How to Introduce Entrepreneurship within a Young Democracy – (a case study)

During a recent Charlie Rose interview, Christine Lagarde, the president of the IMF (International Monetary Fund), shared her views with a packed audience of international economists in Washington D.C. on how young democracies such as South Africa or Malaysia commonly have fragile dual economies operating in parallel, one run by the ‘haves’ or wealthy, while the other by the ‘have nots’ or the impoverished. The wider the gap between them the greater the chance social unrest will follow, such as what happened in Egypt with the Arab Spring in 2011 and most recently in Brazil 2013. Other areas that could potentially erupt include Ukraine, Argentina, Greece, Indonesia, Pakistan… In fact the list of countries is so long that one might wonder, what exactly could the IMF or similar international financial institutions do differently and can lessons learned from one country be leveraged elsewhere?

To further explore new insights with countries operating within dual economies, I recently led a facilitated discussion with 38 university students at the Universidad del Caribe (UNICARIBE) in Santo Domingo, Dominican Republic. This island is a foothold for over 10 million inhabitants and a micro version of a typical young democracy. My goal was to hear how young Dominicans felt about their dual economy and extract a list of recommendations to pass along to political leaders and international creditors. I also hoped their ideas might offer new insights to other country leaders.

Universidad del Caribe is not your typical university. With over 19,000 enrolled students and 330 instructors, the university covers an ambitious range of degrees and disciplines at their two building complex. Students work by day and attend classes, one to two days per week. Campus spirit is notably strong fueled by an enthusiastic faculty comprised of volunteers, many of whom hold other jobs to make ends meet.

Life for a young impoverished Dominican is a daily challenge. Most will spend their lives operating undetected by government scrutiny in an underground economy where basic financial stop gaps such as access to credit for emergencies or a reasonably priced business loan are rarely accessible. Their greatest asset is their ingenuity and vibrant personality, which shines in much of what they do. Job security does not exist. They earn what they can from odd jobs, pay no taxes, and cut corners wherever and whenever by, for example, stealing electricity off the national grid. Providing for family needs consumes their meager incomes leaving them with little to no savings. In short they have few options within their reach to improve their livelihood.

On the other side of the economic spectrum, the Dominican middle class have their own set of problems. As avid consumers they buy beyond their means and spend much of their time fighting frivolous lawsuits or fulfilling new government requirements. Aside from having to pay income taxes, they are also saddled with higher utility bills required to offset the electricity stolen by freeloaders.

Surprisingly, the number one aspiration for a young Dominican adult is not to earn a college degree or to own their own business but rather to align himself or herself with a political party early on in life. In their minds, the only way to obtain job security is by serving a well-connected political group. Competition for these positions can be fierce, not because of an over-supply of skilled workers, which are scarce to begin with, but more for the oversubscribed pool of politically connected job seekers.

Open positions require a minimum of three years working experience, which leaves first time entrants with no other alternative than to join a political party.  This type of politically-motivated workforce, one based on connections rather than qualifications, tends to create a vicious circle. On the one hand, managers and leaders, also mentors, will send the wrong message to younger Dominicans who will see little value in advancing their own education or training, since the better paying jobs can be won with less effort through political connections. On the other hand, less qualified government officials are less inclined to require professional certifications from contractors to ensure that state-of-the-art services are rendered. The end result is a less competitive workforce.

The upkeep for a politically motivated workforce can become prohibitively expensive for any government. Venezuela and Cuba are two good examples where individuals are forced into political alliances for fear of being denied even basic services. Over time the workforce becomes lazy, and their leaders complacent. To please their international creditors, government officials devalue their local currency, which only makes matters worse with higher inflation rates. Eventually, both public and private sectors become trapped by the weight of their own unwillingness to progress. Adding to the malaise are party leaders who fail to recognize the immense value their Informal Sector could otherwise render with existing resources. Instead they would rather keep a tight lid on their potentially vibrant young workforce who due to their discouragement will enter a life of crime making matters even worse for their government and the rest of society.

With these facts on hand, I asked the discussion group what they thought was the root cause for their dysfunctional dual economy. Some cited a lack of women’s rights as they affect the welfare of the family unit. Others pointed to the criminal justice system for sending hardened criminals back on the streets without offering them a job or alternative form of income.  After a lively exchange, the unanimous vote for the root cause focused on the country’s weak judicial system.

According to the participants, on paper the justice system appears formidable, while in practice, it is virtually spineless. Laws are readily legislated, approved, and published to please voters; however, in the courtroom, these same laws are rarely enforced as written or at all. For the right price, a political leader or powerful investor can influence a judge’s decision to their advantage.

Despite their impoverished status, these 38 student/workers recognized the importance an independent legal system. Participants noted that whenever politicians or influencers are allowed to operate above the law, trust between the government and its people erodes. This same feeling of distrust infiltrates society and its family units creating a precariously, wider gap in their dual economy. This revelation raised an important question.

In a dual economy governed by a biased legal system, what can the government and international financial institutions such as the IMF do differently to create a brighter future for the Dominican Republic?

To counter the gap-widening effects caused by a weak judicial system, the group suggested the formation of a student entrepreneur association based out of the University del Caribe.  Members would join the Association then be matched through an interviewing process according to skills, experience, and interest to a cluster of no more than ten students each. Each cluster would be be guided and arbitrated by a university appointed mentor. At least one member of a cluster would have a specific entrepreneurial venture in mind or a launched startup in its initial stages. Members of a cluster would become the new startup’s board of advisors and help in their varying capacities to further the entrepreneur’s venture. As the venture grows, members of the board of advisors can opt to work for the new entity or start their own venture within their same cluster. The University would act as an independent arbitrator to ensure members adhere to a clear set of rules and contracts.

On an interesting side note, one individual admitted that if a cluster were to help him launch his dream construction business, he would most likely leave the cluster and not return the favor. His revealing comment confirmed the inherent distrust among his peers, which our facilitated discussion found to be primarily caused by the lack of an independent judicial system in the country. His comment re-enforces the University’s role as the cluster’s so called ‘mini judicial system’, one that is independently operated. Initially the process will most likely be an uphill battle but after a few success stories should convince others of the many benefits that can be gained from trusting each other.

Although our time ran out, other questions remained unanswered that could serve for future facilitated discussions. For example, how should the contract among members be drafted and how should the spoils and liabilities of a successful launch be structured to ensure a sustainable business? Of course, securing funding for mentors, garnering support from government officials, attracting outside investors, and designing an eco-system for future entrepreneurs are important topics too. After the discussion ended, the enthusiasm from both the students and faculty was evident by the clusters that began to form immediately among them.

As I listened to their animated voices, I could not help but think how a this two-hour discussion with a sample of prospective local entrepreneurs could potentially change the course of a nation. Hopefully, members of the IMF and other international financial institutions can learn from this case study and consider including a similar cluster program as a funding requirement for young democracies.

© 2014 Tom Kadala

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Yes, You can NASA that!

When you need an address, a definition, or information about anything on earth, friends will tell you to ‘Google that’; however, what if your smart device or robot needed to look something up, considering they too have become a part of the ‘Internet of Things’? For them, ‘Googling that’ may help narrow some choices but the binary-like answers (yes or no) that futuristic devices will need to operate may have to come from another source altogether such as a ‘collaborative search engine’, driven and inspired by a half-a-century old institution, NASA. 

What is a ‘collaborative search engine’?

In short it is a search engine that by today’s standards is incomplete; not because a database is missing or links broken beyond repair, but because its primary source of information does not yet exist and is essentially pending discovery. Let me explain.  While Google has become the central source for all known data, (good, bad, and even ugly), NASA is emerging with an alternative search engine concept altogether. Instead of ‘crawling’ throughout the web to organize existing data the way Google algorithms do, NASA is organizing groups of talented individuals all over the world through virtual ‘Challenges’ to help it address a daunting list of unsolved problems whose collective contributions may one day make space travel as much of a business reality as airlines are today. Their global efforts will soon be centralized into a massive collection of ideas that will be in one way or another associated with NASA’s existing space data.

NASA’s Space Apps Challenges
These Space Apps Challenges, as they are called, are huge. Last year’s two-day global event, for example, broke the Guinness Book of World records for the largest ever ‘Hackathon’-like gathering with over 9,000 registered participants representing 484 organizations in 83 cities across 44 countries. At this year’s event, the number of attendees worldwide jumped above 10,000 and is expected to rise further as NASA continues to tap outside its walls for novel ideas, clever approaches, and outright brilliant breakthroughs all from cadres of scattered, talented, and unlikely groups of individuals.

This year one of their city events was held at AlleyNYC near Times Square located in the heart of New York City where a packed house of eager space aficionados of all ages, all walks of life, and every professional talent imaginable converged to inspire and get inspired. In a business-like manner, NASA’s Deputy CIO and CTO, Deborah Diaz, opened the event by presenting details of the institution’s tide-changing decision to post NASA’s gargantuan vaults of space data on the web at open.nasa.gov; …where anyone with an internet connection can access its vast contents freely. Experimental data from the International Space Station (ISS), weather data on Neptune, meteorite real-time positioning, GPS-landscape image coordinates on Mars and so much more are accessible for the connecting. NASA hopes its open-data policy will inspire groups to form organically as they often do at their Hackathons and address many of the institution’s pressing current and future challenges in space. On a side note, Diaz expressed her profound views that NASA’s open-source efforts could one day change the future of global democracies from one of ‘freedom-of-choice’ to one of ‘freedom-of-thought’.

NASA’s Challenges in Space
To help participants place space challenges into perspective, American test pilot mission specialist astronaut, Doug Wheelock, who logged 178 days on the Space Shuttle shared his views about space and space travel with participants during a press conference at the event. According to Wheelock, space is a brutally hostile environment that does not compare to anything on earth. To appreciate his perspective, imagine a place where the sun rises and sets 16 times every 24 hours, and every time the sun shines, materials such as the body of the space station or an astronaut’s spacesuit is subjected to temperatures exceeding 450 degrees Fahrenheit. When the sun sets, temperatures swing the other way dropping to 300 degrees Fahrenheit below zero. Radiation levels surrounding the space station are so high that despite the station’s thick walls, some of the 70+ laptops on board used to perform experiments may inadvertently ‘fry’. In a humble manner, Wheelock told a packed audience that NASA cannot continue its mission to Mars without the discovery of new materials that can withstand wide frequent temperature swings and intense radiation exposures over long periods of time.

Medical issues in space are another of NASA’s imperatives. Wheelock described issues with atrophy in the leg muscles, blurred vision, depression, and even loss of taste, all due to exposure to zero-gravity. Taken for granted on earth, gravity gives our legs purpose, our sight a level horizon to distinguish moving objects, our potential mood swings a sense of equilibrium, and even our mouth active taste buds. Our brains are wired to calibrate our bodily functions based on gravity levels. In a zero-gravity environment, for example, our legs become, essentially useless. In a defensive move, the brain will push blood away from the legs to the brain to allow for recalibration in a gravity-changed environment. Space station astronauts have learned to counter some of these physical anomalies by exercising their legs regularly with bungee cords, for example, but look to other sources for future discoveries and ideas on preventing potential blindness and automating cures for other unexpected and yet-to-be-encountered physical and psychological disorders and ailments.

Challenges in Space Travel
Then, there was the question about space travel; a question that just about any individual young or old would want to ask an astronaut. What is it really like lifting off from earth in the Space Shuttle, living at the International Space Station for months at a time, and taking a space walk? Here Wheelock did not disappoint.

In a candid and unreserved manner, Wheelock described the distinct noises he would hear while walking underneath the space shuttle prior to a launch. He spoke of the heaving and creaking of the massive rocket’s cylindrical shapes, which were brim-filled with liquid hydrogen. He also pointed to the constant clicking sound of the many valves used to control fuel flow. The area was in his own words, ‘its own climate’, with chunks of ice falling and water dripping off the sides surrounded by clouds of hydrogen escaping violently with high pitched hissing sounds. He gazed up at the rocket’s main nozzle knowing that at liftoff its center would reach 6,000 degrees or two-thirds of the temperature of the surface of the sun. Since no metal can withstand such high heat levels, NASA engineers designed a thickness sufficient to prevent the metal from melting completely before its final phase release. With sincere earnest, Wheelock turned to the audience once more and informed them that future space travel requires stronger and lighter materials that have yet to be discovered.

After liftoff a rocket will roll to one side to counter air dynamic forces caused by the shuttle’s stubby wings and to face its antennas toward earth. From the ground the roll looks smooth and orderly but inside, Wheelock admits, ‘it’s another world’. Once airborne the rocket rattles ‘like mad’. The G-forces he experienced are so great that reaching a switch on the controls overhead requires an immense physical effort. The vibrations and gyrations of this metallic beast forging its way against the will of nature causes the vessel to ‘rock all over’. At the earth’s orbital surface, the vessel switches to a liquid fuel and upon entering space reverts to Newtons second law of motion, a state when an object in motion will stay in motion. With a deep sigh of relief, the astronauts are finally cleared for space travel. Their vessel floats gingerly onward into the silence of space.

Inside the International Space Station, a new normal for life on board evolves quickly. Food is tasteless. The air in the station smells like the venting area of a power supply unit. The temperature is a comfortable 70 degrees and the prevailing noise of vents cooling laptops and other electronics hums at a familiar 60 MHz frequency level. The sleeping quarters are slightly quieter, while the exercise room tends to capture the smell of human sweat. Missing in the minds of the astronauts is the familiar earth scents of dirt and grass.

On the few occasions Wheelock ventured on space walks, he liked referring to the space drama film, Gravity  to illustrate his experiences. ‘It’s pretty accurate’, he said. Similar to one of the film’s most suspenseful scenes, Wheelock briefly described his own feelings when he had to release his safety cord attached to the station to complete an improvised maneuver.  For a brief moment as he pressed the button on a joy stick controlling the jet packs on his 300 pound suit (last designed in 1970), Wheelock recalls rotating around to a magnificent view of the earth with the space station out of sight. Images of 2001: A Space Odyssey flashed in my mind as he described his brief encounter of being ‘very alone in space’. With no GPS available to remotely control his automatic safe return to the station, Wheelock turned to the audience and again pointed at more areas where NASA needs help with new ideas and discoveries.

Historically NASA has always fed the industry pipeline for technological advancements. The incredible feats of lifting rockets, placing satellites into orbit, and landing humans on the moon have pushed the envelope on technological breakthroughs. The many derivative applications have created new industries, exciting careers, and a notable increase in global economic standards of living.

In an effort to address a proposed landing on Mars in the next 30 years, NASA is once again taking the lead on reinventing the future of data search engines to be developed by unlikely groups of global talent, fueled by NASA data, and created for machines to interact with other machines. Do not be surprised when, in the not-so-distant future, your friendly robot pauses during one of your voice commands to say, “Yes. I can NASA that?”

© 2014 Tom Kadala

Will Natural Gas become a Geo-Political Tool or a Modern Weapon?

When President George W. Bush invaded Iraq on March 19, 2003, he had over 100,000 army troops mobilized to the region. It was a formidable maneuver that launched a 10+ year conflict with questionable outcomes. Today, President Obama is on the verge of another conflict in the Ukraine that involves Russia’s occupation of Crimea. Unlike Bush, however, Obama and Congress are eyeing natural gas exports as their weapon of choice to rein in Vladimir Putin from reclaiming territories along the perimeter of Russia. A geo-political tool to enable a global energy transformation or a modern weapon to settle disputes, natural gas has truly evolved.

Cleaner to burn but messy to legislate, natural gas from shale holds great promise for the US and the world. This relatively clean energy source has miraculously become the ideal bridge-fuel that society desperately needs to wean itself off its addiction to dirty coal and oil. Already there are positive signs that society is moving in the right direction. For example, utility companies no longer build new coal-fired power plants to produce electricity. Also, transcontinental transportation fleets are converting their trucks to natural gas. These and many more initiatives to replace conventional fuels have helped to reduce greenhouse gas emissions in the US to levels not seen since 1995.

The rapid expansion of wells drilled since 2006 has given engineers plenty of valuable field data to improve upon yields and safety standards. From these field trials, amazing, breakthrough technologies have emerged. However, none of these achievements could have happened without the perfect storm scenario that came together in the last few years; …where favorable property rights laws in the US made it easier to select drilling sights, …where the availability of exceptional talent in the oil industry globally was ready and able and …where the consistently high market prices for oil (above $100) was sufficient to ‘fuel’ the funding needed to keep the engines of this perfect storm humming along.

Now into its eighth year, the US natural gas bonanza is no longer a nascent business for wild cat investors. Its unprecedented success has placed it front and center on the global stage. Presently at the helm, is the US who practically overnight, has gone from being a net importer that was often subjected to the whims of OPEC, to a net exporter. For a long time, Americans have always been taught to loathe their dependence on oil-rich countries. They often accused these oligarchs of using US oil payments to wage war against the same US freedom-fighting armies that protect their regions. With this recent change of the guards, however, Americans and their leaders are finding themselves in uncharted territory. The improved situation favors the US significantly but also leaves its leaders facing a tough dilemma.

To Prohibit or To Allow Exports – a tough dilemma
While the US can boast having the cheapest natural gas on the planet and the best technology to extract it, elected leaders in Congress must deal with two opposing issues: either to prohibit the export of US natural gas so US manufacturers can create more American jobs or to allow exports to threatened US allies whose economies are constantly challenged by volatile energy prices. Already, the US’s offer to export natural gas to the Ukraine in response to Putin’s invasion of Crimea has prompted a strong reaction between both sides. Seen in this manner, one might contemplate the following question:

Could natural gas become the US enabler for global sustainable economic growth and world peace? …and if so, should it be implemented as a tool or a weapon?

There are three key benefits the US could gain from exporting its natural gas. First, the US could stabilize energy prices globally for a long time. Stable energy prices would help remove a fundamental uncertainty that concerns investors. Keeping investors happy is important since they are instrumental in relieving government coffers of additional financial burdens. A second benefit focuses on building global awareness on climate change. Just as the US has done to limit the use of their coal-fired power plants, other countries could be further encouraged to adopt similar environmentally friendly laws and best practices. Finally, for countries seeking a free trade agreement with the US, natural gas exports could earn valuable trade concessions that could lead to integrated capacity-building among government institutions, a critical component toward establishing sustainable democracies worldwide.

These lofty expectations may be too high for even the US, considering that every new encounter will introduce more complexities and unknowns. If left unchecked, however, this dominating role could awaken the Bush-era American arrogance that caused much damage among US allies in the last decade. We can only hope that US elected officials will recognize this once in a millennium opportunity and use natural gas as a tool rather than a weapon to steer the world toward a sustainable energy transformation strategy that follows a common set of internationally vetted guidelines and best practices.

To its credit, the US is quite adept at writing policies based on extensive research that can serve as effective connectors between funding sources and companies. Leaders would do well to study the success of these domestic policies and use their findings as a guide for dealing with international conflicts. One good example, I came across, is an institution called NREL (National Renewable Energy Laboratory).

NREL (National Renewable Energy Laboratory)
At a recent MIT Energy Conference in February panelists from NREL described what they do for the solar and wind energy. For these two industries, NREL devises standardized contracts (i.e. between developers and investors), catalogs best practices, creates a massive dataset for investors called SPA  and even generates a mocked up filing for rating agencies. Their work is available to anyone over the web.  No one is forced to adopt their recommendations but since they work so closely with industry, most do. US government policymakers use their data to design tax subsidy programs and special financial mechanisms (i.e. MLPs – Master Limited Partnerships and REITs – Real Estate Investment Trusts) to attract private sector investors. Since the process is allowed to work under free market conditions, successful outcomes are only a matter of time. Players who are allowed to adapt together naturally align their better interests on their own terms.

One of NREL’s key objectives is to help these two young industries adopt to a structured and comprehensive outline that can fit easily into the most current legal, financial, and policymaking world that currently govern US multinationals. The process allows for give and take from all sides, which leaves some wiggle room for new ideas and progress. This overlay is the ledge where young creative and nimble companies can push the envelope for new ideas and pathways. At the conference, we got a glimpse of what awaits NRELs future considerations.

There is Energi, a risk management company based in Massachusetts that sells insurance on the expected realized energy savings for a renewable project. In Energi’s world, if a project fails to meet an agreed benchmark of savings after an allotted time, investors are made whole according to their insurance policy. Essentially Energi found a way to treat money saved as money earned. Other companies that profit from realized savings include Opower, which gets paid by a home resident’s utility company for kilowatts of energy saved and First Fuel, which uses big data and data analytics to help office building developers lower their energy bills. On the pure concept play there is TeraCool, a young startup currently soliciting investors to build a first-of-its-kind data center at a Singapore LNG port. The data center would be air cooled from the flow of unloaded liquid natural gas. The company does not generate any revenue for its clients but instead seeks to be paid from the estimated annual energy savings it claims to generate to the tune of $70 million dollars.

As seen with the example from NREL, the US is quite capable of managing multi-sector projects to achieve game-changing results.  However, it remains to be seen if US leaders will be equally successful managing multi-country agendas with the same level of confidence. Obama and Congress will soon find out that natural gas may be the catalyst of choice, but it is still highly flammable.

© 2014 Tom Kadala

Greece: Land of Economic Tragedy or Entrepreneurial Opportunity?

Would an ancient Greek playwright like Euripides have ever considered Greece’s current economic malaise a source of inspiration for a modern day Greek tragedy? Probably not. …and yet, an audience for this unwritten, modern-day Greek tragedy has surged as members of the Troika continue to relentlessly pressure Greek politicians to address their overdue financial public obligations now teetering above 170% of GDP.

One can just imagine the utter frustration that Greece’s Government VP and Foreign Minister, Evangelos Venizelos, must feel every time he updates ECB officials of Greece’s economic progress or lack thereof. At a recent ECB review meeting, Venizelos, a burly looking character, bellowed a strong opinion in the nearly empty chambers of onlookers. He told anyone who would listen that to view Greece as the “central problem” of the European and global economy was “false, dangerous, and unfair”. When I read his quote in a local paper, it sounded like the perfect opening line for a riveting and engaging modern-day Greek tragedy, whose first scene might begin as follows:

A Modern-Day Greek Tragedy
As the sun sets over the Athenian skyline, scene one begins. A spotlight, as though originating from the night sky, shines brightly upon the Acropolis. The stage is the city of Athens, while the audience is a virtual network of headline news readers who watch with great anticipation for clues on how this extraordinary Greek tragedy will unravel. 

The first scene begins with a narrator’s soliloquy on Greece’s current financial woes. In a monotone voice, he tells the audience that Greece is in debt up to its eyeballs. The country of 10 million inhabitants owes over 317.31 billion euros plus interest to European bankers and other investors, …which translates to a shared debt of over 31,731 euros per Greek citizen. With unemployment at 27.8% and almost twice as high among its youth (58%), the Greek population has a slim chance of ever paying back its creditors. Increased austerity measures have helped reduce the need for more debt but have done little to address the amount the country owes overall. The severe cut backs have made Greek everyday life exceedingly difficult by spreading public misery, triggering social unrest, encouraging talent drain, and fostering capital flight. 

In a baffled voice, the narrator turns to the audience and asks the following questions:

If austerity has truly brought the Greek people to a dead end, what can Greece’s leadership do today to help secure a better future? How can their government policymakers attract foreign direct investments, create local employment opportunities for its citizens, and eventually reignite a new and sustainable Greek economy? Are we doomed or is there hope among us?

Suddenly, the silence is broken. From the audience, a group representing the future of Greece, speaks out loud. Their message is direct. Their recommendations spot on and their intentions, genuine. They are none other than representatives of Greece’s young professionals.

A Dynamic Facilitated Discussion
Unwittingly scripted into this next scene, I arrived in Athens for a last-minute business trip earlier this year. Prior to my departure, I had asked various groups of Greek young professionals through LinkedIn and other sources to meet with me for an informal discussion. For nearly two hours, we chatted candidly about the future of their Greece.

They were an eclectic bunch, fifteen in all. They covered a wide range of backgrounds including post graduates, young entrepreneurs, teachers, and professionals working in the private sector. Many had spent time outside of Greece either studying or working internationally. For them, Athens was their home, and they had a vested interest in her future. I agreed to write an op-ed expressing their views so their collective recommendations could be read globally.

I began our facilitated discussion with a hypothetical question that went as follows:

If this Group was offered access to a 100 million euro fund to spend in any way they chose for the betterment of Greece, what would they do first and why?

The Group offered three suggestions, which together revealed some fundamental issues that go far deeper than the well-documented mistrust between Greeks and their government. First, funds should go toward changing Greece’s educational system and specifically toward the placement of more non-Greek teachers. Group members felt that the practice of recruiting teachers from the same student body had potentially fostered a myopic view among Greek academics. Bad teachers who have little fear of losing their jobs are rarely challenged by outside peers nor formally evaluated by their students for their comments and suggestions. With a strong bias towards ‘teaching to the test’, teachers have become unchallenged, while students have lost their genuine desire to learn for the sake of gaining new knowledge. To make matters worse, students are never certain if and when they will graduate as teacher and student strikes are common.

Exposed early on to disinterested teachers and unpredictable graduation dates, Greek students have developed an inherent dislike to academia. Their disdain for their educational system has resulted in a long-standing rift between industry and academia, one which has severely lessened the government’s support and industry interest in the development of Greek-based R&D initiatives.

From an early age, children are taught to aspire to public sector jobs. These jobs form part of a government promise that offers lifetime, financial security for its citizens. Aiming for a different career path is considered out of the main stream. Under these preconceived notions, entrepreneurship ranks low as a worthy career among Greek family members. They view young would-be entrepreneurs as fools rather than business pioneers. In fact the literal translation in Greek for entrepreneurship is ‘business man trying to do something’. …they just don’t know what that might be!

Not surprising, the second suggestion for the allocation of the hypothetical 100 million euros was to boost the poor image of entrepreneurs within Greek society. At first I thought the Group’s suggestion would also include financing for an entrepreneurial eco-system which might include a startup incubator and an innovation center. Instead it focused entirely on addressing the severely marred image of entrepreneurs within Greek society. Intrigued, I verified this stigma with other young Greeks I met during my trip and found that indeed it was true. They also felt like ‘social outcasts’ who preferred not to share their dreams with their respective friends and families.

Where American entrepreneurs relish the rebellious freedom associated with entrepreneurship, Greeks do not. Greeks rank social acceptance of their entrepreneurial dreams as a top priority. Not addressing this social concern first could significantly lessen the long-term effects of any experimental entrepreneurial program. Certainly much more can be read into this social angst, and I encourage readers to delve further into this discussion among their friends and colleagues to explore innovative approaches that will turn the tide of traditional thinking.

The third suggestion for the fund was expressed as an off-handed comment but nevertheless unveiled some valuable truths. To the Group funds should be spent to create a new and independent political party, one that would be open to delivering new government promises for financial security that were not associated with a position in the public sector.

A New Normal
Undoubtedly the Troika’s demands have forced layoffs and salary cutbacks within the Greek government that have jolted the fundamental foundations upon which Greek life has been based for decades. Today, a new normal is evolving between traditional Greek  family expectations for job security and government promises. Neither has experience navigating through these troubled waters and as a result blame the other for Greece’s severely weakened economy. Workers strike frequently, making matters worse, while lawmakers struggle to acquiesce to the demands of their key industry groups. Last year alone, the government published over 240 legislative reforms, which created havoc among business owners and investors who remain on the sidelines awaiting greater economic and political visibility from their government.

The Group’s Recommendations
Hanging Merkel in effigy may help release some anger among the Greek population but as the Group pointed out, there are better ways to deal with the current crisis; however, first things first. Steps to favorably reassess the role of the entrepreneur in Greek society will very likely spark a cottage service industry of business coaches, entrepreneurial therapists, web designers, mentors, and more. Their growing presence will encourage other young adults to consider entrepreneurial pursuits, while simultaneously, reverse the current ‘social outcast’ stigma associated with entrepreneurship. If supported by favorable policies and legislation, Greeks living abroad may see this initiative as their calling card to return to Greece. Their expertise, networks, and enthusiasm should further unleash the many innovative capabilities currently bottled up within the Greek population.

The Group felt Greece could one day become a low-cost solution for big data and data analytics services globally. Just as India captured the call center and IT sectors, Greece’s mathematical prowess, recognized throughout history and the world, could drive both the low end side of the business where big databases require meticulous ‘cleaning’ as well as the high-end side of the business where sophisticated algorithms for machine- to-machine communications among devices or robots are required.

Institutes for Excellence
The Group suggested the development of an independently operated Institution for Excellence or IE whose purpose would be to teach and mentor students on the educational tools and skills needed to launch a big data and data analytics eco-system, specifically a human capital engagement research center. The Institute would reside within an existing university but operate independently. Their campus presence should reignite a new sense of purpose at academic institutions, one that industry could value and be willing to support financially. The Institute would have to be fully insulated from political influence and be governed through an independent board whose members represent its constituents equitably. The IE’s footprint should be designated a tax-free zone to help students finance their startups. Startups that reach a specific threshold in sales would be spun off into the Greek economy under a gradual legislative assimilation process.

Funding for an Institute for Excellence could come from three sources. First, from Greek diaspora who may be willing to return to Greece and actively participate in a teaching/mentorship program. Second, from a modified tax amnesty program similar to one implemented in the UK where tax avoiders can come clean with their overdue tax bill by investing in qualified startups. To help Greeks make the transition to entrepreneurship, however, this tax amnesty program could be further simplified by issuing shares from a fund whose charter includes the establishment of multiple Institutes of Excellence throughout Greece and, potentially, other countries.

A third funding source would come from international private equity funds whose involvement could lead to future investments in the IEs startup companies and relevant initial public offerings or IPOs at both local and global stock exchanges.

Existing organizations such as MIT’s Venture Mentor Service ( http://vms.mit.edu/) can be tapped for guidance, know-how, and strategy. As is often the case with entrepreneurship, the initial phases for proof of concept are the most difficult, however, there is little doubt in my mind that the 15 Greek young professionals who worked through these ideas with me in less than two hours can lead this charge. If given the chance, they and their peers could offer Venizelos with another set of talking points that will change the Troika’s next discussion from one of exasperation to one of opportunity fueled by sustainable economic growth.

© 2014 Tom Kadala

Harnessing Big Data with a Systems Thinking Approach – (A Harley Davidson Case Study)

With 90% of the world’s data created in the last two years, what can we expect our data vaults to hold two or even twenty years from now? Today we measure our lives in peta-bytes but by 2020 estimates show a 2,300% increase in the bits and bytes that will define our lives. 35 zeta-bytes to be exact. How then can we as a society leverage the intrinsic value of so much data without getting bogged down with its complexity?

Around the turn of the century, we experienced a similar moment of euphoria when retail outlets opened ‘virtual stores’ and sold products to online buyers. A famous IBM TV ad once depicted an overwhelmed young company whose products went from a few online orders a day to hundreds of thousands. In many respects we have come full circle and are back at the starting gate of yet another era of unprecedented growth only this time instead of millions of orders, the focus is on zillions of data points.

In 2000 CEOs focused primarily on IT integration and supply chain strategies to fulfill a surge of orders. Their managers implemented the latest e-commerce packages, leveraged the cloud to reduce costs, broadened and compressed their global supply chains, and trained their workforce to adapt new work flows. Success was determined from a customer’s positive experience, measured primarily by the number of accurate and timely deliveries.

Today, the paradigm has shifted away from a transaction centric one to customer centric. Companies no longer wait for customers to buy but instead develop sophisticated algorithms that can compare a specific customer’s purchase history with multiple data sets including credit rating reports, recent purchases, and most extraordinarily, their genuine propensity to buy based upon the web pages they most commonly visit. Surprisingly, web behavioral data has become a powerful data complement that can offer unprecedented efficiency benefits to both the merchant and the consumer. Customers receive compelling suggestions, while stores inventory the products their customers will most likely purchase. It’s a win-win for both. Issues of privacy remain a sticking point for some individuals, but, as the benefits to the consumer improve, even these issues are expected to become less significant.

Striking the optimal balance will be tricky especially when the journey also involves flogging through mounds of unstructured web data. One approach being talked up within academic circles is systems thinking.

MIT’s SDM Conference – (sdm.mit.edu)
At a recent Systems Design Management (SDM) conference at MIT called “A Systems Approach to Big Data: Going Beyond the Numbers”,  Senior Lecturer J. Bradley Morrison greeted a packed audience with a refresher on Systems Dynamics; the study of how all the various components within a company (people, materials, contracts, etc), for example, interact and react together to create a product or service. Morrison’s ‘Back to the Classroom’ exercise offered new insights on how the principles of ‘systems thinking’ that today help companies scale their global operations can also be applied to leverage the new era of big data. His explanation is also testimony to the incredible versatility of ‘systems thinking’ and systems design management principles.

Morrison divided ‘Systems Thinking’ into various key areas. First off was ‘Dynamic Complexity’, which evaluates reactions when a smooth-running assembly line becomes inadvertently interrupted; for example, when a supplier’s product fails and an alternative source is unavailable. According to Morrison, unexpected manufacturing events can also have a direct affect on a company’s moral and effectiveness. The reverse is also true where systems that operate smoothly can greatly improve on what Morrison refers to as the ‘Mental Model’.

Another key area is ‘Stocks and Flows’, which Morrison dubbed humorously as  ‘Bathtub Dynamics’.  Similar to balancing the water level in a bathtub with running water, systems thinking can help calibrate inflows (i.e. inventory-build up) versus outflows (i.e. sales). The depth of the bathtub is determined by a company’s internal competitive advantage. These advantages vary widely but with regards to the alignment of systems thinking with big data, Morrison focused on skills training as a key differentiator.  He highlighted his points with a case study from a US motorcycle manufacturer, Harley Davidson.

Harley Davidson Case Study
In the late ’90s, Harley Davidson implemented lean manufacturing systems throughout its operations. Management leveraged their strong union relations to encourage employee input. The response was overwhelming. After numerous meetings, participating employees elected to improve the rotor area on the shop floor. Soon new signs went up. Space allocation was optimized, and the new employee-driven initiative became a reality. Management was pleased with their progress. The improvements paid off with an increase in productivity from 70% to 94% without the need for additional floor space. All in all the project reflected a success story until a common syndrome called ‘process degradation’ set in.

Like an ambitious diet plan, the idea reached its goal only to become unsustainable thereafter. Unaddressed issues such as an understanding of who was responsible to maintain the new process wedged away the achievements. The collaborative efforts to engage and integrate the surrounding workforce were weak and gave way to a ‘do-it-yourself’, ‘if-and-when-you-can’ approach. Despite the obvious benefits, workers returned to their old habits inhibiting further progress.

Who was to blame? …management, labor, or both?

Improving productivity with limited resources is a common problem with every company. That is why CEOs leverage technology, timely intel, and training whenever and however possible. Of these three, Morrison points to training as the greatest challenge and the most commonly ignored. Even when training is available, the type of training that he recommends is not classroom-style but rather on-the-job training.

“Learning a new skill is one thing but learning how to replace one’s old habits with a new skill is quite another,” Morrison  explained. “Workers need the opportunity to ‘change their own mental model’ before the true benefits from increased productivity can be fully realized.”

According to Morrison, managers should give their workers the opportunity to learn a new system on their own terms, regardless if it requires allocating extra time during a shift or work day — even as much as 50% more time. Unless workers are given a chance to appreciate the time saving benefits on a personal level, they will more than likely return to their old habits and simply ‘add-on’ the new changes rather than adopt them for their intended benefits.

Looking ahead…
In the next few years, new skills training will involve some form of data analytics integration. As data sources swell in every part of a business, relying on a specialized team to manage the company’s data needs will become unsustainable, especially when experts tell us that big data and data analytics, done right, depend upon the seamless collaboration and exchange of data from every corner of the company. Visionary CEOs will require every employee to learn how to collect, disseminate, compare, and use data from multiple sources. Soon-to-be, ‘unsilo’ed’ departments will depend upon each other in an entirely new manner, since the data they collect will determine the value and quality of data for the rest of the company.

Just how CEOs balance this data exchange while injecting behavioral changes among their ranks will become a number one priority for years to come. …and yet will CEOs have the foresight to allow their employees to experiment with best practices on company time? As we learned from the Harley Davidson case, those leaders that do allow their employees to adopt new behavioral changes on their own terms will more than likely achieve measurable, sustainable advantages. On the other hand, those who follow the herd by, for example, hiring more data scientists to solve their data issues, may lose an unprecedented opportunity to transform their workforce. At this juncture CEOs would do better implementing a systems thinking approach today that will allow every employee to eventually become a specialized big data provider/user for the company.

© 2014 Tom Kadala

Improving the Odds of Entrepreneurial Success by taking a closer look at MIT’s Eco-System

If you were sitting at a Las Vegas gambling table with a 3% chance of winning big, would you continue to play or fold? Guessing your likely response, then let’s compare this example with launching a startup company. Statistics show that 97% of startups fail after their fifth year of operations with nearly two-thirds in their first year. If your response was to fold at the Las Vegas gambling table, then why are so many institutions encouraging students to launch a new company when the data shows that the odds are severely stacked up against them?

As though these numbers were not discouraging enough, then there are the private equity firms who search through the rubble of startups with the hopes of selecting a winner. Their expectations are even more somber. Of the thousands of business plans reviewed per year, startup investment firms will fund on average 4 deals per year, knowing all along that 3 out of the 4 companies will either fail or break-even after their first year of operations.

So, one might ask, can anything be done to improve the odds of success for a typical startup?

Lab to Market
At universities the term ‘lab to market’ is used to describe the worn path that many young companies must endure to become successful. Their humble beginnings tell a familiar story where an unexpected mishap in a lab inadvertently inspired their startup. For some, the inspiration came from a personal experience, such as in the case of DropBox’s founder, Drew Houston, who got tired of using USB drives to move files from one computer to another. Had Drew not been inconvenienced enough times, DropBox may have evolved differently or not at all. The key to his success was not just his personal revelation and commitment, but also MIT’s established eco-system that was there when needed to grow his nascent idea into a global company. MIT’s contribution was so crucial that one might ask, if every entrepreneur had access to a similar eco-system as MIT offers, would the odds of success improve? Surprisingly, the answer is ‘not necessarily’.

Ideation
Just as moving ideas from lab to market are challenging, coming up with the ideas in the first place or ‘ideation’ requires an entirely new approach and discipline, one that MIT addresses today with the first-of-its-kind ‘proof-of-concept’ center known as the Deshpande Center for Technological Innovation – http://deshpande.mit.edu/.

Recently, I attended an awards reception to honor the 2013 winning teams who were approved for nearly $1m in grants. That evening the lobby of the Media Lab (where the event was held at MIT) was buzzing with sponsors, investors, students, faculty and other interested parties. Hoping to be discovered, the teams were on hand to display their progress and answer questions. Unlike a traditional startup competition that select the best business plans, this event focused on the teams with the best business ideas. Appreciating the difference between both ideas and plans is key. Ideation occurs primarily at the very beginning of the entrepreneurial process, while business plans that build upon proven ideas come later.

When Drew Houston stumbled upon his vision, DropBox was just an idea, an idea that could have easily slipped out of his mind had it not been for a timely injection of funds to nudge him along to help him prove his concept further. That nudge, that tap, that light push made all the difference. The timely urgency to nurture ideation at this very initial point in the entrepreneurial process was what inspired Gururaj “Desh” Deshpande and his wife, Jaishree, to donate $17.5 million to launch the Deshpande Center at MIT.

An Innovative Approach
At the reception I caught up with the founder, Desh, and asked him if he was pleased with the Center’s 10-year record of 110 funded projects with 28 successfully spun out companies. A successful entrepreneur himself, Desh seemed less interested in speaking about his Center’s extraordinary achievements than he was of the impact his Center had among the faculty and graduate students at MIT. To him the true value proposition of the Deshpande Center was less about granting awards to a select few and more on the number of applicants who applied. He felt that the Center’s application process forced researchers to view their work from an ‘idea to impact’ perspective, an approach, he felt, was uncommon among researchers. With his contagious smile, Desh boasted that it was not unusual for non-winning applicants to apply a second or third time.  Last year two such teams that despite not winning a grant from the Center, succeeded in launching their startups anyway. With a deep sense of pride, Desh relished the fact that his Center’s influence had achieved an equally positive impact with every applicant, regardless of who won a grant or not. Through his Center, Desh had created an ‘ideation culture’, one that is often ignored and yet intimately critical to the success of any startup/eco-system.

Surely the odds of entrepreneurial success should improve if more startups had access to established eco-systems, especially those that support ideation early on. But perhaps the lesson to be learned from MIT’s Deshpande Center’s story is less about funding ideation grants and more about giving entrepreneurs a second or even a third chance to prove their concept. Just think how many fantastic ideas are tossed aside and lost forever simply because a business or grant contest is designed to select only three winners?  …or the thousands of business plans tossed in the garbage of an overwhelmed angel investor? …or the business plans that are rejected because of an entrepreneur’s poor presentation skills? Imagine what would happen if one-quarter of the startups presented to a private equity investor were randomly awarded a Deshpande Center-like financial nudge for further proof of concept. Maybe then the odds of succeeding as an entrepreneur would truly improve.

© 2013 Tom Kadala

Disrupting the Banking Industry with Big Data and Data Analytics

Bankers seen sipping away the hours over client martini lunches at upscale restaurants and posh clubs are rare these days. The slump in credit demand from the global economic crisis is part to blame but so to is the absence of ‘live’ clients. Branch offices that were once community hangouts on payday look more like empty office spaces for lease. Today bank clients ‘hangout’ virtually, while doing most of their banking online. They lurk in and out web-based services unwittingly leaving behind hundreds of data points (like footprints) that when reconstructed using data analytics algorithms can accurately reveal the client’s real identity. 

At a first-of-its-kind event in Atlanta,Georgia titled, Customer Insights & Analytics in Banking Summit 2013, representatives from various forward-thinking banks and data-analytics service companies presented their combined views to a packed room of financial professionals. Organized by Data-Driven Business (datadrivenbiz.com), a US arm of FC Business Intelligence (a London-based events company), the Summit personified the past, present, and future of banking.  First, it exposed the ugly truths characteristic of a complacent banking culture mindset.  Then it highlighted the extraordinary accomplishments from early-adaptor banks, and, finally, it unveiled a fantastic prediction on how banking could potentially hold the keys to unlocking the value of social media feeds from Twitter, Facebook, and other similar web-based services.

With off-the-shelf, data analytics, software tools, bankers can gain an accurate 360 degree view of their customers on an individual basis just by matching a customer’s banking data (i.e. loans, credit card purchases, investments) with their behavioral patterns online. The technology used to integrate data sets to match behaviors with individual names has advanced remarkably, so much so, that bankers can calculate with reasonable accuracy the ‘lifetime value’ of each customer. This magical step has been demystified by over 150 vendors who specialize in the science of Digital Data Integration or DDI. DDI connects numerous disparate data sets both structured and unstructured using assigned ID numbers. Expert companies in this area include Aster (asterdata.com, a TeraData Company), Actian (actian.com), PrecisionDemand (precisiondemand.com), Convergence Consulting Group (convergenceconsultinggroup.com) and Actuate (actuate.com, a BIRT company). The principle reason bankers want to segment their customers by their future income potential is to allocate their limited resources more efficiently.

Banks that fully integrate their operational data with unstructured social media streams will become the game-changers to watch. Already the Old Florida National Bank boasts of their younger and more agile management team (under 43 years of age) who credit their surging asset growth in the past four years to their data analytics initiatives – (from USD$100m to $1.4b). Their team has the proper bank culture, mindset, and know-how to implement data analytics tools that fully capture a digitally-holistic view of their customers. By mapping where their customers spend most of their time and money, management can target more relevant and timely offerings. Targeted customers unwittingly respond with not only a buying interest but also a willingness to refer the bank to a friend or colleague. …truly a win-win for all.

SunTrust Bank, also based in Florida, uses data analytics to determine not only the location of their next branch office, but also the optimal management qualifications required to operate one of their branches. Another interesting case study came from Wells Fargo. Their data analytics team integrates thirty-two data sets (from both internal and external sources) and presents the results in a customized dashboard format to their managers company-wide. Managers use the service to make better decisions, present data on an ad-hoc basis at meetings, and self-serve their specific research interests using a number of additional data visualization tools for non-techies. The tools they use are off-the-shelf Business Intelligence or BI software packages provided by companies such as Oracle (oracle.com/BI), MicroStrategy (microstrategy.com) and Tableau (tableausoftware.com).

Servicing a more digital client-base has come with its many challenges as well as with its unexpected opportunities. For example, credit bureaus that traditionally deny 96% of consumer credit requests often reject qualified candidates. Using data analytics tools, however, banks can integrate comparative behavioral data with a candidate’s payment history and reassess their risk profile accordingly. The results would qualify more loans that would otherwise have been turned down. Other exciting ways for banks to grow revenues include working with real estate brokers. Banks can determine which of their clients is most prone to purchase a new home and pass the list on to an agent. Agents seeking better leads will more than likely recommend mortgage business back to the bank that shared their intel.

One can just imagine how many more ways bank data can play an integral part in helping companies find their most likely customers and future business. Banks already manage the transactional data in-house and are rapidly gaining the business intelligence experience needed to integrate their customer’s behavioral data and compare their profile with their peers. Under this scenario, one might wonder why any business would not want to work with a bank that not only understands their business but also delivers buying customers.

With this much real-time intel available on customers in one central location, could banks one day become the primary lead source for their business clients? Could this new normal become a significant game-changer in the banking industry?

Despite a rosy future, the business world is not waiting for banks to embrace data analytics any time soon.  Competitive trends point to a number of threats including retailers such as WalMart who will be offering banking services directly to their customers at their retail outlets.

There is also the emergence of the ‘digital wallet’, which for the time being focuses on reducing the clutter of credit cards using available smartphone technology. Eventually one company will umbrella all credit card transactions and offer global behavioral tracking intel. Pioneers on the forefront include Protean Payments (getprotean.com), a recent startup that plans to use bluetooth technology to replace card swiping at  terminals and Wallaby (https://walla.by), a company that helps cardholders maximize points earned prior to making a purchase.  There’s also Ebay’s PayPal (paypal.com), which has released a debit card concept, which it hopes will entice developers worldwide to promote their data analytics services to SMEs.

In online banking, Simple.com does not have a physical presence nor charges the customary fees that traditional banks do. In fact, they offer plenty of financial management reports and suggestions at no charge. …all online, of course. How they make money is best understood when opening an account. Simple.com new accounts cannot be opened unless one is willing to accept ‘cookies’ on their computer, a permission which releases away a user’s complete web history to a third party. Their insistence suggests that they place a greater value in a customer’s behavioral online data than they do in their banking business.

If Simple.com succeeds, could their new business model significantly change the way consumers perceive a bank’s value proposition?  Will consumers demand additional compensation for allowing access to their behavioral online data, since the data is worth more than the interest paid on deposits?

For now, banks who are looking at data analytics for the first time and wondering how and when to take the plunge should heed practical advice from experts who spoke at the event. One individual concluded that for now, those new to data analytics should start with the data they already have and use predictive findings from data analytic tools to start a conversation rather than formulate targeted recommendations.  This advice and the rapidly evolving changes in both consumer and commercial banking remind me of the famous Aesop’s Fable about the race between the tortoise and the hare. This time, however, the winner may be a third and invisible participant called ‘Big Foot’ representing Big Data and Data Analytics.

© 2013 Tom Kadala

Could PayPal become the Global Reserve for Cash and Data?

As PayPal continues to reinvent itself, expect the mother of all disruptions, a global currency comprised of cash and data. Similar to how voice and data coexist over the same copper wire today, PayPal’s next move will co-mingle cash and data over a shared platform. Instead of bits to sound bytes, however, PayPal hopes to seamlessly integrate customer and peer data (in the cloud, of course) and deliver customized business intelligence across multiple platforms to small business merchants all over the world — right when they need it most. There is one catch. Every merchant transaction including credit cards would have to involve PayPal.

Last July at a PayPal sponsored ‘Battle Hackathon’ event, which took place at AlleyNYC (alleynyc.com) near Times Square, over 100 local software developers worked through the night in small groups to create a new ‘killer app’ of their choice for a chance to win a $100,000 grand prize. This event was one of ten stops along PayPal’s world tour, which included Barcelona, Berlin, Moscow, Seattle, and Tel Aviv. Throughout the night, PayPal’s minions were on-hand to help developers integrate a list of special access APIs (Application Programming Interface) into their code. These APIs offer developers controlled access to PayPal’s databases. Aside from identifying worthy programmers for hire, PayPal uses these Hackathons for feedback on their growing library of APIs. While attending, I caught up with their Global Director for their developer network, John Lunn.

A former marine biologist who compares PayPal’s membership behavior to schools of fish, Lunn shared some eye-popping statistics from PayPal’s extensive databank.

• 65% of items purchased in a retail store have been researched prior on the Internet.
• 43% of browsers at a retail store actually make a purchase.
• 37% of shoppers who price compare in the aisles using a smartphone App, complete their purchase online later,
• On average 15 year-olds will remain on a retailer’s web page for less than 6 seconds.

“You have to be where your customers frequent”, claimed Lunn who strongly believes that the future of the web is with mobile devices, especially since market near-term predictions for mobile payments are upwards of $20b. Already a prominent player, PayPal expects to process $7 billion in mobile payments next year, which is 10 times more than its volume two years ago.

The increased payment activity has PayPal eyeing the customer-specific,  behavioral/buying-preference intel that can be extracted from the transactional data. Rich in details, this harnessed data could become a game-changer for small retailers.

“Without data, you actually know nothing about the consumer,” Lunn exclaimed. Conversely, with data, a merchant can react or address a customer’s wants and needs at a lower cost. Showing a customer what they will most likely purchase based on their personal profile and peer comparisons can make every aspect of running a business immensely easier and efficient. From marketing, sales, inventory control, retail space, and employees on the floor — every improvement that is based off better business intelligence derived from rigorous data analytics and self-teaching algorithms will have a lasting impact on the rest of the business as well as for its corresponding supply chain.

A customer’s buying experience is important too…  

“Buyers no longer want to wait in line,” Lunn notes. …and why should they if technology can enable them to simultaneously step up to the same checkout counter. Lunn used Jambo Juice as an example of how PayPal card holders can order up their favorite drinks from their mobile device and use face recognition to verify their purchase in the store. There’s no waiting around since drinks are prepped in time to be picked up. Watching a worker cut up vegetables and blend a customer’s health drink was once perceived as fresh and worth the wait. Not anymore. Consumers value their time as much as they do the products they buy.

With buyers who are far more knowledgeable of products than ever before, the only line of defense available to merchants is a deeper understanding of their customer’s buying habits. But knowing what a customer purchases in one store is not enough to make a difference. Merchants need access to richer and timely intel about their customers and their peers, not just what they bought recently from them, but elsewhere too, with other merchants, on or offline, locally and globally.  With access to this much data, merchants could target their best customers and provide them with exceptional service especially during the few minutes a customer spends at the check-out counter. For example, once a face is recognized at the register or an account number entered, hundreds of points of data could be co-mingled, correlated, then calculated instantly between PayPal and the merchants database to extract a customized product recommendation such as a special offer or custom-printed coupon booklet. Each timely recommendation would help build a stronger bond with the store’s brand.

Integrating into a merchants database or CRM system requires an army of developers. PayPal knows this fact and hopes that its easy-to-use APIs will encourage developers to include PayPal with their client’s transaction processing needs. PayPal’s inclusion would do away with the ‘clunky terminals and expensive equipment’ many merchants use today to process credit card payments. However, to make PayPal’s ambitious business intel plan really work, every merchant on the planet would have to become a PayPal member.

Could PayPal become the Global Reserve for cash and data?

To appreciate PayPal’s shrewd and brilliant strategy, pick up a copy of a fascinating book titled, “The PayPal Wars” by Eric M. Jackson. The author explains in compelling, narrative detail how the simple idea of helping world economies through job creation, prosperity, and world peace is hinged upon merchants trading freely and seamlessly across borders. If merchants in The Congo, for example, could sell their goods as easily to a local buyer as they would to a buyer in New Zealand, their improved cash flow would help strengthen their local economies and grow their businesses.

PayPal’s past success was predicated on the individual support of its very members. When eBay tried to replace them with an in-house solution called BillPoints, PayPal’s members rebelled. …and after many other similar competitive encounters, members could indirectly claim a personal stake in PayPal’s ongoing success. Their formidable presence overwhelmed even their craftiest challengers. Time will tell if PayPal’s loyal customers will once again help them forge on with their ambitious quest to become the Global Reserve for cash and data.

© 2013 Tom Kadala

To Byte or Not to Bite: The Myths, Realities, and Trends behind the Science of Big Data Analytics

Without data, a company would never survive in today’s global environment. With some data, it might have a fighting chance, depending upon the quality and timing of the information.  But what happens when a company has access to too much data, sometimes referred to as ‘Big Data’? Ironically, it too could go out of business even with the best technology and staff to manage it.  Why? …partly because the data’s ultimate value depends upon who interprets and communicates the recommendations to the rest of the company, a task often left to an internal employee or ‘Data Scientist’ who may be no more than a recent university graduate armed with theories and little industry practice.  

According to Dr. Jesse Harriot, the Chief Analytics Officer at Constant Contact and author of “Win with Advanced Business Analytics”, “setting up a data analytics initiative within a corporation is not a trivial endeavor”.  It requires a lot of sponsorship at the corporate level and can take a year or two before achieving a meaningful balance between the influx of web data and its collective value to the company. Harriot shared his wisdom at a recent conference in Boston titled, “The Science of Marketing: Using Data & Analytics for Winning”. This power event organized by MITX, a Boston-based, non-profit trade association for the digital marketing and Internet business industry – (mitx.org), served up an impressive venue of expert panelists who shared their best practices and experiences.

Among them was a star performer, care.com, the largest online directory that connects those in need of care with care providers. Their co-founder and Chief Technology Officer, Dave Krupinski, discussed how the company uses analytics to drive all aspects of their marketing function including, attribution analyses, customer segmentation, user experience, and predictive analyses. As Krupinski explained to a packed room of 300+ professionals, “most CEOs blindly jump into ‘big data’ analytics expecting immediate returns, only to discover (and after great expense) the many intricacies required to get it right.”

Is ‘big data’ analytics really worth the trouble?

If economic times were healthier then maybe not, but with a slowing economy, companies are forced to either come up with the next differentiating product/service that will give them an extra edge over their competition or figure out better ways to surgically target likely buyers based on real-time data. But, increasingly, fickle-minded consumers whose loyalties remain largely unpredictable have made the task exceptionally challenging. …and yet, no one can blame consumers for their lack of brand loyalty when on average they are bombarded with over 500 ad messages per day.

A Typical Corporate Scenario
In a mocked up example for discussion purposes, a typical CEO hires a ‘Data Scientist’ or promotes someone from IT, after reading positive reports from companies that have boosted their sales using ‘big data’ analytics. Once budgets are allocated and a team is in place, software with funny names such as Hadoop, MapReduce, and HAWQ appear. These packages digest massive data sets (mostly unstructured data from the web) and respond quickly to complex SQL queries entered by a team operator or analyst. The output is then parsed into a more visual friendly format perhaps using expensive Business Intelligence (BI) software and when ready, shared at weekly management meetings. For this example, the meeting is adjourned without much warning. Management felt that the results from the Big Data Analytics Team were not aligned with corporate priorities, a common problem that points part of the blame on the Data Scientist’s poor understanding of managements business needs and on the CEO for not creating a comprehensive, formal data governance.

Disappointed CEOs tend to view ‘big data’ analytics as a ‘think-tank’ style department that delivers flawless dictates to the rest of the company, when in fact, ‘big data’ analytics should be a collaborative data-sharing effort among all departments.The secret of getting ‘big data’ analytics to work is less about massaging structured and unstructured data quickly behind closed doors and more about the timely reintegration of field data from every department to continually tweak predictions and outcomes.

What should a CEO do to encourage data sharing among departments?

Most department heads do not share their data with their cohorts either by choice or due to incompatibility issues.  To address this reluctance, a CEO should first explore a standardized database structure and data exchange format that would allow departments to share their data seamlessly. Next he or she should develop an incentive plan to encourage staff members to not only share their data but request data from others. The fewer restrictions imposed on inter-departmental data exchanges, the more likely, new ideas will blossom. Moreover, the positive behavioral changes in the workforce will help the data analytics team stay focused on corporate priorities. Keeping internal operations lubricated with both internal and external data analytics will boost a company’s revenues by default. This approach can lead to a passive revenue strategy that focuses more on balancing an operation guided by ‘big data’ analytics than relying on traditional consulting advice or CEO hunches.

A Five Stage Journey
I turned to a visiting professor at the Harvard Business School, Tom Davenport, to categorize the ‘big data’ analytics journey a CEO can expect to take. Davenport listed five progressive stages needed to achieve ‘big data’ competence in today’s business environment. First, there are the ‘Analytically Impaired Companies‘. These are companies that have some customer data but lack a centralized strategy to leverage its use.  Next up are the ‘Localized Analytics’. These entities outsource their data needs to companies that follow traditional marketing practices. Then come the ‘Analytical Aspiration’ types who centralize their data sources, enjoy C-level support, and operate an in-house data analytics team. At this level companies are just beginning to grapple with their ‘big data’ analytics issues. A fourth phase has been designated to ‘Analytical Companies’ who are showing some success in using data to drive their business. Finally, and at the top of the heap are the ‘Analytical Competitors’. These companies have fully integrated proven algorithms that combine unstructured web data, with reintegrate field data to seamlessly predict a specific customers expected wants and desires based on their personal past history with the company and elsewhere including the same for their closest peer group.

Most daunting to any CEO is the notion that companies ranked at Davenport’s ‘Analytical Competitors’ level can rely almost entirely on their algorithms to run their business. The indisputable outcomes dictate their level of ad spend per quarter, allocation of ads across multi-platforms, inventory levels per SKU, quality of maintenance support, head count, and so much more. At some point one might even ask what the role of management should be for a company ranked ‘Analytical Competitor’ and the talent/expertise needed to be an effective CEO in this soon-to-be, new normal.

© 2013 Tom Kadala

Data Mining Lessons for Obama

Earlier this month an ex-CIA employee and whistleblower, Edward Snowden, exposed the federal government’s 6-year old, clandestine initiative, referred to internally as PRISM, a covert data-gathering program that began in 2007 as a corollary to the Patriot Act of 2001. This White House-directed, domestic-espionage project has been collecting phone logs of millions of U.S. citizens from major telecommunication giants (e.g., Verizon, AT&T, and Sprint) and emails from nine prominent Internet companies (e.g., Google, Yahoo, Apple, Microsoft) in a concerted effort to thwart future terrorist attacks.  

History shows that PRISM has prevented numerous incidences, including a foiled backpack bombing plot in New York in 2009. Despite its undisputed success record, PRISM has ignited a national debate on whether the administration has gone too far seeking tighter security at the expense of civil liberties. In a statement to the American people, President Obama argues that his actions are justified.

 “You can’t have 100-percent security and also then have 100-percent privacy and zero inconvenience,” he famously stated. “We’re going to have to make some choices as a society.”

Not surprising, many Americans disagree with Obama’s position and have taken action. Among them is Sen. Rand Paul (R-Ky), who will soon introduce a class action suit of which he hopes to obtain more than 10 million signatures. Those in favor of Obama’s PRISM believe that the price to pay for security is small in comparison. Just how damaging can a diverted phone log be to anyone, or a random email read, for that matter, if terrorist attacks can be prevented? However, when the process requires canvassing mountains of data that could randomly incriminate anyone, the fundamental basis for the U.S. judicial system where defendants are considered innocent until proven guilty, is truly at risk.

‘Con’ concerns do not stop there. Dissenters argue that PRISM has set a precedent for further erosion of individual freedom. Without a counter mechanism in place, future leaders will more than likely continue to up the ante on domestic surveillance until an unimaginable, automated version of a Russian-style KGB informant process becomes undetectable and virtually unstoppable. If you are skeptical, consider what happened with consumer debt after Reagan’s supply-side economics took hold: Every American consumer was doused with credit cards. The combination of economic bubbles that followed eroded the effectiveness of our elected leaders in Washington who today are trusted by less than 20 percent of the population.

If eliminating PRISM is not an option, then what mechanisms can be put into place, early on, to prevent domestic surveillance from reducing our individual freedom… and what solutions have worked in the past, and with whom?

Data Mining vs Mining Precious Metals
Lessons can be learned from another type of mining activity that is very similar to mining data, namely, mining for precious metals in some of the most remote areas on the planet. Surprisingly, the operational principles of the two efforts are nearly identical. In both cases expensive machinery and sophisticated software are used to sieve through enormous amounts of data/ore. Both identify specific assets (i.e., key leads/gold nuggets) that in aggregate could create exceptional value, a value so great that individuals, corporations, or governments would break laws or silence whistleblowers to secure its use or acquisition. Finally, both processes are confronted with a conflicting tradeoff that involves the invasion of privacy of a constituency of voters.

Just as Americans feel an attack on their personal freedom from PRISM’s data mining activities, local communities in Peru, Congo, Guatemala, South Africa to name of few, experience a similar personal upheaval when global mining companies (i.e. Barrick Gold, Rio Tinto and many, many more) set up operations without the communities’ consultation or consent. Environmental disasters, such as toxic chemicals found in the water supply or increasing numbers of birth deaths or defects, have exposed rogue mining operations and over time have forced the hand of powerful politicians and legislatures to comply with legal mechanisms that protect the rights of affected community members.

Recent examples include Peru’s mining town of Bagua where 34 people were killed in 2008 in a staged military attack against peaceful indigenous demonstrators. In the Congo, where many rare-earth minerals are used to make mobile phones and appliances, increasing local uprisings have forced mining operations valued at $1 billion to close.  These uprising are clear evidence of a failed system or policy. They offer a lesson and illustration of a similar dark future for Obama’s PRISM project, if left uncontested.

The striking resemblance between data mining and traditional mining suggests that some of the best practices used to resolve conflicts in the mining industry could also be applied to the PRISM project to safeguard it from escalating and potentially causing a ‘trust rift’ between the US government and the American people.

American Society/Council of the Americas
At a recent gathering of the American Society/Council of the Americas (AS/COA) in New York City, a distinguished expert-panel with deep field experiences working on some of the toughest mining-related conflicts in the world offered their insights, best practices and ongoing recommendations to a packed audience of interested parties of non-profits, NGOs, and private investors. (AS/COAs recent issue of, Americas Quarterly, covers additional details.)

To qualify as a best practice, the panel highlighted a simple yet fundamental metric that involves a transparent two-way conversation between the mining company’s project (consultation) and the local communities concerns(consent). Social unrest is almost inevitable when the conversation becomes opaque and one-way or as referred to by the industry, “consultation without consent”. Fortunately, legislative progress continues in countries like Peru where mining laws have been passed that require both consultation and consent, for example, in cases where a community is forced to move.

One of the expert panelists, Rachel Davis, the managing director at ShiftProject.org, highlighted the imperative need to include consent mechanisms. To this end she outlined three key challenges that mining companies must address properly to ensure an open-dialogue with an impacted, local community.

1. Offer a venue for consultation but be prepared to spend at least one month of face time to earn the people’s trust.  “Trust,” she emphasized, “is the imperative currency for collaboration.”
2. Train staff members within the mining company to develop a genuinely concerned attitude along with the skills to handle awkward conversations or even hostile responses.
3. Ensure available access within the company to handle grievances and capacity-building, coordination efforts within a cross-functional, corporate structure.

Emily Greenspan, the Senior Policy Advisor at Oxfam America, tweaked Davis’ three points by adding one more important stipulation. She recommended that mining companies evaluate how decisions are made at local levels.

“Taking the time to understand the culture, temperament, timing requirements, and so much more are crucial from the out start,” Greenspan explained. 

Her comments reminded me of President Obama’s lunch engagements with members of Congress earlier this year. They were, in my opinion, too little, too late to have the desired effect. Had Obama requested these luncheons at the beginning of his first term, perhaps the paralyzing partisan gridlock that we have today would have found common ground. The lesson learned is the vital importance of getting to know your audience from the beginning; otherwise the cost of catching up becomes prohibitive and meaningless.

With the looming ‘black cloud’ surrounding the PRISM Project, Obama would do well to learn from his prior experiences and heed the advice from field experts, many of whom are already within his administration and working on  global mining issues for precious metals. Why not tap on their wealth of experience to help clean up the PRISM project mess?

As history has shown in the mining industry, time may be running out for Obama. A failed policy of this magnitude could turn into an irreversible tide of social unrest.

© 2013 Tom Kadala