Coping with the new reality: Changeist's Scott Smith on disruptive technology and innovation in emerging markets, in this first instalment of his new monthly column, Discontinuities.
JUST two days after Barack Obama’s historic election as US president in 2008, IBM chief Sam Palmisano was among the first in line for infrastructure money in the anticipated flood of government cash that would follow Obama’s January 2009 inauguration. The incoming administration was promising green jobs and fresh infrastructure as a way to get America’s economy off the mat after it had been slammed by the collapse of Wall Street, jumpstarting an economic turnaround and laying down a public works legacy for the next generation. Obama’s anticipated opening of the spending tap had infrastructure bosses salivating.
Palmisano and IBM had read the economic signs, and were eager to articulate a vision for those funds and the supposed technological evolution that would accompany them globally. They had also seen the technology trend lines starting to lean in the right direction, the falling costs of connectivity meeting increased penetration of lightweight technology around the world. Palmisano’s November 2008 speech at the Council on Foreign Relations signaled the higher order implications of strategy beyond technology, kicking off Big Blue’s “Smarter Planet” push -- an initiative designed to package the company’s expertise in large scale IT and communication infrastructure into a massive technology and service play. The move was designed to tap future demand for upgrades of aging public infrastructure in developed markets like the US and Europe. More importantly, it was also meant to exploit the forecasted boom in growth of emerging market megacities. Interestingly, Palmisano’s follow-up speech in January 2010 took place at Chatham House in London. His rhetoric matched Obama’s in its loftiness: “The importance of this moment, I believe, is that the key precondition for real change now exists: People want it. But this moment will not last forever,” he told the audience.
IBM wasn’t alone in its appetite for the potential money to be made upgrading and “futurising” cities, particularly the often-dysfunctional megacities that now house over half the planet’s population. These megacities are expected to hold 70 per cent of world population by 2050. Having seen global network infrastructure spending slow as businesses and consumer homes in the developed world wired themselves up for the Internet, networking giant Cisco had been pushing its Connected Urban Development strategy for several years. It also had a plan to sell city-scale shipments of technology, put in place by armies of consultants and systems integrators. Think of it as re-engineering the city, in the same way that the tech giants had done so lucratively with corporations in the previous decade.
In the past three years, HP, Siemens and a host of other global technology companies — including several from emerging markets themselves, such as WEG of Brazil and Huawei of China — have also jumped into the smart cities game, offering myriad, generally top down approaches to fixing all that is perceived to be broken with the big systems in urban environments . This is particularly the case in emerging markets where megacities are growing fastest and the ability to scale infrastructure is at its weakest. Health care delivery, traffic management, communications infrastructure, energy systems, water and sanitation and an increasingly long list of other critical urban infrastructure are being targeted by what are pitched as faster, better, more wired, more intelligent pieces of software and hardware. The goal of these gargantuan efforts is to optimize and centralize command and take greater control of the city’s moving parts — think of it as a Sim City-like panoptic; running the complex infrastructure operations of a New York City or Rio from a command center glued together by consultants, coders and plumbers.
A funny thing happened on the way to this vision. As the global recession lingered, central government and big city coffers drained faster than had been forecasted, siphoning off funds originally intended to execute these grand strategies. Meanwhile, grassroots innovation using both open and commercial off-the-shelf technology has gained momentum. The former caused many infrastructure projects to slow or grind to a halt — the much-maligned US stimulus package of 2009, for example — or get much, much smaller and less ambitious. But the latter boom around technologies such as mobile phones, open source software and social networks fueled the next tech bubble in the West. It also empowered a growing middle class within emerging economies, as they find easier access to communication, services and each other.
In the bigger picture, the spread of technologies such as mobile phones is seen as being one of the most important contributors to current and future GDP growth in such countries as India, China, Brazil and the middle tier of emerging markets (Mexico, Indonesia, South Africa and Turkey). While we in the West are using technology to amuse ourselves with shared shopping deals, these markets are harnessing similar technologies to continue bootstrapping nascent middle classes, press for reform, and pinpoint local needs and service gaps on the ground.
The proliferation of mobiles phones in particular is less dependent on fixed networks to penetrate deeply into previously underdeveloped areas, and has spurred emerging market innovations from the bottom up. In previously unconnected zones such as the favelas of Rio de Janeiro and the poorer slums of India’s burgeoning megacities like Mumbai and Kolkata, mobile phones are ubiquitous, despite their still-high cost as a percentage of income, and penetration growth rates outstrip those in northern states.
On a recent walkthrough of Dharavi, purportedly Asia’s largest slum, my sense was that the most prominent brands weren’t food or other basic consumer goods but the main mobile operators like Airtel and Reliance, along with Nokia, Samsung and Motorola. Among precariously built corrugated metal, wood and cardboard stalls and workshops were stands of self-taught technicians offering repair and modification of most brands of mobile phone. Even a wi-fi signal detector on my mobile, inadvertently left on, signaled an available wireless Internet connection every 50 feet or so, in some areas where GDP per capita is estimated at less than US$1,000. Worldwide, in areas such as these, the mobile phone has become an essential tool in the local “smartness” of an area, alongside the fixed-line phone, bikes and word of mouth — all good ways of making businesses operate more efficiently.
What armies of consultants can’t do, local activists, entrepreneurs and innovators can (and have done): developing apps and strategies to give previously unavailable intelligence to the street using simple forms of technology, such as Short Message Service (SMS). Grassroots data collection aided by open mapping tools like Ushahidi, gave Kenyans a view of problems on the ground during the 2008 elections. The approach gained traction among relief workers following the 2010 Haiti earthquake. It allows local populations to create a form of transparency where none had existed before, in some cases bringing into view neighborhoods and districts that had previously been invisible to central governments -- literally, off the grid. Such activities are bootstrapped because they can be. In other cases, they are intentionally offloaded by government, or pushed closer to ground level to be crowdsourced, or what can more elegantly be called “combinatorial local innovation”, as Institute for the Future Research Director Anthony Townsend described it in the recent Rockefeller Foundation study, A Planet of Civic Laboratories.
We may now be approaching an inflection point where the West can do less to intervene technologically to provide top-down command and control of cities’ infrastructure. The level of chaos and complexity many emerging megacities present is sometimes managed by local systems and adaptation but difficult if not impossible to solve with packaged software and computing power. It presents a significant barrier, though, to IBM’s credit, it is tasking researchers with understanding and harnessing these forces by looking at local approaches in resources-constrained environments. Local intelligence is gradually catching up in some fields with less elegant but more efficient indigenous solutions, often blending the old, like bicycles, “sneaker net”, and well-honed local knowledge, with the new, such as mobiles, the Web, blogs, databases, and a well-placed processor or two.
Over time, West-East, North-South technology and infrastructure transfer is slowly breaking down, used and shaped under a superimposed layer of local cultures and needs. Code is culture, as the saying goes, and the drivers for that code to align with the culture in which it is deployed are increasing in number. In a recent column on China, Thomas Friedman cited Carlson’s Law, named after the CEO of SRI International, Curtis Carlson. “In a world where so many people now have access to education and cheap tools of innovation,” it states, “innovation that happens from the bottom up tends to be chaotic but smart. Innovation that happens from the top down tends to be orderly but dumb.” Certainly the top-down players are trying to rapidly localize their intelligence and capabilities, and some (like GE), are using the process to extract know-how for export back to resource-strapped, developed markets. The gap between these two approaches remains problematic for long-term management of larger solutions, meanwhile stoking those at the bottom with access to technology to innovate even more rapidly.
The importance of this ground-level innovation is that, in time, it can impact the balance of power in the region. We’re already seeing in the Middle East what happens when simple cameraphone and social networks are used as reporting tools. Obama’s recent foreign policy address on the Middle East and North Africa touched on the role of technology in the realignment of political economies. He mentioned technology no fewer than five times, in a talk largely about the shifting geopolitics of the region. He pointed most noticeably to how technology is altering the balance of security and power for Israel, for example. We are moving not only from a politically bipolar world to a multipolar one, but to a technologically multipolar one as well. Semiconductors, mobile phones and PCs no longer solely come from developed markets. As the number of countries able to produce them diversify, economic and eventually political power is becoming redistributed. “Power to the people through technology” is a great slogan, but from city management to political management, the traditional powers-that-be are having to reassess how they will cope in this new reality over the next few decades.
Scott Smith is the author of Discontinuities, CI's monthly column on disruptive technology and innovation in emerging markets. He is a futurist, founder and principal of Changeist, LLC, a foresight and strategic design lab.