Prediction Markets and Elections

Rather than developing mathematical models for prediction and decision support, should organizations consider designing methods for managed betting!  It seems like betting has continued to predict the election outcomes in the USA correctly, and companies like InTrade may just set the next transformation driven by leveraging social behavior in how to think about the future.

Visit Intrade's website here, it is worth a visit.

Though do note from The Economist article here:

"It now appears that the spotlight may have done Intrade more harm than good. On November 26th America’s Commodity Futures Trading Commission (CFTC) sued the company for allowing betting on the prices of products, such as oil and gold, which trade on derivatives markets it regulates. (In 2005 Intrade had promised the CFTC not to offer such contracts.) In response to the suit, the firm announced it would no longer let Americans trade on its site."

Entrepreneurship in Healthcare

The health law passed in 2010, now come to be known more commonly as Obamacare, seems to have inspired a bourgeoning of health care centric entrepreneurial activity.

The Economist writes:

"Smaller companies are coming up with ways to help bigger ones cope. Venture-capital firms see at least two promising areas: companies that serve consumers directly and those that help hospitals provide better, cheaper care. For some firms, Obamacare is a direct boon. For example, Getinsured.com, which helps people choose health insurance online, is also helping set up California’s insurance exchange. Since the election more states have asked about its services. Peter Hudson of iTriage, which lets a patient tap symptoms into a mobile app and search for doctors nearby, thinks Obamacare will add to his firm’s growth. By directing patients to general practitioners rather than pricey specialists, iTriage may cut costs for ACOs."

I continue to keep an ear out to this sector to see if Obamacare does truly enable a resurgence of creativity where it usually comes from, the one or two man shop, the tinkerer, the thinker of impossible concepts, ... the entrepreneur.

Perhaps, here the political aisles are being crossed?

"The most interesting model may belong to athenahealth, which offers hospitals and doctors billing, electronic health records and other services. Start-ups pitch to athena’s customers at the company’s “More Disruption Please” conference. The winners get to offer their products to the 35,000 doctors in athena’s network, alongside athena’s own. HealthFinch and iTriage are both due to join. Jonathan Bush, athena’s boss (and a cousin of George W.) favours young companies that help hospitals work better by doing the jobs “that all doctors hate and suck at”."

Read the complete article here.

Business Model: Tata Sons

The Economist publishes excellent articles.  Yet, at times, a disappointment does emerge.  While discussing the $100 billion conglomerate and the transition of Mr. Cyrus Mistry to the Chairman of the company, the magazine disappointed in completely missing the history of why Tata Sons' ethos are as they are, while complaining about it sustained growth rates of 3% to 4%.

Tata was founded by Mr. Jamsetji Tata, a Parsi (or Zoroastrian).  The core of Tata companies has always been social sustainability and ethical conduct.

A founder of one of the largest private equity firms in the USA told me recently that he will not work with any company in India, except for a Tata company.  He said simply, "They don't take or give bribes, and they don't lie."

The article states:

"The Jack Welch comedy club
This is the sort of approach that Tata veterans disdain. They see the “kill, cure or sell” philosophy of famous Western managers of conglomerates, such as Jack Welch of GE, as comically macho and short-sighted. One divisional head admits: “Return on capital is not at the centre of our business. Our purpose is nation-building, employment and acquiring technical skills.” This benevolence even applies to staff abroad. Embattled Tata Steel Europe has 33,000 employees."

Perhaps it is time for Capitalism driven on quarterly returns to have a longer term view for the health and well being of its employees and the society.  But then it may not be considered Capitalism with a capital 'C'.

Read the complete article here.  Read the "Purpose and values" of Tata here.

Innovation in practice

I prescribe to the following definition of innovation: "A novel idea, put into practice that offers value to the customers and/or the society." Fisher, Biviji, & Nair, 2011.

Dr. Sebastian Thrun's (top, right) Stanford University team won the 2005 DARPA Challenge for an autonomous automotive. I choose to kick-off 2013 with this example of innovation in practice as it highlights two foundational facts regarding product innovation:

• Traditional product development methods with unlimited resources and funding can produce results, but not necessarily innovation.
• Innovation is about novel ways of doing things, which must disrupt with very large positive margins the cost of doing business, or time to market or resource requirements or all.

Dr. Thrun's team was substantially smaller than his competition Dr. Whittaker who had over one hundred strong team.  Dr. Whittaker had a war chest of $3,000,000.  It is simply delightful to see how different the two approaches are and how Dr. Thrun won the DARPA Challenge.

A key highlight of Dr. Thrun's approach was to quickly identify commoditized processes and technologies, leverage the power of commoditization to focus on the breakthrough from the start.  As stated in "Stanley: The Robot that Won the DARPA Grand Challenge":

"Before both the 2004 and 2005 Grand Challenges, DARPA revealed to the competitors that a stock 4WD pickup truck would be physically capable of traversing the entire course. These announcements suggested that the innovations necessary to successfully complete the challenge would be in designing intelligent driving software, not in designing exotic vehicles. This announcement and the performance of the top finishers in the 2004 race guided the design philosophy of the Stanford Racing Team: Treat autonomous navigation as a software problem."

Read the complete paper "Stanley: The Robot that Won the DARPA Grand Challenge" here.  Watch the PBS video of the race and be inspired to innovate.  The transcript of the video is available here.

In praise of The Economist

I read The Economist. I would like to share why this magazine continues to inspire me (excerpt from Wikipedia):

The Economist claims that it "is not a chronicle of economics." Rather, it aims "to take part in a severe contest between intelligence, which presses forward, and an unworthy, timid ignorance obstructing our progress."

And it has done so since 1843.

Longe-range forecasting: "Exercise in irrelevance"

"Very long-range forecasts from the OECD, a think-tank, may seem an exercise in irrelevance."

Read the rest here.

Core competency driven reinvention

"Why, when so many widget-makers have gone to the wall or been bought up by foreigners, is GKN alive and kicking and British-owned after 253 years?"

The Economist documents the creation of a new business by GKN enabling it to at times preempt and at times work through the downturns like 2009.

"The trick it has mastered is finding new businesses and markets to move into before its established ones run out of steam. “We have been very good at recognising that things don't last forever,” says Nigel Stein, GKN's chief executive since January."

GKN, whose core business is drivelines for automotive industry, is now one of three or four manufacturers in the world who can build a carbon-fibre composite wing spar for passenger jets.

"The aerospace venture might seem to sit awkwardly in a company whose mainstay is selling car parts but Mr Stein says there are “soft synergies” between the two divisions. Both make high-precision kit for a few global firms: it takes the same set of skills to serve and sustain the trust of such demanding customers."

It is a delight to see large corporations comprehending that the same trick does not last for ever.  For me the article highlights three key attributes of companies that last hundreds of years successfully:

• They know their core competency, continuously challenge it, and grow it into "new" businesses.
• They do not hesitate from trial and error when they push their core competency into the "new" or even the unknown.
• They are not risk averse; that is, they are intelligent about where they take risk, they do not jump into business models that everyone is running after, and differentiation, and at time uniqueness remains a driver for the measurement of success.

The best part of such company's as GKN is; they manage Schumpeter's Creative Destruction with finesse!  And deeply understanding their core competency is at the heart to it.

Read the complete article here.

Innovation to solve the "CEO disease"

Prakash Dubey forwards the Economist Intelligence Unit report "Cultivating business-led innovation" with the purpose to "explores how senior executives can promote a culture of innovation by empowering different business units", and a blog "The Hunt for Innovation: 10 Strategic Insights" from one of his colleagues at Oracle, Bob Evans, referencing it. The blog begins:


"Ever hear of the dreaded “CEO Disease?”

It was initially diagnosed by Stanford psychologist Carol Dweck, who discovered that the broad power and authority held by CEOs often leads to risk-averse and even truth-averse culture in which employees offer up nothing but “the good news of their perfection and the company’s success, no matter what the warning signs may be.”"

The report is a valuable read, and well done. The complete survey is provided in the appendix.  The report's executive summary lists four key outcomes from the survey:

1. Effectively capitalising on multiple resources to pursue innovation remains elusive for many companies. The bigger the company, the more likely innovation is to be siloed.


2. Companies furthest along the innovation path utilise customer data and customer participation in their product and service improvements. Fifty-four percent of respondents in this group actively collect customer feedback and analyse customer data for clues to innovate effectively, but in different ways.


3. Leading companies make use of disruptive technology trends to either foster innovation or improve business processes. Big data and social media were identified in the survey as offering the most opportunities for companies seeking to innovate effectively.


4. Many companies have no plan for learning from failed ideas. Nearly half (49%) of respondents said their company had no system to deal positively with failure.

See the complete Economist Intelligence Unit's report here and the blog at Forbes here.

Consumers and privacy

A key method of information access for consumers is via a web browser.  The browsers have enabled plethora of data to be connected in forms that can be utilized for analysis.  Interestingly, it is still the wild west on the net when it comes to collecting consumer information.  Though things are changing:

"In December 2010 America's Federal Trade Commission proposed adding a “do not track” (DNT) option to internet browsers, so that users could tell advertisers that they did not want to be followed. Mozilla's Firefox, Microsoft's Internet Explorer and Apple's Safari all offer DNT; Google's Chrome is due to do so this year. In February the FTC and the Digital Advertising Alliance (DAA), a consortium of trade bodies, agreed that the industry would get cracking on responding to DNT requests. In the European Union a new rule requires websites to ask before using “cookies” to gather data about users' behaviour."

Interestingly, Microsoft is starting to take the lead:

"On May 31st Microsoft set off the row. It said that Internet Explorer 10, the version due to appear with Windows 8, a new incarnation of the software firm's operating system, would have DNT as a default."

"Brendon Lynch, Microsoft's chief privacy officer, blogged: “We believe consumers should have more control.” Could it really be that simple?"

Read the complete article on The Economist here.

Infrastructure: State Capitalism

China has been developing infrastructures around the world and engaged in long term contracts for the past fifteen years at least, ones that I am aware of.  Though, it may not be common knowledge that:

"China State Construction & Engineering Corporation (CSCEC), reckoned by International Construction to be the world’s biggest builder, is renovating the Alexander Hamilton Bridge in New York, helping erect a huge tower block in Moscow and creating a massive tourist resort in the Bahamas. China Railway Construction Corporation (CRCC), the second-biggest, is building Mecca’s new metro system."

China is now the player in the global architecture engineering and construction sector.  In some cases, it is also taking on the management of the infrastructure it develops, all the more reason to build it well.

"In July, in one of the first such deals involving a Chinese firm, China Communications Construction (CCC) signed a deal to build a highway in Jamaica and run it for 50 years."

Read the complete article at The Economist here.

Mexico's engineering talent's economic impact?

The Washington Post reports:

"Mexico is producing graduates in engineering and technology at rates that challenge its international rivals, including its No. 1 trade partner, the United States.  President Felipe Calderon last month boasted that Mexico graduates 130,000 engineers and technicians a year from universities and specialized high schools, more than Canada, Germany or even Brazil, which has nearly twice the population of Mexico."

Does this statistic have a direct correlation with economic growth?  Read the complete article here.

Economic Straddling

"The scale of border-straddling is colossal.  One Mexican in ten lives in the United States - some 12m people."

I wrote about the productivity gains in the US in the past four years, here.  Though the owner of a manufacturing business concluded, "a factory that Sealed Air opened in Mexico was expected to be far less productive than one in America, but within four years had caught up".

Specifically, looking at Mexico, business rethinking is not occurring rather it is taking place as we speak.  The numbers simply are in favor of Mexico for the US:

"In 2001 Mexican manufacturing wages were four times those in China; now the difference is trivial.  Add in the price of fuel, and it is often as cheap to make things in Monterrey and drive them across the Rio Grande as to make them in Guangdong and ship them across the Pacific.  It is also faster: a Mexican lorry can be in Michigan in a couple of days.  Small wonder that Nissan, Honda, GM, Coca-Cola, DuPont and Eurocopter are rushing to invest South of the border."

Now the question is, is straddling one of the world's largest consumer markets is going to be enough for Mexico, or talent, and its growth within the country will be the differentiation among it's peers in the race to create and deliver goods?

Read the complete article at The Economist here.