2007/04/27 10:10 Panel on "The Challenge of Managing Services in a Global Economy"

2007/04/27 10:10 Panel on "The Challenge of Managing Services in a Global Economy", Innovation in Services Conference, Berkeley, California

This digest was created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted on the Coevolving Innovations web site by David Ing.

Intro by Henry Chesbrough

  • Innovation and management in services in a global economy



  • Panel Chair: AnnaLee Saxenian, dean of the information school at Berkeley, trained as a regional economist and technologies: 1994 book on "Regional Advantage" contrasting Route 128 versus Silicon Valley, relational network distributed organizational structures in Silicon Valley, compared to hierarchical
    • The New Argonauts: at a global level, and the role of individuals who are argonauts
    • This panel session will focus on:
    • Challenges of managing services in a global economy
  • Wayne Dai, Chairman and CEO, Verisilicon, chip design in Silicon Valley, with manufacturing in China and Texas where they capitalize on the chip architecture
  • Henry Tirri, Nokia, runs systems research centres around the world, a new role:  in Palo Alto, Beijing, two in Cambridge, as search networks around the world
  • Anssi Rantasalo, Managing Director, Kemppi Oy, manufactures electric arc welding with services


  • Memory sticks in U.S. customs
  • Content will also be

[AnnaLee Saxenian]

Argonaut, returns with golden fleece, but keeps ties

To now, though of globalization in terms of manufacturing busineses, not services

  • Even the most commodity-like products must become services, to be value-added

Two questions:

  • Explain your company, the service aspects, and globalization
  • Top three challenges of managing global services

[Anssi Rantasalo, Managing Director, Kemppi Oy]

PC broke down in Frankfurt, no slides

Kemppi, family-owned business, 1949

  • Customers are in ship-building
  • 160M Euro business, 15 countries, 730 people on payroll
  • Still family owned

Typical equipment manufacturer

  • Success on technology leadership, high quality, and internationality
  • Went international from Finland in early 1950s
  • Almost a global company, but not large

Globalization is putting pressure on manufacturing and technology industries

  • Need to innovate outside technology area
  • Engage company to industrial services business

Move up the value curve to transform from equipment provider to solution provider

  • Have always had some services, including information services
  • Have done some training, consultancy
  • Provide maintenance

Solutions: standard equipment that we manufacture, incorporating technology outside our R&D, related to open innovation

  • e.g. wireless information transfer systems, with network destinations
  • Enables customers with systems for quality and productivity control
  • Remote diagnoses, preventive maintenance
  • Software is a big part
  • Service, whether man-to-man or maintenance or reporting, is becoming more important

[Henry Tirri, Nokia]


  • Formerly life, used to speak as academic
  • Research person, leading research
  • Perspective is renewing Nokia, not focused on present
  • Lead innovation globally, trying to find a way to renew a giant, eating mouses
  • Global as a company, global markets
  • An adventure, won't talk about theories, although good at that

Company history

  • Nokia has renewed itself many times, from paper/pulp to current cellular phones
  • Are currently in the process of renewing again
  • Maybe not like before
  • Rubber boot company

Are a technology company

  • Renew Nokia, lead Nokia, look outside of core business
  • Handsets play only a minor role, there's another group in Nokia researching core technologies
  • More than better devices
  • Device has a role, but moving towards the service-dominant:  hardware, software, services


  • Produce 13 devices per second, 1 million per day (and producing 1 million empty boxes per day is already an achievement)
  • Challenge: what do you do with a giant, that is in a playoff game
  • Large scale, optimized logistics, yet want to innovate and compete in different domains coming together
  • Internet companies, carriers, phone companies all want to come together
  • Google wants to make a phone, Apple has already done it, carriers want services, Nokia and others want to bypass carriers

What is the enabling?

  • Voice centric phones
  • Multimedia phones
  • Corporate-connected phone

Multiple convergences going on

  • Converged devices are fastest growing market

Software has become important

  • Symbian, S60, a necessity
  • PCs became popular on standard software platform
  • Computer scientists by training
  • Have been working with universities
  • Most challenging: these new devices as the new platform, a world of 1 billion devices
  • Connected, not just voice, but computing platform
  • Obvious: mobilizing Web 2.0, more and more sophisticated services, not just passively viewing data

Mapping, navigation, location-based services

  • Almost all mobile handsets from latter 2007 will have GPS built in
  • GPS by itself doesn't do anything, how do you use this information?
  • Came today from Palo Alto over Dumbarton bridge, would have liked to have total dynamic traffic module


  • Mobile entertainment has different dimension
  • Working with Hollywood immersive formats


  • Imaging local level, building a map of the world, sharing it as a service
  • Service mash-ups, services on top of services
  • Same game as Google plays: a platform game

Not just a device game, the value of the device comes from the services and overall interaction, whether you're a carrier, telco or device company

[Wayne Dai, Chairman and CEO, Verisilicon]

Integrated device manufacture

Digital 1.0: mainframe days, 

  • IC fabs, with only  TI and IBM continuing to invest

2.0:  Separation of design from manufacturing

  • Taiwan took advantage of this, fabless

Now, design is expensive

  • Starting is $20M
  • If this is a good market, why isn't Broadcom doing this?
  • Have to do something to outsource design
  • Call this Digital 3.0 for midsized companies

iPod, everything is outsourced

  • Manufacturing is considered to be a service
  • Design foundry as a service
  • Last week, Bosch pulled out, have also outsourced

Reduce cost in electronics

  • Components are from China

Components are System-on-a-Chip

  • Core competence is not implementation
  • Software architecture defines markets
  • Software companies take most profit from components, want to do less from more
  • Not outsourcing China to China, from outside China to China

Support worldwide

  • Manufacturing, packaging, testing, with the branded name on the chip
  • Don't build until there's an order

New 3 C's:

  • Still consumers at central
  • Need a China strategy
  • Consolidation everywhere, pressure to outsource


Relentless: moving towards customers, services

Challenges of managing?


1. Creating a service culture and mindset, for both service innovation and execution

2. Need to educate the industrial market to pay for services that they used to get for free, in the capital equipment

3. Managing quality at a global level when getting together with partners, e.g. maintenance and repair, other kinds of services

Question: how manage the conflicting agenda of partners in different ecosystems?

  • Need to be innovative at how we train to give them capacity to do service
  • Building loyalty in innovative ways


1. Scale: interested in services which are different from a traditional growth market, since there are 1 billion device platforms readily available

  • Growth model is good, because can debug things on the way
  • One-shot model means sink or go
  • Achieving this requires innovation mechanisms to debug earlier
  • Are moving fast to living labs innovation:  testing, roadmap, design

2. Ecosystem game: if one piece missing, don't have anything

  • Content, platform, distribution
  • Maybe something in between, e.g. communication channel
  • Assume starting to use devices as sensors, sending 100 bytes per minute x 1 billion devices, this would collapse the network
  • e.g. pollution sensing around the globe, but the data would congest the whole system

3. World is so heterogenous

  • New, when joined Nokia
  • Understanding different questions and challenges in India, China, North America
  • What is a service, what are the innovations from the consumer parts ... is like day and night
  • e.g. privacy: location-based service, first question in North America, what do you do with the location data; and this isn't a question in India, where no one cares about statistical advantages


1. Repeatable, scalable, high-availability service

  • Division: integration of Texas and Silicon Valley teams with Shanghai head office

2. Business model: low margins or higher-margin IP

  • Can't scale

3. No-asset business, how to retain people without increasing salary, e.g. in Taiwan, help with mortgage to buy a house

  • Leveraging people's knowledge


In China and India, wages are rising quickly, people crowding into Shanghai and Bangalore

  • Salaries between China and India and Silicon Valley could be at the same level in 10 years

How to maintain loyalty?

Wayne: Have to maintain distinctive IP, so customers come back

Henri: Formerly life, bayesian statistics

  • Partnership is the same, it's conditioned
  • Game: Diplomacy
  • e.g. want a dominant platform for Internet services, would make sense for Motorola and Nokia to work together, yet still compete on other parts
  • Win-win game, but the wins change
  • Haven't been successful, don't think IPR can lock
  • Always pieces needed, e.g. content
  • Collaborating with Yahoo, but doesn't seem like collaborating

Anssi: Industrial services, trust is important

  • Keep trust by maintaining promises
  • Have been successful in Finland, where you don't always need paper, handshake is good

AnnaLee:  Taiwanese could do things on a handshake, but a lawyer then says spent hundreds of hours working on that


Device convergence, yet some fundamental changes.  Convergence trends?

  • Convergence to a wireless grid: wireless access that is transparent, but WiMax, Wifi, proximity radio ... 
    • Abstract level, there is convergence to wireless; but at the lower level, it's not converged, it's heterogeneous, with a layer that allows us to do this
    • Converged surface is an artifact
  • Cross-converence in multi-functionality
    • Individual music players
    • Don't see device convergence
  • Software convergence: never see this

Handling spin-offs

  • Henri: one of interests, what are different technology transfer modes
  • Core technology is a technology transfer no-brainer: protocol map, and it pops out
  • New innovation: how to sell it to businesses that don't understand it
  • Want people with an entrepreneurial mindset
    • In Silicon Valley, want first year as angel, second year to sell initially, and third year with a distribution model
    • Starts with assumption of spin-offs, works in Silicon Valley, okay in China, and it's difficult in Finland
    • Yes, encourage this, not for everything, but it should be different technology transfer from core
  • Wayne: starting businesses in long distance
    • Everyone can come back, but the head
  • Henri:  when you go out, you go out, and don't have a safe haven
  • Wayne: people go out, and come back as customers
  • Anssi:  more trouble in attracting talent, want to keep them
    • Understand that from a global perspective, retaining talent in China is an issue

Similar, setting up; dissimilar is the virtuoso teams

  • Wayne: Any service needs to be replicable, scalable, high-value
  • Henri: Why should they?
    • Renewing Nokia to become biotech, doesn't leverage history of machines sending bits
    • Vision: merging physical and digital world
  • Anssi: Binding is challenges, they're all about people and relationships
  • AnnaLee: they're all customer-oriented, which isn't what you would have seen in manufacturing businesses 30 years ago
  • Henri: variation, not opportunity costs
    • Did a chip for Intel
    • Can't afford to do different for countries, China, India
    • Have IP protection