I made this collage up for the previous post. Some of my favourite albums from that time. See how many you can guess without enlarging the photo.

Born in 1957, raised as part of a liberal and progressive family in Calcutta, schooled by the Jesuits from 1965-66 to 1978-79: there is much in my background to explain why I espouse many of the beliefs of the Sixties. It begins with my family and my faith; it manifests itself in how I’m passionate about community and in communal activities, in a participative society, in a collaborative workforce. It underpins my interest in the “maker society”, in open source, in emergent behaviour, swarming, and servant leadership. It is to be seen in my attitude to ownership of material goods, it is to be seen in my attitude to ownership of ideas. It affects how I think about nature and the environment, and informs my beliefs in stewardship. It defines my approach to tolerance and to forgiveness, to war and to peace.  It even influences the way I read and write, what I eat, what I cook.

And it influences the music I listen to. Take a look at the image below:

It’s a collage of 100 album covers, and represents the first 100 albums I would buy in vinyl if they were available at a reasonable price and in reasonable condition. I’ve “owned” these albums before, sometimes multiple times. I’ve paid for them time and time again, in vinyl format, on prerecorded cassettes, as CDs, as 25th-anniversary-with-extra-tracks-you-never-knew-you-needed-(and-you-were-right!), sometimes even in DVDs. Do I hear you say “sucker”? Yup, that’s me.

I’ve managed to buy quite a few of them on mint vinyl already, not as reissues but by being in the right place at the right time. But.

But given a chance, I would buy them as a single transaction, a job lot, a bundle. Even if there was some further negotiation to be done with respect to the sequence in which I would receive them, and the time over which that would happen.

It’s not just about music. I travel a lot. And I’d love to go to an airline and say, I’d like to buy 100 flights. Return. Most of them are on sectors you fly. I will use those flights up in a year. It may not be just me travelling. I will vary the class of travel, “turning left” for longhaul business travel and for at least one family vacation.

It’s not just about travel. I read a lot. And I’d love to go to a bookstore and say, I’d like to buy 100 books. Most of them are on subjects you stock. I will use up those credits in a year. It may not be just me doing the buying, I will vary the class of book, “turning left” for signed numbered limited editions occasionally and for at least one set of family presents.

Music. Travel. Books. Clothes. Eating out. In some ways it’s all the same to me. I want to tell someone what I’m in the market for, build a relationship between that “person” and me. Tell them how much I’d be prepared to spend and over what period and for what class of thing. Work with them to figure out the sequence, frequency and timing.

And expect them to invest in that relationship as a result, be my friend, guide, partner through that process.

But it needs them to think differently, in order to view what they do differently, move from the product perspective to the customer perspective.

Without that fresh perspective, we’re going to continue to see abominations like region coding on DVDs. Which customer was that designed for?

Let me give an example of something that does not work.

Let’s take Premiership football in the UK. Most grounds have capacities in the 30-50,000 range, with a few clubs below 30,000 and a few above 50,000. All of them have fan bases that are multiples of that number, large enough fan bases to warrant the payment of very large sums of money to acquire “exclusive” rights to the live games.

And then someone chooses which games are broadcast live in the UK…. it would appear that if you didn’t live in the UK, you can watch pretty much all the games live. So my brother in India gets to watch his choice of UK-based Premiership game live, while I can’t. Go figure.

OK, so the hardened supporter buys a season ticket to go to all the games. Guess what? Analog is scarce, so there are waiting lists for many of the clubs. [That’s true for most sports at an analog level, and why touts make real money: Lord’s, Wimbledon, Twickenham, the O2, the story’s the same.].

Since I can’t get an analog season ticket, the smart thing to do is to buy a digital one, right? Wrong. Because you can’t. You’re only the customer. Someone else decides what bundle of matches you get to watch, a bundle designed to disappoint every customer.

Which brings me to the nub of this post.

Customers are fundamentally unpredictable.

In the eyes of people trying to sell them things, that is.

Why is this? It’s because customers want to buy things their way, in terms of the nature of upfront commitment, the choices represented, the frequency, the sequencing, the bundling and the discount. And the ability to change everything.

I want to be able to buy 100 books or flights or albums. Or 10. Or 1000. I want to be able to buy it all from one provider, even if that provider has to source some of the services from elsewhere. I want to be able to choose what and when and how. And to change my mind. Of course, if I do change my mind, I will have to pay for it. But only as and when I exercise that “right”.

I don’t want a buyer’s market, I’m happy to see the service provider make a turn on the service provided. Everyone’s got to eat.

The trouble is, it’s been a seller’s market for far too long. Based originally on natural scarcity and monopoly, now more often based on artificial scarcity, regulatory arbitrage, ploys and schemes you don’t want to believe. All designed to ensure that business becomes more predictable….. at the cost of customer service, service quality and even freedom of choice.

This will change.

Customers will choose to make long-term commitments with companies that give them simplicity, convenience and freedom of choice. In many industries, the early movers have provided simplicity and convenience but not freedom of choice, as a consequence of which there are people who believe that the freedom of choice is not important. That’s a big mistake.

A time is coming when the customer decides on the bundle of products and services to be acquired, not the provider. In fact, that bundle will comprise services from more than one provider…. the services themselves will commoditise, but there will be a premium payable for simplicity and convenience, payable to the “prime” who constructs the multiprovider bundle. The customer chooses the bundle.

A time is coming when the analog components of that bundle will last, as they used to last. Cars. White goods. Entertainment systems. All examples of analog goods that used to be built to last, and are now designed for rapid obsolescence. This won’t be tolerated any more. Planned obsolescence will no longer be accepted.

A time is coming when everything, as a result of commoditisation: every bundle, every analog item, every digital item, will come with a published cost of change. The cost of change will be payable in two forms: an “option price” for the right to change, and  an “execution price” to make the change. The penalty for change must be published upfront.

A time is coming where the maintenance and repair of what is purchased will also be commoditised: where you can choose to go where you like for analog spare parts or digital equivalents. A time is coming when every customer will have the right to look under the hood, to tinker with the product or service, to make changes personally, A time is coming when the current warranty system will be overthrown, when the principle goes back to “fit-for-purpose” rather than “will work for a year or so”.

A time is coming.

Why has this time not come already? Because companies have designed products and services with the overriding principle of aiding predictability rather than meeting customer needs. 

A time is coming.

 

 

 

 

 

If you haven’t heard about Big Data this year, please tell me your secret. Tell me how you managed to avoid hearing about it. I want to know. Really. There are days when I want to be in a place like that. Desperately.

For some time now we’ve been hearing about device proliferation. A classic 10x market. People tell me that mainframes are numbered in the tens of thousands, minicomputers in the hundreds of thousands, PCs in the millions, smart mobile phones in the billions. Smart devices in the tens of billions.

These tens of billions of thingummybobs are getting busier and busier as they sense and observe and record everything and everyone around them, saluting the things that move and painting the ones that don’t.

In a perfect world, this would mean that there’s a lot of good data being produced, data that should prove useful to improve our lives. So that means there’s a market for software that helps us crunch the data into something useful, find the data we need, see the data in ways that can help us extract meaning and act on the meaning.

Even though this world is far from perfect, I’m glad to see that all that is happening. VCs have been plunging into Big Data for a while now. Data visualisation tools continue to get better, better and better. And search is beginning to do something about its verb-based future.

And yet……

And yet I have this sense of unease.

You can have lots and lots and lots of data, Big Data. You can have wonderful Big Data Crunchers, tools to help you do something with the data. You can have the world’s best visualisation and search tools.

But they all mean nothing unless you can act on what you see.

Innovation takes place through adoption into practice, and not just through invention and disruption. Until something is being used, nothing actually changes.

Big Data becomes useful when it leads to action.

That action takes place across a wide spectrum. At one end the actors are all machines. And we run the risks that Kevin Slavin alluded to in his TED talk, How Algorithms Shape the World.

At the other end all the actors are human. Shouting from the rooftops about overload, seeking to convert firehoses into capillaries. With limited success.

As Clay Shirky so memorably pointed out, there is no such thing as information overload, it’s all about filter failure. We need better filters, something I’ve been writing about for a while now.

Between the two extremes there’s a universe of space where we have a lot to learn. The more I read about the Air France tragedy the more I feel the need to look deeply into this, how human beings cope with decision making amidst such complexity. Just reading the IEEE blog coverage here and the Popular Mechanics coverage here gives us pause for thought.

My concerns get heightened when I realise major segments of the industry I’m part of can’t stop rubbing their hands with glee as they intone “big data, big big data, big on-premise servers, big on-premise storage, big processor licences, big profits…. Christmas is every day”.

That causes new problems related to the quality and reliability of the big data, as multiple sources take snapshots at different times. When I worked in capital markets, working on out-of-date data could cost millions in seconds flat; it became very very important to know how “live” the data was, and to keep checking that the data was real and up to the second (or even millisecond).

So we have the risk that there’s a lot of Big Wrong Data.

But you know something? These things can be solved. We can learn how to process the data more effectively, present it for visualisation more elegantly, check for its validity more ruthlessly, use the best software and services to do all this, use machines to filter and humans to curate. We can do it all.

And find ourselves in a situation where all we do is “wait faster”.

Because there’s one more thing we have to change. And that is this: the way we make decisions. And then do something.

Some years ago, I remember a story that was used to illustrate the importance of a particular book. [Sadly, I can’t remember the book any more, other than it may have had something to do with Price Waterhouse and may have had a yellow cover]. The story asked a simple question. Five frogs on a log [Aha, that was the title. Five frogs on a log!] Where was I? Five frogs on a log. Four decide to jump off. How many are left?

And the answer was… five. Because, as the authors point out, deciding isn’t doing.

The way we’ve allowed email and calendar to become part of our work lives, decision-making seems to be perennially poor in large, often still hierarchical, organisations. Email chains fragment and break and become divergent infinite loops. “Snooze, you lose” gets stated sometimes but rarely acted on. Getting the right people together has become harder and harder, process delays begin with scheduling time. Everything is at priority one in the scheduling process. If compromises are sought on the quorum front, they are temporary, evanescent. Infinite loop problems recur.

Big Data can have Big Effects.

That excites me.

Big Data can create Big Problems, sometimes with tragic consequences; we need to take extreme care.

Big Data can lead to Big Waste in on-premise activity, and we need to take care here as well.

Big Data can have a Big Positive Impact on industry, on education, on healthcare, on jobs (the subject of a separate post I will try and write this week) and even on government. People like Tim O’Reilly, Tim Berners-Lee, Nigel Shadbolt, Wendy Hall et all have worked hard to get everyone to understand what is possible here, and I am a convert.

But the cultural changes that have to take place in institutions should not be underestimated. Institutional immune systems can render all the big data useless by rising up to slow the processes down, make decisions harder to take, make action harder to initiate, make outcomes harder to achieve.

Big Data means Big Changes.

It’s Not How Big It Is, It’s How You Use It.

There’s a part of me that doesn’t want to write this post. The internet was not, and is not, solely a new distribution mechanism for Hollywood and for pockets of the music industry; but the power of these incumbents is immense in the Western world, and it is therefore possible, perhaps even likely, that bad law will be legislated to protect decayed and dying industries from being disrupted. Even though the customer suffers as a result.

There’s a part of me that doesn’t want to write this post. The internet wasn’t always a global phenomenon. It grew principally from the vision and commitment of US citizens, and as a result there has been a level of US-centricity about its progress and evolution. If the US were to give up this leadership role (which it no doubt will, if SOPA goes ahead) then others will step into the breach. The internet routes around obstacles, we have seen this repeatedly during Arab Spring.

There’s a part of me that doesn’t want to write this post.  The anchors and frames for this debate have already been subverted; the incumbent lobby has done a good PR job. The commonly held belief is that people against SOPA, by definition support stealing,  support denying artists their rightful income. So everyone who tries to attack SOPA goes through that mill, and the mill grinds slowly and exceeding small.

There’s a part of me that doesn’t want to write this post. Anything I do may not be enough to stop it happening; it may not matter anyway; and it may damage my reputation unduly and unwarrantedly.

There’s a part of me that doesn’t want to write this post. There appear to be only downsides to my action.

So why am I writing it?

Because the internet matters. It matters to the world. It matters to people who are giving their all to changing historical and broken paradigms in education, in healthcare, in business, even in government. As the price of being connected with smart mobile devices drops, as three billion more people join the ranks of the ubiquitous always-on, we’re going to see amazing changes. Changes that will radically improve the lives of our children and grandchildren.

For that to happen, we have to make the internet a safer place. We. Not me. Not you. We. Much has been done to achieve this, much remains to be done. Sustainable cybersecurity is essential if we wish for a world where health, education, welfare, business and government are transformed anew. And there’s been so much progress in making this happen that wasting it is bordering on the criminal, the insane, the criminally insane.

This transformation, bringing in the power of the collective, making everything more social, more sharable, democratising access and knowledge and power, this transformation is essential if we are to solve some of the core problems we face, in environment, in disease control, in health and nutrition, in climate change, in food supplies, in water. The institutions we looked to in the past cannot cope with the complexity they face. They need the internet and what it represents. And they need it to be safe,  secure, reliable.

I’ve read more than I care to list here about SOPA; I can’t claim to understand all of it, I’m neither a lawyer nor a politician. The Wikipedia article is probably a good place for you to start, if you’re interested… the very existence of Wikipedia is threatened by everything that SOPA represents.

There is so much emotion around about SOPA that I wanted to give my readers something fundamentally different to look at, when it comes to forming your views. What I suggest is, leave aside everything else you’ve heard and read about SOPA, and concentrate on this one point:

How do you defend cyberspace while protecting against online piracy?

This research paper by the Brookings Institution: Cybersecurity in the Balance: Weighing the risks of the PROTECT IP Act and the Stop Online Piracy Act, is a must-read in this context. Here’s part of the opening:

This paper does not deal with the questions of economic value, free expression or other issues raised by advocates on both sides. Instead, I highlight the very real threats to cybersecurity in a small section of both bills in their attempts to execute policy through the Internet architecture. While these bills will not “break the Internet,” they further burden cyberspace with three new risks

The “three new risks” mentioned are spelt out further in the article. I summarise them below (my words, my interpretations):

• PROTECT IP and SOPA make it harder and more complex to keep the internet secure, just in terms of architecture and processes
• In addition, as companies and customers are forced to migrate away to less secure places, they will be exposed to greater risks
• Current national and international initiatives to improve security will be undermined, set back, and sometimes even abandoned

 

We need to frame the argument differently, and the Brookings paper helps us do that.

It’s not “Do you support Hollywood or do you support stealing?”

It is “Do you want a safe internet where health, education, welfare and government are transformed, or do you want a distribution mechanism with protection for Hollywood’s historical business model?”

I hope SOPA does not happen. I hope better, more sensible, more technically feasible, more equitable and more progressive means are found to deal with the problem of decay of Hollywood business models. I hope that the more sensible routes will actually mean that creatives get paid properly, rather than what happens to them today.

 

[This post continues from where I left off in the early hours of this morning, here].

I’ve been following the work of W Brian Arthur for over three decades now, starting with his paper on “Samuelson, Population and Intergenerational Transfers” in 1978 or thereabouts, while I was reading Economics at university. During the 1980s, he was responsible for introducing me to the concepts of increasing-returns models, understanding path dependence better, working out the importance of positive-feedback loops and so on. His work on looking at the economy from the perspective of a complex adaptive system was also a key influence on me.

He may have written many books, but the two I’ve read were both brilliant: Increasing Returns and Path Dependence in The Economy (back in 1994) and The Nature of Technology (which came out a couple of years ago). More recently, I made reference to his article in the October 2011 issue of the McKinsey Quarterly, on The Second Economy.

The article is all about this great invisible network of things extremely busy talking to other things so that people like us can get on with our lives. Don’t write it off as yet another “internet of things” article, Professor Arthur deserves real respect. His description of the evolution of the web of interactions between machines is of fundamental importance, particularly once you understand that it’s all about software, particularly when you realise that this is what happens when Wal-Mart grows up.

You can see the sequence, can’t you? There was a world before Wal-Mart, and the machines who lived there were called mainframes. Then came minicomputers and Wal-Mart and some level of distribution. Along came PCs to increase distribution’s reach, and that begat Amazon. And soon we were in the land and ubiquity of mobile phones, heralding the dawn of Facebook. Now, that people are talking about another 10x, the internet of things, who’s going to be the facebook of that generation? What particular Noah Business will they be in? What disruptive vision will they build the infrastructure for?

You can see where you thought I was going. But I’m not going there. That post is for some other day.

Here’s where I am going.

We all appear to be very relaxed about machines talking to machines in their biliions, yet remarkably un-relaxed when it comes to people talking to people. As Doc Searls said in The Cluetrain Manifesto, markets are conversations.

Doc reminded us of the market in the context of the Middle Eastern souk, where relationships come first, then conversations, then transactions.

Let’s look at Facebook in that context.

The Friend Graph is all about relationships.

The Timeline is all about conversations.

Yup, you know where they’re headed. And they should. Relationship before conversation before transaction.

We’ve lived in a transaction-focused world for too long. Transactions are outcomes of relationships and discovered via conversations. That’s why markets are conversations.

I keep quoting Drucker, but who cares? He said people make shoes, not money. Money, like a transaction, is an outcome of something else done well. Not a goal in itself.

The broadcast-model centralised advertising-is-God style of business that dominated the postWar world should have been strangled at birth. But it wasn’t, which is why Messrs Locke, Levine, Weinberger and Searls had to write Cluetrain in the first place. To remind us of what we were losing.

Relationships.

And conversations.

The Facebook Timeline is about persisting conversation in a new way. Making conversation mobile, multimedia, multipartite. Yes, it’s an audit trail and that can make you feel creeped-out. But then your mailbox was an audit trail as well. And your call detail records. And your analog mail.

Over time, it’s become easier to persist the audit trail of conversations. This persistence comes with benefits and with risks.

The risks are to do with our erstwhile concepts of privacy and confidentiality and data protection; the concepts will themselves change, along with the social mores and values they underpin; as the concepts change, as society transforms their meaning and purpose, the law will catch up. Sometime.

But in the meantime there are many benefits to be had as well, as we share more and we understand more about what, when and how we share. As we interact with what we share, individually and in community.

It was only yesterday that I received an email from Pandora suggesting that I “listen to holiday music by Jim Croce”. Why? Probably because I’d tweeted about listening to him, or perhaps even because I’d tweeted my intention to have dinner at Croce’s in San Diego in early February.

One way or the other, they’d identified that I was interested in Jim Croce. They’d managed to identify an email address that went with my twitter handle (assuming their actions were related to my tweeting). But despite all this they hadn’t managed to identify that it’s not easy for me to use Pandora, given they adhere to the barbaric notions of licensing music according to national borders.

In all probability, you’ve been at the receiving end of targeted advertising gone not-quite-right, and sometimes wondered what you’d shown in your profile to get that reaction. That will improve and it will also change. Recommendations by social network are gaining in importance, and intention signalling is becoming more and more common. These developments will alter the advertising landscape in remarkable ways.

Marc Benioff’s Social Enterprise is about all this. It’s about getting the relationships right first, then enabling the conversations, so that the transactions that occur are not ends in themselves, but instead consequences of the relationships and discovered via the conversations.

In a way, when it comes to Professor Arthur’s statements, we may be talking about three economies rather than two: the first, the one we all know, the one that’s lying tattered and broken; the second, the invisible root system between machines; and the third, the now-becoming-more-visible conversations between people.

Markets are conversations. Conversations are social, and take place between people usually around social objects. Social objects come in many shapes and guises.

The Facebook Timeline is about making the discovery of those conversations easier in space, time and context.