Innovating in an Age of Personalization

Software, content, and just about everything else you see online today has been designed for the masses. Apple builds one Mail app for millions of people to use; EA expects a wide swath of people to enjoy the video games it creates; journalists write news stories intended for mass consumption.

And this makes sense; it’s how most products are made these days. After all, it’s not feasible to craft a custom offering for every individual, right?

In fact, we’re just barely scratching the surface of personalized products. A/B testing and variants let us target increasingly granular demographics with the content most likely to convert them, but this isn’t true personalization — at least, not yet. But what if every piece of software, every article, and every video strived to be what each person wanted it to be?

It’s already happening in journalism, e-commerce, financial services, and business intelligence. In fact, a pioneering automation company in the Research Triangle of North Carolina called Automated Insights is working on just that.

Robbie Allen, its founder and CEO, claims the company is the largest content producer in the world, having written more than 1 billion articles in 2014 alone. “We flip the traditional content creation model on its head,” he says. “Instead of one story with a million page views, we’ll have a million stories with one page view each.”

The same is coming to video games and other software. One day, we’ll have applications that can adapt themselves to each user’s needs. Automation and AI will make this a reality, and the game will change not only for consumers, but also for entrepreneurs.

What the Future of Automation Means for Startups

There’s a reason companies like Atlassian, for instance, focus on project management for developers and don’t branch out to project management for construction or financial services: If you go after too broad a market, someone will build a more specific — and more personalized — system that better serves the needs of your niche.

This is how markets fragment, and it’s why businesses are advised to target one very specific part of their market. Going forward, though, you should expect to be able to target individual people and companies using automated development systems that can tailor a piece of software to fulfill a customer’s precise need. Targeting usually takes place at the marketing level, but you’ll soon see that moving to the product development level as well — when software products become able to self-modify in order to better suit individual users.

Automated capabilities will affect hardware, too. Standby Screw, a custom parts manufacturer in Ohio, is already reaping the benefits of having intelligent machines perform custom operations that originally took hours of manpower. The company uses Baxter, a Rethink Robotics’ product, to perform a variety of tasks — even repositioning parts bumped out of place — without having to stop or be reprogrammed.

Baxter has freed up valuable time for employees to do tasks that require more creative intelligence and has cut down on the production time needed to build custom parts and packaging. In the future, enhancing customization will be the bare minimum for companies looking to remain competitive — startups, and even larger businesses, will have to differentiate themselves through other means, such as price and customer service.

What this means for entrepreneurs is that the barrier to entry will be considerably lower: Fewer employees will be needed to complete increasingly complex tasks, rendering startup costs, even for manufacturing, relatively negligible.

How to Prepare for a Brave New Personalized World

So how do existing tech companies prepare for this future of ultrapersonalization? What’s the best way to stay on the cutting edge of the automation revolution?

Here are three ways to stay on top of the customization game:

1. Don’t be late to the party. Begin looking at ways to adopt automation and personalization technologies as soon as you possibly can, including partnering with other companies and products that can help you get to that next level. Mercedes, for instance, has taken advantage of Nest’s developer program, and its cars can now let your smart thermostat know what time you’ll be home. Nest can get your home to the optimal temperature before you pull into the driveway.

Lest you think only tech companies in Silicon Valley need to worry about this issue, a recent survey found 60 percent of businesses across a variety of industries are already seeing returns on their investments in personalization tools. Nearly every industry will be deeply affected by this movement toward greater personalization — to remain competitive, it’s best to prepare now, regardless of your area of expertise.

1. Expect the rules to change. The hard and fast rules of the startup world (i.e., find a specific target market, build one product that works for that group, and market it accordingly) are going to change. A core product that’s good at accounting, project management, or payroll, for example, could adapt and personalize itself to fit the needs of a broad range of individual prospective users.

In the near future, many businesses will allow each consumer to customize, and in some cases, design his or her own product from scratch — even if it’s digital. Something as mundane as breakfast cereal is already being hyperpersonalized: Muesli now allows you to create your own mix on its website. Creating something that’s perfect for just a percentage of the population is no longer a requirement; automation and AI will allow you to paint with broad strokes.

1. Implement automation in product testing. Thanks to automation, the timeline of going from idea to implementation will be dramatically decreased.

Many companies that have shifted from a completely manual testing process to a hybrid of automated and human testing are already seeing efficiency improvements in product development. The shortened time frames that result would be a huge boon to startups, which are more often than not limited on time and resources.

A future where nearly every product and service is customized to fit the individual is closer than you might think. By preparing for this future and incorporating automation wherever possible, entrepreneurs and existing startups can ensure that they remain one step ahead of the competition.

Why Leaders Need to Know What Machines Can't Do
by  Geoff Colvin @geoffcolvin JUNE 20, 2016

Some jobs really must be automated; others need the human touch.
When stock markets plunged early this year, managers at USAA’s investments division noticed something odd. Customers who routinely conducted business online were suddenly lighting up the phones. USAA had nothing new to tell them—its fundamental advice hadn’t changed, and they could have found that guidance online. Yet clients deeply wanted to talk to a real human being, and never mind why. They just did.

That reality illustrates a high-stakes decision that confronts managers in every industry: choosing which employees must be replaced by technology and which must not be. Growing numbers of jobs at every level can be performed by ­machines—not just faster and more cheaply than humans can do them, but better. In many of those jobs, such as in factories, failing to replace people could doom a company through uncompetitive costs. Yet in other jobs that machines can do well, such as giving financial advice, replacing too many humans could be a fatal error. How to decide? Three situations in particular seem to justify the costs, and quirks, of people.

When customers value the human touch. Many decisions that in theory are calculable—where to invest, whether to sue, how to respond to a medical ­diagnosis—are in fact laden with emotion. Many people need to interact with a person before choosing a course of action. In finance, law, medicine, and other fields, workers who handle those interactions most adeptly will be the least susceptible to replacement.

When constituencies must be represented. All organizations are run ultimately by and for humans, and most are complex matrices of desires, incentives, budgets, and myriad other factors. If marketing can’t get along with sales, or management with labor, nothing good can happen. Technology could optimize the whole intricate machine, but it will seize up if humans can’t agree on how to make it go.

When someone must be accountable. So long as humans and not machines are in charge—let’s assume that’s a long time—societies will demand that people be made to answer for decisions, even if technology recommends those decisions. Government officials, military officers, judges, business managers, basketball coaches, and others in leadership roles will remain where the buck stops. Technology may reduce the number of people in such roles—it’s already taking over tasks of middle managers, for example—but responsibility will ultimately end up in human hands.

As machines grow more powerful, deciding who must go and who must stay becomes harder. A guiding principle: Just because technology can do a job brilliantly doesn’t mean that it should.

Combine velocity and volatility with the 24/7 global business cycles and it becomes virtually impossible for any leader to stay on top of his or her game. For Chief Marketing Officers (CMOs), staying on top can spell the difference between success and failure, for them as well as their companies.

Marketo funded a qualitative study looking into emerging marketing trends. A wide range B2B and B2B2C Chief Marketing Officers (CMOs) participated, representing companies ranging in size from the Fortune 10 to early stage start-ups across financial services, manufacturing, high technology and SaaS industries.

Only 24 Hours in the Day
A common refrain heard in the study were the challenges of juggling multiple demands on time, while trying to keep up to date.

Andy, a CMO of a Fortune 15 healthcare services company summed it up well, “I have internal goals to meet and pressures to address that are not based on best practices or what is happening in the marketing discipline. Seventy percent of my time is spent on internal constituents.”

And when the question of travel came up, CMOs said they needed to define priorities.

Andy shared a sentiment that was echoed by most CMOs, “Conferences don’t do it for me; networking with peers is more useful. But it needs to be local.” Katy, another study participant is the CMO with a high profile Fortune 1000 social technology vendor, shared, “When I’m out of town or at conferences, I’m with customers. They are my priority.”

CMOs want to network with peers, but LinkedIn Groups, exclusive meetups, CMO-only conferences and CMO tracks at conferences offer little perceived value and require valuable time out of office. If they have to travel, CMOs opt to meet with prospects and customers before sitting in a conference or dinner meeting, regardless of how prestigious the group is.

When do CMOs find time to read from the daily deluge of posts and articles available? They don't. Not from lack of interest or motivation, but from a lack of time. Just as customers are overwhelmed and fatigued by the constant bombardment of information, so too is the CMO. CMOs regularly scan a handful of publications including Fast Company, Harvard Business Review, Wall Street Journal, Forbes and McKinsey reports. The topics of interest vary based on the issues facing them and the company. Andy summed it up with “if a topic peaks my interest, I’ll read more.”

4 Strategies, 1 Secret
CMOs employ 4 strategies to stay on top:

1. Routinely visit customers to understand market shifts and new expectations.
2. Network with a handful of trusted peers by scheduling periodic calls or meet ups.
3. Stay in touch with trusted consultants and influencers.
4. Hire right.
The CMOs who succeed at staying current share a common secret: they rely heavily on their teams. “I’m constantly blasted with ideas from my team and they educate me,” shared Katy. “I’m very focused on hiring a good team and giving them room to grow and experiment.”

By adding new roles — many of which didn't exist five years ago — CMOs are rapidly evolving their teams’ competency portfolio:

• Social engagement and community managers
• Chief content officer, evangelists, editors, chief listener, chief storyteller
• Data scientist, marketing operations, business analyst, center of excellence managers
• Chief customer officers, customer experience analysts, customer marketing specialist, employee engagement strategist
• Digital/growth acquisition, digital experience marketers, lifecycle marketers, marketing technologist

Hiring the right candidate is challenging, regardless of company size or industry. It's difficult to find the right person out of a large candidate pool who fits the culture, offers the right expertise and is interested in joining the company. Marketing leaders of large and small companies resort to hiring from their network. The candidate quality is higher and frequently a better fit.

Larger, established companies face an additional obstacle of not being considered ‘hot’ enough. This reduces the pool of candidates substantially for key positions in analytics, data science, modeling and digital marketing. Millennials — who make up the majority of the candidates — feel that large or mature companies would restrict their creativity, mobility, opportunities and need for flexibility. To keep competitive, established company CMOs evolve their culture, structures and spend a lot of time selling their vision of the company.

CMOs with brand cache companies have the reverse problem: retention. Their employees are constantly being recruited away with lucrative offers, creating in one case 20 percent annual turnover. These CMOs retain top talent by regularly moving people between roles and increasingly offering high performers more latitude, responsibility and opportunities to do new things.

One irony in this growing reliance on teams is that anyone seeking to woo the CMO as their ideal target buyer, need to redirect the marketing and sales strategy to win the hearts and minds of their subordinates.

Building the Business Case for Marketing Hires
Any discussion of adding headcount brings with it the age old conundrum of how to justify hires in environments where the business case is based on revenue ROI. Unfortunately many of the new marketing competencies required to build awareness, reach, engagement, credibility and loyalty in this "age of the customer" are either indirectly linked or are too new for anyone to have hard data on their impact on quantifiable revenue.

CMOs cited two strategies on how to justify new hires:

1. Contract with candidates to complete a high visibility project
Engage the candidate as a contractor for a project that has high visibility with key constituents and let the value-add and impact of the project’s results "sell themselves." This approach is effective for some positions such as videographer, sales enablement, field marketing/ops and digital branding, but doesn't apply to all positions.

2. Redefine traditional roles with new competencies
Reduce traditional marketing headcount in print advertisement, etc. and repurpose them for new competencies. This approach is used to bring in data scientists, social managers and digital branding where the link to revenue is not directly measurable.

CMOs are building networks made of employees, contractors, Martech vendor specialists and influencers to gain the agility that companies. Clark, a CMO with a Fortune 1000 SaaS Financial Software provider, values this approach as it “enables me to have continuous access to the best and brightest while easily adjusting the mix in response to market and business changes.”

The CMOs who stay on top of their game know, this is no one person job.

Creative Commons Creative Commons Attribution 2.0 Generic License Title image by garryknight
About the Author
With more than 25 years of marketing and leadership experience, Christine Crandell, President at New Business Strategies, is a recognized thought leader, expert, practitioner, speaker and author regarding corporate strategy and customer experience. Christine’s Forbes blog, “Outside the Box” focuses on helping the C-Suite understandhow to drive faster revenue growth through innovative business strategy, practices and models.

Here are some cold, hard social media truths: likes, follows, shares and hashtags aren’t communities. The newsfeed is little more than a way to consume news and maintain relationships with people you already know. Hashtags are often ineffective.

As much as we love it, social media doesn’t make it easy to build new communities around a shared identity or interest. Legacy products such as Facebook Groups and the like only scratch the surface of what’s possible in a digital world where three billion people are connected by supercomputers in their pockets.

When software’s never been smarter nor have we been more connected, the lengths we ask people to go to in order to meet new people around the things that matter most to them are absurd. To many, a web forum is still held up as state-of-the-art. To truly harness the power of social networking, we need to think beyond views, likes, follows and hashtags.

My A-Ha Moment

Most of my professional career has centered on creating software platforms dedicated to building communities. And by communities, I mean networks that build real, tangible relationships between people who share an identity or interest, whether it be a profession, medical diagnosis, political candidate, sports team, social cause or subculture.

Back in 2007 I launched Ning, a platform for niche networks on the web. From the moment we offered “your own social network for anything,” I saw the excitement of pez collectors, teachers, Brooklyn artists, Dallas Mavericks fans, DIY Drone enthusiasts and Offbeat Brides connecting for the first time live in their own communities.

I was hooked.

I loved that people could create networks around anything that mattered to them, no matter where they lived, what they looked like, how popular or unpopular they were in the real world or how much money they made. These were communities created around strong identities and interests. But as social networks evolved, the world naturally and collectively gravitated to more familiar connections. As more people joined networks and connected to high school friends, extended family, college classmates and professional colleagues, the people we already knew started to consume the majority of our time online.

Since 2007, a few things have changed. I left Ning and started Mightybell to create a new generation of mobile-centric identity networks. Maxed out with connections to people we know, I believe we are at an inflection point where the social-networking world is ready to connect and build new relationships in smarter, more natural ways with new people who share a common identity or interest.

Don’t hashtags bring together people around interests? The most popular hashtag movements aggregate people’s perspectives in one place. They are fantastic at demonstrating energy around an idea, but they are missing the opportunity to build towards concentrated, sustained action, support, learning and real relationships. It’s not for lack of organizing savvy by leaders. It’s the limitations of the software. We can do better than platforms that require a convoluted combination of hashtags and poorly organized numbers for questions and answers to “have a conversation.” No one should have to work this hard to chat.  

The difference between real community building and the current state of “communities” built on the dominant networks is evident in this comment from a member of Beyond Type 1’s new network dedicated to navigating Type 1 diabetes:



For people trying to connect with those who share their identity or interest, sifting through junk to get to something valuable is simply wasting time. That an app dedicated to building relationships between people navigating Type 1 Diabetes didn’t already exist was a missed opportunity that Beyond Type 1 is filling.

In this new, more effective definition of what it means to create a community, likes, follows, shares and hashtags are the means to attract members, and these new identity networks are the end, offering the opportunity to bring together a coalition of the motivated to build strong relationships with each other, not just with you.

For brands with a passionate customer base, advocacy organizations, not-for-profits, authors, influencers and anyone with the desire to build a community, these identity networks create a powerful engine of sustained action and durable relationships that outlast any individual campaign, book or hashtag.

A New Way to Think About Engagement

If you are not coupling views, likes, follows and shares with a destination, you’re missing the opportunity to craft a powerful network of your most motivated fans and followers.

This isn’t throwing people together in an empty channel or forum online. Imagine a new world where the network plays the role of a host. A new member joins an identity network like Beyond Type 1 for those touched by Type 1 diabetes or OWN IT for small business owners and is instantly connected to those members near them in real life, those members who share the same specialty and those members who share an interest in the same topics.

As this same new member shares more about their interests, their feed becomes more personalized and they see the most popular and highest quality conversations happening in the topics they care about. The most relevant members are not only surfaced by location, profession or stage, but can also message similar members based on how they answer polls, which live chats they attend or the groups they opt-into within the network.

Organizing and connecting your community more deeply in the same place also removes the friction and arduous work currently needed to connect the right people to each other or organize events. Imagine tapping the most active members in a particular geography to host a meetup. An identity network already knows which members are in the same location and can take care of inviting, managing replies and – through APIs – can even suggest a venue without requiring the network host to lift a finger.

With these new models (and the powerful technology behind them), we can finally retire the simple, chronological group comment thread, event page or chat room paradigms created when we accessed the internet from a dial-up connection. Facebook Groups will remain for small groups and Meetup will still be there for local groups not connected to a larger network, but when you want to build an army, the savviest leaders will turn to the organizing power of identity networks to build stronger, deeper relationships at scale.


A Better Way to Create a Community

The key to translating your likes, follows and shares from a hashtag to an identity network is reframing your definition of success from big numbers alone to one that includes, at its core, a more deeply engaged community of your most motivated fans or followers. Once you wrap your mind around this, the mechanics of growing an identity network are straightforward:

It’s about them, not you. If you want to build real connections and sustained engagement between members, share the spotlight. At Mightybell, as we’ve introduced new features like polls, questions and groups, we’ve seen the percentage of contributing members double across our roughly 50,000 networks. More contributing members trigger more interesting and diverse notifications that bring more members back frequently. Then, as more of your members engage in the network, you as the host can step back and see a self-organizing community emerge.

Encourage members to share ideas, stories and experiences, not advice. The one thing dead communities have in common? Advice. It’s not inviting as a reason to join a new network. Much more inviting are similar people sharing their practical ideas, stories, experiences and current dilemmas with each other in a convenient mobile app. Create the conditions for sharing stories and practical ideas, and your network will become more valuable almost immediately.

Choose icebreakers over listicles. The biggest mistake we see over and over again is a host repurposing generic “content” they’ve created for content marketing. The sad truth is that a listicle built to drive sharing on LinkedIn doesn’t spark conversation among new members in a community. Rather, we’ve seen dramatically better results with a portfolio of conversation starters – or “engagement strategies” – that seek to offer members multiple ways of contributing to and participating in the network.

In addition to things like multiple choice polls, live chats, hangouts and meetups, the best engagement strategies include introductions, topics, hot or cold polls, percentage polls, questions and prompts. Think about them as a portfolio to use in rotation to bring in more members to contribute and share their stories. As we use these today, we regularly see over 50% of members contributing to an identity network. That’s a far cry from the accepted rule that says only 1% of people contribute to networks while the rest of us consume.  

Likes, shares, views, hashtags and follows are no way to organize in a live, social and mobile-first world. Given the intelligence of software and the sophistication of algorithms, they are downright pedestrian. To build powerful, effective, sustained communities, we need to think beyond them. Identity networks are already unlocking new connections across the three billion-strong graph of humans on mobile. The technology is here. The only thing you need is to know who you’re going to bring together.

JUNE 11, 2016
Our M&A Wish List
Here are the types of companies CB Insights is interested in acquiring.
By Anand Sanwal (@asanwal), CEO / Co-founder / Customer Service
In the last 6 months, we’ve looked at 3 acquisitions. Two of them came to us and one we sought out. Unfortunately, none of them worked out for various reasons. Some deals died quickly and some at the diligence stage, but through these 3 experiences, we’ve learned a lot about what we want and what type of acquisitions makes sense for us.

So we decided to do something atypical and publish a list of the types of things we’d like to acquire and why. It offers some visibility into our playbook so we were a bit reticent to do this for fear of competitors copying us. We then read a great quote by Jeff Bezos which changed our mind.

“If we can keep our competitors focused on us while we stay focused on the customer, ultimately we’ll turn out all right.”
So with that bit of angst/preamble out of the way, here are the types of things we’re looking to acquire as of June 2016. We will add to this over time.

Acquisition interest #1 - Vertical media / niche B2B media
When we boil down what has worked for us, it comes down to two things:

We have an amazing research team that develops content that generates a lot of interest in CB Insights
That research gets people to try out an amazing product (sign up for a free trial)
Recently, we’ve been going from a more general research strategy to one that is more industry or vertical specific. The results have been amazing for us. We started with insurance tech, then launched auto tech and have several others in the works.

Each of these verticals has their own newsletters with thousands of subscribers that, in very short order, include senior executives from all the big players in both industries.  And they are helping us grow quickly.

But building these verticals up takes time.

As a result, we are interested in getting there quicker by acquiring vertical media sites which are focused on a very specific industry or topic and whose readership is largely B2B. For vertical media sites, we are looking for a few things:

The site should be covering technology or emerging industry trends within the space
A team with deep domain expertise and intense passion for the space
A highly engaged readership. The readership need not be big (although that is of course nice), but the content/research must be great.
If this resembles you, we’d love to hear from you.

Of course, a fair question you should probably ask yourself is “Why would CB Insights be a good home for us?”

Here is what we bring to the table.

A better way to monetize – Most vertical media are reliant on advertising or events revenue as their primary sources of revenue. Of course, many are also doing native advertising and paid reports. We offer a better way to monetize a B2B audience through subscriptions to CB Insights. These subscriptions start at $20k and increasingly are in the six-figures per annum with extremely high annual retention.  Our only “ads” are what can be thought of as ‘house ads’, i.e. they are suggestions to sign up for the CB Insights platform. You’ll see examples of these house ads to the right of this post or at the bottom which encourage you to sign up for a free trial. An example is below.

The reality is that there is massive gap between how we can monetize 10,000 or 100,000 readers on thoughtful content/research with our subscriptions than what traditional ad units can offer. This arbitrage is big and offers you a much better way to monetize.

The ability to focus on your content – Because we can monetize content better, it will allow you to focus on what you do best – great research and writing, increasing domain knowledge, building relationships in the industry, etc. You’ll never think about Facebook’s algorithm again.

Our growth team is phenomenal at finding new ways to get increased exposure on content via newsletters, webinars, podcasts, reports, whitepapers and more which we can provide.

In addition, we have data that can open up new types of content opportunities. And with that data comes a team of data scientists, analysts and graphic designers who can help you find new interesting content angles and ways to present that data.

Exposure & influence at highest level – Through the CB Insights newsletter with 167,000+ subscribers (and which is growing by 1300 per week), we reach:

SVP level+ executives at the entire global 5000 including almost 100 publicly traded company CEOs
Partners at every VC firm worth knowing
Journalists at all the leading newspapers and blogs (our press page is testament to this) 
Executive of tomorrow’s big companies (yes – those much talked about unicorns)
In other words, we can get your writing in front of people who won’t just read it but who are in a position to use it to make major strategic decisions.

The screenshot below from our press page highlights the number of press mentions our data has received in the world’s most respected publications.

Acquisition interest #2 - Vertical newsletters
While newsletters might often go hand & glove with vertical media categories outlined in #1, we do know of a few newsletter-only companies so wanted to call this out separately. The criteria we look for and the reasons a vertical newsletter would benefit under the CB Insights umbrella are largely the same as for vertical media / niche B2B detailed above.

We will look for a highly engaged readership in these cases and prioritize seniority of readership as much as size. In other words, a newsletter that reaches Chief Strategy Officers and Heads of Strategy with just a few thousand subscribers could be as interesting as a more general tech / industry trend conference which reaches 100k.

Acquisition interest #3 - Proprietary data 
We are building software that uses data to predict technology trends. Our customers use insights into tech trends to do a few things:

Predict the next market they should enter
Predict the industries of tomorrow
Predict their next M&A target
Predict competitor strategy and likely moves
Predict their next investment
Predict the S&P 500 of tomorrow
If you have data that you believe is instructive in understanding technology trends, we’d love to talk. A few important things that we look at when evaluating datasets.

Ownership / Chain of custody – You must own the data. Data which is scraped / crawled is fine but it must not be obtained in any way that is in violation of anyone else.
“Supply chain risk” – If the dataset relies on a 3rd party, that is generally less interesting to us. For example, data that derives insights extracted from Twitter or Instagram or Facebook as examples would be less interesting to us as the rules to accessing those platforms can, do and will change.
Hard to get is good – If the data obtained requires digging into PDFs or is extracted from obscure documents or is submitted by organizations directly, we love that. If it’s a dataset available online which is dirty and which you’ve cleaned, this is a good thing.
Applicability – We are interested in datasets that are broadly useful in predicting technology trends and helping with any of the use cases above as well as datasets that are more vertically specific, i.e. data for healthcare or retail or financial services as examples.
Again, a fair question you should probably ask yourself is “Why would CB Insights be a good home for us?”

Here is what we bring to the table.

A software platform to plug your data into - It is straightforward for us to integrate new datasets into CB Insights. The platform was created to be able to do this easily.
A better way to monetize – We’re a premium provider in the market because of the quality of our product and our data. We can very effectively monetize great data.
A research and dataviz team to promote the data – Our ability to tell stories with the data is a distinctive capability of CB Insights. Of course, our newsletter serves as a bullhorn to create awareness of new data as well.
 
Acquisition interest #4 - Teams
If the idea of using data and probability to predict technology trends is of interest to you, we are interested in hiring teams of 2-8 people with engineering, machine learning and data science backgrounds.

That’s our wishlist for now. As it evolves/changes, we’ll update this post.

If you are part of a company that fits the bill or if you know a company or team that would be a great fit, we’d love to chat.

The stage is set for the coming battle between the big five tech giants: Google, Apple, Facebook, Microsoft, and Amazon (wait, make that four tech giants and one really tech savvy retailer). All are now heavily investing in AI. All now offer personal AI assistants poised to make your life easier.

One of the most recent announcements is from Google. The company launched Google Assistant, which is an integral part of the new Google Home device and Allo (its new messaging app).  

Apple is set to announce its additional AI assistant plans mid-June but has already leaked some details. The Information reported that the company is developing its own device for the home and that Siri will open up to third party  “apps.” Earlier this Spring, Microsoft and Facebook made their own announcements which put AI Assistants (or in their parlance, chatbots) front and center. And each has a clear vision for how third party bots can exist as part of their platforms.

On the surface, this looks like head to head competition around the AI personal assistant by five of the top tech companies in the U.S.

But what’s really at stake—will we eventually be paying obeisance to Siri or Alexa, while their competitors wither? Is the personal assistant the key to “the era of Artificial Intelligence”?

Here are my five immediate takeaways:

1. The AI Market Segments
One way to view the current setting is to divide what is happening into three distinct market segments (Platform, Service and Software), and you should know which segment any given company plays in to better understand its ambitions

AI Platform
Intelligent Platforms have a set of existing features that you use to build bots (Applications). These include Facebook’s Messenger platform, Microsoft’s Bot Platform (its bots can run on Skype) and all the way up to Amazon’s Echo device, which lets third parties create new skills for Alexa.

Pro: The most dramatic and most important dimension is distribution; these platforms come with easy access to hundreds of millions of users. Almost any programmer can build a bot on the platform, and the time from idea to market is short—think days or weeks.

Con: The most obvious downside is a limited opportunity to innovate outside of what the platform was designed for, which to a large degree consists of the sensors and actuators inside their environments required for the bot to exist, leaving much of the actual intelligence to the developer. And we probably have to accept that the bots are not (yet) true intelligent agents. Platform dependencies put large parts of your destiny in the hands of the platform owner. There’s very limited opportunity to optimize much on output accuracy, and so your product quality (outside of design) depends on the platform. Finally, those users are probably not going to be given to you for free, so expect an App Store like tax.

AI as a Service
These outsourced and on-demand machine learning services allow developers to build models and generate predictions in the cloud, without having to engineer and/or maintain the supporting infrastructure. These include offerings from companies like Amazon Web Services, Microsoft’s Azure and of course Google’s Cloud offerings.

Pro: You can build anything for any platform or channel and move forward pretty rapidly think weeks or months. You do not have to maintain or build your own machine learning infrastructure.

Con: This comes with some sort of recurring cost which might just hurt your unit costs or costs in general. It is likely that some ceiling to accuracy arises given the fixed constraints of the services.

AI Software
You could build your own AI infrastructure from the ground up. Even if you want to do all of this yourself, you’re likely going to end up using either proprietary software and/or open source tools like TensorFlow from Google or say scikit-learn, Theano or Spark’s MLlib. These will help you with the learning aspect of building an AI, much like the services described above, but there’s typically a whole lot more that you’ll still need to build yourself. For example, you’ll need to collect and clean your data, engineer features, evaluate your learned models, serve predictions, incorporate changes to your system and so on.

Pro: This provides the ultimate freedom and allows for very high accuracy in output. True innovation can happen here. It can provide long term cost benefits through infrastructure optimization as well.

Con: This is very time consuming and thus quite expensive as an upfront investment. Anything you build should be thought of as a months- or years-long project.

This is not necessarily a perfect segmentation, but it does provide a good backdrop.  And, given that each of the five tech giants is playing in multiple segments, it suggests to me that this is indeed the era of AI. It also suggests that none of the five is immediately convinced that the personal assistant is the only way to dominate in this new era.

2. Cross Device
AI Personal Assistants will be cross device. The recent announcements also point to a scenario in which these assistants will become ubiquitous. Siri is already in your Apple TV, and at the re/code conference, Jeff Bezos announced that Amazon will license Alexa to third parties.

It’s clear that the only way for these behemoths to compete is to make their AI Assistants available across devices. This presents some interesting political challenges right away, as Siri’s and Alexa’s skills converge, Apple would seem pretty uninterested in making Alexa available on your iPhone, for example.

The funny thing is that the player who used to be the most protective about their O/S Platform, Microsoft, has been among the quickest to push its assistant across devices. You can get Cortana on Windows 10, iPhone and Android. I think this willingness could let them leapfrog the others, should they not be as forward-thinking.

3. Horizontal vs. Vertical AI
The structure of the AI Assistant space is now crystal clear: Horizontal AI will integrate with and enable vertical AI. All five companies have built what I like to call horizontal AI, which is to say AI Assistants that operate more as enablers of more focused services (like x.ai).

They’ve also all signaled that they would like third parties to develop these more focused services, just as third parties developed the apps that populate the app store and our smart phones. These are early days, so there are few fully realized vertical AI services in market. (We have built an AI personal assistant, Amy Ingram, who does only one thing: schedule meetings for you.) You should expect to see much more activity on this front. The value of these horizontal AI assistants will hinge to a large degree on the quality of vertical agents that each can enable and the seamlessness of those integrations.

But don’t expect exclusive integration deals with Siri, Cortana or the like. Any vertical AI agent will want to offer its agent up everywhere. And there is precedent for that model:  popular apps go cross device quickly.

4. Conversational UI
The conversational UI, whether in voice or text, will be the dominant interface for these horizontal AI assistants, and for many, if not almost all, vertical agents as well. Whether you are texting with M or chatting with Alexa or asking Amy to set up a meeting, you will be holding a conversation rather than navigating a visual interface. Right now, those conversations can feel stilted and awkward. This is one area in which a single player could really separate itself from the pack. I’m not placing any bets, but to achieve a truly natural level of interaction, you need masses of data and the right data and the willingness to massage it. Here Apple seems to be most disadvantaged, for the moment.

5. No Winner Take All
This is not a winner take all setting. While one or two players may fail to woo consumers to their AI personal assistant, I do not see any reason for a single or even just two players to dominate the market. After all, Alexa gets only marginally better if I use her and you use her too, and this has to do with data collection (the more and more varied data, the smarter she can get).

The opposite may be true for many vertical AI assistants. For example, if Amy were to run everyone’s calendar, she could find the most convenient location for all meeting participants (not just the host) because she would know where each one has been and where each is going on any given day. That means less travel, which saves everyone time.

One thing is indisputable: the major parties in the AI battle have assembled. Now the war for consumers hearts and minds begins. This should be great for the consumer and fun to watch.

Myopia, inertia and other vices that make incumbents victims of disruption
May 24, 2016126,532 views847 Likes126 CommentsShare on LinkedInShare on FacebookShare on Twitter
Once upon a time (in 1998, to be precise), PolyGram was a music industry leader, with a roster boasting Bob Marley, U2 and top classical artists. Yet one day Cornelis Boonstra, CEO of PolyGram’s Dutch parent Philips, flew to New York, met with Goldman Sachs, and arranged to sell PolyGram to Seagram for $10.6 billion. Why? Boonstra had come across research showing that consumers were using the new recordable CD-ROM technology largely for one purpose: to copy music.

The MP3 format had barely been invented. Napster was a mere gleam in Sean Parker’s eye. Polygram’s business was humming along. Yet Boonstra detected the first signs of transformational change and decided to act.

I often use this story when I talk to clients about digital disruption, to highlight the value of foresight and quick action. But it also prompts a question: Polygram’s competitors had access to similar research – so why didn’t they act?



Almost 20 years later, with the music industry revolutionized by digital technology, it’s easy to talk about who made the “right” decision and who the “wrong” one. Things are far murkier when you’re in the middle of disruption’s uncertain, hype-filled early stages. Under the real-world constraints of running a large company, executives tend to hope the cloud on the horizon will dissipate. So they wait. In the 1980s and 1990s, steel giants were slow to grasp the potential of mini-mills; minicomputer makers likewise underestimated the personal computer. More recently, publishers, retailers and lodging providers have all fallen victim to similar shortsightedness and inertia. “Companies rarely die from moving too fast,” Reed Hastings, the CEO of Netflix, has observed, “and they frequently die from moving too slowly.”

The good news is that many industries today are still in the early days of digital disruption. That means you still have time to act, provided you can overcome the organizational barriers and match your response to the disruption stage.


Stage 1: Faint signals amidst much noise
As with the music business, the newspaper industry had no shortage of signs that digital disruption was coming. Norway’s Schibsted was one of the earliest media companies to both anticipate the threat and act on the opportunity. As early as 1995, its leaders became convinced that “The Internet is made for classifieds, and classifieds are made for the Internet.”

It’s not surprising that most other publishers didn’t react. At this early stage of disruption, incumbents feel barely any impact on their core business except in the distant periphery. It takes rare acuity to make a preemptive move, likely in the face of opposition from stakeholders and uncertainty as to which trends will really matter.

To escape the myopia that afflicts many incumbents at this stage, you have to challenge your long-standing beliefs about how your industry makes money. As my colleagues put it in a recent article, “These governing beliefs… are often considered inviolable—until someone comes along to violate them.”

 Stage 2: Change takes hold
 The trend is now clear, the technological and economic drivers validated. At this point, incumbents should nurture new initiatives so they can establish footholds in the new arena. Importantly, those new ventures need autonomy from the core business, even if the goals of the two operations conflict. The idea is to act before you have to.

But with disruption’s impact still not big enough to dampen earnings momentum, motivation is often missing. Even as online classifieds began to take off, most newspaper publishers lacked a sense of urgency because their market share remained largely unaffected and the new players were small and unprofitable.

Now I know how hard it is for a company’s leaders to support experimental ventures when the core business is still going strong. When Netflix disrupted itself in 2011 by shifting focus from DVDs to streaming, its profit dropped by 90% and its share price plunged. Few boards and investors can handle that kind of pain. The vague longer-term threat just doesn’t seem as dangerous as the immediate hardship. Additionally, management teams are more comfortable developing strategies for businesses they know, and are reluctant to enter a new game with rules they don’t understand.

The upshot: Most incumbents dabble. Many newspapers built online add-ons to their classified businesses, but few were willing to risk cannibalizing their traditional revenue streams.

Stage 3: The inevitable transformation
By now, the future is pounding on the door. The new model has proven superior to the old and the industry is rapidly moving to it. The incumbent’s challenge now lies in accelerating its own transformation by aggressively shifting resources to the new ventures, even if they hurt the core business. Think of it as treating new businesses like venture-capital investments that only pay off if they scale rapidly, while the old ones are subject to a private equity-style workout.

In my experience, this is the hardest stage for incumbents to navigate, because it requires surmounting the inertia that can afflict companies at the best of times. As performance starts to suffer, tightening up budgets, companies naturally tend to cut back on peripheral activities and focus on the core. The reflex to conserve resources kicks in just when you most need to aggressively reallocate.

Which makes it all the more instructive to consider what Axel Springer did. The German media company was “a mere Internet midget” until it leapt into action in 2006. Within seven years, it acquired 67 digital properties and launched 90 initiatives of its own. The ambitious campaign paid off: By 2012, Axel Springer’s websites had almost twice the number of unique visitors as Schibsted’s. The lesson: Incumbents can win even with a late start, provided they throw themselves wholly into the race.



Stage 4: Adapting to the new normal
 By now, you have no choice but to accept reality: the industry has fundamentally changed. Most incumbents find their cost base is out of line with the new (likely much shallower) profit pools and their earnings are caving in. They have little choice but to restructure – and in some cases would be best off exiting the business.

So in which stage of disruption is your industry? If it’s one of the first three, it’s not too late to act. Being a winner in a previous era is not an entitlement to being a winner in the next one – but nor need it be a hindrance.

For a deeper exploration of incumbents’ disruption challenge, please read my recent article. I also encourage you to view this animated narration, which walks you through the four stages of disruption.


I’d love to hear your thoughts on the barriers and responses I’ve described here. Do your experiences bear them out?

Article - McKinsey Quarterly - May 2016
The ‘tech bubble’ puzzle
By David Cogman and Alan Lau

Public and private capital markets seem to value technology companies differently. Here's why.

Aggressive valuations among technology companies are hardly a new phenomenon. The widespread concerns over high pre-IPO valuations today recall debates over the technology bubble at the turn of the century—which also extended to the media and telecommunications sectors. A sharp decline in the venture-capital funding for US-based companies in the first quarter of the year feeds into that debate,1 though the number of “unicorns”—start-up companies valued at more than a billion dollars—over that same period continued to rise.

The existence of these unicorns is just one significant difference between 2000 and 2016. Until seven years ago, no venture capital–backed company had ever achieved a billion-dollar valuation before going public, let alone the $10 billion valuation of 14 current “deca-corns.” Also noteworthy is the fact that high valuations predominate among private, pre-IPO companies, rather than public ones, as was the case at the turn of the millennium. And then there’s the global dimension: innovation and growth in the Chinese tech sector are much bigger forces today than they were in 2000.2
All of these factors suggest that when the curtain comes down on the current drama, the consequences are likely to look quite different from those of 16 years ago. Although the underlying economic changes taking place during this cycle are no less significant than the ones during the last cycle, valuations of public-market tech companies are, at this writing, mostly reasonable—perhaps even slightly low by historical standards. A slump in current private-sector valuations would be unlikely to have much impact on the broader public markets. And the market dynamics in China and the United States are far from similar. In this article, we’ll elaborate on the fundamentals at work, which extend beyond the strength of the current pipeline of pre-IPO tech companies, and on the funds that have washed over the venture-capital industry in recent years.

The lessons of history

The defining feature of the 2000 tech bubble was that it was a public-market bubble. At the start of 1998, valuations for tech companies were 40 percent higher than for the general market: at the peak of the bubble in early 2000, they were 165 percent higher. However, at that point the largest-ever venture-invested tech start-up we could find evidence of barely exceeded a $6 billion valuation at IPO—a small number by today’s standards. Moreover, a considerable part of the run-up in valuation came not from Internet companies but from old-school telecom companies, which saw the sector’s total value grow by more than 250 percent between 1997 and 2000.

Equity markets seem to have learned from that episode. In aggregate, publicly held tech companies in 2015 showed little if any sign of excess valuations, despite the steadily escalating ticket size of the IPOs. Valuations of public tech companies in 2015 averaged 20 times earnings, only 10 percent above the general market, and they have been relatively stable at those levels since 2010.

By historical standards, that’s relatively low: over the past two decades, tech companies on average commanded a 25 percent valuation premium, often much more. During the technology and telecommunications bubble of 2000, the global tech-sector valuation peaked at just under 80 times earnings, more than 3 times the valuation of nontech equities. And over the five years after the bubble burst in 2001, the tech sector enjoyed a valuation premium of, on average, 50 percent over the rest of the equity market (exhibit). Even with a focus limited to Internet companies—the sector most often suspected of runaway valuations—there is no obvious bubble among public companies at present.

Nor do these companies’ valuation premiums appear excessive to the general market when viewed in the light of their growth expectations. Higher multiples are in most cases explained by higher consensus forecasts for earnings growth and margins. The market could be wrong in these expectations, but at least it is consistent.

China is a notable exception, though equity valuations in China always need to be viewed with caution. Before 2008, Chinese tech companies were valued on average at a 50 to 60 percent premium over the general market. Since then, that premium has grown to around 190 percent. Why? In part because the Chinese online market is both larger and faster growing than the United States, and the government has ambitious plans to localize the higher-value parts of the hardware value chain over the next few years.3 The growth in China’s nonstate-owned sector is another part of the story. Many of the new technology companies coming to the market in the past five years have been nonstate-owned, and nonstate-owned companies are consistently valued 50 percent to 100 percent higher than their state-owned peers in the same segments.

This time, it’s different?

Where the picture today is most different from 2000 is in the private capital markets, and in how companies approach going public.

It wasn’t until 2009 that a pre-IPO company reached a $1 billion valuation. The majority of today’s unicorn companies reached that valuation level in just the past 18 months. They move in a few distinct herds: roughly 35 percent of them are in the San Francisco Bay area, 20 percent are in China, and another 15 percent are on the US East Coast.

Notable shifts in funding and valuations have accompanied the rising number of these companies. The number of rounds of pre-IPO funding has increased, and the average size of venture investments more than doubled between 2013 and 2015, which saw both the highest average deal size and highest number of deals ever recorded. Increases in valuation between rounds of funding have also been dramatic: it’s not unusual to see funding rounds for Chinese companies involving valuation increases of up to five times over a period of less than a year.

Whatever the quality of new business models emerging in the technology sector, what’s unmistakable is that the venture-capital industry has built up an unprecedented supply of cash. The amount of uninvested but committed funds in the industry globally rose from just over $100 billion in 2012 to nearly $150 billion in 2015, the highest level ever. And where buyout, real-estate, and special-situations funds all have the luxury of looking across a range of deal sizes, industries, or even asset classes, venture capitalists have less flexibility. Many venture funds fish in the same pool of potential deals, and some only within their geographic backyard.

The liquidity in the venture-capital industry has been augmented by the entry of a new set of investors, with limited partners in some funds looking for direct investment opportunities into venture-funded companies as they approach IPO. This allows companies to do much larger pre-IPO funding rounds, marketed directly to institutional investors and high-net-worth individuals. These investors dwarf the venture-capital industry in scale and can therefore extend the runway before IPO, though not indefinitely: their participation is contingent on the promise of an eventual exit via IPO or sale.

Thus valuations of individual pre-IPO start-ups need to be viewed cautiously, as the actual returns their venture-capital investors earn flow as much from protections built into the deal terms as by the valuation number itself. In a down round (when later-stage investors come in at a lower valuation than the previous round), these terms become critical in determining how the pie is divided among the different investors.

The IPO hurdle

Private-equity markets do not exist in isolation from public markets: with few exceptions, the companies venture capitalists invest in must eventually list on public exchanges, or be sold to a listed company. The current disconnect between valuations in these two markets will somehow be resolved, either gradually, through a long series of lower-priced IPOs, or suddenly, in a massive slump in pre-IPO valuations.

Several factors incline toward the former. Some late-stage investors, such as Fidelity and T. Rowe Price, have already marked down their investments in multiple unicorns, and it’s increasingly common for start-up IPOs to raise less capital than their pre-IPO valuations. Given the still-lofty level of those valuations, this no longer attracts the extreme stigma that it did in 2000. Regardless of how the profits divide up, the company is still independent and now listed.

Tech companies also are staying private for, on average, three times longer.4 A much greater share of companies wait until they are making accounting profits before coming to market. From 2001 to 2008, fewer than 10 percent of tech IPOs were launched after the company had reached profitability: since 2010, almost 50 percent had reached at least the break-even point. The number of companies coming to market has remained relatively flat since the 1990s technology bubble. But the average capitalization at IPO time has more than doubled in the past five years, reflecting the fact that the companies making public offerings are larger and more mature.

What happens post-IPO? Over the past three years, 61 tech companies have gone public with a market cap of more than $1 billion. The median company in this group is now trading just 3 percent above its listing price. The valuations of a number of former unicorns are lower still, including well-known companies like Twitter in the United States and Alibaba in China.

History paints a challenging picture for many of these recently listed companies. Between 1997 and 2000, there were 898 IPOs of technology companies in the United States, valued collectively at around $171 billion. The attrition among this group was brutal. By 2005, only 303 of them remained public. By 2010, that number had declined to 128. In the decade from 2000 to 2010, the survivors among these millennials had an average share-price return of –3.7 percent a year. In the subsequent five years, they returned only –0.8 percent per annum—despite soaring equity markets.

The geographic dimension

The current crop of pre-IPO companies is far more diverse than in 2000. It will be particularly interesting to see which of the two largest geographic groups—the US and the Chinese unicorns—weathers the shakeout best. Consider just Internet companies. The total market value of listed Internet companies today is around $1.5 trillion. Of this, US companies represent nearly two-thirds, and Chinese companies—mostly listed in the United States—almost all of the remainder. The rest of the world put together amounts to less than 5 percent.

The differences between the unicorns in these regions are revealing. Of the more than 100 unicorns operating in the United States and China, only 14 have overlapping investors, and just two—the electronics company Xiaomi and the transportation-network company Didi Chuxing (formerly Didi Kuaidi)—account for two-thirds of the combined valuation of all of them. Three-quarters of the Chinese unicorns are primarily in the online space, compared with less than half of the US unicorns, and these serve separate user bases as a result of regulatory separation of the two countries’ Internet markets.

It is not obvious which group holds the advantage. The local market to which Chinese Internet companies have access is substantial, with well over twice as many users as in the United States; the e-commerce market is significantly larger and growing almost three times as fast. Moreover, the three Chinese Internet giants, Baidu, Alibaba, and Tencent, have invested in many of the Chinese unicorns, giving them easier access to a platform of hundreds of millions of users on which to operate.

The Chinese unicorns also have a much higher proportion of “intermediary” companies—start-ups that act primarily as channels or resellers of other companies’ services and take a cut of earnings. Around a third of the Chinese unicorns have business models of this kind, compared with only one in eight of their US counterparts. Finally, the US start-ups tend to adapt faster to a global audience. Although there are several established Chinese technology companies that have successfully made the leap to the global stage, such as Huawei, Lenovo, and ZTE, very few of the companies founded in the past five years have reached that point.

For all the differences between the tech start-up markets of today and those of 2000, both periods are marked by excitement at the potential for new technologies and businesses to stimulate meaningful economic change. To the extent that valuations are excessive, the private markets would appear to be more vulnerable. But perspective is important. The market capitalization of the US and Chinese equity markets declined by $2.5 trillion in January alone. Any correction to the roughly half a trillion dollars in combined value of all the unicorns as of their last funding round is likely to seem milder than the correction of the last technology bubble.

About the author(s)

David Cogman is a principal in McKinsey’s Hong Kong office, where Alan Lau is a director.

Historically, sales and marketing have not always been harmonious bedfellows, but the opportunities afforded by big data and the complexities of connecting with customers in more granular ways require integrated and collaborative models that bring marketing and sales together.

On average, a B2B customer will regularly use six different interaction channels throughout the purchase process, and two-thirds come away frustrated by inconsistent experiences. The notion of a customer decision journey (CDJ) around which marketing and sales collaborate has become embedded in many leading sales organizations, but the journey differs by customer segment, with needs and expectations varying at each stage. Insightful customer research and advanced analytics mean these segments can be defined ever more precisely by marketing, but that work is wasted unless sales reaches the right people with the right offer. Nor is the onus all on marketing. Both functions generate enormous volumes of valuable data on customer segments and preferences, but at outperforming companies, the front line reports back to help marketing refine its value propositions.

As data becomes more readily available and easier to crunch, companies can move from broad-based predictive modeling to a much more personalized approach. Information from past interactions with a customer or from existing sources can be used to instantaneously customize the buyer’s experience. Remembering customer preferences is just the beginning; true personalization is the next wave in a customer’s journey and helps drive loyalty.

Pay attention to presales

For B2B sales, “personalization” is about delivering tailored solutions. To do that, sales organizations need a very clear understanding of customer needs. This requires technical experts to be involved with customers at a very early stage in the buying journey. These presales specialists are so important that one account manager at a global technology company said, “Every sales leader would say they couldn’t run the business without a specialist. The competitive dynamic is such that if you don’t bring your A-game to the deal, you’re not going to win.”

In addition to getting experts working on deals, the presales function can play a vital role in qualifying leads. Social media, digital marketing, advanced analytics, and the more pervasive use of inside sales have exponentially increased the number of deals a company can pursue. But too many potential deals can have a negative effect on the organization by diffusing focus and taxing resources. It is far more efficient and effective to qualify leads using data and analytic tools, so that only the most attractive ones then move into the pipeline.

Despite its importance, presales is often understaffed and overlooked. A high-performing sales organization should have about two-thirds of its presales team undertaking technical presales activities (crafting solutions to customers’ problems) and the rest involved with commercial presales activities (managing deal qualification, pricing, and bid). For maximum productivity, the function should account for 40 to 50 percent of the overall commercial headcount. B2B companies with strong presales capabilities consistently achieve win rates in excess of 40 percent in new business, which is 10 to 15 points higher than we usually observe.

Although this technical sales support is most associated with B2B sales, it can apply to B2C, too. Apple’s product geniuses may be the best-known examples, but some car dealers send the product expert, not the salesperson, out on the customer’s test drive to answer questions.

With its focus on how digital technologies, data, and analytics are changing the face of selling, it’s natural that Sales Growth concludes with some thoughts on where the future may lie for sales organizations. The pervasive automation of back-office processes and the complete outsourcing of the sales function, enabled in part by precisely this technology shift, are redrawing the lines of sales management.

Machine learning and intelligent automation are already transforming a wide range of industries and functions. By 2020, customers will manage 85 percent of their relationship with an enterprise without interacting with a human, and 40 percent of sales activities could be automated using technology that already exists.4
“Cognitive agents” such as IPsoft’s Amelia, already understand, interact, and—crucially—learn in order to solve customers’ problems in industries from financial services to telecommunications. They can parse natural language and independently determine which questions to ask in order to diagnose what the customer really needs and act accordingly. It’s a small step from helping customers tackle basic processes to selling, and Amelia can already solve basic customer problems, for example, moving a customer to a more comprehensive phone tariff.

These new technologies and trends do not spell the end of salesmanship. They will fulfill much of the presales work, but many sales will still need people to close them. Making sure that the right salesperson is in place is becoming easier, too, thanks to analytics. Matching the seller with the lead and equipping the salesperson with the maximum amount of useful information to close the deal will characterize the new sales environment.

AI can be deployed beyond just responding to queries. Today, even with modern CRM systems, only a quarter of leads are actually contacted. A bot can contact 100 percent of them and do so in a relatively engaging, human-like manner that should not put off any potential customers.5 Companies that have pioneered the use of AI in sales rave about the impact, which includes an increase in leads and appointments of more than 50 percent, cost reductions of 40 to 60 percent, and call-time reductions of 60 to 70 percent. Customers love it too—these companies have seen an increase in customer satisfaction as customers get what they want faster.

Sales teams will need to be comfortable with algorithms and able to work with data scientists and marketing-tech experts to design solutions. Sales leaders, meanwhile, will need clear escalation and exception protocols to manage the trickiest or most valuable situations. As the machines get smarter, the biggest differentiator of success will be the human touch. Senior executives will need to ask the right questions, vigorously approach the exceptions that the machines highlight, and shine in the areas that AI will always struggle with: ambiguity and emotional engagement.

With more sales organizations turning to technology vendors to solve problems, is it only a matter of time before the whole sales function is outsourced? Outsourcing the part of your business that involves selling to customers sounds risky at first, but for pioneering companies, the fact that the salesperson doesn’t work directly for the company no longer matters, nor is it important that s/he may be selling products from several different companies in the same category over the course of a week. What matters for the manufacturer is that someone is out there pounding the pavement, the phone, and the digital platforms, getting the product into the hands of customers more cheaply and effectively than the company can do itself.

Telesales is the most common form of outsourcing, but we have also seen a big rise in the outsourcing of sales operations. Alongside CRM, companies are outsourcing sales-compensation programs, lead-generation insights, sales analytics, account planning, and other operations. In return, they benefit from lower costs of operation, greatly reduced error rates, and the ability to shift their limited resources and energy to the critical parts of their business that they are best equipped to manage.

CEOs have valid reservations, yet sales often has significant variation between top and bottom performers and thus is ripe for being handed over to companies that can bring costs down and performance up. Outsourcers are experts at standardization and script every part of the sales interaction to bring the average performance up to the highest levels.

As outsourcing providers become more sophisticated, they are likely to infiltrate more complex B2B sales settings where customers need more tailored solutions and managing accounts still requires the personal touch.

About the author(s)

Thomas Baumgartner is a director in McKinsey’s Vienna office; Homayoun Hatami is a director in the Paris office, and Maria Valdivieso is Director of Knowledge, based in the Miami office.

DEFENSE WINS CHAMPIONSHIPS
How to build a winning alternatives strategy

BY ERIC CRITTENDEN
APRIL 29, 2016

Longboard’s original research proves that over the long term, a small minority of stocks drive returns for the overall market.

If you’ve heard of the Pareto Principle before, this might not surprise you.

What does this mean for investors? It may be more efficient to navigate this reality by getting defensive, and strategically avoiding the majority in this equation: the underperforming investments.

Be aware of disproportionate rewards

Here’s a closer look at our research on this competition gap in action in the U.S. stock market.



We analyzed 14,455 active stocks between 1989 and 2015, identifying the best performing stocks on both an annualized return and total return basis.

Looking at total returns of individual stocks, 1,120 stocks (7.7% of all active stocks) outperformed the S&P 500 Index by at least 500% during their lifetimes. Likewise, 976 stocks (6.8% of all active stocks) lagged the S&P 500 by at least 500%. The remaining 12,404 stocks performed above, at or below the same level as the S&P 500.

The principle of the competition gap remains true in practice: The minority accumulates a disproportionate amount of the total rewards, creating a “fat tail” distribution of extreme outperformers and underperformers with a large gap between the two.

Focus on the minority

What’s more, the left tail in the stock market’s competition gap (or distribution) is significant. 3,431 stocks (23.7% of all) dramatically underperformed the S&P 500 by 200% or more during their lifetimes.



So, let’s say an investor’s portfolio missed the 20% most profitable stocks between 1989 and 2015. Instead, he invested in only the other 80%. His total gain would have been 0%.

Once again, the principle holds true: Over the long term, the more efficient approach is to strategically avoid the many underperformers.

Seek alternative long-term returns
To get more benefits from alternative allocations, investors can seek long-term trend following strategies that proactively trim investments that don’t perform over time. These more defensive strategies are better positioned to avoid sustained downtrends — and a diversified portfolio with fewer strategies trapped in sustained downtrends can recover more quickly.

What’s more, some of the same strategies that can deliver this downside protection can add further diversification, potentially delivering results that are uncorrelated to the market and to other alternatives.

Methodology

This research was originally published by Cole Wilcox and Eric Crittenden of Blackstar Funds in 2006. Since then, Blackstar Funds has become Longboard Asset Management, and the organization updated its research in 2016 to focus on data from 1989–2015.

Our database covers all common stocks traded on the NYSE, AMEX and NASDAQ since 1989, including delisted stocks. Stock and index returns were calculated on a total return basis (dividends reinvested). Dynamic point-in-time liquidity filters were used to limit our universe to the approximately 4,000 most liquid stocks each year, representing approximately 99% of the investable U.S. equity market. In total, 14,455 stocks were evaluated (due to index reconstitution, delisting, mergers, etc.).

Disclosure

The information set forth herein has been obtained or derived from sources believed by Longboard Asset Management to be reliable. However, Longboard does not make any representation or warranty, express or implied, as to the information’s accuracy or completeness, nor does Longboard recommend that the attached information serve as the basis of any investment decision. This document is approved for public use. This document has been provided to you for information purposes and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments, and may not be construed as such.

Longboard hereby disclaims any duty to provide any updates or changes to the analysis contained in this spreadsheet. Market analysis, returns, estimates and similar information, including statements of opinion/belief contained herein are subject to a number of assumptions and inherent uncertainties. There can be no assurance that targets, projects or estimates of future performance will be realized.

There is a risk of substantial loss associated with trading commodities, futures, options, derivatives and other financial instruments. Before trading, investors should carefully consider their financial position and risk tolerance to determine if the proposed trading style is appropriate. Investors should realize that when trading futures, commodities, options, derivatives and other financial instruments could lose the full balance of their account. It is also possible to lose more than the initial deposit when trading derivatives or using leverage. All funds committed to such a trading strategy should be purely risk capital.

Index performance in this document was sourced from third-party sources deemed to be accurate, but is not guaranteed. All index performance is gross of fees and would be lower if presented net of fees. Indices referenced are not representative of the entire futures or trading universe. Investors cannot invest directly in the indices referenced in this document.

Diversification does not eliminate the risk of experiencing investment losses. Past performance is not an indication of future performance.

MARCH 17, 2016 92 of the Biggest, Costliest Startup Failures of All Time  

From financial fraud to just running out money, we scanned our database to identify 92 of the most expensive startup flameouts in history. For those who’ve been reading, we’ve had failure on the brain recently. This is partly because its a good counterbalance to the typical survivorship bias laden stories we read and also because understanding failure is critical to the algorithms underlying our product. In this review of failure, we’ve looked in our venture capital database to find the most well-funded startup companies that ultimately failed or that had an undesirable exit, i.e. an asset sale or in some cases an acquisition for less than the total funding raised by the company. As you’ll see below, the reasons for failure are varied but a few common threads do emerge such as running out of money, inability to generate sustainable revenue, bad product-market fit and losing to competitors. And then there were some uncommon and more dramatic causes of failure including: Financial fraud Lawsuits A most-wanted founder We’ve broken down the companies that failed by the amount of funding they received and start with those that failed that raised over $100M (Ouch). We then highlight discussion about the reasons for failure based on press reports.  

Update 1 (March 11, 2016)

Total Funding: Over $100M

Company: KiOR  

Select VC Investors: Khosla Ventures, Alberta Investment Management Corporation, Artis Capital Management  

Total equity financing raised: $252.9M  

Different parties disagree about which side was responsible — Khosla Ventures or [chemical engineer Paul] O’Connor and the CEO — but most agree that KiOR made poor hiring decisions as it staffed up. The result was a relative preponderance of lab researchers with Ph.D.s and a dearth of people with technical, operational experience running energy facilities. The lack of people with real operational experience “hurt KiOR a lot,” says O’Connor. via Fortune  

Company: Quirky

Select VC Investors: RRE Ventures, Kleiner Perkins Caufield & Byers, Andreessen Horowitz

Total equity financing raised: $185.3M

Steering the ship — handling all of the engineering, manufacturing, marketing, and retailing, even when you’re taking 90 percent of the subsequent profits — was ultimately too expensive of a proposition, especially in comparison to other, less-handholding-oriented start-ups. “The reason why Kickstarter makes a ton of money is they don’t have to do anything besides put up a website,” [founder Ben] Kaufman notes. via New York Magazine  

Company: Powa Technologies

Select VC Investors: Wellington Management, Otto Group

Total equity financing raised: $176.3 million + at least $50 million of debt

The chief executive’s downbeat tone was a stark contrast to an optimistic tone last year. “I’ve forced you to hold out your nerve because I asked you to and I’ve taken you through that, but we’re past that point and now it’s all sunshine and light,” he said in a staff video. In a meeting with the Financial Times last April, [Dan] Wagner compared himself to John Rockefeller, the US business magnate who dominated the oil and rail industries in the 19th century. He believed Powa would set down mobile payments infrastructure that would be just as revolutionary. “What we’re building here is the biggest tech company in living memory,” he said in his offices in Heron Tower, a skyscraper in the heart of the City of London. A person with knowledge of the matter said that Powa could be paying as much as £2.5m a year.

via The Financial Times   

Company: Lilliputian Systems 

Select VC Investors: Kleiner Perkins, Atlas Venture, Intel Capital Total equity financing raised: $150.4M The Nectar system had its roots at MIT’s Microsystems Technology Lab — and may have simply left the lab a few years too early. via Beta Boston   Company: Rdio  Select VC Investors: Atomico, Mangrove Capital Partners Total equity financing raised: $117.5M “Rdio, I guess, made the mistake of trying to be sustainable too early,” says [early employee Wilson] Miner. “That classic startup mistake of worrying about being profitable and having a business that makes any sense before you’ve reached this astronomical growth curve. Which is partly the trap of the business model itself — because of the content licensing deals, the margins for the business were so incredibly thin. No matter what we did, the labels made the lion’s share of the revenue. You have to make it up with extreme volume, which is why you see Spotify going after every human being in the world.” via The Verge  

Company: OnLive Select VC Investors: Lauder Partners, Time Warner Investments Total equity financing raised: $116.5M First there were doubts about its ability to deliver a lag-free experience, then business troubles led to a form of bankruptcy followed by big layoffs and a buyout, and all sorts of uncertainty after that. via Kotaku  

Company: Coraid Select VC Investors: Azure Capital Partners, Menlo Ventures Total equity financing raised: $114.3M Its U.S. operations and had not been successful in raising new funding, among other things. A CRN report earlier this month said the company was closing up for good and was filing for bankruptcy. via Venture Beat  

Company: Terralliance  Select VC Investors: Kleiner Perkins Caufield & Byers, Goldman Sachs, DAG Ventures Total equity financing raised: $296.3M “All told, the investors had sunk nearly half-a-billion dollars into Terralliance, an astounding sum given the audacity of the company’s aspirations — and the paucity of its accomplishments.” via Fortune  

Company: Solyndra Select VC Investors: Redpoint Ventures, US Venture Partners Total equity financing raised: $1.22B Even industry heavyweights such as China’s Suntech Power Holdings Co Ltd and U.S.-based First Solar Inc are struggling with dwindling profits, while small, up-and-coming solar companies are finding it increasingly difficult to stay afloat. Solyndra said it was evaluating options, including a sale of the business and licensing its copper indium gallium selenide (CIGS) technology. via Reuters  

Company: Webvan Group Select VC Investors: Sequoia Capital, Softbank Capital Total equity financing raised: $275.2M “They spent so much money on all this infrastructure, which was basically part of their business model,” [stock analyst David] Kathman said. “But what they hoped was going to be their advantage turned out to be their downfall. They got big fast, but size turned out to be an albatross when the demand wasn’t there.” One reason demand fell short was that Webvan wasn’t as convenient as it billed itself, Kathman said. via SFGate  

Company: Better Place Select VC Investors: VantagePoint Capital Partners, Lend Lease Ventures Total equity financing raised: $675.3M The bet was risky because it required large geographies — indeed, entire nations — to adopt the technology in order for it to scale successfully. The company chose small countries like Israel and Denmark to test its model, but the company’s upfront costs kept mounting, and it kept delaying debuts. Also, a number of competing electric car efforts, including the venture by new company Tesla but also by the Big 3 and other manufacturers, kept the industry from adopting any one standard. via VentureBeat  

Company: Amp’d Mobile Select VC Investors: Highland Capital Partners, Columbia Capital, Redpoint Ventures Total equity financing raised: $324.5M Maybe it was Verizon’s most recent in-court request to stop serving up costly airwaves for which it couldn’t pay, maybe it was the cold reality that it’ll allegedly have a mere $9,000 in the bank as of next Monday — but at any rate, Amp’d Mobile appears ready to throw in the towel. via Engadget  

Company: AllAdvantage.com Select VC Investors: Alloy Ventures, Walden Venture Capital Total equity financing raised: $133.8M In a statement posted on the site, the company said the move was taken because “the advertising and capital markets have changed so fundamentally that it is now impossible to continue our infomediary incentive programs and benefits.” . . . The company saw traffic to its Web site drop significantly during the last six months of 2000. In June, the site was drawing visitors 2 million visitors each month, according to Nielsen/NetRatings. That number dropped to less than 600,000 by December. via San Francisco Business Times  

Company: Kozmo.com Select VC Investors: Oak Investment Partners, Flatiron Partners Total equity financing raised: $256.5M  If making money on operations was a near impossibility, Kozmo seemed perpetually on the precipice of tapping into the public equity markets. Meanwhile, it floated other plans, like starting a print catalogue and delivering for local retailers. But then they discovered that other retailers had their own deliverymen. via Forbes  

Company: eToys Select VC Investors: Bessemer Venture Partners, Sequoia Capital Total equity financing raised: Undisclosed, but raised $166.4M at IPO  The company also said it was on the verge of being delisted from the Nasdaq stock exchange. The exchange sent a notice to eToys, threatening to remove the company by May 2 because it has failed to maintain at least a $1 share price for 30 consecutive days, according to Gary Gerdemann, spokesman for eToys. The events were not a complete surprise, given that company executives had cautioned late last year that eToys had only enough cash to remain open through March. via The New York Times  

Company: Caspian Networks Select VC Investors: New Enterprise Associates, US Venture Partners Total equity financing raised: $260M First core routing. Then P2P networking. Then net neutrality. Investors apparently put the kibosh on the company before it crow-barred itself into another communications fad. via Light Reading  

Company: Pay By Touch Select VC Investors: Mobius Venture Capital, Rembrandt Venture Partners Total equity financing raised: $130M Despite those early customers, processing fingerprint payments has not taken off as expected. Pay By Touch claims that it has fingerprint scanners in 3,000 stores, but the privately held company has never disclosed how many transactions it processes. For millions of consumers accustomed to using credit and debit cards, the proposition of using a fingerprint hasn’t been all that appealing. “It’s hard to fight the credit-card companies,” says Gartner (IT) analyst Avivah Litan. “Consumers are so used to racking up frequent-flier miles and other rewards that it’s like a David vs. Goliath situation. There’s just not much of a value proposition for the consumer to use a fingerprint.” via Bloomberg Businessweek  

Company: RealNames Corporation Select VC Investors: Draper Fisher Jurvetson, Clearstone Venture Partners Total equity financing raised: $116.2M RealNames said it had no choice to but to close operations as Microsoft was its primary distribution partner. Microsoft was owed $25 million for RealNames “resolutions” already delivered over the past two years and remained unwilling to bet that RealNames would become successful in the long-term. In addition, Microsoft expressed concerns about the quality of RealNames keywords that were sold.  The bad guy in all of this is clear: Microsoft, at least when reading the commentary posted on the weblog run by RealNames founder and former CEO Keith Teare, as well as comments he’s made to the press. via Search Engine Watch  

Company: Boo.com Select VC Investors: Arts Alliance Total equity financing raised: $135M “The firm mis-timed and failed to execute on a good idea,” Torris said. “They started by keeping most of their target audience out,” she added, referring to the need for high-speed connections to easily use the site. Torris said Boo.com also spent too much on advertising and promotions and failed to keep pushing forward on technology innovations. She pointed out that sites such as Landsend.com now feature similar “try on” technology and that third party vendors have begun to develop similar Web sites. via eCommerce Times  

Company: Savaje Technologies Select VC Investors: VantagePoint Venture Partners, RRE Ventures Total equity financing raised: $113.7M Now the company is close to closing its doors as it seeks additional funding from venture capitalists. The company, which employs about 140 people, had furloughed its developers and some other employees early in October, asking them to use up their vacation time or go on unpaid leave while Savaje moved to find its way out of its financial troubles. via eWeek  

Company: Pets.com Select VC Investors: Hummer Winblad Partners, Bowman Capital Total equity financing raised: $110M Almost from the start, Pets.com was a losing proposition, despite its backers’ talk about how much money consumers lavish on their pets. Many pet supplies are heavy and costly to ship — cat litter, cans of dog food — and the firm couldn’t sell enough higher-profit items such as pet toys. Moreover, to attract customers, the company depended heavily on discounts, said Jupiter Communications analyst Heather Dougherty. As a result, the firm was selling supplies below cost the entire time. via The Wall Street Journal  

Company: Cereva Networks Select VC Investors: Oak Investment Partners, North Bridge Venture Partners, Intel Capital, Goldman Sachs Total equity financing raised: $109.5M A victim of swiftly shrinking corporate IT budgets and a sharp drop in demand for the startup’s large-scale enterprise storage systems, the Marlborough, MA.-based company last week abruptly shut down and laid off 140 employees. via DSstar  

Company: COPAN Systems Select VC Investors: Globespan Capital Partners, Austin Ventures Total equity financing raised: $108.4M The COPAN product was well differentiated. The weakness was their not understanding, focusing and exploiting its sweet spot. A consequence of an incomplete or erroneous market understanding and a sole reliance on the internal body of experience and knowledge. via Toolbox.com  

Company: Calxeda Select VC Investors: Battery Ventures, Flybridge Capital Partners Total equity financing raised: $103M ARM server chip designer Calxeda has shut down as one of its executives told The Register: “We simply ran out of money.” via The Register Total Funding: $75M – $100M  

Company: DeNovis, Inc. Select VC Investors: Advanced Technology Ventures, UV Partners Total equity financing raised: $97.8M  In a Boston Globe interview in January, he had indicated that the company’s financial performance was a pressing concern. He said the $22 million in venture capital the company raised nine months ago was effectively its last chance. But having spent such a large sum of venture capital, DeNovis needed to go public or find a deep-pocketed buyer to return a large profit to its investors. Burkett said at the time, ”I only hear that about 11 times a day.” via Boston Globe  

Company: Aereo Select VC Investors: FirstMark Capital, Highland Capital Partners Total equity financing raised: $97M Inside the infrastructure that drove its online service, it assigned every Aereo user a mini broadcast TV antenna, and it used this to argue that its service was no different than sticking a pair of bunny ears on your television. That way, Aereo could avoid paying retransmission fees for broadcasters’ content. But broadcasters never bought this argument, and when it came down to it, neither did the US Supreme Court. via Wired  

Company: Canopy Financial Select VC Investors: GGV Capital, Foundation Capital Total equity financing raised: $89.5M …company management discovered earlier this month financial records provided to investors and lenders that were “fraudulent,” as well as “significant financial and accounting irregularities.” via Wall Street Journal  

Company: Soapstone Networks Select VC Investors: Accel Partners, Oak Investment Partners Total equity financing raised: $87.3M Soapstone was an underdog from the start. Even as a known quantity, it was going to have to wrestle with the slow process of qualification at big carriers. The recession certainly didn’t help. And it seems to me (and one source from outside Soapstone agrees) that while Soapstone wasn’t entirely wrapped up in PBB-TE (Provider Backbone Bridging – Traffic Engineering), the stall in that technology’s ascent was a contributing factor, too. via Light Reading  

Company: Claria Corporation Select VC Investors: US Venture Partners, Crosslink Capital Total equity financing raised: $84M The company realized that there were too many ad networks out there, and with the souring outlook for advertising, it made better sense to close shop and sell the company’s extensive set of patents, the source said. via VentureBeat   

Company: SunRocket Select VC Investors: Anthem Capital, BlueRun Ventures Total equity financing raised: $79.3M Analysts have been predicting that it would be difficult for companies, like SunRocket and the more popular Vonage, to base an entire business around a VoIP service. While VoIP makes it relatively cheap to serve customers, it’s still expensive to acquire them. via CNET  

Company: 38 Studios Select VC Investors: Rhode Island Economic Development Corporation Total equity financing raised: $75M Add it all up, including interest, and already-cash-strapped Rhode Island could be out as much as $110 million on the loans. As Schilling sits beside the softball diamond, his company, with nearly $151 million in debt and just $22 million in assets, is being liquidated through Chapter 7 bankruptcy. via Boston Magazine   Total Funding: $50M – $75M

Company: Beenz.com Select VC Investors: Gefinor Ventures, Apax Partners Total equity financing raised: $73.8M After the Internet bubble burst, e-currency companies tried to evolve by concentrating on business customers, but the collapse of a high-profile trailblazer such as Beenz shows that the Old Economy credit card companies have probably won the online shopping battle. Experts believe that online currency sites such as Beenz were overtaken as a way of shopping online by credit cards, which had the advantage of being virtually universally accepted both on and offline. via CNET  

Company: Veoh Networks Select VC Investors: Shelter Capital Partners, Spark Capital Total equity financing raised: $70.8M . . . the venture was pronounced dead in a tweet today by Veoh board member Todd Dagres of Spark Capital, a Boston VC firm that invested in Veoh Networks. Dagres tweeted, “Veoh is dead. Universal Music lawsuit was the main killer. Veoh won resoundingly but was mortally wounded by the senseless suit. Next.” via Xconomy  

Company: Dash Navigation Select VC Investors: Kleiner Perkins Caufield & Byers, Sequoia Capital Total equity financing raised: $41M, sold for $8.3M to BlackBerry    User adoption was slow, likely because the device carried a $600 price tag (later reduced to $399), but the service won praise from many reviewers, including Om. The navigation device was designed with true mobile web access and interactivity in mind, but sales were sluggish. via Gigaom       

Company: Move Networks   Select VC Investors: Hummer Winblad Venture Partners, Steamboat Ventures   Total equity financing raised: $60.3M    So what went wrong? For one thing, Move Networks never reached critical mass on the consumer side of things; despite early success with ABC, Fox, the CW, and others, many media companies shied away from the technology because it required a plugin that not many consumers had installed. This created a vicious chicken-and-egg problem: How do you get people to install the plugin if it’s not being used to deliver good premium content? And how do you get good premium content unless people already have the plugin installed? via Gigaom  

Company: Nirvanix Select VC Investors: Valhalla Partners, Mission Ventures Total equity financing raised: $70M By trying to play in the pure storage business, Nirvanix found itself in a market that, over the past five years, became increasingly commoditized by Amazon Web Services, Windows Azure and now Google Compute Engine, which have all been engaging in a price war. With no service to offer on top of its storage, Nirvanix did not stand a great chance of differentiating from such large competitors. via TechCrunch  

Company: Expand Networks Select VC Investors: The Challenge Fund-Etgar, Tamir Fishman Ventures Total equity financing raised: $69M Although Expand Networks won appreciation for its technology, its operational performance was much less impressive. The court documents show that it was losing $ 250,000 a month and had $ 11 million revenue in 2010. Although it was a pioneer in its field, it failed to make a breakthrough. via Globes   

Company: Ecast Select VC Investors: Doll Capital Management, Crosslink Capital Total equity financing raised: $66.8M  The San Francisco-based technology firm’s board of directors voted for an immediate shutdown after the company failed to raise enough capital to continue operating. “We worked diligently for this not to happen,” said Ecast vice-president of network operations Scott Walker. “We appreciate all the support from jukebox operators and the industry.” via Vending Times  

Company: Edgix Select VC Investors: Battery Ventures, Venrock Total equity financing raised: $65M “Companies that joined in during the last few years are primarily the ones dropping out. Many never had a sound business model to begin [with]. Edgix is one example. The company was basically a carbon copy of Cidera and other ISP caching solutions, with little new to offer. They basically launched a platform and went into business believing they would quickly generate revenue. Unfortunately for companies such as Edgix, once you continually say to investors, ‘There is a market out there and we can own it,’ you start to believe it yourself.” via Newsday  

Company: DoubleTwist Select VC Investors: Institutional Venture Partners, Boston Millennia Partners Total equity financing raised: $56.6M  Two months later, DoubleTwist bowed to the inevitable. “No one was surprised by this,” Williamson told the San Francisco Chronicle, “but everyone was disappointed. We had a great product and a great team — we just didn’t have the revenues.” via Bio-IT World  

Company: Akimbo  Select VC Investors: Zone Ventures, Draper Fisher Jurvetson Total equity financing raised: $54.7M The company had raised $4 million earlier this year from existing investors, but Chantel said the company was looking to raise $8 to 10 million to become cash positive with its new white-label strategy. Unfortunately, “there wasn’t enough runway to execute the plan,” he said. via Gigaom  

Company: Sequoia Communications Select VC Investors: Tallwood Ventures, BlueRun Ventures Total equity financing raised: $54M Luis Arzubi, a general partner at Tallwood Ventures, told EE Times that Sequoia (San Diego) was forced to cease operations despite having working parts and customers because it failed to raise the needed capital to continue. The company and its investors “basically had no choice,” he said. via EE Times Total Funding: $25M – $50M    

Company: Carrier IQ Select VC Investors: Accel Partners, CRV, and Mohr Davidow Ventures Total equity financing raised: $42M Knowledge of what (our) software tracked unbeknownst to the average user clearly hit a nerve with a public already skeptical about how private information is regarded by large corporations and other organizations for their own purposes … And so, unsurprisingly, following the revelations, there was a windfall of announcements about which companies were using it (and were not using it) to collect information; lawsuits over privacy violations and legislation drafted to tighten controls for the future. Some of those class-action suits, it appears, have been settled. As AT&T did not acquire the full company, we understand that it will not be liable for any outstanding litigation or settlements against CIQ. via Tech Crunch  

Company: Homejoy Select VC Investors: First Round Capital, Google Ventures, Max Levchin Total equity financing raised: $39.7MM CEO Adora Cheung said the “deciding factor” was the four lawsuits it was fighting over whether its workers should be classified as employees or contractors. None of them were class actions yet, but they made fundraising that much harder. “A lot of this is unfortunate timing. The [California Labor Commission’s] Uber decision … was only a single claim, but it was blown out of proportion,” she told Re/code. via ReCode  

Company: Laguna Pharmaceuticals  Select VC Investors: Sante Ventures and Versant Ventures Total equity financing raised: $34.5M  Two months into its roughly 600-patient initial Phase 3 trial, called Restore SR, researchers started to see side effects that would not have enabled Laguna to market the drug as widely as they had initially anticipated, [Laguna CEO Bob] Baltera said. “We were actually very surprised,” he said. “The [prior] Phase 2 study was robust.” Baltera declined to say much about the side effects, describing them only as “safety signals.” “The normal response in this business is to find a way forward,” Baltera said. “But it just wasn’t going to be commercially viable. Rather than trying to find any path forward, we decided to shut the company down.” via Xconomy   

Company: Healthspot Select VC Investors: BlueTree Allied Angels Total equity financing raised: $32.7M Jason Gorevic, CEO of telemedicine company Teladoc, expressed his belief that there are three critical elements to success in this industry segment: the technology platform, clinical capabilities and consumer engagement. “Consumer engagement is hard to do,” Gorevic said. This is where HealthSpot may have fallen down. Teladoc has two revenue streams: a per-member, per-month fee it charges its partners, plus a per-visit fee. “Because we have both of those revenue sources, we can pour that money back into our customers.” … Also, Teladoc is purely a software company, so it doesn’t have the overhead associated with building and delivering kiosks … A bigger issue, according to [CEO of American Well Roy] Schoenberg, is that HealthSpot required patients and providers to pre-arrange appointments; it was not truly telemedicine on demand. “You actually have to build a lot of administration around it,” he said. via MedCity News  

Company: Nebula Select VC Investors: Highland Capital Partners and Kleiner Perkins Caufield & Byers Total equity financing raised: $25M + $3.5M in debt At the same time, we are deeply disappointed that the market will likely take another several years to mature. As a venture backed start up, we did not have the resources to wait. via Nebula  

Company: Nanochip  Select VC Investors: New Enterprise Associates, JK&B Capital Total equity financing raised: $48.8M “No matter what, you’ll need $70 million to take [Nanochip's technology] into production,” he [ CEO Gordon Knight] said. That’s a large hurdle considering established chip companies have not been very active buyers lately and venture investors only put $327 million in chip deals in the first half of this year – not even half the amount for the same time last year, according to VentureSource, a research unit of Dow Jones & Co. via Wall Street Journal  

Company: Joost Select VC Investors: Sequoia Capital, Index Ventures Total equity financing raised: $45M  Joost attracted investment — $45 million to be exact — because it appeared to be the antithesis of YouTube, suspected by the networks of enabling and then turning a blind eye to piracy. Indeed, news coverage at the time billed Joost as a “YouTube killer.” But while YouTube proved popular, was acquired by Google and came to dominate web video, adoption of Joost was stunted by its peer-to-peer technology, which allowed high-quality video but required a clunky software download. via Crain’s New York  

Company: Pixelon Select VC Investors: Advanced Equities “In April, Pixelon employees and investors were surprised to learn that the real name of Michael Fenne, the company’s founder and former chairman, was Paul Stanley. And they were more shocked to find out that Paul Stanley had been on Virginia’s most-wanted list for several years, after skipping bail following a stock-swindling conviction.” via Wired   

Company: Digg Select VC Investors: Highland Capital Partners, Greylock Partners Total equity financing raised: $44M “In the soon-to-be end, Digg will become known as the first network to die from social fatigue,” wrote Mike Phillips in June 2010. “Facebook and Twitter are booming, LinkedIn is holding steady and even Myspace seems to have settled into a niche. But Digg is in a deadly, unrecoverable tail spin. “The fact is, people – real people – are beginning to tire. Submit this, upload that, vote on this, ‘like’ that, be my ‘friend’, check in here, suggest this, retweet that … there’s already so much to do. The only thing left to ‘Digg’ is a grave.” via The Guardian  

Company: ThumbPlay Select VC Investors: i-Hatch Ventures, Softbank Capital Total equity financing raised: $41M Our source tells us that the sale is a do-or-die scenario because the company is running out of cash: “The price is very low. No one is making any money.” . . . the music industry has been hit hard with cannibalisation from digital sales and piracy. And the promise of new revenues, on the back of the explosion in mobile and internet usage, have yet to materialise for most music companies, with Apple’s iTunes dominating the market with more than a 60 percent share. via Gigaom   

Company: Color Labs Select VC Investors: Bain Capital Ventures, Sequoia Capital Total equity financing raised: $41M Nevertheless, the app simply failed to gain much traction with users, with reviewers often commenting that Color appeared to be an app trying to solve a problem that didn’t seem to exist. via PCMag   Company: Goodmail Systems Select VC Investors: Doll Capital Management, Emergence Capital Partners Total equity financing raised: $40M Daniel Dreymann, cofounder and CEO of Goodmail, said the biggest reason for the shutdown was an aborted acquisition attempt by a firm he would only call a “Fortune 500 company.” via Direct Marketing News  

Company: Vente-Privee Select VC Investors: Summit Partners Former employees said Granjon and his co-founders mismanaged the U.S. operation. For example, the co-founders were insulted when their American team adapted the design of the site to be more user-friendly. Confused by the presence of Facebook share buttons, a fairly standard feature for e-commerce sites, Granjon once asked a manager, “Why are you running ads for Facebook on my website?” via Fortune  

Company: Xeround Select VC Investors: Benchmark Capital, Ignition Partners Total equity financing raised: $39.8M + $4M of debt Xeround is shutting down their MySQL Database as a Service (DBaaS) because their free instances, while popular, simply did not convert into sufficient paid instances to support the company. via Head in the Clouds  

Company: Webvisible Select VC Investors: Sutter Hill Ventures, Redpoint Ventures Total equity financing raised: $37M “Even with all our efforts to recover throughout this past year, we found ourselves in a position in which the debt load of the company was simply too much to overcome. Our bank foreclosed on its loan which means they are taking over the company’s assets and collecting all remaining payments. As a result they have forced the company to shut down.” via TechCrunch  

Company: ArsDigita Select VC Investors: Trident Capital, Greylock Partners Total equity financing raised: $35M The technical and managerial incompetence of the VCs and those they hired drove the company into the ground. All but 10 of the 240 employees were fired, laid off, or quit. All of the $40+ million in venture capital was squandered. The monthly operating profit turned to loss as more talentless executives were hired who threw out the company’s old, useful products and put their blind faith in engineers who spent millions building complicated software that solved no business problems. via Content Wire  

Company: Optiva Select VC Investors: AltoTech Ventures, NGEN Partners Total equity financing raised: $30M  Like most other nanotech companies, Optiva took a while to get its product out. It shifted focus, its technology changed, as did the market. Its “polarizer” technology was supposed to be sold for use in wrist watch, calculator and PDA displays, but as VentureWire reports, suddenly the people who already made the displays found a glut of scrap material, which was also suitable, thus resulting in a rapid drop in market prices. via SiliconBeat  

Company: Flooz.com Select VC Investors: Oak Investment Partners, Maveron Total equity financing raised: $51.5M  While the company says it suffered in an unfavorable economic climate, credit card fraud also played a part in its demise. “We have been the victims of organized credit card fraud,” says Levitan, who says Flooz was hit for $300,000 for transactions charged to card numbers stolen by an international crime ring. The company’s credit card processor was holding $1 million in Flooz’s funds to cover chargebacks, says Levitan. via Internet Retailer   

Company: AdBrite Select VC Investors: Sequoia Capital, Artis Capital Management Total equity financing raised: $35M Despite claiming to be the largest independent ad exchange and at one time being seen as a serious competitor to Google Adwords, it seems that they were unable to make enough money or sell the company to potential buyers. via Performance Marketing Insider   

Company: Microdisplay Corporation Select VC Investors: Mobius Venture Capital, BlueRun Ventures Total equity financing raised: $33M “We knew that we were entering a mature, competitive market, and that we had a narrow window in which to succeed. We developed a TV with a unique display technology, excellent picture quality and a low cost, and we saw an opportunity. Unfortunately, the recent uncertainty in the TV industry, highlighted by particularly slow sales in May, made it virtually impossible to introduce a new type of projection TV at this time.” via Twice  

Company: Cuil Select VC Investors: Tugboat Ventures, Greylock Partners Total equity financing raised: $33M …if it has failed, it’s probably because the name is tough to spell and unintuitive to pronounce (every story about Cuil has to remind you that it’s pronounced “cool”), and because it couldn’t live up to its hyperbolic claims of outperforming Google. via Switched    

Company: TrueSAN Networks Select VC Investors: JT Venture Partners, Spring Creek Partners Total equity financing raised: $30M …a turnaround plan that founder and CEO Tom Isakovich presented to its board of directors last week failed to convince the company’s backers to stump up more cash. via Network Computing  

Company: Asempra Technologies Select VC Investors: US Venture Partners, Polaris Partners Total equity financing raised: $29M Why did Asempra cease trading – which, by the way, happened so fast its PR agency knew nothing of the asset sale to Bakbone? The probability is that it ran into cash flow problems in the recession and the investing VCaps were reluctant to go through another funding round. Three million dollars does not look like anywhere a worthwhile exit strategy for the three VC firms, not with $29m in the Asempra can, but it is something to pull out of the failed venture. via The Register    

Company: Entellium Select VC Investors: Ignition Partners, Sigma Partners Total equity financing raised: $28M Just because you run a private company that does not have to file quarterly financial statements with the SEC does not make it okay to cook your books. The CEO and CFO of Seattle-based CRM firm Entellium found that out the hard way. They were arrested by the FBI earlier this week for inflating their revenues and then lying to their board about it. The company appears to be toast. via TechCrunch  

Company: Bling Nation Select VC Investors: Meck and Camp Ventures, Lightspeed Venture Partners Total equity financing raised: $28M Executives at several banks said that they liked Bling Nation’s business strategy but its service ultimately suffered from a lack of merchant adoption and consumers’ unwillingness to switch from bank-issued debit cards. via American Banker   

Company: NebuAd Select VC Investors: Menlo Ventures and Sierra Ventures Total equity financing raised: $31.6M  The company, which has occassionally been described as the ‘US version of Phorm’, has been dying a slow death since US authorities forced the company to abandon its targeting practices with local internet service providers in September. NebuAd was sued in November 2008 by US web users, who alleged the company violated privacy rights by purchasing information about their web activity from ISPs, using the data to serve targeted ads. The company was investigated for its targeting practices, which included the purchase of detailed web history from broadband providers, including search queries and browsing habits. NebuAd argued that it did not know the web users names, phone numbers, home addresses or IP addresses and gave users the option to opt out of the service. After being grilled in US Congress, NebuAd chief executive and founder Bob Dykes quit the company, shedding a number of staff and its PR firm in his wake, including staff from its offices in the UK. via Marketing Magazine   

Company: LV Sensors Select VC Investors: US Venture Partners, Mayfield Fund Total equity financing raised: $27M  …the company closed its doors in the spring after failing to raise a new round of capital. . . Though many sectors have been under pressure as venture funding is harder to get than it was a year ago, chip companies have been especially hard hit due to their high capital needs and the many years it can take to move beyond the development stage. via Wall Street Journal Total Funding: Below $25M   

Company: GigaOm Select VC Investors: True Ventures, Alloy Venture Total equity financing raised: $22M  For its eight years of life Gigaom never turned in an annual profit. Many other VC-funded publishers are in a similar position. via The Guardian  

Company: Procket Networks Select VC Investors: New Enterprise Associates, Institutional Venture Partners Total equity financing raised: $20M  Since introducing its products more than a year ago, Procket has only a handful of customers, mostly including universities and small carriers. Its most prominent customer is NTT in Japan, which also uses Cisco and Juniper gear. It has yet to announce a major deal in the North American market. via CNET  

Company: Prismatic Select VC Investors: Accel Partners, Breyer Capital, Battery Ventures Total equity financing raised: $16.2M “Four years ago, we set out to build a personalized news reader that would change the way people consume content,” the Prismatic team wrote in a blog post. “For many of you, we did just that. But we also learned content distribution is a tough business and we’ve failed to grow at a rate that justifies continuing to support our Prismatic News products.” via VentureBeat   Company: Top 10 Select VC Investors: Balderton Capital, Accel Partners Total equity financing raised: $12.4M  The hotel industry is particularly challenging given the size, reach and budgets of the big players. At Top10 we did an amazing job innovating in this tough space, but ultimately the competitive landscape made it too expensive for us to scale, and for that reason we decided to close the company. via Business Insider  

Company: Daptiv Select VC Investors: Bay Partners, Kennet Partners Total equity financing raised: $24.7M “Everyone thought there was an opportunity to take this company and jump it up, and operate it at a higher level and grow in a different direction,” Franklin said at the time. “We made a good attempt at that and ultimately just weren’t able to raise money around that opportunity.” via Puget Sound Business Journal  

Company: RatePoint Select VC Investors: .406 Ventures, Prism VentureWorks Total equity financing raised: $24.5M RatePoint was venture capital funded. According to a press release back in 2009, the company reported at the time that it had “closed a $10 million Series B round of funding led by Castile Ventures of Waltham, Mass., with participation by existing investors .406 Ventures and Prism VentureWorks.” Which goes to show … venture funding is no guarantee of business success. via Small Business Trends  

Company: BuyWithMe  Select VC Investors: Bain Capital Ventures, Matrix Partners Total equity financing raised: $21.5M “The capital markets willingness to invest in *daily deal* businesses has dried up. Our game plan was to raise a significant amount of capital to push this comprehensive service offering deeply into markets and, as a result, change the basis of competition in the daily deal space. We were a little late.” via VentureBeat  

Company: BusRadio Select VC Investors: Charles River Ventures, Sigma Partners Total equity financing raised: $20.1M The FCC study found that BusRadio, the only commercial broadcaster on school buses, had disguised commercial content as editorial and exposed kids to more commercial content than the four-minutes-per-hour limit it promised parents. . . “What happened was they were unable to get into schools because of parental protests at the local level. Without a really large audience, they were unable to attract significant advertisers.” via Media Life Magazine  

Company: Monitor110 Select VC Investors: Acadia Woods Partners, Draper Fisher Jurvetson Total equity financing raised: $16M + $3.5M in debt “We began to raise our next round of funding in May, during one of the most challenging quarters in recent history for VC investments, and despite the progress we have made operationally, we have been unable to secure funding. As a result, the company has decided to cease operations.” via Business Insider  

Company: Atrato Select VC Investors: Aweida Venture Partners Total equity financing raised: $18M A big problem at Atrato has been sales. The boxes simply didn’t sell in large enough numbers. . . The new executives couldn’t turn the company around on their own, and by June of this year, it was looking for new funding and what was called a rebirth. Up to a quarter of its staff were laid off, and the company’s strategy changed so that Atrato focussed more on software than hardware. It also intended to promote OEM sales more. We understand just 18 employees were left in July 2010. via The Register  

Company: Moblyng Select VC Investors: Deep Fork Capital, Mohr Davidow Ventures Total equity financing raised: $17.4M “We did not monetize enough to stay in business,” said [Stewart] Putney. . . Putney said the games have gotten traction, but too late. The company launched its HTML5 games on the Facebook HTML5 mobile platform in mid-October, but the audience started growing in December when time and cash had run out. via VentureBeat   

Company: Alice.com Select VC Investors: Kegonsa Capital Partners Total equity financing raised: $13.9M + $3.4M in debt Nacho Somalo, Alice.com’s president for the European Market, said that Alice.es closed due to lack of funding opportunities. Alice.com tried to reorganize its structure, and used the few funding yet available in their Spanish subsidiary to help their growth in the US market. But it seems they have not been able to do so. via BrainSINS  

Company: LucidEra  Select VC Investors: Benchmark Capital, Matrix Partners Total equity financing raised: $15.6M According to Kaplan, a LucidEra representative he spoke with characterized the roots of the company, founded in 2005, as being firmly in the “SaaS 1.0″ era. This group of technology innovators had to “build a lot of their own architecture, delivery capabilities, and software-development resources,” Kaplan explains. Companies starting today can leverage platform-as-a-service capabilities and computing power from vendors such as Salesforce.com and Amazon.com, greatly reducing costly upfront capital investments and ongoing operational expenses. “[LucidEra] got caught with the heavy overhead,” Kaplan says, “and they weren’t going to continue to invest.” via Destination CRM  

Company: Intrinsic Graphics Select VC Investors: August Capital Total equity financing raised: $12.5M Intrinsic’s board decided on Monday to shut down the company and sell its assets. Intrinsic Graphics, which was founded in 1999 and backed by Sony and others, was running out of cash, according to Thomas. via CNET  

Company: Savantis Systems  Select VC Investors: Highland Capital Partners, Star Ventures Total equity financing raised: $12M “We weren’t getting a lot of traction in the marketplace,” Parkinson said. “So we did a fairly detailed audit of the technology from a functional and a technical perspective.” What he found, Parkinson said, is that the product needed more development work to meet the standards of a large corporate data center. In addition, Parkinson said, incumbents had released new products that somewhat addressed the problem, and market research cast doubt on whether large corporations would buy a new product for such a crucial part of their network from a startup. “Given the amount of incremental investment with the uncertain demand, we decided that the best thing to do would be to return the cash to the investors,” he said. via Boston Business Journal  

Company: Novafora Select VC Investors: Vertex Venture Capital, Gemini Israel Ventures Total equity financing raised: $12M …the company laid off all 40 employees yesterday at noon, after being unable to attract additional venture capital funding. Existing backers Vertex and Gemini Israel Funds apparently opted against another large investment, and no new firm stepped up.  “VC appetite has really dried up for later-stage semiconductor companies,” says a former Novafora executive, reached at his home this morning. “They all want to do social networking and things like that.” via peHUB  

Company: Renkoo Select VC Investors: Maveron, Matrix Partners Total equity financing raised: $12M Our burn was low and we raised a total of $9 million. We were not in any danger of running out of money. But a combination of no mission, the hostile economic environment of 2008′s downturn, and the uncertainty of the Facebook platform itself, gave us no real reason to keep going as a company. via Quora  

Company: JellyCloud Select VC Investors: US Venture Partners, Crosslink Capital Total equity financing raised: $11.5M The company realized that there were too many ad networks out there, and with the souring outlook for advertising, it made better sense to close shop and sell the company’s extensive set of patents, the source said. via VentureBeat  

Company: ParaScale Select VC Investors: Menlo Ventures, Charles River Ventures Total equity financing raised: $11.4M ParaScale, which gained $11.37 million first-round funding in 2008, failed to get second-round funding in June this year. At the time, founder and chief technology officer Cameron Bahar said: “We have a rock star team, and a tough situation to deal with. Wish us luck.” via The Register  

Company: Songbird Select VC Investors: Sequoia Capital, Atlas Venture Total equity financing raised: $11M Songbird, an early digital music service that aimed to compete against the iTunes, Pandoras and Spotifies of this world with an open source platform, is shutting down on June 28, after running out of money and failing to find a buyer. . . A post in Digital Trends on the closure notes that a sale of the company had fallen through at the last minute. via TechCrunch   

Company: DigiScents Select VC Investors: Cyberworks Ventures Total equity financing raised: $10M  Among the problems that Digi-Scents faced was trying to market a service that required consumers to acquire another piece of hardware, say observers. “It’s case of ‘just because you can something on the web doesn’t mean you should,’” says David Taylor, senior vice president of consultants Operon Partners. “The complexity of a technology-driven product makes it a real expensive value proposition.” via Internet Retailer  

Company: Arcwave Select VC Investors: Mayfield Fund, SBV Venture Partners Total equity financing raised: $10.3M While calling Arcwave “the undisputed leader in providing wireless plant extension solutions to the cable operators,” [CEO Bill] Sickler conceded that “this market did not develop to the extent necessary to sustain a small company like Arcwave. He added that cable operators “have been slow to pursue the commercial services segment where Arcwave products are applicable. With neither strong revenue growth nor belief from investors and strategic partners that the market will become attractive any time soon, Arcwave has had no choice but to terminate operations.” via Light Reading  

Company: EcoMom Select VC Investors: 500 Startups, Rhodium Ventures Total equity financing raised: $10.2M Just two and a half weeks after founder and CEO Jody Sherman stunned the tech community by taking his own life, Ecomom will be shutting down and liquidating all its assets. . . “Everyone was surprised to discover the precipitous increase in losses over the past 2-3 months. The company’s liabilities appear to be greater than its assets and this financial burden makes it difficult to continue down the current path. In light of recent events, given the $1 million securitized bank note and the company’s dwindling cash position, the board has been in discussions with the bank to determine the next steps. Without a current prospect of further cash infusion into the company, the bank will likely ask to sweep most of the company’s cash very soon and take steps to liquidate the remaining inventory and sell assets to pay off the bank debt. At this point, it appears that the company has no other choice than to wind-down the business.” via Pando

For years, people have told us to that group brainstorms don’t work. Here are well-written articles on the topic from 2010, 2011, 2012, 2013, 2014, and 2015. And this isn’t some recent trend—half of those articles cite a 1958 Yale study which found that individuals working on their own are emphatically better at problem-solving than teams of brainstormers. 
And yet, we keep right on brainstorming. We have a problem to solve, we have a group of people, and somebody says, “Let’s brainstorm a few ideas.” We can’t resist. 
Right now, you’re reading 2016’s anti-brainstorming article. But this time, you’re going to change your ways. No, really! This time, I’ve got something much better to offer you: a sprint. 
But first, I need to admit something: I am a recovering group brainstormer myself.

A brief history of the design sprint
Back in 2008, when I worked at Google, I ran a lot of group brainstorms. For a long time, I’d been interested in helping people be more productive and effective at work. Structured group brainstorming seemed perfect. After all, people brainstormed already—why not teach them how to do it properly? When engineers followed the classic rules (defer judgment, encourage wild ideas, and so on), they were able to generate stacks of solutions. Not only that, they enjoyed the process.

Then one day, in the midst of a 100 person training workshop, an engineer stood up and loudly interrupted me: “How do you know group brainstorming actually works?” 

I didn’t have an answer. And at that moment, I realized how foolish I’d been. 

Later, spurred by doubt, I reviewed the outcomes of the workshops I’d run. What happened in the weeks and months after each brainstorm? The results were depressing. Not a single new idea generated in the brainstorms had been built or launched. The best ideas—the solutions that teams actually executed—came from individual work. 

I was still convinced that teamwork was important. Teams provide a variety of skills and expertise, as well as conflicting opinions—all healthy ingredients for success. And I still believed that teams could do better work—and do it faster—if they had a method to follow. I wanted to come up with something that did work. I decided that if I wanted a great problem-solving process, I’d have to make one from scratch, and I’d have to build it on individual work.

So I started over. Teams at Google were open to experimentation (and willing to forgive my mistakes!) By 2010, I’d come up with an alternative: a five day process that I called a design “sprint”. I ran problem-solving sprints with teams like Gmail, Google X, and Google Search. This time, the process worked. The output of the sprints made it into real products.

In 2012, I went to work at Google Ventures (now called GV), and there—with the help of my partners—I’ve run over one hundred sprints with startups in fields as diverse as healthcare, farming, and robotics. 

The big idea of the sprint is to take a small team, clear the schedule for a week, and rapidly progress from problem to tested solution. On Monday, you make a map of the problem. On Tuesday, each individual sketches solutions. On Wednesday, you decide which sketches are strongest. On Thursday, you build realistic a prototype. And on Friday, you test that prototype with five target customers. It’s like fast-forwarding into the future to see your finished product in the market. 

Four big fixes

In my experience, there are four major problems with group brainstorms. When I designed the sprint process, I built in steps to address each one.

1. Brainstorm problem: Shallow ideas from the group

In a group brainstorm, ideas are shouted out loud, rapid fire. The goal is quantity, with the assumption that there will be diamonds among the coal. But details matter, and good ideas require time for deep thought.

Sprint solution: Detailed ideas from individuals

In a sprint, each individual considers several approaches, then spends an hour or more sketching their solution. In the end, there are fewer solutions than in a group brainstorm, but each one is opinionated, unique, and highly detailed. 

2. Brainstorm problem: Personality outshines content

If somebody has a reputation for being smart or creative, their ideas are frequently overvalued. And a group brainstorm can be a nightmare for an introvert. Charismatic extroverts who gives great sales pitches often dominate.

Sprint solution: Ideas stand on their own

The sketches in a sprint don’t have the creator’s name on them. And when we critique them on Wednesday, the creator remains silent and anonymous, saving any sales pitch until after everyone else has given their opinions.

3. Brainstorm problem: Groupthink

The collaborative, encouraging environment of a brainstorm feels good, but often leads teams to talk themselves into watered-down solutions.

Sprint solution: Opinionated decisions

In a sprint, decisions are made by one person: the Decider. The Decider is a CEO, executive, product manager, or other leader. For example, in a sprint with Medium, the Decider was founder Ev Williams; in a sprint with a cancer data company called Flatiron Health, the Decider was Chief Medical Officer Amy Abernethy. With the Decider in the room making all the calls, the winning solutions stay opinionated.

4. Brainstorm problem: No results

Worst of all, brainstorms result in a pile of sticky notes—and nothing else. It’s a loose methodology to begin with, and there is no map to get you from abstract idea to concrete implementation.

Sprint solution: A prototype and data, every time

The sprint process requires your team to build a prototype and test it. By the time you’re done, you have clarity about what to do next.

To give you an idea of how this works, I’ll tell you about a sprint we did with the team at Slack. (If you’re not familiar with Slack, it’s messaging software for teams.) Slack wanted to improve first-time customers’ experience with the product. In the sprint, one person sketched a very clever and ambitious solution—the kind of bold creativity we normally associate with brainstorms. Someone else sketched a traditional approach, but spent a lot of time thinking through the text and steps. It wasn’t flashy, but it was logical and clear. Out of ten competing solutions, those two rose to the top. 

So what happened? Slack prototyped both solutions and put them to the test. In the end, it turned out that the boring, traditional approach was the clear winner—it actually explained the product to customers. In a group brainstorm, that idea might never have been noticed, and even if it had, it likely would have remained as a sticky note. The sprint helped Slack consider multiple solutions and make a decision informed by data. 

It’s hard to stop brainstorming. I know this as well as anyone—despite all my talk, I slip into brainstorm mode at least once a week, blurting out ideas and giving a sales pitch before anyone has a chance to speak. Heck, “brainstorm” is even fun to say—it sounds smart and fast (in fact, the word was coined by an advertising executive). 

But when an important challenge comes along, you owe it to yourself and your team to make better use of your time. Give a sprint a chance. You can find out more about the process at gv.com/sprint, or in my new book, Sprint. Check it out—and may 2016 be the last year you have to read this article.

Personalization is now everywhere. Over the past few years, it has transformed from a marketing objective to a larger value system that guides how we produce and consume content. The advent of big data and artificial intelligence gives business and advertisers greater access to information about their customers’ behavior online, and in turn, helps them curate options based on their individual needs.

Amazon was one of the first companies to use customer data to make purchase suggestions based on a user’s browsing history. Now, most websites and social media platforms, including Facebook, Twitter, and Pinterest, use data to tailor content for specific users. Personalization has caught on because it’s highly effective, and useful not just for companies but for consumers as well.

Customers now want, and even expect, content that is tailored to them. A study conducted by Janrain, a company that tracks consumer identity, found that 74 percent of people report feeling frustrated with websites when content – such as offers, ads or promotions – has nothing to do with what they want. A 2015 study conducted by Gigya, another company specializing in customer identity management, found that “65 [percent] of email users were likely to unsubscribe from a brand’s emails if they weren’t relevant to their interests.” It’s common sense – why waste time with something that isn’t useful?

Personalized recommendations also tend to bump up revenues. The Harvard Business Review finds that personalization can raise sales by more than 10 percent, and McKinsey notes that 35 percent of purchases on Amazon and 75 percent views on Netflix come from personalized recommendations. Recommendations drive users deeper inside an e-commerce site and can significantly increase a seller’s conversion rate (the number of customer transactions, or purchases per visitor, to a particular store or website). A study of purchasing and browsing behavior conducted by MyBuys, a data provider that helps companies understand their consumers, showed that personalized recommendations on product pages increased conversion rates by an astonishing 411 percent. When those recommendations were on the homepage, conversion rates increased by 248 percent, but the most effective place for recommendations was the shopping cart, which led to a 915 percent increase in conversion rates. Recommendations also increase a company’s average order value.

Personalized advertising is also becoming more popular. Confident that the company has the ability to track and target users better than any other platform, Facebook will now be collecting information about all Internet users and selling personalized advertising on a broader scale in what appears to be an attempt to take over online advertising. The rising demand for social media ads, which can provide a level of specificity other advertising cannot, is clearly increasing, suggesting that brands are focusing more on personalization in their advertising. Consumers have come to expect personalized messages, and now it’s up to brands to deliver if they want to maximize the effectiveness of their advertising.

McKinsey predicts that companies will continue to dive further into the personal lives of consumers: “Social media could well make up 22 percent of marketing budgets in five years as retailers increase their spending to facilitate and influence peer connections about brands through paid ads and branded pages on social media platforms,” the consultants write. One goal of this social spending is to promote peer recommendations through social networks and user reviews, which have proven to be 10 times more effective than recommendations from salespeople. One thing is become quite clear: The personalization of content and recommendations is not going away. It’s too good for business.

Mainstream VR for sports still 2-5 years off, says Warriors’ digital chief

Kenny Lauer, vice president of marketing and digital for the Golden State Warriors, answers questions at a FutureCast event put on by the AT&T Foundry at AT&T Park in San Francisco Credit: Fredric Paul

Kenny Lauer, VP of marketing and digital for the Golden State Warriors, talks tech and sports

Network World | Jul 18, 2016 8:32 AM PT 

Professional sports teams around the world—including the NBA’s Golden State Warriors—are working furiously to leverage all kinds of technology, from mobile connectivity and social media to player analytics and augmented reality. But according to Warrior’s vice president of marketing and digital, Kenny Lauer, it will be at least two to five years before virtual reality (VR), perhaps the most exciting new development, will achieve widespread adoption.

According to the warm and approachable Lauer, who spoke at a FutureCast event put on by the AT&T Foundry at AT&T Park in San Francisco last week, VR requires a complex ecosystem, including hardware, content and many other factors.

What VR needs

For VR to succeed, you first need an installed base of headgear, Lauer said, and then you need to put arrays of cameras in all of the arenas to capture the action. VR also needs to be less isolating: When you’re wearing a VR headset, for example, you can’t really high-five your friend after a great play, and you can’t enjoy a snack, either.

On the technical side, VR audio still needs work, Lauer noted.

“We need to improve on that quite a bit. … We need to mike up the court and deliver it to all parts of the arena. It fundamentally changes the experience,” he said.

Finally, “media rights is a big challenge for [all kinds of] streaming content” including VR, he added. It isn’t easy to get the leagues, the teams, the players, the TV networks, the equipment vendors, and everyone else involved all on the same page. And only “then you can figure out revenue!”

VR can’t be stopped

Lauer is confident, however, that VR is going to happen.

“Ninety-nine percent of fans can’t be at the game,” Lauer noted, and 99 percent of the ones at the game are not courtside. “VR collapses the distance between fans and players. … It’s a no-brainer for sports franchises.”

Lauer is not worried that high-quality VR experiences will cannibalize the desire of people to come to live events.

“I do make a distinction between the live vs. online experience,” Lauer said. “There’s something uniquely powerful about being at a live event.”

For one thing, he added, only live attendance gives fans the feeling that they can actively affect the outcome of the game.

Of course, VR is far from the only tech sports teams must focus on.

“We are a constant student of what is happening,” Lauer said.

Sports teams are in a lot of businesses, he notes, from the television business to the food service business, but it all adds up to the “experience creation business.”

“We have a Harry Potter bag of technologies we can use to create experiences,” Lauer said. “We are exploring other ways to bring people closer, [and] that’s valuable for other service-oriented business.”

The Warriors want to provide a variety of hooks for fans beyond when they’re watching a game.

Lauer said the Warriors are “evolving into an entertainment company that also plays basketball,” which may be why he wanted the word “digital” in his title.

“A lot of people want to talk to the head of digital,” he laughed. “No one wants to talk to the head of analog.”

I'm personally overwhelmed with the sheer volume of information to which a typical professional is exposed.

• IoT Will Overtake Mobile Phones By 2018, Ericsson Mobility Report, June 6, 2016
• You will consume 7 GB of mobile data a month by 2021, TOI Tech | Jun 7, 2016
• Cisco Visual Networking Index Predicts Near-Tripling of IP Traffic by 2020, July 6, 2016 

The new VNI report predicts that by the end of the decade, there would be 3.4 devices and connections for every human on the planet, up from 2.2 per capita in 2015, through a combination of more access to personal devices and the deployment of machine-to-machine (M2M) or internet of things (IoT) devices. 

The challenge becomes how to stretch the functionality and usability of our platforms and devices so that we can strategically and tactically leverage the data to serve the needs of our customers in an efficient and practical manner. 

We will write a series of posts for doing just that - stretching the envelope of the internet, specific to different industries. Below is targeted to the retail industry.

1. Solutions which address the astounding number of mobile devices and IoT sensors will be more practical and immediate to a larger base of users. So adding mobile implementations for existing web solutions only make sense, especially if these implementations also integrate IoT sensors, and particularly as Google has implemented mobile-friendly web site standards.
2. Web 2.0 solutions have done a great job bringing products online and allowing for the secure ordering of products. We can take online ordering to the next level - think from-the-device-to-the-door - if we add order personalizations, warehousing and delivery, fulfillment through Drop Ship, support and set-up options to typical online orders.
3. Drilling down onto the prior point, in this Age of the Customer, allowing online shoppers to customize their purchases - beyond size and color and into try-before-you-buy immersion experiences - will likely both increase orders, as well as customer satisfaction levels.

4. If you link these immersive experiences - whether it's a customized graphic or video or a virtual reality solution - to social networks, whether it's a group of friends, a community of experts, or a group of fellow shoppers, customers will more likely become more engaged and better enjoy the experience.

5. In turn, if you integrate the localization aspect, connecting shoppers to physical retail presences, more customers will more likely participate as there's an option close the deal on-site, after doing the online research, plus purchase other items once they are in the store.

6. Forward-thinking retailers are connecting with existing communities of experts and fanatics who share a common interest, hobby or passion. Providing customized offers and solutions to this market, and allowing the community to vet purchase options would not only increase sales, but also increase satisfaction levels.

7. If we take ordering solutions to brick and mortar storefronts, implementing personalized shopping lists, with tailored made coupons based on real-time physical location would also increase targeted engagement.

8. The other side of the coin is how IoT and mobile solutions can decrease operating costs - by proactively managing inventory and security for example.

9. With these comprehensive mobile, IoT and on-site app solutions, retailers would have a better understanding of customers. Real-time measurements and analytics from these apps can report on success metrics, real-time, allowing retailers to tweak strategies and tactics to increase engagement, participation, margins, and volumes.

10. Voice or text originated solutions can also leverage machine learning and artificial intelligence to support product comparison and ordering needs, automating the online research for product selection, and even placing orders based on pre-specified criteria.

These are some thoughts for stretching the envelope of the internet in the retail industry. We welcome your feedback, additions and comments. Share your retail strategies and goals at info@fountainblue.biz. 

In the age of healthcare consumerism, it should not come as a surprise that retailers like Walmart and CVS are poised to change how we seek and receive a wide spectrum of care services.

The retail care-in-a-box or solution is not necessarily a new service; however, with integration of digital health platforms and a rapidly expanding footprint, these models are expected to play an increasingly prominent role in our day-to-day lives.

Intriguingly, Frost & Sullivan Transformational Health research found the popularity of retail clinics is spreading similarly in regions across the globe from Asia to Europe to South Africa.

What is it about this model that makes it so intriguing, given the transitions occurring in healthcare? There are obvious advantages: convenience, cost and access. These clinics are open beyond typical clinic hours, offer services at affordable rates, have unparalleled access to customers who walk through their doors every day and can, through operational scale, provide levels of efficiency not feasible in other models of care.

Recently a Frost & Sullivan thought leader asked an interesting question: given two potential data sets, one containing all of the biometric data of the past 12 months (heart rate, activity, body temperature, weight, etc.) for an individual and another containing credit card data (where they shopped, ate, went and other behavioral insights), which data set would serve more useful in predicting future health trends for that person? The implications being, based on how much junk food you bought, if you purchased tobacco products, if you ate red meat regularly, if you demonstrated interest in healthy activities, you could better engage the individual on how to think about their long-term health. This highlights the meta-data retailers have access to; how might they be able to leverage that toward targeted initiatives in a specific region or city?

It is clearly evident retailers are on the cusp of changing healthcare. From a primary practice point of view, Frost & Sullivan believe the disruptiveness of this trend is on the magnitude of Starbucks and the traditional local coffee shop.

To learn more about Frost & Sullivan’s analysis, “Future of Retail Healthcare Delivery,” visit: http://frost.ly/fq.

Here Frost & Sullivan just scratch the surface by identifying five key ways retailers will change healthcare:

1. One-Stop Shop

After being diagnosed with a given condition, customers can easily go into the store, grab a basket and add prescription medicines and other medical supplies and their regular groceries. Beyond the simple convenience of everything under one roof, retailers are proactively working to create programs selling bundles or packages targeting specific conditions. Walmart, for example, is contemplating the introduction of disease management care packages, which, for an annual or monthly fee, will provide you with consultations, coaching sessions, medicines and medical supplies, dietician advice and referrals.

As the distinction between clinical and self-managed health continue to blur, retailers see a particular strategic opportunity to engage consumers.

Retailers are now working to provide customers with a holistic care approach. Instead of a physician simply writing prescriptions, these clinics want to ensure a quick recovery and overall wellness by providing the right medicines and helping customers make healthy food choices suitable to their health profile during grocery shopping. While some provide nutritionists or healthy food guidelines, others are planning to provide coaching sessions on disease management as well as referrals to specialists whenever needed. While such services were discretely available previously, the retail environment brings them all to customers in one location at inexpensive prices.

2. Omnichannel Care

Any uneasiness or sickness means a visit to the family physician, and the range of practical and logistical problems associated are expected nuisances–distance from residence or office, timing, holidays or weekends, proximity to pharmacies or challenges in filling our prescriptions. In essence, a lot of effort for someone needing care.

While retail clinics are committed to a holistic care approach, they are not limiting themselves to on-site care. True to the nature of holistic care, retail clinics are partnering with telehealth vendors like Doctor on Demand and Teladoc to provide customers with care services outside a doctor’s office or clinic.

An eCommerce channel or online ordering is being implemented by CVS Health, the operator of the leading MinuteClinic chain of retail clinics. Realizing the difficulties patients face with the filling of specialty prescriptions, CVS Health piloted the Specialty Connect program. The patient drops off the prescription at a CVS store and can pick it up once ready or even have it delivered to their home or clinician’s office. Similar alternatives are being explored by retail clinics to provide automated support for patients.

3. Transparency or Empowered Consumer

In this age of consumerism, customers are accustomed to prices being displayed prominently. Healthcare has not reached this point yet. Behind the shroud of insurance eligibilities and co-pays, customers find themselves confused about the cost.

Retail clinics uphold the cost transparency initiative. In fact, it is a characteristic they borrow from the retail heritage and use for a competitive advantage. This empowers customers to make informed decisions about care sites, based on insurance coverage, costs and access. Consequently, the lower costs mean customers visit care facilities more frequently, ensuring they stay on top of their health status and make the right decisions to prevent major health issues.

4. Inverting the Clinician-Consumer Power Paradigm

Dr. Peter Antall, CMO of American Well’s, discussed a changing dynamic, a healthcare system structured around the convenience of the individual.

By virtue of being walk-in clinics with extended hours, customers rarely would have to wait beyond 15 to 20 minutes at retail clinics. CVS MinuteClinics offer the text message service in case the wait times exceed 30 minutes, allowing customers to shop. As for tracking health indicator measurements, retail clinics may consider leveraging self-service kiosks similar to HIGI, which measures weight, body-mass index, pulse and blood pressure with mobile app support.

5. Seamless or Coordinated Care

An individual’s medical records can be difficult to track, especially if they have seen multiple physicians. When customers visit a clinic with an ailment, their entire medical history is crucial for the doctor to make a better diagnosis.

While retail clinics are flourishing, they do not want to become another cog in the disconnected healthcare system of several provider gearwheels. The answer lies in unifying customers’ electronic health records (EHR) across providers, and retail clinics are synchronizing their medical systems with those of other providers to facilitate this. Walgreens moved to Epic’s EHR system, which is widely used by hospitals, allowing for seamless synchronization of health records.

This article was written with contribution from Siddharth Shah, Research Analyst, and Venkat Rajan, Global Director of the Visionary Health practice, with Frost & Sullivan’s Transformation Health Team. For more information on specific needs, challenges or opportunities in the healthcare sector, contact us directly atTransformationalHealth@frost.com.

Preparing for What’s Next
May 20, 2016130,463 views4,258 Likes395 CommentsShare on LinkedInShare on FacebookShare on Twitter
On May 20th, I delivered the keynote at New York University’s Stern Business School convocation. Here are excerpts from my message to the graduates. 

We’re in a volatile, global economy – the most uncertain I have ever seen. There is distrust of institutions. Protectionism is rising. Globalization is being attacked as never before. For those looking to succeed, the playbook from the past just won’t cut it. It’s time to pivot, be bold, and not fear criticism. 

I built my career at GE in a time when productivity, innovation and globalization were the way to win. When I joined the company in 1982, 80 percent of our revenue came from the U.S. Now, 70 percent of our revenue will be global. We have customers in more than 180 countries. We export over $20 billion worth of goods to the world each year. We have become woven into the global economy.

You would think that companies like GE that give people good jobs, make good products, and contribute to their communities would be valued. That governments would try to nurture growth and address big problems like income inequality and unemployment. That global integration would be seen as a force of good and would continue to grow.

You would be wrong. Today, big companies are distrusted; governments and global institutions are failing to address the world’s challenges; and globalization is being attacked as never before.

This is not just true for the U.S., but everywhere. These sentiments have traction in Europe and Latin America, on both the right and the left. The future of the EU is an open question. Protectionist barriers are rising in Asia and Africa. China is repositioning its economy to be more sustainable and inclusive.

The global economy is growing too slowly, and many people feel left behind. Some workers have been displaced by outsourcing, the middle class has been squeezed, and income inequality has risen to unacceptable levels. As technology and globalization race forward, people understandably fear their impact on jobs and incomes, and distrust the motives of companies and government.

There are many causes, and business bears some blame. Productivity has slowed to a crawl and capital investment is declining. Financing is more difficult to get, particularly for infrastructure projects. Investment is required for productivity, which in turn, supports higher wages.

Part of the fault also lies with technology. Innovation has driven growth but also leads to greater instability. The internet can connect people, but doesn’t necessarily give them jobs. Technology has raised the competitive requirements for companies and people. This exacerbates economic insecurity.

Finally, Government is also responsible. In the U.S., regulation has expanded while infrastructure has lagged. Our trade deals are languishing in Congress, and we remain the only developed country in the world without a functioning Export Bank. Our tax code is 30 years old; our immigration system is broken; and a huge structural deficit clouds the future. In the face of this headwind, we are having a raucous Presidential election where every candidate is a protectionist, and globalization is being blamed for unemployment and wage inequality.

Globalization is still essential to growth. But, the globalization I knew, based on trade and global integration, is changing, which is why it’s time for a bold pivot. And in the face of a protectionist global environment, flexible thinking is required, and companies must navigate the world on their own. We must level the playing field, without government engagement. This requires dramatic transformation. This is how we will lead:

We will localize. In the future, sustainable growth will require a local capability inside a global footprint. At GE, we will always be a strong American manufacturer, but we also have built factories in China, India, South Africa, Nigeria, Hungary and elsewhere around the world. We are managing extended supply chains. We are not pursuing low wages; we are using a manufacturing strategy to open markets. We will produce for the U.S. in the U.S, but our exports may decline. At the same time, we will localize production in big, end-use markets like Saudi Arabia.

Our competitive advantage is digital productivity. When we digitize power plants and hospitals by connecting them to the Industrial Internet, we improve global productivity. In Pakistan, we are using analytics to improve energy efficiency and expanding capacity. In India, we can use the internet to deliver healthcare to remote regions. In China, engine analytics are improving airline productivity. Every industrial company must also be a digital leader. This is the next wave of competitiveness.

We accelerate growth by solving local problems. We can make the world work better when we innovate to solve problems with local capability. Our GE technologists around the world have come up with new ways to produce cleaner energy that’s more accessible and to give remote communities access to healthcare. Solutions from the developing world improve outcomes in developed markets.

Financing is the new oxygen of global growth. Capital is the fuel for globalization of the future. We have positioned GE to capitalize on investment flows from new sources. China’s “One Belt One Road” initiative is building new relationships in Central Asia, the Middle East and Africa. Most countries are increasing their export financing. We’ve learned how to invest in these countries, access those pools of capital to support export growth. This is critical as we cannot count on the U.S. EXIM Bank. Companies need to globalize on their own and control our destiny.

Winning requires simpler organizations. Change requires new business models that are leaner, faster, more decentralized. Complex and centralized bureaucracies are obsolete. GE is pushing capability to local teams who are empowered to take risks without second guessing.

We tend to think of globalization as a philosophy, but it is much more about what you do on the ground. Success requires hundreds of little things, and decisions made with a local context. A good global leader has an appreciation for how people do their work in a local culture. They try to make a teams’ work meaningful to their country. This allows us to hire the best talent in every country where we compete.

By taking these bold actions – by pivoting – I am confident we can continue to grow. One thing I know about globalization is that there will always be plenty of critics. Early in my career, I worried way too much about what people thought. Over time I realized that progress counts for more than perfection and that anything worthwhile takes persistence and resilience.

My shield consists of competency, hard work and fairness. I run a meritocracy with the highest standards. Discrimination has no place in business – in the U.S. or anywhere else in the world. Similarly, our factory teams know that, while we cannot guarantee markets, we can guarantee effort; we always play to win.

So be flexible, be bold, don’t fear criticism. We are going through a transformational change in globalization, which will require fresh, new thinking. Our goal is to build an economic ecosystem that is the most competitive in the world. To create great jobs through private enterprise and ingenuity. To give back competency and innovation directed at solving the world’s toughest problems. There is nothing elitist, or establishment, about this task. Only by being in the arena can you create work for others.

The discord we see in the U.S. today is primarily due to slow growth and the wealth discrepancy it creates. This problem will not be solved by any bureaucracy. It requires leaders who see the world as it is and are willing to drive change.

The Sales Secrets of High-Growth Companies

The authors of Sales Growth reveal five actions that distinguish sales organizations at fast-growing companies. What distinguishes sales organizations at fast-growing companies from their lagging peers? In a wide-ranging survey of more than 1,000 companies, we unearthed five meaningful differences:

1. Commitment to the future

That the world is changing ever more quickly may be a cliché, but that makes it no less true: all sales leaders know that they need to anticipate changes that could turn into opportunities or threats. Yet the best leaders move beyond acknowledgement to commitment.

They make trend analysis a formal part of the sales process through systematic investments of time, money, and people. Building and sustaining the capability to take a forward-looking view of the market is not easy. In discussions with more than 200 sales leaders while researching our new book, Sales Growth, two common characteristics emerged: the mind-set of sales leadership and resource commitment.

Sales leaders must consistently monitor the macro-environment in search of sales opportunities, no easy task given the relentless pressure to hit near-term targets. Forward planning must be part of someone’s job description—not just part of top management’s lengthy to-do list—with sufficient resources to take advantage of the best opportunities. Companies have to be willing to take risks now to create sales capacity long before the revenue will materialize. More than half of the fast-growing companies1we analyzed look at least one year out, and 10 percent look more than three years out.

After planning, sales leaders aren’t afraid to put their money where they think the growth will be: 45 percent of fast-growing companies invest more than 6 percent of their sales budget on activities supporting goals that are at least a year out—a significant commitment in an environment where sales leaders fight for each dollar of investment.

Exhibit 1

2. Focus on key aspects of digital

Successful brands don’t just “do digital”; they use their full arsenal of capabilities to massively increase the effectiveness of their sales force and to transform the customer buying experience to be “digital first.” It pays off: digital channels provided at least a fifth of 2015 revenues for 41 percent of the fast-growing companies we surveyed—both business-to- business and business-to-consumer—compared with just 31 percent at slow-growing companies.

This trend is only becoming more important, as almost two-thirds of all US retail sales by 2017 will involve some form of online research, consideration, or purchase.2

When it comes to customer experience, leading organizations are building out digital routes to market or augmenting traditional direct or indirect sales with digital. For traditional software companies, the focus on SaaS-based products is driving a change toward a digital sales experience where they discover, demo, and trial, all within a few clicks online. Many industrial companies are seeing their products also sold in external marketplaces, which is prompting them to build out their own e-commerce platforms to directly shape the customer experience.

Exhibit 2

Sales leaders are especially strong at harnessing digital tools and capacities to support the sales organization. Fast-growing companies are more effective than slower-growing ones at using digital tools and capabilities to support the sales organization (43 percent versus 30 percent). They tend to focus on three fronts:

First, they arm sales teams with digital tools that can quickly deliver relevant and usable insights. Second, they treat partners as an extension of the sales force and invest in collaboration tools to improve the flow of data between organizations. Third, they recognize the potential for big micromarket or macrotrend analyses to improve planning and capture opportunities most effectively. As the technology emerges, they are making targeted investments in tools, technologies, and talent to make the most of these opportunities. Success in digital comes from fanatical optimization—not as a one-off project, but as a continuous process. It comes from harnessing mobile technologies to drive growth, understanding how customers use and switch between the mobile channel and other channels. And it comes from integrating digital into a great omnichannel experience that spans marketing to post-purchase.

3. Harnessing of the full range of sales analytics

Only now is the promise of advanced analytics catching up to the hype. Take customer analytics. Companies that use it extensively see profit improvements 126 percent higher than competitors who don’t. And when it comes to sales improvements through the extensive use of advanced analytics, the difference is even larger: 131 percent.3

Exhibit 3

The value of advanced analytics is wide ranging, but where sales leaders excel against their peers is in making better decisions, managing accounts, uncovering insights into sales and deal opportunities, and sales strategy. In particular, they are shifting from analysis of historical data to being more predictive. They use sophisticated analytics to decide not only what the best opportunities are but also which ones will help minimize risk. In fact, in these areas three quarters of fast-growing companies believe themselves to be above average, while between 53 and 61 percent of slow-growing companies hold the same view.

But even among fast-growing companies, only just over half—53 percent—claim to be moderately or extremely effective in using analytics to make decisions. For slow-growing companies, it drops to a little over a third. This indicates that there remains significant untapped potential in sales analytics.

4. Investment in people

A rigorous focus on sales-force training is a clear differentiator between the fast- and slow-growing companies we surveyed. Just under half the fast growers spend significant time and money on sales-force training, compared to 29 percent of slow growers. There’s room for improvement, though. Among fast growers, just over half believe their organization has the sales capabilities it will need in the future, while a third of the slow growers feel similarly equipped. As few as 18 percent of fast growers think they excel at pipeline management, and even in the most successful area—understanding specific customer needs—only 29 percent claimed to be outstanding.

Exhibit 4

What is notable from our research, however, is that fast growers are committed to improving sales talent and performance. The head of sales at a North American consumer-services company, for example, tried a new approach to improving sales performance after years of fruitless initiatives. Instead of focusing solely on what the sales force had to do, the program also devoted significant attention to building the talents and capabilities to enable them to do it, making a substantial investment in teaching skills and enforcing their use with specific goals. The result? A 25 percent improvement in rep productivity across all regions within 18 months. More impressive still, the gains stuck, and two years later performance was still improving.

5. Marriage of clear vision with leadership action

Two-thirds of fast-growing companies undertook a major performance improvement over the previous three years, and 84 percent considered it successful or very successful.

Exhibit 5

Sales leaders at these organizations said the two most important factors that contributed to that success were management articulation of a clear and consistent vision and strategy, followed by leadership commitment.

Articulating the vision should be simple. The chief executive officer of an emerging-markets telecommunications firm, for example, announced a “3 × 3 × 3” growth aspiration: three years to expand beyond its home country, three years to expand beyond its region, and three years to become a leading global brand. Besides being simple, the aspiration was bold, specific, and easily measurable.

No sales transformation will work without steadfast support from the very top. Only a committed leader can override internal politics, see the big picture, and focus on the best solution regardless of past practices. Sometimes, the commitment can be very personal. For example, the head of sales at another telecom firm recognized how fundamental customer experience was for success. At the same time that he controversially clamped down on aggressive sales techniques that had a negative effect on customer experience, he proposed to his CEO that customer satisfaction ratings should determine 25 percent of his variable pay.

Sales leaders face a dizzying array of issues and opportunities to manage, often at speeds that seemed unimaginable even a few years ago. But by focusing on what really matters, sales leaders can break away from their competitors.

About the author(s)

Homayoun Hatamiis a director in the Paris office,Mitra Mahdavianis an associate principal in the Silicon Valley office,Maria Valdiviesois a senior expert in the Miami office, andLareina Yeeis a senior partner in the San Francisco office.

As individuals, we all want to prosper, be free, and to live our dreams, also in terms of economical liberty. However, even the mathematical foundation of game theory (Nash equilibrium) tells us that the end result will be even better for each individual if we consider what is best for others as well. Economically speaking, we are in "Nash equilibrium" if each one of us is making the best decision possible, taking into account the decisions of the others – as long as the other party's decision remains unchanged, i.e., working towards the same goal. The latter part of the previous statement points to a twofold insight: 1) Societies based on equality are vulnerable to individuals who try to exploit this system, and 2) such societies imply a high level of trust.

The French economist Thomas Piketty specializes in studies on economic inequality, taking a historic and statistical approach. He has helped put the world leaders' attention to the fact that inequality is one of the most important problems of our time. The U.S. President, the U.K. Prime Minister, the Pope, and leaders at the International Monetary Fund, the United Nations, the World Bank, and the World Economic Forum have all emphasized the social cost of increasing the gap between poor and rich.

Interestingly, a quite recent study came to the conclusion that there are two key social features that contributed to the collapse of every single advanced
civilization from the past:

1) "The stretching of resources due to the strain placed on the ecological carrying capacity”.

2)  "The economic stratification of society into Elites [rich] and Masses (or
“Commoners”) [poor]” These social phenomena have played “a central
role in the character or in the process of the collapse,” in all such
cases over “the last five thousand years.” 

Another significant symptom of this inequality, is put forth in the book "The spirit level: Why greater equality makes societies stronger" by Wilkinson and Pickett (2011). They have simply graphed the Income Inequality versus Health Problems:

Even though this may sound like communism to some of us, this model has worked well in the Scandinavian countries after the Second World War. But health problems are now increasing here as well.

None of us wish for a communist state, where everyone is treated, or paid, equal. So, we still need to benefit from a liberal economic system. We also wish to welcome international economic growth. However, economic growth and increases in average incomes have ceased to contribute much to wellbeing in rich countries (Wilkinson and Pickett, 2011, p. 15). It is also interesting to note that "While things such as having poor health, doing badly at school or having a baby when still a teenager all load the dice against your chances of getting up the social ladder, sorting alone does nothing to explain why more unequal societies have more of all these problems than less unequal ones. Social mobility may partly explain whether problems congregate at the bottom, but not why unequal societies have more problems overall" (Wilkinson and Pickett, 2011, p. 24–25). Accordingly, we do not wish to suggest equal payment, equal treatment or a dictatorial society – quite the opposite, we simply point out that a huge difference in income seems to reflect a troubled society.

Poverty is not a certain small amount of good, nor is it just a relation between means and ends; above all it is a relation between people. Poverty is a social status . . . It has grown . . . as an individous distinction between classes . . .
– Marshall Sahlins, Stone Age Economics

Stephen Hawking wrote this on 23 September 2015, and U2 has brought his message to millions of their fans:
"We are here together, and we need to live together with tolerance and respect. We must become global citizens. Our only boundaries are the way we see ourselves. The only borders, the way we see each other… Let us fight for every woman and every man to have the opportunity to live healthy, secure lives, full of opportunity and love. We are all time-travellers, journeying together into the future. But let us work together to make that future a place we want to visit. Be brave, be determined, overcome the odds. It can be done."

General poverty is a tremendous problem to our planet, and a more "global" problem than inequal income. Hopefully we will at some point all recognize that we are indeed one species, totally interdependent, on a joint space journey – points made by many leading figures (Hawking, Bono, etc.). The society we want to co-create implies that nobody tries to exploit the system. High-trust-communities can probably not be built top–down. Perhaps Ken Wilber's version of "Spiral Dynamics" is a proper argument for this. He desribes the top level of society functioning ("Holistic") thus: "Universal holistic system, holons/waves of integrative energies; unites feeling with knowledge; multiple levels interwoven into one conscious system. Universal order, but in a living, conscious fashion, not based on external rules or group bonds."

Observing the current consumption of psychopharmaca (which also has other causes than mental health problems, as the pharmaceutic industry especially in the U.S. has grown into a hugely money-making industry), this signals quite clearly that if we want to prosper and blossom, we actually need to make (or conserve) our society in an optimal range of economical equality. In line with this, it can be interesting to investigate how the world's biggest companies motivate their employees to succeed (no, it's not only about the money – leading companies find that giving people meaning and time, is more effective than raising the salery):

References:
Motesharrei, S., Rivas, J., & Kalnay, E. (2014). Human and nature dynamics (HANDY): modeling inequality and use of resources in the collapse or sustainability of societies. Ecological Economics, 101, 90-102.

Wilkinson, R., & Pickett, K. (2011). The spirit level: Why greater equality makes societies stronger. Bloomsbury Publishing USA.

We live in a time of digital Darwinism, an era when technology and its impact on business and society are constant with varying, but inevitable, degrees of both evolution and revolution. The effect of digital Darwinism is real and it’s enlivened though changes in people (your customers, employees and partners) and how markets are advancing as a result. To thrive in these times, many companies are investing in digital transformation to drive business evolution and modernization. In fact, all the big research firms and consultancies from Deloitte to Accenture to CapGemini and also my team at Altimeter Group are dedicating significant resources to study how companies are changing because of digital. 

Recently I've had the opportunity to debate the ROI of digital capabilities, especially API platforms, with executives mired in traditional ROI justification governance.  They are stuck trying to unlock new ways of doing business, while justifying the acquisition of platforms in terms of ROI for that specific expenditure.  

Here I try to synthesize research from the likes of MIT, CISR, Harvard, consultants and analysts, along with my own observations from successful customers, into a succinct point of view I hope is useful for CFOs and executives advancing their digital agenda.  This entry is not about API platforms, but about the digital enterprise in general.  For guidance specifically on allocating funding in your digital initiative, please refer to Funding Your Enterprise API Program.

Shifting Foundations

Traditional enterprise ROI calculations are usually based on addressable market models with specific characteristics: long payback periods, predictable long-term mass-market consumption and pricing strength, and seemingly efficient cost models based on high volume.  

However, the emerging patterns of business success are quite the opposite:  

• shrinking horizons for which product are viable, reducing the payback period (shortened by increasingly innovative competition);
• accelerating marketing cycles and increasingly fragmented customer segments, reducing effectiveness of each particular messaging platform, strategy, campaign or initiative;
• digital competition launching similar products at lower prices, often using models with alternate monetization strategies.

A Digital Investment Model

Those legacy enterprises that are surviving and thriving now are the ones that can match this stride and are able to accelerate product innovation, diversify marketing, and reduce cost to deliver.  That means the funding models have to change to enable this behavior.  In particular, it helps to break funding into two components:

• highly adaptable, multi-purpose, loosely coupled platforms that provide underlying robust fundamental business functions like quality, customer privacy, auditability, operational metrics, reliability, security, etc;  and can be reconfigured quickly to produce / support new products, without reworking the platform itself. Platforms here are people / skills, systems / technologies, processes, and contexts.
• highly product-specific modules that are lightweight, easy and cheap to build / source and launch on these platforms, with little product-specific modifications to the platforms themselves.

The ROI on the platforms is a strategic one; not operating on platforms is simply not an option going forward.  Most enterprises have begun to embrace platforms for CRM, supply chain, finance, marketing, and other business areas.  So the accounting is not to optimize for individual bespoke end-to-end product value propositions, but optimize for the ongoing TCO needed to operate the platforms at a level of operational excellence needed to support a rapidly evolving portfolio of products.  Such successful strategies contain a small collection of multi-purpose platforms, each of which is loosely coupled to the others, and together act as a platform of platforms with little inherent complexity.  At massive scale, enterprises like VW (manufacturing), Diageo (marketing), Unilever (product segmentation), Apple (consumer electronics), Amazon (retailing), and Fast Retailing (fashion) are good examples of platform-based enterprises.  

The ROI on the product-specific modules is based on risk, where each product has short a lifespan, a diversity of go-to-market paths, and an unpredictable risk of failure along any combination of features and go-to-market paths.  So the accounting is not to optimize for longevity, sustain pricing power, or to minimize risk of adoption at product launch, but optimize for ability to launch quickly at low cost, measure outcomes in real-time, adapt the product rapidly, double down quickly on successful adoption, and/or cut losses with little collateral damage.

Innovating into Profitability

This funding model acts as an innovation engine that generates a large diversity of products, each at low incremental cost, with rich instrumentation to detect successful adoption patterns (and/or abandonment) in real time. The engine adjusts its production processes in real time, trimming back product variants that don’t work, and doubling down in volume and diversity on those that do work.

Profitability becomes a secondary effect of this configuration, derived from short-lived, unpredicted, successful adoption of specific product variants.  As soon as it detects successful adoption using the capabilities of the platforms, the enterprise rapidly scales production by quickly replicating (or scaling) the underlying lightweight product-specific modules. During that window of adoption and rapid scaling, the product has pricing power and sustains a profit margin, until competition floods in with other, more indirect revenue models or more cut-rate production capabilities.  Meanwhile, the enterprise innovation engine continues to generate and launch new product variants, finding the next “winners” and scaling them as well.  As the profitability window of certain variants closes, the enterprise can often sunset them, sometimes with a support model that is also a platform in itself, capable of supporting many sunset products to their end of life.  

A Platform of Platforms

From a due diligence perspective, the enterprise architecture for the platform of platforms should end up containing sufficiently configurable and loosely coupled components, such as:

• A revenue generation platform for billings, payments, and problem resolution;
• A customer relationship platform, including a profiling and personalization capability;
• A production platform, producing the core product in a highly modular fashion (insurance policies, cars, software, fashions,, services, etc.);
• A customer experience platform, including all digital and marketing experiences;
• A partner / supply chain / channel management platform;
• An API platform  to easily connect the platforms and connect to every external participant in the value chain, all the way to the individual customer and employee.

Once this larger perspective is accepted by the board and executive suite, other funding decisions and ROI expectations tend to align more easily.  

There is a corollary to this, in that well-tuned and instrumented enterprises running on platforms paradoxically become better able to predict successful products, design more successful marketing campaigns, and forecast profitability more reliably.  But rarely is this success coupled with a reversion to an old way of doing business.  The cultural change that accompanies the evolution to a digital enterprise remains a competitive advantage and allows the enterprise to continue to behave in an agile, innovative manner.  

Does this resonate with your experience?  How are these ideas unfolding in your enterprise?