business transformation and strategy for large companies in the age of ai - peter evans, the cge
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Peter Evans, PhDVice PresidentCenter for Global Enterprise
H2O Open TourNew York, NYJuly 19, 2016
Business Transformation | Strategy | Large Companies | Age of AI
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World's 500 largest companies
Revenue $ 31.2 trillion
Profits $ 1.7 trillion
# Employees 65 million
Collective Size
RoyalDutch
Toyota Motor
ENI
Total
AXA
State Grid
Sinopec Group
China National Petroleum
BP
E.ON
Wal-MartStores
General Electric
Exxon Mobil
CountryU.S.
Germany
Australia
Austria
Belgium
Brazil
Britain
Britain/Netherlands
Canada
China
Colombia
Denmark
Finland
France
Hungary
India
Indonesia
Ireland
Italy
Japan
Luxembourg
Malaysia
Mexico
Netherlands
Norway
Poland
Russia
Saudi Arabia
Singapore
South Korea
Spain
Sweden
Switzerland
Taiwan
Thailand
Turkey
United Arab Emirates
Venezuela
CountryU.S.
Germany
Australia
Austria
Belgium
Brazil
Britain
Britain/Netherlands
Canada
China
Colombia
Denmark
Finland
France
Hungary
India
Indonesia
Ireland
Italy
Japan
Luxembourg
Malaysia
Mexico
Netherlands
Norway
Poland
Russia
Saudi Arabia
Singapore
South Korea
Spain
Sweden
Switzerland
Taiwan
Thailand
Turkey
United Arab Emirates
Venezuela
CountryU.S.
Germany
Australia
Austria
Belgium
Brazil
Britain
Britain/Netherlands
Canada
China
Colombia
Denmark
Finland
France
Hungary
India
Indonesia
Ireland
Italy
Japan
Luxembourg
Malaysia
Mexico
Netherlands
Norway
Poland
Russia
Saudi Arabia
Singapore
South Korea
Spain
Sweden
Switzerland
Taiwan
Thailand
Turkey
United Arab Emirates
Venezuela
Source: Fortune Global 500 2015 and Center for Global Enterprise.
Countries
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Strategic Fit
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A framework for understanding change
• Major world shaping trendsMegatrends
• Disruptors Shocks
• Restrictions on market actorsConstraints
• Facilitators (e.g. tech innovation)Enablers
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Mega Trend
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Rise of the data layerNew locus of value creation and capture
Agriculture
Physical Layer
Energy
Physical Layer
Healthcare
Physical Layer
Banking
Physical Layer
DATA Layer DATA Layer DATA Layer DATA Layer
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Startups with “data” in their name
2009 2010 2011 2012 2013 2014 2015Year
2,000
5,000
10,000
20,000
50,000
100,000
200,000
500,000
1,000,000
2,000,000
5,000,000
10,000,000
20,000,000
50,000,000
100,000,000
200,000,000
500,000,000
Running Sum of Funding Total Usd
Waterline Data Science
Vantage Data Centers
SenseData
Reduce Data
Primary Data
HG Data Company
HealthPlan Data Solutions
FlyData
DataStax
DataSift
DataRank DataFox
Datadecision
Datacratic
DataCentred
Databricks
Coho Data
Big Data PartnershipAmerican Prison Data Systems
3D Data
Beekeeper Data
Cequel Data
Crunch Data
Data Stream CBOT
Databraid
DataClover
DataCrowd
Datadog
DataGravity
Datasnap.io
Dataspin
datatracker
DataVote
Double Data
Global Data Management Software
Hyperloop Data
Kona DataSearch
OhmData
PernixData
ScalingData
SlamDataSocial Data Technologies
Turing Data
VelociDataWibiData
WineDataSystem
XOR Data Exchange
Over 100 companies have raised over $1.4 billion
Source: CrunchBase, March 2015
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Large companies explore “data lakes”
ANALYTICS BASED MAINTENANCE
CUSTOMER PERFORMNACE ANALYTICS
DESIGN EFFECTIVENESS
FLEET PERFROMANCE INSIGHTS
PRODUCTION INSIGHTS
RELIABILITY PROGRAM EFFECTIVNESS
Source: Tech Mahindra, NABE Big Data Conference, Boston, June 2016
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Shocks
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Shocks
political
financial
military
natural disaster
Current hazards, events
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Source: http://atlas.pdc.org/atlas/
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World-wide natural disaster trends
Source: “NAT CAT 2014: What’s Going on with the Weather?” Munich Re, January 7, 2015
Annual rate of events has more than doubled since 1980
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Growing attention to resilience
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Applications of AI … supply chain resilience
supply chain management
Companies with large supply chains are exploring AI, which develops appropriate work orders based on an understanding of demand fluctuation.
By integrating the AI into business systems, it may become possible to realize smarter, more efficient operations in a diverse range of areas
More data-driven and more autonomous supply chains provides an opportunity for new levels of optimization in manufacturing, logistics, warehousing and last mile delivery.
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Constraints
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Constraints
regulatory
talentresources
Organizationalstructure
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Firms developing IoT technologies
Organization TypeLarge Industry
Small Industry
Source: Peter Evans IoT Alliance Database, CGE, 2015
Companies most actively developing new products and services
3,046 companies<$1billion sales
220 companies >$1billion sales
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“Before you go to war, assemble allies”“Before you go to war, assemble allies”
Art of Standards WarsCarl Shapiro and Hal R. Varian
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Fragmented/conflicting standards
2016Today
2001 2004 2007 2010 2013
Open Mobile Alliance
Source: P. Evans, CGE, 2015
Internet of Things alliances
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IoT companies by alliance
Organization TypeLarge Industry
Small Industry
Source: Peter Evans IoT Alliance Database, CGE, 2016
IoT Alliance
GSMAssociation 3GPP ZigBee
AllianceZ-WaveAlliance
Digital LivingNetworkAlliance
IEEE-SA EnOceanAlliance
IndustrialInternet
Consortuim
AllseenAlliance
OSGiAlliance
LoRaAlliance
OpenConnectivityFoundation
Open MobileAlliance AIOTI
Internet ofThings
Consortium
OpenInterconnectConsortium
ThreadGroup
Eclipse IoTFoundation
HomeGatewayInitiative
IPSOAlliance
IoT Alliance
GSMAssociation 3GPP ZigBee
AllianceZ-WaveAlliance
Digital LivingNetworkAlliance
IEEE-SA EnOceanAlliance
IndustrialInternet
Consortuim
AllseenAlliance
OSGiAlliance
LoRaAlliance
OpenConnectivityFoundation
Open MobileAlliance AIOTI
Internet ofThings
Consortium
OpenInterconnectConsortium
ThreadGroup
Eclipse IoTFoundation
HomeGatewayInitiative
IPSOAlliance
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Playing IoT standard’s the fieldIoT Alliance
Company
Huawei Samsung LGCisco
Systems NEC Corp IBM Intel HoneywellSchneider
Electric Bosch VodacomSumitomo
ElectricRobertBosch
ArrisGroup BT Group
HomeGateway
Initiative (.. Sagemcom SAP Sprint Telekom Telstra Xilinx Inc.3GPP
AIOTI
Allseen Alliance
Digital Living Network Alliance
Eclipse IoT Foundation
EnOcean Alliance
GSM Association
Home Gateway Initiative
IEEE-SA
IPSO Alliance
Industrial Internet Consortuim
Internet of Things Consortium
LoRa Alliance
OSGi Alliance
OneM2M
Open Connectivity Foundation
Open Interconnect Consortium
Open Mobile Alliance
Thread Group
Z-Wave Alliance
ZigBee Alliance
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Source: Peter Evans IoT Alliance Database, CGE, 2016
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Enablers
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Ideas as enablers
Classic economic ideas Free market economies are always stable Trend toward full employment & full production equilibrium Freely fluctuating prices in three key areas ensure this outcome (goods, money and labor markets)
Keynesian economic ideas Free market economies are unstable Equilibrium yes, but not necessarily for full employment/ full production Demand becomes a much bigger driving force Supply will always adjust to demand
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Technology as enabler
Yahoo! Directory - 1994 - 2014Telephone switchboards, 1890 – 1960s
Traffic Service Position System (TSPS) Web indexing algorithms
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APIs enable platform data capabilities
Revenues
Reach
Engagement
Innovation
Integration
Application Programming Interface (APIs)
Definition: Standardized machine-readable digital communication interface for a system, which can be designed to have open or restricted access and be exposed both internally and externally of an organization’s network
Exchange and value creation
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API Economy: Core vs. Periphery
Source: Peter Evans and Rahul Basole, with data from ProgrammableWeb, Center for Global Enterprise, 2015
Social media / webJob search / workE-commerce Tools / analytics / big data
Payments
API Clusters
Messaging services
Companies
Enterprise
Amazon SNSAlexa Web Inform
Amazon Marketplace Amazon
SimpleDBAmazon Product
Advertising
Amazon CloudWatch
Amazon Flexible
Amazon Redshift
Amazon SC2
Amazon S3 Amazon Mechanical TurkAmazon RDS
Amazon DynamoDB Amazon Queue Service
Walmart
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AI and enterprise strategy
Explosion of interest in articles related to “ai” and “business strategy”
Number of articles focused on AI and business strategy has grown by
Increase 25 a quarter in 2013 to over 150 a quarter in 2016
from 2013 to 20166x
Source: Data and visualization from Quid, July 2016
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AI and enterprise strategy
• How do alert leadership teams take advantage of AI?
• Is AI similar to other computer technologies?
• What types of internal resources are most needed?
• What types of business processes are required?
• What types of external communities/ ecosystems support competitive advantage?
The search for strategic fit
RoyalDutch
Toyota Motor
ENI
Total
AXA
State Grid
Sinopec Group
China National Petroleum
BP
E.ON
Wal-MartStores
General Electric
Exxon Mobil
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Council of Economic Advisors report on AI
“The biggest worry I have about AI is that we will not have enough of it, and that we need to do more to make sure we can continue to make groundbreaking discoveries that will raise productivity growth, improving the lives of Americans and people throughout the world.”
Jason Furman Chairman
New York University New York, NY
July 7, 2016
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Looking ahead … strategic landscape
Age of Data
Megatrends
Natural disasters
Shocks
Fragmented IoT
Standards
ConstraintsArtificial
Intelligence
Enablers
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Peter Evans, PhDVice PresidentCenter for Global Enterprise
H2O Open TourNew York, NYJuly 19, 2016
Business Transformation | Strategy | Large Companies | Age of AI