Something profound is happening to the world economy. Our traditional understanding of the Information Economy is giving way to a new variation that will have an enormous impact on jobs, wealth, and entire industries. This new economy has its roots in data, but of equal importance are two other components: Application Programming Interfaces (APIs) and Mobile Apps. There is also a fourth factor working as an accelerator on each of the three others: the Internet of Things.

The business entry point for this new economy is low. All you need for success is a good idea and the will to push it through. The new economy’s biggest impact will be to unleash a vast surge of human creativity. For this reason, perhaps the most appropriate name for it is the Innovation Economy.

The Innovation Economy is being made possible through new tools that make it easy to connect data sources and monetizable application components accessed through published interfaces called APIs. These APIs enable applications to be composed with other APIs to develop completely new application solutions. A catalyst for the development of these new applications is the emergence of new cloud-based platform-as-service (PaaS) offerings such as IBM Bluemix.

This paper will layout the forces and technologies which are making this new economy, explaining how it will form and the role of PaaS offerings like IBM Bluemix.

New Economy

The New Innovation Economy

It may seem cliché to say “something profound is happening to the world economy”, but something profound is indeed happening and we need to pay attention to it. We have had the The Agricultural Economy, The Industrial Economy, and The Information Economy. The new economy may just be a new phase of the The Information Economy, but if so, it is very different from what we’ve experienced thus far. The participants are different. Its impact will be different. It deserves a different name.

The new economy has its roots in ‘data’. We could call it “The Data Economy”, but it would be insufficient. Data is central, but there are other elements. The term “The API Economy” is also popular. That’s important, but only part of it. Mobile Applications (Apps) and the Internet of Things (IoT) also play a role, as does a new class of programming tools.

What is singularly different about this new economy is the impact it will have – indeed is already having — on human creativity and innovation. The ability for an everyday programmer to easily incorporate advanced technologies into his/her app will make it possible for business people to rethink how applications and business processes can be recreated. We are already beginning to see a profound impact on almost every industry. New ideas are easily shared, which serves to accelerate the further stimulation of yet more new ideas. Because barriers to entry are low, it is in the hands of everyone to build new business offerings and services at a much lower entry cost. All you need to participate is a good idea and the will to push your idea through. This accelerated generation of ideas will grow and unleash innovation on a scale we’ve not previously witnessed. Because of this impact, perhaps the best name for it is the New Innovation Economy.


It all Begins with Data

The Industrial Economy has been fueled for decades by a specific natural resource: oil. Take oil away and, as we have witnessed many times, economic activity slows. The Innovation Economy is similar but the fuel is different. The fuel is data. Take data away from the Innovation Economy and activity slows.

But data has a different property from oil that changes how it impacts economic activity. Physical resources are finite in their re-usability. Data is not. Data is infinitely reusable. While both natural resources and data can be mined and processed for value – i.e., to create insightful information – data is different in that it can be combined with other data and then mined and sold over and over again. In the Innovation Economy, we don’t run out of fuel. The fuel generates more fuel!

It is important to note that there is a distinction between data and information. Data is typically raw information – it is not necessarily meaningful. Information is data that has been processed. In the context of this article, when the word ‘data’ is used, it could be either.

Almost every major industry is being remade by data. From healthcare, to agriculture, to manufacturing, to insurance, to banking, to retail. Data is having a massive impact.

Lets look at healthcare, one of the largest segments of today’s modern economy. In many respects, the healthcare industry is still in the dark ages. Yes, we know a lot about how diseases work and we have wonderful medicines to target them, but at its core medicine still uses a lot of guesswork. We don’t have a great way to capture and compare symptoms, diagnoses, treatments, and outcomes across the population. Whenever a doctor is presented with symptoms, he/she has to reach back individually into his/her experience to make an educated “guess’ as to what the problem is. There is never enough information to say for sure what is going on. Treatments similarly are also driven by best guesses based on individual experience.

But what if doctors had a massive amount of additional data at their fingertips upon which to formulate both diagnosis and treatment? The effects would be different. That day is fast approaching. We may see it happen as more and more people begin wearing “wearables”, portable sensor technologies that measure everything from blood pressure to glucose level to muscle fatigue. Right now “wearables” are used by only a small portion of the population. But mobile phones started that way too and look at how ubiquitous they are today. People care enormously about their health; they have huge vested interests in monitoring and maintaining it. The problem with wearables is the hassle factor, but if the devices were non-intrusive and tracking was easier and users received massive benefit from wearing them, almost everyone would do it.

Big things happen when you get enough data to see what is going on in a whole system. When a sizable portion of the population begins wearing “wearables”, and sending real-time (anonymized) data to the cloud, big things can happen to healthcare. Certainly the effect on individuals may be great in itself, but the best insights will be achieved when we can compare information across the population. It will mean doctors will be able to capture much better information upon which to base both diagnoses and treatments.

People get nervous about having their medical information put up in the cloud and potentially misused. With the rash of breaches we have seen of confidential information, it would be naïve to say these concerns aren’t justified. But at the same time, there are techniques to protect information and prevent abuse. Client-doctor confidentiality can be put in place so that diagnoses and treatment cannot be linked to a specific individual. Data anonymization techniques can mask the identities of individuals but preserve the characteristics of overall populations. When large quantities of anonymized health data are analyzed, the value for all can be amazing. It also opens commercial opportunities for the data – both raw and analyzed. When this occurs it can drive great innovations in healthcare enabling improvements in efficiency and effectiveness on a large scale.

The benefits of anonymized data can be tremendous across industries. Banks can sell anonymized data to marketers and policy makers to better understand the characteristics of a population and help target businesses better. Telecoms can do the same.

For some industries the use of data can remake the industry. Take insurance. The business of insurance is built on the idea of measuring risk; the more accurately an insurance company can measure risk, the more accurately they can price a policy accurately. Right now the insurance industry tends to focus on averages. More and more they will focus on targeting based on individuals.

Retail is also becoming a data industry. The more a retailer knows about what a specific customer wants, the better they can target their offerings. There is a reason why Google makes so much money while giving away so much for free. They have data about you that retailers are willing to pay for, handsomely.

Data is a core fuel for this new economy. If one can access large amounts of data and analyze it and offer back insights, people will pay for it. More and more organizations are realizing the economic value of data. We are seeing companies set themselves up to be data brokers in the data economy.


APIs as the Mechanism of Trade

If data is the raw material for the Innovation Economy, APIs are the machines used for getting at and consuming the data. APIs can be used to access commercial application components that can be bought and sold in their own right.

What are APIs? In computer programming, an application programming interface (API) specifies how to interact with a particular software program. An API is an interface to a service. You send messages to an API, or ask for something via an API, and a program executes a function or returns a specified result. APIs are not new and the term can be applied to a broad set of callable functions.

But in the context of the Innovation Economy, APIs often refer to a specific type, REST APIs. REST (REpresentational State Transfer) is a mechanism that allows two applications to talk over the Internet using tools similar to that of a web browser. The way a Web browser works is that when you type in a URL, you are pointing to an address of a resource, in this case a specific set of data. A URL is like a GPS coordinate for information. The browser grabs the data found at the coordinate and formats it for you as a Web page. The web page itself is just a representation by the browser of the resource.

REST APIs work similarly in that they use URLs to identify the location of a resource, but rather than representing the resource via a browser, the resource is represented in a manner that is suitable to the particular application program. REST also adds another dimension. It uses additional verbs to do things with the resource. The resources can be data or a whole applications, or even parts of applications.

An example of a REST API most people can relate to is the API used to call Google Maps. As a user, we typically think of Google Maps as a web or mobile application. But Google also provides Maps as an API. Google allows 3rd-party programmers to call Google Maps functionality and to incorporate that functionality into their own applications.

Many apps today are assembled from APIs from multiple sources. For instance, cars.com is a website that provides a single point of service for buying, selling, researching, financing, or repairing cars. The company has effectively “composed” for themselves a business that uses APIs from several sources – auto dealers, banks, insurance companies, map providers, and an analytics provider (IBM).

Vendors can choose to make their APIs available for a fee or free. Google Maps are available to the general public for free, or at least we think the app is free. The reality is that Google has made a deal with you. The deal is that you have given Google the right to your information, and in return Google are giving you all kinds of free app function (check the fine print on any Google application). Maps is therefore not really free; advertisers are paying for it. It is a similar business model to television or radio.

But Google Maps is not free to everyone. When a 3rd-party incorporates Maps into their own app, Google charges for the privilege. APIs, like data, are therefore essentially commercial building block for the new economy.

APIs, like data, can be bought and sold, and the role of data and APIs are interrelated. APIs provide a mechanism for accessing data and packaging it up for commercial purposes. Data can be presented in many different ways using a variety of APIs. Raw data can be accessed as a simple query API. Analyzed data (providing specific insights) can also be presented as more advanced API. One can also aggregate data from different points, run new analyze on it, and produce new consumable APIs.


Apps Usher in the Era of the Composable Business

According to Portio Research, the global market for Mobile Apps will be worth $64B by 2017. That’s just for “paid” mobile apps primarily off the Apple App Store and Google Play. There are also plenty of “free” apps, which actually account for 94% of all downloads. When you factor in the free apps and consider the fact that most free apps make money using alternative business models (the Google Maps example), the size of the total market driven by apps is enormous — bigger than the economies of many countries.

In the late 1990s, IBM coined a term and ad campaign around “e-business”, betting that company web sites would become as necessary to every company as a logo. Today, the prediction is that mobile apps will become as commonplace for every company as a web site. In fact, given the more focused nature of Web apps, companies are more likely to build many of them. Having a mobile app is becoming table stakes for running a business.

Just as cars.com has fashioned a unique business by aggregating a variety of APIs into a useful new consumer service, other companies are realizing the power of APIs too. The new apps being developed are not just coming from startups. Traditional businesses are realizing that they can dramatically refashion their own existing businesses with apps, and in particular mobile apps.

The two most differentiating features about mobile apps are (1) that mobile phones are almost always with us and (2) that mobile phones enable a new class of apps – context aware apps. On the first point, 91% of people keep their phones within arms reach 100% of the time, so companies are realizing that if they want to reach their customers the first and most important channel for them is the mobile phone. On the second point, mobile devices come with all kinds of sensors – GPS and WiFi for understanding location, accelerometers for understanding the direction you are going and how fast you are moving, cameras and QR scanners to help you feed back the immediate world around you. All of these features give us a better picture of context and so businesses are realizing that they can dramatically improve their business processes by reshaping themselves with context aware mobile apps.

Although we already have a lot of context aware apps available to us, the reality is that the market for new context ware apps will explode once we consider the last input to the Innovation Economy story – the Internet of Things.


The Internet of Things as the Accelerator

In 2000, IBM ran an e-business TV ad called “The Refrigerator”. The ad opened with a doorbell ringing. A woman opens the door and a repairman says “I’m here to fix your refrigerator”. The woman says “My refrigerator? There’s nothing wrong with my refrigerator”. The man says “Not yet!”. The ad then flashes to a line “Appliances that call for help before they break down – they’re coming”.

The ad was meant to illustrate that the era of machine-to-machine (M2M) communications was just around the corner. At the time, IBM even put together a “Pervasive Computing” organization. Unfortunately, IBM was a little ahead of the market on that one, but the prediction was accurate. The era of machines that report back when they need help is indeed coming, and in many industries these machines are already here.

The market has largely stopped using the term “M2M” and has instead adopted the term “Internet of Things”. For years, IoT/M2M had a relatively consistent level of media chatter. But near the end of 2013, IoT media chatter started to pick up and by mid-2014 interest has increased exponentially. The top sources of chatter around the world are South Korea and San Jose – the centers of gadgetry and technology.

The Internet of Things is hot. There are probably a few reasons. Mobile phones are maturing. We are seeing technology companies, like Apple, move into new spaces. It is evident with technologies like Continuity, which is coming with Apple’s iOS8. Continuity helps to preserve state across devices – you start a task on an Apple Mac, move to your iPad, later pick up your iPhone, and potentially interface with Apple Carplay in your car. The point is that you interact with a number of things in your world.

It is in this context that it is best to view the Internet of Things. People want to be able to interface with their world so that their interactions with devices are not separate silos. Technology is supposed to make life easier not harder. The IoT is really the beginning of a system for integrating technology more fully into our lives.

To make IoT work, it requires open communications protocols that allow for the integration of devices from many sources as well as the aggregation and analysis of data. This is happening. Lightweight open protocols like MQTT, supported by information technology standards bodies like OASIS and open source proponents like The Eclipse Foundation, are setting in place the standards for IoT interoperability.

But the big advances for IoT will come from the ability to access all of this data and to do analytics on it. It is estimated that by 2020 there will be more than 50 billion things connected to the Internet. Data from IoT devices will eclipse all other data currently available. As these data sources come online, the potential for the Innovation economy will accelerate. But it will be the revolution in developer tooling that will make it happen.

This is where platform-as-a-service, and particularly IBM Bluemix come into the picture.


IBM Bluemix – the Canvas for Drawing the Innovation Economy

The universal question line of business leaders always ask their IT organizations is “how come you can’t build me a solution faster?” The pace of change in business is fast and the window of opportunity is often short. When business leaders get an idea they want to be able to implement it quickly.

This is what IBM Bluemix does for business. Bluemix is a Platform-as-a-Service (PaaS) built upon the IBM SoftLayer cloud. SoftLayer is Infrastructure-as-a-Service (IaaS), a cloud where you can run your apps. Instead of buying a server, finding a place to run it, and managing it, SoftLayer takes the hassle away by providing and running the infrastructure for you – as a service. You can run your software on a virtual machine on SoftLayer or you can choose a particular server to run it on (what SoftLayer calls its ‘bare metal’ service).

Bluemix is a higher abstraction than SoftLayer. It provides a middleware platform upon which you can build your applications. It can provision all the core services you need to run and build an app – the database, the application server, analytics systems, mobile backend services, development tools, and more. Two of Bluemix’ most interesting services are an Internet of Things cloud service and an API marketplace, called IBM Cloud Marketplace. This is where it gets really interesting for enabling the Innovation economy.

The value of Bluemix is that you can build applications much faster than you would otherwise be able to if you had to install and provision all the pieces yourself. Bluemix is also more cost-effective since as a developer you don’t have to buy all the software. Instead you rent what you need and pay for only what you consume. This eliminates some of the financial hurdles and makes it easier to get a project up and running.

The IoT cloud and the API marketplace on Bluemix are particularly interesting. With the IoT cloud you can get access to data from all kinds of physical sensor systems. You can then turn the data into APIs and do analytic processing on it. Finally, you can make the finished offering into a mobile app. The IBM Cloud Marketplace provides an area where you can consume third-party APIs as a service or create your own APIs that others can consume.

In short, Bluemix provides a toolset that can accelerate the consumption of data, the creation of APIs, the consumption of 3rd-party APIs and the development of totally new mobile apps. It is the single canvas that lets developers build composable business apps that will drive the New Innovation Economy.


Toward an Economy Driven by Innovation

All economies need some sort of fuel. The Industrial Economy fueled itself with oil. The Innovation Economy is fueled by data. Like oil, data can be mined and processed for value – it’s value being insights. But data also has different properties from oil. Unlike oil, data is infinitely reusable. Data can combined with other data and then mined and sold over and over again. With data, we don’t run out of fuel. We generate more fuel.

APIs, like data, can be bought and sold, and the role of data and APIs are interrelated. APIs provide a mechanism for accessing data and packaging it up for commercial purposes. APIs can also be bought and sold as applications and application components in their own right. Both can be used to usher in a new class of mobile apps focused on context awareness.

The accelerator for all this activity is the growing market of the Internet of Things. Put these pieces together and you have all the ingredients to drive an explosion of new economic activity.

But there is still one thing required – a canvas upon which the Innovation economy can be drawn. This is where PaaS solutions like IBM Bluemix fit in. Bluemix lowers the business entry point. All you need for success is a good idea and the will to push it through.

When all of these pieces are put together, we can unleash a vast surge of human creativity. We can start seeing the real results of the Innovation Economy.


About Me:  Graham Churchill leads the IBM MobileFirst and Internet of Things Software Solutions Portfolio for IBM Canada. Previous to that Graham led the IBM WebSphere Technical Team for IBM Canada and before that was IBM’s Global Connectivity Software Sales Leader. Starting in the IT industry over 25 years ago as a systems analyst, Graham moved into sales and marketing roles soon after. While living in the UK for 9 years, he ran the first global marketing campaign for IBM on business integration, worked in product management at IBM’s Hursley Lab, did competitive sales, and then global sales. Always an inquisitive student of business strategy, Graham studied Strategy and Marketing for an MBA. He is currently based in Toronto, Canada. You can reach Graham on Twitter at @GraChurch.

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