Third Industrial Revolution Sept 2014

Leading into the 3rd Industrial RevolutionExploring the future of value creation

Dr. Robin Teigland Karinda Rhode in SLStockholm School of Economicswww.knowledgenetworking.orgwww.slideshare.net/eteigland

@RobinTeigland

September 2014www.hhs.se

Who am I? (LinkedIn Inmaps)

SSE

Exec Ed

Swedish IndustryResearch

Wharton

Stanford

McKinsey

vonorange.com

Leading into the third industrial revolution

Part I Background

Part II Collaborative Innovation

Part III The Sharing Economy

Then…

Thx to R. Wieselfors, Ericsson for photos

…Now

Thx to R. Wieselfors, Ericsson for photos

“Old” Film from 2008Did You Know: Shift Happens

http://www.youtube.com/watch?v=cL9Wu2kWwSY&feature=search

1. What trends do you recognize?

2. How are these trends affecting you and your organization?

3. What leadership challenges do these trends lead to?

History tends to repeat itself….Innovation, financial crisis, industrial revolution,

…

Steam engine

Internal combustion

engine

Microelectronics

Late 18th C Late 19th C Late 20th C

Schön 2008

Third industrial revolution?

Valuecreation

People• “Net generation”• 24x7 “mobile”

workforce• Knowledge via MOOCs• Sharing not consuming• Sustainability

Technology • Broadband access• The Cloud• Mobile phones• Internet of Things • Big Data• 3D printing• Robotics/AI• VR/AR

Open Source

• Software • Hardware• Physibles

Convergence of…..

Finance•

Microlending/microfinance

• Crowdfunding/equity/P2P

• Non-fiat cryptocurrencies

• Mobile money/payments

If the rate of change on the outside (of an organization) exceeds the rate of change

on the inside, the end is near....

-Jack Welch

Increasing pace of change

From 1920s to 2010s−Average lifespan of S&P 500 company fell from

67 years to 15 yearsFrom 2000 to 2010

−40% of companies on Fortune 500 list replacedPredictions

−In next few years, 70% of Fortune 1000 companies to be replaced

−By 2020, >75% of S&P 500 companies do not exist today

−By 2025, >45% of Fortune 500 companies to be from emerging markets

Fast Company, McKinsey & Inc

”Bitcoin has made me interested in issues like finance and money – things that I never thought about before. Now I am really curious and questioning why things are the way they are in the finance

world….and wondering what can I do to change them.”

- Bitcoin 2014 Conference Attendee

The genie is out of the bottle….

In just a few years in Sweden alone…

Company Founded Business

Klarna 2005 E-commerce payment services

MyLoan 2006 Loan broker

Trustly 2008 Online payments

TrustBuddy 2009 P2P lending

iZettle 2010 Mobile payments

FundedByMe

2011 Crowdfunding, crowd equity

Kivra 2011 Digital mailbox

Tink 2012 Personal finance

Safello 2013 Cryptocurrency exchange

KnCMiner 2013 Cryptocurrency mining equipment

Toborrow 2013 P2P lending for companies

Banks’ share of wallet is rapidly shrinking

Nordic BanksPay, Save,

Lend, Insure

Nordic Entrepreneurs

International Entrepreneurs

What is Crowdfunding?

Accumulation of small investments in individual projects by large number of

individuals (the “crowd”) via or with help of Internet and social networks (De Buysere

et al., 2012)

Picture: FundedByMe

Four forms of crowdfunding

Form Benefits for funders

Donation-based

Donation Intangible benefits.

Reward-based Donation or pre-purchase

Rewards in addition to intangible benefits.

Equity-based Investment

Return on investment if company does well. Rewards sometimes also offered and

intangible benefits may motivate too.

Debt-based LoanRepayment of loan with

interest. Alternatively intangible benefits if loan given interest-free.

Ingram & Teigland 2013

Local Stockholm success story: Flippin’ Burgers

Money raised: SEK 36,502 / €4,000

Number of investors: 186

Date funded: September 2011

Sector: Food

Enabling local, small-scale solutions

Top 5 Best American

Restaurants in Europe

http://travel.cnn.com/best-americana-restaurants-europe-023346

Crowd equity taking off

P2P lending in the US and UK…

• USD 3.8 bln in personal loans since 2007

• USD 750 mln growth each quarter

• Now offering business loans

• Strategic alliance with Union Bank

Toborrow.se

Democratizing innovation through access to capital

Kickstarter• Women 13% more likely to to

meet crowdfunding goals than men

• 67% of women-led technology ventures reached goals vs 30% of male-led ventures

Indiegogo• Women 61% more likely than

men to meet goals • Women account for 41% of

projects that meet goalshttp://online.wsj.com/articles/kickstarter-closes-the-funding-gap-for-women-1407949759

Bitcoin = The power of community + open source + internet + CPU

• Developed by self-organizing community of thousands of “strangers” across globe

• Not one but many motivations (intrinsic, extrinsic)• 91 bln SEK in circulation vs SEK 44 bln of Bitcoin in

five years• Approx USD 6.2 bln in circulation (Sept 2014) and

70,000 daily transactions

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2263707

http://techcrunch.com/2014/09/04/kncminer-raises-14-million-to-take-bitcoin-mining-to-the-moon/

Bitcoin – one of many cryptocurrencies

Currency CodeYearEst.

Founder(s)

Active Website PoW PoS

Bitcoin BTC or XBT 2009

Satoshi Nakamoto (pseudonym)

Yes N/A Yes No

Ripple XRP 2013

Chris Larsen & Jed McCaleb

Yes ripple.com No No

Litecoin LTC 2011 Charles Lee Yes litecoin.org Yes No

Peercoin PPC 2012Sunny King (pseudonym)

Yespeercoin.net

Yes Yes

Dogecoin DOGE 2013

Jackson Palmer& Billy Markus

Yesdogecoin.com

Yes No

Namecoin NMC 2011 N/A Yes dot-bit.org Yes No

Mastercoin MSC 2013 J. R. Willett Yesmastercoin.org

No No

Primecoin XPM 2013Sunny King (pseudonym)

Yesprimecoin.org

Yes No

https://ripple.com/

https://litecoin.org/

http://peercoin.net/

http://peercoin.net/

http://dogecoin.com/

http://dogecoin.com/

http://dot-bit.org/Main_Page

http://www.mastercoin.org/

http://www.mastercoin.org/

http://primecoin.org/

http://primecoin.org/

Rise of local currencies

The future?

Facebook + banking license?

The future is already here, it’s just not very

evenly distributed.

- William Gibson


Part I Background



Many are stuck in our old ways …

No one knows everything, everyone knows something,

all knowledge resides in humanity.

networks.

Adapted from Lévy 1997

Six degrees of separation

- Milgram, 1967

105 emp350+

Partners

43,900+Communitymembers

15,000+Customers in 130 countries

eZ Ecosystem

• Content management software, #1 in media industry

• 250,000 sites in 170 countries• Customers: UN, FT, WSJ, Vogue, Hitachi, 3M, BMW

• 105 employees in 9 countries (US, Europe & Asia)

Teigland et al., 2014 forthcoming

eZ’s platform for building identity and competence throughout its ecosystem

eZ Software development team

Where have the traditional sources of sustainable competitive advantage been?

#1

InnovationNetworks of relationships

Brand & Reputation

FIRM

Kaye 1993

#1

InnovationNetworks of relationships

Brand & Reputation

FIRM

TWhere are the sources today of

sustainable competitive advantage?

Teigland 2010

Measuring demand in advance

Est. $30 mln sales

30% profit margin in commodity business

20 employees but a 24x7 global “workforce”

of 2.4 million

No internal R&D or sales & marketing

ThreadlessA platform for global community

collaboration

From clothing to home products….

GE opens up patents on Quirky

Innovation in automotive design/production

“Local Motors is the place for people to create influential vehicles together.”

http://www.youtube.com/watch?v=azCRuwtE_n0

DIY 3D printing becoming more commonplace…

DIY 3D printing becoming more commonplace…

http://openfabpdx.com/fffiddle/

“Made in Africa” 3D printer (Togo)crowdfunded through Ulele

Winner of International Space

Apps Challenge

http://www.engineering.com/3DPrinting/3DPrintingArticles/ArticleID/5712/E-Waste-3D-Printer-to-Mars.aspx

Endless possibilities for developing countries

http://opensourceecology.org/

OpenSimulator: A value-creation ecosystem

AcademicEntrepreneurHobbyistLarge FirmNon-profitLocal PublicFederal PublicResearch InstSME EmployeePeriphery

Teigland, Di Gangi, & Yetis 2012

USD 5.5mln in development

costs

What’s around the corner?24x7 Global Internet Collaboration + Open Source + 3D

Printing

http://mashable.com/2013/02/13/robohand/

$60,000

$150

Available for free download on

Where is the

firm?


Part I Background



What is the Sharing Economy?

Range of services that facilitate peer-to-peer transactions through the Internet

USD 335 billion by 2025 in top five sectors

https://www.youtube.com/watch?v=LWD-I5qPCfw

http://www.torbenrick.eu/blog/strategy/the-sharing-economy-is-changing-consumer-consumption/

UberGlobal platform for local community

collaboration

Launched June 2010

USD 17 bln valuation

43 countries globally

Limited physical assets

UberPop, Uber Rush, ??

UberGlobal platform for local community

collaboration

DHL’s MyWays

Internet – A Technical Glue

Petra Sundström

Bitcoin – so much more than a “coin”

From dumb to smart moneyUnderlying Bitcoin protocol holds

real transformative powerTransfer property rights (e.g.,

shares, certificates, digital money) fast, transparent and very securely.

http://thenextweb.com/insider/2014/02/15/bitcoin-platform-currency/

Big Data is now big money

Tomas Larsson, Sep 2012

http://hbr.org/2012/10/data-scientist-the-sexiest-job-of-the-21st-century/ar/1

Thomas Jefferson (1816)“Laws and institutions must go hand in hand with the progress of the human

mind.”

The problem is that the human mind itself can’t keep pace with the advances

that computers are enabling.

http://wadhwa.com/2014/04/15/mit-technology-review-laws-and-ethics-cant-keep-pace-with-technology/

Knowledge becomes quickly outdated

Ray Kurzweil, Singularity Institute

http://motherboard.vice.com/read/driverless-cars-are-going-to-kill-insurance-companies

Institutions

Emergent Collective vs

E.g., Central Bank~ Long-standing financial

institutions and regulations

E.g., Bitcoin Community ~ Emergent collective of users across globe connected through internet

Challenges to institutions?

Teigland, Yetis, Larsson, 2013http://papers.ssrn.com/sol3/papers.cfm?

abstract_id=2263707

Increasing pressure due to variety of new financial instruments

Forces for change

• Cryptocurrencies

• Community currencies

• Crowdfunding• Microfinance• P2P lending

• Sharing

The status quo

Forces for stability

• Governments• Central banks• Multinational

financial actors

• Legal system• Mindset

How should organizations react?

Strategic partnership

+

Internal corporate crowdfunding

iFundIT

More than 300 participantsEntry-level workers to VPs

Given $2,000 to invest over 8 week period

Choose internal projects in which to invest

“Keep your enemies close…”

Some questions…

What basic assumptions about value creation will no longer hold?

What opportunities are there for your company related to the future of money, collaborative innovation, and the sharing economy?

What strategic challenges are there within the nearest 2-3 years in connection with the future of money, collaborative innovation, and the sharing economy?

What will you do tomorrow at work as a result of today’s discussion?

ExploitationImproving

existing value creation activities

ExplorationDeveloping new value creation activities

Adapted from March 1991

What’s around the corner?24x7 Global Internet Collaboration + Open Source + 3D

Printing

http://mashable.com/2013/02/13/robohand/

$60,000

$150

Available for free download on

Where is the

firm?

The Firm

The Collective

vs

E.g., Microsoft~ Built by employees within

organizational boundaries

E.g., OpenSimulator~ Built by users and distributed freely regardless of affiliation

Models of Knowledge Creation

Teigland, Di Gangi, & Yetis 2012

Moving into the Third Industrial Revolution?

O’Driscoll 2009

From the mobility of goods to the mobility of financial capital to …

Teigland, JVWR, 2010

...the “mobility” of labor?

Overview− EU funded, 3 year multilateral and transversal network (LLP EACEA,

KA3 (ICT))− December 2011 – December 2014− Project Leader: University of Hull (Darren Mundy, Luisa Panichi)− 19 partners from Austria, Cyprus, France, Germany, Israel, Italy,

Netherlands, Norway, Portugal, Sweden, UK Network Aims

−Collect good practice examples in teaching and learning in virtual worlds from different subjects and national and local contexts− Facilitate transfer of core knowledge to new contexts− Provide framework for creation of pan-European virtual-world university

Expected Outcomes− Increased number of experts in virtual world education− Policy for long-term sustainability of network and its outcomes− Model for knowledge transfer− Range of dissemination events

More information: http://www.euroversity.eu/

Published by Palgrave Macmillan

http://www.amazon.com/dp/1137283017

Some things do not change

Innovation Exchange

Exchange Trust

Trust RelationshipsRelationships Interaction

Robin [email protected]

www.knowledgenetworking.org

www.slideshare.net/eteigland

www.nordicworlds.net @RobinTeigland

If you love knowledge, set it

free…

If you like this presentation and would like to contribute to our research, we accept bitcoins: 14hs4JbnQLXE87GGzu84uXGaspmxmnLpwC.Thank you!!!!!