 Live from Cambridge, Massachusetts, it's the Cube at the MIT Chief Data Officer and Information Quality Symposium with hosts, Jeff Kelly and Paul Gillin. Good morning, welcome to the Cube. We're here live at the MIT Chief Data Officer Information Quality Symposium here at Cambridge, Massachusetts. I'm Jeff Kelly. I'm joined by my co-host, Paul Gillin. We're here, of course, talking about the role of the CEO, how that role is evolving and maturing, and really just kind of coming to the fore in a lot of organizations. We're lucky enough to be joined here in this segment with one of the keynote presenters this morning at the MIT show, Dr. Rick Watson, who is Professor of Information Systems at the University of Georgia. Dr. Watson, thanks for joining us. Thank you. So why don't we start off talking a little bit about your keynote. For those watching who weren't able to see your keynote, it was about the digitization of capital. Could you kind of, in a nutshell, tell us what you mean by that? What does that really mean? OK, so for me, an organization is something that converts capital from one form to another. And if you can digitize that capital, you can create more value from the capital that you have, and you can make the conversion process more efficient. So the idea really is to, when you're digitizing that, you're talking about capital could be human capital, it could be social capital. That's right. You outlined the different forms of capital, so that takes the, as a little bit of complexity to the process. Yeah, and so there are six forms of capital that I identify. And the digitization capabilities vary with the form of capital. So if you think about natural capital, which for a mining company can be its order policy, to digitize that, you need to know the characteristics, say, by the cubic meter of your body. How much gold is in there? How much zinc and silver? Things like that. And you capture all of that, and then you can use advanced data visualization techniques to work out where the ore bodies are and then how to mine it in some optimum fashion, right? So that's one form of digitization. We were talking earlier about digitizing an economic asset like a parking space, right? So for a parking space, you want to know whether or not someone's using it. And once you digitize it, you have that data. You also have the capability to change the price for using that parking space. And so you can create more value from it by controlling or linking it to demand, linking price to demand, right? So those are two examples of different types of capital and different ways in which you digitize. I want to pick up on your example of the parking space. I think it's a wonderful way of demonstrating how information about something as simple as a parking space can be translated into greater economic value. But can't that also be used to destroy value? And I'll give you the example of Airbnb, which is an internet service that is making it possible for people to rent their apartments or their homes or rooms for a much lower price than hotels would charge. And this is actually potentially can have a devastating effect on the hotel industry by undercutting their business. Is that a case where achieving greater efficiency actually destroys capital rather than creating it? Well, it creates capital for another group. It creates capital for the person who's willing to take a room in their house and rent it out on a short-term basis, right? So on the other side, the hotel has less use of its capital, but we live in a capitalist system, right? And we tend to think of it only as financial capital, but there are all sorts of other forms of capital and people are continually competing on the basis of the capital offering that they give you. So if I rent a room, that's my capital, right? And I found a way to do it that gives me a good return. The hotel has to find a way to compete with me, right? Private enterprise system. When you talk about digitizing capital, people may think, well, there's some capital that simply can't be digitized. There are physical assets that can't be digitized. How do you respond to that or how do you digitize those kinds of assets? Yeah, I think that's where you're creative. Now, I never thought that a parking space could be capitalized, right? But then once you see it, you say, ah, every asset that an organization has can be turned into some digital capital, right? And so when I was working with the Port of Gothenburg, they said the problem is we don't know when a ship leaves berth. And so what happens there? Well, the ship is connected to Bollard, which is actually a cheap piece of iron that sits on the wharf, but it's an asset, right? And if you digitize that asset in some way so that when the rope is taken off and there's less pressure on the Bollard, and you can detect that, you then know that a boat's left, right? And now you can think of a marina that's got lots of Bollards. You've got then a way of managing what's happening there. So I think that the trick is to understand what creates value, even the little pieces of value, and then find a way to digitize those, sensitize them as what's happening as well. So kind of building on that. So what got you thinking about this topic now? Is it simply the ability to, you know, this whole Internet of Things movement around the ability to take relatively cheap sensors and apply them to physical objects? Or are there some other forces of play that got you thinking about the digitization of capital? Right, so the history of this is quite long. About six years ago, I got with my colleague and said, when we look at sustainability and global warming, people in the information systems field are ignoring it totally. They don't seem to think it's our property. So we started researching what we called initially green information systems and later converted them into energy informatics. And behind that came the realization that in order to manage the use of energy by all of the devices you have, you need sensor networks, right? So one of the examples I gave was Telenoor, which is sensitized each workspace and then they decide how much air to deliver, right? Simple sensor network. The parking space we saw as a way of reducing congestion. So we got on this notion of sensitize all assets in order to reduce energy consumption. And then gradually I made the broader recognition that what you're really doing is creating a digital data stream that's telling you about your assets and then you're finding ways to use that information to be better at using that capital, right? So that's how I got to it. It's taken several years to think about it. So it's both about building value but also about finding efficiencies, whether it's energy efficiencies or efficiencies with through existing assets. Yeah, and in fact, the way I framed the problem at the beginning, we have two big issues, greenhouse gas emissions, right? Which change the habitability of the earth and population growth. And we solve, as a society, most of our problems through technology. So we can start to work on greenhouse gases by increasing energy efficiency, which the US has been doing really well for many years. But also combined with that is increasing capital productivity. So we do more with less, which is a sustainability argument. So that's why I said, I think there are four main factors that determine the state of the earth. And therefore, if you want to do more with capital, you have to know the state of your capital at any time, right? And this is a problem we see in the shipping industry. They don't know when the cranes are available. So you'll find ships that will sail full speed to a port and then sit there for three days waiting for birthing space, right? If they knew the data about utilisation of the harbour, they could sail at a slower speed and get there just in time, right? So there's all sorts of issues about not knowing the status of capital. There's a lot of excitement today. I mentioned Airbnb earlier over this so-called collaborative economy. The idea that I can use my car, I can turn my car into a taxi cab for a few hours or I can turn myself into a delivery person and generate some value for that. And many, many other examples. Even parking spaces now, I can arbitrage and sell public parking spaces. Are we on the verge of a revolution that's enabled by these kinds of new uses that do mobile-enabled, real-time uses of the internet that enable us to, for example, know that a shipment is awaiting on a dock and if I can, I don't have to send a boat back empty. I can send it back with the shipment on it because the internet makes that happen. I don't know that it's so much the internet. I think it's ubiquitous access to information and through wireless networks, right? Through G4 and potentially G5 and all that. Because you want access to information wherever you might be. And the internet sort of gets it to some point. It's those last few metres or yards that gets it to you personally and then you can start to utilise resources better, right? But it's an information problem in most cases, right? So many of your resources are underutilised because we have no information about the current status. So your car is underutilised when you're here. And if you want to rent it for two or three hours, that's good for the economy because it raises C-prime and therefore we need less resources, less cars, to create a sustainable economy, right? That's good for everybody. Now, it's bad news for the car company, bad news for the rental company, but it's a free enterprise system. We should celebrate these sort of things, right? That's what we're about. So we're here at the MIT Chief Data Officer and Information Quality Symposium. So I wanted to ask about the role of the CDO and how a CDO or equivalent type of position can help an enterprise actually start this process of digitising their capital assets. Do you outline in your keynote three core areas where the CDO could help? Maybe if you could share with our audience what those are and then we could talk a little bit about how they actually go about doing this. Yes, I think the first thing is for the organisation to understand its capital conversion process. And I gave a model of a prestige car company. This is, if you think, the business model of the company. Now, until that's understood, the CDO can't really do anything because if you don't know the purpose of the company or how it's converting capital, you can't decide which capital you should provide. And in many cases, when I talk to people who help develop information systems strategies, they say there's often a gap, there is no strategy for the organisation. So I think if they can work with the organisation to work out what the capital conversion system is for that company, then what are the prime capitals? And then start to say, how do we hone in to make the conversion between one form of capital to another, the prime ones, more effective? What do we need to know about them, right? And then how might we digitise capital to improve the capital conversion process? So first of all, work out what the organisation's strategy. And that identifies what needs to be digitised. Then once you've done that, you implement the plan, right? You make it happen and you collect the data and you ensure that there's integrity and quality and all of the sort of security things you need. And then, and I think Jeannie alerted to this, is you then go through the process of making certain that the organisation exploits it fully. And she's done research that shows that many times companies create these systems, but they don't get every last dollar and send out of them, right? And if you've spent all that money, then you have to reap it. Yeah, I mean, I would agree with that from some of the research we've done at Wikibon. We find that there's a lot of investment going on in technology and services to support some of these so-called big data initiatives, but they're not getting the full value because it's that last mile. It's actually getting people to either change the way they make decisions or take actions or in some cases, actually you've got to infuse your business processes with these new approaches to making decisions. So one thing you didn't mention, and we talked a little bit before we went on air, was I wanted to get your opinion on the role of a CDO, specifically, but more generally in an organisation, what are the challenges around kind of the ethical use of data, essentially your digitised capital, and some of the risks associated with that. We hear a lot about data governance, information qualities, and the title of this symposium we're here at. What role, what is your opinion on the risks associated with digitising capital? Well, I think there's any change in the risk because we've been digitising capital for some years. The problem is, is so much more capital is now digitised, there is much more to manage, right? And of course, once you digitise a lot of capital, there's much more advantage to be gained by being able to access that capital, right? So very simple, if you've got your intellectual property and previously you stored it on paper and now you digitise it and put it on a disk system or a server somewhere, and then that's a big incentive for people outside to come and grab it. So those issues are amplified, but the core problem of preventing unauthorised access doesn't change, right? It's been there for a long time. We just have to continue to be better at managing that risk against the people who are trying to continually invade the organisation. I know you have a special interest in energy, and I want to ask you about, there are some office buildings now in Europe that are completely off the grid. They are actually net energy generators by using solar and wind power and such. Clearly it's possible now to operate off the grid, and if this were to happen on a large scale, what do you see as being the ultimate, the economic impact, some of the economic implications of large amounts of capital being taken off of the grid and essentially allowed to move around geographically wherever the companies want to position them? Yeah, you can't totally move off the grid without a lot of cost, because solar power and wind power is intermittent. You must have some base generating power that provides continual support for emergency type services. So I think we will still need a grid, but we will need less of a grid and a smarter grid so that you can dynamically start to think about which things do I power now? One of the, I've been in Europe this summer, went to an energy conference there. One of the big issues in Germany is, when do you power the one million electric cars given all of this intermittency in the system? So I think with this smart grid, we will have much more flexibility in how we use electricity. So you want to wash your dishes, but you don't have to wash them now, we can do that later. And so if we're getting more electricity generated locally, we have this massive grid system and that overhead now has to be handled somehow or other. And so the overhead of that is gonna appear in your bills, but you might be paying less for electricity and this is the problem that worries the utility companies because when people go off grid, that overhead is now left for everybody else to pay. And if you're the last one on the grid, your electricity bill's gonna be very expensive. So we have to work out how to do that transition and some of the utilities are rejecting that. So in some states, you cannot feed your solar power into the grid system, right? They won't allow it. And this really is an intrinsic characteristic of transitioning to a more efficient economy is there is entrenched opposition from those institutions that are threatened. Yes, exactly. And they're large organizations and they have tremendous lobbying power and a lot of influence and they will resist it. But ultimately, are you an optimist? Oh, I don't think we have any other alternatives than to move to power sources that don't generate CO2. I mean, unless we want to destroy the environment, but the interesting thing is companies have worked this out. A lot of large companies now say sustainability is our future. In fact, one of my papers, I argue, we're shifting from a customer service dominant logic to a sustainability dominant logic. And so you'll get someone like the CEO of Coca-Cola saying, we don't have a chief sustainability officer. I'm the chief sustainability officer. This is a problem for the whole company. The chairman of Hewlett Packard has come out and said, our future is in building systems to support sustainability. So I think the organizations have got it. The politicians haven't, not all of them, some of them have. But I think that's the great advantage of the system we live in that the organizations see the problem, they think long-term and we're going to solve it. Maybe not as fast as we need to, but we're working towards it. Well, yeah, I'm glad you're an optimist. I think if we all need to be, we see the forecast and they sometimes look a little dire, but I agree with you that many of the organizations and enterprises around the world are starting to get it. I think there's certainly still some in the US specifically that are fighting this trend, but I think as more data comes online that's kind of showing the real impact of climate change, I think more and more will start to get it. Yeah, I think for them, the data they see is, it hits their bottom line. Well, right, that was one of my next questions. How do we incentivize those who don't get it at this point to move in this direction? Well, the economists say the simplest thing to do is have a carbon tax, because the problem with carbon-based fuels is they create the problem and they don't pay the full costs of it. So we all have to pay the costs of pollution and things like that, but it's an externality. If you tax pollution so that those who use polluting products pay the full cost, then there's an opportunity for alternatives to come into the marketplace. But while we in effect subsidize those, then you squeeze out the opportunities for others to exist in the marketplace. One of the interesting discussions that was presented at this energy conference in Germany was the German government dictated that would be wind and solar power. And one of the economists said that was a lousy decision. They should have just set up a carbon tax and then let the market work out what the good solutions are. And in fact, Germany's paid a lot of money for its system. On some days, Germany generates far more electricity than it can use. And Holland and Poland get paid to take electricity. They think this is a wonderful system, right? Of course, we're about to see in this country or we're in the middle of a large-scale move to natural gas because of the new opportunities opened up by shale exploration. In fact, is that going to put off other sustainability initiatives that we should be making now? Yeah, I think we got lucky. We got lucky with shale and burning natural gas doesn't produce as many emissions. And it's going to drive the coal industry, is driving the coal industry out. But eventually, we're going to have to switch to a carbon-neutral system. Well, I guess my question is, is that buying us time to develop sustainable resources or is it putting off the problem further? It's doing a bit of both, actually. It gives us a bit more breathing space, but it doesn't force us to address the problem immediately, right? Which we're going to have to do at some stage. Now, if you look at what's happening, the US has become very energy efficient. It's places like China that present the major problem. I don't know if you've ever been to China, but you arrive in Beijing, you taste the air immediately, right? Yeah, it's a black cloud. And you don't see much. And China has to get out of that, right? Right, well, I think the argument, I guess, in the developing world as well, we didn't benefit from kind of one of the, maybe the first or two ways of the industrial evolution, and now it's our turn. And really, we're the ones, and this climate change has really been created by some of the more developed nations. How do you fix that problem? Yeah, that's the response of the developing economies that they need their turn to be wealthy, but their timing is pretty bad because this is a global problem. If we could confine the carbon emissions to China and had a nice big wall around there, we could say, you go ahead and pollute all you want, but everybody gets affected. Right. And so I think they have a valid case, but there's a much bigger argument and that is we're talking about the economic impact upon the world, right? And if every economy starts to suffer, China suffers as well. And also, they've got a large middle class now who don't want pollution. I've taught in China a couple of times, and people there are allowed to criticise the government for pollution. You can't criticise actions into bad and a few other things, but you can complain about pollution. So the government knows they have a problem. Interesting. So we only have time for one more question. We'll have to hear what's on your roadmap in terms of research. Are you going to be building out your thesis around the digitisation of capital? What's kind of on your roadmap? Yes, so I'm working on this in a practical way. So with the shipping industry in Europe, we were applying some of these ideas to help the shipping companies and the other stakeholders understand what's going on. In parallel with this, we're working on the idea of digital data streams and what sort of opportunities they create and how we can move decision-making to real-time by letting entrepreneurs get access to digital data streams in some standard format and with standard APIs to create all sorts of services that we can't imagine at this stage. So in the shipping industry is saying, put everything online, stream everything, control who has access to it and then let the market provide you new sorts of services so you can be more efficient. You can reduce your energy, increase safety and become more sustainable. So that's what I'm going to work on over the next couple of years, I think, unless some other problem lands on my desk that looks just too interesting to put us off. Well, I hope that because I'm interested in seeing the outcome of that research, very interesting. So Dr. Rick Watson from the University of Georgia, thank you so much for joining us on theCUBE. Appreciate it. We hope we can have you back some time again soon. Thank you. Thanks for the opportunity. You can see it.