CYBAEA Journal

By Allan Engelhardt
[CYBAEA Journal]

Read the CYBAEA Journal for our latest thoughts on the business impact of disruptive technologies.

This blog is business focused and is relevant for large enterprises and entrepreneurial startups alike.

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Employee productivity revisited

On 2010-06-22 11:45:00, Allan Engelhardt wrote:

[Results of analysis shown in graph]
We have a mild obsession with employee productivity and how that declines as companies get bigger. We have previously found that when you treble the number of workers, you halve their individual productivity which is scary.

We now re-do the analysis four years later and, just because we can, we are using the leading companies of the London stock exchange instead of the largest American companies.

The results still hold. We called it the 3/2 rule: treble the number of workers and you halve their individual productivity. Large companies with ten times the number of employees are ¼ as productive as their smaller competitors.

Employee productivity is a big issue. If all the FTSE-100 companies achieved their average profits per employee, then the index would generate almost £1 trn of additional net profits for the economy.

Your mobile phone knows everything about you ... and it is telling

On 2009-08-17 09:18:00, Allan Engelhardt wrote:

We knew the potential existed already, of course. Mobile devices in the USA generates some 600 billion transactions per day, each tagged with the location and time. Jeff Jonas: Every call, text message, email and data transfer handled by your mobile device creates a transaction with your space-time coordinate[...].

The mobile operators have this data, of course. We all know this (especially here where we have been using some of it for social network analysis). No real surprises here, except perhaps in the volumes.

But did you know that the operators are sharing your data? What is new, at least to me, is that this data is being provided to third parties that are leveraging specially designed analytics to make sense of our space-time-travel data.

B2B Content Marketing

On 2009-07-22 06:59:00, Allan Engelhardt wrote:

The nice people at Velocity has released The B2B Content Marketing Workbook. It is behind a registration wall which means we wouldn’t normally recommend it but you can just type junk in the fields if you are not comfortable with giving your personal details to a marketing agency. (Think about it....) If you are relatively new in the B2B world, say having joined a professional services or consulting organization, you may find this one useful.

Marketing lessons from Antiquity

On 2009-07-10 21:25:00, Allan Engelhardt wrote:
[Cumaean Sibyl by Michelangelo]

A story from antiquity involving a king of Rome and a Greek Sibyl has lovely marketing lessons for today.

Sometime around 576 BC the Cumaean Sibyl arrives in Rome and offer nine books of her prophesies to King Tarquin, the legendary (in both senses of the word) last king of Rome (they had emperors after that).

The king laughs at the enormous sum she is asking for the books and sends her packing. She then burns three of the books and goes back to the king offering the six books at the same high price as the original nine. He rejects her again.

Then she burns three more of the books and offer the last three to the king at the same price.

This time he buys them.

Does social networks influence purchases?

On 2009-05-22 02:35:00, Allan Engelhardt wrote:

Havard Business School has an interesting study titled Do Friends Influence Purchases in a Social Network?. I would like to get my hands on the raw data (which is from the Korean social site Cyworld), but the outline conclusions seems plausible:

  • Highly connected people are negatively influenced by purchases in their network. This is consistent with a hypothesis that they are trend leaders who are always looking for new things to differentiate themselves from their group.
  • Moderately connected people are positively influenced by purchases in their network. This is consistent with a hypothesis that these people are trying to "keep up with the Joneses".
  • Weakly connected people (48% of the data set) are not influenced by purchases in their network. The paper rather offhandedly dismisses these people as "the low status group".

KDD Cup 2009

On 2009-05-12 10:02:00, Allan Engelhardt wrote:
[Full article]

The results from the KDD Cup 2009 are both interesting and fundamentally not interesting. For this public data mining challenge Orange, the mobile telecommunications company, provided anonymous data sets on mobile customers: 50,000 records each of training and testing data with 15,000 variables. (The data set are still available for download and there are also smaller data sets with only 230 variables.) The competition was to provide the best models for churn, cross-sell (“appetency”), and up-sell.

The problem with the competition is that we do not know what the data means: the variables are simply named Var1, Var2, ..., Var15000. This means that this is purely a statistical exercise and no understanding of the business problem is required or helpful. Which is really disappointing and made the challenge much (much) less interesting for me.

The financial crisis and physicists

On 2009-03-20 10:04:00, Allan Engelhardt wrote:
Dragon Ride, Southend-on-Sea

The financial crisis is all my fault. Or so David Smith from our friends REvolution seems to suggest in his post Physicists, models, and the credit crisis:

I remember working in The City in the late 90's and Wall Street in the early 00's and remarking then that just about every quant had a physics or engineering background. I met very few statisticians. Quantitative models have taken a hefty share of the blame for the credit crisis, but I wonder whether the blame lies more in their application, rather than the models themselves. Statisticians are trained on the limitations of models, and how to detect when models are breaking down, but statisticians were woefully underrepresented amongst quants. Do physicists and engineers get similar training?

I was a physicist who left the CERN research facility to work as a quant in an investment bank in the days before “banker” became a four-letter word, so I do have an opinion on this. I firmly believe that no statistician should ever be allowed out in the wild unsupervised, and this gives me an opportunity to also comment on the current crisis: We have the luxury to be angry with the bankers. I do not want to take that luxury away from us: it is wonderful that we can afford to indulge ourselves. But I would like to remind us that is is a luxury that we can afford, and that we can afford it at least in part due to those bankers.

Happy birthday WWW

On 2009-03-12 22:34:00, Allan Engelhardt wrote:
[Read article]

Twenty years ago, on 13th March 1989, Tim Berners-Lee wrote the original proposal for what was to become the World Wide Web. Happy birthday!

5 step process for customer base segmentation

On 2009-02-26 11:15:00, Allan Engelhardt wrote:

All too often marketing departments thinks that database analysis is the first, last, and only step in segmenting the base of existing customers. In fact, identifying clusters of common behaviors is only the first activity you should undertake in creating a customer base segmentation.

In this article we identify the five steps you need to follow for success. We also discuss when you can cut short the five step process.

3 things we want from a segmentation of the customer base

On 2009-02-26 08:16:00, Allan Engelhardt wrote:
[Main article]

Over the last years we have been doing a tremendous amount of customer segmentation work with the marketing departments in companies across a number of industries. We have experienced that there are many misconceptions about what “segmentation” really is, why we do it, and what we can expect to achieve from it.

In this first article in a series, we look at the goals and objectives you should set yourself for the customer segmentation effort.

The truth about venture capitalists according to Marc Andreessen

On 2007-06-10 14:00:00, Allan Engelhardt wrote:

Marc Andreessen, who as founder of Netscape and other companies knows a thing or two about the subject, has a nice little series on The Truth About Venture Capitalists, part 1, part 2, and part 3. We've said something similar before, but Marc puts it very well.

Innovation forever

On 2007-05-27 19:38:00, Allan Engelhardt wrote:

We are keen on innovation here at CYBAEA, so I feel obliged to mention two articles on the subject that I noticed this week. One talks about urban growth and what we might call the innovation horizon while the other argues that there are no age limits on innovation.

Enterprise social software and profits per employee

On 2007-05-24 12:48:00, Allan Engelhardt wrote:

McKinsey writes about Better Strategy Through Organizational Design and come out strongly in favor of Enterprise Social Software and collaboration techniques:

[T]he new element that can help 21st-century corporations create more wealth is large-scale collaboration, across the entire enterprise, enabled by digital technology. ... Digital technology provides the means not just to promote efficient, effective, and large-scale collaboration but also to measure each person’s “assists” and thus motivate employees to collaborate in ways that were not possible in the past.

Their arguments are closely linked to the profits per employee measure we introduced back in October last year. This is the most important metric for the CEO to manage.

Need to know versus need to share

On 2007-05-09 17:50:00, Allan Engelhardt wrote:

If you are into security, classification, and document sharing, then you need to read Jeff Jonas' post "Need to Know" vs. "Need to Share" – A Very Fine Line Indeed. Otherwise you should probably skip it.

Jeff, whom I met at the ETech conference, is one of the smartest guys around, and if you are interested in information sharing, data privacy, and mining shared data, then you will be interested in his blog.

Do you have a customer strategy?

On 2007-05-08 02:03:00, Allan Engelhardt wrote:
[Las Vegas]

I am in Las Vegas for the Unica user conference where we are considering the future of marketing (and how Unica can help you spend a lot of money, naturally). Darcy Bevelacqua from Harte Hanks had a neat line. As a consultant, she gets called in to help companies to define their direct marketing (and customer relationship) approach and to implement it. Her first question is Do you have a customer strategy?, and the answer is almost inevitable yes.

She then goes to Sales, Marketing, and Customer Service and seperately asks the question: Who is your best qustomer?

If she doesn't get the same answer, then she knows you do not have a customer strategy, not matter what your corporate slide-ware says.

She never gets the same answer.

Row over DRM

On 2007-05-02 12:57:00, Allan Engelhardt wrote:

DRM is DefectiveByDesignThe BBC is reporting on a row over HD-DVD encryption which was broken almost half a year ago by some customer who actually wanted to watch the movie he (thought he) had purchased.

I think it is terrible that anybody would even think about bypassing digital restrictions management (DRM) technologies, much less actually distribute the 16 bytes that makes up the decryption key in hexadecimal digits or otherwise. Truly terrible. I would never do such a thing. Ever.

The Post-GUI era

On 2007-04-06 08:28:00, Allan Engelhardt wrote:

The Post-GUI era. I like the expression and I think what it tries to encapsulate is important.

I am back from O’Reilly’s 2007 Emerging Technologies conference. The recurring theme of the conference, at least to my mind, was this: as technology becomes ubiquitous we need to think much harder about how technology interfaces with humans.

The world already has an interface, and it isn’t a GUI. We should learn from that.

Enterprise Social Software is Mainstream

On 2007-03-24 16:53:00, Allan Engelhardt wrote:

Enterprise Social Software has gone mainstream. I say this based on the fact that the analysts are now releasing stacks of research on this area. Forrester is a good example, and McKinsey is also in on it (yes, Web 2.0 is a strategic management issue now).

Enterprise Social Software Links

On 2007-02-19 10:08:00, Allan Engelhardt wrote:

We don't normally post just links, but sometimes it is just too hard to keep up with the good stuff. Mike writes from South Africal about lessons learned from social software implementations, and Centopeia (almost as difficult a name as CYBAEA!) comments on Lee's presentation at LIFT.

Optimal Knowledge Management

On 2007-02-12 22:17:00, Allan Engelhardt wrote:

Interest in productivity and how to manage innovation and know-how appears to be growing. Our article on employee productivity gets about four times more hits than the next most popular post. I imagine that more and more people in the West are waking up to the fact that innovation and high productivity is the only thing that keeps jobs here.

A recent paper from Harvard considers the optimal implementation of knowledge management. The maths is ridiculous, but the conclusions broadly ring true. With a slight reformatting for clarity:

We derive three main results [about the optimal management of know-how].

  1. First, information about successes is typically more useful than information about failures, since successful methods can be replicated while failures can only be avoided. This supports firms' focus on 'best practice'.
  2. Second, recording mediocre know-how can actually be counter-productive, since such mediocre know-how may inefficiently reduce employees' incentives to experiment. This is a strong-form competency trap.
  3. Third, the firms that gain most from a formal knowledge system are also the ones that should be most selective when encoding information (i.e., the ones that are most at risk from the competency trap); namely, large firms that repeatedly face problems about which there is little general knowledge and that have high turnover among their employees.

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