Softbank acquired BostonDynamics, the four legs robots maker, alongside secretive Schaft, two-legged robots maker. Softbank, the perpetual acquirer of emerging leaders, has entered a foray into artificial life by diluting their stakes in media and communications and setting a stronghold into the full supply chain of artificial life. The chain starts with chipsets where ARM was acquired but then a quarter of the holdings were divested since Google (TPU) and others have shown that specialized processors for artificial life are no longer a stronghold of giants such as Intel. The next move was acquiring a significant stake in Nvidia. Nvidia is the leader in general purpose AI processing workhorse but more interesting for Softbank are their themed vertical endeavors such as the package for autonomous driving. These moves set a firm stance in the two ends of the supply chain, the processors and the final products. It lays down a perfect position for creating a Tesla like company (through holdings) that can own the new emerging segment of artificial creatures. It remains to be seen what would be the initial market for these creatures, whether it will be the consumer market or the defense though their position in the chipsets domain will allow them to make money either way. The big question is what would be the next big acquisition target in AI. It has to be a major anchor in the supply chain, right in between the chipsets and the final products and such acquisition will reveal the ultimate intention towards what artificial creatures we will see first coming into reality. A specialized communications infrastructure for communicating with the creatures efficiently (maybe their satellites activity?) as well as some cloud processing framework would make sense. P.S. The shift from media into AI is a good hint on which market matured already and which one is emerging. P.S. What does this say about Alphabet, the fact they sold Boston Dynamics? P.S. I am curious to see what is their stance towards patents in the world of AI
Random thoughts regarding Mary Meeker's Internet Trends 2017 report:
Slide #5The main question that popped in mind was where are the rest of the people? Today there are 3.4B internet users where the world has a population of 7.5B. Could be interesting to see who are the other non-digital 4 billion humans. Interesting for reasons such as understanding the growth potential of the internet user base (by the level of difficulty of penetrating the different remaining segments) as well as identifying unique social patterns in general. Understanding the social demographics of the 3.4B connected ones can be valuable as well as a baseline for understanding the rest of the statistics in the presentation. Another interesting fact is that global smartphones shipments grew by 3% while the growth in smartphones installed base was 12% - that gap represents the pace of the slowdown in the global smartphones market growth and can be used as a predictor for next years.
Slide #7Interesting to see that the iOS market share in the smartphone world follows similar patterns to Mac in the PC world. In the smartphone world, Apple market share is a bit higher vs. the PC market share but still carries similar proportions.
Slide #13The gap fill of ad spending vs. time spent in media across time follows nicely the physical law of conservation of mass. Print out, mobile in.
Slide #17Measuring advertising ROI is still is a challenge even when advertising channels have become fully digital - a symptom of the offline/online divide in conversion tracking which has not been bridged yet.
Slide #18It seems as if there is a connection between the massive popularity of ad blockers on mobile vs. the advertising potential on mobile. If there is such then the suggested potential can not be fulfilled due to the existence of ad blockers and the level of tolerance users have on mobile which is maybe the reason ad blockers are so popular on mobile in the first place.
Slide #2599% accurately tracking is phenomenal though the question is whether it can scale as a business model - will a big enough audience opt-in for such tracking and what will be done about the battery drain resultant of such tracking. This hyper monitoring if achieved on a global scale will become an interesting privacy and regulation debate.
Slide #47Amazon Echo numbers are still small regardless of the hype level. Could be fascinating to see the level of usage of skills. The number of skills is very impressive but maybe misleading (many find a resemblance to the hyper growth in apps). The increase in the apps world was not only in the number of apps created but also in the explosive growth in usage (downloads, buys) - here we see only the inventory.
Slide #48This, of course, is a serious turning point in the world of user interfaces and will be reflected in many areas, not only in home assistants.
Slide #812.4B Gamers?!? The fine print says that you need to play a game at least once in three months which is not a gamer by my definition.
Slide #181Do these numbers include shadow IT in the cloud or does it reflect concrete usage of cloud resources by the enterprise? There is a big difference between an organization deploying data center workload into the cloud vs. using a product which is behind the scenes partially hosted in the cloud such as Salesforce. Totally different state of mind in terms of overcoming cloud inhibitions.
Slide #183The reduction in concerns about data security in the cloud is a good sign of maturity and adoption. Cloud can be as secure as any data center application and even much more though still many are afraid of that uncertainty.
Slide #190The reasons cloud applications are categorized as not enterprise-ready is not necessarily due to their security weakness. The adoption of cloud products inside the enterprise follow other paths such as level of integration into other systems, customization fit to the specific industry, etc...
Slide #191The reason for the weaponization of spam is simply due to the higher revenue potential for spam botnets operators. Sending plain spam can earn you money, sending a malware can make you much more.
Slide #347Remarkable to see that the founders of the largest tech companies are 2nd and 3rd generation of immigrants. That's all for now.
IBM stock was hit severely in recent month, mostly due to the disappointment from the recent earnings report. It wasn't a real disappointment, but IBM had a buildup of expectations from their ongoing turnaround, and the recent earnings announcement has poured cold water on the growing enthusiasm. This post is about IBM's story but carries a morale which applies to many other companies going through disruption in their industry. IBM is an enormous business with many product lines, intellectual property reserves, large customers/partners ecosystems and a big pile of cash reserves. IBM has been disrupted in the recent decade by various megatrends including cloud, mobile computing, software as a service and others. IBM started a turnaround which became visible to the investors' community at the beginning of 2016, a significant change executed quite efficiently across different product lines. This disruption found many other tech companies unprepared, a classic tech disruption where new entrants need to focus only on next generation products and established players play catch up. A seemingly unfair situation where the big players carry the burden of what was previously defined as fresh and innovative, not so long time ago. IBM turnaround was about refocusing into cognitive computing a.k.a AI and although the turnaround is executed very professionally the shackles of the past prevent them from pleasing the impatient investors' community.
Can Every Business Turn Around?A turnaround, or a pivot as coined in the startup world, means to change the business plan of an existing enterprise towards a new market/audience requiring a different set of skills/products/technologies. Pivoting in the startup world is a private case of a general business turnaround. In a nutshell, every business at any point in time owns a different set of offerings (products/technologies) and cash reserves. Each offering has customers, prospects, partners and the costs incurred of the creation and the delivery of the offerings to the market. In an industry which is not disrupted the equation of success is quite simple, the money you make on sales of your offerings should be higher than the attached costs. In the early phases of new market creation, it makes sense to wait for that equation to get into play by investing more cash in building the right product as well as establish excellent access to the market. Disruption is first spotted when it's hard to grow at the same or higher rate, and fundamental change is required to the offerings such as rebuilding the offering from scratch. This happens when new entrants/startups have an economic advantage in entering the market or by creating a new overlapping market. When a market is in its early days of disruption the large enterprises are mostly watching and hoping for the new trends to fade away. Once the winds of change are blowing too strong, then a new thinking is required.
A Disruption is Happening - Now WhatOnce the changes in the market ring the alarm bell at the top floors, management can take one or more of the following courses of actions:
- Buy into the trend by acquiring technologies/products/teams/early market footprints. The challenges in this course are an efficient absorption of the acquired assets as well as an adaptation of the existing operations towards a new direction based on the newly acquired capabilities.
- Create a new line of products and technologies in-house from scratch realigning existing operations into a dual mode of operation - maintaining the old vs. building the new. Dual offerings that co-exist until a successful internal transfer of leadership to the new product lines take place.
- Build/Invest in a new external entity that is set to create the future offering in a detached manner. The ultimate and contradicting goal of the new business is to eventually cannibalize the existing product lines towards leadership in the market. A controlled competitor.
Contemplating About A TurnaroundFrom a bird's eye view, all forms of turnarounds have common patterns. Every turnaround has costs. Direct costs of the investment in new products and technologies as well as indirect costs created due to the organizational transformation. Expenses incurred on top of keeping the existing business lines healthy and growing. These additional costs are taken from the cash reserves or it is new capital raised from investors. Either way, it is a limited pool of capital which requires a well balanced and aggressive plan with almost no room for mistakes. Any mistake will either hurt the innovation efforts or the margins of the current lines of business and for public companies neither is forgivable. Time is also critical here, and fast execution is key. If mistakes happen, the path can turn into a slippery slope very quickly. Besides the financial challenges in running a successful turnaround, there is a multitude of psychological, emotional and organizational issues hanging in the air. First and foremost is the feeling of loss around sunk cost. Usually, before a turnaround is grasped there are many efforts to revive existing business lines with different investment options such as linear evolution in products, reorganizations, rebranding and new partnerships. These cost a lot of money and until the understanding that it is not going to work finally sinks the burden of sunk costs has grown very fast. The second big issue is the impact of a turnaround on the organizational chart. People tend not to like changes and turnarounds. The top management is hyper-motivated thanks to the optimistic change consultants, but the employees who make the hierarchies do not necessarily see the full picture nor care about it. It goes down to every single individual who is part of the change, their thoughts about the impact on their career as well as their personal likings and aspirations. Spreading the change across the organization is kind of black magic and the ones who know how to do that are very rare. The key to a successful organizational change is to have change agents coming from within and not letting the change being driven by the consultants who are anyway perceived as overnight guests. The third strategic concern is the underlying fear of cannibalization. Many times the successful path of a turnaround is death to existing business lines and getting support for that across the board is somewhat problematic.
Should IBM Divest?A tough question for an outsider like me and I guess pretty challenging even if you are an insider. My point of view is that IBM has reached a firm stance in AI, a position that it is becoming more challenging to maintain over time. AI has in magnitude more potential then the rest of the business and these unique assets should be freed from the burden of the other lines of business. IBM should maintain the strategic connections to the other divisions as they are probably the best distribution channels for those cognitive capabilities.
The Private Case of Startup PivotsA pivot in startups is tricky and risky. First, there is the psychological barrier of admitting that the direction is wrong. Contradicting the general atmosphere of boundless startup optimism is a challenge. On top of that, there will always be enough naysayers that will complain that there is not sufficient proof that the startup is indeed in the wrong direction. Needless to talk about the disbelievers that will require seeing evidence before going into the new direction. Quite difficult to rationalize plans when decision making is anyway full of intuitions with minimal history. Since the history of many startups is quite limited and their existence at the early stages is dependent on cash infusion then the act of pivot even if right and justified is many times a killer. There aren't too many people in general who have the mental flexibility for a pivot, and you need everyone in the startup on board. The very few pivots I saw that were successful did well thanks to incredible leadership which made everyone follow it half blindly - a leap of faith. Food for thought - How come we rarely see disruptors buying established disrupted players to gain fast market footprint?
The patents system never got along quite well with software inventions. Software is too fluid for the patenting system, a system that was built a long time ago for inventions with inherent physical aspects. Software is perceived by the physical point view as a big pile of bits organized in some manner. In recent years the patenting system was bent to cope with software by adding into patent applications artificial additions containing linkage into physical computing components such as storage or CPU so they can be approved by the patent office. But that is just a patch and not evolution.
The Age of AlgorithmsFast forward to nowadays where AI has become the main innovation frontier – the world of intellectual property is about to be disrupted as well and let me elaborate. Artificial intelligence although a big buzzword, when it goes down to details it means algorithms. Algorithms are probably the most complicated form of software as it is composed by base structures and functions dictated by the genre of the algorithm such as neural networks but it also includes the data component. Whether it is the training data or the accumulated knowledge it eventually is part of the logic which means a functional extension to the basic algorithm. That makes AI in its final form an even less comprehensible piece of software. Many times it is difficult to explain how a live algorithm works even by the developers of the algorithm themselves. So technically speaking patenting an algorithm is in magnitude more complicated. As a side effect of this complexity, there is a problem with the desire to publish an algorithm in the form of a patent. An algorithm is like a secret sauce and no one wants to reveal their secret sauce to the public since others can copy it quite easily without worrying about litigation. For the sake of example let’s assume someone copies the personalization algorithm of Facebook, since that algorithm works behind the scenes it will be difficult up to impossible to prove that someone copied it. The observed results of an algorithm can be achieved in many different ways and we are exposed only to the results of an algorithm on not to its implementation. Same goes for the concept of prior art, how can someone prove that no one has implemented that algorithm before? To summarize, algorithms are inherently difficult to patent, no one wants to expose them via the patenting system as they are indefensible. So if we are going into a future where most of the innovation will be in algorithms then the value of patents will be diminished dramatically as fewer patents will be created. I personally believe we are going into a highly proprietary world where the race will not be driven by ownership of intellectual property but rather by the ability to create a competitive intellectual property which works.
By Rajesh Jain, managing director, Netcore Solutions, Mumbai, India
My latest column in Business Standard:
Application Service Providers (ASPs) are set to make a comeback – in an avatar that is also being termed on-demand software or software-as-a-service (SaaS). Business Week wrote recently: "Companies like Salesforce.com, NetSuite, and newly public RightNow Technologies are reinventing the way customers buy software. They're all making basic corporate software to manage finances or a sales team, run a business or run a call center -- not new stuff, and in many cases, with fewer features than existing products. But the innovation is in the business model. These companies deliver software over the Internet –- a Web service, if you will -- and companies pay as they go with monthly fees. That means less costly integration, no hiring an in-house administrator, and no big up-front contracts. It's a considerably cheaper and easier approach that gives these software-as-a-service companies an entr
Good investment banking advice on - A VC: Hiring Bankers - Pick the Lowest Number.
My moral perspective on each conflict mentioned:
Confidentiality Conflict - Due to the nature of VCs work, where they meet everyday with different people it is reasonable that pieces of information disclosed or domain expertise gained in discussions with entrepreneurs will be used or even spoken without harm intentions. We are all people and having to keep high level of confidentiality is an important part of a VC job description.
The situation that really worries entrepreneurs is when a VC takes this sensitive information and uses that intentionally for its own benefit with the knowledge that it will harm the person that trusted him/her. This, of course is not the common state of mind although in life, you encounter situations where the temptation gets high. This behavior is a matter of personal ethics since the decision to do or not to do lies in the VC's head only and many times it will be taken without external accountability.
Portfolio Company Conflict - If relationship with portfolio companies are open and candid then all the sides of the conflict should be aware to each other line of business, duties and responsibilities; A VC has to manage a portfolio of companies driving to the best result possible. As long as decisions are based on good rationale and not on personal preferences (As it happens also) I think that the involved parties will understand and accept the decisions, and if not immediately then it will happen within time.
Relationship conflict - I agree that this is a true conflict that can be handled only by openness and sensitivity.
Every now and then I stop and think on how I perceive the concept of strategy in the business environment and how it relates to other terms such as: strategic plans, tactics, objectives, mission, vision and policies. I welcome any kind of feedback and within time I will update this post to accommodate new thinking as well as users' feedback. Businesses are measured or compared on certain qualitative and quantitative aspects such as: level of profitability, share of a specific market, number of employees, no. of incoming service calls, employee churn, pipeline of prospects, web site ranking on Google, market value of shares, domain knowledge, and many others. These attributes change within time based on what the business does and on what happens around it. Business objectives represent an ambition to change business reality into a desirable one, where certain aspects of the business will meet certain criteria. For example, an objective to reach a 30% market share in a target market within 5 years can be measured as the percentage of customers out of the total addressable market. To change the complex business reality for a business and achieve objectives, the business has to execute a set of actions and to follow different guidelines during a specific time frame. The complexity of business reality is driven by different forces such as regulation, available talent, available capital, customers spending level, available innovation, politics and others. Setting and achieving business objectives bring into the equation of complexity an additional unique set of conflicting forces, and that is competition. Competition is when other businesses share similar objectives to yours and everyone can not have it in the same time. An objective that no other business tries to accomplish except for your business, within time becomes more of a personal ambition and less of a business objective. The "virtual" group of all actions a business is intending to take in a predefined time frame comprises the pile of corporate plans. In reality there isn't a one plan for a business that includes a recipe on what to do and usually it takes the form of several inter-dependent plans. In the complex and unpredictable reality planners consider known facts and also make predictions for different scenarios and how it can affect attaining the business objectives in a low risk fashion. Every action a business decides to take has a specific goal to be achieved; the process of breaking down the main objectives into the set of intermediary goals and setting the dependency among them represents the core of planning. A strategic plan contains, except for the description of goals and resources, a continuous and coherent line of thought that answers the questions of what is the current state? What concrete goals can be achieved in high probability with available resources and finally how these goals will contribute to the accomplishment of the desired objectives. This underlying stream of thoughts can viewed as one aspect of business strategy and that is why a strategic plan is called a strategic plan. The strategic plan takes into account the most important objectives for the business and dictates what to do with the most important resources available on a specific timeframe. A strategic plan is the root of any other plan in the organization. A business mission represents the path set in a strategic plan for reaching the objectives. The vision is a wider set of longer term objectives; and every strategic plan in its time has to be aligned with the general direction set by the vision's objectives. A strategic plan is made of explicit actions and their target goals (Or goals that will be achieved based on dependent lower-level plans) as well policies. Policies can be viewed as a set of rules that dictate the boundaries of actions laid in a plan. A rule unlike an explicit action is triggered upon certain predefined events and when it is triggered it activates other predefined actions for returning the business back to its chartered course. It is mainly a tool for accommodating the unpredictable nature of reality where a plan is executed. Achieving one objective can affect the success ratio of achieving a different parallel objective and policies serve as a synchronization mechanism for orchestrating a successful execution. In a short example of a business that develops and sells software for banks the top management assumes that an excellence positioning on customer service would be the right strategy for achieving their strategic objectives. Customer service excellence means maintaining a constant high level of service that is satisfactory in relation to their expectations and to what competitors offer. Business policies serve here as a watchdog for assuring the excellence level and when things don't go as planned different correctional courses of action are triggered. Of course it is not an automatic mechanism, but still it is a way for a business to react better to unexpected scenarios. It somehow reduces rethinking on core strategies when events occur and leaves more space for thinking on correction. Strategic policies can be viewed also as the corporate values that are wished to be maintained on a certain level for keeping the general direction of the company on its mission. A strategy is eventually translated into groups of standalone concrete steps – tactical steps, where every group of logically-bound steps share a visible and attainable goals that can be achieved only by successful and ordered execution. Tactics represent the implementation aspect of the strategic line of thought, where concrete actions take place with real consequences.