago, the Bloomberg administration launched a number of programs to help recently unemployed city residents.  JumpStart NYC is one such program.

The JumpStart program was initiated by the New York City Economic Development Corporation (NYCEDC).  Its key objective was to help people who lost their jobs on Wall street to apply their skills and abilities in opportunities beyond financial services.  Most of these people had previously worked for large firms.  A primary goal of JumpStart was to help them explore new career paths and opportunities in small and entrepreneurial firms in the New York area.

Reflections on Surviving Disruptive Innovations

Last week I wrote a post on the impact that digital technologies are having on the newspaper, entertainment and media industry in general.  It was based on the “Social Media Implications for Business” panel I moderated during my recent week as Innovator in Residence at USC’s Annenberg School of Communications and Journalism.

The panelists pretty much agreed that many legacy media companies are going through a kind of near death experience as the industry transitions from analog to digital technologies.  Two forces, in particular, are wreaking havoc on the industry: cannibalization - inexpensive new products that are cutting into their existing revenues; and fragmentation - audiences being shared across the many new kinds of content and experiences now available to them.

Jeff Zucker, President and CEO of NBC Universal, has succinctly captured what is going on in the media industry, with his widely quoted comment that the new digital business models are turning media revenues from analog dollars into digital dimes.  The key problem for legacy media companies is thus to come up with new, innovative business models that will enable them to make money and survive as their industry continues to transition from a business model based mostly on analog dollars into one based mostly on digital dimes.

Social Media Implications for Business

I spent the first week of November as Innovator in Residence at USC’s Annenberg School of Communication and Journalism.  As part of my activities during the week, Dean Ernest Wilson hosted a conference on Social Media: Platform of Provocation for Innovation?.  The half-day conference consisted of two panels: one on the social and technological innovation being brought about by social media, and the other on the implications of social media to business.  Each panel included experts from USC Annenberg and IBM.

The first panel covered topics on social networks, 3D virtual worlds, immersive journalism, social computing research and a number of others.  It was moderated by Henry Jenkins, who moved from MIT this Fall to join the USC faculty as Provost’s Professor of Communication, Journalism and Cinematic Arts.  Henry, - whom I met at MIT a couple of years ago because of our mutual interest in virtual worlds, - was previously Director of MIT's Comparative Media Studies program and Professor of Humanities.

The full video of the first panel can be seen here.

I wouId like to focus this blog on the second panel, which I moderated.  The panel focused on the implications of social media to the communications and media industries as well as to organizations in general.  Panelists included Marc Cooper, Jonathan Taplin and David Westphal from the Annenberg School, and Melissa Cefkin and Steve Canepa from IBM.

The full video of the second panel can be seen here.

The MIT Distributed Leadership Forum

The MIT Leadership Center is one of several research groups in the MIT Sloan School of Management.  Its key focus is distributed leadership “. . . the idea that leadership today, even more than in the past, must come from every level of an organization or every part of an organizational network.”   Central to the Leadership Center is the belief that “the development of skilled, thoughtful, passionate leaders must be rooted in real world experience.”

Earlier this month, the Center sponsored a Distributed Leadership Forum, which brought together an invited group of people from industry and academia to explore the key attributes of distributed leadership required for effective 21st century organizations.  I am a member of the Leadership Center and was involved in the planning of the Forum.

Communications, Journalism and Media in the Internet Age

I spent the first week of November at USC’s Annenberg School of Communications and Journalism.  USC Annenberg is one of the largest and most comprehensive schools of its kind in the world, with research and educational programs in communications, journalism, public diplomacy, public relations, media, educations and related areas.  It is thus in a unique position to analyze and influence the impact of information technologies on the world’s news, media and entertainment industries, and on organizations and institutions in general.

Last July I received an invitation from Annenberg’s Dean, Ernest Wilson to be its first Innovator in Residence.  This is part of a program Dean Wilson is launching to bring people to Annenberg from different fields, who have real-world, practical understanding of the impacts of disruptive innovations, - because they have lived through it, as I have in IBM.  His letter said:

“ . . . The communications and media sectors are in a state of great turmoil.  Over a relatively short period of time, technological progress has altered everything from the media for information delivery to the revenue sources for the news, media and public relations business.  At this moment, there is a remarkable confluence of social, economic and technological change - all of which affect vital information flows in our democracy.”

“Rather than seeing these changes as threats, I am encouraging my team to view them as unique opportunities to lead and contribute to innovative thinking and action in the communication field.  The Annenberg School is expected to play a major role in shaping this future:  we need to be able to step up to meet the expectations, offering bold and creative solutions for the communications and media industries, and a meaningful education for our students.”   

Dean Wilson’s invitation letter was very eloquent, but frankly, given my strong interest in the subject, he had me at “Dear Irving.”

Education and Services Innovation

Richard Larson is Professor of Engineering Systems and Civil and Environmental Engineering at MIT.  Professor Larson is a pioneer in applying technology, science and engineering to a wide variety of problems in services industries, from technology-enabled education to urban service systems.  His interests in emergency response systems have led him to organize initiatives for applying engineering principles to planning and responding to global pandemics, such as the ongoing H1N1 flu.  He also leads MIT’s overall efforts to establish an inter-disciplinary services science initiative.

I met Dick Larson when I first joined MIT’s Engineering Systems Division as a visiting faculty member, almost four years ago.  Dick is one of the MIT faculty members I have worked closest with since then, so I am comfortable referring to him as Dick instead of Professor Larson..  He is one the best role models I know of the kind of systems oriented, market-facing engineers that we increasingly need to help us tackle the highly complex, multi-disciplinary problems we are facing in the 21st century.

One such problem is education.  Dick just published an op-ed article, Education: Our Most Important Service Sector in Service Science, a relatively new online journal focusing on state-of-the-art research and development in service sciences and related areas.

Reflections from Another Part of the World and a Different Side of My Brain

I spent the first week of September in Chile and Argentina.  Three yeas have elapsed since I last visited Santiago, and I have not been to Buenos Aires for almost four years.  It was very good to be back in these two very nice cities.

I love to travel in Spanish speaking countries, - I go to Spain and Mexico from time to time in addition to Argentina and Chile.  The reason is not just because the people are so wonderful.  After all, in my experience, the people have been very nice in just about all countries I have been to around the world.  But, being totally immersed for days on end in my native language, is a particularly pleasurable experience, and one that, as I have thought about it, is not only personally appealing but also important to my mental health.  Let me explain.

It is well accepted that a good physical exercise plan should include different kinds of workouts, some focused on aerobics to increase cardiovascular endurance, and some anaerobic in nature to strengthen our muscles.  In addition to its benefits on our physical health, a regime of exercise also improves our mental health as well as helping to reduce depression.But, advances in brain sciences have begun to show the importance of also exercising our mental faculties.  Throughout our lives, our brains need stimulation to be healthy, in the same way that our bodies need physical exercise.  A lack of mental exercise and stimulation can result in severe problems, from the time we are born to old age.

I am convinced that as we learn more about the workings of our brains, we will learn how different kinds of stimulation best help different parts of our brain, much as we have learned how to best exercise different parts of our bodies.  Furthermore, I am sure that future advances in functional magnetic resonance imaging will show that for those of us who were immersed in different languages at different times in our lives, we can best reach feelings and concepts stored in our brain by using the language were were speaking at the time we experienced and learned them.

Soft, Smart, "Pink" Power

I first learned about the concept of soft power two years ago or so.  The term was coined by Harvard Kennedy School professor Joseph Nye in his 2004 book Soft Power: the Means to Success in World Politics.  It is all about influencing behavior based on the legitimacy of your objectives without commanding it with threats or payment.  It relies on the ability to shape the preference of others through co-option, rather than coercion.

Soft power is particularly critical in our times, due to the nature of the conflicts in which we increasingly find ourselves, in particular, the global war on terrorism.  These conflicts are sometimes called the The Long War, especially within the US Military, as a way to describe our present global struggles against a variety of enemies spread around the world, which will likely last for decades.  These enemies are organized into small groups, distributed and very local - that is, living among civilian populations - but they coordinate, recruit and fund their actions around the world in a whole new set of ways.

Such conflicts have much more of the feel of a battle of civilizations or cultures.  The main objectives of the amorphous enemies in the Long War seems to be to destroy our very way of life and impose their own.  Thus, winning the Long War is perhaps as much about winning the hearts and minds of people and nations as it is about defeating, or at least containing, an enemy that is amorphous and often hard to find.

The Smarter Planet University Jam

For several years now, IBM has used a Web 2.0 collaborative approach to exploration and problem solving called Jams.  Jams help discover new solutions to broad, complex problems by bringing together a wide variety of minds and perspectives.  They are essentially massive online discussions, where people contribute their own ideas, as well as build on each other's ideas in a kind of structured conversation, under the guidance of subject-matter experts and moderators.  A Jam typically lasts around three days, and after it is completed, extensive analysis is used to extract insights from the perceptions and comments of the Jam participants, and to develop plans to put the insights into action.

In 2003, a Values Jam involving more than 300,000 IBM employees around the world was used to redefine the core IBM values for the 21st century.  Two years later, the Government of Canada, UN-Habitat and IBM hosted Habitat Jam.  Over three days, tens of thousands of participants from over 150 countries, including urban specialists, government leaders, and residents from cities around the world, discussed issues of urban sustainability.  Their ideas shaped the agenda for the UN World Urban Forum, held in Vancouver in June of 2006.

Then in 2006, an Innovation Jam brought together more than 150,00 people from over one hundred countries, including IBM employees, clients and partners, to help identify the ten most innovative new ideas in which to invest $100 million.  IBM’s virtual worlds initiative was one of the recommendations coming out of the Jam.  So were a number of projects, including intelligent utility networks, integrated transportation systems, smart healthcare payments, and Big Green innovations that helped form the core of IBM’s Smarter Planet initiative launched in November of 2008.

Hidden Wealth: Science, Technology and Services Innovation in the 21st Century

The Royal Society, - the UK’s national academy of science, - recently released a report: Hidden Wealth: the contribution of science to service sector innovation.  This excellent report represents the findings of a major study on the role of science, technology, engineering and mathematics (STEM) to innovation in the services sector.  It is one of the most comprehensive investigations of the impact of services innovation in the 21st century.

The services sector is by far the largest in the global economy, comprising about 65 percent of the world’s overall GDP, and between 70 and 80 percent in countries with more advanced economies.  Most of the working population in such countries are employed in services in one way or another, - roughly two thirds of all jobs in Brazil, Japan and the European Union and around 80 percent in the UK and the US.

This new report is very important and timely, given that the creation of well paying jobs is currently among the highest priorities not only in the UK, but also in the US and many other countries around the world.  As the report says:

“Our main conclusion,  . . . is that services are very like to remain central to the new economy, not least because we are at or near a tipping point: innovations now underway seem likely to change dramatically the way we live and to generate many services (though few can be predicted in detail at present). . . .”

The Big Shift: from Scalable Efficiency to Scalable Learning

I have known John Seely Brown for many years and have served with him on several committees and boards.  John was Chief Scientist at Xerox and Director of its Palo Alto Research Center for almost twenty years.  Since retiring from Xerox, he has continued to be very busy as a speaker, writer, member of the boards of several public and private companies and lots of other activities.   In his website, he writes “Today, I’m Chief of Confusion, helping people ask the right questions, trying to make a difference through my work - speaking, writing, teaching.”

I have indeed learned that John is always asking just the right questions, be they about technology, business, learning or society in general.  So, when he recently sent me an e-mail, recommending that I look into his latest project and recent papers, I proceeded to do so. 

The project John referred me to is called The Big Shift.  It is being conducted at the Center for the Edge, which is part of Deloitte Consulting.  The Center is co-chaired by John Hagel, whom I have also worked with and greatly respect, and John Seely Brown.  They just published an article on their research in the July-August issue of the Harvard Business Review, co-written with Lang Davison, Executive Director of the Center for the Edge, as well as a more extensive report explaining their ideas and methodologies in detail - Measuring the forces of long-term change: The 2009 Shift Index.

A Very Tough Balancing Act

Managing large companies has never been easy.  But, managing is particularly tough given our fast changing, global, intensely competitive market environment.  With increasing frequency, senior executives have to make major strategic decisions which could have a huge impact on the future of the company, - perhaps even its very survival.

Among the toughest decisions facing the senior management of a company is finding the proper balance between investments in their current operations, and investments made in new, promising areas for the future.  It is indeed a very delicate balance, even more so given an unpredictable future where major changes are likely to take place in technologies, markets and global economic conditions.   Often, the consequences of these strategic decisions may not be apparent for years.
 
What is the right balance between carefully managing existing operations, and investing in potentially disruptive innovations for the future?  There is clearly no set answer, as every industry has its own dynamics, and every company has a different mix of circumstances driving its decisions.  A recent article reminded me of the challenges involved in making such strategic decisions, especially in the energy industries, which are particularly tough because of the multiplicity of choices now available, the long term implications of the decisions, and the highly uncertain market and political environment in which this industry operates.

Complex Organizational Systems: Some Common Principles

Last week I attended the second Engineering Systems Symposium at MIT.  The Symposium was co-sponsored by MIT’s Engineering Systems Division and CESUN - the Council of Engineering Systems Universities.   

Chuck Vest, - former MIT president, and now head of the National Academy of Engineering, - gave an excellent keynote address.  He talked about some the grand challenges that the field of engineering faces.  Only 4.5 percent of US university graduates have degrees in engineering, he said, a number substantially lower that in other parts of the world.  Large-scale system challenges, he added, offer us the opportunity to reinvigorate engineering education and capture the imagination and intellect of the next generation of engineering leaders.

Following Vest’s keynote, I participated in a panel on Critical Issues and Grand Challenges, in which we discussed the kinds of complex and exciting societal challenges Chuck told us are needed to inject excitement into engineering.  The panel was moderated by Jim Champy, head of consulting and strategy at Perot Systems and co-author of Reingeneering the Corporation, the best-seller that launched the business process re-engineering revolution in the early 1990s.

Gender-based Differences in Behavior

In the last few months, I have been thinking a lot about the potential causes of our global financial crisis.  I have done my best to capture my thoughts in various entries in this blog as well as in seminars I recently gave at Imperial College and MIT.  While doing research on the subject, I came across a few interesting, perhaps somewhat far-out articles that took my thinking in intriguing directions.  Let me share some of them.       

Gender diversity and the financial crisis

Is testosterone to blame for the financial crisis?, asks a Scientific American Science blog, as it writes: “High levels of testosterone are correlated with riskier financial behavior, new research suggests.  Men with more of the sex hormone made riskier investments than guys with lower levels, according to a study published online yesterday in Evolution and Human Behavior.”

An article in The Guardian reports on a separate study of traders in a London bank.

Design, Innovation and Organizational Systems

I was back at Imperial College in London in the last week of February.  I gave several seminars and held a number of meetings, but the main reason for my visit was to once more participate in a STIR lecture sponsored by Design London. 

Design London is an initiative launched about two years ago between Imperial College and the Royal College of Art.  It aims to bring together the disciplines of design, engineering, technology and business to address jointly the challenges of innovation in an increasingly global, competitive economy.  As part of its many research and educational activities, Design London offers the STIR (Simulator, Teach, Incubate, Research) lectures, which cover a wide range of subjects from widely different personal experiences and points of view.

Our STIR lecture - CROSS OVER:  how a new approach to architecture is inspiring a new architecture for business - aimed to “explore not only how a radical approach to design has inspired a new genre in the built environment, but also how this approach can be applied to designing a new architecture for business.”

Services, Jobs and Related Subjects

The services sector is by far the largest in the world’s economy.  Services comprise 64 percent of GDP overall, about twice as large as the GDP of the industrial sector.  The services sector represents over 70 percent of GDP in advanced economies and close to 80 percent in the US. 

Jobs exhibit similar statistics.  According to the 2008 World Factbook, about 40 percent of all the jobs in the planet are in services.  The numbers go up significantly in the more advanced economies.  About two thirds of the jobs in Brazil, Japan and the European Union are in services.  In the US, UK and Israel the percentage of such jobs is around 80 percent.  

It is interesting that while constituting such a large portion of GDP and jobs in the world, the nature of services remains vague - a kind of hard-to-measure dark matter.  It is easier to define the services sector by what it does not include:  it is not agriculture or fishing, and it is not manufacturing, construction or mining.  Just about every other job is in services.  Perhaps the one definition everyone can agree to is one attributed to The Economist: a service is “anything sold in trade that cannot be dropped on your foot.”

A Gathering Storm We Totally Missed

I think that it is by now pretty clear that there is no simple answer to the causes of the biggest financial crisis since the Great Depression. 

Plain, old-fashioned greed - that is, the pursuit of individual wealth, possessions and power - clearly played a major role.  So did the Wall Street's bonus system which practically encouraged its people to make risky investments so they can earn huge sums of money in a good year, without having to worry about the impact of their risky, short-term bets in subsequent years.

There is plenty of blame to go around: the management of the financial companies; the rating agencies; the regulators; the extreme anti-government ideology that prevailed in the US in the last several decades.  Our financial crisis is best seen as a systemic failure of massive proportions.

But, there is one group whose role in this systemic failure I personally find particularly troublesome: my own technical and research community.