Jim Spohrer was a director at IBM. He led IBM’s Cognitive OpenTech, IBM Global University Programs Worldwide, IBM Almaden Service Research and CTO IBM Venture Capital Relations Group. Jim developed speech recognition systems for Verbex, an Exxon company, before earning his PhD in Computer Science and Artificial Intelligence (AI) from Yale University. While at Apple, he was named a Distinguished Scientist in Learning Research and received nine patents. His research interests include service science, open innovation, value co-creation, service systems, computer science and AI. Jim has over 90 publications and has received numerous awards, including the Christopher Lovelock Career Contributions to the Service Discipline, the Gummesson Service Research award, the Vargo and Lusch Service-Dominant Logic award, the Daniel Berg Service Systems award and the PICMET Fellow for advancing service science. He serves on the boards of several non-profit organizations, including the International Society of Service Innovation Professionals (ISSIP) and ServCollab. Jim is also on the board of the Journal of Creating Value (JCV). He was named a Senior Fellow of the University-Industry Demonstration Partnership in 2021.
Fatiha Boukouyen: To begin, could you share your perspective on the distinctions between being a practitioner and a researcher?
Jim Spohrer: In general, researchers work to expand knowledge and share their explorations and findings with other researchers, whereas practitioners apply knowledge to specific customers or contexts. My co-authors and I wrote ‘Service in the AI Era’ for practitioners, scholars (also known as researchers) and educators. These are three important roles in business and society today. To do their jobs better, practitioners, scholars and educators must all become more skilled in AI. Practitioners, scholars and educators all give and get service. Today, practitioners provide customer service as a means of staying in business. Researchers ask and answer big questions so that we can gain more knowledge and provide better future service. Educators are helping to prepare the next generation of both practitioners and researchers. I’ve spent my entire life working as a researcher and practitioner. In 1978, after graduating from the Massachusetts Institute of Technology (MIT), I joined a start-up AI company that specialized in speech recognition. So, I was a business practitioner who also conducted research. I was trying to figure out how to get machines to understand spoken speech. Next, I went to Yale to get my PhD in Computer Science, and I was conducting research at the university, so I wasn’t much of a practitioner. I then went to Rome to serve as a visiting professor and scholar at the University of Rome in Italy. Primarily, I worked as a researcher, but I also helped teach the next generation of Ph.D. students. Next, I joined Apple as a practitioner, but I also worked as a researcher in Apple’s Advanced Technology Group (ATG), first doing Business Learning Research and then Authoring Tools & Titles Research. At Apple’s ATG, I studied learning platforms such as SK8 Authoring Tool, EOE (Educational Object Economy) and WorldBoard, a proposed planetary augmented reality system. In the late 1990s, as the internet boom was beginning, I joined IBM definitely as a practitioner, and then I started the service research area in IBM Research to help our service business innovate. So, for most of my life, I’ve been both a practitioner and a researcher, with the exception of the educator role, which I’ve done less of. Nonetheless, all three roles are crucial. These three distinct roles can be thought of in terms of the type of service they give and what kind of service they get. The difference is that the educator focuses on preparing the next generation of practitioners and researchers. Researchers grow knowledge, whereas practitioners apply knowledge.
Fatiha Boukouyen: As an IBM Director, what would value creation look like?
Jim Spohrer: Better computing leads to better business outcomes. In IBM, value creation focuses on business-to-business, digital transformation of business (such as using AI) and next generation computing platforms (such as quantum computing). So, IBM is largely a business-to-business model, with the idea that technology improves year after year. Many of those technologies, such as mainframes, were developed by IBM in the past. The hard disk was invented by IBM. IBM is currently making significant advances in artificial intelligence and quantum computing. So, there’s this idea that technology, specifically computation, is about how many computations you can do in a given amount of time, how much energy it requires and so on. IBM has always believed that there is a technology infrastructure that businesses will use to do business better. The accounting part was the mainframe revolution. The personal computer, or IBM PC, came along. Believe it or not, when smartphones first appeared, some of the chip technology in them, as well as the security systems that accompanied them, were developed by IBM. So, IBM’s business value creation is primarily based on a thorough understanding of the technology that businesses can use to run their operations more effectively. The mainframe was probably IBM’s most important early phase, so people were migrating their accounting to mainframe computers, and a lot of that was automated. Instead of having a thousand people in your accounting department, you only need ten people, and you can free up all of those accountants to work on other aspects of your business. After the mainframe came the PC. Following the PC, the big thing was outsourcing IT (information technology). IBM would approach one of our customers, say Ford Motor Company, and say, ‘We have been selling you our mainframes, and you have all of these people at Ford who are running the mainframe’. However, you are a car company, not a computer company, so how about we at IBM take ten thousand of your Ford employees who are running all of this technology and rebadge them overnight, converting them from Ford employees to IBM employees. IBM will manage your data centre for you and provide better career opportunities for the technical people who use computers at your company. IBM will reduce the cost of computing by 10 per cent every year. So, your technology costs will come down, but you must sign a 10-year, billion-dollar contract with us. So, yes, what is value creation in IBM changes, some parts of it change year to year, but it always comes down to, at least so far, what IBM can sell to other big companies. Typically, they require more and more computation to run their businesses better and better. IBM creates new computing platforms and then helps our clients, who are primarily large corporations, change so they can use the upcoming platforms to better serve their clients.
Fatiha Boukouyen: So, it’s a whole process followed by IBM to create value?
Jim Spohrer: Yes, IBM Research employs a variety of innovation processes to develop new computing platforms, including open innovation to collaborate with other innovators in the field. Additionally, IBM business units employ a variety of processes to support businesses in transforming through the adoption of these new platforms.
Fatiha Boukouyen: Do you think that value creation in B-to-B relationships is the same as in B-to-C relationships?
Jim Spohrer: The mindsets of B-to-B and B-to-C are very dissimilar. A small number of very large deals are necessary for a B2B mindset. Conversely, if you have a B-to-C mindset, you’re considering how to reach a million or even a billion people. There is always the temptation to try to make them similar, but when someone spends a thousand dollars or even a few thousand dollars on personal items, that’s one thing; however, when they spend tens of millions, hundreds of millions or billions of dollars on a single contract, that’s quite another. It’s just the scale that is enormous. IBM also strives to build long-term relationships. However, on a B-to-C scale, someone can buy something from you today and then someone else tomorrow; for example, I could buy a Coca-Cola today and a Pepsi tomorrow. B2B must focus on changing the workplace culture for thousands of employees, whereas B2C can focus on the individual decision-maker. For example, I may use AT&T for internet today and Comcast Xfinity tomorrow. Switching costs are typically lower for B-to-C than for B-to-B, which is another distinction. There are several distinctions between B-to-B and B-to-C. Today, B2C technology companies such as Apple, Microsoft and Google have the largest market capitalizations. However, in the 1980s, B2B and IBM dominated the technology company market. Scholars specialize in studying B2C, B2B or B2B2C, among other variations. As a practitioner who has worked with both Apple B-to-C and IBM B-to-B, I can see some of the strengths and weaknesses of both approaches when it comes to value co-creation. I prefer the term value co-creation rather than value creation. There will always be interactions between entities, so value is always co-created. Even if you’re alone on a desert island, when you build a hut, start a fire or do anything else, you’re co-creating value with your future self. So, to me, it’s always about interaction, and sometimes that interaction is with yourself in the future. In our book, ‘Service in the AI Era’, we discuss responsible actors who are learning to invest in becoming a better future version of themselves. This is what individuals, businesses, universities, nations and all service system entities are doing.
Fatiha Boukouyen: The concept of interaction transforms value creation into value co-creation. So, interaction is at the heart of value co-creation; whenever there is interaction, there is always co-creation, correct?
Jim Spohrer: Yes, the long arc of history is towards win–win interactions which increase interaction capacity, and away from lose–lose interactions which decrease interaction capacity. Imagine a world in which everyone is self-sufficient. For example, you could make your own clothes, generating your own energy. I grew up on a farm in Maine, and I remember having a horse and feeding it grass. I remember when we received the tractor. We bought the tractor from John Deere and then had to get gas from Exxon. You transition from being a pioneer who does everything for themselves to becoming a consumer. The fundamental decision is to build or buy. Mathematically, the law of comparative advantage explains why, in a population of entities that trust one another and can learn to specialize and do things better the more they do them, it is preferable for everyone to interact (trade) rather than try to do everything on their own. Even for pioneers, entities that can do everything on their own, the rule suggests doing a little more of what you do best and a little less of what you do poorly, and trading to fill the gaps; if all entities do this, productivity will skyrocket over time. There is a learning curve, so we’re improving over time by trading; if we trust each other and can trade, which is a big IF, things will get better for everyone. This is one of the fundamental concepts in service science. We use this abstraction to describe how individuals, businesses and even countries provide and receive service, and we refer to all entities as service system entities. To simplify things in the book, we referred to the service system entities as ‘responsible actors’. Comparative advantage, also known as Ricardo’s law, is the mathematical basis for understanding why entities interact. Entities should learn to trust one another because the overall productivity of a system that includes all actors increases dramatically. In the early 1800s, Ricardo studied how England made clothes, Portugal made wine, and Poland made wheat for bread. He was trying to figure out how England, Poland and Portugal could optimize trade for everyone’s benefit. In summary, there is a mathematical basis for how service entities, or responsible actors, provide and receive service. Value co-creation and entities evolving into better future versions of themselves go hand in hand. For example, there are all of these ways of thinking about value co-creation, from the mathematical foundations of Ricardo’s law to IBM’s concept of investing in change called Run-Transform-Innovate. An organization can invest in three types of activities to effect change: Run-Transform-Innovate. James March, the field’s founder, coined the term ‘exploitation and exploration’ in his famous paper. He referred to them as ‘learning organizations’ rather than service system entities. All systems—businesses, individuals and governments—are learning systems. We all must make a fundamental investment decision. We must decide how much to invest in simply doing what we know how to do, routine tasks and how much to invest in exploring and trying new things. So, March referred to the routine things as exploitation, which is the use of our existing knowledge for benefit. However, even though there are risks involved, exploring for new knowledge can be preferable to exploiting existing knowledge. For example, early humans may try eating a new plant, which could be poisonous or delicious. Exploration entails risk, but if you are a member of a social collective, you can spread the risk and accumulate increasingly more benefits for future generations. At IBM, exploration takes two forms: transformation, or learning from others, and innovation, or inventing and sharing with others. Transformation entails looking around and becoming a social learner. Others do the exploration; now I’ll just adopt it, so I’m transforming myself, which is how we think in B-to-B business at IBM. For several decades, IBM has been one of the world’s top patent-generating companies. For me, the question has been: What is the science of entities that give and get service? How can we use emerging technologies to improve entities’ capabilities, then use new business models to provide more benefits to our customers, and finally use institutional arrangements to mitigate harms to stakeholders, the environment and future generations? With any new technology, there is always the risk of accidents or bad actors using it inappropriately. For example, early steam engines exploded. They were putting them in buildings to keep them warm, but some of them exploded and killed the people inside. As a result, new technologies always bring both advantages and disadvantages. A major concern about the Metaverse is that people will lose touch with reality.
Fatiha Boukouyen: We’re discussing privacy issues in the Metaverse because when one person is present in another’s virtual environment, the latter can record all of the former’s information and data and use it for their own goals or purposes. As a result, there will always be risks and issues.
Jim Spohrer: Yes, several companies can take a few pictures of you, as well as some audio and video, and then simulate how you look and speak. Scammers are beginning to use it. So, identity theft has existed for a long time and may become more prevalent. Punishing bad actors is crucial and necessitates new institutional arrangements. We mitigate the harms so that we can reap the benefits. For example, a faculty member who gives routine lectures can create a virtual version of themselves so that if they become ill, their digital twin can deliver the lecture for them or they can move on to more valuable lectures. This is one of the advantages of digital twin and AI technologies. Entrepreneurs typically consider the positive social benefits of their innovations, but there are always bad actors who take them and exploit them to cause harm. That is simply the nature of the beast, and that is the nature of technology. There are both advantages and disadvantages to technology. Things sometimes have to get worse before they can get better because governments and institutional arrangements move more slowly than technological change. I believe that is the nature of the world. Perhaps the Metaverse will assist with experimenting in a simulated world before attempting them in the real physical world.
Fatiha Boukouyen: How do boards and CEOs assess value creation in practice?
Jim Spohrer: CEOs and boards of directors in public companies are concerned with shareholder value, which is represented by stock price. I serve on non-profit boards of directors, and the emphasis is on providing value to members, including career development for sharing knowledge and building their eminence, or reputation as experts. Both public companies and non-profits must strike a balance between short and long-term goals. Some people think of it as air, water and food: you must keep employees, customers and shareholders satisfied. In IBM’s history, it’s instructive to look at Lou Gerstner, who came in and basically saved the company in the 1990s. Gerstner kept IBM together by expanding its service business, which included IT outsourcing. Even when IBM customers preferred someone else’s hardware or software, they relied on IBM to ensure that everything worked together seamlessly. Each decade brings new challenges and opportunities for growth, as well as ways to engage with employees, customers and shareholders.
Fatiha Boukouyen: Is there any process to follow to create value?
Jim Spohrer: This is where I follow thinkers such as Curt Carlson and Gautam Mahajan. I read their writings on value creation processes. Gautam has numerous ideas. Curt has a value creation process. My interests include service science, service innovation, value co-creation, benefits-harm, business models, institutional arrangements, service-dominant logic and emerging technologies. All of this adds up to a view of the world as an evolving ecology of entities that get and give service. Multi-scale actors, such as individuals, businesses, universities and nations, interact and evolve over time as they receive and provide service.
Fatiha Boukouyen: You are a member of the Creating Value Alliance (CVA), what do you think about this movement?
Jim Spohrer: It’s fantastic that there are journals, conferences and a newsletter. A lot of interesting people are thinking hard about the topic of creating value. It is a vibrant community with opportunities to exchange ideas. I’m always happy to provide a little positive encouragement.
Fatiha Boukouyen: What can CVA members do in order to move CVA forward and thus keep raising awareness towards value creation?
Jim Spohrer: Every community wants to know how to grow and better serve its members. At the end of the day, all communities strive to strike a balance between practitioners, researchers and educators. All communities are attempting to build a knowledge base, so researchers are required; all communities are attempting to have exemplar practitioners who apply that knowledge base and are successful; success stories from applying the knowledge; and finally, all communities have educators who are trying to raise the next generation. All communities are attempting to teach the next generation of practitioners and researchers to speak a common language. Every community is trying to create a knowledge base. You understand how to attract great researchers, practitioners and educators. That is what every community does, including the physics and computer science communities. All entities that provide and receive service to their communities and collectives. They are all trying to accomplish the same thing. Even as individuals, we strive to expand our knowledge, apply it successfully, and educate ourselves so that future versions of ourselves are constantly improving.
Fatiha Boukouyen: I appreciate your time and the valuable thoughts you’ve provided throughout this interview, Jim. Thank you.
