Is your CIO protecting you from Worker’s Comp claims by remote employees?

By Richard Eichen

Courts have found that remote workers are entitled to have safe and injury prevention workspaces, even if they work from home.  The issue is, as an employer, how can we ensure someone working remotely on a company supplied laptop, at their kitchen table will not claim carpal tunnel, neck, a fall, or another injury?  In conjunction with HR, how can IT protect the organization while fostering company culture and productivity during these ‘odd’ times? With layoffs looming or imminent for many organizations, how does IT help protect the organization from employees trying to get the most they can before they get the email?

The key is to remain in control of the remote employee’s workspace, as best as is realistically possible.  Suggested areas of focus are:

·         A telecommuting policy covering, among other areas,

o   working hours, permitted work scope, quantity, and regularity of work performed at home on company supplied technology and applications

o   meal and rest periods; included and excluded work-related activities (which could continue post-employment, such as feed a pet or getting a drink of water)

o   dedicated space and clean electricity requirements

o   Cyber and WiFi security requirements (ex: passwords, use of public WiFi)

o   handling of sensitive information (i.e., a locally printed copy of financials, PII, HIPPA information, a business plan or new product feature set) which is visible to anyone walking into the work area, or if a remotely working Doctor is using Telemedicine, anyone overhearing the conversation

·         Training in phishing identification, particularly those messages supposedly providing Covid-19 updates

·        Centrally managed desktops, and applications, freeing remote employees from applications and infrastructure support burdens. This is easier now that many critical applications are provided via SaaS. Centrally managed Desktop as a Service also allows IT to enforce and monitor work times per the telecommuting policy.

·         Require all business is conducted over a company provided VPN; ensure all company supplied smartphones have a hotspot capability as a backup resource

·         Restructuring the Help Desk to be the central source of contact for all employee issues other than HR or business.  An automated application, with auto-routing can make this easier, but a phone line to a live person can help a remote worker who needs reassurance or has an outage.

IT’s role has changed from a supplier of data, applications, and support to the glue that physically holds the company together.  Working with Insurance, HR, Procurement, and strategic vendors, IT must be ready to instantiate the telecommuting policy for both productivity and loss avoidance.  This may be easier in large, highly profitable organizations that can bulk order chairs, monitors, and even desks to send to employees’ homes, but for lesser organizations, the cost of compliance will be a test of the CIO’s agility and creativity.

 

Going off the tracks – What happens when a university goes from high-touch to Digital under Social Distancing?

By Richard Eichen

 

Most senior technology and operations leaders understand the mechanics and support impacts of the new highly-remote user base, but what about the sudden transition from high-touch to no-touch from the user’s point of view?  In a university setting, that’s the educators and students, and both groups feel ether ‘cheated’ or thrown into the deep end of the pool.

To see how university educators and students are handling the change from in-person to remote/Digital teaching, I asked several professors who teach primarily face-to-face. The questions included institutional preparedness, student experience, coursework/teaching style, and administrative overhead. As an odd coincidence, in the April 24 New York Times, there is an article ‘Transforming Higher-Ed’ which confirms our findings, below:

Q: How prepared was your institution for mass online instruction?
A: Some institutions have been planning on weather and other short-duration events for 20+ years. The challenge was multi-month instruction of previously in-person courses. In one instance, the institution has not yet set a start date for the Fall semester. Some instructors have relied much more on their internal IT units, both for support and infrastructure, and some institutions, like any other organization, are doing better than others. Since the online platforms are SaaS /Cloud-based, there should be minimal additional IT overhead.

Some institutions seem more concerned with getting through this semester than the longer-term impacts on student and educator satisfaction levels. More than one educator felt they were given only a few days to reinvent their world after years of successfully teaching a body of coursework. More than one used the ‘diving into the deep end of the pool’ metaphor.

Q: How prepared were the students?
A: Most students have access to both a laptop and broadband. Some institutions issue a standard tech kit to each student, much like the commercial world. Some students do not have reliable (or have slow) broadband, and so have ‘listen only’ access and type questions into the online platform’s (ex: Blackboard Collaborate or Zoom) chatbox. In some cases, one laptop is shared between the student and siblings (parents as well), and scheduling can become an issue. Therefore, some sessions are recorded or presented multiple times, resulting in more work for the educator, a source of frustration. Where there is more than one campus, including some inner-city locations with a broader student demographic, students download the online platform’s app onto their phone and participate that way, including, in some cases, writing entire papers.

From a student’s perspective, are they getting the expected ‘bang for their buck’ if they have ‘listen-only’ or a less than expected experience, and will this affect enthusiasm (and the university’s reputation) if this continues for many more months? Before this enforced experience, only about 20% of students took an online course, and 75% feel they are not getting a quality experience (NYT, 4/24).  Some have asked for lowered tuition.  The educators we contacted said they could ‘feel’ how their many of their students were only making the best of a bad situation and not sure for how much longer once this semester is over.

Q: How is the curriculum/coursework adapted to online learning if it was previously in-person?
A: There was some frustration, a feeling of getting through the semester, making the most of a weird situation. It was more than typical remote work experience, understandable given the high-touch, high-personal fulfillment aspects of teaching. The educators had to immediately adapt their in-person coursework to a new, and undesigned, online experience in only a few days. Professors have been creative in changing their style, coursework, tests, and schedules. Some made downloads of reading material and discussion questions available for those students who cannot participate fully via technology, making for more prep work and less instruction time. Educators have the additional strain of engaging each student during a class to ensure they are paying attention as they cannot visually scan a room to see who is hanging out in the back. Worse, some lamented that they could not see many of their students, instead, seeing those student’s initials solely on stadium views. There was a level of detachment that educators do not like.

The platform can drive the teaching style, which can grate on the educator’s personality and what they know works. Some now emphasize fewer instructor lectures, more group discussions, and opportunities for questions. Others conduct the class as they usually would, including letting students become the presenter. Since a room is tough to ‘read’ when everyone is 2 inches tall (or just initials), there is added pressure on the educator to make sure students are engaged, which may include re-explaining or changing the delivery in near real-time.

One professor felt entirely translating face-to-face instruction, and class dynamics are almost impossible and feel they are now more information sharers than real educators, with a reduction in their satisfaction. It also raises the risk of not getting good student reviews.

Q: What is the administrative overhead resulting from the switch to online reality?
A: Staff meetings are held via Zoom or WebEx at their regularly scheduled times, often with better attendance than usual. Otherwise, there is not much additional admin overhead. Several said that once this crisis is over, there should be meetings inside their institutions to explore curriculum, culture, group adhesion, and other considerations in case this mass exodus recurs.

In sum, at the university level, based on this admittedly small sample, it seems instructors and institutions prepared in-person course delivery for a few days of occasional remote instruction, but not for an entire semester. Professors experience some stress and frustration at having to adapt material and work schedules in near real-time. Students are not having their expected experience and feel ‘cheated.’ Post-crisis, institutions should think through the lessons learned, including the evident but also educator and student satisfaction, ‘relationship management,’ and identification with the institution itself. Universities need to ask at what point, with all institutions using the same platforms, do they become a commodity purveyor of information, hurting their brand, value proposition, and pricing.  IT groups will need to rethink their mission and value proposition as their users will now be highly experienced in Zoom and other SaaS-based platforms, much like their commercial counterparts. They might want to explore providing a well designed, collective experience by offering a Virtual Desktop.

Stay safe.

 

 

Are COBOL applications the next illness?

By Richard Eichen

Many people are surprised by the failures of crucial government systems recently, most notably unemployment application processing. Blame has been laid upon system age and COBOL era technology. However, the unemployment systems are the visible tip of an enormous illness – much older banking, airline, hospital, and government systems were initially architected and built during the IBM S/360 mainframe era, which started circa 1964. COBOL itself was created through the contribution of Admiral Grace Hopper (who coined the term ‘bug’), beginning in the late 1950s. There have been cases where the original COBOL developers who wrote a mission-critical system not only retired but have passed away. This is old technology, so why is it still around?

Let’s dimension the size of this illness – Reuters, in 2014, came up with some troubling stats focused on the US Financial Services industry:

  • 43% of banking systems rely on COBOL applications
  • 80% of in-person transactions rely on COBOL
  • 95% of ATM swipes rely on COBOL
  • There are 220 BILLION lines of COBOL code in production systems
  • The average age of a COBOL developer was 45-51 in 2014, (51-61 today, but most of us have not met a COBOL coder under 60 in a long, long, time. As of Q4 2019, about 10% of remaining COBOL coders retire annually)

Why the longevity when your mobile phone is ‘old’ in a year and ancient in 2? First, IBM’s S/360 architecture was, for its time, revolutionary in separating the underlying computer and operating system from applications software, permitting many applications to run on the same hardware. IBM, being a large company, understood the computing needs, still being defined, of other large enterprises including transaction integrity, remote terminal and device support, and a 10-year product roadmap, ensuring backward compatibility of software on their newest engines (preserving investment). Their technical field support force was top-notch, wore white shirts and ties, had been trained in customer service, and looked just like their customers’ employees, bringing peace of mind to the C-Suite.

Given the high LOE involved in software development, applications were thought-through, end to end, which did take time, and were not very flexible. It all worked; however painful it was to get there at times. Out of sight, out of mind.

It worked so well, the timesharing industry was born, the ancient ancestor of SaaS, where applications were sold on a per-transaction basis without having to install and maintain your system. For example, you could upload massive amounts of data (for the time) and have the timeshare company do the sort or run a statistics pack against it. Defense contractors were among the early providers of timesharing, selling unused computer time on their massive systems, just as Amazon initially created AWS to help pay for the increasing costs to build out their transactions and fulfillment configurations.

From this stability, and intra-company cultural alignment, many essential but not so sexy applications became an ‘if it ain’t broke, don’t touch it’ utility. Another downside was IT’s inward focus and lack of flexibility, spawning the Business Unit use of distributed computing to avoid the regimentation and long backlogs.  COBOL applications grew cobwebs while the investments went into Java-based newer systems. Given the loss of documentation over the decades, even modifying the COBOL code had significant risks, especially if there is unpaid technical debt. We forgot about legacy applications, because they worked, day in and day out – until they fell over.

As a result of the new visibility on older systems, the C-Suite should address:

  • What behind the scenes applications are mission-critical, COBOL based, and if so, can they be phased out in parallel? The good news is many offshore companies have strong COBOL capabilities at desirable rates, so ongoing maintenance is affordable during the transition.
  • For your SaaS vendors, have they taken old on-premise applications, thrown them into a data center (or on AZURE or AWS), and now present it as their new SaaS offering rather than rewrite them entirely?
  • Have Procurement review all SaaS contract Business Continuity and Disaster Recovery sections, focusing on three key concerns:
  1. RTO (Recovery Time Objective, i.e., how long before they restore full service)
  2. RPO (Recovery Point Objective, i.e., how much data will be lost, for example, the most current transaction or a day’s worth)
  3. When was the last full-scope lifeboat drill, who conducted it and what were the results?

These considerations are particularly crucial in specialty applications, which can be from relatively small vendors struggling with handling user growth. In the end, this is not an abstract exercise. For example, more than one SaaS EMR vendor has recently experienced multiple complete fails, and AZURE and AWS have both had significant outages, and who knows when the COBOL unemployment systems will be back up.

Admittedly, there is not much strategic thought here, but these are tactical times.

Be safe.

Disruption causes disruption: IT and Vendor strategy in a post-Corvid-19 world

By Richard Eichen

With most organizations at a standstill, it only makes sense that IT follows suit, for both vendors and customers.  Where working from home was optional or even prohibited, it is now the norm, posing obvious burdens on IT in the short term for bandwidth, remote equipment, and collaboration platforms.  However, going forward, multiple strategic trends will emerge or continue to accelerate. This post examines several.

 

IT becomes a strategic operating area, even where it was previously a ‘necessary evil’

Before Shelter in Place, many organizations, be they healthcare, manufacturing, or services, considered IT to be a necessary evil, an internal utility much like electricity and water, noticeable only in its absence. Partly this was self-inflicted as IT and many consulting organizations have an abysmal record of overpromising and then missing budgets and delivery dates.  Case in point is the massive overruns for EMR and ERP implementations, often occurring because IT fails to properly herd its internal cats for specifications, testing scripts, training, and rollouts.  Business and Operating ELT now sees the potential contributions from IT, empowering remote work, and collaboration during this crisis.  They realize, probably for the first time, that without IT, their operations would either fold or barely eke along.

It is incumbent on IT to capitalize on this goodwill and become more sophisticated in customer management, thinking not like an internal department, but as a captive vendor, with a product roadmap, eyes over the horizon view of technology, and tight implementation processes. It also must distribute the Enterprise Architecture from the internal ivory tower to embeds in business units, incorporating Business Architecture and local development and testing.

Vendors will have to adjust their sales and support processes from the holders of functional knowledge such as multi-state taxation, to that of knowledge transfer via automation (see below) or through added education.

 

Self-reliance and taking back essential IT functions

Supply chain disruption and the risks with over-outsourcing /offshoring has become evident on the business side, and now with India locked down, we can see it coming on the Support and Development functions within IT. Much like we have done with manufacturing, we have weakened out internal capabilities, including the most critical development requirement – deep contextual understanding and institutional memory.  It made economic sense but introduced significant business continuity risk. CIOs will have to begin pushing back when told by the ELT to cut costs once again, stressing agility and sustainability during a crisis.

Many IT managers will have to move from vendor relationship managers to technology services delivery leaders.  Establishing a series of business unit led IT Steering Committees to hear user views firsthand will help IT become more aligned. The CIOs role will be strategist and translator of business goals into deliverables and service levels. Here too, business skills and context will be more critical than uber-tech leadership. The CIO will have a foot in both camps, where new CIOs will probably start their careers in the business and then move to the CIO role, making sure the user community feels ‘one of their own’ is leading this crucial and costly function.

Vendors will have to adapt their model from taking over Support or development to that of a hybrid, long-lived joint workforce with clients.

 

Intelligent automation for both cost take-out, and now, business continuity

Robotic Process Automation and Intelligent Automation will accelerate, not just for cost take-out and transactional scalability at low cost, but to provide a means to carry on business operations during employee disruptions. Look for increased short-term use of ‘swivel chair automation’ (user emulation) and the accelerated use of AI to take over processing of 90% or more of all recurring transactions, including those requiring judgment calls, leaving employees to resolve exceptions.

There will be a market opportunity for a vendor to supply the necessary algorithms and rules for various business processes, rather than each company developing their own.  SaaS application vendors will be able to offer this, and Intelligent Automation as part of their differentiation and cost justification.  Marketing will have to be adjusted to help, for example, a Finance leader to subscribe to a product knowing half or more of their employees will become redundant, and where the size of a department translates to internal political power.

 

Vendors must manage their cash; IT must work with HR on employee engagement

Vendors must be ready to operate with no new revenue for months to come, adjusting their burn rates accordingly.  We still do not know PE and VC appetites for funding continued losses, but we did see the stock market reject overvalued money-losing tech IPOs before the crisis began. We can only expect this to increase.  A near existential crisis like this virus brings everyone back to reality, and a company that does not make money, or can’t figure out how to do so, is no longer attractive. Successful technology vendors will have to debate how much of the product roadmap is strategically necessary vs. how much is affordable in the near-term. Customers must understand their vendor’s viability under stress.

Companies have a natural mindset to furlough many employees in a downturn, which makes economic sense. The downside is it resets the internal social contract from a place to contribute and think long-term, to a form on in-house gig relationship.  IT must work with HR on employee engagement, and once this crisis passes and companies decide to increase in-house IT staff, employee retention. Since employees are now much more comfortable with remote work (and their managers now trust this operating model), aggressively hiring companies can poach employees nationwide from low-engagement employers.  The very human nature of this crisis and the shelter in place orders nationwide means personal and organizational relationships are ever more critical, so throwing money thinking it will retain employees will most likely be cynical and not work.

 

Disruptions cause disruptions and maintaining IT in its current form is no longer viable.  A tighter link, and integration into, business strategy is necessary as the Covid-19 virus is the first of many upcoming unplanned events.  Standing still is no longer an option. A case in point is General Motors engineers getting hold of an early Tesla Model S, and instead of seeing how they had to adapt to the future, compiled a lengthy report on how many GM internal rules Tesla had violated.  When you think of an EV, what name first comes to mind? Who has a higher valuation? The technology world, internal and vendor, is now at a similar point of disruption.

 

 

Surviving when your critical technology vendor goes away

by Richard Eichen,  Partner, Fortium Partners

Q4-2019, sitting in a conference room, getting ready for a potential strategic vendor to set up and defend their RFP response.  We asked the sales rep if there was any ongoing concern risk as the same PE firm owned both his company and his arch competitor, and a merger seemed logical and inevitable.  As expected, the sales rep denied any potential risk.  So, it was no surprise when in early 2020, their merger was announced by the PE fund, with our second choice as the surviving entity.  As CIOs, what do we do when a critical vendor is merged and goes way?

First, some context from the inside of a software company when it is acquired.  Sitting in my office early one day and catching up on the news, I noticed our logo in a tombstone ad.  An aggressive accumulator had bought us (we’ll call it ‘X’ here), infamous for buying companies for their user bases, freezing R&D and marketing, and having their call centers cross-sell their other products into the target’s user base. When we told our customers, ‘X’ was our new owner, almost 100% said they would drop our products.  ‘X,’ per their industry reputation, rapidly cut all R&D, all marketing, reduced support to basic levels, and cut the enterprise-grade direct sales force to a bare minimum.  Those customers who chose to keep our products were not in good shape.

How does a company protect itself when a key vendor merges as the non-surviving entity or otherwise acquired?  We’ve invested in integrating them into our stack, have internal expertise on their APIs and data models, and provide Level 1 and 2 support.   We have contracts in place with strict SLAs and beneficial pricing based on current and projected usage. The Training Dept has integrated this software into their new employee orientation, complete with slides, manuals, and an exam.  Hopefully, our contracts have a material change of control provision, giving us some leverage.

Below are some of the considerations which will help determine if you continue using the software or begin searching for a replacement, organized into two buckets, Strategic and Operational:

Strategic

  1. If acquired by an accumulator or a PE fund, does our vendor’s product strategy and direction fit into the overall strategy and time horizon, or is this pure financial opportunism, subject to another change within the next 24 months?
  2. Does the acquirer hold their companies for the usual 3-5 years, or is this a fix and flip?
  3. Many PE firms load an acquisition’s Balance Sheet with considerable debt, shortly after that declaring an extraordinary dividend to remove as much cash as they can, upfront. It’s how the industry works, and this is well known and accepted practice.  What guarantees can we get to ensure the acquired company and any merged entity will survive for our contract term (ongoing enterprise risk)?
  4. Assuming Vendor Rationalization is in effect, and the acquirer is not on our list, can we terminate the contract, and if so, who pays for data migration?
  5. If we already have contracts with the acquirer, can we normalize the termination dates and negotiate a better set of terms across all products?
  6. Will our existing contract continue to be in effect? Will it be renewed at logical and expected terms, or will the new owner run out the clock and then start with their standard, and we must ultimately renegotiate, at our risk? What is the acquirer’s history regarding preserving business models?
  7. As new regulations on Data Privacy, statutory reporting, and verifications, as well as Gov’t program billing, come into effect, does the new owner have a positive history of rapidly funding these mandatory changes within their portfolio?

Operational

  1. We negotiated tight SLAs. If ours are more stringent than the acquirer’s standard, will they try to convert them to KPIs, without default penalties?
  2. We have identified vital vendor personnel (executive, development, support, and training) and need to know if they remain, or will these functions be absorbed into other operations? Most likely, much senior staff will leave within the first 18 months, can we get all outstanding commitments and understandings in writing?
  3. Is the published product roadmap in effect, including those key enhancements and new features we were counting on to provide better service to our internal users?
  4. If multiple products in the acquirer’s portfolio will be consolidated into one offering, how can we provide input into which modules survive? What is the migration path, including any customizations and APIs, as well as data migration?
  5. Will, the R&D team continue in-place, and for how long? Will R&D on our product continue at the current funding rate and new release cadence? Is the product being frozen, and if so, will the new owner at least fund identified bug fixes?
  6. Will our internal customer support team remain in place, with empowerment, and for how long? Will they remain dedicated to this product line or be shared across multiples? If named in our contracts, will they be named in all new contracts?
  7. Is the Business Continuity plan still in effect?

 

Having a strategic technology vendor acquired by a PE firm or an aggregator is not necessarily a bad thing.  It can result in a more stable company, with better senior leadership, access to capital, and a better business model.  None the less, prudence is required.

Digital Transformation — is it being led by your business strategy or by your vendor’s strategy?

By Richard Eichen, Partner, Fortium Partners, LP

 

At a recent Institute for Robotic Process Automation and AI symposium, we were discussing who owns Intelligent Automation (iA), IT or the Business Units. Attendees were IT Senior Leaders, consultants/integrators, and vendors along with a smattering of industry analysts.

The vendors, implementers, and advisors say it belongs to the Business, Cloud-based, with 4–6 weeks to build a first, basic, process. From the seller’s perspective, it is an easier to control buying cycle as IT usually publishes standards and reuses common vendors/consultancies with context learned over time, while each Business Unit often goes its own direction and moves faster.

As for 4–6 weeks, the consensus was it is possible to automate a basic process having a large percentage of transactions following the Happy Path, and where the Exception conditions are few, limited in error types, and easy to auto-repair. In Financial Services and Insurance, this is called Straight Through Processing or Low Touch. Internal to a company, there are examples of this class of processes, which is why many early Intelligent Automation adopters start with inward facing processes. Real-world hands-on experience has shown, however, the more realistic estimate for a simple but useful first process is 8 weeks, where an upfront Process Dynamics Discovery process is used instead of expensive and potentially disruptive iterations.

IT tends to flow in cycles, decentralized followed 4 years later by re-centralization. By then technology has sufficiently changed to restart the ‘who owns what’ cycle. Today, many IT organizations are seen as expensive speedbumps, incapable of empowering the Business on its Digital Journey. Part of this is due to the ITIL and COBIT methodologies both of which are very procedural and predominately allowed outsourcers and governments to standardize their SLAs and operations across multiple clients and sites. Internally, its heavy guideline approach slows project initiation/funding, focusing on documentation standards more than results, even in Agile shops. IT’s culture aligned with these methodologies, becoming slow but well documented. The user experience was frozen between releases, even when customers started to compare IT’s UI to that of their smartphone apps, including the frequent updates. IT’s UI orientation took on the vendor’s vision, not the customer’s, and the customer’s vision is what drives Digital Transformation, particularly with a multi-generational workforce. IT wants to own this new paradigm, but the Business is rejecting that notion, often forcing IT to become the operator of legacy systems and networks, a necessary but not strategic partner, and a source of grab-back money to fund Transformation.

The Business, responding to rapid market changes and sophisticated customer expectations, adapted to this new reality via the growing trend of Business funded Shadow IT, most of which is AI-powered Analytics, and Intelligent Automation with the platforms and data hosted in a public cloud. This approach, however expedient becomes an issue when, post-implementation, the Business returns operations of these cloud-based systems to IT, commonly called a Data Boomerang, some of which may not be able to support increasing transaction loads beyond the initial pilot projects. It also manifests in Digital Transformation strategized, budgeted and executed by the Business, and not IT.

Forty-five minutes later, it was time to agree on how IT and the Business join in lock step into the Future of Work. The consensus was IT should maintain control of databases and operations, as well as security and SLA monitoring. To promote some degree of standardization to avoid vendor bloat, IT can promote a list of vetted and approved Intelligent Automation vendors, going further by creating reusable iA modules (“Lego blocks”) as well as APIs into legacy applications. From a transformative point of view, there isn’t much new in this approach. We propose a different tack.

Transforming IT from service providing utility to front-line customer and employee engagement enabler has to reflect the ways a multi-generational workforce approaches systems and their unique expectations of the user experience (also known as a Customer Journey). The vendors, analysts, and implementers talked about the “customer experience” ad nauseam, but when pressed, had no clear definition of what that should look like, making the job harder for IT. The vendors’ and implementers responses were typical — we’re agile, we iterate, forgetting to address who will pay for this or if it is even appropriate for each use.

Even the Business representatives could not definitively describe customer experience expectations. However, they did stress how important it is, and rightly so. Our solution is to establish a Technology User Insight Center within IT, gaining deep-mind user insights. This learning, going way beyond A/B testing will provide a day-in-the-life of users, achieving context necessary for optimized decisions and process flows, AI augmentation, and meaningful analysis of the petabytes of IoT data expected to flood companies. Use of tools capturing eye movements, emotional attachment and feature use at a granular level uncover ‘move the needle’ insights. Linking this data to AI-based tools designed to select processes best fit to be automated, the Technology User Insight Center can be the go-to source of application-level user experience requirements and the rank order of what processes will supply the largest ROI, all based on data. IT will replace the vendors in who is guiding the Business’ adoption of Digital.

In sum, IT has to rapidly morph to its next stage — from processor of transactions and infrastructure operator to user-insights and customer digital technology advocate, partnering with the Business as their strategic Digital Transformation Business Enabler. Some CIOs and their teams can make this switch; some may need a politically neutral outside trusted advisor to set up this new IT function, establish the methodology and tools with the Business’ cooperation, and lead the initial data analyses. CIOs who do not embrace this will soon find they are losing more and more Shadow IT funding battles and invited to fewer and fewer Digital Transformation meetings.

 

Is this the opening salvo in the war against social media?

By Richard Eichen

Which country purchased a copy of the ‘Social Network’ DVD? To paraphrase the best line in the movie, “You’re not an asshole social media, you’re just trying so hard to be.”

Silicon Valley companies are extensions of their founder’s personalities. Oracle is sharp-elbowed; Salesforce is innovative and fast-paced, Uber… enough said. Social media’s current problems are not about the founders’ personalities; it is about the effects of their platforms on a larger stage than harvesting user data.  They have created a data equivalent of a nuclear reactor, minus the core damage frequency KPI dial.

Their recent bunch of lawyers, well coached by the crisis PR firms, testifying before Congress on the retooling of their platforms into a propaganda and psych warfare weapon shows how essential they are as a source of news, ‘fake’ or ‘real.’  The word ‘source’ is intentionally used as they are more than just a pair of telephone wires, not responsible for whatever goes on them.

Pew Research Center has explored the reach of these platforms for presenting news, with not completely surprising results (http://www.pewresearch.org/fact-tank/2017/10/04/key-trends-in-social-and-digital-news-media/).  Their October 4th research findings show only a 7 point gap between the number of people who get their news from television (where there is hopefully some fact checking and editorial overview) and online, via a mix of news websites/apps and social media platforms (50% vs. 43%).  This is the tip of the reader/viewer iceberg as 67% of Americans get at least some of their news via social media. To further complicate this pool, 64% of adult Americans see fabricated news stories as sowing confusion about the most basic facts of current issues which assumes the same users can differentiate between ‘fake’ and ‘real’ facts when presented professionally by propaganda professionals.  If this is the result of psych ops, well, job well done.

Besides the national security and threat to democracy this poses, it may also affect the core valuation of these firms.  Those same Pew researchers found only 5% of web-using U.S. adults place much trust in the information they get from these platforms. Since the premise of most platforms is to bind you to their site for hours per day, low trust in what users see, except for those wickedly cute cat videos, can result in fewer ads and sales and less time on the platform itself. Less revenue will lead to lower valuations.

The underlying issue is with governance and internal standards, however the knee-jerk answer is to ask the social media firms to adult-up with a call for ‘transparency’ and systems to solve the underlying issue of exploitation by some smart, sophisticated and very bad people.   For example at an average employee age of 28, Facebook’s management does not have the historical or perhaps educational background to understand how their platform is manipulated  (many developers could care less about politics and more about their options and toys).  Most likely, neither does FB’s Board of Directors. Except perhaps for Donald Graham and Erskine Bowles, all other members all from the hi-tech echo-chamber or FB itself.

The solution is two-fold. First, add Board members with strong credentials in journalism and international affairs. Form a Committee for Journalistic integrity and oversight.

Secondly, the Government should create a variant of the systemically important financial institution (SIFI) enacted after the recent financial collapse to ensure ‘too big to fail’ banks’ don’t.  Declare the social media platforms a new form of ‘Systemically Important’ with sufficient safeguards and controls surrounding news content.

By the way, once again, Prof Scott Galloway of NYU nails it: https://www.l2inc.com/daily-insights/winners-and-losers/prof-galloway-grills-big-tech?utm_source=email&utm_medium=email&utm_content=winners-losers&utm_campaign=email

 

To innovate faster, organize around the human behind the data

By Richard Eichen

The 2017 Nobel Prize in economics went to Richard Thaler for his work on how humans, being irrational, don’t always follow economic theory and dogma.  Funny how the world changes.   Many years ago I studied Mathematically Oriented Macro Economics where we attempted to model the US economy by a series of complex equations. My favorite was the fudge factor component, to help adjust any long formula to retroactively ‘predict’ the past (and therefore presumably, the future).  The underlying assumption is we were all rational actors, making enlightened decisions, describable in the language of mathematics.  We just needed to find the correct equation. We never quite got there.

Companies are the sum of its people, not rational actors in of themselves, and so we have to apply human economic behavior to make them work effectively.  The key speedbump hindering innovation and new product launches in large established companies is what Mr. Thaler termed the ‘endowment effect,’ where people most value (and therefore defend to the death) that which they already own. By changing the definition of what is owned, companies can turn this current form of internal resistance from speedbump to accelerator.

Look at any established company’s org chart, and you will see Brand Management, Product Management, Engineering, Legal and Sales groups.  One owns marketing and messaging with its definition of success; another owns bringing products and new iterations to market with its definition of success, while the others have still additional definitions of success.  The Senior Leadership Team is where the all these definitions of success converge into the common definition of success, be it top-line revenue, or EPS. However, what would happen if, leveraging the endowment effect, we defined success not as an entity to be produced, marketed and sold, but as a specific product domain derived EBITDA flow over 12+ months to be filled with a mix of products and messages?  It moves the common definition of success down at least two levels.

By reconfiguring the Product, Brand, Engineering and other groups to focus on their assigned EBITDA, employees would own, and therefore most value a commonly defined outcome.  This approach is by its very nature, initially disruptive, as giving teams a financial target and not product specifics requires mental agility and deprogramming from the way they were hired, trained and operate. It also requires the company to give them room to think.

Much like economics, it is time to refocus Management Theory on human nature, not forcing people to act in theoretical ways. How many MBA’s would that obsolete?

Are Facebook’s full-page ads a dead end?

By Richard Eichen

Today’s WSJ has a full page ad from Facebook with a set of bullets on how they are attacking their latest PR nightmare. Facebook generally maintains they are a platform, the phone company defense; they just supply a message delivery platform. As Professor Galloway of NYU wrote, that means a fast food chain can serve fake meat because it’s just a meat delivery system?  No, Facebook is responsible and has to step up and solve its problems by a well thought through approach, not piecemeal.

The first problem is not the technology, but a reduction in Facebook’s extremely high operating margins every time they add resources and layers of technology to beef up security and fake news detection. It goes against their low-cost scalability model. Their second issue is when does responsibility transfer to them for knowingly propagating fake news, opening the door to ‘trouble’ and settlements.  These are the price to pay when you mature – you become a company with responsibilities. ‘Break things’ has to include ‘fix things’.

Other industries have solved similar problems and herein lay the solution. Banks and other Financial Services firms have strict Know Your Customer (KYC) requirements, and therefore internal rules, procedures, and systems. They also have extensive Anti-Money Laundering (AML) detection and risk avoidance capabilities.  Facebook can form strategic relationships leveraging existing infrastructures to identify bad actors via named entities and payment flows.  They can then append a notification to the end of any flagged article, or ban the content completely, just as a bank cannot process transactions from known bad actors.

So if the issue is not one of existing capabilities and emerging technology (AI and Cognitive analysis of free-form data), then why the resistance or blindness to solving this issue by going outside the Silicon Valley echo-chamber?  It’s culture. Silicon Valley’s culture is winner takes all, mixed with a level of moral disengagement that would make Attila the Hun queasy. There’s also a fair dose of NIH – Not Invented Here, and that made sense in an industry where it had to create so much from scratch.  However, as these companies mature, such as Facebook, it’s time to adult-up, become a member of the larger community and reach out to already proven solutions to solve already solved issues. They can do it now, or wait for regulators to force them to do it. Which is more palatable?

My engine is spinning, I’m burning gas, but I can’t make innovation progress

By Richard Eichen, Return on Efficiency, LLC

Companies need to innovate, as their once stable, well defined markets evolve from CPG to FCPG (Fast CPG) and then morph into consumer electronics. Banks are going from long-term retail relationships to online and Digital presences, nameless and faceless with a race to the bottom on fees.  Still, companies move too slowly, are comfortable with incrementalism, and leave space for upstarts to enter the market, some to grow, and most to be acquired and buried in Big Corp.

The bottom line is: companies move at the pace of their largest revenue stream and only when faced with an existential threat.  Apple did not develop the iPhone because they thought phones were a great idea (actually, they thought the opposite).  Phones were becoming platforms to download music, threatening the iPod which was then their halo product.  Potential extinction facilitates clarity and focus.

Innovation is about audacity.  On this 73rd anniversary of D-Day, let’s see what was innovative and therefore broke the centuries old static siege mentality mold:

  • Big Data analysis to predict the exact time and day for the right tide.
  • Floating artificial harbors, providing a logistics capability where none existed before D-Day
  • A 3 inch pipe under the English channel providing vehicle and aircraft gas in quantiles to keep the advance moving post initial invasion
  • The Higgins landing craft, created iteratively by a startup, and including the IP contributions of African-Americans and women
  • With water behind them, the Allied soldiers were fully committed in every sense of the word

It took having their backs to the wall, no room for failure or a second go at it.  Successful startups are like that, all-in, innovate big; no way back. Maturing technology companies retain that culture until they get too large and outgrow their founders. Big companies typically live behind their ramparts, feeling safe from a siege, until an innovation D-Day occurs.

How to recognize if your company has a siege mentality:

  • Your Executives, especially the SLT, self-reinforce how great the company is, how crazy the competitors are and who are these upstarts anyway?
  • Middle Management thinks long-term revenue is solid (for now), so they can focus on short term tactics
  • Executives are promoted through the company’s culture filter, absorbing any risk aversion or fear of failure and adopting the velocity associated with your best selling products.
  • Engagement and commitment to ideas have a political cost if they do not support or even challenge that biggest revenue stream. Promote these radical ideas – to a point, but don’t fight for them without paying a price.
  • New product initiatives are run through open-spaced new product teams; nonlinear breakthroughs are typically not funded beyond 1st stage exploration.
  • Innovation by acquisition usually buries the innovation but it does keep a competitor from having it. At best, acquired IP is leveraged into other initiatives.

So the question I’m often asked is, “OK, do I hire an Innovation Leader from outside the company?”  The expected answer is “yes, even from outside the industry”, but a more practical answer is “search high and low for a leader who has the mental agility to be promotable but not so ingrained in your culture they are self-limiting. Put them under a different compensation plan, and put their back to the water.  Tell them if they start to do too many things ‘our way’, they’re toast.  And finally, tell them you want 3 breakthrough products to fail fast in the next 6 months, and 1 breakthrough game changer in 12.”

One last D-Day reference, proving our point:

“This operation is not being planned with any alternatives. This operation is planned as a victory, and that’s the way it’s going to be. We’re going down there, and we’re throwing everything we have into it, and we’re going to make it a success.” — General Dwight D. Eisenhower

Eisenhower was not known for being  a tactical genius, he was a deep and methodical planner. He knew how to get leaders with crazy off the scale egos to cooperate, if grudgingly.  And he had an absolute sense of mission and timing, and doing it big. His boss, Marshall, instilled a culture of rapidly identifying and replacing failing or underperforming commanders, i.e. Generals who followed the book but could not win.

Who else falls into this category, who was also truly innovative? Steve Jobs. On this 10th anniversary of the iPhone, here is a summary of what is was like to work on this breakthrough project:

“Because you created a pressure cooker of a bunch of really smart people with an impossible deadline, an impossible mission, and then you hear that the future of the entire company is resting on it.”  – Senior Apple Engineer.

Combine audacity, creativity, an existential threat, smartest people, 1 year to roll it out – this is how a leader turns organizational energy into innovation motion.