IST02 Decentralized Collaboration

Dynamic, digital ecosystems will emerge in which constituents will interact collaboratively over decentralized networks. This open exchange of information and resources will revolutionize both workplaces and societies. 

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Peer-to-peer Society

The Internet, for which no centralized management mechanism exists, has changed the information distribution system via peer-to-peer networks, where users are interconnected on an equal basis. Organizational structures are being flattened and decentralized and open systems are spreading throughout society at large.

Emergence of Blockchain Technology*5

Virtual currencies do not have an issuer such as a national government or central bank. Instead, it ensures reliability with decentralized, distributed ledgers and forms an ‘Internet of money’ that circulates values. Not only can virtual currencies be used as a means of settlement in lieu of real currencies, they can also be used in coordination with tangible and intangible assets, thereby managing and transferring rights and contracts. Because blockchain technology has high transparency and are immutable, they are gradually becoming used in the registration of real estate, distribution of copyrights and management of medical information. Decentralized e-commerce and market forecasting, where there is no central management entity, are also starting to appear. Usage in voting and notary service are also being sought.

A Distributed Autonomous Organization (DAO), where no centralized governing system exists, is operated autonomously according to the predetermined rules. Although the characteristic that the transactions on the blockchain cannot be altered or canceled, if once recorded, may be an issue, DAOs have potential to be used for shared services, investment funds and asset management. For example, Estonia has implemented a notary service for marriages, births and contracts using e-Residency, which is used by foreign nationals. ID issuance, notary service, and other services offered by a virtual nation also have the potential of widespread use in the future as a means of verification without depending on a national government.

Rise of API Economy*6

Services are increasingly integrated by virtue of inter-company coordination. Sharing information and systems leads to coordination that involves a wide variety of parties concerned, including those in different industries. This in turn leads to the creation of highly convenient new services and innovations. Examples include: the coordination of flight information with airport transportation services and hotel reception; utilization of information obtained from automobiles for proposing insurance and maintenance services and the process for searching for a house to purchase on a smartphone and applying for a home loan. Because services are automatically proposed based on individual situations, users do not have to spontaneously find services by themselves. This will lead to an easy decision-making for purchase. Contextual commerce integrates social media and payment services, enabling an on-the-spot purchase of a product a user wants. This type of commerce is changing consumers’ purchasing behaviors.

Building Collaborative Economy

All types of information are circulating on the Internet, which is used by more than 3.4 billion people in the world. Large amounts of knowledge and know-how are contained within online encyclopedias, which let anyone edit topics at will. In this collective intelligence approach, each author contributes the knowledge from his/her specialty area. Because inaccurate information is corrected over time, encyclopedias created this way are comparable in accuracy to those edited by experts. Some believe that these encyclopedias offer detailed information that ordinary encyclopedias do not address.

Other examples for similar uses of collective intelligence include: investigating the causes of illnesses and developing therapeutic methods based on various information provided by the patients; and participatory sensing where individuals’ smartphones are used for monitoring the environment and acquiring data on traffic conditions. While ordinary sensors are more precise than participatory sensors, they are expensive and thus measurement locations are limited. Although sensors such as smartphones may be lower in precision, collecting huge amounts of such data over wide areas makes overall errors low. Participatory sensing is also used for purposes such as map information updates and urban planning.

To encourage open innovation, an increasing number of companies are utilizing crowdsourcing, which solicits knowledge, know-how, services and work from the general public. Its uses have expanded to include development of new products and services, problem-solving ideas, specialized expertise and skills. Professionals also use crowdsourcing to leverage their skills and expertise by identifying opportunities.

Crowdfunding solicits funds from the general public, enabling innovation by opening new opportunities of funding to startup. It diversifies financial risks and introduces new a decision-making mechanism for financing that enables even companies without collateral to raise funds if they win support for innovative ideas. A growing number of large companies as well as small businesses use crowdfunding for development of new products because they can derive benefits such as improvement of ideas during the development stage and prediction of reaction via communication with the market.

The Growth of IoT

The Internet of Things (IoT) has always existed as a concept, but not until recently has it started to become a reality. By adding a sensor and a communication feature, a variety of things can be converted to digital devices, including smartphones, information devices and household appliances, allowing them to report conditions and changes in devices and environments and to remotely monitor, manage and control devices. By 2020, as many as 20 to 30 billion devices are predicted to have access to the Internet*1234 , coordinating with one another. Autonomous problem avoidance and condition optimization delivered by artificial intelligence technology and big data analysis are also anticipated to become commonplace. Some examples include demand control for electricity by balancing and prioritizing the usage of home appliances, and collision avoidance of self-driving cars and drones by mutual communication.

In manufacturing, IoT brings an industry revolution called Industrie 4.0 or the Industrial Internet. With the Industrial Internet sensors installed on parts and manufacturing machinery are linked to people (laborers), production plans, and processes to optimize the entire lifecycle of a product, including procurement, production and post-shipment. It is now possible to change a production plan on a real-time basis in accordance with changes in the market, replace a production process in response to a mechanical failure and improve operational efficiency by monitoring product conditions. This is giving rise to new business models aimed at increased profitability by optimizing machine operation. By coordinating the entire supply chain including distribution, plans are underway to detect a delay in the arrival of a specific part ahead of time to optimize the production plan that covers multiple factories.

Migration to a Decentralized Society

Although only some progressive organizations are currently practicing a decentralized approach, it is anticipated to spread widely as a system of value exchange that does not need an intermediary. Of the current systems with centralized management, those that do not have central managers from the beginning such as international payments and remittances, and tasks of governmental agencies suitable for outsourcing to the private sector, are considered to be the best initial candidates for the decentralized system. On the other hand, many tasks are not suitable for the decentralized system, including transactions of listed stocks, where situations may change instantaneously and areas that require substantial decision-making.

Shutdowns of the Internet by a government in 2016 occurred as many as 56 times in 18 nations, including partial shutdowns*7. In a truly open, decentralized society, even the government could not shut down such services. An open, decentralized society is one with high transparency and no conflicts. At the same time, it is a society with no leader. The speed and spread of the migration to the decentralized society will likely depend on future system planning and the degree of societal acceptance.

*1 http://www.gartner.com/newsroom/id/3165317

*2 IDC, “Worldwide and Regional Internet of Things (IoT) 2014–2020 Forecast: A Virtuous Circle of Proven Value and Demand,” May 2014.

*3 Ericsson, “Ericsson Mobility Report,” November 2016.

*4 IHS Technology, “IoT platforms: enabling the Internet of Things,” March 2016.

*5 The core technology for virtual currencies such as Bitcoin.

*6 A trend for a company to disclose (or create a platform for) its API (application programming interface), a mechanism to call a software function, thereby making the coordination of information systems with other companies easier and creating new values and businesses.

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