bitcoin, the blockchain & the next big productivity revolution

Bitcoin, The Blockchain & The Next Big Productivity Revolution

Sao Paulo, Brazil December 2015

An evolving perspective on how the Bitcoin, the blockchain and the Internet of Things will create substantial ROI.

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Notes for SlideShare Viewers:

This is the slide deck from my 2 December presentation to the Harvard Business Review’s Sao Paulo innovation meeting. For those who have seen some of my prior writing and presentations on Bitcoin, the Blockchain, and the Internet of Things, you will know I am very focused on the opportunity around driving increased utilization of personal and enterprise assets.

In my recent clients work at EY, however, I have seen more and more opportunity in a second space that I had included in my previous assessment of IoT potential, the opportunity to decrease cycle times and raise productivity in service industries.

The service sector, now much larger than manufacturing in employment and GDP has never had a “Henry Ford” moment, when productivity surged by 90% in a short period of time. Increasingly, I think that time is now. And the driver will be the integration of people, devices, with business processes and markets.

Paul Brody Americas Technology Sector Strategy Leader Sao Paulo, Brazil 2 December 2015

The Next Big Productivity Revolution

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Looking Backwards

The Productivity Revolution

Required Ingredients

Dawn of A New Era


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Looking Backwards



Dawn of a New Era

Those who cannot remember the past are condemned to repeat it.

George Santayana

There’s nothing new about cycles of innovation and disruption

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Hours of Labor Per 100lbs of Cotton Processing

0

500

1,000

1,500

2,000

1780 1790 1795 1825


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Hours of Labor Per 100lbs of Cotton Processing

0

500

1,000

1,500

2,000

1780 1790 1795 1825

British Textile Imports & Exports Value, £000, 1697 Prices

0

10,000

20,000

30,000

40,000

1784 1794 1804 1814 1824 1834 1844 1854

Imports from India to BritianExports from Britian to World

Henry Ford drove a second industrial revolution but putting the model T on a moving production line

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0

3.5

7

10.5

14

1907 1914

Assembly Time for Model T, Before & After Moving Production Line IntroducedHours required for Model T Assembly

90% Reduction in time required for assembly of a completed Model T

Global economic output corresponds closely with industrial output and the two big industrial revolutions

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Between AD 0 and Ad 1700, GDP per capita was about $400 1990 dollars. No change. Starting in 1820, GDP started doubling every 35-50 years.

- Average growth 1850-1900 was 1.4% - Average growth 1900-1950 was 2.0% - Average growth 1950-2000 was 3.8%

Since the 1970s, however, growth GDP per capita in the mature industrial countries has slowed down and most of the global economic growth has come from the industrialization of China and other emerging markets.

Shift To Services. Manufacturing = Productivity

Productivity is the problem that each industrial revolution has solved. But we have never had a service revolution.

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UK Total Factor Productivity,1990-2012

UK Office of National Statistics, SoftMachines Blog

Service productivity growth is much lower than manufacturing productivity growth.

Information & Communications productivity growth is high, but it is a relatively small component of the total economy.


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Looking Backwards


The Big Opportunity

Dawn of a New Era

Show me the money.

Jerry McGuire

Productivity in the service sector is a complex problem that many have historically thought was not fixable

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Can we improve the productivity of a string quartet?

Get rid of some of the players? Then it’s not a quartet.

Have them play faster? Then it’s not Mozart.

The reality is that productivity in the service sector is much more challenging than a factory, but not less addressable

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Scheduling

Concert Hall Utilization

Ticket Sales

Facility Maintenance

Actual time playing, very small

We believe there are two big opportunities areas where a revolution in productivity can occur

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Asset Utilization

Cycle Time Compression

We believe there are two big opportunities areas where a revolution in productivity can occur

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Asset Utilization


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Asset Utilization, Select Consumer & Industrial Examples

0%

25%

50%

75%

100%

Dishwas

her

CarOffic

eMRI

Taxi

Airplan

e

60%50%

25%20%

4%4%

Real world utilization of assets is much lower than we realize

Companies like Uber are using analytics and mobile technology to create real-time digital markets

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➡ Buyers and sellers can all see each other in a single UI

➡Analytics show where demand is high and premium pricing is in effect

AirBnB, Unikey, and a group of service providers have worked together to speed up the sharing of apartments

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➡Unikey smart digital locks are now available and

can be connected directly to the AirBnB online

market

➡Renters can rent an apartment and AirBnB will

automatically give them a unique code for the

door valid only on the days when they are renting

➡Renters can unlock the door with their

smartphones

➡Cleaners get a separate door code

All these productivity solutions have a common foundation: the increasing connectivity of people & devices

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• What data is being generated by assets?

Granular ability to understand assets will quickly shift towards a desire to take action on how they are used

Instrument Optimize Monetize

Sensor networks Asset Management

Asset Markets

• How are my assets being used?

• How can I get maximum value from my assets?

We expect every physical asset may participate in many different marketplaces

The Internet of Things will become an Economy of Things

Rental / Leasing

Insurance

Utilities

Sensor Data

The return on investment that comes from asset utilization is much bigger than other “connected device” services

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Case Examples: ROI on Smart Sensor Use Cases

$0

$1,000

$2,000

$3,000

$4,000

Maintenance Energy Asset Rental

Tag CostReturn

Maintenance • 5% annual chance of mechanical problem • Average truck roll costs $100, 1.5 per repair • Smart systems eliminate some repairs and

reduce average truck rolls total to 1.0/repair • $25 tag cost on BOM, 10% annual ROI

Energy • $250 for a smart thermostat at home • Average of $141/year in savings reported for

Nest thermostat users • 56% annual ROI on average

AssetRental

• $350 annual cost for installing and managing connected tag on GetAround.com

• $325/month average earnings for cars available on GetAround ($40/day average, about 9 days average rentals/month)

• >1,100% annual ROI

The second big opportunity is for us to decrease the cycle time required to complete work

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Asset Utilization


When it comes to services and cycle time reduction, the scope for opportunity is just as large

24 Source: Ford history, Wikipedia

Assembling A State of The Art Modern Automobile

40 Hours

Renovating & Updating A Home Bathroom

4 Months

To achieve a cycle time revolution, Henry Ford brought precision, order, and speed into manufacturing

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Standardized Process

Standardized Components

Synchronized Resources

•Too many variants to easily apply in services & sites

•Every site and location is unique to some degree

•Impossible to find & coordinate all the people & equipment

Pervasive IoT combined with process orchestration software makes cycle time compression possible

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Standardized Process

Standardized Components

Synchronized Resources

•Apply process orchestration software to managed variants

•Always be able to find the right tools & resources

•Respond instantly to variations & surprises

•Impossible to find & coordinate all the people & equipment

Many every-day business processes take much longer in practice than in theory

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Illustrative Example

Identify Broken Part

Open Trouble Ticket & Order

SpareInstall Spare Test & Certify

Update

15 Minutes 24 Hours 30 Minutes

<25 Hours

Identify Broken Part

Open Trouble Ticket & Order

SpareInstall Spare

Test & Certify Update

3 Days. Noticed but not documented for several days.

24 hours 5 Days. Testing & Installation Tools Missing When Engineer Arrived. Forced to Reschedule.

9 Days

Theoretical Cycle Times:

Real-World Experience:

To make asset-light strategies work, companies need to squeeze big performance gains from existing assets, cutting the difference between real-world performance and theoretical minimums. The results can be better utilization of existing assets even as they age and require more maintenance.

A few companies are starting to demonstrate they can tightly integrate process & operations, however

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Delta Airlines Has The Oldest Fleet of the US Majors, But The Best Operational Performance

Average Fleet AgeIn Years

Air Carrier Delays, Last 12 Months

0

5

9

14

18

DL UA AA WN 0%

2%

4%

6%

8%

DL UA AA WN

Air carrier delays exclude air traffic, security and weather and late arrival of incoming aircraft. Source is transtats.com

http://transtats.com


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Looking Backwards



Dawn of a New Era

You can see the computer age everywhere but in the productivity statistics.

Robert Solow

To enable the next big productivity revolution, we have one required ingredient, we need two more

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Connected People

Connected Devices

Digital Process & Markets

A smartphone already lives in nearly every pocket.

Our assets and tools need to be raise to the smart-phone level

Secure, open, reliable software to build & operate digital services

The good news: thanks to smartphones, we are at the point where smart devices are cheap and everywhere

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It’s now cheaper to make things smart than it is to make them stupid.

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Powerful System on Chip costs are dropping so quickly, they are converging with traditional embedded chip costs:

Non-Recurring Engineering Cost for Customized Embedded Chips

Shift to SOC with software customization here

Illustrative: As SOCs drop in price, customization will shift to software, not hardware

Time + + + +

Embedded Unit CostAverage Embedded CostAverage SOC Cost

At higher end of the market, this shift has already started:

These high powered SOC chips can run the full technology stack - they are servers in their own right, no need for a data center any more.

Apple Lightning HDMI Adapter

• Full ARM SoC with over 256MB of RAM

• Boots OS X Core when plugged in

• Conducts software conversion of MPEG to HDMI in real time

The computing power in every-day things is already more than everything in every data center.

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Global Installed Base of Computing Devices Millions of Units in 2015

1

10

100

1,000

10,000

AWS Servers PCs SmartPhones

2,222890

5.6

Global Installed Base of Computing Storage Estimated Petabytes in 2014-5

1

100

10,000

1,000,000

Dropbox Facebook Microsoft AWS PC Storage

890,000

900300300

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Installed base and company data center sizes are estimates based on limited public information. PC & Smartphone shipments from statistia.com. Storage data estimated assuming 1TB per PC.

http://statistia.com

To build a global network of billions of devices and people collaborating together, we need an entirely new approach

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Secure

Efficient

Open

Commercial

Alongside the revolution in hardware, a revolution in software is brewing at the same time: BitCoin

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What bitcoin does is nothing special. How bitcoin works is revolutionary.

BitCoin is the re-invention of the most basic workload in the world of modern computing: transaction processing.

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The Block Chain

CICS in 1966

Though the results look similar to other systems, the way that BitCoin works is profoundly different

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Distributed processing

Every node in the network checks the work of other notes.

Transactions are confirmed by a kind of digital majority vote.


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Synchronized RecordsEvery participant in the network keeps a copy of all the transactions.

Transactions are secured by encryption to prevent tampering.



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Synchronized Records

Smart InformationTransactions can be sent with rules attached - small programs that govern when and how money is delivered.

BitCoin may the single most secure piece of information technology ever created

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Secure

Efficient

Open

Commercial

Resilient and reliable.

Using the resources already there.

Open source, transparent.

Designed for commerce.

The core functionality of BitCoin, known as the BlockChain is now being re-purposed into all kinds of applications.

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Application Development EnvironmentsMarketplace InfrastructureSystems of RecordDistributed Social Networks

The Internet of Things

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Looking Backwards


The Big Opportunity

Dawn of a New Era

The future is already here, it’s just not evenly distributed.

William Gibson

Productivity revolutions are disruptive. Capturing this value will be very very challenging. Five final thoughts.

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Capacity Our understanding of capacity is still very limited

Market Makers The first company to get it right seems to lead the market

Growth Industry Growth Is Not The Same As Profitability

Innovation Simplicity seems to be the key to speeding up adoption

Consumers Where Consumers Lead, Enterprises Follow

Lead, follow, or get out of the way.

@pbrody linkedin.com/in/pbrody

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