Recorded on June 1st, 2012, and written up on Virgin America Flight 27 NYC to San Francisco on June 18, 2012
With the Service economy playing an ever-increasing role in both our professional and personal lives, I wanted to focus part of the Future of Work project on people like Jim Spohrer from IBM. Jim is a computer scientist who is leading the development of a new science of service systems, often known as Service Science, Management and Engineering. He is helping companies figure out how to turn “service” into a science. In his role as Director of IBM Global University Programs, he developed curriculum guidelines in this area for universities around the world.
Jim has an interesting background:
I have studied physical systems, technological systems and now social systems, or what we call service systems, which consist of people and skills and technology and business models. I studied the evolution and transformation of complex service systems and how to best scale up innovations that can improve quality-of-life in cities worldwide, resulting from university-driven regional economic development. Smarter cities and smarter universities are fascinating types of service systems to study these days.
I felt Jim could provide some real insight into the current transformation going on in the knowledge economy. To get us started, I wanted to focus on what really is ‘”the science of service systems,” which is a term that most of my clients are not familiar with. Jim highlighted the shift from automating work in agriculture and manufacturing to a more service-oriented approach to knowledge work in the future:
You can think of business-to-business service; analytics; software-related service. Most people have the misconception that the service economy is dominated by low-value jobs, and in fact the low-value jobs, just like in agriculture or the manufacturing, are being largely automated out of existence (e.g., retail checkout) except for a few, and most of the growth is in the high-value service economy, and that includes, you know, government, healthcare, education, business service, and so forth. … If we want to get better at service innovation, then we’re going to have to approach it scientifically.
In the service economy, the new science of service systems impacts how a company competes, cooperates, learns, and improves. Most organizations fail, but some do not and that is interesting to study. Equally interesting is the societal context of these organizations, and what defines progress and improving quality-of-life in cities around the world. The study of service systems provides insights into why organizations fail and succeed, and how cities and regions, in spite of this organizational turnover, can improve innovativeness, equity, sustainability, and resiliency generation over generation. Not surprisingly, smarter cities and smarter universities are key types of service systems, along with smarter businesses and smarter families as service systems.
One of the key requirements is developing what IDEO’s CEO, Tim Brown, originally called T-Shaped* individuals, who are deep in a particular discipline but have broad communication skills across many different disciplines and systems. (Brown summarized the T-shaped interview in an interview with XX: Brown summarized the T-shaped individual: The vertical stroke of the “T” is a depth of skill that allows them to contribute to the creative process. That can be from any number of different fields: an industrial designer, an architect, a social scientist, a business specialist or a mechanical engineer. The horizontal stroke of the “T” is the disposition for collaboration across disciplines. It is composed of two things. First, empathy. It’s important because it allows people to imagine the problem from another perspective: To stand in somebody else’s shoes. Second, they tend to get very enthusiastic about other people’s disciplines, to the point that they may actually start to practice them. T-shaped people have both depth and breadth in their skills.)
As Spohrer stated, “you can take specialization too far, and if you specialize in one competence, either as an individual or as a city, and that one thing is disrupted – if you don’t have the breadth, you can’t be adaptive to the new opportunities.” Spohrer highlighted the importance of these individuals to our future success. Even corporations who have historically been thought of as manufacturers need to adopt this approach and think about service.
In the old days, Rolls Royce would sell an airline a jet engine, and the airline would use that jet engine, and that was a typical, you know, manufacturing company making a sale to a customer—an airline. These days, however, Rolls Royce is able to create more value by leasing the jet engines to the airlines. So, Rolls Royce has a command center where they can see all the jet engines—what altitude they’re flying at; how much fuel they’re using; whether there’s any anomalous vibration. According to Jim,
This shift from selling products to selling service & solutions goes along with IBM’s notion of a smarter planet, customers refer to buy outcomes and solution, not things. A customer really wants a 1/4” hole (outcome), not a 1/4” drill (product). With these smarter service systems that configure products to create service outcomes —you look how the customer is using your product(s), and offer more services, maintenance, support, help for the customer. You leverage the information you have about how other customers use it, you leverage information you have about how other customers want to make it better.
Spohrer points out that in our more instrumented, interconnected, and intelligent – smarter planet, “It doesn’t make sense to just sell the product and lose connection with the customer.” Therefore, it is imperative to develop a long-lasting relationship with the customer. Companies want to ”maintain information flows coming from the product, so that you can offer services to help the customer get more value from that product.”
Certainly, IBM knows a bit about transforming an organization from a purely product-oriented entity to a service-oriented powerhouse. In the 1990s, IBM made a conscious decision to focus on the IT services business and the embrace of the Internet, both of which probably saved the company. The challenge today, however, is that customers demand different types of services, such as teach me and I will it DIY (do it yourself); or “outsource” it and just create the right checks and balances to ensure a positive return. This entails really understanding the customer more scientifically, and understanding what opportunities there are to co-create value with the customer.
We also talked about how anything can be automated and Jim recommended reading Erik Brynjolfsson at MIT who has written some great material about how automation is impacting all types of jobs – even the knowledge-intensive jobs. And when services get automated, labor will have to move onto another task or project. This is why have T-shaped individuals are so important. They have to be adaptive and flexible to take on new work. This requires the employee to embrace lifelong learning to keep up with the rapid evolution of technology. (One of the reasons I really enjoyed talking to Jim is that he too is clearly a lifelong learner. He confirmed this at the end of his interview saying “I’m a voracious reader, so I try to use my Kindle Fire and download may eBooks. I downloaded three before my last trip a week ago, that I looked over on the flight.”)
Spohrer focused on the driverless car, something that has been in the press recently due to Google’s development in this area, as an example of a new technology impacting how we work and live. So, if these vehicles are safer due to better reaction time, Jim asks, “How will that impact the insurance industry?”. If you are being driven by a robot to work, your can be more productive along the way. Other industries from building construction, to product manufacturing to education will change. Spohrer mentioned innovations, such as 3D printing and Online Learning (another passion of mine) to “individuals and institutions need to become more adaptive to the opportunities as technology works its way through these different type of service systems, as we would say from a service science perspective.”
We then focused the conversation on education. He pointed out that universities have three missions:
- Mission 1: Knowledge transfer, which is teaching, and that’s being really disrupted more and more by online education and new business models.
- Mission 2: Knowledge creation, which is basically research.
- Mission 3:, which rarely gets discussed, ‘applying knowledge to create value” – think start-up companies. Universities need to be thought of as incubators for entrepreneurs. Spohrer mentioned the University of Utah has been a leader in terms of startups and regional economic value being created from startups, surprisingly rated #1 in the US for two years in a row, ahead of MIT, Stanford and others.
(Note: There has always been a lot written about Stanford University’s close relationship to Silicon Valley, but lately, my local press has questioned whether the university is too motivated by this business relationship vs. giving students an education. In fact, the University conducted a research study on this last year. See Ken Auletta’s New Yorker article that focuses on Stanford University’s close relationship to Silicon Valley)
There is a big difference between a tobacco compny funding research to “prove” that smoking is healthy, and a company lending its employees to guest lecture and teach at a university about solving real-world problems, or supervising student team working on real-world grand challenge technical and social problems that society is experiencing. We have to get smarter about thinking about the triple helix – academic, industry, government collaboration to solve grand challenges that can improve quality-of-life in cities worldwide.
The explosion of online learning will increase student enrollment and decrease the cost of knowledge transfer. Spohrer believes this will also lead to an increase in faculty time spent on the research and innovation mission of universities, and in applying knowledge to create value the entrepreneurship mission of universities. As a result there will be more focus on entrepreneurship and incubators and regional innovation at the university level. As a result, there will be more partnerships formed amongst Universities, Governments, and Corporations. This was one of the key items cited in IBM’s recent 2012 CEO Study, which mentioned the importance of establishing new types partnerships. (This report is a must read!). IBM plays the role of a scale-up partner in these relationships, where an innovation is created in one region, and then scaled-up for other parts of the world.
Jim provided some guidance on how governments and educational institutions can work together to accelerate the growth of the service economy:
First of all one needs to appreciate the growth of service economy. It is a reflection of how well we have learned to use technology to improve labor productivity in agriculture and manufacturing. As a result there is growth of people and organizations augmented by technology that interact to co-create value with others… Technology advances also mean a growth of self-service, where people have advanced technology to do things without interacting directly with other people (ATMs, check-in kiosks, on-line stores, etc.) so organizations can use customer-labor to replace employee-labor, which improves labor productivity in the traditional service sector of the economy. Education, health, and government will soon be impacted by self-service technologies as well.
All the regions in the world need to figure out policies that improve innovativeness, equity, sustainability, and resiliency generation after generation. It is progress that improves quality-of-life. This is what IBM calls smarter planet, smarter cities, smarter universities, and smarter education/people. In a single statement, government, academia, business, and the social sector need to focus on transforming universities to create more start-ups that improve local quality-of-life, and then learn to partner to scale those innovations globally. Knowledge in action to improve quality-of-life in smarter cities and benefit people. Service is often defined as the application of knowledge for the benefit of others. Service is a good thing, and service science creation more service innovations.
One example, Spohrer shared was the Linnaeus University in Vӓxjӧ, Sweden, a place few have heard of, unless you know a lot about IKEA. That’s where the company was founded. Vӓxjӧ, Sweden does a great job of doing startups around wood products and wood energy thanks to IKEA, who invests in university and partners with the local government in regional innovation associated with wood products. As a result, the town has one of the greenest cities in Europe, because they use renewable wood chips for both heating during the winter and cooling during the summer.
Obviously, location is important – read Richard Florida “Who’s Your City” for example. In Arizona, for example, they focus on border security related issues. This regional focus, however, benefits from a strong understanding of science of service systems, especially because technology changes so fast, thus requiring new skills and resources. IBM Service Science Initiative works to scientifically understand these systems: How they change over time, how certain investments impact outcome, etc. Standards for measuring these service system improvements is still a challenge; however, progress is being made in this area especially due to some of the work by Stephen Ezell, who focuses on Information, Science and Technology policy and Manufacturing and Service issues at the Innovation Foundation (ITIF) and a researcher who has written extensively about the innovation economy and innovation measurement. Spohrer states that:
From a service science perspective, though, you don’t want to just be good at innovation. You know, obviously, if you look at service systems, there are productivity measures, quality measures, compliance measures, regulatory measures, and innovativeness measures. But in the broader picture, you want to balance four types of measures that matter to long-term quality-of-life: innovativeness, equity, sustainability, and resiliency.
Due to IBM’s international presence, it’s involved in service innovation and delivery projects around the world. Jim’s organization works with about 5,000 universities worldwide, ensuring universities have the opportunity to integrate this into their curriculum. IBM has a database of all these schools and a scorecard that in its simplest form, evaluates each school by six R’s:
1. Research—Collaboration in areas of mutual interest and value
2. Readiness—Building the skills pipeline
3. Recruiting—Acquiring top talent
4. Revenue—The university as a complex enterprise
5. Responsibility—Community service and access to IBM’s expertise/resources
6. Regions—Regional innovation ecosystems–incubators, entrepreneurship, jobs
Source for the above
Listen to more about the 6 Rs
IBM’s The Smarter planet Initiative involves building more intelligence transportation systems, water systems, food and manufacturing systems, energy systems, etc. Smarter building is a big topic area at IBM. We also have to have smarter commerce, retail, hospitality, finance, healthcare, education; and smarter governance at the city, state, and national level which includes security systems. We’ve got some amazing things going on the University of Memphis and the City of Memphis around reducing crime.
Part of our discussion focused on one of IBM’s technological phenomenon, Watson, which outscored the world’s champion in the game show Jeopardy—television game show. It also engaged in and was part of a victorious college bowl type of competition with certain schools like MIT, Stanford, and Harvard. However, now, Watson is having an impact on healthcare. IBM works with WellPoint, the nation’s largest publicly traded health insurer based on enrollment to place the medical records of 34+ MM people at the fingertips of doctors and nurses, so that they can provide the medical assistance faster and more accurately. “It will integrate Watson’s lightning speed and deep a health care database into its existing patient information, helping it choose among treatment options and medicines. IBM says the computer can then sift through it all and answer a question in moments, providing several possible diagnoses or treatments, ranked in order of the computer’s confidence, along with the basis for its answer.” (Huffington Post)
As Jim points out, these are exciting times for the service economy.
If we can figure out how to make the systems smarter, if we can think about them as service systems that are systems of service systems that can improve quality of life, if we can figure out the ways to invest to improve innovativeness, equity, sustainability, and resiliency year over year, you know, then maybe, you know, we’ll be approaching the grand challenge we have of what’s the Moore’s Law for service systems year over year, just like we’ve improved technological systems, computing systems, year over year. The great thing about science is, every time you answer a question you get ten new questions. So, as our frontiers become more and more open, There’s no end to the number of interesting research questions that are coming out, opening up new avenues for research, new avenues for startup companies, new opportunities for different regions around the world. So, it’s definitely an exciting time.
There are also a lot of opportunities related to making cities smarter. More than 50% of the world population now lives in cities, and the percentage is increasing. Energy for transportation and buildings, water and material recycling are just some of the areas of great opportunity. Using technology to improve self-service and using customers as co-creators of value is a huge opportunity. IBM is also making a big push in Big Data and Social Media. Some the big opportunities in the service economy late with Big Data Analytics and Social Media, two of areas that are of particular interest to me. It has made over 100 acquisitions in the last year (there’s even a Wikipedia page dedicated to their M&A activity). IBM is giving away these tools to universities and helping cities make their data available for free online at cityforward.org. When Jim talks you can hear the enthusiasm and excitement in his voice:
The analogy (for the future) in my head is, you know, you think about the pioneers going West who loaded up their wagons with, you know, maybe a saw and a hammer and some basic tools, and they would go off into the wilderness and set up their homesteads, because they have the right tools to build, you know, a family farm or whatever.”
One thing that has always struck me about IBM is the freedom it gives employees to share knowledge. In the past, I have spoken about IBM’s amazing social media policy letting any employee have their own professional blog or a twitter account. Along these lines, Jim described and stressed the importance of “technical eminence,’” which is about bout not just wanting people just to be famous inside of IBM for the work they do. “We want them to be famous outside of the company.” Jim cited the recent IBM 2012 CEO Study and reinforced the benefits of openness. He also recommended Henry Chesbrough recent book Open Services Innovation.
I have worked closely with probably 10 of the top technology companies in the world, and few of them encourage their employees to this degree to go out on the web and share their knowledge: The shared cultural information. Spohrer, however, highlights that this is changing and that organizations are becoming better at sharing information and encouraging openness. He stresses the importance of leaders having humility, which is something IBM learned from almost going out of business in the 1990s.
One of the biggest corporate changes Spohrer cites is companies’ willingness to invest in their future. It is identifying and focusing less on routine tasks, which enables them to focus their workforce on the tomorrow’s products and services. This requires T-shaped people, however, who can adapt to change and welcome new challenges. He cites the Chinese company, The Broad Group, that is able to build 30-floor buildings in 15 days. (see YouTube video of this). This requires a resilient type of approach — resilient to innovation. If a new innovation comes along, companies need to be nimble and quickly incorporate it into their processes.
This requires organizational structures and technological infrastructures to be very modular and adaptive. To prepare for tomorrow’s knowledge and service economy, C-level and front-line works need to build modular and adaptive organizational structures and technological infrastructures. Geoffrey Moore’s book Escape Velocity provides good practical insights, and IBM is one of the examples highlighted in the book. As learning accelerates, most of the opportunities are in the future; so we have to learn how to escape the pull of the past to innovate better. Service science provides the theory for service systems learning, and the book “Escape Velocity” nicely captures the practical implications.
All organizations will need improved relationships with universities (student competitions, linkages to university based start-up, life long learning and alumni activities, etc.). They will also have to factor in and prepare for the need for constantly using more technology innovation, and up-skilling their talent year over year. “Doing more with less” is the right mantra and business discipline to master year over year. This means using technology to both improve productivity and create new work opportunities in balance.
I thoroughly enjoyed my interview with Jim. He is a teacher, a practitioner and someone who truly is committed to sharing his knowledge and experience. I hope to have the opportunity to talk to him again soon.
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Thank you Nation!