Thoughts on the Tube: Culture and Entrepreneurship

I had an interesting experience on the London tube the other day.

I got on the District Line at South Kensington and as soon as I was seated, and as if by some compulsive nerve, I started playing “Who has the Biggest Brain?” on my iPhone. What was absolutely innocent, and entirely personal, seemed to have amused my American co-travellers. This family (husband, wife and 2 kids) had this expression on their faces, which can only be described as being completely amazed! I on the other hand felt naturally British, and quite embarrassed! I couldn’t figure what had tickled them – whether it’s because I had picked a game they were hooked on to as well or because I had an iPhone. Anyway, we got friendly (this is also very rare on the London tube where eyes are usually focussed on books, newspapers, personal gadgets or just thin air). The wife pulled out her iPhone and shared her favourite bowling game with me. They explained how I could move with a swipe and could flick with a swoosh. And the husband added, eyes wide, that this was free!

So I thought I should also share my game with them. I explained how my game can measure the size of the brain and this too was free. At first they were amazed to learn about this new game. But that didn’t last long – the husband was nodding his head as if to say he already knew how the calculations were made, and even remarked that he had seen something similar. I felt bad. Absolutely disgusted at my inability to keep them entertained! They left a couple of stops later and I was left mulling over this strange meeting.

For some reason the experience reminded me of what Stephen Fry said after his recent documentary series in the USA. If I remember correctly, he felt that the Americans will never hide their amazement at learning something new (unlike the British) and equally claim that such things can happen “only in America”. This American family were amazed one minute to learn something new and by the second minute had somehow already, hmm, owned it! Perhaps this explains the entrepreneurial spirit so often seen in American business? Absolutely anything, any weird idea, seems to fly there. Americans can take something alien to them and with a few changes completely internalise it. Compare this to Britain and one is constantly reminded that risk aversion is the best policy. You often hear “don’t mend what is not broken”.

But may be keeping an eager, open (and a slightly forgetful) mind, may mean that we are open to new discoveries. It could lead to innovation and entrepreneurship. And we can learn that from the Americans.

Businesses don’t get social media

I was at a panel discussion organised by the F.S. Club: the topic “Do Banks get social media?”. Chris Skinner from the F.S. Club facilitated this enthralling discussion with social media experts who presented their different views. These are experts who blog and tweet personally. And they have their own take on social media in organisations: from those who have embraced it in some form within FS, to an implementor who advises other businesses on how to do it, to someone who is sitting, may be undecided or perhaps unconvinced, by the sidelines. The onus was of course on Banks though in my opinion this could easily apply to any institution.

Some interesting comments from the panel can be found here. I picked up a certain theme such as “need for experimenting with social media”, and of course several questions. Such as the ones concerning efficiency: “how to scale online, social exchanges?”, and those seeking opportunity: “can you make money using social media?”, and the deeper: “what constitutes a business, a person or a transaction?” The last question is a good one; organisation science is a discipline and there are contrasting theories on what an organisation is and how it should be managed (mostly around structure, politics, human resources, society and symbolism).

This question gets asked in every era. There is no doubt that from the industrial economy to the knowledge economy, organisations have changed. And if the coming era is that of the social network economy??, then this would demand a yet different framework. In my opinion, it would demand the greatest change. There are several challenges to organisations that want to thrive in the new economy:

1. Thus far organisations have always maintained a clear boundary between themselves and their environment. However as someone in the panel pointed, Google (always a leading example of the new economy) is quite the opposite; it is “porous”. So the social economy would demand more of this amoeba-like quality (sorry if it seems a bit crude). This is entirely different to the insulation that most existing organisations prefer. Google was started only 10 years back by two PhD students who audaciously believed they could capture everything on the web on their single computer. And they shaped different rules to achieve that – whether it is the 20% time or do no evil, Google’s ethos and operating procedures are something that many other institutions will not be able to emulate.

2. Industries are of course regulated. And somehow the ones that are most regulated (like Banks perhaps) have themselves taken on the role of gatekeepers. Contrast this with the web; there is freedom there and social media demands that organisations be more like facilitators rather than gatekeepers. So roles and responsibilities, and mostly power distribution, are changing. And this is never easy to get accustomed to.

3. Most businesses have fought their entire existence to project a single consistent image. Of course in reality every customer forms their own view of the business. But management nevertheless has campaigned hard and spent huge budgets on branding. The web is different. It’s an alternate reality and allows participants to have multiple personalities. Which means that organisations that want to actively participate in the new era will need to get away from that single image and be different things to different people? This is much more complex than the global v/s local dilemma of the globalisation era.

4. Social media allows communities to take ownership (ownership of an idea or a tool and give it some meaning). Interestingly at this point we are owners of some high street Bank. Most of us are reluctant owners. And I find this a bit strange. Of course banks have got a bad reputation and this ownership was forced; there was no freedom to choose. I suspect it is also unappealing because we are owners by an old framework; which is that we are all capital owners of something tired and not really idea owners of something cool. May be the frameworks supporting what we produce, what we consume and how we trade today are also are also losing appeal?

5. In my opinion the more established businesses experiment less. Yes, innovation and NPD are taken seriously by some, but there is always the promise of a top-line benefit driving the business case. So far there is no clear blueprint to benefits realisation using social media.

It is equally important to ground all of this in some reality.  There is a lot of hoopla in the social media world that is undeserved and may never find mass. But this only adds to confusion for organisations as there is little research or expertise on this new economy to say what would work and what doesn’t deserve attention.

One final thing that makes me a bit uncomfortable: we cannot tell organisations that they need to get into social media because there is some sort of first-mover advantage. Firstly, I don’t believe that first-mover advantage is sustainable. Secondly, technology and tools are getting more commoditised, so the trend is opposite and this never makes a compelling sale. Finally, isn’t social media incredible because we are all allowed to find our own meaning of it? So we should leave organisations to figure this out on their own. Some will find some meaning, some will not last. This economic downturn will only make the purge look more natural.

Interestingly this discussion was held at Lloyd’s. Which is a bit ironic given that Insurance has a far worse reputation when it comes to technology than Banks.

Managing life

I found this very interesting and entertaining talk by Marshall Goldsmith at Google. Marshall is a world-renowned coach and mentor to many CEOs and students around the world. The video is long and totally worth watching. There are lots of gems in what Marshall says, so hope you enjoy this one.

Too cloudy

I was at the Intalio Road Show yesterday where among other things Intalio introduced The Intalio Cloud or “Cloud in a Box” as Intalio likes to call it.

Just a few days ago a friend of mine rightly pointed out that all of this talk about Cloud is just some virtualisation at the data center level among other things – it’s a mishmash of technical things just packed to look like new. I could understand where he is coming from, nothing in the Intalio offering was truly out of the world either (appliances are not really new). To me Cloud was never a technical concept, but rather something that businesses would understand – more than virtualisation and services, businesses could understand the need to form, break and reform technical services, benefiting from what already exists, to suit their ever changing needs. But Cloud in a box? I have more sympathy for my friend now because this does reek of some marketing gimmick. Ismael Ghalimi, the CEO of Intalio, says it offers elastic scalability. Again I know what he means, but I would prefer if it wasn’t termed like that – all too often scalability means scaling up rather than finding the right size whatever that may be.

Coming back to the road show, it was good overall. Intalio has made what look like smart acquisitions. ProcessSquare which forms Intalio’s Business Edition would now allow actual business users to design their own processes. It offers a level of abstraction over their existing BPMN-based designer which is more familiar ground for analysts and process experts rather than real business users. And then Intalio have acquired CodeGlide which means Intalio now has a CRM offering which on paper at least seems to match (and maybe even better) salesforce. And there are more acquisitions coming in HRM for example, which mean Intalio Cloud now has the infrastructure, the platform to build and customise, and the applications on top that makes it a strong offering. Or as Intalio’s architecture diagram called it Infrastructure-as-a-service, Platform-as-a-service and Software-as-a-service levels. Oh dear!

Even though it was exciting to see these latest developments, I couldn’t help but feel that this road show was a sales pitch to larger, existing client representatives. After all, I was surrounded by some big name clients in financial services and retail. And I found myself concerned about Intalio’s early open source community users (there are some 50,000 companies in that crowd), but there was no mention of what was unique in the new Intalio for them. With these upcoming acquisitions Intalio would soon have some 10-15 million customers, and with this so called Boxing I just felt that perhaps the Bazaar was being boxed neatly into a Cathedral.

I must say that I am a fairly new Intalio user and this was my first ever Intalio road show. Ismael Ghalimi came across as a very confident and smart executive – more in tune with what the business is about and where it’s headed than some of the other Intalio reps on the day. But the whole show had a feeling that Intalio wanted to be in the “me too” crowd rather than taking a stand and being counted as different. Like any typical road show, they even had a couple of VAR/partner presentations thrown in. Intalio is trying to step up into the big league and acting like it, but it seemed unnatural. I have no clue what the VARs were doing there apart from selling their own. I would have much appreciated their presentations on why they are an Intalio partner and what their clients like about Intalio.

In my limited experience with Intalio, as good as the underlying open source technology seems to be, their documentation (or lack of it) is frustrating. They haven’t matured into an open source platform who knows what it means to support a community. And now I am not sure whether they are really scaling their presence or changing track all together. Intalio is backed by investors and I know how this bunch thinks. But it seems too sudden, almost unnatural, and I am not sure where all of this will land up. This could propel Intalio into a different league. But just as easily marginalise their community users and literally scare those simple-thinking aspirants. The good thing is Ismael said that Intalio acts on what their users tell them, in which case they should do fine.

The future of business

I read this interview with Eric Schmidt, the CEO of Google, where he expresses his views on how the internet impacts (will impact) businesses, competition and innovation.

Interestingly he opines about the long tail (remember that one?) and democratic markets and how he does not quite believe that the internet levels the playing field. According to Eric Schmidt the power law still holds true where a small number of things are highly concentrated. I guess he is right; volumes still reside with the a few at the head. Global brands still hold clout over a majority of smaller ones in that ever increasing tail. And he is right when he says that businesses need to have one superstar in their portfolio which will draw most revenue.

However what is not talked about there is where I believe the head is getting increasingly fragmented. As I sit and think, I can’t really come up with one shining example of a true global superstar. May be it’s the times we are living in when most of the superstars have flopped (and how!) Or may its because such superstars get created in under a day today (Susan Boyle?). I believe the real reason is that crowds no longer want to believe in one superbrand. In fact I believe that the power law is detested where no single entity is being trusted to hold all power. And where the search for the next superstar is always on. Anyway, Google is still the superstar of the internet business. But that may change.

I hope you find the interview an interesting read as well.

Singularity – The ever blurring line between real and virtual worlds

Ray Kurzweil talks about his vision of singularity. I found this video, which is actually part 2 of a series of 4, quite interesting. You can check out the other parts over there too.

Not business as usual at Google?

I like Google. Like millions of googlers around the world, I am a big fan of this company. They deliver great functional utilities, most of which are now an intrinsic part of my daily life, and they do it without making too much of a fuss about it. So this news about Google in The Times caught my eye.

Google Street View camera car snapping pictures in British villages and towns has raised a few concerns with the Britishers. I understand their concerns: if someone was standing outside my house looking at it for any longer than two minutes, I believe I would be suspicious too. Let alone them picturing the street and my house on it. It’s interesting reading this piece of news and the hundreds of responses to it. The Americans (from what I can make out by the responses) can’t understand what all this complaining is about. Are we just being paranoid? Or perhaps this shows how reserved and cautious the Europeans (in general) are as compared to the Americans. I am an immigrant in Britain and from what I see and understand, and can compare with the American culture, I think it’s the latter. Surely Google should understand such cultural differences too and approach the matter with more subtlety in the UK?

For example, I do not like the comment by Google’s spokesman according to whom Google will respond “within hours” for picture removal requests. It seems to me they have missed the point completely! Shouldn’t the nicer thing be for Google to request before taking pictures rather than people now having to specially put in requests for removal? And this from a company who is famous for it’s “you can make money without doing evil” philosophy?

I suspect the Google car’s 360 degree camera doesn’t help the matter at all: a tall hovering camera conspiciously turning 360 degrees and picturing everything is perhaps a design for such controversy. And it raises the question once again: how much should we trust Google with our data? We don’t trust our own governments thesedays. And mind you the government and it’s most secret and special agencies are known to bugger up with our confidential data, so can we and should we trust a for-profit corporate?

I guess having a business philosophy of do no evil is not enough. Winning trust is never easy; in fact it’s a never ending job. Google needs to get more serious about its own philosophy and perpahs start thinking local?

What’s wrong with a virtual broker-underwriter marketplace in large commercial insurance?

It makes complete logical sense. In this day and age, when most industries are opening up to virtual as an alternative/secondary medium for trade, then why not a virtual marketplace in large commercial (re)insurance?

To be clear, by virtual marketplace I mean a internet platform where 2 or more types of participants come on-board to trade. Generally the 2 participants represent a buying and selling side (or a demand side and supply side). Such platforms capitalise on network effects also referred to as network externalities in which positive trade benefits are realised as membership to the platform increases. A famous example is eBay which is an autioning marketplace. eBay succeeds in creating opportunity: the opportunity for sellers to get visibility with a large buyer base and the opportunity for buyers to get a bargain from a large number of sale options.

I see three major challenges for a broker-underwriter virtual marketplace in large commercial insurance. First of all, there is very little residual externality in broker-underwriter relationships to bring any benefits for trading on a common platform. Take the London Insurance market – it’s all based in the very small area of London EC3 where there are limited number of connections between broker and carrier firms. There are efficiency gains to be achieved by trading electronically but a virtual marketplace is not really the best tool to represent these limited number of connections. To quote eBay’s example again: eBay succeeds because it allows users to manage an unknown, an unmeasureable and physically unmanageable number of trade opportunities. However the magnitude is not quite the same  for broker-underwriter relationships in large commercial insurance. Moreover with consolidation affecting this industry, I suspect the number of broker-underwriter connections are fairly well defined at this point.

A major concern of trading electronically in the large commercial insurance world is achieving straight through processing (STP). This is the second area where the virtual marketplace falls short. The marketplace’s independent existence means that it relies on other pieces of the electronic jigsaw (typically gateways, adaptors and electronic repositories) to be in place if users are to make the most efficient use of their data. In such a scenario the marketplace is not the closest to its users (this is generally the space of adaptors and gateways) and therefore electronic trading is more transient. There is then very little pull for users to come on-board an independent virtual marketplace where their data maintenance spreads rather than consolidates.

The third consideration in any marketplace is price level and price structure. Price level is the total cost to the users in a trade and price structure is the actual share of the total price that each side pays. Pricing structure is a strategic issue which is always difficult to get right. After considering the reduced network effects and the fact that the marketplace may not be the closest to its users, it becomes apparent that the price level cannot be high. Most likely the price will be a small transaction charge:  there is very little case for the marketplace to charge a service/membership fee. Counter balance that with the costs involved: the cost to reach critical mass for a marketplace are quite high. Not to forget that standardisation of trading technology means that it becomes very costly to achieve user stickiness and the marketplace will eventually suffer from multi-homing (when users use multiple and competing marketplaces for their trading activities).

So is there any case for a virtual marketplace in large commercial insurance? Actually I believe there is under the following:

1. The marketplace needs to serve multiple types of participants, not just brokers and underwriters. There are greater network effects in some of the other relationships in the insurance value chain. And more likely these relationships have largely escaped electronic efficiencies which means that there are huge trading benefits to be realised as a result.
2. The marketplace needs to consider a path towards openness and continuous innovation to keep fresh. The provider of the marketplace could assume the role of a facilitator and allow natural discovery of new value propositions by the participants.
3. The marketplace needs to be realistic about costs involved. And more realistic about its price structure and price level. Profits per trade will be low, but numbers involved could be large once critical mass is achieved.
4. Also, and this goes without saying, the marketplace needs to be fair and open in its operation. This will add to its likeability, a key feature whose positive effects are too great to measure.

Any thoughts welcome.

Unpretentious bank

If, for some reason, you still love your bank, then may be this would change your mind.

Trust

The context of this talk is Banking where trust runs low thesedays. I found a lot of interesting Trust talk, with a few thought-provoking and motivational statements towards the end, that is worth sharing.