ICT as Platform for a New Economy: Future Horizons for Canadian Innovation Policy

1. ICT as Platform for a New Economy: Future Horizons for Canadian Innovation Policy Foresight Synergy Network Telfer School, University of Ottawa Arthur J. Cordell May 14, 2009

2. Profound Technological Innovation is Transformative • Steam Engine • Started First industrial Revolution – Mechanized factory-based mass production • Railroad, Postal and Telegraph communications • Changed the way goods and services were produced and distributed as well as the mobility of people, creating the first national economies • Electricity • Propelled the growth of industrialized economies by the enhancement of production capacity and productivity and the proliferation of a vast array of household goods and services • Internet and ICT Networks • Alters market structure and industrial organizations, similar to the previous impact of railways and electricity

3. Transformative technologies are often associated with General Purpose Technologies • GPTs transform because they act as a platform for new innovations of all types: product and process. • Innovation is a new or significantly improved product (either a good or service), or process, a new marketing method, a new organizational method, or new workplace organization. • Innovations are taking place all the time but the GPT provides a new platform for a new range of innovations.

4. General Purpose Technologies: Fundamental for Transformation • General purpose technologies (GPTs) are key technologies which have economy-wide application and drive profound economy-wide transformation, over a long period of time • Induce major changes to society’s economic and social structure • The organization of work, management of firms • Skill requirements • Location and concentration of industry • Supporting infrastructure Lipsey, Carlaw & Bekar, Economic Transformations: General Purpose Technologies and Long Term Economic Growth, Oxford University Press, 2005

5. GPTs enable • Rather than offering complete solutions GPTs enable by opening up new opportunities, new applications, new process and product innovations. • e.g. Productivity gains associated with electricity in manufacturing were not limited to reduced energy costs. The new energy source led to more efficient factory layout and design. • In the economy, as electricity became embedded, over-all output changed. Over-all inputs changed. Productivity grew.

6. GPTs are transformative • The real impact of the GPT comes when the entire economy delivers a new bundle of goods and services. • Both inputs and outputs have dramatically changed as the new technologies become embedded into them. • Interaction between technology-rich inputs and outputs a signal characteristic of a GPT. • A case of change leading to change. • Change is so great, the bundle of goods and services so different, that conventional measurement unable to capture the true magnitude of the transformation.

7. GPTs are transformative (2) • Difficult to compare one economic stage with another. • Time period A (with one basket of goods and services) with time period B (with a different basket of goods and services). • The classic case of “comparing apples and oranges.” • Pay-back is difficult to measure because the over-all change to the economy is so profound.

8. GPTs are transformative (3) • A new GPT may decrease productivity in the short term before increasing it over the longer term. • Because………….. • Obsolescence of old technologies and skills • Learning curve and associated learning costs. • Time required for development of new infrastructure • Labour readjustment, causing temporary unemployment. • Initial inability to exploit the benefits of the new technology is known as the Solow Paradox (I see computers everywhere but increased productivity nowhere.)

9. GPTs in the Modern Era • Steam powered technology – key technology of the First Industrial Revolution • Electricity and Electrification – key technology of the Second Industrial Revolution • The Internal Combustion Engine – key technology of the modern transportation system and distributed power source • Information and Communications Technologies (ICTs) – • Key technology of the modern, connected global economy - • The New Electricity?

10. ICTs are GPTs: The New Electricity? • ICTs are transformative general purpose technologies with economy-wide applications: impacts not restricted to just one high tech sector • Useful to compare electricity and ICTs • Respective positions on their applications curves • ICTs are today where electricity was in 1920 + or – • Lessons to be drawn from this analogy Carlaw, Lipsey and Webb, The Past, Present and Future of the ICT Revolution, Final Report, March 27, 2007 . . . driving profound, economy-wide, transformation and providing the communication infrastructure of the global economy

11. Electricity analogy • When did electricity move from foreground to background? • When did it become “plug and play”? • When did it become transparent to the user? • When did new applications appear that assumed that electricity would be present? • When were standards developed so that applications could run anywhere in a jurisdiction. A toaster can be plugged in anywhere in Canada or US and it will work. Standardized plugs and electrical currents. National electrical grids. • When did electricity move from finicky technology to a commodity?

12. ICTs and Economic Growth • It’s not just about how the ICT sector has grown • It’s about how ICTs have stimulated productivity, trade and investment in all sectors, thus transforming the nature of the economy • ICTs as an enabling and transformative General Purpose Technology: a platform for innovation throughout economy and society.

13. Information and Communications Technologies: Pervasive Only 1% of all chips go into computers – most go into other equipment such as cars, airplanes, mfg machinery, etc US Dept of Commerce “Digital Economy” … changing how we live, work and play

14. ICTs Drive Business Investments • Not about technology alone: rather about using information as strategic input for operations. Not about the technology alone: it’s what you do with it. • Investments in networks and infrastructure, creating new business models • Ford Motor Company built its own fibre network to provide a number of functions: from production to supply chains to marketing and sales • Fedex handles 3 million tracking request each day. 2.5 million customers connect online each day. “…information about the package is as important as the package itself.” • Wal-Mart • Data provides a core competitive advantage - captures all the day's sales and product data across its global operations on an hourly basis – Over $250 Billion in sales per year -$68 million per day – almost $3M per hour • Largest world wide non-carrier telecom enterprise, and 5th biggest TV broadcaster . . . And leads to organizational innovations

15. The Internet: A Primary Driver for Innovation The Internet is: • a universal platform for communication, collaboration, innovation, creativity and economic opportunity • a catalyst for closer integration of the global economy • an engine for research and innovation • fostering new types of market-based entrepreneurship • allowing people outside the boundaries of traditional institutions to join groups that collaborate in the production of content, services and goods

16. Apple Google Toyota GE Microsoft Tata group Nintendo Proctor & Gamble Sony Nokia Amazon IBM RIM BMW Internet and ICT Firms Lead in Innovation The World’s Top 14 Most Innovative Companies Source: BUSINESSWEEK Magazine, The World’s 50 Most Innovative Companies, April 28, 2008

17. ICT leads to new companies, new industries, new ways of doing business . . . Web 2.0 “Wider participation in creating, distributing, accessing and using digital content is being driven by rapidly diffusing broadband access. . .” (Participative Web and User Created Content, OECD 2007)

18. A Vision and Prediction for the Internet Economy “A billion people interacting with a million e-businesses, with a trillion intelligent devices interconnected.” Lou Gerstner, ex-CEO IBM, 1995

19. The innovations will continue: • Advanced wireless applications • Access to anything, anytime, anywhere • Sensor-based networks • Beyond RFID, reading temperature, sound, vibration, pressure . . . • Objects networked together through an “Internet of Things”

20. Innovations in an ICT Enabled Economy AIRLINE ADDS CUSTOMER-RECOGNITION TECHNOLOGY • American Airlines customers who call for flight information will get it faster because of speech-recognition technology. • The "Remember Me" system will recognize phone numbers and greet customers by name and pass along flight information.

21. Innovations in an ICT Enabled Economy AIRLINE INTRODUCES MOBILE BOARDING PASSES • American Airlines sends mobile boarding passes to a traveler’s cell phone or PDA. • The new system e-mails a two-dimensional barcode to a traveler’s cell phone or PDA. When the traveler gets to the airport the phone is scanned instead of a regular boarding pass. The new system does not eliminate the paper option, as travelers who would still like to receive a paper boarding pass may do so.

22. Innovations . . . WIRED SCHOOL BUSES BECOME ROLLING CLASSROOMS • The project, the Aspirnaut Initiative, gives some high-performing students laptops or video iPods which provides online courses and educational videos during their long bus rides to and from rural schools -- a round trip that often starts before dawn and ends after dark COMPUTERIZED HITCH-HIKING • Soon you may no longer need to stick out your thumb to catch a ride. Instead, you may get one by tapping your fingers on your iPhone. A new iPhone application will let drivers and prospective passengers connect and share rides. (note there are currently over 14,000 suggested applications being evaluated for iPhone)

23. Innovations . . . DIGITAL ADS ON BUSES • Screens Target Ads For Specific Neighborhoods • New York's transit agency is testing digital advertising screens on the sides of buses. The screens can target ads for specific neighborhoods. The ads could even advertise coffee in the morning, and beer after work. "These signs are bright and unavoidable and will enable advertisers to target mass audiences by time of day, block, zip-code, demography and ethnicity."

24. Innovations . . . GOOGLE HELPS PEOPLE NAVIGATE PUBLIC TRANSIT • In New York City, the Google Transit tool includes: subway stops, bus routes and commuter trains. • The Google Transit system operates like Google Maps. The user types in a departure point and destination, and gets written directions and a map of how to get there.

25. Innovations . . . LICENCE SCANS CATCH LAW BREAKERS • One out of every 60 cars on the road is stolen, uninsured, or belongs to a suspended driver. "Licence-plate technology." will get these cars off the road • Police vehicles with cameras constantly scan licence plates, as many as 3,000 an hour. The plate numbers go to an onboard computer that sounds an alarm and stores a picture of the car if it gets a hit. • Two cameras operate: one forward and one sideways. Forward scans all approaching plates. The other scans the rear plate in the right-hand lane, or along the curb. The patrol car can drive through a parking lot and capture all plates in a matter of minutes

26. Innovations . . . VOICE-OPERATED BADGES FOR NURSES • Voice-operated badges give busy nurses help in patient care. Kingston General Hospital equips nurses with hands-free communicators revolutionize patient care. • Simple spoken commands can be given while nurses are tending to patients or moving around the unit. Allows them to talk to each other, page doctors, summon help, make and receive phone calls, locate equipment and even connect with some life-saving monitors. • "We have to use technology to overcome our challenges,…..in the future there will be more patients and fewer nurses. We need to change the way we do things, embrace technology, and do it all soon."

27. Roles for Governments • 1. Ensuring orderly implementation • Historically, governments have played a major role in ensuring the orderly implementation of broad, transformative technologies (e.g. railroads, electricity, the telephone and the automobile). • “To say that governments and their law enforcers should stay out of cyberspace is as naïve as saying that they should stay out of city centres…The Internet may be the cleverest infrastructure that the world has ever known, but it is not a world apart.” • “For the Internet to achieve its maximum social and political potential, there will have to be agreed upon and effective ‘rules of the road’, both nationally and globally.” • New Scientist, May 8, 1998

28. Roles for Governments • 2. Building a Trust Environment • ". . commerce dies the moment, and is sick in the degree in which men cannot trust each other". Henry Ward Beecher (1813 - 1887) US clergyman, abolitionist In "Webster's Electronic Quotebase," ed. Keith Mohler, 1994. • authenticate and authorize the parties to a transaction • protect privacy of personal and corporate information • ensure that networks operate reliably, on a 24/7/365 basis • ensure that electronic transactions have the same force in law as paper-based ones

29. Roles for Governments 3. Ensuring Trust and Confidence • It is clear that the cyber-infrastructure that is put in place has to be one that carries with it, at a minimum, the same degree of trust and confidence as the current infrastructure (physical, legal, institutional) developed for the industrial economy.