Industries Transform Using Technology

My Wishlist for 2015

The year 2014 has ended with  several developments in the sharing economy, sustainability  economy and the data economy. Last week I posted an article about the progress made in 2014 on all three fronts.This year will see many of these firms become publicly traded entities.

Given below is my wishlist for progress this year:

1. Applications in Deep Learning – i.e. Artifical Intelligence combined with Predictive Analytics.

a)Natural Language and Speech Processing combined with the power of big data analytics create possibilities in a many fields.

Tweet: Natural Language and Speech Processing combined with the power of big data analytics create possibilities in a many fields.

Though deep learning has been around for at least 50 years – the availability of computing power and advanced software analytic tools in today’s age has made business applications viable. Several applications of this field include autonomic computing, self healing systems, information search and retrieval, robotics, drug discovery, disease prediction and manufacturing.

b)  Machine Intelligence –  Business Intelligence could aid human intelligence by enabling real time decision making, reducing wastage and optimizing business processes. Imagine speaking into your predictive system and asking it to predict demand conditions at a particular location in the future OR  predicting molecular structure for a medicine that could help cure a particular disease. Deep learning could accelerate innovation across industries and has seen extensive development in university labs. Imagine, using 1 billion parameters on inexpensive GPU harware to create a system, created by Andrew NG’s group at Stanford or to  make robots learn and mimic human behavior based on changing environmental conditions as shown in this demo at Georgia Tech. It is time for the industry to adopt the same.

c) The full power of AI + big data analytics will be realized once the internet of things  in which devices communicate with other devices become very common. The internet of things creates large volumes of data.It is possible that such large volumes of data are stored and processed using extremely powerful computing systems in real time.

Tweet: It is possible that such large volumes of data are stored and processed using extremely powerful computing systems in real time

Such processing could lead to variety of insights, affecting all facets of human life – for example driving autonomous vehicles, remote surgical systems used in tele-medicine.

2. Human Transportation

a) Personal transportation despite the ever increasing advances in avionics, space and fuel technologies has remained two-dimensional for over a 1000 years now, except for the aeroplane. I hope that this year will mark the beginning of three dimensional personal transportation, which is technically feasible. It has to be seen whether this is economically feasible. This should significantly ease traffic woes and problems of pollution and overuse of fossil fuel.

Small  beginnings are being made in the form of the Hendo Hoverboard for short distance travel and  the aeromobil for long distance transportation.

Similarly, jetpack technology is about to get its largest push this year when Martin Jetpack goes public. Affordable Mass transportation, is potentially going to see significant prototyping in the form of high speed mass transit systems due to the efforts of Hyperloop Transportation Inc.

3. Sustainable living (and business):

  1. Zero Waste Living – Any consumerist society is waste-producing society. Harmful toxins are commonplace is such societies and chemicals in the form of preservatives, fertilizers and plastics cause much harm to the average health of the individual. Harmful industrial byproducts  are released into the natural habitat also. The true impact of some of these are not fully known or researched, but known effects include cancer and various incurable diseases. Strides are being made to consciously shift toward this form of living. The retail industry is slowly embracing this change, and hopefully over a period of time will see accelerated adoption.
  1. Social Plastic  and metal extraction-  “All the plastic that was ever created is still existing on planet earth somewhere”. Mining from waste plastic using technology has been around. However, arriving at a financial model which makes business sense  (i.e.profitability for firms engaging in it,)  has only recently started seeing traction. Organizations such as socialplastic.org and a profitable business mbapolymers.com have a headstart in this field. Below is an interview with the founders of Socialplastic.org

Similar ventures include mining precious metals from electronic waste. Last year saw the beginning of Venture Capital and private investment into these initiatives. Over a period of time sustainable businesses would make as much financial profits and value to society while making the earth a greener place to live in. I  am hopeful that sustainable use of plastics is here to stay.

  1. Smart Cities and Green Homes – These concepts would get more attention this year, due to the onset of the energy revolution. Many individual houses are slowly becoming energy surplus homes which means these houses would generate more energy than they consume. A good example is GE’s ecoImagination home. Several established industry vendors including Schneider Electric, IBM, Accenture, GE  are creating technologies supporting such projects on the city scale – making cities more liveable and self contained.

Overall, I am hopeful that this year  will see many  more industries transform using technology. This is what makes sustainable living interesting.

Technology enabled transformations in 2014

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We’re ending 2014 on a very positive note. Many industries have been affected by disruptive technology. Societies, Markets and Individuals are seeing this impact of disruption in a variety of ways. A few highlights of these important changes that interested me in the past year are described below. I will be post a follow up post in the first week of 2015, with my wish list of major trans-formative changes that I would love to see this new year.

  1. The “Sharing” economy:  While this economy is still in its infancy, several established industries in transportation services, financial services and travel services are already feeling the impact. Brand new markets are being created. Uber, Lyft, Hailo, Airbnb, HomeJoy, Indiegogo, Kickstarter, etc. have seen much traction this year. F!function(d,s,id)%7Bvar%20js,fjs=d.getElementsByTagName(s)%5B0%5D,p=/%5Ehttp:/.test(d.location)?’http’:’https’;if(!d.getElementById(id))%7Bjs=d.createElement(s);js.id=id;js.src=p+’://platform.twitter.com/widgets.js’;fjs.parentNode.insertBefore(js,fjs);%7D%7D(document,%20’script’,%20’twitter-wjs’);” title=”tweet this” target=”_blank”>irms in the sharing economy have effectively used information technology innovations in the form of mobile apps and web services as a means to convert economic surplus into tangible economic value.
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  2. The “Sustainable” economy:
    Natural resources such as sunlight, wind and tidal waves are becoming economically viable sources of energy. For example, Germany generates  more than 3/4th of  its energy from the Sun today. Very innovative business models such as the ones pioneered by SolarCity and SunRun makes installation of solar panels affordable. Smart grids  which make dynamic switching between generation sources, power distribution and power consumption more efficient have seen traction this year.The transition to green transportation gathered more steam this year and was led by Tesla Motors’ Model S. Every major car manufacturer – the likes of  BMW, Toyota, Honda, GM, Ford OR Mahindra has released least one mass market all-electric car this year.
  3. The “Data” economy:
    Accessible high power computing, storage and processing power has made data aided decision making possible at low costs. Because of this affordability, small and medium businesses face fewer entry barriers as far as their data operations are concerned. Such technology enables powerful commoditized data analytic toolsets to assist human intelligence in making important business decisions. 2014 was the year when many firms such as Jive, Hortonworks, Cloudera raised money from markets and private entities. Job titles such as “data scientists”, “data analysts” and “Business Analysts” became common place. Competition among Google, Amazon, Microsoft and the likes of Rackspace, Cloudera in the infrastructure and analytics spaces has seen prices drop significantly.!function(d,s,id)%7Bvar%20js,fjs=d.getElementsByTagName(s)%5B0%5D,p=/%5Ehttp:/.test(d.location)?’http’:’https’;if(!d.getElementById(id))%7Bjs=d.createElement(s);js.id=id;js.src=p+’://platform.twitter.com/widgets.js’;fjs.parentNode.insertBefore(js,fjs);%7D%7D(document,%20’script’,%20’twitter-wjs’);” title=”tweet this” target=”_blank”> Most traditional software (or apps) have moved onto these platforms, earning infrastructure firms recurring revenue, multiples of what software license based revenues could provide. Several data centric startups have seen success in the fields of Mobile analytics, Health Analytics and the Industrial Internet analytics spaces

It is really amazing to see the capability of technology products increase according to Moore’s law. The higher the capacity of processing, storage and connectivity (bandwidth), the more powerful the software (and hence human) applications that use this power are going to be. It is exciting to see what is in store in 2015.

The most important metrics in the internet business

In the internet economy – be it a web2.0 Or the App industry, one of the most important metrics determining a firm’s value is: “Customer Lifetime Value” (CLV).  CLV is the value generated by a customer while using the app (or website) that is in turn captured by the website or the app.  Another metric of importance is the customer acquisition cost  (CAC).  CAC is the cost of acquiring a customer through  either advertisements, referals or through regular sales cycle.

One of the ways to calculate the CLV is as follows:(A more detailed definition and formula for the same is given here.)

Customer Lifetime Value (CLV) = average  sale  value x number of repeat transactions x average retention time.

For example, Lets say that a Netflix customer uses the service for 5 years (average retention time) and pays 8$ per month (average sale value) and 12 times a year ( i.e. number of repeat transactions).The customer lifetime value for Netflix is 5 X 12 X 8 = 480$.

If Netflix spends 80$ to acquire one customer on average, the net realizable value from a customer is:

CLV – AC  ie. 480$ – 80$ = 400$ per customer per year

Obviously the more the number of customers the higher is the firm’s revenue. The net realizable revenue for netflix with 40 million customers is 16billion$ over 5 years. For services that are dependent on advertisements e.g. news sites or google, the average sale value is dependent on the average number of times a customer clicks on an advertisement (CPC ads) OR the number of times an advertisement can be displayed to the customer (Display/banner advertisements).

Most internet firms or apps try to increase their customer lifetime value by increasing either:

a)the number of repeat transactions:  This is achieved by increasing a customer’s time spent using the app (or the website) by making the site’s value proposition very compelling. In addition high repeat transactions are achieved by making customers engage in  actions such as clicking ads or browsing or purchasing digital goods.

b) the retention:  This is achieved by making it very difficult to leave the application or the platform AND by making the user return to the platform  over and over again.

Overall, if an internet business increases the number of repeat transactions and increases the retention of customers while simultaneously increasing the number of  customers, their business  will get very valuable quickly – like Whatsapp…

Lessons from “The Shark Tank”

ABC network is telecasting a series called the Shark Tank, where entrepreneurs pitch their businesses to a panel of 5 Venture Capitalists (VC). The Venture Capitalists (VC) then choose to buy a stake in the entrepreneur’s firm. After acquiring the stake, the VCs  help to take the entrepreneur’s business to the next level by increasing sales, marketing reach, production capacity, etc.. Also, during the course of the show one Venture Capitalist will show you how his(or her) prior investments have performed. Several entrepreneurs get rejected (and nastily too) by the venture capitalists and fail to raise capital.

During the pitch, most entrepreneurs showcase new consumer products e.g. better winter wear,  packaging for wine, wipes for greasy hands, kids toys, etc. Very few of these products are software or hardware related which are valued very differently, and may not interest the audience of nationally broadcasted TV series.

While funding success is a great criterion to measure  the entreprenuer’s capability, there are also definitely several lessons learnt  from failed pitches. These learnings  could be applied  to any creative profession: be it scientific research, fine arts or even computer programming.  A few learnings that impressed upon me are as follows:

1) Build products which people buy in order to use.

2)Demonstrate 100% commitment to make the venture a success. You should be so convinced about your idea that you should be willing to do whatever it takes to make your idea  successful.

3) Plain Innovation ( in the form of patents) sometimes do have a value, even when there are no sales. [ you could either license or sell your patent.]

4) If you want a large valuation for your company – you should already have big sales or  should demonstrate a large market potential for your product.

5)Though prior money raised by your firm is not a criterion for additional funding, prior money from investors does help increase the value of your firm.

6) Know your idea very well, know your market very very  well and know how your customers think and act  with your product very very very well in that order.

7) Don’t go begging for funds with a half baked idea and a half baked product – you will never get funded irrespective of how much you are in debt. Be humble , patient and listen… these guys have done it over and over…

8) Once VC’s invest money, the value the entrepreneur derives from an investment is much larger and is significantly disproportionate to a monetary investment. For e.g. if a company is making a revenue of 1,00,000$ before VC investment then the company could see its revenue grow to 2 million$ after VC investment. The VC investment is a classic “Inflection point” for the entrepreneur.

9) Age and experience are never binding factors for innovation, entrepreneurship and funding. E.g. a 18 year old high school student raised 100,000$ and a 60 year old man raised more than 1 million$.

10)However, the older the firm the lower the investment raised (and the possibility for raising money)

11) The investment is mostly in the talent of the entrepreneur(s) and is rarely ONLY based on the technology.

Culture and its effects on the technology Firm.

Historically,  “culture” within an organization has been defined as a  value statement. e.g. IBM, HP, Google OR Yahoo.This is because “culture” drives the behavior and interactions of a firm’s representatives both within and outside.  A culture (or value) statement could be used by employees or other stakeholders as a “frame of reference” when they act on the firm’s behalf.

To make culture as a driver of technology disruption was unheard off, till the early 2000’s. One of the pioneers of the culture movement was Tony Hseih of Zappos. Tony Hseih, the founder differentiated himself from the rest using “Culture” as the pivot. Anyone could look at their awesome  “culture” here. Most employees think so well of their workplace, that it makes you feel jealous.. Read more about this in “Delivering Happiness”  – Tony’s book…

More recently firms such has Hubspot have released more detailed  manifestos (135 slide presentation) of the firm culture.

 In a high growth rate industry with a lucrative compensation structure and a competitive workforce, Culture plays the role of a guiding framework. Defining a culture early on and forcing a firm’s ecosystem – i.e. employee, customer, stakeholders, investors –  to adhere to it,  plays a very important role in increasing the amount of positive perception about the firm in a market.

In recent times several disruptive start-ups such as SnapchatUber, Zynga have been at the receiving side of  unwanted media attention because of incidents completely unrelated to their business  execution.

One of the large parameters everyone talks off while hiring is “cultural-fit” … Several distractions such as unwanted media attention or litigations or cases of dishonesty could be avoided if firms  clearly define their culture. And if these firms  followed up with enforcing a “cultural-fit”  along with a “skill-fit ” for the new employee.

Technology innovation and Legislation

“Atlas Shrugged” – Ayn Rand’s book on capitalists and innovators who get regulated out by politicians – though satirical, seems to put a point across. While legislation affecting businesses bring checks and balances to prevent unscrupulous profiteering,  legislation also curtails innovation, slows adoption and impedes societal progress.

Last week Aereo filed for Chapter 11 bankruptcy,

Aereo –  which created the amazing cloud DVR and  the microantenna – was regulated out by the courts. The firm fought the battle all the way till Supreme Court and lost. In this case, the competition ie. big cable operators and network lobbies had deep pockets to make litigation expensive for a startup. Here is a 5 minute video about Aereo’s scenario – about technology created by a startp that wants to transform the cable television industry.

  Another  regulated industry is the taxi industry. Taxi operators in cities like San Fransisco and Boston pay upward of 300,000$ to obtain a permit. There is also a  multi-year waiting time to obtain the permit if you have to get it from the city council.  Technology (mobile computing) enabled ridesharing services provides  the alternative – drivers can work  at their time while consumers can get a reliable ride. Ridesharing firms like Uber, Lyft, Hailo and a few others do a great job of filling this gap in society.

Recently Singapore  introduced a law to control mobile app based ride sharing services.  This law though is not as restrictive as the one needing to pay for a permit yet (sic). Is this because taxi operators are not yet powerful lobbies who can pay their way through legislation? OR Is it that taxi operators are not savvy enough to take on big venture funded  corporates?

Tesla motors produces the Model S( and D) electric car.  As ridiculous at it may sound, the best and safest car in the world, cannot be sold  directly in about 28+ states. This is because Tesla motors sells their cars directly to consumers, instead of through a car dealership. This is another instance where regulation slows adoption of new technology by creating roadblocks to adoption.

The Question

When?, How long? and Why? will legislation interfere with technology related innovation..

Uber – the transformative power of software applications and data analytics.

Last week there was a lot of noise about “Uber” – (ref #Ubergate – on twitter)- because an executive spoke something at a private dinner. Also, Taxi drivers formed large roadblocks in San Francisco downtown to protest Uber and other ride sharing services. Two completely unrelated events – highlighted by national and international media, bring Uber right at the center of media attention. Success – a 4 billion $ revenue in 4 years – has its problems and media scrutiny is one of them.

My friend Sangeet Paul (of Platform thinking), has beautifully described the feedback loop which Uber’s business model thrives (ref. simple diagram). Uber has executed on each phase described in the feedback loop with precision. They are super-star executors with a very humble and forward thinking CEO – who publicly apologizes for his exec’s “private dinner” gaffe…..

Uber has got multiple sides of their platform (the  driver’s side, the passenger’s side and payment gateway side) working well and at scale. It is easy to onboard a driver and it is easy to get a customer a car within a few minutes of requesting one. Their backend analytics which allows for dynamic pricing and matches cars to consumers works well. Their payment system integration operates superbly over mobile networks and lets customers travel without credit cards. These in themselves are engineering feats worth credit.

Overall, Uber is a classic product that solves a large societal problem – one pertaining to human transportation. It also gives many people (drivers on Uber(X)) a chance to add  to their income, without imposing time or location restrictions. At least for now, Uber allows markets to decide a fair price – and effectively gives consumers a choice against  taxi driver (or autorickshaw) lobbies, such as the ones in India.

In an economist’s language, Uber as a platform has made several constituents in their network better off (or increased social welfare) i.e.

a) the drivers, because now ordinary people can earn an additional income. b) the consumers (riders), because they have an accessible, reliable and affordable transportation service. c)  the car dealers because they see increased sales of a particular “black car.”d) the taxi industry – because they bring quality and price competition (UberX).

In general, societal welfare increases too – because Uber has enabled net demand in the economy by creating thousands of paid jobs where people earn money.  For me, Uber portrays a shining example of the transformative uses of the mobile internet technology on society.

As a frequent Uber(X) user – I love the service. On many occasions when I have traveled either alone or with my family, I have used it. Even  last week, my colleague and me were stuck at the mist covered Golden Gate bridge at 7:30 am. Uber – at the click of a button on my iPhone- helped us get back to the warmth of our hotel, within 2 minutes of waiting.

Imagine that you get off a train at San Francisco(or any other big city) during peak hours (6pm – 9pm), when it is very cold outside, after a long day of work, and, you find NO taxi waiting. The taxi service number you call  tells you that someone would  pick you up in 25 minutes, but you are not sure where to wait in the cold. Then you will know why Uber Rocks!!!

The classic Timekeeper

The Classic Product – NOT too pricey, serves its purpose well,  while being robust

One of the most classic products which suites its purpose very well as a watch is the Timex IRONMAN digital watch. I have really thought a product as something which just serves its purpose very well, by providing you a service, beyond expectations. In fact as I think about this watch – the only one that I cared to keep safely off the 200+ watches I must have owned (or been gifted in my life) – just serves its purpose very well.

As a watch it keeps time (in fact keeps times from 3 timezones, if you set it), it can set three alarms and also time your laps (if you are an athlete or a swimmer or a biker). It also has a stop watch (counts down) and a timer(which counts up).   It is weather resistant and has worked in subzero temperatures, and also under water when I swim.

The setting of each of the times, alarms , stopwatches and timers are pretty easy. the alarm has just a single ringtone – which makes it easy to recognize..

That’s the sign of a classic product – serves its purpose well, is easy to set/configure and is weather/drop resistant.