But what if the ability to collect proprietary data gets legally and ethically complicated, a few years down the line? Say the government imposes a limit on data collection from durable goods that are not replaced in 5 years, deeming these to be “natural monopolies”—for example, products with high switching costs for consumers, such as home appliances, smart home devices (e.g Nest thermostat), TVs, or cars—and therefore subject to US anti-trust laws?
A sustainable market for big data has yet to be defined
Business decisions about “big data” applications are not simply engineering or technology decisions. They are have philosophical, legal, and moral implications.
Markets, and the business models they support, are defined and sustained both by technology horizons as well the social, economic and political agendas of a certain moment in time. Understanding these contextual factors are equally important in figuring out how to position yourself on the winning side of data-enabled businesses.
The challenge for companies is that nascent markets built today around big data are going to change radically. We are now at a point in development similar to where internet business models were roughly 12 years ago. Since then, we have seen much back and forth about appropriate norms and rules regarding privacy and net neutrality, as well as dramatic shifts in how the public views and trusts some of the leading, innovative internet companies (i.e. is Google the “do no evil” company, or the “evil monopoly?”)
In a similar way, the fundamental decisions about what is fair have not yet been determined. And they may shift around a lot over the next five, ten, even twenty years. Some of the most important market-determining questions—like those in the financial services and appliance examples—haven’t yet even been clearly posed.
How do we connect the social and political context to today’s business decisions?
Why is this important? Because as with other newly emerging markets, the definition of the playing field will determine what is or is not a real opportunity, and which parts of a big data business will be the most advantaged and protectable. Anyone who is not thinking about this as part of their strategy may be left behind in some of the largest opportunities, or find themselves over-invested in fantasy, million-dollar businesses. This is a critical time for firms deciding which of their potential data-intensive business ideas to pursue, and in what form.
But while enabling technology may be “exponential” and future sources of customer value to be unlocked “boundless,” budgets and time are not. When everything can look at first glance like a billion-dollar opportunity, these can be hard choices to make.
Having a point of view on the broader context will help organizations evaluate these choices more clearly, and with more complete criteria. Such criteria include:
• Which applications and use cases offer the most sustained value to your company? For example, for a digital health company, how will your bottom line be affected if new rules for wearable computing are introduced that define wearables as medical devices? Compliance costs could make many business models unprofitable.
• What data will be most valuable, and which is worth owning versus buying? It may be much cheaper for others to collect and organize data than for you to create your own proprietary system.
• What kinds of data use will cross the lines of socially accepted behavior? The now famous Target pregnancy offer case shows there will be situations where you should not preemptively market to someone. But what if you do it based on other kinds of attributes—like having been admitted to Harvard? A robust strategy will need to understand the distinct reputational risks and returns for every kind of sale and try to position around the positive-attribute marketing versus the negative in many situations. But this requires human judgment.
Sure, in theory, hospital emergency rooms would run more efficiently with real time pricing—just like Uber does. But a decision such as this requires applying additional choice criteria about what kind of value capture the market will allow. The social, economic and political guide-rails that will ultimately shape where pools of value can be created are evolving just as dramatically as the technology.
By Lauren Mayer, on Wed Mar 25, 2015 at 8:30 AM ET
I don’t generally take pleasure in the woes of others, but every now and then it is delicious to see someone get a much-deserved come-uppance. Like when that speeding shmuck who cut you off 2 miles ago gets pulled over by a cop, or when a morality-preaching evangelical gets caught with his pants down. So you can’t blame people for gloating a bit about the spectacular (and quick) downfall of resigned Congressman Aaron Schock – he used taxpayers and donors to finance a glamorous, jet-setting lifestyle having nothing to do with his district, and flaunted his exploits – and his abs – at every opportunity, on social media and magazine covers. Not to mention his homophobic voting record, which as Barney Frank pointed out, actually does make his sexuality at least somewhat germaine.
And how fitting that Schock was a fan of Downton Abbey, a show about the lavish, glamorous lives of a soon-to-be-obsolete upper class . . .
There has been a lot of hype lately about the coming wave of capabilities enabled by the Internet of Things (IoT). Through products as diverse as the Apple Watch, Google Nest, and any number of “connected-car” features offered by major auto makers, we are beginning to link together our most valuable possessions—our homes, our vehicles and even our own bodies. Each product comes with a new wave of “smart” applications designed to study our habits and get to know us better than ourselves; each will help us offload the complications of daily life.
The promise of a “smart” life, an IoT life, is usually couched in broad language about a utopian future where everything works “optimally” and “in balance.” But as any reader of Orwell might point out, these are subjective terms. What is optimal?
Defining how things are “supposed” to work
When did we decide exactly how things are supposed to work? Whose values and needs will be most represented in an optimized world? Those of the engineers who are coding it? The product manager who is defining the features? Certainly, for the moment, it’s not the end user.
A smart traffic management system, for example, will make decisions for drivers: prioritizing lanes, setting speeds, timing light changes, etc. These decisions will make traffic more efficient, in theory. But the traffic management system will also have to decide whether right of way goes to the parent with screaming kids in the back who is running late for school, or to the trucker with perishables in back.
In an ideal traffic system, is the goal that everyone move at the same speed? Should decision-making algorithms try to optimize fuel efficiency by speeding up slow movers? Or should they limit pollution by letting electric cars use the fastest lanes? One possible tradeoff of efficiency will play straight into the classic US tension between fairness and an individual’s right to take risks for higher rewards: in this case, to drive faster and get there sooner.
Smart systems are stumbling on values and policy questions
In Jan. 2015, the city of Los Angeles stepped in to ban parking apps like MonkeyParking and Haystack, which allow drivers to auction off the parking spots they occupy, creating an optimized market for parking supply and demand that put drivers who most wanted certain parking spots (and could pay) directly in touch with those who had them. But many in the Los Angeles City Council objected to what Councilman Mike Bonin described as “pimping out a parking spot in the city of LA—taking something which is a public good, something that all of us own, and privatizing for a period of time.”
Within the next three to five years, a similar tension is likely to play out in home delivery services. As a key piece in fulfilling the promise of online commerce, delivery growth rates are expected to rise and include more food delivery and other types of services. Amazon, Google, and Wal-Mart are already competing with UPS, FedEx, and the US Postal Service, as well as crowdsourced-based startups such as Deliv and Postmates.
Smart delivery platforms will have to prioritize. With food delivery, will it be the customers who pay the most or those in most need of better nutrition who get the first drop-off? Is it okay for UberFresh to optimize profits over need? In another part of its business, the recent furor over Uber’s surge pricing is a good example of the public demanding a voice in what, on the surface, is simply an automatically optimizing mechanism.
Who gets to have a say?
We have already seen one optimization battle play out in the net neutrality debate. In Feb. 2015, the United States’ Federal Communications Commission ruled that all Internet traffic is equal. This is not the most efficient approach; some applications don’t really need the same speed as others, just like an Instagram photo needs less than a realtime, remote surgery protocol. But we’ve decided to sacrifice priorities like need and profit for the sake of protecting other values: an “open” internet, unrestricted access, and unrestricted speech. The same decisions will need to be made when it comes to the IoT.
As automated systems mechanisms control more of our everyday lives, governments and markets want to know—and influence—decision-making algorithms, even if those algorithms belong to privately-run businesses. In an Oct. 2013 paper published in the Boston College Law Review, Kate Crawford (Microsoft Research) and Jason Schultz (NYU School of Law) argue that consumers deserve to understand the data and decision-making processes used by analytics systems to make recommendations and perform other types of optimization.
Public intervention in optimization practices is not new. We have always had to make choices and trade-offs in community or national policy decisions. What is different this time, however, is the specificity of choice that is exposed by the technology: day-to-day choices that have historically remained hidden, embedded in social norms, like letting the hurried guy pass you. Other choices have been historically been made by experts and regulatory bodies specifically tasked with designing and running things on our behalf, like public utilities commissions.
What this means for developers
“Code is never found; it is only ever made, and only ever made by us,” once wrote Lawrence Lessig, law professor and director of the Edmond J. Safra Center for Ethics at Harvard University. Although he was discussing the structure of digital space (such as virtual worlds), the same is true of our integrated physical and digital platforms. With this in mind, the companies currently developing, deploying and using smart, big data, and algorithmic platforms would be wise to do a few things:
Be explicit about the values that are being optimized in these solutions during development and regularly test these against the market or societal sentiment.
Build in the flexibility today that will allow for substantial revision of the core algorithms in the future, as society changes. Yes, even if this does cost more; optionality comes at real time and resource cost.
Take pride in the shared values embedded in the code. It’s what defines and differentiates a community and keeps society together for the long haul.
Just as we now have very specific parameters for building codes, it should not surprise us to eventually demand oversight on smart software code. And when we do, we will have to agree, as human stakeholders, on what we mean by “optimized” lives.
I am proud of my bona fides on supporting the advancement of women. It angers me to think how slow executive suites and boardrooms are to welcome more qualified females. Stubborn gender wage gaps for comparable work are unacceptable and must be closed.
However, with all of the attention and focus on supporting equal opportunities for women, we have taken our eyes off an alarming trend. Young men in the US are in trouble by any measure of educational attainment. It’s a big deal and, for reasons of political correctness, we aren’t talking enough about this growing national problem.
I refuse to believe the support of young American’s progress is a zero-sum game – that somehow if we call attention to the problem and take a different approach to improve the experience and outcomes of boys it would come at the expense of celebrating and enabling continued advancement of girls. We can and must recognize the unique challenges of young men and we had better start doing something about it now.
Have you taken a stroll on a college campus recently? Where have the men gone? In the latest census, males comprise 51% of the total US population between the ages of 18-24. Yet, just over 40% of today’s college students are men. In fact, in each year since 1982, more American women than men have received bachelor’s degrees. Over the last decade two million more women graduated from college than men. And the gap continues to grow. Michael Thompson, author ofRaising Cain, a great book on the plight of young males, illustrates the path we are going down with a startling extrapolation. He notes that if today’s trends continue unaltered, the last young man in the US to get a college degree will do so in 2068. Scary stuff.
The gender achievement gap is astounding. The average 11th grade boy writes at the level of the average 8th grade girl. Men are significantly underperforming women. According to a recent NBC news report, women dominate high school honor rolls and now make up more than 70% of class valedictorians.
Again, I am happy to see women succeeding. But can we really afford for our country’s young men to fall so far behind? A growing education attainment gap has profound consequences for the economy.
It mattered far less during the industrial era when young men in this country could find good high-wage jobs in the manufacturing sector without a college degree or post-secondary credential. In a post-industrial economy, the social contract has changed. The deal used to be that college was only for a narrow segment of our population. Everyone else willing to work hard could make enough money to raise a family and achieve the American dream of owning a home, without higher education. With the disappearance of those industrial era jobs, the rug got pulled out from under that assumption. We replaced it with a new social contract by which a college degree, or at least some form of post-secondary credential, was a necessity for anyone hoping to make a decent living. The numbers on this are clear. According to census data, annual earnings for high-school dropouts average $18,900; for high-school graduates, $25,900; for college graduates, $45,400. Add up those numbers over a lifetime and the importance of education comes into focus.
And that’s if there is a job at all. Take a look at how hard the current recession has hit men. Of the jobs lost over the last four years 78% of them were held by men. That leaves 20% of working age men out of work. These jobs are not coming back and men are ill prepared for the 21st century workplace.
Read the rest of… Saul Kaplan: Plight of Young Males
Beware of random collisions with unusual suspects. Unless, of course, if you want to learn something new. In that case seek out innovators from across every imaginable silo and listen, really listen, to their stories. New ideas, perspectives, and value creating opportunities are in the gray areas between unusual suspects. It seems so obvious and yet we spend most of our time with the usual suspects in our respective silos. We need to get out of our silos more.
It’s human nature to surround ourselves with people exactly like us. We connect and spend time with people who share a common world-view, look the same, enjoy the same activities, and speak the same language. We join clubs to be with others like us. I want to belong to the non-club club. The only tribe I want to be in is a tribe of unusual suspects who can challenge my world-view, expose me to new ideas, and teach me something new. I founded the Business Innovation Factory to enable random collisions of unusual suspects.
I am reminded of the power of this simple idea as my friend Bill Taylor launches his new book,Practically Radical (a must read for all innovators). Bill is a magnet for innovation stories and a master storyteller. I’ve been a Bill Taylor fan since he founded Fast Company and was surprised when he showed up at BIF-1, our very first Collaborative Innovation Summit, back in 2004. I shouldn’t have been surprised. Bill loves searching for compelling innovation stories among the unusual suspects. He has attended all but one of our six annual summits to-date including co-chairing several of them. There have been countless random collisions. As I started reading Practically Radical I was immediately hit with a powerful reminder.
Read the rest of… Saul Kaplan: Practically Radical
It’s rare that a book so enhances your world-view that you think the author has taken up residence in your head. Henceforth What Technology Wants shall be known as my new playbook for understanding technology. It’s a must read for innovation junkies trying to sort the infinite possibilities of the 21stcentury. Many have tried to help us understand the meaning of technology. Few get below the buzzwords.
What Technology Wants captures the essence of our technological revolution and provides a lens to understand its origins. It provides a unique view from technology’s perspective shedding light on what technology wants and where it can take us. It’s a call to action reminding us of the opportunity and responsibility to remake our world in a way that deeply honors technologic potential around us. I expected the book to be great. Kevin Kelly has been an innovation hero of mine dating back to his days as the founding editor of WIRED. Every story during Kevin’s tenure at the magazine was a voice from the future that seemed to be speaking directly to me. It was a thrill to spend an entire day with Kevin when he came to the Business Innovation Factory recently to discuss What Technology Wants. Talk about being a kid in a candy store. My head is still spinning.
Kevin Kelly’s visit and book discussion stretched my thinking in both comfortable and uncomfortable ways. Let’s start with the comfortable leap. Kelly clearly asserts that humans are the evolutionary conduit connecting the cosmos, bios, and technos. He paints a compelling narrative arc asserting that the concentric creation stories of the universe, life, and the man-made world all share the same inexorable evolutionary path. I now know what Stephen Johnson meant by taking a long zoom view. Kelly traces the four billion year history of life through transitions marked by ever-increasing complexity of information flows. From molecules to single-cell organisms to language based societies to writing and printing to agriculture to scientific method, to mass production to ubiquitous global communication. It’s all one grand evolutionary arc and we are center stage.
I have always been fascinated by biomimicry, a design discipline that emulates or takes inspiration from nature to solve human problems. In What Technology Wants, Kelly helps us make the connections and intellectual leap necessary to see evolution as a connecting process, seamlessly working its magic across both the natural and man-made world. Technology doesn’t just mimic nature it’s a natural evolutionary extension of the human mind, which in turn is a direct extension of our cosmic beginnings. Kelly invites us to become one with technology. It’s a far easier invitation to accept knowing we share a common evolutionary process and limitless opportunities to explore the adjacent possible together.
The leap I am less comfortable with and still trying to process is Kelly’s assertion that there is an inherent direction to the evolutionary process. He claims evolution is a predictable process with predetermined tendencies. His argument isn’t theological but science based. It’s enough to make your head explode. Kelly claims there is an aspect of structural inevitability or predetermined outcomes built into the evolutionary process. He suggests that if somehow we could replay four billion years of evolutionary process over again we would see roughly the same outcomes. How can that be? The notion goes against everything I am wired to believe. I grew up incessantly arguing with my mom, who must have said a million times, if it is meant to be it will be. To which I always countered in full-throated argument, the only things meant to be are things we make happen. I never bought into mom’s fatalistic life view preferring the self-deterministic outlook that has shaped my life.
And yet What Technology Wants advances a compelling argument that complex adaptive systems will converge into recurring solutions given enough time. Kelly is claiming that evolution is reproducible. He sites the convergent evolution of eyesight as evidence. Evolutionary biologists have determined that a camera like eye evolved not just once but independently six times over the course of life on Earth. It seems that eyesight is an inevitable evolutionary outcome not a random event. Many other examples are highlighted in the book pointing to similar evolutionary convergence across the natural world including flapping wings which evolved independently three times in birds, bats, and pterodactyls.
Read the rest of… Saul Kaplan: What Technology Wants
By Jonathan Miller, on Mon Feb 9, 2015 at 12:00 PM ET
Yesterday morning I found myself at Goodwill looking for a sports jacket to purchase that I had donated last week thinking it was a different — and much older– sports jacket that no longer fit me rather than the new sports jacket I bought as a present for myself over Christmas.
I was even willing to “buy back” my sports jacket –but still was going to be shrewd about it. After all, it was Goodwill and I did make the mistake of donating the wrong sports jacket but I was not willing to pay full price and was going to explain to the manager what happened and ask for a discount under the circumstances. I was even going to point out, if I needed to, that I didn’t take a “Donation Receipt” last week to declare a tax deduction when I donated the wrong sports jacket.
This is called “pre- planning” and “postioning” in negotiation strategy and is always important to do in every kind of negotiation. I figured it would probably be on sale for between $60 and $75 dollars but I had decided beforehand that my starting offer to buy back my sportsjacket would be $20 and the absolute most I was willing to pay for it was $40. In negotiating tactics this is called your “anchor price” for beginning a negotiation and your “walk away price” or your “best and final offer” (or BAFO).
I was really pleased with myself that I was remembering all of these important negotiating strategies from a course titled “Negotiations” that I took over a decade ago while pursuing my MBA. And I was grateful I had such a great professor for that class, Dr Tom Byrd at Bellarmine University.
Unfortunately, Dr Byrd never told us to avoid putting ourselves into really stupid negotiating situations like the one I had gotten myself into. That would have been really helpful to me now–even more helpful than all the great negotiating tactics he taught us. I think I’ll suggest Dr Byrd include this pointer about avoiding dumb negotiating situations for his future classes.
As it turned out Goodwill no longer had my sports jacket. But I would have been ready to negotiate adroitly for it if they had. And apparently someone got a really good deal on a nice new sports jacket before I could buy it back at a discounted price applying what I had learned in my Negotiations MBA class.
But to tell you the truth, I now wish I had taken the course in “Bargain Shopping” instead of that silly negotiations course.
During my six years as an accidental bureaucrat, after spending twenty-five years in the private sector, my friends often wondered how I could do it. They routinely asked versions of the question: doesn’t government move too slowly for you? My standard reply was that, yes, the public sector moves slowly – but then, big companies don’t move so quickly either. And come to think of it, I teased my friends in higher education, colleges and universities move more slowly than either business or government! The point is, all institutions move slowly.
What surprised me wasn’t how slowly the different institutions moved, but the different language, behavior, secret handshakes, and views of each other I found across sectors. Xenophobia runs rampant within public, private, non-profit, and for-profit silos. Each silo has created its own world completely foreign to inhabitants from other sectors. Visiting emissaries are always viewed with skepticism. (”I’m from the government and I’m here to help …”)
One epiphany from my immersion into the non-private sector is how strenuously social sector organizations resist the notion they have a “business model”. Non-profits, government agencies, social enterprises, schools, and NGOs consistently proclaim that they aren’t businesses, and therefore business rules don’t apply.
Well, I’m sorry to break the news, but if an organization has a viable way to create, deliver, and capture value, it has a business model. It doesn’t matter whether an organization is in the public or private sector. It doesn’t matter if it’s a non-profit or a for-profit enterprise. All organizations have a business model. Non-profit corporations may not be providing a financial return to investors or owners, but they still capture value to finance activities with contributions, grants, and service revenue. Social enterprises may be mission-driven, focused on delivering social impact versus a financial return on investment, but they still need a sustainable model to scale. Government agencies are financed by taxes, fees, and service revenue, but are still accountable to deliver citizen value at scale.
The idea that business models are just for business is just wrong. Any organization that wants to be relevant, to deliver value at scale, and to sustain itself must clearly articulate and evolve its business model. And if an organization doesn’t have a sustainable business model, its days are numbered.
It may be, however, that the model is implicit rather than explicit. It’s amazing how few organizations can clearly articulate their business model. Can yours? If you ask any ten people in your organization how it creates, delivers, and captures value, will the answers even be close?
If not, it’s probably because, in the industrial era when business models seldom changed and everyone played the game by the same set of well-understood industry and sector rules, it wasn’t as important to be explicit about business models. Business models were safely assumed and taken for granted.
That won’t work in the 21st century when all bets are off. Business models don’t last as long as they used to. New players are rapidly emerging, enabled by disruptive technology, refusing to play by industrial era rules. Business model innovators aren’t constrained by existing business models. Business model innovation is becoming the new strategic imperative for all organization leaders.
Perhaps the most important reason for developing common business model language across public, private, non-profit, and for-profit sectors is that transforming our important social systems (including education, health care, energy, and entrepreneurship) will require networked business models that cut across sectors. We need new hybrid models that don’t fit cleanly into today’s convenient sector buckets. We already see for-profit social enterprises, non-profits with for-profit divisions, and for-profit companies with social missions. Traditional sector lines are blurring. We’re going to see every imaginable permutation and will have to get comfortable with more experimentation and ambiguity.
Read the rest of… Saul Kaplan: Business Models Aren’t Just For Business
By John Y. Brown III, on Mon Feb 2, 2015 at 12:00 PM ET
I have had the privilege several times in the past year of being around Jack “Goose” Givens on a business matter.
Our fist interaction was through an email introduction that asked me if I knew Jack Givens and copied him. I responded, “Are you kidding me? I’ll never forget the night back in 1978 when Jack Givens and I combined for 41 points and UK won the NCAA championship.” And then added, “Of course, Jack was on the basketball court that night and I was just one of 20,000 fans in the stands –but it was a great night for both of us.”
That was how I knew “Goose” Givens. 41 points and the cover of Sports Illustrated. Oh, and baseball enthusiasts are quick to point out that those 41 points was without the 3 pointer.
But that was a long time ago. I can’t say I know Jack Givens well…but after a few brief interactions I have become less impressed with Jack Givens the UK basketball star a lot more impressed with Jack Givens the smart and savvy businessman, the community and civic leader, and just all around great and gracious guy.
I am glad I have gotten to see the “other” Jack Givens. Without the UK uniform. The post-game Jack Givens. Who in his personal and professional life regularly posts the equivalent of 41 point games –and has been quietly doing so for a very long time now.
The record Jack Givens has compiled off the court since his NCAA Championship game is more impressive to me than his making the cover of Sports Illustrated for one amazing night.
And, by the way, has also been done without the 3 pointer.
In his State of the Union Address, President Obama made a big deal about manufacturing jobs as a central part of his economic vision for the country. “Our first priority is making America a magnet for new jobs in manufacturing”, he proclaimed. I support the president’s aim and passion to revive manufacturing, but to accomplish it we first have to jettison industrial era thinking. The industrial era and the 7.1 million manufacturing jobs lost in the U.S. from 1979 to 2012 aren’t coming back. We must create new 21st century manufacturing jobs that leverage what America is great at, creativity and innovation. Manufacturing will grow in the U.S. when we accelerate the use of technology to increase productivity, enable new business models designed for mass customization and unleash the manufacturers in all of us.
To begin, we need to recognize that manufacturing isn’t an industry sector, it’s a capability with plenty of opportunity for innovation. We take industry sector definitions for granted. As if industries were clubs with exclusive admission criteria and secret handshakes only revealed to companies that agree to play by understood rules. The industrial era was defined by clearly delineated industries, making it easy to identify which sector every company was competing in. It was all so gentlemanly really, as if competition was governed, like boxing, by a code of generally accepted Marquess of Queensberry rules. Companies were all assigned a numerical Standard Industrial Classification (SIC) code (now North American Industry Classification System, or NAICS) identifying which industry sector they fit in to.
Those days are over. Industries don’t work that way any more, the industrial era isn’t coming back. Is Google a manufacturer or a service provider or both? Their acquisition of Motorola Mobility and U.S. production of the Nexus Q home media player suggest Google is serious about building manufacturing capability. Is Apple a manufacturer or a service provider or both? It’s hard to tell the difference between a manufacturer and a service provider and the distinction is limiting. Today the lines are blurring. Think iPod. Apple didn’t bring the first MP3 player to the market. It changed the way we experienced music by delivering on a value proposition that bundled product (iPod) and service (iTunes). Apple didn’t view the competition as other product manufacturers. Apple is a market maker not a share-taker.
Read the rest of… Saul Kaplan: Tech is Destroying the Line Between Manufacturing and Services