The economics and attractiveness of Smarter Cities

After a relaxing break over the festive season, I’m finally back up to speed with working life. It looks like an exciting year ahead; we’ve expanded our “Smarter Cities” team in the UK, and are working with some interesting clients and partners.

I met this week with the Bartlett Institute for the Built Environment at University College, London. We discussed how cities can make themselves “more attractive” places to live and work – a common priority of cities in the process of regeneration. A mixture of factors are involved such as lighting, education, the vitality of business and retail environments, transport, public safety and architecture. Technology isn’t central – but it’s going to be interesting to me as a technologist to see how it can play a role.

I’ve also been looking at how investment cases for Smarter Cities projects and transformations are constructed. A business partner commented recently that a good number – perhaps a majority – of Smarter Cities initiatives have been pilot projects rather than full-scale implementations; or have been part-funded by Government or EU Research programmes; or both.

There are exceptions, such as the London Congestion Charge scheme; that has an interesting mix of short-term return (it generates revenues that cover both investment and operating costs); longer-term economic benefits (by reducing congestion it lowers barriers to productivity, economic growth and job creation); and improvements to the city environment – it was an enabler for pedestrianisation in some areas.

A colleague of mine told me about the healthcare trust in Durham and Darlington that helped its local council pay for pavements to be gritted. It was “common sense” that by doing so they prevented people from slipping and thereby improved wellbeing and lowered treatment costs. Not everyone agreed with the practise – and one trust governor resigned in protest, particularly as there was no model to quantify and prove the benefits. Perhaps for the same reason, the practise has now stopped, a victim of public sector spending cuts.

It’s clear that we need new models and tools to calculate the financial, social and environmental costs and impacts of “Smarter” projects, so that we can build business cases and commercial vehicles for investing sustainably in them. Some of my colleagues were involved in a project to create such a model in Manchester – you can download a report on that project here after registering; and I spoke this week to another business partner who has been developing financial models in a similar space.

The UK Smarter Cities community is eagerly awaiting a decision by the Technology Strategy Board as to whether it will approve funding for a “Future Cities” Catapult centre; I have argued that a capability to construct such financial models should be a focus for such a centre if and when it is approved. I have my fingers crossed, and am hoping to hear news soon.

Building these models will bring challenges. For example, the pollution created by traffic congestion in cities has a measurable effect reducing life expectancy (see the reports here  and here ). So congestion charge schemes such as London or Stockholm should increase life expectancy. That’s clearly a wellbeing benefit – but financially speaking, it increases the costs of supporting the city’s population as it lives longer.

If we can get the models right, though, and evolve them to be usable by different cities for different Smarter City initiatives, then we may finally see the explosion in full-scale projects that we’ve been expecting – and that we’ll need to face the financial, demographic and environmental challenges facing us.

Localism and economic regeneration in cities

Through the course of this year, I’ve spoken with stakeholders from a lot of cities in the UK about their goals for economic stimulus and regeneration. Often, those discussions start around how cities can use technology to boost economic growth, particularly for small and medium enterprise – in Sunderland, for example.

In very many cases, cities today have a focus on the “digital economy” as a source of economic growth. That’s not at all surprising given the digital economy is a significant and growing part of the UK’s GDP.

However, the digital economy is a very transferable economy; in his frankly titled 2007 paper “How Many U.S. Jobs might Be Offshorable?“, Alan Blinder of Princeton University concluded that “computer programming” was the easiest form of work to transfer from one physical location to another. So if cities want to build sustainable economic growth in the digital economy, we clearly need to think carefully about exactly what forms of “digital” activity that entails.

There are a number of ways to do that; for instance I  met a very interesting company recently, Lamasatech, who provide multi-touch screen solutions. Their technology is slick, exciting and leading edge. And whilst they do provide software, they also provide unique hardware technology. Their multi-touch surface is much more flexible and portable than other solutions I’ve seen. Access to science and leading edge manufacturing and materials are important elements of a successful digital economy.

In a similar vein, there’s a very interesting cluster of wireless technology expertise in Cambridge, epitomised by the Cambridge Wireless Network, and that encompasses science, design, engineering and technology. Some of the developments they’re working on in low-power, long-range wireless communication technologies such as the proposed “Weightless” standard could have a dramatic effect on the cost and feasibility of Smarter City and Smarter Planet solutions.

What’s particularly interesting about the Cambridge example is that it represents a self-reinforcing regional cluster; the critical mass of expertise in the region leads to innovative interactions which continually generate new value. Any other region attempting to stimulate economic growth in the same area of technology would have a significant challenge in developing to the point where it could compete against the Cambridge cluster.

Jay Bal from Warwick University wrote a very interesting paper in 2007 describing his work building online marketplaces to stimulate the formation and growth of such clusters. His West Midlands Collaborative Commerce Marketplace now drives contracts worth billions of pounds sterling every year into a cluster of small and medium enterprises in the West Midlands.

What’s key in Cambridge and in the West Midlands example is that one way or another the specific capabilities available in a particular region are being brought together in ways that create synergies. By design or by history, such regional clusters also have synergy with their physical environments, nearby academic institutions, the skills base created by the local education system, and other factors to do with “place”. In Sunderland, for example, there’s a long cultural tradition of social enterprise which will probably influence the future economic development of the city.

An interesting organisation seeking to exploit and enable these local synergies is Addiply. Addiply offer online advertising content – but they do it by enabling local businesses to sell online advertising space to other local businesses with whom they share complimentary markets and customer bases. By using advertising to create those local linkages, Addiply’s approach is one way to stimulate synergistic growth in local economies. Addiply’s CEO, Rick Waghorn, recently blogged about how he came up with the Addiply model, and how he thinks Addiply can compete against the big players such as Google Adwords by offering a more focussed value proposition.

As we go into 2012 with no let-up in sight from the tough and competitive economic environment we’ve been in for some time, I think these ideas will be crucial in shaping successful economic strategies in our cities and regions. It will be important to all of us that the cities that we live and work in use them well.

Smarter Cities need Smarter Social Enterprises

I’ve just been at a great workshop with a variety of social enterprises in Sunderland, hosted by Sustainable Enterprise Strategies (SES). The objective of the workshop was to identify ways in which social enterprises might harness new technologies to help them respond to – and exploit – the dramatic changes coming to social care and health in coming years – such as personal care budgets, Big Society, Open Public Services and GP commissioning of health services.

Mark Heskett Saddington, Director of SES, started off the day with some striking statistics about Social Enterprises – which include co-operatives, employee-owned companies, mutuals, charities and other such organisations. Mark’s team alone support 100s of traditional and social businesses in Sunderland, employing 1000s of staff, mostly from deprived, high-unemployment areas. Their combined annual turnover is in the tens of millions of pounds sterling.

Across the world, the figures are even more striking. 4 in 10 residents of the USA– the world’s flagship private enterprise economy – are members of a co-operative, including 87 million people who belong to a credit union. 13% of Sweden’s GDP and 21% of Finland’s GDP are created by social enterprises. Worldwide, social enterprises employ over 100 million people with a turnover of £1.1 trillion. That’s big business.

People in the social enterprise community are – not surprisingly – passionate in focussing on the needs of their customers, or “service users”, to whom they are often providing some form of care or support. But they’re also passionate about their business model (though not all of them would call it that).

For example, Margaret Elliot told us how she first started a co-operative in Sunderland in the 1970s, a home care provider called “Little Women”. At the time, it was born of necessity: her and some friends, all mothers, needed to work; but needed to look after pre-school children too. So they started a co-operative and ran a nursery in their office premises. More than 30 years later – and now leading an organisation that is franchising itself across the UK and that employs many hundreds of people – she described social enterprise as “a bug” that people catch. She spoke of the power of giving people ownership of the organisation that they work for; and described how it focuses organisational decision making on delivering value to the end users of services.

The changes coming to local public services, social care and health are going to create a new, transactional market in which social enterprises will need to participate, and in which they’ll need to behave in some ways more like private enterprises do today. For instance, many organisations, such as social landlords, that are currently funded by regular grants, will in future have to compete for individual service delivery transactions paid for by individual end users. That’s a dramatic change; and one that will require new processes and new infrastructures that those organisations don’t have access to today.

In a world that is “digital by default”, it’s tempting to think that existing marketplaces – such as Amazon and e-Bay – provide a model that can be emulated. But the language and models of those marketplaces tend to emphasise products and cost, not what social enterprises value – the quality of outcome for the end user of a service.

For example, if you search for branded batteries in the Amazon Marketplace, you’ll find some very, very cheap batteries which have what appear to be high review ratings. If you look a bit closer, though, there are a lot of 5 star reviews that simply state “the batteries were really cheap and arrived quickly”. There are a smaller number of 1 star reviews that warn “I only used them for a week, and then they ran out. They’re obviously fakes!”.

In social care, that sort of information simply can’t be hidden at the end of such a long trail. For all its merits and success, Amazon is clearly not a market that balances economic and social outcomes in the way that Social Enterprises will need. Of course, it was never designed to be, so that shouldn’t come as a surprise. Whilst existing online marketplaces provide rich experience we can learn from, they don’t yet provide the answer.

What I’m sure will happen is that social enterprises will co-create their own markets that strike a better balance. Early examples such as “Shop 4 Support” already exist, though the social enterprises I spoke to yesterday told me that the transaction prices in that market are currently often too high for small social enterprise service providers to bear. There will be considerable challenges along the way – dealing, for instance, with managing online identities and personal data in a way that’s appropriate for sensitive services, perhaps exploiting the initiatives announced recently by the Cabinet Office and Technology Strategy Board on personal data stores and identity.

It’s going to be a period of great change; and of great innovation in the use of technology. And, I hope, of exciting new opportunities to deliver improved outcomes for Social Enterprise.

For me, this is very much part of Smarter Cities. It may not involve instrumenting physical systems such as transportation and water; and it may not in the first place require the application of big data technologies (though I think the need for them will come); but it does represent a striking change in the way city systems will work. In particular, it’s about dramatic changes in the interactions that involve some of the people who need the most help.

But if cities can repeat Mark’s success with SES in incubating successful social enterprises creating new jobs in areas of high unemployment, it’s also an opportunity for economic growth. And whilst the focus of most of this post has been on social care, that’s far from the only sector in which social enterprises are active. Lydia’s House, for example, are a co-operative in Sunderlandwho train local employees from vulnerable backgrounds to produce artistic home furnishings with potential for export from the local economy.

In a previous post, I blogged that growing city economies whilst consuming less resources was the number one concern of city leaders today. If helping people to help themselves in local communities isn’t a resource-efficient way to create value, I don’t know what is. That sounds like the sort of Smarter City we’re looking for.

Smarter Cities: Doing More for Much Less

Most of my time this week was spent in two very interesting meetings. The first, on Monday, was with a team from the UK Technology Strategy Board shaping a proposal for a Technology Innovation Centre (TIC) focussing on “Future Cities” (the transcript of David Cameron’s announcement of the £200m TIC investment programme is here). The second, on Wednesday and Thursday, was the annual general meeting of SOCITM - the society of IT Managers in local government. I’ll come to the themes that meeting addressed shortly.

Before I do that: just over 2 years ago, I wrote a blog post inspired by the October 2008 issue of New Scientist magazine titled “The Folly of Growth”. That magazine – written in response to the 2008 financial crisis – challenged the assumption that the world’s economy could continue to grow at the rates it has historically. It’s basic point was that such growth simply could not continue based on the current level of environmental resource usage per dollar of GDP created, because there simply aren’t enough resources on the planet.

In Monday’s TSB meeting, representatives from Academia, City authorities, construction companies and technology companies all agreed that City leaders – both Council CEOs and elected Council leaders – had a single overriding priority: maintaining and growing their Cities’ economies, whilst using less resources to do so. Three years down the line from the New Scientist’s seminal magazine, that’s a real vindication of their thesis.

At the SOCITM AGM on Wednesday, Martin Reeves, CEO of Coventry City Council and the incoming president of SOLACE, the society of local government CEOs, gave a visionary plenary speech echoing similar themes.

Martin referred to the very, very challenging financial pressures facing local government (and all of public sector) that were magnified by George Osbourne’s Autumn Statement this week which predicted 100,000s more job losses in public sector.

But Martin said that the real priority was not dealing with cost pressure. He said that the real priority is to carry out a radical transformation of local public service delivery in support of the most challenging policy agenda we have ever seen.

I couldn’t have agreed more.

As well as the unprecedented financial pressures created by the realisation that we have long been underestimating and mis-managing risk on an international scale, we also face global competition between city economies to a previously unforeseen degree. More locally to the UK, GP commissioning, personal care budgets, open public services, “Big Society” and several other central government policy initiatives are forcing enormous changes into local public sector organisations.

The changing role of local government of Cities and Regions is, in my view, the most critical challenge we face today. City and Regional councils are not only the organisations concerned most urgently with the local business development and economic growth strategies that create employment; they are also challenged to deliver increasingly complex services to vulnerable, hard to reach communities at lower and lower cost, whilst working with an increasingly diverse base of suppliers and service providers to do so.

I personally believe that – properly and sensitively applied – technology can be a tremendous enabler of successful change in this context. But we are still in the very, very early days of understanding how to make that work, from the technology challenges of assuring identity in a world of open digital services to the financial and governance challenges associated with defining successful models for shared service delivery.

Trial and error is the only model for moving forwards with this agenda. Doing nothing is not an option – it will result in dying cities, following the unfortunate path taken byDetroit.

And no amount of analysis will reveal the “ideal” or “right” approach. We have never faced these challenges before, so there is no proven “blueprint” for success. We will only learn how to face them successfully by trying the best solutions that we can imagine; and constantly changing and adapting them according to the results that they deliver.

Smarter Regional Priorities in Mature European Economies

I’ve spent a lot of time in recent weeks thinking about “Smarter Regions”. Smarter Regions are similar to the “Smarter Cities” concept shared by IBM and many other organisations; but they’re different in one obvious way and one not-so-obvious way – particularly in mature economies such as those of Western Europe.

A lot of the focus in Smarter Cities is concerned with instrumenting and interconnecting physical systems – such as utilities, transport and buildings – with the intelligence represented by IT systems, especially operational control and decision support tools. Solutions based on those ideas can deliver tremendous benefits, such as the congestion charging system that IBM and our partners have implemented for Stockholm.

However, in European cities, the business cases for investing in such systems are complicated, to put it mildly. Transportation, utilities and buildings are often operated by private sector organisations subject to a plethora of contractual and franchise obligations and oversight regimes; whereas the benefits of such systems – for example, reduced environental impact of city systems, and reducing the barriers to economic and productivity growth – often relate to medium to long term goals of local government organisations. Those cities – such as Stockholm and London – that have made such investments tend to be driven by what could be called “survival” concerns. They have identified a clear and pressing threat to their city systems and economies – in these cases, severe traffic congestion limiting economic growth – that must be addressed.

Smarter Regions are similar to Smarter Cities in that they seek to exploit advances in our ability to integrate and analyse information from a rich variety of systems and sources. But they are different in two ways:

• Firstly, and obviously, whilst all cities are regions, not all regions are cities. Regions are broader, more diverse economic, geographical, political and social systems.
• Secondly, in mature economies at least, regional priorities are concerned with a different set of systems. Their priorities are often economic growth; supporting ageing populations; and reducing the cost of their administrative, financial and public service operations whilst improving the outcomes that they deliver

Examples of initiatives addressing these priorities include IBM’s work in Bolzano, Italy, providing remote home monitoring and healthcare services in sheltered accommodation; our work with Medway Youth Trust in the UK, helping them to transform youth services to a predictive, preventative model; our “Smarter Cities Challenge” project in the city of Glasgow investigating fuel poverty; the Municipal Services Cloud that IBM Research developed for the State of New York to help small councils across the State reduce costs and implement “joined-up working”; and, of course, the Cloud Computing platform that IBM and Sunderland City Council announced last week, that will be used to deliver services and capabilities to stimulate growth and innovation in the City’s economy and public services, and that I blogged about recently.

In recent years, we’ve seen terrific pressure on regional administrations in the UK driven by the overall cuts in public sector budgets. Financial pressures in the Eurozone  area create similar drivers on the continent; and in the US the rising costs to public organisations of healthcare and pension liabilities to past and current employees created by ageing populations cause huge cost pressure too.

Despite all this, global competition for private sector investment and job creation are causing regions to seek ways to invest in addressing these challenges. Slowly but surely we are learning how to build business cases to justify those investments – often based on technologies that can both reduce internal operational costs and enable improved external outcomes (see this set of examples from IBM’s customers, for example).

There’s no panacea or silver bullet here; every region is different in its economic, social, political, financial, geographic and environmental characteristics (not to mention others that I’ve forgotten). All of those have to be taken into account when constructing business cases for Smarter Regional solutions.

But I have a sense that we’ve passed a tipping point in the build-up of momentum in this area; and I think we’re going to see a lot more exciting projects and initiatives announced by Cities and Regions in Europe over the next year.

It’s a great time to be a technologist working in local government.

Building a Smarter City on the Cloud in Sunderland

It’s been a great week. IBM and Sunderland City Council jointly announced a deal we agreed recently to build a Cloud Computing platform for the City (here’s IBM’s press release, and here’s the Council’s). I was part of the team that wrote IBM’s proposal, and am now excited to be working closely with the Council to help them deliver the benefits we both envisage coming from their investment.

The press release describes several ways in which Sunderland intend to exploit the Cloud to stimulate innovation and growth in business and public services in the city. How I hope to help them do that on IBM’s part is by exploiting our experiences working with clients around the world on “Smarter City” engagements.

For example, I was lucky enough earlier this year to meet the New York Conference of Mayors and the team in IBM Research led by David Cohn and Juhnyoung Lee that delivered the “Municipal Shared Services Cloud” for City and Town Councils in the State. In that project IBM helped some very small local authorities (looking after towns with just 20,000 inhabitants, for example) to integrate data between different business systems in a very cost effective way, achieving “joined up working” cost and outcome benefits that had previously been beyond their reach. It’s that sort of experience and expertise that we hope to apply in Sunderland to help the City meet its goals as laid out in their Economic Masterplan.

I’ve already met with some of the other stakeholders in the city, such as Sustainable Enterprise Strategies, who support local social enterprises, and are building a fantastic new “container city” incubation facility from re-purposed shipping containers. We’re hoping to hold a workshop with the organisations they support very shortly.

It’s probably the most enjoyable and rewarding project I’ve worked on in many years for IBM; and Sunderland is a city with a lot of exciting plans. As The Register noted, for example, the Cloud builds on Sunderland’s recent announcement that they’ll soon be the first city in the country with complete superfast Broadband coverage.

Everyone I’ve told about the project has immediately caught the enthusiasm we have about working with Sunderland; and a quick search of “Sunderland Cloud” on Google or Twitter shows that the story is spreading like wildfire in the twittersphere too.

I’m looking forward to spending as much time as possible in the North East for the foreseeable future!

The need for technology and mathematical skills in a Smarter Planet with Open Data

In amongst all the great discussions of Smarter Water, Smarter Transportation, Open Data and other themes at this week’s Science of Smarter Cities Colloquium in IBM’s new Research Lab in Dublin, an interesting theme has emerged that’s been on my mind for some time.

Many discussions have focussed on the huge importance of processing, analysis and acting on data and information in the Smarter Planet that’s gradually emerging around us as more and more of the physical world is instrumented, interconnected and automated. Imperial College’s work on disruptive business platforms includes the new commercial opportunities – some of them highly disruptive – that this information is making possible. And McKinsey recently wrote a fascinating paper on a similar subject – the emerging “Information Economy”.

A vital consequence of this is renewed – or even wholly new – demand for the skills required to manipulate and understand information. I’m talking about mathematics, statistics and computer programming here, amongst others. Unless it’s prepared by a numerate communication expert, data is often very difficult to understand and interpret. And communication experts may also have their own agenda in determining how they prepare data. And quite simply, we need more people able to undertake that sort of work – people with mathematical and technical skills. Some of the speakers from transport organisations at the colloquium this week have spoken directly of needing more of those skills.

The problem is that in the UK, we’re not producing enough of them. Google’s Chairman Eric Schmidt recently lambasted the British Education system for not producing enough computer programmers to feed demand in the creative industries vital for economic growth; and the recent Nesta report on the UK’s computer gaming industry cited the same issue as a reason for that industry’s recent decline in the global market.

City leaders understand this; Hanna Zdanowska, the Mayor of Lodz in Poland, spoke this morning of the importance of young skilled people to city economies, particularly as european populations age. (Lodz have amazing plans for regenerating their physical infrastructure and optimising their city systems, by the way, it was a great talk).

So what can we do about this? In yesterday’s Open Data discussion, Christopher Gutteridge, who’s behind Southampton University’s Open Data programme, said that we needed to encourage more “playful coding”. I think that phrase hit the nail on the head.

Our world is at the stage where technologies that can be manipulated by any human being who learns the basics of computing programming are becoming terrifically powerful. At the same time, the information that those technologies control is the lifeblood of our economy and society. For us to educate people without giving them the ability to participate in that system is surely a terrible folly for our children and our economy.

A fellow visiting academic at the University of Warwick, Jonnie Turpie who’s the Digital Media Director of Maverick TV, introduced me recently to the Birmingham Ormiston Academy. BOA is a new school that’s intended to teach creative and digital arts by exposing young people directly to small enterprises in that industry. I think it’s a great idea, and an example of the sort of way we could teach young people the skills to exploit information and technology in a way that’s exciting, challenging – and directly builds the skills we will need for the future.

Smarter City Collaborations

I’ve been lucky enough this week to take part in the “Science of Smarter Cities” colloquium IBM has held at our new Smarter Cities Technology Centre in Dublin. The colloquium has brought together stakeholders from public sector, private sector and Universities across Europe to discuss key issues to driving Smarter City agendas forward. We’ve been discussing issues such as Open Data, the economics of social capital and Smarter City technologies.

The colloquium also coincided with the formal opening of the Technology Centre, with presentations by Richard Bruton, the Irish Minister for Jobs, Enterprise and Innovation, and John Kelly, IBM’s Senior Vice President who runs IBM Research worldwide.

Richard and John both spoke about the reason why IBM chose Dublin – out of all of the cities in the 170 countries the company operates in – as the site of the new centre. They both singled out the collaborative relationship the city of Dublin, the country of Ireland and IBM have established in recent years. Dublin is engaged in some exciting Smarter City programmes, such as the “Dublinked” open data project; and IBM has been engaged in the “Smart Bay” project in Galway with the Marine Institute of Ireland and many other partners for some time now.

I spoke with a delegate from the Marine Institute at the colloquium today about the way that they’ve successfully engaged a number of large and small organisations across public and private sector in the Smart Bay project; and created a research programme that encourages innovation in that ecosystem.

It’s a great example of something that seems to be common across many of the most innovative “Smarter City” projects – new collaborations between organisations of different sizes and types; finding new ways to deliver not just financial but social and environmental value too. I hope the colloquium this week leads to more opportunities to do that.

This week’s reading

Some great reading this week on technology, the economy, banking and smart transport … plus a little humour …

• A great article in Prospect magazine on the credit crunch, environmental issues and the possibility for a technology-enabled evolution of capitalism – it’s worth linking to the discussion on the weblog too: http://www.prospect-magazine.co.uk/article_details.php?id=10680 – a much more comprehensive view of something I suggested in a simplistic way in my recent post “Social media – a reminiscence”.
• A discussion of the applicability of a broad spectrum of Web 2.0 ideas and technology to commercial banking: http://www.banktech.com/blog/archives/2009/04/banks_need_to_b.html?cid=RSS_bt_blog
• Facebook’s launch of “virtual credits” – not a currency yet, but could be an early move in that direction: http://venturebeat.com/2009/04/03/facebook-wants-you-to-give-credit-where-credit-is-due/ and http://thefinanser.co.uk/fsclub/2009/04/facebook-testing-virtual-currency.html
• Yet another electric car network announced as a partnership between an electricity provider and a car manufacturer, in this case Renault/Nissan and ESB in Ireland – this idea seems to be taking off in the current economic and environmental climate: http://earth2tech.com/2009/04/03/renault-nissan-ireland-utility-team-up-for-electric-car-network/
• An interesting and challenging post from Information Arbitrage and the likely effectiveness of the US and UK bank bailouts: http://www.informationarbitrage.com/2009/04/bailing-out-the-bailout-or-a-plan-for-change-.html

And on a lighter note:

• The amazing “BillMyParents.com”: http://www.netbanker.com/2009/03/straight_out_of_twitter_billmyparents_launches.html and http://www.billmyparents.com/
• … and take a look at Rockwell Automation’s superb technology:

Social media – a reminiscence

Since June 2007 I’ve had an incredibly interesting job with IBM exploring the possibilities of social media and some of the other internet and related technologies that have emerged recently. I was first asked by Graham Spittle, who was then the Director of IBM’s Hursley Software Development Lab in the UK, to go and work with our customers to get a better understanding of what “Web 2.0″ meant to them, and what it meant for how they would use our products.

One of the key things I learnt was that it’s pretty impossible to get hold of what Web 2.0 “is”. I quickly started to think of it as “everything that’s been done with internet technologies since the dot.com crash”. That tallies with O’Reilly Media’s 2003 coinage of the term as the name for a conference intended to revive business interest in the internet (see Tim O’Reilly interviewed by CNNMoney.com in 2007).

In 2007, Web 2.0 was already old hat in internet circles – and is much more so now. But for many “traditional” companies it was and remains something new, intangible, exciting, scary … but also, for its own sake, often irrelevant.

Do I really mean irrelevant? Not quite … I’ll explain with my personal conclusions and predictions for “Web 2.0” …

1. “Web 2.0” is an irrelevance to businesses …

Web 2.0 is best viewed as a banner term for the collection of internet-enabled technology, commercial and social phenomena that appeared between 2003 and the present time of writing. I don’t think that timeframe will expand much further for reasons that will become clear.

That definition covers such an incredibly broad area that in total it never has and never will be of interest to anyone other than technologists of one variety or another. “Web 2.0” is not relevant to any individual business (with the possible exception of Web 2.0 consultancies) – but elements within it are highly relevant in wildly different ways to (arguably) all individuals, businesses, communities and other organisations.

For those reasons, most organisations I talk to are not interested in “Web 2.0”, and many are frankly bored by the number of people who want to talk to them about it. However, they are very engaged by the way specific developments in internet technology are affecting their businesses and their industries.

2. … but does describe a period in history during which individuals, businesses, governments and social organisations harnessed an incredible variety of new technologies …

Depending on the client I’m working with and the area of their business we’re discussing, I’ll talk specifically with them about communicating intimately with their clients through social media, using Enterprise Mashup technology to create rapid, content-driven applications,  using community effects to create and commercialise new interactions in their ecosystem, using “Web-Oriented Architecture” to deliver scalable online content and services in an easy-to-consume form … etcetera. Our clients are exploring all of those possibilities – sometimes under the banner of Web 2.0, sometimes not.

For example, mobile telephone service providers maintain enormously expensive communications infrastructures that enable us to use our increasingly capable handsets to access a multitude of third-party applications and content in ways that do not necessarily deliver significant extra revenue to them. Conversely, they have a set of capabilities not easily replicable in an integrated manner elsewhere in the online world: they identify us through our SIM card; they bill us through our accounts with them, and the financial information we trust them with; they locate us through the cell network; and they can identify our friends, family and contacts through the entries in our address books. As a result, these organisations are investing huge energy exploring the potential of multi-platform social applications and gadgets that use these capabilities to create revenue-generating traffic through network subscriptions, data bandwidth usage, application licenses or transaction fees.

3. … and represents an ongoing fundamental change in the social and economic organisation of the world …

I really believe that the world is changing through this process. Web 2.0 didn’t start this – the Grameen bank, for example, have been harnessing (and creating) these ideas to enable microfinance to benefit the developing world since 1997. But the wave of activity and technology development driven by the evolution of the internet and represented by Web 2.0 has in many cases demolished the cost and difficulty involved in connecting people around the world with complimentary interests, and enabling them to interact with each other. Some examples:

• Microfinance (e.g. Grameen, Kiva) – greatly increasing the ability of millions of people with not much to give to chose exactly how their donations are used to directly benefit those in need.
• Online marketplaces (e.g. eBay, Amazon) – greatly increasingly the fluidity with which resources such as second hand goods are exchanged for cash, bartered, or given freely.
• Collaborative business models (e.g. Threadless, Zopa, Zuda Comics) – directly connecting anyone with the ability to create clothing, music, video entertainment, comic art, handmade goods and many other products, with the people interested in consuming them, wherever they are, and no matter how few or many they be.

I’m passionate about this aspect of Web 2.0. I blogged recently about the combined impact of the current economic crisis and the environmental challenges we face, inspired by an excellent special issue of the New Scientist magazine. The implication is that we are in great need of these new models of economic interaction and resource optimisation to support a growing population with rising expectations on a finite planet.

4 … enabling individuals to interact without the aid of traditional organisations …

Consider peer-to-peer lending. Zopa in the UK have shown tremendous growth in recent months (see my previous blogpost). Zopa provide introduction, vetting and bad-debt recovery services to individuals wishing to enter into agreements to borrow from or lend money to each other. Internet technologies make the introduction part incredibly cheap.

That simple model replaces part of business of traditional Retail Banks or Building Societies, wherebv product design, sales & marketing, branches, call centres and a huge number of other operations are used to persuade and enable savers to deposit funds and lenders to request them on a sufficient scale that a regular operating margin and sustainable business model can be created.

Is it a huge business? Not yet. But is it interesting and growing fast? Definitely. Read this great post from the Financial Services Club’s blog for a balanced picture.

Online marketplaces enable a similar model: small traders using them can leverage a global infrastructure to reach markets they couldn’t dream of a few years ago; and by using the brand and reach of the parent marketplace, they don’t need to be experts in online marketing to do so.

5 … creating challenges and opportunities “traditional” organisations to reinvent themselves – or just evolve.

Newspapers. Record companies. Book sellers. Filmmakers. Software companies. Electronics retailers. Banks. Mobile telephone service providers. It’s easy to find news and opinion pieces every day citing the struggle these organisations are facing as the internet evolves – and the opportunities they are presented with.

And for sure, some of this is serious. In Tribes, Seth Godin wrote a great description of the way cheap music recording, production and distribution technology has undermined every aspect of the traditional business model of a music company. As a result, many traditional companies are struggling to get to grips with the new world, whilst newcomers such as iTunes flourish.

In other areas, the picture is less clear. Traditional media organisations such as broadcasters and newspaper publishers have seen advertising revenues plummet in their traditional channels as advertising spend shifts online – these revenues are the basis of their business models.  But they are – faster or slower, for better or worse – evolving their business models to embrace and commercialise the online world. The Daily Telegraph, for example, made great use of Twitter in covering the G20 summit.

Am I predicting imminent collapse for vast numbers of businesses? Not driven by the internet, no (current economic conditions are a different matter). But do I expect that in 5 and 10 years time we’ll see not just a different set of companies dominating the industries we recognise today, but in some cases a completely different set of industries themselves? Absolutely. Are Google today a dominant technology company, or a dominant media company? How do you breakdown a world in which the same digital content is accessible on your TV, PC and mobile and embedded in your MySpace page? We’re about to find out.

Moving On

As I’m moving on from my current role, I have a sense that the world is (finally) moving on from Web 2.0. Unlike Service-Oriented Architecture, the last sweeping trend to affect the technology world, I don’t think Web 2.0 will stick around – unlike SOA, it doesn’t have a cohesive, innate structure. And I don’t think it will be replaced by “Web 3.0” either – the internet was only created once, it will only ever cause one fundamental economic crash caused by the hype following that creation, and it will only ever emerge from that crash to be called “Web 2.0” once.

From here, a whole plethora of internet-enabled technologies, ideas, applications and models of commercial or social interaction will evolve along their own separate paths. The generation of people who grew up with a globally connected internet as a completely normal part of the everyday world are already inventing new forms of communication at a faster rate that ever seen before on this planet, and all of them, and those who seek to exploit them, will suffer their own individual trials and tribulations.

What I’ve learnt is that what’s interesting to me is not so much the technology, but the individual and organisational behaviours that affect its adoption and usage. It’s those thoughts that I’ll take into my new role, which whilst it won’t be focussed around Web 2.0 or any of its elements, will doubtless involve them – and many other new and exciting developments – in some way. More about that later.