SA475: Trends in Technology

SA475: Trends in Technology Presented for BlueCross BlueShield of South Carolina By The Rushing Center Furman University

Key Learning Outcomes When you complete this course you will be able to: • Contrast the evolutionary versus the revolutionary approach to technological innovation. • Distinguish between sustaining and disruptive technologies and innovations • Discuss the elements of an innovation strategy. • Give a brief description of the following emerging technologies/innovations: • Peer-to-peer networking • Grid (distributed/utility) computing • The Cloud • Data mining • Nanotechnology • Quantum computing

CONTENTS • Module 1: Evolutionary vs. Revolutionary Change • Module 2: Sustaining vs. Disruptive Innovations • Module 3: Some Emerging Technologies/Innovations • Module 4: The Innovators Dilemma • Module 5: Elements of an Innovation Strategy • References

MODULE 1 Evolutionary vs. Revolutionary Change BlueCross and BlueShield of South Carolina The Rushing Center Furman University

Organizational Agility Kathy Harris, Vice President and Distinguished Analyst in Gartner's Executive Leadership and Innovation team, recently made the following observation: “Agility is an organization’s ability to sense changes and to respond efficiently and effectively to them.In 2009, if there’s one thing that organizations need, it’s agility. Our economy and the business environment are a steady stream of ups, downs and rapid change; in such an environment, the ability to sense, respond and react are true survival skills! … Aim to make your organization agile throughout – this means ensuring that people, processes and technology are flexible and adaptable to change.”

Being a Change Leader Peter Drucker, who has written extensively about innovation and change, declares that it is “a central 21st-century challenge that [organizations] become change leaders.” He further asserts that change leader organizations will see change as opportunity, and hence will actively seek out the right kind of change for the organization. While we might be tempted to assume that such organizations would embrace bold and daring steps to establish themselves as change leaders, the process Drucker describes for doing this is an evolutionary as opposed to a revolutionary one. He advocates an analytical and systematic approach focused on creating continuous improvement as the primary basis for becoming a change leader.

Good to Great In his book, Good to Great, Jim Collins also finds evidence of the value of an evolutionary approach to change. In his study of companies that rose from good to great he found no pattern of singularly identifiable, transforming moments to which they could attribute their remarkable success. He writes, “revolutionary leaps in (company) results were evident, but not by revolutionary process.” In other words, he found that, consistent with Drucker’s assertions, evolutionary, not revolutionary, processes were at work.

Revolutionary Results Total I/S Staffing Levels: 1993-2008

Revolutionary Results Total Online Transactions: 1993-2008

Evolution, Not Revolution in I/S The BCBSSC Information System Division has taken a unique, evolutionary, and systematic approach in the development and implementation of its administrative and operational practices over the past 20 years. I/S Management Practices Manual

I/S Organizational Architecture: OSD-IT Model A model-basedevolutionary and systematic approach in the development and implementation of an IT Organization’s administrative and operational practices. External Influencing Factors Choices Mission Client Business Environment Guiding Principles • Customers • Client Business Definition • Client • User Strategies to Influence External Environment Organizational Culture Outcomes Goals & Objectives IT Industry • IT Skill Sets • Computer Technology • Best Practices Resources Organizational Structure Processes 11

Advantages of the Evolutionary Approach- Balancing Change and Continuity - This approach has resulted in the creation of innovative, function-rich, and award-winning healthcare administrative systems based on a standard, yet flexible systems architecture which incorporates current and future business requirements that can be leveraged across various business segments. It has also provided the benefits of increased technological economies of scale by leveraging technical capabilities within an effective IT Service Management framework across various business segments to efficiently handle increased operational volumes. And most importantly, it has provided the ability to integrate IT staff as required while ensuring management philosophies and administrative and operational practices remain intact. I/S Management Practices Manual 12

The Nature of Innovation Sustained improvements over time lead naturally to process and product innovations. Drucker has advocated that innovation is much more the product of systematic hard work – what he calls the practice of innovation – than of flashes of insight and genius. He expresses it as follows. “To be effective, an innovation has to be simple, and it has to be focused. The greatest praise an innovation can receive is for people to say, ‘This is obvious! Why didn’t I think of it? It’s so simple!’ By contrast, grandiose ideas for things that will ‘revolutionize an industry’ are unlikely to work.”

The Practice of Innovation • The process of systematically anticipating and pro-actively responding to change is very closely aligned with the practice of innovation. • An innovation is more than a brilliant new idea. • An innovation is accomplished by creating something new that also proves to be appropriate and useful for some purpose.

Technology Brokering • Andrew Hargadon explores the idea of innovation as systematic work in his book How Breakthroughs Happen. • Based on ten years of study into the origins of historic inventions and modern innovations the book’s findings reinforce that innovations do not usually result from flashes of brilliance. • Instead, innovations are much more likely to come about from the creative combination of ideas, concepts, and products from existing technologies in ways that spark new technological initiatives. • Hargadon calls this process technology brokering.

Hargadon’s “Rules” • The future is already here • In other words, organizations that seek to anticipate and exploit change will do well to consider carefully the activities, products, and services they and others are focused on in the present. • It is almost always the baseline of present activities that allows organizations to make the insightful moves that position them as change leaders in their industry.

Hargadon’s “Rules” • Analogy trumps invention • Instead of searching for insights and flashes of brilliance that no one else has thought about or considered, a more promising approach is to look for successful ideas and inventions in other areas and think creatively about how to combine them, modify them, and apply them to the opportunity or problem you have at hand. • This approach has more promise simply because it is much easier to recognize the similarities between two situations than to come up with something neither you nor anyone else has ever thought of before. • In this approach, you attempt to think inside other boxes, to use Hargadon’s phrase, instead of trying to follow the more common advice of thinking “outside the box.”

I/S Guiding Principles Technology itself is never a primary cause of either greatness or decline in a business. Avoid technology fads and bandwagons. Recognize that you cannot make good use of technology until you know which technology is relevant to the business it supports. Technology can accelerate business momentum, but not create it. Therefore, you need the discipline to say no to the use of technology. Crawl, walk, run is a very effective approach to technology change!

I/S Guiding Principles Keep your eye on the goal. Inventing the “Next Big Thing” is not the goal. Building the “Current Big Thing” better than anyone else is the goal. We are not Alpha inventors, we are Beta improvers!

I/S Guiding Principles If you start with a blank sheet of paper, you’re dead. “Thinking outside the box” has come to mean thinking of a solution that is somehow outside of what you already know and do, and coming up with something wholly new. Pushing people to think outside the box doesn’t work. Instead, our approach to innovation is to take an idea or solution that has been used somewhere else, combine a number of existing ideas or solutions, and introduce them as a solution never seen before.

I/S Guiding Principles Maintain an attitude of healthy discontent. Sound management requires a probing, inquiring mind. Satisfaction with the status quo should be avoided. As you carry out your responsibilities as a manager, intelligently question existing practices and procedures. Ensure the most effective, up-to-date methods are being used. Actions based on the rationale, “that's the way we've always done it" should be examined closely. As a manager, you must not be afraid to challenge precedent. Be alert for antiquated or improper practices, which must be changed.

Team Exercise • Can you identify some examples of evolutionary innovations that the I/S Division has implemented? • Can you identify some examples of attempted revolutionary change in the IT industry that didn’t work out so well?

MODULE 2 Sustaining vs. Disruptive Innovations BlueCross and BlueShield of South Carolina The Rushing Center Furman University

Group Exercise: Case Study of DEC • Listen to the first part of the lecture by Clayton Christensen. • What happened to DEC? • How did this happen? • Could it have been avoided? • What would it have taken to do this?

Sustaining Technology/Innovation A sustaining technology/innovationis a technology or innovation employed to improve a company’s product or service to better meet their customers’ needs. Sustaining innovations can be: • evolutionary • revolutionary • incremental and gradual • discontinuous and dramatic The distinction is not about the innovation itself but rather what it is used to do.

Disruptive Technology/Innovation A disruptive technology/innovationis a technology or innovation employed to appeal to or even create a new market. Disruptive technologies and innovations are often characterized (at least at first) by: • inferior performance • lack of appeal to established customer base • lower profit margins • convenience • appeal to a select group of potential customers • lower cost - +

Sustaining or Disruptive? • Microsoft’s development of Internet Explorer • Open-source software (like Linux) • More fuel-efficient cars • Electric cars • The personal computer • Selling computers via the Internet • Selling stocks via the Internet • Education via the Internet • Online banking • Insurance claims processing via the Internet Sustaining vs. disruptive can depend on your perspective

Market for Disruptive Innovations? • The personal computer (in the early 1980s) • PDAs • Electric cars • Buying computers via the Internet • Buying stocks via the Internet • Open-source software (like Linux) • Online banking • Digital goods (books, music, movies, newspapers) via the Internet • Books & travel via the Internet How can such markets change over time? How might the rate of potential change differ for these examples?

Markets and Technology Innovations sustaining technology performance enhancements performance performance that market can absorb new technology performance disruptive time Adapted from The Innovator’s Dilemma, Clayton Christensen

Group Exercise • Identify some sustaining technologies or innovations that BCBS of SC has implemented. • Would you classify any of these as potentially disruptive technologies/innovations for others? • Can you identify potential future disruptive technologies or innovations for the company?

MODULE 3 Some Emerging Technologies/Innovations BlueCross and BlueShield of South Carolina The Rushing Center Furman University

Some Emerging Technologies • Grid (distributed/utility) computing • The Cloud • Crowdsourcing, Social Technology • Web 3.0 • Data mining • Nanotechnology • Quantum Computing • Biometric Security Photo by Randall Schwanke Emerging Technologies, MIT Technology Review

Grid (Distributed/Utility) Computing • Computing grids pool together and manage resources from isolated systems to form a new type of low-cost supercomputer • Makes supercomputing available where economics would otherwise prevent this • Grids remained a bit of an oddity in the domain of researchers for many years Sustaining or disruptive?

Grid Computing: Non-commercial Uses • Most well-known example is the SETI@home project (more than 5,000,000 volunteers and more than 2,000,000 computing-years of CPU time volunteered) • Oxford and Intel-United Devices cancer research project is another example (over 3,000,000 volunteers) • IBM sponsors an effort called World Community Grid that connects volunteers with worthy scientific projects that could benefit humankind (relatively new, 50,000+ members thus far) • All of these involve: • Volunteer efforts • You sign up your computer and download a screensaver which runs background processing whenever the computer is idle Photo by Jenny Rollo

Grid Computing: Commercialization • Sun President, Jonathan Schwartz, compared grid computing to history of the electric power industry: “The world does not need 5,000 different custom electrical generators with 5 million electricians customizing the distribution of electricity. ... The industry around IT will likely go through the same transformation that the electric industry did about a hundred years ago.“ • Bill Gates told InformationWeek six years ago that grid computing is “the holy grail of computing.”

Grid Computing: An Example Video Burlington Coat Factory Warehouse Corporation has deployed an enterprise Grid computing infrastructure utilizing Oracle 10g software. The retailer's adoption of an Oracle Grid computing solution has begun the enablement to deliver higher application service levels, improve Information Technology (IT) resource utilization, and allow for scalability of IT systems to support future growth. "Grid computing is viable with Oracle 10g," said Michael Prince, CTO, Burlington Coat Factory. "Oracle 10g does away with the complexity related to deploying and managing a grid. Our grid is automated, redundant, and delivers a pool of IT resources large enough to deal with the spikes in demand that occur.""Our Grid infrastructure allows us to maximize the use of our hardware and software infrastructure which is key to our ability to support mixed workloads," said Brad Friedman, CIO, Burlington Coat Factory. "With a grid at our disposal, we can run transactional, decision support and administrative operations simultaneously while maintaining high levels of system availability and performance."

The Cloud What is Cloud Computing Why Cloud Computing • The latest state of grid computing commercialization is often referred to as cloud computing, or simply the cloud. • The name apparently derives from the fact that cloud computing involves software that resides in the “clouds” of the Internet. • According to Vinton Cerf (one of the creators of the Internet and VP and Chief Internet Evangelist at Google): “At Google we operate a number of data centers around the world, each of which contains a large number of computers linked to one another in clusters. In turn, the data centers are linked through a high-speed private network. The data centers support applications and services that users can access over the Internet to tap into virtually unlimited computing power on demand, a process known as cloud computing.”

The Cloud (cont’d) Conceptually a cloud operates by creating virtual machines (VMs) on servers. These VMs can be created and configured in an instant, and disappear just as fast when no longer needed. These dynamically allocated VMs give users access to essentially as much computing power as they need for a very low price, compared to what it would cost for them to provide the same computing power on their own. In addition to a low price, the user is relieved of all maintenance issues. The analogy with the electric grid captures the concept very closely. 38

The Cloud (cont’d) For example, Gmail, Twitter and Facebook are all cloud applications. The load and performance demands of each of these are unpredictable and vary considerably over time. The almost-immediate expansion capabilities of the cloud makes applications like these robust at a reasonable cost. 39

The Cloud (cont’d) • Amazon, IBM, Microsoft, Sun, Salesforce and others are implementing and experimenting with systems similar to the one that Google has developed. • Currently, all these clouds operate in isolation communicating only with their users. • Cerf suggests that one of the great challenges for cloud computing is to create ways for the clouds to communicate with each other, giving users the option of moving data form one cloud to another without first downloading it and then uploading it again to another cloud. • Cloud computing service providers offer server space and processing and often operate these servers for many businesses

Computing in the Cloud The 3 Ways to Cloud Compute • Cloud computing includes three main areas of service: • Infrastructure as a Service (IaaS) • Delivery of a networked computing structure over the Internet • Platform as a Service (PaaS) • Delivery of a computing platform over the Internet • Software as a Service (SaaS) • Delivery of software applications over the Internet • Cloud computing is more cost-effective

Infrastructure as a Service: Computing in the Cloud Dropbox

Infrastructure as a Service: Virtualization • Using virtualization, one host machine can operate as if it were several smaller servers Video Virtualization can generate huge savings. Some studies have shown that on average, conventional data centers run at 15 percent or less of their maximum capacity. Data centers using virtualization software have increased utilization to 80 percent or more

Platform as a Service:Application Development in the Cloud PaaS facilitate deployment of applications without the cost and complexity of buying and managing the underlying hardware and software and hosting capabilities. PaaS provide all of the facilities required to support the complete life cycle of building and delivering web applications and services entirely available from the Internet.

Platform as a Service:Application Development in the Cloud Azure Video Azure Google App Engine Force.com video

Software-as-a-Service • Software-as-a-service (SaaS) – delivery model for software in which you pay for software on a pay-per-use basis instead of buying the software outright • Use any device anywhere to do anything • Pay a small fee and store files on the Web • Access those files later with your “regular” computer • Makes use of an application service provider Force.com video dashboards 9-46

Software-as-a-Service 9-47

Consumer Applications in the Cloud • Cloud computing makes it possible for companies to offer Web-based versions of popular personal computer programs • Google Apps - Replace Microsoft office? • Gmail, Google Calendar and Google Docs • Google Calendar • Share your scheduleGet your calendar from your phoneGet event reminders via email or have text messages sent right to your mobile phone. • Gmail • Google Docs • Google Reader • Stay up to date: Google Reader constantly checks your favorite news sites and blogs for new content. • Share with your friends: Use Google Reader's built-in public page to easily share interesting items with other people • Use it anywhere, for free: Google Reader is free and works in most modern browsers, without any software to install. • Google Sites • ZohoWriter • Microsoft Office Live

Business Applications in the Cloud • The Salesforce Service Cloud allows businesses to pay as they use services, instead of owning comparable software. Force.com video customer service

Computing in the Cloud with Google Docs • Integrated SaaS suite of Web applications • Free service to customers • Users can access documents from anywhere • Documents • Spreadsheets • Presentations • Folders • Forms • Users can upload existing documents • Users can collaborate with each other

SA475: Trends in Technology