What will drive long-term value in the tech sector?

Will the tech sector continue to defy the gravitational rules of business with overheated valuations for unprofitable companies? Should we be collectively holding our breath that “the next big thing” will be the Internet of Things (IoT)? Or is it simply a case of too much angel, VC and acquisition money chasing too few really good new business model ideas?

Stratospheric Valuations.

Simple. Personal. Real Time Messaging. Gold.

The Wall Street Journal reported on the stratospheric valuations in the tech sector a few weeks back. They cited the $ 19 billion Facebook acquisition of WhatsApp back in February in a play to dominate messaging on phones and the web. Then there is the valuation of Uber at $ 18.2 billion in a recent round of funding. That makes Uber worth more than Whole Foods, United Airlines, and ALCOA. According to The Guardian's James Ball this valuation represents "...a nadir in tech insanity." 

Moving People. Stratospheric Valuation.

Doing the simple math, that's a whole lot of taxi-dispatched rides. Bell went on to say "So long as there are greater fools down the line - prepared to buying the hype and load up on tech stocks - the train will carry on...founders cashing in on the venture capitalist, who in turn get rich off the pension funds and 401ks who load up on these stock after buying into the west coast hype."  

Some scary thoughts around some really big numbers.

What's the next big thing?

A bad idea - that died quickly.

The WSJ Technology Columnist Christopher Mims went on to report on more start-ups a few weeks later in an article titled "Is Silicon Valley Pouring its Money Into the Wrong Stuff?

 They cited possibly the dumbest app ever "Yo" that allows users to send only one message is reported worth $ 10 million, and Washboard -  the start-up that launched a while back promised to  deliver a roll of quarters (worth $ 20) for only $ 27. Perfect for people who are lazy and hate standing on line at the bank. Thankfully, it just closed down.

The "Smart Things" value proposition. But is it good business?

Mims is not even convinced that "smart homes" powered by IoT are the next big thing. I tend to agree with this perspective. I don't wake up in the morning using my smart phone as the remote control device for the rest of my life. I actually get up, go running with my dog in Central Park and eat breakfast, all without any tech intervention.

Mims argues that the complexity added by automation outweighs the convenience. The WSJ visited "the smartest home in America" - inhabited by Smart Things CEO Alex Hawkinson. He says all these dumb objectives that are now connected promise to make life better...at least in theory. Watch the video and you can judge for yourself. The only thing that really made sense to me was the home security use case.

Is too much money chasing too few really good ideas?

Lots of start-up time and energy is being channeled into optimizing advertising platforms vs. creating life transforming businesses in energy, food production or medicine. Simple research shows that the entire market for US advertising is about $ 100 billion against the backdrop of the US GDP of $ 16 trillion. All these ad-optimizing sites are chasing 0.6% of the US economy. I didn't go to Harvard for business school, but I get the folly in this misdirected effort. Still this fixation on monetizing business models based their ability to generate ad revenue continues.

Where does the US need help?

The list of worthy sectors for investment and tech-driven improvements is not hared to find. Crumbling infrastructure, the "digital divide" of those with easy access to the Internet vs. not, affordable medical care, wellness education for a nation suffering an obesity epidemic and widespread substance-abuses. The list goes on and on. 

A smarter way forward.

I admire VC firms like Artiman with its one line description of "Partnering for the long haul" and its investments in companies that meet basic human challenges with "white-space investments."

They openly claim they love hard science and technology. They say that some of the most exciting disruptions come from technologies in the "ampersand" in R&D - proven research that hasn't been commercialized yet. 

Just look at their amazing portfolio of investments that cover a broad range from 
CellMax Life and OncoStem Diagnostics focusing on cancer diagnostics to that using leading edge technology to zSpace, a firm that enables natural interaction with virtual holographic 3D images for manufacturing, architecture and medical research. 

A venture investor taking this "doing well by doing good" approach to business is NGEN. They invest in companies that positively improve the environment and human wellness, that offer rapid growth and sustained profitability. What a novel idea.

These types of investment are not so glamorous, and I don't see may pitches for these kinds of firms at all the NYC tech meet-ups I attend. So I just might encourage my HS senior age son to take AP Chemistry and Physics this fall and major in a hard science in college. This education track may lead him to a career in medicine or being an engineer - and end up paying handsome dividends, not only for him but for many people in the long-run as well.

Big Data: A means to and end, or an end in itself?

Big Data: The Matrix in Reality?

Back in the spring of 2011 McKinsey declared “Big Data: The next frontier for innovation, competition and productivity. As usual, they called this explosive trend “Leaders in every sector will have to grapple with the implications of big data, not just a few data-oriented managers.”

Their estimations of value creation were nearly unbelievable back then. They declared big data a critical factor of production, along with labor and capital. They cited five broad ways using data might create value, from making information transparent and usable at higher frequency to improving performance and making better management decisions.

Experts cite the fact that many firms have jumped on the big data bandwagon -analyzing large streams of information - only to fall into common traps and have nothing to show for their efforts in the end. Some 44% of IT professional surveyed by business software firm Infochimps Inc. said they had worked on big data projects that ended up on the scrap-heap.

Last year the Wall Street Journal reported on “Big Data, Big Blunders” and cited five common mistakes firms make and ways to avoid them. # 1 was “Data for Data’s sake.” Many firms fail to agree on the most important question: What is our goal for use of this information?” Considering anything with an on / off switch throws off “data exhaust” there is a nearly inexhaustible source of data – but to what end?

A lack of qualified data professionals is also causing problems. The Harvard Business Review called “Data Science the sexiest job of the 21^st Century” back in 2012. They say that demand has raced ahead of supply in the data scientist labor pool. The problem is magnified by the lack of formal training / degrees in data science, little consensus on where the role best sits in an organization nor how data scientists can add “the most value” possible. McKinsey estimated a short-fall in the US of 140-190,000 skilled analytic professionals, along with 1.5 million managers who can make better decisions based on their findings.

Marketing and IT departments discussing Big Data.

Another pitfall the WSJ identified as “organizational infighting” or “territorial spats” between departments over who owns a project. I have seen first hand knock down, drag-out fights in Fortune 500 firms between IT (who claimed ownership of the data) and marketing (who desperately needed the data to inform and measure business plans). 

Some claim a Chief Analytics Officer position is the solutions, but that person will be little more than a referee at an unruly sports match unless they control the budget allocation for data analytics.

One of the best uses of big data is IBM Watson – a big experiment in cognitive computing that searches massive amounts of data and serves up hypotheses (with confidence levels) on questions it is asked. And it is designed  to “learn” as it works with more data on a give subject matter.

In the end I am in the camp that supports use of big data as a means to an end.

For business - use of big data and analytics should help save money by defining the most cost- efficient ways to do things; drive incremental revenue by helping identity new business opportunities or optimization of investments by better measuring ROI of all sort of things from marketing spend to distribution strategies. 

Using big data as a means to an end supports one of the most pragmatic business lessons I ever learned: Test – Learn – Apply. Try different approaches, measure their success (or not) using data, and apply analytic-based learning to inform future efforts. Rinse. Repeat. Look smart and drive profitable growth in the process.

A tale of two IBMs: Big Blue vs. IBM Watson.

I had an interesting experience with IBM a few weeks ago, or actually two very different IBMs. It started with attending the IBM Business Analytics Summit at the Plaza Hotel here in NYC.

I had just read the cover story in Barron’s on IBM’s CEO Ginni Rometty: Reinventing Big Blue. “A $100 billion ship that is facing declining revenues and fierce competition at every turn.” Rometty spoke about the need to focus on growing their data and analytics business to “the cloud”, where IBM is the leader in private cloud computing.

Beyond some of the obvious revenue and stock valuation problems, IBM has is another big issue - the widely held perception of the firm being a large enterprise solution-focused behemoth. None too nimble nor quick, not very interested in small start-ups, nor up and coming young web developers. They don't seem to offer well publicized developer summits like Apple's Developer Conference held recently or the Google I/O conference set for later this week.

IBM looks like a giant company, mostly interesting in doing business with other huge corporations and government agencies. It take these mega contracts to move the needle on a multimillion dollar income statement, like the massive US Defense Department Healthcare System Modernization contract that just went up for bid valued at $ 11 billion.

The Business Analytics Summit reinforced this perception for me. Compared to the downtown NYC Silicon Alley way of doing business I’ve become accustomed to – which is collaborative, friendly, hip and open in every way – IBM could not have been more different and frankly less relevant. 

The event was dominated by mostly unfriendly people in business suits, lots of PCs and Blackberry devices, with very little social media streaming of event content. Add to that way too many IBM product acronyms being served up like a fire hose - SPSS predictive analytics, the Cognos performance management platform and IBM risk management solution algorithms - my mind went numb in short order despite the luxurious event venue.

They did lots of talking at the audience, telling them how wonderful IBM data solutions are. Very little back and forth dialogue with the audience, just loads of power point presentations with well rehearsed scripts. It seemed to be the IBM-way or the highway.

To add insult to injury they did not even offer free Wi-Fi ($14.99 fee) so I did not use my laptop, and when they invited me to get more information at analyticszone.com I found a website that was not even mobile optimized. I signed up for an IBM analytics beta trial on the site – they acknowledged my registration – and I am still waiting to hear back from them. Nice.

However not all is lost for IBM. It comes down to what web developers call delivering a superior UX or user experience.

That evening I went to a downtown Meet-up at Turn to Tech – a hip IOS coding school in the Flatiron District in the heart of Silicon Alley to learn about IBM Watson.

It was sponsored by Teddy Angelus from BlueWater Labs – a NYC based data / tech consulting firm that specializes in building communities. This effort is a tangible way IBM is reinventing itself – with a cognitive technology that processes information more like a human than a computer. The IBM Watson business proposition is simple: It interacts with humans on human terms.

At the very least the young IBM Watson team at the Meet-up interacted with the attendees like real people. They engaged in a delightful conversation about the possibilities of

IBM Watson to help people work better and smarter across a wide range of applications. They explained IBM Watson runs algorithms on data – and conducts probabilistic analytics to reach conclusions.

People at the event asked hard questions, and the Watson team admitted when they did not have all the answers. They simply asked people to consider the possibilities, from mobile device programming to business and medical uses. I learned that Watson is not your average analytic tool. It can search and sift through huge amounts of data to deliver a relevant data set with simple visualizations and info-graphics in split seconds that show key data points. Wow.

IBM is putting its money behind Watson, with a massive new presence in the heart of Silicon Alley at 51 Astor Place in New York City, hiring a reported 2,000 new people and a commitment to seed venture investments to the tune of $ 100 million to use the IBM Watson Developers’ Cloud. 

Now that will get the attention of the downtown Silicone Alley Crowd for sure.

I spoke with William Sennett – one of the new faces of IBM Watson at the event. He’s been brave enough to pose a poignant question in his Linked In profile: “How can we take social technology, big data and analytics and marry them to create a scalable personalized experience?” A relatively recent graduate of Duke University with a Mechanical Engineering degree, it appears Sennett is asking the right kinds of questions, rather than preaching canned corporate solutions.

You can check out IBM for yourself at the next "Introduction to IBM Watson" Meet-up on June 25, 2014 at Turn to Tech.

I’m not sure how I will use IBM Watson in the future when it comes to marketing, but I am sure that this is the face of IBM that I will look forward to doing business with, in what ever form it comes.

The Marketing Funnel vs. “McKinsey Loop” and the role of data.

Back in 2009 McKinsey made the argument in its Quarterly journal article 

"The Consumer Decision Journey"  that the traditional “marketing funnel” had become obsolete in lieu of a “marketing loop” model.

The metaphor of a “funnel” is one where consumers start with a number of

potential brands in mind (the wide end of the funnel). Marketing programs are then directed at them as they methodically reduce that number of considered

brands as they move through the funnel. At the end they emerge with one brand they choose to purchase.

The "McKinsey Loop": An Evolution of Consumer Behavior

Being McKinsey they went out and analyzed the purchase decision process of 20,000 consumers across five industries and three continents to come up with a different model. Their research showed that the proliferation of media and products combined with the shift from one-way communication - from marketers to consumers – towards a two-way conversation sparked the need to think about new ways to look at marketing.

But I am at a loss in terms of aligning current marketing data analytics with this loop model.  I’ve talked to lots of smart marketers recently who still think generating brand awareness / consideration is important, and measure it religiously. Forbes called 2014 "The Year Digital Marketing Analytics" and the Harvard Business Review declared data scientist "The sexiest job of the century."

Marketing programs using “attraction” or an “in-bound” approach like content marketing to increase consumer engagement are growing in effectiveness and efficiency. Savvy marketers use data-based attribution to figure cost-per-inquiry, cost-per-lead and cost-per-acquisition and use this learning to optimize their marketing mix spend and ROI. So measuring the moving prospects along the "funnel" still seems to have business merit.

User ratings, social media sentiment and content sharing now also come into play – maybe as part of the new “loyalty loop” - but have more positive business building impact by increasing the number of “brand advocates” who fuel modern day word-of-mouth like support via technology based venues.

The move towards ever more engaging content is changing the modern day marketing mix as well. The VB News blog recently discuss the evolution of content marketing – from simple text and visually enhanced streamed content towards customized marketing apps.

Interactive White-Paper Marketing App Example.

According to author Scott Brinker “The fourth wave will be a proliferation of responsive web “marketing apps” — wizards, configurators, calculators, assessment tools, interactive white papers, participatory e books, games, quizzes, guided tours, contests, diagnostics, workbooks, utilities, and a wide range of entertaining and educational experiences.”

The beauty of these apps will be better user engagement and the marketing data exhaust they will surely produce. These tech-driven offerings will deliver a more tangible value exchange between the marketer and consumer, with the ability for marketers to test – learn – apply based on measurable behaviors. They will tip the art vs. science discussion about marketing towards science, for sure.

Content Marketing: Content is King and Data is Queen.

Kessler is co-founder of Velocity - a UK-based B2B marketing agency.

We had a really interesting conversation last night at the Weber Shandwick Data Salon # 4 discussing the evolving role of data in content marketing at their offices in midtown Manhattan.

It was fun to start the event with an open-ended question: “What is content marketing?”

Responses ranged from SEO / SEM to story telling, from “clandestine sales”  to “paid not earned media.” In the end – there was no clear consensus, so I offered the Content MarketingInstitute definition:

“Content marketing is a marketing technique of creating and distributing valuable, relevant and consistent content to attract and acquire a clearly defined audience – with the objective of driving profitable customer action.”

In the face of vastly diminishing returns from traditional marketing / advertising investments, content marketing is being seen as a viable and necessary element in the modern marketing mix.

The observation was made that tech-savvy consumers are great at avoiding traditional advertising, so the marketing paradigm has shifted from “promotion” to “attraction” or inviting a conversation with customers / prospects using content marketing.

But how does a marketer know if they are producing relevant and engaging content, or remarkable content * – content that is worth noticing and remarking upon – sharing on social media / commenting / bookmarking?

*  [As defined by pundit Seth Goden in his classic book “PurpleCow”]

This boils down to how content marketing is approached: Is it the art of great content story telling or the science of using data to track which content best engages and converts prospects against predetermined business objectives?

Content and Data (left to right).

It’s likely to be both – so the notion that “Content is King and Data is Queen” was put forth and sparked a lively conversation. Data can certainly track user engagement and helps optimize subject matter, writing style and delivery venue based on how it is received. But astute audience members pointed out that does not necessarily foster innovative and highly creative content that will in fact get noticed, read, shared and ultimately impact consumer behavior.

One salon participant – who identified herself as a creative in the design field – pointed out that lots more people read her blog content if it is unique, innovative and creative… this was a blinding glimpse of the obvious.

So what's the big deal with content marketing?

I pointed out that it appears that many Fortune 500 companies don’t understand nor appreciate the full potential value of content marketing based on learning from a qualitative research project I am currently conducting on behalf of a leading global business publisher. This conclusion is drawn on the apparent lack of interest on the part of senior CMO level executives, and ad-hoc budgeting and project management approach most firms appear to be taking for content marketing programs, with often-tepid data analytic performance measurement.

The discussion went on the focus on the need to treat content marketing as on-going customer relationship management program, or in essence a friendly and useful dialogue that improves the perceived value of the company sponsoring the content, versus a one-off / ad-campaign like effort.

And like any smart marketing effort, the content marketing should be tied to clearly defined business goals against a well-defined target audience, with a desired end-outcome or “conversion.” This could be as simple as capturing contact information in exchange for information to actually selling a product or service as a result of content marketing driven engagement.

Well defined analytic framework.

The data measurements come in the form of web analytic data - ranging from overall and unique site visits to “bounce rates” and identification of web traffic sources. Some firms measure improvement in brand awareness / familiarity and “favor-ability” of their offerings. Savvy marketers work to attribute inquiries, leads and actual sales to their content marketing efforts.

So it looks like content marketing will continue to be a combination of art and science for the foreseeable future, a blend of remarkable content creation and smart data-driven analytic analysis on the back-end.

Weber Shandwick Data Salon # 4: May 29, 2014

I'm excited to announce that I am speaking on Thursday 5/29/14 from 6:00-7:30 PM at The Weber Shadwick Data Salon # 4 on Content Marketing. Each month Weber Shadwick along with NY Data Consultancy Blue Water Labs invites a data / digital marketing profession to come in and lead a discussion that sparks a lively conversation on variety of topics.

This month we'll be discussing content marketing - now widely viewed as a more efficient and effective way to engage and acquire prospects / customers than traditional marketing methods. Yet there appears to be some confusion about exactly what it is, and how it can best be managed in business.

We'll be discussing the evolving balance between the art and science of content marketin and the increasingly important role that data plays in the effective creation and optimization of content marketing programs.

My goal is to get the audience thinking about better ways to engage their audiences using content marketing programs, with measurable results, that will drive positive business outcomes.

To RSVP for this event please register here.

3D Printing + Crowd-sourcing = Potential for Explosive Growth.

Some of the most exciting tech start-ups use the “mash-up” approach to building a business model. The “mash-up” terms comes from web developers and refers to a web application that uses content from more than one source to create a new service displayed in a single web page.

The term has grown to encompass businesses that combine two proven business models to create a new business that represents a “blue ocean” strategic opportunity – doing business in an “unoccupied space.”

3D Hubs provides 3D printing access to consumers and businesses via a global community of 3D printers. The owners of these 3D printers set their own prices, and list resolution capabilities and available printing materials.  It closes the gap between design and access to 3D printing production. And they have a clear and well defined business process for both 3D printer owners and end-users that makes it all easy.

Bram de Zwart

3D Hubs is based in Amsterdam and was started in 2013 by Bram de Zwart and Brian Garret - who previously worked for industry giant 3D systems.  Their simple mash-up business model combines elements of place-based applications like Foursquare and AirBnB – the Global lodging network. It delivers fast, affordable 3D printing locally.

But is 3D printing a really big idea? Global consulting powerhouse McKinsey & Company seems to think so. In their 2013 “Disruptive Technologies” report they cite that the 3D printing sector could produce an economic impact of $ 230 - $ 550 billion by 2025. This suggests that 3D printing is no passing fad.

Local 3D Hubs Printing Hubs in Metro NYC Area.

   The 3D printing technique so far has been used so far mainly for rapid prototyping, but McKinsey says the industry may be reaching a tipping point where widespread adaptation could occur. Improvements in materials and falling prices, plus wider spread use across a wide variety of consumer and commercial applications are fueling growth.

"How to Hub" for 3D printer owners with 3D Hubs: Simple

As 3D Hubs works towards universal 3D printing access, their offer of affordability and creative empowerment that are the underlying benenfits of the business model. They are helping level the playing field in a broad range of business sectors – from specialized industrial production like aerospace to the explosive heath care industry including customized hearing aids and artificial joints. 

3D Hubs has an eye on growing its presence in the metro NYC market. Zwart commented recently at a  Hardwired NYC event "New York is probably the most active city in terms of 3D printing, with many firm having their headquarters here. Our local community here consists of over 300 people, including 75 3D printer owners - where customers can get their designs made.

Even Amazon is getting in the act with its 3DLT online marketplace for 3D printed products – from smart phone cases to jewelry. But 3D Hubs has Amazon beat – because it fosters a community of like-minded people to get the chance to meet and do business with each other in person. These introductions and collaboration opportunities may be the best mash-up of all.