Emerging Services Reflections on how Innovative, Growing and Tradable Services will continue to impact the Global Economic and Social Agenda - Presented at Cornell University, Johnson Graduate School of Management

1. Presented April 8th, 2015 at
S.C. Johnson Graduate School of Management
Emerging Markets Institute
Humberto Ribeiro
Visiting Scholar
Prof. Lourdes Casanova
Academic Supervisor
Emerging Services

2. What are Services
• Intangible products/commodities that satisfy wants or needs
• Economic activities that produce time, place, form, or psychological utilities
• Economic activities that transform goods and talent into well-being
Services
Intangible
Perishable
Variable
(Inconsistently
Unique)
Customer
driven
(Involvement)
Inseparable
Customer and Service
Provider CAN be
separated in all
TRADABLE ServicesSources:
Service Management: An Integrated Approach to Supply Chain Management and Operations – Cengiz Haksever, Barry Render (FT Press, 2013)
World Trade Organization – Services Profile 2014
Definition

3. What does “Emerging Services” mean?
• Conceptual model in development
Emerging Services
Services
Trade
Growing
Services
(Emerging
Markets)
Innovative
Services
(Developed
Markets)
Definition

4. Services Classification
• According to UN Central Products Classification 2.0
0 to 4 - Goods
5 - Constructions and construction services
53 - Constructions
54 - Construction services
6 - Distributive trade services; accommodation,
food and beverage serving services; transport
services; and electricity, gas and water
distribution services
61 - Wholesale trade services
62 - Retail trade services
63 - Accommodation, food and beverage services
64 - Passenger transport services
65 - Freight transport services
66 - Rental services of transport vehicles with operators
67 - Supporting transport services
68 - Postal and courier services
69 - Electricity, gas and water distribution (on own account)
7 - Financial and related services; real estate
services; and rental and leasing services
71 - Financial and related services
72 - Real estate services
73 - Leasing or rental services without operator
8 - Business and production services
81 - Research and development services
82 - Legal and accounting services
83 - Other professional, technical and business services
84 - Telecommunications, broadcasting and information
supply services
85 - Support services
86 - Support services to agriculture, hunting, forestry, fishing,
mining and utilities
87 - Maintenance, repair and installation (except construction)
services
88 - Manufacturing services on physical inputs owned by
others
89 - Other manufacturing services; publishing, printing and
reproduction services; materials recovery services
9 - Community, social and personal services
91 - Public administration and other services provided to the
community as a whole; compulsory social security services
92 - Education services
93 - Human health and social care services
94 - Sewage and waste collection, treatment and disposal and
other environmental protection services
95 - Services of membership organizations
96 - Recreational, cultural and sporting services
97 - Other services
98 - Domestic services
99 - Services provided by extraterritorial organizations and
bodies
Source:
http://unstats.un.org/unsd/cr/registry/regcst.asp?Cl=25 accessed Feb. 9, 2015
Definition

5. Are Services Good for the Economy?
• Services growth & Agroindustrial growth
impacting GDP per capita
– Japan grows GDP despite AI decline
– UAE modest GDPpC growth despite high
AI growth
– Nigeria and China high GDPpC growth
while SVC grow stronger than AI
– Mexico and Egypt with good AI growth
had slower GDPpC growth than Turkey
India and Russia, which had similar AI
growth, but higher SVC growth
• Jobs – final consumer rules!
• 21st Century agenda (global, modern,
green, systemic, pervasive…)
Sources:
The World Bank – Growth of the Services Sector -
www.worldbank.org/depweb/beyond/beyondco/beg_09.pdf
The World Bank - http://data.worldbank.org/ accessed Feb 9, 2015
Definition

6. More than Cogs
• Macro-policy Example: China focus on Services
Beijing - November 9th to 12th, 2013
Third Plenary Session of the 18th Communist Party of China Central Committee
Since then:
• Lifting price controls
• Changing tax
incentives
• Removing barriers
(telecom, finance)
• Privatizing state
assets
Source:
http://www.xinhuanet.com/english/special/cpcplenum2013/economic.htm accessed Feb. 9, 2015
Definition

7. The Three Dimensions
Emerging Services

8. • For Everyone
– Individual Services
• From glasses to cups to watches to family appliances
– Governmental Services
• Security, Governance, Public Services
– Supply-chain Services (Embedded)
• Productivity, Efficiency
• A Few Current Triggers
– Smart Cities
– Web of Things
– Industrial Internet
– Aging Society
– …
Innovative Services
Source:
http://www.nbcnews.com/tech/innovation/teslas-elon-musk-
says-human-driven-cars-may-be-illegal-n325331 accessed Mar.
17, 2015
Innovation

9. Global World Product & Services Share
World Bank Data 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Total GWP 30,643 31,301 31,213 31,089 32,241 33,284 33,087 34,335 38,560 43,412 46,965 50,880 57,328 62,858 59,539 65,217 72,140 73,514
Services GWP 18,643 19,099 20,433 20,591 21,496 22,220 22,428 23,498 26,399 29,590 32,074 34,690 39,220 43,284 42,032 45,653 50,374 51,591
% Serv 60.8% 61.0% 65.5% 66.2% 66.7% 66.8% 67.8% 68.4% 68.5% 68.2% 68.3% 68.2% 68.4% 68.9% 70.6% 70.0% 69.8% 70.2%
60.8% 61.0%
65.5%
66.2%
66.7% 66.8%
67.8%
68.4% 68.5%
68.2% 68.3% 68.2% 68.4%
68.9%
70.6%
70.0% 69.8%
70.2%
54.0%
56.0%
58.0%
60.0%
62.0%
64.0%
66.0%
68.0%
70.0%
72.0%
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
U$Bi
Global World Product & Services Share
Total GWP Services GWP % Serv
Source: The World Bank - http://data.worldbank.org/ accessed Feb 9, 2015
GWP Compound Growth (95 to 12) 5.3%
GWServP Compound Growth (95 to 12) 6.2%
Growth

10. • 2013 GDP (U$) and % of Services in Total GDP
Country Ranking by Services GDP
Source: The World Bank - http://data.worldbank.org/ accessed Feb 9, 2015
From 50 Countries GServP Total GDP % Serv
23 are Developed 32,682,960,845,180 43,642,121,112,231 74.9%
27 are Emerging 14,249,475,546,358 26,471,729,562,837 53.8%
Total 46,932,436,391,538 70,113,850,675,069 -
13,030,848,507,621 United States 77.71
4,259,214,832,234 China 46.09
3,600,205,894,102 Japan 73.18
2,552,647,894,726 Germany 68.43
2,202,659,980,513 France 78.49
2,120,309,409,660 United Kingdom 79.16
1,599,561,105,479 Italy 74.42
1,556,616,771,858 Brazil 69.32
1,293,245,463,560 Canada 70.79
1,253,477,601,515 Russian Federation 59.78
1,103,675,069,588 Australia 70.73
1,070,273,977,423 India 57.03
1,029,325,784,676 Spain 73.89
778,094,185,755 Mexico 61.71
771,063,947,171 Korea, Rep. 59.11
647,625,653,675 Netherlands 75.88
529,747,757,203 Turkey 64.44
504,193,516,455 Switzerland 73.56
421,457,420,276 Sweden 72.71
402,385,064,284 Belgium 76.67
393,728,559,445 Argentina 64.56
346,252,184,253 Indonesia 39.87
333,673,550,988 Poland 63.45
301,266,127,238 Austria 70.34
297,486,232,263 Nigeria 57.01
295,548,640,124 Norway 57.66
281,338,666,667 Saudi Arabia 37.59
254,536,876,154 Denmark 75.78
254,114,793,663 Hong Kong SAR, China 92.74
245,545,335,972 South Africa 70.03
223,026,560,001 Singapore 74.86
214,463,349,292 Colombia 56.67
199,610,988,057 Greece 82.41
188,345,686,198 Finland 70.45
184,311,640,524 Venezuela, RB 42.05
176,091,811,495 Thailand 45.47
174,251,065,656 Portugal 76.65
172,535,565,252 Ireland 74.34
169,855,256,780 Chile 61.28
167,144,555,484 Iran, Islamic Rep. 45.31
162,244,252,422 United Arab Emirates 40.33
157,152,559,586 Malaysia 50.18
156,846,715,989 Philippines 57.65
134,905,921,329 Kazakhstan 58.18
128,316,876,809 New Zealand 69.07
126,734,704,090 Czech Republic 60.7
125,976,667,833 Egypt, Arab Rep. 46.32
124,987,538,541 Pakistan 53.81
111,139,339,441 Ukraine 62.64
104,374,532,217 Peru 51.58
Growth

11. • Replication & Franchising of Business Models
• Infrastructure
(Energy, Telecom, Logistics, Sewage)
• Family Demand
– Needs
(Finance&Insurance, Healthcare, Education, Real Estate)
– Desires
(Tourism, Content, Entertainment)
Growing in Breadth and Depth
Growth

12. Services Trade
Source: United Nations Conference on Trade and Development - http://unctad.org/en/conferences/gsf/2013/Pages/Data-on-services.aspx accessed Feb. 9, 2015
1995: WTO
2001: China @WTO
1994:
Commercial
Internet
2008: Global
Financial Crisis
1998: Y2K Bug
& Offshoring
1989:
Berlin Wall
1986:
Perestroika
Major Tradable Services
in 2013:
• Travel = U$ 1,200 Bi
• Transport = U$ 906 Bi
• Financial = U$ 335 Bi
• Royalties = U$ 310 Bi
• IT Serv. = U$ 285 Bi
• Commun.= U$ 120 Bi
• Construct = U$ 120 Bi
• Insurance = U$ 105 Bi
Trade

13. Gross World Product & Trade
• (U$ Billion)
$53,050
$22,543
$4,720
$18,604
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
Services Goods
GWP 2013 (U$ Bi) Trade 2013 (U$ Bi)
Sources:
United Nations Conference on Trade and Development - http://unctad.org/en/conferences/gsf/2013/Pages/Data-on-services.aspx accessed Feb. 9, 2015
The World Bank - http://data.worldbank.org/ accessed Feb 9, 2015
(8.9%)
(82.5%)
Trade

14. Moving Forward
Emerging Services

15. Gold Rush?
• Scenarios
World Economy maintained growth:
Growing Services:
Innovative Services:
Services Trade:
GWP Compound Growth (estimate 13 to 25) 2.6%
GWServP Compound Growth (estimate 13 to 25) 3.1%
With continuous growth, by 2025 GWP is (U$ Bi) 103,170
Total GWP Growth in $ terms (U$ Bi) 29,655
With continuous growth, by 2025 GWServP is (U$ Bi) 76,581
Total GWServP Growth in $ terms (U$ Bi) 24,990
% of GWServP in GWP in 2025 scenario 74.2%
Moving Forward
9.9%
12.3%
14,609
9,889
5,745
4,323Dvlping Services Growth in $ terms (U$ Bi)
Dvlping Services Trade Compound Growth (01 to 13)
Global Services Trade by 2025 (U$ Bi)
Global Services Trade Growth in $ terms (U$ Bi)
Dvlping Services Trade by 2025 (U$ Bi)
Services Trade Compound Growth (01 to 13)
Dvlping What-if Scenario 1 Scenario 2
Dvlping % Services 62.5% 70.0%
GservP Dvlpg would be 20,380,096,875,809 28,501,208,802,398
GDP would be 32,602,350,892,289 40,723,462,818,878
Services Opportunity 6,130,621,329,452 14,251,733,256,040
Tied with the above!

16. Where are the Opportunities?
• Find Gold… or Sell Tools!
• Tradability
People flow, internet, globalization… Customers reach out across the globe!
• Innovation
Services can be greatly improved by business models transformation, webification, digitalization, and
other innovation
• Incipiency
Services still have huge untapped marketspace in many regions and segments (Education,
Entertainment, Logistics, etc)
• Consistency
Quality, certification, training, auditing and other support activities (Services) will ramp-up as fast as
(or even faster than) Services in general
• Outsourcing
Services are, in many cases, still state-owned ventures which are being either deregulated, granted
and/or sold to entrepreneurs
• Social Structure
Transformations in societies provide new opportunities. Social inclusion, gender equality, aging
population are examples
• Fragmentation
Multiple service industries today are still not consolidated for the benefits of scale and/or scope
Moving Forward

17. Public Policies
• Tradability
• Innovation
• Entrepreneurship
• Outsourcing
• Formalization
• Certification & Metrics
• Education
• Labor
• Infrastructure
• Tax structure & Incentives
• …
Moving Forward

18. Thank You!