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Smart Villages and Smart CitiesA Service Science perspectiveA Service Science perspective
Presentation at the Global Asia InstituteGlobal Asia Institute
On February14 2011 at NUS SingaporeOn February14, 2011 at NUS, Singapore
N. ViswanadhamIndian School of Business Hyderabad 500032, India
Contents• State of Service sector in India
– Education Vs GDP
Th STERM F k A h f i• The STERM Framework: An approach for service system design
• STERM Framework to build a Smart Village– Case Study: Pochampally village
• STERM Framework to build a Smart City – Food Security : To Serve 100M Urban Poor
• Conclusion: India needs to Usher in the Third Service Revolution
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State of Service sector in India
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Shares of Agriculture, Industry and Services in India
Agriculture (17.5%)Agriculture (17.5%) Industry (20%) Services (62.5%) (2009 )
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Size of Service Activities in Three Groups ( % of GDP)
Retail and wholesale trade, transport and storage, public administration and defense
Education, health, hotels and restaurants
Financial , computer, business, legal telecom, and technical services
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Unique characteristics of India’s Service sector Growth
• The service sector picked up the decline in the share of agriculture in GDP, i.e., from 32 % in 1990 to 17.5 % in 2009, while manufacturing sector’s share has remained the same.
• The rising share of services in GDP and trade, has not created corresponding rise in the share of employment.– Jobless growth of service sector and no increase in manufacturing raises
doubts about its long run sustainability.
– Some services have grown fast in terms of their share in GDP (e.g., software and telecom). Some are only provided by MNCs (Accounting, Management consulting) and Some are provided to companies in the developing countries.
– Service content in Manufacturing has increased due to modularization and globalization Some argue that Growth of the service sector is simply disguisedglobalization.Some argue that Growth of the service sector is simply disguised manufacturing activity or book keeping puzzle (Research is manufacturing when in‐house and a service when outsourced)
• This sector is plagued with Inefficiencies in the Design, Planning and Execution and Project delays, High levels of Corruption and Counterfeit. Radical Change needed since 60% of the GDP is accounted by services
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Percent of Global GDP vs Percent of Top 500 Univ.
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US has 30.3 % of top‐500 Universities and has 23.3 % of global GDP and 4.5% of world’s population . India has 17% of the population, 2% of the global GDP and 0.4% of the global 500 Universities
The STERM Framework
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Innovations that are creating Block Buster Industries in Recent Times
• Blockbuster products: Nano, Video Games, Cell phones, Search engines, IPod, Wikipedia– New technology solutions to redesign of services (water, power,
gas, construction, banks, education) to be intelligent and smart, e‐mail, e‐retail, Face book(social networking)
– New Business models: Containerization, Outsourcing, BPOs, FDI, Sell direct, e‐retail, ATMs, Clouds, Orchestration, e‐bay, Face book, PPP, Financial aggregation
• Creating New industrial Clusters, Special economic zones (China), New Universities, Power
• New Logistics and IT Infrastructure: Linking Ports and• New Logistics and IT Infrastructure: Linking Ports and airports into the global transportation network (Singapore, Hong Kong)
• Government regulations: Process patent, Deregulation of Telecom & Airlines, VAT, Green, Free trade agreements, SEZs, PPP, WTO, New labor laws, etc
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Institutions
The Basic Ecosystem
Delivery Services Infrastructure
Resources
Service Chains
Investment ClimateCoEvolution, Conflict, Risk Propagation
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Virtuous Co‐evolution
• Modularization of products and services lead to outsourcing to low cost countries.
• Countries started liberalizing their economies and reducing the tariffs further encourage outsourcing. g g– The logistics content in manufacturing has increased by about 50%.
• Ports, Airports have been developed to enable transport of people and also freight of raw materials as well as intermediate goods . – Trade facilitation and other innovations have helped the rapid processing
of goods transfer across the borders.– The Internet has enabled error free secure communication among
partnerspartners• The demand for natural resources has tremendously increased
and mines and oil have become treasures. •• Contract Manufacturers & Third party logistics providers have Contract Manufacturers & Third party logistics providers have
proliferated proliferated
GSNs can also be Risk Transmission & Amplification Channels
• Credit crunch affects trade finance and hence trade volumes.
– Prices for letters of credit increased in 2008 and 2009 & trade‐related loans were charged higher interest rates
– Preference to source from domestic suppliers during downturns because of trust or financing problems & greater trust or financing problems & greater protectionist policiesprotectionist policies
• Global supply chains that reacted “just in time” to the collapse in demand resulting in synchronized fall in trade volumes from all countries. – A sharper drawdown of firms’
inventories– Greater protectionist policies– A larger decline in trade of goods,
which make up the bulk of world trade, relative to services,
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The Five STERM forces• Science research generates new and or improved products• New Technologies (Internet, Search, Solar) emerge at a rapid pace• New Engineeringmaterials and designs come out every day• Globalization brings new challenges of following Regulations and policies
f l h d d l hof several countries the intermediate products visits. Regulations such asClimate change require attention
• New Management techniques and business models such as outsourcing,sell direct, supply hubs are invented to face competition and enablegrowth.
• Some of the service networks were built several decades ago. Newdesigns, technologies and management models should be used toupgrade the existing ones and in building the new ones. This requiresprocess orientation , modularization, standardization, use of IT and sensornetworks. R & D in this area would be highly remunerative.
• Given the government regulations, the investment climate and thevertical space, the company has to tread carefully with right products,services, planning strategies such as location and partnership decisionsand business models to succeed.
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Wider Innovation Policy Needed• Traditional science policy is rooted in a ‘linear model’ : scientific
discovery & invention followed by commercialization in the form of new products and processes.
• A Wider innovation Framework should include both the new to the market as well as new to the world innovations
• Innovations in Management (like Outsourcing) and Institutions (Social, Policy ,Regulation and Governance)need to be incorporated
• Innovations due to convergence (Finance with Mobile)as well as co‐evolution (Globalization of services) need to be explainable using the f kframework
• Science, Technology, Engineering, Regulations & Policy, Management (STERM) contribute to innovations in services and determine the sector’s competitiveness
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Applying STERM Framework to build a Smart Village
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Motivation for the Study• Of India’s 610 districts, the National Rural Employment Guarantee Act has a list of 200
backward districts. Similarly, out of India’s 600,000 villages, around 125,000 are truly backward.
• Currently, there is lot of public spending to improve the infrastructure, water and it ti i th Th G t b t ki ibilit f lifti thsanitation in these areas. The Government by taking responsibility for uplifting the
rural and the economically poorer regions.
• All these efforts are disparate, fragmented and piecemeal and not much improvement has been achieved in most of the villages.
• On the other hand, the villages themselves are a powerhouse of large pool of man power. About 700 M people in India live in villages and at least half of them are below 25 years of age.
• Availability of this rapidly expanding pool of young workers could and should be a major advantage for India’s economy if the new generation of workers is healthy and educated. The government should address social infrastructure (housing, health care, schools, colleges and universities) and labor markets for all categories of people primarily those who are educated up to middle school or less.
There is a need for Smart Villages
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Smart Village Design Using STERM Framework
• A Smart Village is a bundle of dozens of services delivered effectively to the residents and businesses indelivered effectively to the residents and businesses in an efficient manner. These services could be location specific depending on the demography of the village and occupations of the residents.
• This requires strategy, integrated planning and aboveall monitoring and execution of the activities usingappropriate governance models.pp p g
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Design of a Village: Investment Climate
• Investment climate of a village is the policy, institutional, and behavioral environment that influences the returns and risks of an investment.
• The investment climate of villages differs depending upon the significant occupation of the village and its natural resources.
• The primary occupation of the villagers can be farming, aqua culture, working for industries such as apparel or leather goods or doll making.
• The village can be a tourist location, pilgrimage centre, or a l f h lplace of historical importance etc. Mines, Forests, Ocean
shores or River banks can be part of the natural environs of the village.
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Bus, Truck Transportation
Se
Village PanchayatCitizen Groups,
NGOs
Institutions
State Government(Collector, Revenue Officer)
Regulations
Water Energy & Power
Land ResourcesLand records
Smart VillageEcosystem
Food Courts
p
IT and Mobile Networks
ervice Delivery Technolog
& M
echanisms
e‐kiosks, Spoken Web
ffi b d i
Procurement, Warehousing & Marketing for of
Agricultural and SMEsResources
Healthcare & e‐health records at district level
Human ResourcesUID
Financial Resources,Post Office
Agri Resources(Seeds, Fertilizers,
Equipment)
Water, Energy & Power Resources
gies
Post office based services(Online ticket booking,
retail, etc) Service Chains
Water Purification, Distribution
Affordable Housing
Vocational training
Primary Education
Rural Employment
Schemes(NREGS)Retail Farming
SMEs (microfinance)
High school & other Educational Institutions
at district level
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Gandhiji's Views on Village Development
• The best, quickest and most efficient way is to build up from the bottom . . . Every village has to become a self‐sufficient republic. This does not require brave resolutions. It requires brave, corporate, intelligent work. . . (Harijan, 18‐1‐1922)
• If we interpret brave as entrepreneurial and risk taking attitude, corporate to mean meeting t t i l d bj ti i t lli t ith ITstrategic goals and objectives, intelligent with IT enabled governance models, called smart nowadays, we implement Mahatma’s vision.
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GRIP
• Governance
• Risk Analysis
• Innovations
• Performance Management
Government
Industry CEOs
Village Panchayat
Funding Agencies
Advisory Board
Governance Model
Business Development
Manager Utilities
Manager Local
Services
Manager Employment Developmen
t
Executive Director
Water Power
Affordable Housing
Health care
RetailWaste Disposal
Transportation
Education
Rural Schemes
SMEs
Vocational
Training
Post Office
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Risks
• Failures in the supply chain due to lack of communication & management expertise
• Weak Infrastructure and resultant Operational• Weak Infrastructure and resultant Operational inefficiencies
• Delays in the availability of resources from Govt. and other FIIs
• Inertia in adapting to anything new due to lack of awareness and education among the villagers
• Exploitation by political parties, corruption and mismanagement of funds
Strategy Themes for Self Sufficient Republic
Enhance Living Conditions
Improve Investment Climate
Enhance Job Security
Connectivity with other Villages and
Cities
Promote Entrepreneurship
Balanced Score Card :Smart Village PerformanceBalanced Score Card :Smart Village Performance
Customer Reliable Service Delivery
Connectivity with outside world
Customer Perspective
Improve Growth Outlook
Skill Development, Ensure Job Security
Attract Business Funding
Integrate SMEsinto Global Value
Chain
Financial Accountability Perspective
Promote Business Mix (Industries
SMEs, Agriculture)Revenue Model
Upgrade utility services
Improve Supply Chain Connectivity
Using ICT
Standardize Processes, Improve
Productivity
Internal ProcessesPerspective
Growth Oriented Strategy
Formulation
Enhance Primary Education
Provide Vocational Training
Learning And GrowthPerspective
Provide Employment Opportunities
Encourage Entrepreneurship
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Examples of Smart Villages
• ISB Campus ‐ operational
• GIFT – Smart Village under construction
• Housing communities by Real Estate developers
• LAVAS near Pune
• Sri City near Chennai
Case Study
P h ll ill• Pochampally village
Pochampally Village• Pochampally is a village 40kms outside of Hyderabad, India.
• Called Bhoodan Pochampally. Acharya Vinobha Bhave
started Bhoodan Movement (Land Donation) from this village.
• Famous for Pochampally ikkat tie‐and‐dye weave art ,
Occupation Number of Families
Weaving 1448
Sari Shop Owners
102
Agriculture 402
Toddy Tapping 109
Washing 93
Fishing 79
Won IP Rights in the Geographical Indications Category
(Equivalent of a Copyright or Trademark ).
• Pochampally is one of UNDPs 36 rural tourism sites, and is also supported by rural tourism scheme of the Ministry of Tourism.
• Pochampally does more than $22 Million annual business in terms of yarn sales, purchase of handloom products and sales.
– The marketing is done through the cooperative society and APCO, the master weavers and the business houses in Pochampally.
Basket Weaving
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business houses in Pochampally.
– Pochampally weavers association are selling their products online through pochampally.com.
– The products reach the market though various channels operated by Middlemen.
• It is close to recreation places like Ramoji Film City, Mount Opera
• Though there are vocation training institutes like Swamy Ramananda Thirtha Rural Institute (SRTRI) near Pochampally, they do not cater majorly to the weaving community at Pochampally strategically.
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Bus Truck Transportation
Se
Village PanchayatCitizen Groups,Self Help Groups,
NGOs
Institutions
Ministries of Textiles, Chemicals and fertilizers,
Trade
Trade Regulations, Labor laws, Textile policies
Apparel Park, Technology up‐gradation schemes
Water Energy & Power
Cotton, Silk and Fabric Resources
Smart Village PochampallyEcosystemProcurement, Warehousing
& Marketing for SMEs
Bus, Truck Transportation
Power looms, Computer aided design
ervice Delivery Technolog
& M
echanisms
e‐ shopping,
IT and Mobile NetworksResources
Healthcare & e‐health records at district level
Human ResourcesUID
Financial Resources,Post Office
Market Research and Domain Specific research
Water, Energy & Power Resources
gies e‐kiosks, Spoken Web
Service Chains
Water Defluoridation
Affordable Housing, education
Vocational training
Utilities, Healthcare
Rural Employment
Schemes(NREGS)
Retail, Handicrafts Tourism
SMEs (microfinance)
High school & other Educational Institutions
at district level
Recommendations from Ecosystem
• Though Pochampally is claimed as one of the model villages by thetourism department, our analysis finds that there is no strategicgrowth orientation.
• Current focus is on Sarees and local markets but their competencies• Current focus is on Sarees and local markets but their competenciesare in design. Should focus on other Dresses: men, Women andChildren (both Indian & Foreign) and link into the global value chain.
• Protecting the heritage, the occupation and skill of weavingpochampally sarees by training people in other villages andencouraging more innovation rather than keeping it in house
• Vocational training of the latest advances in design and weaving automation and environmentally friendly techniquesautomation and environmentally friendly techniques
•• Governance follows classical Governance follows classical PanchayatPanchayat model supported by model supported by Government and UN agencies and is not entrepreneurial & this Government and UN agencies and is not entrepreneurial & this needs to changeneeds to change
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Applying STERM Framework to build a Smart City
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The Largest Urban Migration in History
• Each week, nearly one‐and‐a‐half‐million people move to cities, almost all in developing markets
• More than 70 million people are crossing the threshold to the middle class each year, all in emerging economies.
• By the end of the decade (2020), roughly 40 % of the world’s population will be middle‐class (20% today).
• Urban poor require food, housing and other facilitiesp q , g• To tap these new markets, organizations must reinvent business models, innovate new products and services and Build smart cities
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Municipal Corporations
Regulators & Policy Makers
Transportation Ser
Citizen Groups,Social Activists,
NGOs
Land Resources,Land Records
Institutions
Central /State Governments
Business Organizations
Food Courts
IT and Communication Networks
Smart CityEcosystem
rvice Delivery Technologi
& M
echanisms
Resources
e‐kiosks, e‐Retail
Infrastructureroads, airports, rail
Human ResourcesUID
Financial Resources
Business Development Industrial Clusters
Water, Power, Energy Resources
Distribution Centers
Service Chains
es Call CentersUniversities & Research
Institutions
Water Network
Power Network
Public Transportation
Sewage, garbage treatment
Healthcare, Emergency Services
RetailFood
Security
Education,Entrepreneurship
Housing SecurityJuly16,2010 31
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Food Security : To Serve 100M Urban PoorFood Security : To Serve 100M Urban Poor
Vocational Training using Government programs
Kitchen
Mid Day Meals
Households
Consumers
Processed Food
Products
Meat & Diary
PDS
Distribution Center
Distribution Center
KitchenHawkers
Meat & Diary Products Distribution
Center
IT Backbone on Cloud IT Backbone on Cloud
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Municipality & Ration shops
Citizen Groups,NGOs
Institutions
Regulations – APMC act, Min Support Price, Ration cards
Quality Control & Hygiene
Se
Logistics & Transportation service providers Farmers & Land
Hawker Manufacturers
Food SecurityEcosystem
ervice Delivery Technolog
& M
echanisms
Schools & Food Courts
Cloud :Data records and Audit
Communication & IT service providers
Hawker carts with GPS and Sensor Networks
Resources
Water, Energy & Power Resources
Food processing Industry & Dairy Clusters
Human Resources
Govt., Banks, Micro Finance
Resources
gies Vocational Training
Service Chains
PDS, Meat , Dairy Fruits and Vegetables
ConsumerKitchensDistribution Centers
HawkersSchools
Food courts
Food research Labs
Vehicles for Food Transport
Industry CEOs/Technology
Officers
Restaurant Chains
Government
City Governance Advisory Board
Governance of Food Security System
Manager Sourcing
Business Development
Executive Director
Quality Control Board
DataMonitoring & ExecutionCall Center
Stakeholders
M
Manager Services
PDSMeat
Diary Vegetables and Fruits
Manager Distribution
Hawkers School
Food Courts Transporta
tion
Manager Food
Preparation
Warehouses
Kitchens
Food Processing
ICT Hygiene, Quality
Waste Management
Vocational Training
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India needs to Usher in the Third Service Revolution
• The first service revolution was led by growth in the standard of living and the retail sector.
• The second one was driven by globalization and outsourcing, where the talents are diverted to improve the service and manufacturing sectors in the western countries.
• We need the third service revolution which concentrates on Indian services, manufacturing and agriculture with the following agenda. – Streamline and upgrade the service chains using modern technologies– Strategically deregulate the service sector while encouraging the firms to co‐
evolve.– Initiate education, research and entrepreneurial programs in service sector
innovation– Re‐innovate manufacturing and agriculture using recent advances in servicesRe innovate manufacturing and agriculture using recent advances in services– Improve the investment climate for Foreign trade– Plan and Build integrated service systems or systems of systems such as smart
Cities, SEZs, Villages• Develop Services Systems Theory with predictive and governance models
for better operations and execution.
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