Machines For Living

The Great Rules vs Process Debate

2009-07-02T18:01:42-04:00

Business rules are used 99.99% of the time to provide discrete, stateless decision services to a stateful process flow that is itself independent of the business rules engine. As Mark Proctor says, business rules engines currently are "glorified spreadsheets". Is this the right approach to application architecture? This is one of the big debates in software architecture circles, and is something we think about alot at my company within the domain of the telecom sector. The ability of software to be more lightweight, agile and reflective of the intelligence humans would like to bring to their activities is ultimately, I believe, what is at stake in the debate.

In one corner, Paul Haley and Mark Proctor...

Paul Haley (founder of Haley Rules which was sold to Oracle) and Mark Proctor (development lead for JBoss Drools at Red Hat) argue passionately for the integration of rules with process. Haley argues in this brief abstract that "until BRMS understand rules that refer to activities and events occurring within business processes, business rules applications will remain largely confined to discrete decisions, such as encapsulation within a decision service". Proctor argues in his provocative "Vision for Unified Rules and Process", "after 30 years of research and development is that the best we have to offer, multi-million pound license deals that effectively boil down to glorified spreadsheets called via a stateless web services from some workflow engine?" I agree with these guys. They say more clearly than I did what I tried to argue in the paper I delivered at the Information Science Forum in Dresden this February - rules don't constrain static facts, rules constrain change.

In the other corner, James Taylor...

James Taylor, who built Fair Isaac's business rules engine (the #2 BRMS after Ilog) and is now a prominent consultant and the author of Smart Enough Systems, argues in "Please Don't Just 'Unify' Rules and Process" that "the reason for focusing on stateless decision services is that such a model is a good fit with how companies handle decision-making" and thus "while it may, intellectually, be interesting to consider them both [rules and process] forms of declarative programming, I am not sure such a collapsed view of the world is useful". I would disagree with Taylor, because I think the reason why companies make decisions this way is because the business intelligence industry hasn't provided effective tools for operationizing business intelligence. Instead, we've hoarded data in data warehouses accessible by complex database reporting tools (Crystal, Cognos, etc) that impose a turnaround time to any requests from managers trying to conduct their processes with more intelligence.

Video: Sprawl, the Single Greatest Threat to Mankind

2009-05-11T22:46:21-04:00

Ken Archer

Swine Flu: Why Designers Must be Environmentalists

2009-05-02T22:29:18-04:00

The Swine Flu outbreak provides a teachable moment for everyone, but perhaps most directly for industrial designers, that our world has boundaries, and that the purpose of design is not to try to overcome them through technology.

The purpose of design is not to overcome the limitations provided by our environment, by nature. Rather, design should interpret the limits of nature as clues guiding them to the sustainable design of a product or process that makes money in the medium and long terms.

Case in point: In 1965, there were 53 million US hogs on more than 1 million farms; today, 65 million US hogs are concentrated in 65,000 facilities, according to The Guardian. This jump in operational efficiency was achieved by industrial designers at agribusiness giants like Smithfield (the largest provider of pork in the world) who figured out interesting, but ultimately unsustainable, methods for managing the rampant spreading of disease that occurs when thousands of hogs are shoved together like sardines. Nicholas Kristof wrote in the New York Times 6 weeks before the Swine Flu outbreak about "the insane overuse" of antibiotics on industrial hog farms, including rampant preventitive use of antibiotics, which results of superbugs such as drug-resistant MRSA.

But it looks like rampant superbugs spreading amongs swine aren't the source of Swine Flu - no, all evidence points to the manure lagoons designed by industrial pork companies. When there were 1 million hog farms in 1965, the sustainable amount of animal waste naturally fertilized surrounding farmland. Large-scale industrial hog pens would produce too much waste and overwhelm the surrounding farmland. Industrial hog farm designers solved this problem with huge manure lagoons that collect and store tons of waste. This solution didn't work, though, because the massive pools of feces emitted by overmedicated hogs fouled the air with pollutants that poisoned neighboring communities and ultimately produced new diseases, such as Swine Flu. Mexican newspaper La Marcha reported on April 15 of the "fetid odors" and flies hovering over waste lagoons that neighbors of hog farms run by Granjas Carroll, a subsidiary of Smithfield, complained about for years. 30% of these neighbors now have Swine Flu.

The point of this, though, isn't to go off on Smithfield. (If you're intested in industrial hog farming, you can learn more here.) The point is to reorient the direction of modern design and technology. The purpose of design is not to overcome the limitations provided by our environment, by nature. Rather, design should interpret the limits of nature as clues guiding them to the sustainable design of a product or process that makes money in the medium and long terms. That's why it's essential that good designers also be environmentalists, because we live and breath in an environment that has limits and naturally designed processes that operate optimally within those limits. Why not begin design by learning, mimicing and even having some wonder about these natural limits and processes? This has to be the starting point of any design that will work for the long term.

Is this naive? Only if creating shareholder value is naive, because Smithfield's shareholder value has plummeted from $30 per share a year ago to $8 today.

Telcos & MSOs: Leaving Money on the Table until Telco 2.0

2009-03-01T22:12:40-05:00

The idea behind Telco 2.0, that telcos collaborate with innovative designers & marketers in other industries to design and sell to those industries new or enhanced communications-enabled products & services, may sound futuristic - certainly not a top priority amidst the current economic crisis and competitive battle for connections. Surely the examples of such communications-enabled products & services - a washing machine that sends you a free text message when a load is finished, and includes an Order Detergent Refill button that initiates a shipment to your home by your telco that shows up on your next telco bill - aren't the solutions to the current problems of (a) plateaus in demand for broadband and wireless and (b) laid off subscribers cutting their connections.

Or maybe they are.

The following are three examples of new communications-enabled products & services that were designed without telecom involvement and, as a result, without payment to the telcos. Instead, these providers benefit from consumers' telecom usage without paying a dime themselves. And the services to these providers that the telcos didn't come up with would have required no capital build-out - just new products riding on the existing network.

(1) Phone-In Parking Meters: Cities across the U.S. are adopting smart parking meters, including phone-in meters that allow you to call a number and enter a parking spot number, and parking duration. If the service at the restaurant was slow, you can call the number to add time to the meter, instead of running to your car every 30 minutes. Doesn't it seem silly that the phone-in meter manufacturers, like IntelliPark, designed and built technology to receive, store and process your credit card number over the phone when the wireless service provider bills you every month?

(2) On Call Street Lights: In a move likely to be followed in other countries, cash-strapped municipalities in Germany are turning off street lights at night and allowing residents to temporarily turn them on within a district by text message. Does this seem like a service that telcos, who can geocode your location if you have the right phone (T-Mobile is the sole iPhone carrier in Germany) and who could allow subscribers with no texting plan (e.g. the elderly) to text a particular number for free, could design such a service and charge municipalities or vendors like Dial4light?

(3) Hearst e-reader: The last example is an opportunity that will also likely be missed, but hasn't technically been missed yet because the launch is later this year. In a bid to save the newspaper industry, Hearst is launching a wireless e-reader for its magazines, newspapers and their ads. Everything from Cosmo to Esquire to the San Francisco Chronicle may soon be read on an e-reader whose cost could be subsidized by subscriptions to Hearst properties - just like cell phones. Speaking of cell phones, could the wireless providers enable for Hearst all of the fancy location-based advertising their vendors are enabling for their supported cell phones? In fact, since the wireless provider has your address and billing relationship, couldn't they allow you to click on ads to have free samples mailed to your home or to have products sent to your home and billed on your wireless invoice?

The examples are enough to make one wonder if the challenges facing the telecom industry are a lack of credit and capital, or a lack of imagination.

Deep Multi-Sided Business Models

2009-02-22T10:02:45-05:00

William McDonough, co-author of Cradle to Cradle, casts a vision for the next industrial revolution based on Cradle-to-Cradle design of all products and services as ecosystems. From a business perspective I believe a deeper understanding of multi-sided business models (central to today's technology industries) is possible when we apply them to an ecosystem-based Cradle-to-Cradle design model. Whereas multi-sided business models, exemplified by the likes of eBay and Google, are important in markets with multiple sides desiring interaction, players in the next industrial revolution understand that all markets have multiple sides - you just have to look deeper. Urban renewal expert David Barrie, for example, explains how real estate displays the same multi-sided logic, just on a deeper level. The next industrial revolution will require deep multi-sided business models that address the cooperative networks behind any product or service in order to provide the same products, but in a way that stimulates and captures all network externalities as nutrients: value nutrients, technical nutrients and biological nutrients.

Players in the next industrial revolution understand that all markets have multiple sides. The next industrial revolution will require deep multi-sided business models that address the cooperative networks behind any product or service in order to provide the same products, but in a way that stimulates and captures all network externalities as nutrients: value nutrients, technical nutrients and biological nutrients.

What are multi-sided business models? Most businesses facilitate a one-way flow of value, in which they buy labor and supplies and then sell products or services to a set of customers. Multi-sided markets, as Harvard Business School professor Andrei Hagiu explains, "are markets in which firms need to get two or more distinct groups of customers who value each other's participation on board the same platform in order to generate any economic value". eBay sees that auction sellers value interaction with auction buyers, so they significantly reduce the costs of searching through auctions with a web site. Google sees that advertisers value highly segmented audiences, so they create such audiences through their online properties. Microsoft sees that consumers want a computer that enables them to use lots of applications, so they bear the shared costs of developing applications with the Windows operating system.

In each case, eBay, Google and Microsoft identify a desired interaction, and facilitate that interaction through a platform that provides services to one side of the interaction - audiences, buyers, application developers. The services are strategically designed to stimulate externalities known as cross-network effects, that is, the other side values the platform more because of the use of the platform by the first side. eBay sellers value the platform more because there are many buyers, Google advertisers value the platform more because of the many viewers and application users value Windows-based PCs more because of the many application developers using Windows. Platform players capture these cross-network effects through monetizing access to the platform (direct effects) and additional services created on the platform (indirect effects).

But are the networks in which different groups of people value each others' interaction limited to trade and advertising? Is it true, as the Harvard Business Review reports, that "Most markets are one-sided in nature—customers interested in buying running shoes, for example"? After reflecting upon Cradle to Cradle design, I don't believe so. William McDonough writes in Cradle to Cradle (p 81),

Just about every process has side effects. But they can be deliberate and sustaining instead of unintended and pernicious. We can be humbled by the complexity and intelligence of nature's activity, and we can also be inspired by it to design some positive side effects to our own enterprises instead of focusing exclusively on a single end.

Cradle to Cradle design is based on the closed-loop systems found in nature (that it, it is biomimetic). Ecosystems have closed-loops because they capture all externalities as nutrients for another process. In manufacturing and other business processes, though, we call externalities waste. And that's because the design of most products produces unusable externalities - waste - during manufacture, use and disposal of their products. But what if products and product manufacturing processes were redesigned so that these externalities were useful? What if deep multi-sided business models stimulated and captured three types of externalities as nutrients for their businesses:

Value Nutrients: These are the externalities of typical multi-sided businesses like eBay, Google and Microsoft, in which platform usage on one side increases platform value on other sides.

Biological Nutrients: These are the externalities that are captured by the Earth's ecosystems for far more savings to a business and environmental damage than the waste generated by conventional products and processes.

Technical Nutrients: These are the externalities that are captured by a company's manufacturing processes for far more savings to a business and less environmental damange than the sate generated by conventional products and processes.

A Deep Multi-Sided Shoe Business Model Let's take the example of shoes, which HBR claimed above are a good example of a one-sided business model. Most shoes are made with leather that, while historically tanned with vegetable tannins harvested from trees, are now usually tanned with metals - particularly chromium. Michael Braungart writes in Cradle to Cradle that the largest chromium extraction factory in Europe hires only older men, all of whom wear gas masks, because it takes on average 20 years to develop cancer from chromium exposure. One of chromium's byproducts, Chromium IV, was the carcinogen found in the water supply of Hinkley, California, the case made famous by Erin Brockovich. Today shoes are usually tanned in developing countries, where regulations don't prevent them from dumping waste from chromium extraction in nearly bodies of water, or incinerating them for local kids to inhale. In addition, the rubber in soles, an amalgam of lead and plastics, emits lead particles into the soil and atmosphere as your use of your shoes wears down the soles. And your disposed of shoes end up in a landfill, because the monstrous amalgams of which they are made are of no use to anyone.

What would a deep multi-sided shoe business model look like? Imagine a shoe that is tanned with sustainable vegetable tannins. Vegetable tanning takes longer than chromium tanning? Then tan the leather on or near your leather supplier, and get your vegetable tannins from plants on the suppliers' property, in a just-in-time arrangement that would rival a Toyota factory, all while returning used shoes to your leather and tannin supplier to biodegrade (see below).

Instead of an amalgam sole that can either be dumped or recycled at great cost, make your shoes with a rubber sole core and biodegradable skin, as is described in Cradle to Cradle. The biodegradable skin is safely returned to nature at disposal, and the rubber core is returned to the shoe company - a technical nutrient in its redesigned shoe manufacturing process. Furthermore, the shoe company advertises that its shoes have been worn by Kurt Warner and Serena Williams, so you could be wearing their shoes by buying from them. So, something that was a wasteful, and even deadly, byproduct is now a rubber and leather platform - both literally and figuratively - for a multi-business model that reuses technical nutrients (the rubber sole), biological nutrients (the leather and biodegradable skin that are returned to your supplier to biodegrade) and eBay-like value-enhancing nutrients (the athletes who wore your rubber soles).

The Future of Design

2009-01-11T13:15:39-05:00

Brian Ling, a designer at Philips, writes at Design Sojourn that the next industrial design evolution will treat all layers of a product as an expression of a single conceptual design. "In the past", writes Ling, "what was practiced and taught to us at school was that Industrial Design was a process that was essentially a linear step by step process." This step by step approach, diagrammed on the right by Ling, is also found in the legacy approaches to software design (waterfall) and architecture (design-bid-build), each of which is undergoing changes very similar to the one Ling describes in industrial design.

Ling describes a common problem with the legacy step by step approach, a problem which designers in all industries will recognize.

"The problem with this sort of approach we found out, was that people started to treat our product “layers” as they would budgets. If there was a lack of budget they would “logically” start to “cut” back these layers. Some examples of common discussions designers have include “Oh no money? Ok lets toss that metal housing and turn it into plastic…” or “Can’t afford that brush metal trim, lets turn it black instead?”. Does this sound familiar?"

Telco 2.0 and the Redesign of Everything

2009-01-05T10:42:45-05:00

The residential telecom (and cable) industries appear to be careening down a path of evolution from a provider of consumer network services to a revolutionary platform for all businesses to redesign their products and services. This path is defined, above all else, by the Broadband Incentive Problem. The transition to a platform for the redesign of everything, spurred by this problem, is a story best told in three acts: Telco 1.0, Telco 1.0 SP1, and Telco 2.0.

Telco 1.0: Broadband access is currently provided all-you-can-eat in industrialized countries. The result of this business model has been remarkable broadband penetration, but this penetration leads to a plateau in access revenue while network costs continue to escalate (primarily from video over the Internet). Korea, which has the highest broadband penetration in the world, is the canary in the coalmine, as the chart to the right shows. The resulting Broadband Incentive Problem, as explained by the MIT Communications Futures Program (which included participants from Comcast, BT, DT and FT) is the following: "The broadband value chain is headed for a train wreck....Today's prevailing business models give wired and wireless broadband operators the perverse incentive to throttle innovative, high-bandwidth uses of the Internet." The network cost increases that prompt this throttling are both capital and operational costs, as the MIT report explains in detail.

"The broadband value chain is headed for a train wreck....Today's prevailing business models give wired and wireless broadband operators the perverse incentive to throttle innovative, high-bandwidth uses of the Internet."

Telco 1.0 SP1: Several innovative approaches are already being taken to address the Broadband Incentive Problem. Some ISPs are charging premiums for subscribers that exceed monthly usage limits. While this affects few subscribers now, as more high-bandwidth Internet apps are innovated this will evolve into a pricing scheme tiered by traffic volume in order to cover network costs. Unfortunately, as the MIT participants explain, "The aggregate monthly traffic volumes used to set price tiers today are only gross approximations for the actual costs that any user's traffic imposes on a network."

A more interesting approach than traffic volume pricing to the Broadband Incentive Problem is the attempt to recover network costs from non-access-based revenues, or, vertical integration. According to a Forrester report, "successful operators will acknowledge MRC as a shrinking business" (see chart on left). What will take it's place? "In the past, operators
built services internally; but to meet consumers’ shifting needs, operators must work with third parties to source content and applications as well as build platforms to support the consumption of these services over any device." In other words, service providers will vertically integrate with and resell/subsidize (a) network devices (beyond phones, modems and DVRs) and (b) content (beyond TV video and ringtones), resulting in a plethora of new product bundles. Verizon's CTO said last month that "Broadband capabilities will be found in virtually every electronics product out there", while Verizon and many others (including content providers like Paramount) are working to develop standards for improved content delivery via TM Forum's Content Encounter. As their ability to manage content-specific bandwidth improves, the ability to sell higher bandwidth for specific online content and applications opens new revenue streams.

While resale of network devices and content enabled by vertical integration will bring some new revenue sources to the telecom industry, it will not be enough to cover the increasing network costs of the industry, as the MIT paper explains. First, legal and regulatory interventions will constrain the range of vertical integration available to the service providers. Content providers and application service providers (e.g. VoIP) will cry foul on net neutrality grounds, as Vonage successfully did when Madison River degraded their traffic and others are currently in response to Google's edge-caching in ISP networks. Second, many bandwidth-intensive sites and applications have no revenue generation, but are critical to innovation. Service providers obviously can't vertically integrate to replicate such services when competitors provide them for free. Should these sites therefore be throttled because they have no revenue to share? Third, reliance on revenue-sharing with sites that do generate revenue (like YouTube) presumes a static Internet, because all new sites would need to then be throttled by default. All of this, of course, leads us back to the fundamental Broadband Incentive Problem. (A fourth obstacle is that telcos' ability to roll out new content services in rapid product development cycles is likely to remind well behind the likes of Google, Disney, GE, CBS & Apple thanks to slow telco industry adoption of SOA standards needed to streamline the dozens of product data silos.)

Telco 2.0: So why is the previous stage labeled Telco 1.0 SP1? Because the vertically integrated devices, content and applications of this stage are still squarely within what STL Partners calls the one-sided market structure of Telco 1.0. A one-sided market structure is one "where the telco buys equipment and content from suppliers ('upstream'), integrates them, and bills the end user for services ('downstream'). The upstream side is cost, and the downstream side is revenue" according to STL's Telco 2.0 Manifesto.

In contrast, Telco 2.0 will witness the telecom industry leveraging its assets as a platform for businesses in all industries to redesign their products and services. Telecom vendors like Avaya, Nortel and Cisco call this Communications Enabled Business Process (CEBP), an approach that makes new products and services possible by removing the "human latency" from communications. A basic insight here is that the telco web portal is not the place to sell most of the products and services that incorporate communications elements. The two-sided market structure addresses the Broadband Incentive Problem by enabling merchants and customers to interact directly using the network as a platform so that the costs of the network are allocated to all parties.

Imagine a washing machine that sends you a free text message when a load is finished, and includes an Order Detergent Refill button that initiates a shipment to your home by your telco that shows up on your next telco bill.
Imagine an ad on a bus that asks you to send a free text message to a number to receive a free sample delivered to your home, with the telco selling the free texts and fulfillment services (the telco knows your address) to the provider.
Imagine an airline that sells prepaid calling cards with unlimited minutes within your destination city during the term of a round-trip flight, as well as 100 minutes to your origination city.

The only limitation of Telco 2.0 will be the creativity of product designers in other industries. New CEBP enable radically new services (and the evolution of products into multiple services). Furthermore, the services enabled by CEBP are more sustainable from a revenue perspective because they directly address individual consumer needs and more sustainable from a cost/environmental perspective because they squeeze our wasteful "human latency" from business processes.

Obama's Stimulus Planners: Design Jobs lead to Electronic Health Records

2009-01-01T19:54:08-05:00

A growing chorus of politicians is raising concerns over the inclusion of projects that would create green collar jobs (alternative energy and transit projects) and those that would finally bring about the digitization of medical records, because they are not "shovel-ready" and so would not create jobs anytime soon. Rep. Baron Hill (Ind) argues to the Washington Post, ""If we're going to call it a stimulus package, it has to be stimulating and has to be stimulating now. I think there are members of our caucus who are trying to create a Christmas tree out of this." This is a red herring argument in the case of electronic medical records just as much as it is with regard to green collar jobs.

The design of a technical infrastructure for portable electronic medical records that includes all health care providers, consumers and researchers is as massive an undertaking as was the creation of the interstate highway system in the 50s, and will require thousands of design jobs.

The design of a technical infrastructure for portable electronic medical records is as massive an undertaking as was the creation of the interstate highway system in the 50s, and will require thousands of design jobs.

Why are thousands of designers required? The current DHS Secretary, Mike Leavitt, explains in a recent Washington Post editorial that simply providing millions of dollars for the purchase of heath IT systems that digitize patient records "could do more harm than good". The point is not to bring individual health care providers into the information age, the point is to share this information among health care providers, consumers and researchers. Leavitt explains, "If stimulus money supports a proliferation of systems that can't exchange information, we will only be replacing paper-based silos of medical information with more expensive, computer-based silos that are barely more useful. Critical information will remain trapped in proprietary systems, unable to get to where it's needed." The result would be a balloon in ongoing health care IT costs to integrate incompatible systems and an inability to rapidly create, deliver and bill for innovative health care services until dozens of incompatible systems were modified to support the new service. If this sounds like a doomsday scenario, just look at the current telecom industry, where exactly this scenario has existed for several years.

What design jobs are needed to avert this technical dead end and bring about all the benefits of portable electronic health records?

(1) Software Architects: It's faster and cheaper to design a single, closed IT system than to design one with an open architecture. Architects are required - working both for health IT vendors and for health care providers - to design technical interfaces that ensure critical health data isn't trapped inside expensive silos. Architects are also needed to design Enterprise Service Bus systems that are the physical plumbing of any Services-Oriented Architecture.

(2) Biomedical Ontologists and Standards Designers: It's not enough to design interoperability on a physical level, we must also design interoperability on a semantic level. This requires a common data model or ontology, enforced via a standard. This is no small task. Even philosophers are required for the job - as it requires a universal description of the types of activities, events and bodily parts and wholes that contribute to health.

(3) Organizational, Process & Quality System Designers: Digitization of medical records, like all IT projects, is not really about software, it's about processes. Providers and researchers will be doing their jobs differently as a result, and these new processes must be designed, documented, and then communicated back to health IT system designers. For example, electronic health records may eliminate many sources of medical errors (e.g. cross-drug effects) but they encourage many others, such as rushing through assessments during daily rounds now that one can "copy and paste" assessments from previous daily rounds. Process and Quality System designers are needed in large number to bring about the process changes that are required to leverage technology in health care.

Obama's Stimulus Planners: Design Jobs lead to Green Collar Jobs

2008-12-28T18:14:40-05:00

President-elect Obama's much anticipated Economic Stimulus Plan is in danger of prolonging out-of-date economic ideas, with its anachronistic search for "shovel-ready" projects. Governors and Members of Congress are telling Obama that, if the purpose is to stimulate the economy, then the Stimulus should be spent on "shovel-ready" projects that create jobs in the short-term. Missouri, for example, has said it would spend all of its money on highways, and none on St Louis mass transit. Environmental and smart-growth advocates are warning that this focus on traditional transportation projects will result in "roads to nowhere" that only deepen our dependence on foreign oil and increase greenhouse gas emissions, all while transit budgets are being slashed even though transit ridership still breaks new records despite falling gas prices.

It's precisely because traditional roads projects invest relatively little in design that they are "shovel-ready".

While the concerns of environmental and smart-growth advocates are valid, they do not go far enough. The focus on "shovel-ready" projects doesn't just postpone the creation of a green infrastructure for America, it reflects a fundamental misunderstanding of how jobs are created in the emerging economy. A transit infrastructure for a sustainable city requires a much larger investment in design than do traditional roads projects. Conversely, it's precisely because traditional roads projects invest relatively little in design that they are "shovel-ready".

The present need to redesign our cities, our buildings and our products for sustainability coincides with the rise of the creative class, such that design is playing a far more prominent role in the economy than 10 or 20 years ago. Redesign of cities is done by urban planners, a profession filled with tens of thousands of transportation planners, civil and environmental engineers, architects, geographers, surveyors and market researchers. These people are the key to green collar jobs when it comes to transit. Creation of design jobs for these folks leads to green collar jobs for construction workers, and would be the short-term result of any investment in green infrastructure by Obama's Stimulus Plan.

Some expect the Stimulus to include $100 billion for green jobs, following the recommendation of the Center for American Progress. While such an investment would be welcome, this represents a small portion of the expected $750+ billion package. CAP's moderate recommendation, it seems, reflects the same misunderstanding of where the jobs are in the new economy. According to p. 7 of CAP's report,

Other areas, such as building light-rail or subway systems, will entail long lead times before a large amount of new hiring and spending occurs, but higher funding for existing mass transit and light rail projects would result in job growth in engineering, electrical work, welding, metal fabrication, and engine assembly sectors.

While the jobs listed by CAP do make up the vast majority of spending for roads projects, roads projects are not the model for green infrastructure projects. To do light-rail, subway, trolleys and bus rapid transit right, an investment in every stage of urban planning and design is required.

Expansion of Service Economy is About More Than Business and Personal Services

2008-12-19T19:39:05-05:00

Most literature on the expansion of the service economy asserts, correctly, that the primary source of economic activity in the U.S. has shifted from manufactured products to services (a shift as significant as the previous shift from agriculture to manufactured products). However, analysis of that shift tends to focus on business services (IBM and GE used to be product companies, now most of their revenues comes from business services) and personal services (hospitality, food, your morning mocha latte).

But what about services that are replacing products? This seems to me to be the next major area of growth in the service economy (and to the authors of Cradle-to-Cradle and Natural Capitalism). These product-replacing services result in:

(1) Happier customers (see Natural Capitalism quote at bottom of post)

(2) Less pushing (er, advertising) of manufactured products with their long life cycles

(3) Less waste in manufacturing processes (fewer steps that are unrelated to customer benefits, like packaging CDs) resulting in higher profits

(4) Less consumption of energy in manufacturing processes, with the related environmental and national security benefits

Examples? The music industry used to view music videos as advertising for their products: records, tapes and CDs. Now, CNET reports, "Some argue one of the music industry's biggest mistakes was giving videos away to MTV nearly 30 years ago". Why? Because Universa l Music - the largest label - is on track to bring in $100 million dollars in ad revenue from its YouTube channel. YouTube, which now accounts for over 25% of Google searches (YouTube now gets more searches than Yahoo), is thus enabling the servitization of the music industry.

SaaS is another servitization of a product. But the examples go beyond published work like music and software. There are more and more examples of old economy product companies that are retooling in order to provide their products as services. Take carpet. Did it ever occur to you that replacing carpet is extremely wasteful and generally unnecessary? Why do we replace all the carpet in a room (which requires moving all the furniture out of the room) when only the highly trafficked areas need to be replaced? Flor is a modular carpet company that provides carpet modules (it looks like an unbroken carpet when installed), and replaces individual modules as a service when they need replacing. They dispose of (and increasily reuse) the modules as well. Wanna change your carpet color? No problem! Flor will come out and change the modules that are visible while you're on your lunch break. The company's Sr VP, Jim Hartzfeld, told the authors of that the concept of carpet as a service emerged when they sought "new ways of directly satisfying customers' needs rather than finding new ways of selling what we wanted to make." The Ernst & Young Center for Business Innovation comments in Natural Capitalism, "When you're dealing with the same customers with that frequency, doesn't it begin to qualify as a service business?" The Natural Capitalism authors sum this new movement up as follows:

Instead of selling the customer a product that you hope she'll be able to use to derive the service she really wants, provide her the service directly at the rate and in the manner in which she desires it, deliver it as efficiently as possible, share as much of the resulting savings as you must to compete, and pocket the rest.