Friday, June 14. 2013
Like many others I've been watching the whole PRISM issue unfurl with an increasing measure of amusement and amazement, mainly that people are surprised and shocked. There is so much BS being spouted in every direction, I thought it may help to remind everyone of the 10 Rules Of Social Data Mining:
1. "Data wants to be Free", and most people give it away as if it was. It may want to be free, but it is very valuable.
If, while reading all the hoo-ha, you keep all that in mind, you may not lose your head
And (again) be careful what you put online. Datamining algorithms can tell a hell of a lot even from 30 days worth of your "what I had for lunch" tweet data once it's cross correlated with all the others in your network and teh other data out there that can be cross referenced to you
*They who can give up essential liberty to obtain a little temporary safety will get neither liberty nor safety - Benjamin Franklin
Sunday, June 9. 2013
Saturday, June 1. 2013
I'm liking Microsoft's Kate Crawford, she too is a Big Data sceptic - her "6 Myths of Big Data" in the NYT is exactly the sort of thing we would write, so we've copied it (expurgated) here, with a few comments [in brackets]. In essence she thinks that Big Data boosters (aka Fundamentalists) are labouring under the misapprehension that more data = more facts = more accuracy, and she has pointed out 6 myths around this:
In other words, Big Data behaves in much the same way as Not-So-Big Data really.
We'd also add a Coda - Statistics, and to an extent Operations Research (or Decision Maths or whatever the latest in-word is), is the science (or art, too often) of estimating what large data sets will contain from much smaller datasets, and once those sample datasets are above a certain size they are fairly indistinguishable from the overall dataset, so long as they are properly randomly sampled. A lot of the "insights" from Big Data - the "80/20" in my experience - are usually quite easy to glean from small datasets and "Big Maths". In fact, if I may be so bold, I do think a lot of the Big Data hoo-ha is from people whose main grasp of maths is spreadsheets with $ sign denominations.
We will definitely keep a closer eye on Ms Crawford's work. I suspect Microsoft may as well
Wednesday, May 29. 2013
McKinsey Disruptive Dozen Technologies
Hot on the heels of our look at McKinsey's Top 10 Technologies, we look at their "Disruptive Dozen" (They really have taken the "Number Of X" blogpost trope to heart ).
The first thing that hits me, looking at the chart above, is that some of these are relatively tiny in impact, so its unclear how they will be "disruptive" in any significant way. The other thing that hits me is that three of these tiny ones are new energy sources. This implies a huge discrepancy between the new energy source hype/expectations, and the likely reality. I am impressed that they have not been carried away with the hype around 3D printing, we believe it won't be that high impact either (see here)
Looking at the high impact technologies, the Cloud and Mobile internet are both already large, and their change vectors are well known. Existing systems have existed for quite some time, so why will these be disruptive? If you look at previous true disruptions, it usually comes from the "first off" delta with high penetration which has arguably already happened, not the later "build ons", in this case to the existing, globally available Server Farm/Web Hosting and Mobile Internet systems.
And as for "Knowledge Automation", this is supposed to remove the jobs of the 200 million Western knowledge workers. These, however are the people who are most connected and have political power. Besides, we suspect - again if the past predicts the future - that offshoring to lower wage economies is far more likely. Whichever, selling Automation and Globalisation was one thing when it was for blue collar workers in the boomtime, it'll be another thing when it hits lawyers, doctors and bankers in the Great Recession. History implies this will be a bunfight....
The areas that they do flag that we agree are both large and disruptive are the Internet of Things, and Advanced Robotics (of which autonomous vehicles are really just a subset). More on our thinking about these here and here.
They seem not to have featured one thing they did have in their Top 10, ie the next 3 biliion people in poor countries joining the internet via mobile systems - now history suggests that will be extremely disruptive across all vectors.
It's a bit Curate's Eggy in my view, no doubt to spur debate. Anyway, the report is well worth a read, and there is a livechat later today on the topic on #McKDisrupt on Twitter
Sunday, May 26. 2013
Modified Gartner Hype Curve applied to McKinsey Forecasts
McKinsey's latest set of ICT trends. This is a follow on from their 2010 forecast (we reviewed that here). Here is the Broadstuff expurgated version, and probably one of the few where you are likely to get a bit of a qualified reality check [In Brackets]
We are not saying these things won't come to pass, but we are saying it is going to happen far more slowly than this paper implies. This will mainly be a slow evolution, not revolution. To help you work out what is real, what is coming, and what is hot air we present the Broadsuff Modifiied Gartner Hype Curve, complete with the Perpetual Hype Re-Cycle for those topics that go up and down the curve time after time but never seem to create a new service.
*I've just invented it, but I'll bet it exists by 2015 as anyone who has worked with big datasets or simulaton models has seen this phenomenon. The behaviour of anchoring - seeing things you want to see that aren't there, or stopping when you see something you like and not testing for anti-patterns - is also already well documented
Wednesday, May 22. 2013
This is a very interesting development - TechCrunch
Kindle Worlds will initially just have the licenses to the Gossip Girl, Pretty Little Liars, and the Vampire Diaries book series. The Mary Sue asks all the questions that occurred to me, so allow me to praise by copying it:
Finding a way for aspiring authors to not just write fan fiction, but build a reputation by siting them in existing (well read and loved) worlds. This interests me because its an early sign of how content rights are being rationally restructured for the digital world. Easy to do, low cost - Ronald Coase would be nodding, saying "I told ya"
I just pray they never get the rights to Middle Earth....
Tuesday, May 21. 2013
Soundbite video from the Business Reimagined session last week, I used the term "Coasian construct" for Social Business, thought it may need a bit of background.
Firstly the Coasian bit - that is referring to Ronald Coase, a 1930's economist, and his thesis on transaction costs. Wikipedia sums it up perfectly:
I've put the last line in italics. To explain a bit of history, I started looking at the impact of information flows on business in the mid 1980's for my MSc, and that's when I came across Coase and transaction costs, and it became clear to me that the Internet (as it came to be called, it wasn't called that in 1985 when I started playing with "wide area networks") was going to have a massive impact on business transaction costs. Researching back, it became clear that the main impact of all communication revolutions in the past had been to reduce transaction costs, and once that became clear it was possible to predict the impact of the Internet far more closely, so for example the arrival of things like Amazon, eBay etc ("Silicon Soukhs", as we called them in the early 90's before the dotcoms existed) were entirely predictable.
Secondly, the Construct bit. Now we are seeing the next jump forward in Comms technology, Social Networking. We started looking at their impact on business seriously in 2005 when we founded Broadsight, as we could see what the rise of blogging, wikis etc, and what better webtools would do to Web 1.0 technologies like groupware (If anyone would like our classic 2005 paper, "Everyone is a communication business now" email me now ). It was clear that what they would do would be to have another major impact on another layer of transaction costs, that between individuals both in any enyerprise and in the value chain, ie it would go down to the person to person messaging level. Previously the major impacts here had been the telephone and email, this would take the costs down another order of magnitude. That was also why Twitter was so interesting when it emerged, as although we had great fun laughing at the "what I had for lunch" tweeters, the bigger point was that the transaction costs had reduced to the level you would say this over an electronic medium.
In essence, what this means is that with Social Media the whole enterprise can, (in theory - see below), start to resemble the buzz of conversation around a small company's workspace, even if it is larger, geographically, and even temporally dispersed. This buzz is the stuff that makes businesses hum, that ensures many little things "go right" and its why businesses that get above a certain size they start to become much less efficient ("decreasing returns to the entrepreneur function", including increasing overhead costs and increasing propensity for an overwhelmed manager to make mistakes in resource allocation, as Coase would have it). Furthermore, Social Media is continuing outside the enterprise, so in theory the buzz of your potential customers, suppliers, competitors and existing users are also all in the room with you. The business efficiencies that are theoretically possible from this are immense. Just imagine all the little inefficiencies you see in your company, and in those you transact with, and imagine a major reduction in that.
It would be a massive change in efficiency for any enterprise.
But, what still has to be controlled is data and message overload - that is what has killed email's usefulness, the lower transaction costs of writing and sending an email has not been matched with a similar reduction in the cost of reading and acting on the message - and it wil kill social media in an enterprise if it is not managed better than email. The term "Big Data" to me is an admission of failure, its occurring because we have not yet worked out how to target what we are looking for. The major risk in social business is drowning in data, and that will be the big challenge for social business systems.
Monday, May 20. 2013
Hot on the heels of the wisdom (or not) of acquiring Summly, Yahoo has now apparently also acquired Tumblr for $1.1bn. Tumblr, for those of you who don't know, is somewhere between a a blog and a microblog (a Mediblog), has revenues of $13m. So why pay $1.1 bn? The argument is the user numbers - Next Web:
With more than 300 million monthly unique visitors and 120,000 signups every day, Tumblr is one of the fastest-growing media networks in the world. Tumblr sees 900 posts per second (!) and 24 billion minutes spent on site each month.
So lets value it the old, boring way:
300 million x 12 = 3.6 billion unique visits (not necessarily different visitors of course) and 120,000 new ones a day x 360 days = c 43m new users per annum, the hope no doubt being that this will continue to grow like topsy. Lets assume that this growth gives c 1 billion users in 5 years, so we get a 50% increase PA on 50m new users, and assume we lose none, and that gives a Net Present Value of about $ 0.33 margin (at 15% IRR) to get to c $1.1 bn fully discounted free cash flow.
Or thereabouts.....we can also do it another way - by comparison:
Another Mediblog, Facebook, has an Average Revenue per user is about $1.25, and it's user base is about 1.1 billion and slowing. It is valued at $60bn in an open market. Applying Facebook's valuation to Tumblr today, with c 1/2 the user base gives us $60 bn x 1/2 user base x (0.03/1.25) ARPU = $0.75bn. Throw in a 33% uplift fir future optimism, and there's your $1.1bn
So you can believe on of two things:
(i) The Bubbletime will continue after Yahoo's acquisition, and the business will stay as good as Facebook is now, or
But of course you can - or Yahoo thinks so anyway, heck they even paid with cash, not shares!
Alternatively, one could take the opening line from Cockney Rebel's "Tumbling Down" anthem.
The refrain of which is Oh dear, look what they've done to the blues, blues, blues.....
Friday, May 17. 2013
Implicit relationships people seek from products (source: Simon White, Draftcb)
Last week I attended another event i think was very useful seminal in pushing Social Media forward, the ChinwagPsych event, which reviewed the emerging lessons from the emerging fields of digital psychology and anthropology. It was really good as well because the amount signal was high, and the amount of noise from snake oil, bullshit and hype was low. Here are some notes of mine from the event.
Nathalie Nahan, who wrote Webs of Influence, on Website design in the Social era.
- Trussst is what stops people buying online, as customer service/delicvery etc is unclear. Consumer reviews are good at creating trust, also earned media. Using recognised logos eg paypal also helps
Leigh Caldwell, Inon - Psychology of Pricing
- This is an emerging new field - cognitive economics
Simon White, Draft Cb - Why are people NOT using all this stuff?
- Old models (persuasion) only lead to accidental success as 95% of decisions are instinctive, not rational/ logical
The new thing I got from Simon's talk was this:
- People buy things to achieve goals, they do not have a "relationship" with brands as such. And their real goals are the implicit goals, eg buy Mercedes to feel powerful
Simon Hill, Wazoku - Open Innovation - A rereshingly free-from-hype talk about the reality of Open Innovation.
- technology is not the issue in Innovation
I then had to go to a client meeting, so missed a few talks and lunch (boo), returning in time to catch:
Steven Haggard & David Stillwell, Cambridge Predictive
I first heard about them awhile ago when they started to put together patterns of connected likes, on Facebook, they mentioned some typical insights e.g. people who like Terry Pratchett and computing tend to be introverted and Likes on Facebook can tell relationship status (I'll bet!!). They started to look at Business Applications, for CRM, trying to find predictive qualities of personality for honing the Marketing message; keywords, behaviour types etc. They mentioned as an example the Relentless fizzy "energy" drink going up against Red Bull etc:
- Its roots were in music roots so they started look at interconnections there
Cat Jones, Unruly Media - Viral Video Chart
- built Unruly Sharerank algorithm by testing large no of hypotheses of what drives sharing vs actual sharing
Milward Brown (Similar findings to Simon White, above)
- The only people who were shocked by behavioural economics were economists (rational man)
What was new is they have tested a number of these new approaches against Ads
- Most useful method they have found is facial response, map facial
The next 2 talks were about Smart work, and were interesting in that they seem to apply a "psych" layer to the Quantified Self movement
Design by Day (Book on smart work) Nokia/Anthony Mayfield
- using mobile technology to improve productivity
Prof Karen Pine - "Do something different"
- Use technology to remind you to do something different that is good for you, force behavioural flexibility
Benjamin Ellis, Social Optic
- how to use technology to change larger groups - uses social data to drive changes in organisations
Daniel Bennett & Marina Clement, Ogilvy Change: Case study - the missing £2
- Rory Sutherland started behavioural economic arm, heavy usage of outside academics. Case study was that people are stopping buying newspapers, so how do we sell them again. Approaches were
Those 4 "nudges" hit 257% ROI, I asked which ones had the most impact, they said they didn't know. I find that hard to believe
Fascinating and worrying in equal measures.....
Thursday, May 9. 2013
Broadsight Simplified Value Creation Flowchart
We have been asked to be on the Microsoft Business Re-Imagined panel on the 15th of May, looking at the potential impact of Social Media in business. We've been consulting to and building social media systems for clients since 2005, and it seemed like this was a good time to boil down our experience down. Above is a simple value creation flowchart, and we look at how, in our experience, social media can impact value creation. Stripped to it's bare bones, a business creates sustainable value by increasing revenues and/or reducing costs. Social Media is a new set of technologies that can help in a number of ways.
Essentially, there are only 2 ways of increasing revenue, which is sell more stuff, or increase the price at current volumes. In my view, Social Media is more powerful (with current technology, anyway) in dealing with Consumer sales, rather than Business sales, as the main cost in a consumer sale is reaching the large mass of disparate consumers. With business sales the target market is much easier to identify, and there are less customers to contact so current approaches work well.
Sell More - Social Media is a potentially very powerful tool to generate new demand - to find new customers, to bring them to the enterprise, create trust, ease their purchasing journey, and help optimise website design to maximise sales throughput. Taking it to greater extremes, Social Media data can be used to start to psychologically profile your customer base to understand what sort of people may also be your customers. It is also a very powerful tool to optimise the product - to discover the features or configurations that customers really value, and you can identify what competitors do well and include those in your product. But it is not a substitute for existing methods today, it is an adjunct, it can't be the only tool. It is not an appropriate tool for overt "hard sell" marketing, for example.
Increase ARPU (Average Revenue Per Unit) - Social Media has two main functions here - to aid in communicating the value proposition of the product, and to improve the perceived value vs competitive offerings. Communicating the value is fairly straightforward, as it serves as an extension of traditional channels, with the added benefit is that it has a strong feedback loop so it is quickly possible to see what is working and what is not. It is also probably better at communicating implicit values than more traditional media. Social Media can also help to improve the pricing point by optimising product differentiation amomg dofferent customer groups, and find pricing points for these different customer groups. That feedback loop, and the data it drives, can be used to to find attractive product combinations, and to optimise the website design to maximise value per sale. Taking it to greater extremes, Social Media data can be used to start to psychologically profile your customer base to understand their hot buttons better
Again, essentially there are only 2 ways to reduce costs - reduce operating expenses (Opex) and reduce Churn (Customer defection). I will ignore Capital expenditure (Capex) for now. Social Media in my view is as useful in both consumer and business facing enterprises, as it's power is about increasing productivity and effectiveness in reducing costs
Reducing Opex - In most companies, there are two major cost areas - raw materials and labour, the sum of them is typically the "80/20" of the cost pie (companies with near zero raw material costs tend to be professional service businesess, with very high labour costs). So far in or experience the two major Social media impacts are from:
(i) getting better market information (both pre and after sales) from customer to company, allowing the company to both reduce costs or lead times of raw material while not reducing value, and being able to better place its human resources where it really matters - it can work like a real time value engineering approach. It's not just useful for line operations, social media can be used to influence better design and innovation, and can be used to increase "brain cycle cpacity" by tapping into customers and the overall milieu without having to employ it
(ii) getting a better flow of information between people in the company, so co-ordination is better (less balls are dropped because A didn't know what B knew about customer X) and spped of reaction is faster.
The third cost element, overheads, is interesting. I have some thoughts about using Social Media transaction data to better allocate some overheads, but I don't have a fully formed set of ideas and I haven't seen it put into practice anywhere yet.
Reducing Churn/Increasing Retention
Churn is often not well understood, as many businesses are not aware of the huge differences in cost between retaining an existing customer, and finding a new one. There is often an order of magnitude difference. Thus reducing churn can have a massive impact in cost reduction and revenue increase Social Media can be used to aid customer service, to serve as an early warning for customer problems, to find out what people really value in post sales service, and to improve the product lifecycle. Social media also means bad service is more likely to leave a company's reputation punished, which can also impact sales, as customers typically research online before buying. In saturated industries, having a better churn than the competition can radically alter the market share and strategic positions within a few business cycles.
A brief word on Capex costs - if Social media is helping a busines to make better use of existing assets, in theory it will slow down future Capex requirements - but Social Media technologies do have Opex and Capex costs of their own, and these are typically incurred early up, while the benefits are then gained over a series of cycles. Which brings us to the dreaded Return on Investment (RoI) question.
Return on Investment
For any new technology, ROI is hard to work out, as few case studies exist to allow calibration of cost and benefit. If history is any guide, new and risky ideas are typically implemented first where forces are greater than a pure ROI worry:
- Piloting: trying out the New new thing in some areas of the business, somethimes structurally, often though by "Intrapreneurs" who do it locally out of passion, or seeking promotion etc.
But eventually, for Social Media to take off and scale, believable ROI needs to exist. We are dubious of some of the various "Returns on" currently touted for Social Media, as it is hard to tell which are valid proxies for hard to measure benefits, and which are just Snake Oil. Our test is that if a proxy measure cannot be linked to an underpinning economic benefit logically, its more likely than not to be snake oil.
So far we have seen 3 meta-impacts of Social Media occurring
Firstly, there is a synergy when multiple of the above areas are pursued. The marketing listening systems can influence the customer satisfaction and product design systems, the customer satisfaction system can improve the marketing message, better staff co-ordination can improve customer service and salesforce knowledge and thus effectiveness. In general as more information flows in a business, better decisions are made throughout the business. But its not a given - if organisation culture is not open, if individual reward structures do not encourage sharing, if management use the new dataflows to further expolit staff, these systems can go nowhere, even potentially accelerate problems as they are just better ways of making sure all the sh*t hits the fan.
Secondly, the same influencing ability that works on attracting potential customers can influence sentiment, and thus share price. But this has always been a temporary game in the past, and its unlikley Social media will be any better at selling the sizzle if there is ultimately no beef.
Thirdly, expanding on this, a basket case will be exposed far more quickly - disaffercted customers, employees, investors etc will make their feelings known. In teh old days, they sued to say one disgruntled customer would on average tell 7 people. Now they will tell tens, hundreds, thousands, will write on review sites, will push negative pages higher in the search rankings than "official" company narraticves, etc etc.
Beware the Snake Oil
There are too many Social Media snake oil merchants promising miraculous cures today. We talk about what Social Media can do above. This is what it cannot do:
If we had to give our sanguine view, Social Media is the sort of cluster of technologies that today can give low % increases to all those areas we cover above - but once you sum up say a 5% increase in sales volume, a 5% increase in ARPU, a 5% reduction in OPEX and 5% reduction in churn, you wind up with a shift from (ay) 5% margin to near 30% margin. That is life changing for any business, but it has to be done within the current business systems to get the full impact. The medium may be the message, but it isn't the modus operandi*.
The Downside Risks
As with any powerful new technology, used improperly it can blow up in ones face. There are two main dangers that have emerged so far
The devil in doing all of this is of course in the details. So, we hope to see you on the 15th.....
(*With the exception of wholly new businesses that are Social Media businesses, of course - but that is the subject of another post)
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