Computers and Business
David L. Olson
James & H.K. Stuart Professor and
Chancellor’s Chair
University of Nebraska-Lincoln
Moore’s Law
• Intel:
– Noted that the number of transistors possible on
integrated circuits doubled every so often
• 2 years? 18 months?
• Seems to apply to about everything
computer—technology related
– Computing speed
– Storage capacity
– Transmission capability
Computer progress
(see Moore’s Law)
• 1988 Intel 386D processor ran at 8.5 MIPS
– First IBM PCs, Microsoft Windows
• 1992 Intel 486DX ran at about 54 MIPS
– PCs supported Windows 3.1
• 1999 Intel Pentium II over 1,300 MIPS
• 2008 Intel Core 2 Extreme 59,000 MIPS
Linear vs. Exponential
4500
4000
3500
3000
2500
Linear
Exponential
2000
1500
1000
500
0
1
2
3
4
5
Period
6
7
8
9
Ray Kurzweil
The Singularity is Near: When Humans
Transcend Biology
NY: Penguin Books, 2005
Singularity – future period when pace of
technological change will be so strong that human
life will be irreversibly transformed
When exponential crosses linear
Epochs
• Epoch one: Physics and chemistry
– information in atomic structures
• Epoch two: Biology
– information in DNA (DNA evolves)
• Epoch three: Brains
– information in neural patterns (brains evolve)
• Epoch four: Technology
– information in hardware and software designs (technology evolves)
• Epoch five: Merger of technology and human intelligence
– integration in exponentially expanding base
• Epoch six: The universe wakes up
– patterns of energy & matter saturated with intelligent processes & knowledge
(vastly expanded human intelligence spreads through the universe)
A Theory of Technology Evolution:
The Law of Accelerating Returns
• The nature of order:
– paradigm shifts are major changes in methods and
intellectual processes to accomplish tasks
• Each paradigm shift follows S curve
– Slow growth, rapid growth, leveling off
• Under accelerating returns, paradigm shifts occur
faster
• 15 different lists with a lot of overlap
– All show decreasing gaps in time
Achieving the Computational Capacity of
the Human Brain
• We’ve had 5 paradigms of computing:
–
–
–
–
–
electromechanical calculators
relay-based computing
vacuum tubes
discrete transistors
integrated circuits
• Singularity representing profound & disruptive
transformation in human capability in 2045
– nonbiological intelligence created will be 1 billion times
more powerful than all human intelligence today
Achieving the Software of Human
Intelligence:
How to Reverse Engineer the Human Brain
BRAIN
• Very slow
• Massively parallel
• Rewires itself
• Details random
• Emergent
• Imperfect
• Evolution
• Patterns important
COMPUTERS
• Fast (electricity)
• Can be parallel
• Humans wire
• Deterministic
• Programmed
Genetics, Nanotechnology, Robotics
• Designer baby boomers
• Can we really live forever?
• Somatic gene therapy
– enabling us to change genes by infecting them with new
DNA, creating new genes
• Kurzweil speaks badly of manipulating human life
– but takes 250 pills per day
• Solving world hunger
– we would not be creating the entire animal but rather
directly producing the desired animal parts or flesh.
Nanobots - 2004
• used for mission-critical software systems
– control nuclear-power plants
– 911
– ICU
– land airplanes
– guide missiles
Artificial Intelligence
• Expert systems, Bayesian nets, Markov
models, neural nets, genetic algorithms,
recursive search
• Applications
– military & intelligence, space exploration,
medicine, science & math, business finance &
manufacturing, speech & language, entertainment
& sports
Singularity our destiny
• We can live forever
– evidently freezing an existing population that will
never die nor procreate
• We are becoming Cyborgs
• Transfer to nonbiological experience
• Change
– Warfare
– Work
Intertwined Promise & Peril
• Environmentalists
– world that has enough wealth and enough technological capability
– should not pursue more
• The many benefits of progress can always be turned to evil
purposes.
• The precautionary principle:
– If the consequences of an action are unknown but judged by some scientists
to have even a small risk of being profoundly negative, it’s better to not carry
out the action than risk negative consequences.
• Golden rice genetically modified to contain high levels of
beta-carotene
– precursor to vitamin A, needed to stop African children from going blind.
– Greenpeace strongly opposes Golden rice as genetically modified.
Criticisms
• Malthusian
– exponential trends don’t last forever
• Computer limits not very limiting
• Software limitations
– Computer instability, slow responsiveness
• Intelligent algorithms are on the way
• Analog processing
– Computers use digital medium
• Idea is to combine digital & analog
Criticisms
• Ontology
– Can a computer be conscious?
• What difference – human constructs
• Rich-poor divide
– Technology makes rich richer
• History of technology shows evolution from inefficient/expensive
to efficient/cheap (cell-phone)
• Holism
– Biological is holistic, computers deterministic & modular
• With AI can use both
In Conclusion…
• We are building machines with
– Powers far greater than the sum of their parts
– By combining self-organizing design principles of
the natural world
– With accelerating powers of human-initiated
technology
• The Singularity will occur about 2040
Emile Zola (1901) Work
• “The machines did everything….What an
elevating sight: an army of obedient
mechanical laborers with never-tiring
stamina…that were now the worker’s friends,
instead of their competitors….They liberated
instead of exploiting him. While he rested,
they did his work.”
– Aren’t machines (computers) wonderful?
Martin Ford
(2009) Create Space Independent Publishing Platform
• The Lights in the Tunnel: Automation,
Accelerating Technology and the Economy of
the Future
– What if technology progresses to the point where
a substantial fraction of the jobs now performed
by people are instead performed autonomously
by machines or computers?
– People who rely for jobs for income the same as
those who buy the products produced
Productivity Paradox
• Economy hasn’t had expected productivity
gains from computers
– Greenspan – no noticeable benefit
– Brynjolffson – of course they benefit
Erik Brynjolfsson and Andrew McAfee
2011 Digital Frontier Press
Race Against The Machine:
How the Digital Revolution is Accelerating
Innovation, Driving Productivity, and Irreversibly
Transforming Employment and the Economy
• Computer progress advancing exponentially
• AFFECT ON
–
–
–
–
Jobs
Skills
Wages
The Economy
US
• Great economic changes
– Wages too high
• Outsourcing
– Computer programming (service) to India
– Manufacturing to China
• Technology
– Robotics – no health benefits, no vacations, no complaints
• Computers
– ERP systems replacing multiple legacy systems
» Layoff most human IT people
– Business Analytics
– BIG DATA
World Wide Web
• Innovations
– eBay & Amazon Marketplace
• Over 600,000 earn living by new products for worldwide
market
– Apple’s App Store, Google’s Android Marketplace
• Easy to implement mobile applications, distribute them
– Threadless
• Customers create & sell t-shirt designs
– Heartland Robotics
• Robots-in-a-box
• Small businesses can access inexpensively
Examples of Innovation
• Crowdsourcing
– Amazon
• Cloud
– Innocentive
• Commercialized research & development
Amazon collaborative systems
Crowdsourcing: Mechanical Turk
Cloud: EC2
Amazon.com
• Many unprofitable years in the 1990s
• Now highly successful
• USER PARTICIPATION
– Reader reviews, ratings
– Personalized suggestion system
• Once toyed with personalized pricing
• CLOUD
– Can rent storage, software
Mechanical Turk
• 200,000 participants
– Use free time to work for customers
– Amazon the broker
– Started in 2006
• EXAMPLE
– Powerset search site wanted feedback
– Through Mechanical Turk, got 100 people to rate results for 2
hours, at $2/hour
– Powerset then started Dolores Labs to assess accuracy and
speed of Mechanical Turk participants.
• Cost $2,000, estimated $30,000 for full-time staffers
– Typical worker
• Guitar teacher supplements income by 15 hours of work on
Mechanical Turk at $3/hour
Mechanical Turk Hits
Task
Requestor
Identify Arabic dialect in text
An
individual
PIO verification for US cities
Nutella42
Find political bias
University
17 Dec
2010
9 Dec 2010
Translate English to Urdu
An
individual
techlist
23 Dec
2010
7 Dec 2010
$0.70
Dolores
Labs
Dolores
Labs
Dolores
Labs
Dolores
Labs
13 Dec
2010
13 Dec
2010
13 Dec
2010
13 Dec
2010
$0.08
Find URL for college club
directory
Judge quality of search
results
Find product information for
electronics
Search for terms
Choose best search result
Expiration
date
31 Dec
2010
Reward
$0.05
per
phrase
$0.08
per city
$0.05
$0.05
$0.12
$0.55
$0.10
Time
allotted
15
minutes
Hits available
30
minutes
60
minutes
24 hours
1617
15
minutes
60
minutes
60
minutes
60
minutes
60
minutes
1001
14196
1097
1002
996
995
962
951
Mechanical Turk Examples
• Select correct spelling for given search terms
• Evaluate website suitability for a general
audience
• Rate search results for given key words
• Evaluate product similarity
• Select appropriate category for given products
• Categorize an article’s tone
• Translate from one language to another
Informed Consent Form
Heading
Content
Purpose of research
study:
Benefits:
To collect human annotations to improve automatic translation of Arabic
into other languages.
Can benefit society by improving how computer process human
languages.
None
Risks:
Voluntary
participation:
We may end your
participation if:
You can discontinue at any time without penalty by clicking on “Return
Hit”
You don’t demonstrate adequate knowledge of the language, or are not
following instructions, or if your answers significantly deviate from
known translations.
Confidentiality:
The only information about you retained will be a WorkerID serial
number and your IP address.
Questions/concerns:
You may e-mail questions to the principal investigator. How may contact
Johns Hopkins University Institutional Review Board if you feel unfairly
treated.
Clicking on the “Accept Indicates your understanding of this information. You have not waived
HIT” button
any legal rights you otherwise would have as a participant in a research
study.
EC2
• Elastic Compute Cloud
• Users can link over web
– Utility (web service)
– SOA useful, not necessary
– Pay/use
• Has very large capacity
– Competitor to Google, IBM, Microsoft
– At least one case where Amazon servers went
down, causing grief to users
EC2 Operations
• Users bid on unused computing capacity
– Pay by the hour
– Amazon has a fluctuating spot price set by supply
& demand
• If bidder exceeds spot price, job run and charged
• If bid lower than spot price, job terminated until spot
price drops to bid price
• Enables customers to cap costs
EC2 Products
• As of April 2010
– 16 Amazon cloud computing products
– Services (processing, disk storage, database)
• SimpleDB
– Simple Storage Service (S3)
• Users can store and retrieve large amounts of data at any
time
• Can make stored data private, public, or targeted
• Authentication devices used for security
• Billed on monthly pay-by-use basis
– In 2010 opened Singapore data center
InnoCentive
Web-based business
Link those with problems (businesses, NGOs,
public sector organizations)
With those willing to work (over 160,000)
Description
• Eli Lilly and Company start-up
• Spun off to be independent company
• CHALLENGES
– Ideation challenges - broad questions seeking new ideas.
– Theoretical challenges - detailed solution requirements.
• Usually, intellectual property rights transfer from the solution provider to the
client organization, although some clients prefer a non-exclusive perpetual
license.
– Reduction to Practice (RTP) challenges - high level of detail
• Require solvers to submit validated solutions in the form of original data or
physical samples. Clients are allowed to test proposed solutions. Intellectual
property rights are always transferred to the client in RTP challenges.
– eRFP challenges - requests for proposals to the world.
• When solvers submit proposed solutions, clients evaluate responses and select
solvers for further details. Terms of subsequent contracts are negotiates for
scope of work, duration, etc.
Challenges by Discipline
•
•
•
•
•
•
•
•
•
Business and Entrepreneurship
Chemistry
Computer Science and IT
Engineering and Design
Food and Agriculture
Life Sciences
Mathematics and Statistics
Physical Sciences
Requests for Partners/Suppliers
Examples
5 Oct 2010
Title
Tags
10/05/2010
Active
Deadline
Solvers
$50,000
69 1/05/2011
10/04/2010
$50,000
118 12/04/2010 Theoretical
10/04/2010
$7,500
End of life indicator Science10/04/2010
system
Engineering
$10,000
157 11/05/2010 Ideation
Theoretical
RTP
eRFP
193 11/04/2010 Ideation
Theoretical
RTP
eRFP
Room temperature Science
oxidation catalyst
Improving
Science
therapeutic
targeting of
Bevacizumab
Better cat litter
Science
Posted
Award
Categories
Theoretical
Purported Value
Advertises for Seekers (clients) in categories:
• Corporations might benefit in keeping pace with the dynamic
competitive landscape by tapping into the creative talents of those
who register as Solvers. InnoCentive argues that since no firm can
afford to hire all the best people, an army of hundreds of thousands
of individuals are available for ideas. Companies are encouraged to
have their employees participate in an open culture of innovation.
• Not for Profit organizations might benefit because they have
limited staff and budget for research, and InnoCentive offers a
platform that only requires payment when useful solutions are
found.
• Governments might benefit because they also face limited
resources due to lower tax bases and higher deficits.
• Solvers benefit by taking advantage of opportunities to work on
problems sufficiently worthwhile for InnoCentive clients to pay.
TRENDS
• Networked global economy
– Open
– Wal-Mart; IBM; Nike
• Digitization
– Moore’s Law
• computing power doubles every 18 months
– Metcalfe’s Law
• Value of a network increases with square of number of users
– Coase’s Law
• As transaction costs decrease, firm complexity diminishes
• Firms tend to expand until
marginal cost of internal transactions = external marginal cost
Friedman (The World is Flat)
• THREE CONVERGENCES
– New players (through global access)
• BRIC
– New playing field (Web economy)
• Global warming
• Green emphasis
• Cultural conflicts
– Ability to develop new ways
Megatrends
• Energy supply
– Peak Oil
– Global warming
• Complexity
– Unintended consequences
• Globalization
– Japan; Asian Tigers; BRIC
• Digitization
– Enterprise systems
• Paradox: More Integrated Systems ˃˃ Fewer Systems People
• DEREGULATION/PRIVATIZATION
– Home mortgage crisis
• COMMODITIZATION OF PROCESSES
– Software as a service
Convergence Revolution
Industry
1st Wave
2nd Wave
3rd Wave
Agriculture
Industrial
Knowledge
Service
Economic
Competitive
Advantage
Regional
Economy of
Scale
Primary
Focus
Convergence
National
Economy of
Scope
Global
Economy of
Expertise
EXPLOITATION
Components
/Products
Functions
Economy of
Convergence
EXPLORATION
Organizations
Technology
Industries
Bio-artificial
systems
Economies
Evolution & Organizational Innovation
LEVEL
CONVERGENCE LEVEL PURPOSE
1
2
3
4
Component/Product
Functional
Organizational
Technology
Product/Service innovation
Process innovation
Value chain innovation
Technology value innovation
5
Industry
6
Bio-Artificial
New industries
Customer value innovation
Molecular economy
New Products/Processes
• Component/Product convergence
– iPad, Smartphone
• Functional convergence
– BPR
– Matrix organization
– Temporary supply chain linkages
E-Globalization
• Develop Corporate Global Mindset
• Build Global Competitive Advantage
– AGGREGATION
• Seek economies of scale & scope
• McDonalds, IBM, Microsoft
– ADAPTATION
• Maximize local relevance
– Mini-IBMs by country, Google China
– ARBITRAGE
• Exploit differences in national, regional markets
– US Headquarters-Chinese factories-Indian call centers-US retail
– Organizational convergence
Technology Convergence
• BIOTECHNOLOGY
– Drugs – convergence of pharmaceuticals, agriculture,
chemical
– Neural technology – convergence of biology, computer
technology
– MRI/PET scanning – convergence of engineering, biology
• NEURAL SCIENCE
• NANOTECHNOLOGY
• Evidence:
– Cell phones – convergence of internet access, music,
photography, telecommunications
– Microelectromechanical systems (MEMS)
Industry Convergence
• Two or more previously distinct industries
become direct competitors or cooperators
• Apple vs. music distributes
• Walt Disney – travel convention
– FUNCTIONAL
• Products of 2 industries linked
– PCs & TV
– COMPLEMENTARY
• Multiple objects of value from 1 location
– Travel & lodging (air tickets & hotel rooms, rental cars)
– Commercial & Investment banking (post-Glass-Steagall)
Industry Convergence Examples
• News
– Newspapers – disappearing
• Network TV swamped by Cable Networks
– CNN, ESPN, directTV
– Telecom
• AT&T breakup
– EDUTAINMENT
• Education & entertainment
– INFOTAINMENT
• Information & entertainment
Biological & Artificial System
Convergence
• Application of microtechnology to business
•
•
•
•
MINIATURIZAATION = computer chips, health care, gene splicing
VISUALIZATION – X-ray, material chemistry
MANIPULATION – virtual reality & tactical feedback
EVALUATION – partition test medium (genome project)
– Biotechnology
• Genetic modification – US/European debate
– Nanotechnology
• The science of the very small
• SINGULARITY
– Ray Kurzweil (2005)
– Computers surpass human knowledge
Innovation Through Open Systems
• Web 2.0
– Openness, participation, collaboration
• Service oriented architecture
– Strategy to turn applications & information
sources from different organizations into SERVICES
accessible via Web
• IBM: On Demand Business
• Hewlett-Packard: Adaptive Enterprise
• Dell: Blade computing
SOA & New Products
• iPod
• Banking – Salesforce
– Automate forecasting processes in CRM
– Provide open but secure system
• Bank of the West
– Enabled access to software to better identify
seasonal traffic
• Wal-Mart
– RFID linkage
Open Source Development
Red Hat [2009]: Can save by:
1. Enabling use of commodity hardware rather
than proprietary machines
2. Avoids maintenance contracts
3. Greater functionality, reliability, performance
4. Faster learning curve, available support tools
5. Avoid vendor lock-in
6. Reduce need for security consultants & tools
CONFENIS 2010 Natal
Open Source ERP Products
• Compiere
• OpenMFG
• Open for Business Project
• Tiny ERP
• Web ERP
• Open Office
• OpenBravo
• OpenPro
Sourceforge.net listed over 1,000 ERP projects May 2009
OPTION FOR SMEs
CONFENIS 2010 Natal
Strategic Innovation
• Applying new convergence developments to business
opportunities
• TYPES OF INNOVATION
– Improve products or services
• Speed, customization, aesthetics
– Improve value chain processes
• Lower cost, improved quality
– Continuous improvement
• Participation by customers, producers
– Strategic
• New ways of doing old tasks
• SOUTHWEST AIRLINES
• IKEA
Convergence Evolution
• Component/Product Convergence
– Clock radios, cell phones, Amazon’s Kindle
• Functional Convergence
– BPR – Dell’s value chain, McDonalds’ food delivery
• Organizational Convergence
– Supply chains – Wal-Mart, Nike, Dell
• Technology Convergence
– Nanotechnology, biotechnology
• Industry Convergence
– Combining industries – Apple iTunes, Health Tourism
• Open-source Convergence
– Web 2.0, open source ERP
• Biological & Artificial Systems Convergence
– Miniaturization – gene splicing, molecular biology, MRI
CONCLUSION
• The world is flatter
• Widening economic & digital divides
• Convergenomics brings new business models
& opportunities
• Strategic innovation required to survive
Large-Scale Business Software
• Enterprise Resource Planning
• Customer Relationship Management
Artificial Intelligence
• “Next Killer App”
• “Tool for Managers, not for workers”
• Robotics technology in military
– P.W. Singer, 2009
• Advance pattern recognition
Job Automation
• Globalizing labor and capital
– Not globalizing consumption
• Shift away from lowest labor to lowest energy
costs