Web site update: Ten industry sectors

Just a quick note today as I wanted to share a new section of our web site that briefly describes sectors of our economy that our research suggests would be well matched to Kyield enterprise.  These ten sectors will be expanded to twelve in the near future with more detail on each, but we’ve had to restrict our published use cases due to the competitive nature of our industry and use of the Web. We will continue to develop specific use cases for clients in each industry to help them understand the functionality, value, and assess needs.

Aerospace / Defense Consumer / Retail Energy Financial Services Government

Healthcare Information Technology Life Sciences Manufacturing Travel / Tourism / Hospitality

I am headed out the door with our dog for a nice long hike in the fabulous sunshine and clean air of the southern Rockies at 7,000 ft elevation.  It occurred to me that it’s been too long since I took a few hours off and got some exercise… with a little reminder via the stern gaze and voiceless communication from Sophie….

time to get away from the machines for a while.. cheers, MM

Future of BI in the Organization

We enjoyed a pleasant surprise this week in the form of a new Forrester report that named Kyield as one of the interviews. The topic and content was certainly appropriate for introducing Kyield to Forrester clients:

Future of BI: Top Ten Business Intelligence Predictions for 2012, by Boris Evelson and Anjali Yakkundi with Stephen Powers and Shannon Coyne.

I have reviewed the brief paper, finding that I am in substantial agreement with the direction and predictions so I recommend the product, and I wanted to share a few additional thoughts.

One of the main themes in the report concerns expanding the use of BI throughout the organization, which essentially follows a proven management philosophy and strategy I have advocated my entire career due to a combination of logic, experience, and testing in many real-life cases.  In a broad sense this issue speaks to organizational awareness, or as too often has been the case; the lack thereof.

Whether missed opportunity or crisis prevention, the problem is not that organizations do not contain essential knowledge for good decision making—or even that accurate predictions are not transferred to digital form—indeed experience shows that digital red flags are commonly found that were appropriate, accurate, and in many cases followed rational policy. Rather, in the super majority of cases a combination of obstacles prevented the critical issues from reaching and/or influencing decision makers. It required more than a dozen years for related technologies to evolve and mature to the point of allowing our system to resolve this and other critical issues in near-real time, but that day has finally come.

I found it interesting that the paper acknowledges that BI has serious limitations, and that the next generation of technologies may turn traditional BI relationships “upside down”, to include business alignment. The Forrester team also warns clients about excessive control and the need for balance. Indeed our patented system provides fully adaptable modules to tailor to the specific mission and needs of the individual, group, and organization. Each organization requires the ability to tailor differentiation in easy to use modules based on standards that are cost efficient and adaptable for continual improvement.

Other highlights in the paper point to the benefits of a semantic layer based on standards and a well-deserved warning to avoid consultants and integrators who “love the old-fashioned BI” as it can result in “unending billable hours”. Of course this problem is not limited to just BI—a serious problem across the enterprise ecosystem that has resulted in a unified defense against any innovation that reduces costs and improves efficiency, leading to ‘lock-in’ and low levels of innovation in the enterprise.

Unfortunately for those who rely on inefficient systems and misalignment of interests, technology advances have come together with economic necessity at roughly the same time to form an inflection point at the confluence of organizational management and neural networks. That is to say that our internal R&D as well as considerable external evidence is in strong agreement with the advice the Forrester team provides clients in this report, including to “start embracing some of the latest BI trends — or risk falling behind”. That risk is currently significant, expanding quickly in 2012 and will no doubt impact outcomes for the foreseeable future. -MM

Strategic IT Alignment in 2012: Leverage Semantics and Avoid the Caretaker

A very interesting development occurred on the way to the neural network economy: The interests of the software vendor and the customer diverged, circled back and then collided, leaving many executives stunned and confused.

The business model in the early years of software was relatively simple. Whether an individual or enterprise, if the customer didn’t adopt the proprietary standard that provided interoperability, the customer was left behind and couldn’t compete—a no brainer—we all adopted. By winning the proprietary standard in any given software segment, market leaders were able to deliver amazing improvements in productivity at relatively low cost while maintaining some of the highest profit margins in the history of business. This model worked remarkably well for a generation, but as is often the case technology evolved more rapidly than business models and incumbent cultures could adapt, so incumbents relied on lock-in tactics to protect the corporation, profit, jobs, and perhaps in some cases national trade.

Imagine the challenge of a CEO today in a mature, publicly traded software company with a suite of products that is generating many billions of dollars in profits annually. In order to continue to grow and keep the job, the CEO would need to either rediscover the level of innovation of the early years—as very few have been able to do, play favorites by providing some customers with competitive advantage and others with commodities—occurring in the enterprise market but risky, or focus on milking the commoditized market power in developed nations while pushing for growth in developing countries. The latter has been the strategy of choice for most mature companies, of course.

Doing all of the above simultaneously is nearly impossible. Killer apps by definition must cannibalize cash cows and public company CEOs have a fiduciary responsibility to optimize profits while mitigating risk, so most CEOs in this position choose to remain ‘dairy farmers’ either until retirement or are forced to change from emergent competition. In discussing one such incumbent recently with one of the leading veterans in IT, he described such a CEO as “the caretaker”. For enterprise customers this type of caretaker can be similar to the one we hired a few years ago to protect our interests when we moved to the Bay area, returning to a property that was uninhabitable after messaging ‘all is fine’ (beware of the caretaker wolf in sheep’s clothing).

Now consider that software exports generate large, efficient import engines for currency in headquarter countries, thus placing those national governments in strategic alignment with the incumbents in the short-term (often dictated by short-term politics); and another entire dimension appears that is rarely discussed, yet very strongly influences organizations worldwide. This situation can influence governments in protecting and reinforcing perceived short-term benefits of commoditized market leaders over critical long-term needs of organizations, markets, and economies. It is not inaccurate to suggest that national security is occasionally misunderstood and/or misused in the decision process on related policy.

Monopoly cultures think and act alike, whether in the public or private sector, which is often (eventually) their undoing, unless of course they adopt intentional continuous improvement. This is why creative destruction is so essential, has been embraced internally by most progressive organizations in some form, and why customers should proactively support innovators and farm markets towards sustainable diversity. Despite what may appear to be the case, the interests of incumbents in enterprise software are often directly conflicting with the interests of the customer.

While the theory of creative destruction has roots in Marxism, the practice is a necessity for capitalism (or any other ism) today due to the natural migration of cultures and economies to seek security and protection, which in turn takes us away from the discipline required for continual rejuvenation. We embrace creative destruction in what has become modern global socialism simply because very little innovation would emerge otherwise. Competitive advantage for organizations cannot exist in rigid commoditization of organizational systems as we see in software. Simply put—whether at the individual, organizational, or societal level, we should embrace creative destruction for long-term survival, especially in light of our current unsustainable trajectory.

Which brings us to the present day emergent neural network economy. In our modern network economy we simply must have interoperable software and communications systems. The global economy cannot function properly otherwise, so this is in everyone’s interest, as I have been saying for 15 years now. The overpowering force of the network effect would place any proprietary standard in an extortion position to the entire global economy in short order. The current danger is that functional global standards still do not exist while national interests can align perfectly in the short-term with proprietary standards. That is not to say, however, that proprietary languages and applications should not be encouraged and adopted—quite the contrary—open source suffers similar challenges as standards in terms of competitive differentiation. Rather, it only means that proprietary technologies cannot become the de facto standard in a network economy.

In peering into the future from my perch in our small private lab and incubator in wilds of N AZ more than 15 years ago, the need for standardized structured data becomes evident, as does the need for easily adaptable software systems that manage relationships between entities. Combined with the data explosion that seems infinite, it was also obvious that filters would be required to manage the quality and quantity of data based on the profiles of entities. The platform would need to be secure, not trackable for many applications, reflect the formal relationships between entities, and set the foundation for accountability, the rule of law, and sustainable economics. In addition, in order to allow and incentivize differentiation beyond the software programmer community, thus permitting market economics to function, the neural network economy would require adaptability that is similar to that which takes place in the natural, physical world.

I suggest then while nascent and imperfect, semantics is the preferred method to achieve alignment of interests in the emergent neural network economy, for it represents the building blocks in structured data for meaning in the digital age, resting at the confluence of human and universal languages, and serving as the functional portal to the neural network economy.

Finally, as the humble founder and inventor, permit me then to suggest that Kyield is the optimal system to manage semantics as it intentionally achieves the necessary elements for organizations to align and optimize their digital assets with the mission of the organization, containing adaptable tools to manage the relationships between entities, including with and between each individual and workgroup.

May 2012 deliver more meaning to you, your organization, and by extension our collective future.

Historians will view 2012 as the inflection point for the semantic enterprise

While one can question my sanity for attempting to educate markets on the free and open Web (we have many times)—‘tis the season to be jolly’, fearless, or perhaps both, so in the spirit of the holidays let’s polish the predictive analytics in the neural network we call the human brain and make a prediction:

2012 Kyield Enterprise UML Diagram

Hindsight will prove 2012 to have been the inflection point for the semantic enterprise, representing a generational change at the confluence of information technology and organizational management.

Never underestimate the power of good will (or the human brain).

Happy Holidays and best in 2012!

 

 

Mark Montgomery

Founder & CEO

Kyield

http://www.kyield.com

Best of Kyield Blog Index

I created an index page containing links to the best articles in our blog with personal ratings:

Best of Kyield Blog Index.

Kyield is seeking select organizations to partner on enterprise prototype

Greetings,

We are now seeking clients to work in a collaborative manner to develop and test a fully functional prototype of our patented enterprise platform during 2012.

For a small group of well-matched organizations, we are prepared to offer exceptional benefits:

• Very attractive license terms of extended duration
• Extraordinary consulting in tailoring and optimizing the system
• Priority terms for future innovation, providing on-going competitive advantage

General target criteria for prototype / client partnership

Must be interested in improving:

• Crisis prevention
• Innovation
• Productivity
• Decision making

Preffered entity of 500 to 10,000 knowledge workers

• Flexible depending on work type & intensity
• Can go much higher but not much lower
• No direct competitors
• Strategic partner organizations possible

Above average technical environment

• Create original digital work products
• Distributed, remote workers
• Place high value on invention & innovation
• High value on prevention of crises & litigation
• High priority on competitive advantage & differentiation
• Thought leader more important than market leader

English language work environment

• To interact efficiently with Kyield, not for internal files

The project will require CEO/COO buy-in for unit or organization

• The nature of the organization platform will likely require CEO leadership prior to engagement

If your organization or a client matches these general criteria for this opportunity, or you are aware of one that might, please contact Kyield’s CEO Mark Montgomery ( markm@kyield.com ) to explore in more detail. 

Kyield will not disclose identities of either the individuals or organizations until both parties agree.

Thank you!

New executive summary + CTO recruitment

I recently posted a new executive summary on our web site so wanted to share the link here on the blog as it seems that many who visit the web site don’t visit the blog and v/v.  The ES is the best public source on Kyield.  I also wanted to link our LinkedIn ad – we are about half-way through the recruitment process for our future CTO. Thanks for your interest– MM

The Perils of Partnering in Enterprise IT – A Sad, True Tale

Note– this article is presented as an actual business case much like dozens of private organizational audits I have performed earlier in my career as a business consultant–for boards, investors, courts, and others. Those without experience as executive board members, audit, governance, and finance committees, or serving as an expert adviser to same, may not be in a position to understand and appreciate this case. Readers who are not expert on these issues (such as IT consultants) should learn from the case–that’s the reason for sharing it–market education surrounding the structural issues in enterprise software. While we cover technical issues in this blog, we also cover macro economics, business, governance, innovation and organizational management (among others). This article deals with advanced organizational issues; directed at corporate directors, CEOs, COOs, CFOs, the few CIOs who serve on boards of large organizations and their most trusted advisers. — MM

~~~~~

About a year ago I contacted an old friend at a large multinational enterprise software company who has been following our work for many years with an update on Kyield, and asked what the best method might be to form some kind of alliance. Due to a combination of our emerging technology, macro trends, and discussions with many of their customers and partners, a near perfect match appeared to be forming.

My friend said that their company culture (company x) doesn’t deal well with IP, small companies, or entrepreneurs, so suggested that we start through official channels and attempt to work our way through the maze. We began with the certified partner route even though our company is an innovator with key IP, not an integrator or reseller, which was understood from inception.

Due to the importance of emerging technology and innovation, most companies have high level relationship managers who report to the CTO and/or CEO, including for managing relationships with universities, venture firms, national labs, and legal with IP licensing. In some cases to include competitors of company x, one email has resulted in a quick response from the appropriate corporate officer, which provides a good backgrounder to this story. For anyone attempting to better understand what’s wrong with our economy, this should be instructive.

Following is a summarized, accurate description of our attempt to partner with this company with minor narration intended to better communicate reality.

1) Our initial effort was with the certified partner process in the form of a conference call with young, inexperienced people who clearly had no authority and had no choice but to follow the rigid rules in partnering through the certified reseller process. They were pleasant people I enjoyed speaking with, but from a business perspective a complete waste of time, so I suffered through it.

2) We regrouped, I repeated what Kyield was and was not. My friend asked several people internally what our next step should be. Apparently, at that time our efforts were elevated at company x to senior management, although the identity of the individual was never confirmed. My assumption then was that it was a senior competitive intelligence manager, and that they had a file on us all along. Given past history, I would have been surprised and a little disappointed in company x if they did not.

3) A few weeks later my friend suggested that we contact SVP (a) on the business side who shared acquaintances in customers, partners, and staff at company x. I made contact. SVP (a) responded that he was “the wrong person to pitch this to”, suggesting an office on the tech side, but did not make an introduction or provide a name or contact of the person we should be talking to, only that my friend could make the introduction if appropriate. My friend didn’t know who else to contact.

Consider as I did during this time that this is a company that makes and sells software that a significant portion of the world’s economy depends on for operations, yet internally they had no idea who to contact for which reasons (or so they claimed); a problem basic software cured long ago. It was becoming quite clear that titles and stated relationships were much different from authority and decision processes. We were left sharing thoughts internally: “if their high-profile SVP doesn’t know who to contact for issues in areas they are responsible for, who does?”

4) I recalled multiple overlapping relationships with a board member of company x dating back many years to the person’s university days, did a search in my own address book and found the contact, so sent a brief email. In the message I described our challenge in partnering with company x and mentioned that tens of thousands of customers of their company had demonstrated various levels of interest in our IP, from downloading white papers to one on one discussions with chair of their board. Many of our prospects have said that they would prefer that company x partner with us to reduce cost and complexity. Some have blatantly told us that this company needs to work with us.

The board member at company x forwarded my email to another SVP (b) within the hour on a weekend who then responded the following Monday with a meeting request.

I accepted the meeting request a few weeks out and invested substantial time and money on the trip only to find that the meeting was not really with the company, but rather the one individual. In my extended meeting with this individual, who is a very likable in person, it became clear that he was challenged with his role, appeared to be looking for external opportunity, and seeking what appeared to be free consulting at our expense. He asked strategic questions that were the most important issues facing their company, representing potentially tens of billions of dollars in answers. I was polite, but deflected the questions. I am a former business consultant, but restrict pro-bono services to worthy causes, not multinationals (obviously), and my role here was as CEO of Kyield.

5) The following day, unknown to anyone at company x, I had a meeting with an old friend who was a director of one of their largest partners and customers. We spent a lot of time discussing the situation at company x. He suggested that I copy their director on every communication from then on, which I have done.

6) After returning to my office I followed up with the SVP (b) individual I met, copying their board member. No response, no follow-up. A couple of weeks later I sent a fairly detailed proposal to SVP (b) and the board member that clearly outlined a partnership that could be potentially worth billions of dollars to their company, and importantly provide much-needed functionality such as crisis prevention and enhanced innovation to their customers, which are not areas this company is known for, nor were we made aware of any competing products. Several months later I have never had a response to that proposal.

My friend at company x seemed as confused as we were, as did several others who were current and former managers. Something was clearly wrong. My reasoning and proposal was based on solid business logic, global business culture, and the rule of law with IP in our system of governance and international treaties—this was logic-based partnering driven by customer demand, matching IP, and optimizing alignment of interests. This situation was win/win/win, but it didn’t seem to matter.

7) Over the following weeks, we reached out to many current and former company x executives, including another SVP (c), customers, partners, etc. in attempt to navigate the confusing culture. Several weeks later we were told by one of several of company x partners we were in contact with that the person I met with—SVP (b)—had left the company.

8) After several more weeks with no coherent response from company x, I sent a follow-up message to the board member describing our challenges. About a week later we heard from a new person from company x who the board member had forwarded my message to. This person wanted to talk to me to learn more about our challenges in partnering with their company, but failed to offer any business reason for us to do so. They wanted me to spend my money and time to visit them and consult for free about their structural problems and our technology, but offered no value to us. It looked to me like a major competitive intelligence effort, not an attempt to partner in any way.

So I declined and suggested they talk to my friend at company x, who was on their payroll, a long-term employee and had been in the loop all along. This person did so, responded in email a few days later in the most decisive manner to date, saying that part of the problem was that we were dealing with the wrong people (we were dealing with the people company execs suggested, of course). This person copied a group of new contacts to include SVP (d) we had not talked to yet, suggesting that this was the right person. SVP (d) immediately responded and copied yet another SVP (e), suggesting that he was indeed the person who we should be talking to, and that it was “his job”. SVP (e) responded immediately in a decisive manner saying that he would do the leg work internally and then get back to us.

9) SVP (e) and I exchanged several emails that would be considered more professional between experienced executives trying to find a path to work together for the benefit of their respective companies and customers. However, after a couple of weeks, he did say that he and his group normally only work with other multinationals, not smaller companies—signaling that he either didn’t want accountability or wasn’t the right person after all, so he suggested that we meet with a person who worked very closely with two of the others we had been in contact with during the past year, including the SVP (b) I met with. I sent this new person a private message in an attempt to expedite. He has yet to respond.

10) About a week later, I received a meeting request from an executive assistant of SVP (e), but it had no proposed name, location, or agenda. I responded that I was flexible on dates as partnering with their company in some manner was a priority (it wasn’t essential for integration, just preferred), but I would need this information before confirming or making the trip. A week later the EA of SVP (e) responded, ignoring my request and copied another person we could not verify (the discussions had included multiple offices–without a location it wasn’t even possible to confirm meeting, obviously).

I repeated my request more firmly saying that I don’t normally meet with anyone who doesn’t mutually agree on names, location, and agenda, and I was surprised that they did (in fact it was the first time I had ever received such a blank meeting request and I’ve dealt with senior execs at most leading companies in this industry and many others).

SVP (e) responded within 24 hours suggesting a phone conference, providing clarity on proposed agenda, but the agenda was to learn about our company and product which one would expect of a sophisticated CI operation, not a legit attempt at partnering. I responded in a positive manner, thanked him for his professionalism, and agreed to a phone conference, suggesting that I could work around their schedules and to please just send me an invite. It never arrived.

Several days later, I contacted the lead executive for partnering who reports to their CEO, suggesting they had major problems in the partnering process, and that I would discuss if interested as he claimed privately to mutual acquaintances. I received a five word reply, followed up, and never heard back.

About a week later I received an email from SVP (e), copying SVP (d) and several of the others who had recently been in the loop, saying:

After further discussion with internal stakeholders, I wanted to reach back with some closure on our earlier email thread regarding company x/Kyield partnering opportunities. At this time, a (relationship) with Kyield does not make sense for company x due to overlaps with (our) offerings and ongoing collaboration we have had with customers over the past (many) months to deliver products in this area.

Thank you for your patience as I worked to track down internally the stakeholders with whom you engaged, and the resulting point of view from our (delete) organization. As I began setting up a follow-up discussion, it became clear that such a meeting did not make sense based on conclusions that had already been drawn.

We appreciate your interest in partnering with company x and wish you the very best success.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
My response:

Dear xxxxx,

I appreciate your response. It would have been ethical and perhaps wise for others to inform us that company x was in collaboration with customers in competing products during the entire time they were talking to us.

To not do so is a very serious mistake. Frankly you confirmed our worst fears. We’ll review with our attorneys and look forward to inspecting your future products for patent infringement.

Thank you,

Mark Montgomery

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Conclusions

One of the reasons I reached out to company x was in part because I don’t see how it’s possible for company x to thrive in the future without our IP, and I thought they would be smart enough to see it. Some of the individuals clearly were, but apparently the company shares the broader culture in enterprise software: “Why pay for something you can beg, borrow, or steal?”.  The answer to that of course is that beyond what their parents should have taught them at a young age about doing the right thing, there are repercussions for our actions, even if some are too blind to see it.  Granted, perhaps our system and their company lack sufficient accountability and penalties for this kind of behavior, but consequences still exist–legal, market, economic, trade, regulatory, relationships, careers–the list is long. More importantly is that this type of culture and behavior erodes our entire global economy, one experience at a time.

From a business consultant’s perspective, company x has enormous opportunity to improve the bottom line, functionality, and efficiency by reducing the number of VPs and SVPs significantly, and installing a functional internal address book with clear responsibilities. They badly need to install Kyield, which would cure this problem, but I’ve lost trust and respect for the company so we’ll focus our energy elsewhere.

In addition to poor morale and operational issues, not least of which is bloat, like many other multinationals in recent years, this company has an enormous liability problem, confirmed by very large legal losses. The aging business model still kicks off sufficient cash flow that (apparently) the board doesn’t care enough to change.

While many of the individuals are ‘nice’ people, the culture and governance is frankly toxic—the only word that comes to mind, not just to David and Goliath in this story, but frankly this experience drove a wedge in-between several important relationships with both companies. I observed no respect for the property of others, tested often but gained no trust, and witnessed systemic lack of accountability in what is obviously a dysfunctional governance structure. After this experience it’s easy to see why this company has suffered so many operational problems. Company x is a classic case of the type Bob Herbold discusses in his book What’s Holding You Back, which I reviewed in my previous post.

Note that speculation on who company x is may be wrong. Also of note, I offered this story to CIO Magazine (through an editor) and Forbes (through contributor/columnist). CIO Magazine declined and Forbes contributor did not respond. I suspect conflicting relationships is the underlying reason, but we’ll save that topic for another day.

Book Review: What’s Holding You Back? — By Robert J. Herbold

While I rarely seem to have time for book reviews, the timing, content, and match to current needs of Bob Herbold’s new book is even more rare, so I wanted to share some thoughts while fresh. I read the book while on annual vacation in the San Juan Mountains with my wife at the end of September.

As a previous business and organizational consultant with dozens of similar cases in my past, combined with years of pro-bono advisory for the public sector and non-profits, and recent partner negotiations with multinationals, I can confirm that the operational guidance throughout the book is spot on.

Indeed, many of the current economic challenges facing the U.S. and EU can be directly traced to the consensus cultures in large organizations of the type highlighted consistently in the business cases Bob shares. In case after case, he shows us how lack of accountability, fear of negative impact on careers, refusing to take decisive bold action meeting actual needs, and poor cultures for innovation have led to failure in our hyper competitive global economy. We know what works and what doesn’t, but the truth is what works is quite often very difficult and uncomfortable; not unlike team competition on the football field or climbing mountains.

I suspect that this book will clash sharply with the predominant idealism found in government, academia, unions, and multinationals that have sufficient market power to ignore competitive issues during the tenure of current management, or so many believed until very recently. For decades now the most common response to increased competition has been to circle the wagons and kick the can down the road for the next generation to worry about, which is of course why western economies in particular are suffering today.  However common and popular, any such culture and practice is failure by any credible definition of leadership. This is why most strong leaders agree that we are suffering from an era of leadership crisis; it’s impossible to conclude otherwise.

Some managers in consensus cultures might even consider Bob’s message as brutal, claiming that such a management philosophy is politically unacceptable in their organizational culture. Such a conclusion would be accurate in many organizations I’ve worked with, which is why crisis is so common today. The mathematical truth in a world with finite resources is indeed often perceived as brutal, particularly for those who have enjoyed a life of surplus and subsidy. These are precisely the cultures and managers who need to fully embrace the teachings offered by Bob, if for no other reason than everything such cultures claim to care about are being economically devastated by uncompetitive philosophies and practices. It is ironic that what’s holding our economy back are so many cultures and leaders who are refusing to follow the proven practices that work in the real economy and attempt to protect a world that no longer exists, rather than deal with the reality we face on planet earth today.

While I found a few items I could quibble with relating to my own specialty work in Kyield, they are minor compared to the much needed broader message. A few of my favorite conclusions include:

• Avoid commodity hell
• Staff for success
• Move weak performers out quickly
• Creativity and six sigma don’t mix
• Demand accountability and decisiveness
• Value ideas from anywhere
• Exploit inflection points

In each of these areas and many others, Bob provides some detail on how to execute, whether in large global companies like his role at P&G and Microsoft, or in business units dealing with many of the same issues.

Finally, I’d like to share a few personal thoughts. While I’ve never met Bob in person, as is often the case in business we do have multiple shared acquaintances in our past, so I pinged him when reading the book and we’ve exchanged a few emails since.  I often thought about Bob in his role as COO at Microsoft when his duties included dealing with the DOJ on one hand and Bill Gates on the other, which frankly must have been among the most difficult positions any modern executive has endured. The outcome for Bill Gates and Microsoft was exceptional by any known metric, which can be largely attributed to Bob Herbold in my view.

In a recent interview and podcast with the Puget Sound Business Journal (my old stomping ground), the editor asked Bob about his experience at Microsoft and why the company has not been more innovative. His answer was almost verbatim to my own in answering the same question for my late partner Dr. Russell Borland who was on the founding team of Word, and a key person in many of the early products that still deliver most of the profits for MSFT.

Paraphrasing the answer: “It’s very difficult to voluntarily cannibalize two of the most profitable products in the history of business (Office and Windows)”.

Frankly, this reality was not easy for Russell to digest, nor even myself who was an early booster to MS. However, based on fiduciary responsibility that requires quantitative reasoning to guide decision making, a CEO in a public company wouldn’t voluntarily cannibalize such cash cows, and Steve Ballmer hasn’t, so it’s up to customers and innovators–that’s why we need new companies; creative destruction and disruption are essential to our economy.

Unfortunately for the world, when companies who dominate our work environment with commoditized products fail to innovate, and fail to provide easily adaptable tools that enable differentiation and competitiveness, the risk of failure becomes systemic to the entire global economy, acting like a wet blanket to creativity and economic growth. That’s why we spent 15 years creating Kyield—organizations simply can’t afford commoditization of the digital workplace environment, and the world cannot afford not to embrace the rare generational leap Kyield represents.

If you are a senior executive in a mid to large size organization, you will hopefully already have this book, but if not—buy it for all of your managers, then call me and let’s talk about what it will take to install Kyield in your organization so that your organization can execute and optimize the lessons learned:

What’s Holding You Back?

10 Bold Steps That Define Gutsy Leaders

By Robert J. Herbold

New paper: Optimizing Knowledge Yield in the Digital Workplace

I am pleased to share a new paper that may be of interest:

Optimizing Knowledge Yield in the Digital Workplace
A new system design for thriving in the data-intensive universe

From the abstract:

The purpose of this paper is threefold. First, it briefly describes how the digital
workplace evolved in an incremental manner. Second, it discusses related structural
technical and economic challenges for individuals and organizations in the digital
workplace. Lastly, it summarizes how Kyield’s novel approach can serve to provide
exponential performance improvement.

Alternatives to the CKO

My response to Dave Snowden’s blog post on alternatives to the CKO:

Thought provoking and refreshing; rarely have found fresh thinking on this topic– we could have benefited greatly from your view over the past few years David as we struggled through our design work, which forced us to deal with these issues.

I came to some similar conclusions after years of R&D and thousands of discussions with organizations at the top, bottom, and in-between– might be of interest. We found that in most orgs the philosophy, process, and functions (intent of KM) need to be distributed, but each situation was different — at times radically different for pragmatic and necessary reasons (legal, security) — frankly causing the software architect some grief (me) until we over came the adaptability issue in an affordable manner (a recurring theme here and elsewhere).

Given that an enterprise or organization exists for a mission (albeit questionable at times), is a legal and economic entity, with management sometimes held accountable for policy and decisions, centralization of the CKO role is necessary. But like David suggests — we made a mistake even calling the module a CKO module — revealing the buzzword definition problem in KM circles — some took it the wrong way — did more damage than good in many cases. However, we were able to automate sufficient tasks that the centralized role is very much a part time position on the computing side, need not be conducted by a titled person (we know of a few dozen CKOs), and in many cases shouldn’t be– in some orgs that are so blessed to have capable leadership– I like the CEO taking that role as much as he/she is able. Again the need for adaptability, particularly in the digital work environment which is historically rigid– was a key.

The system design should include some centralization functions (in digital world or real– security, policy, legal, meritocracy), but also have a similar function enabling large business units, project team leaders, and last but certainly not least the individual, where most of the future value lives in modern organizations. From a KM perspective, dealing with how the org and individual personalization interact was among the most interesting of our design process.

I am agnostic on the revolving CKO issue, except that agree that whatever label one puts on it– everyone should be exposed to the learning organization philosophy — in order to convert that philosophy to reality however, we had to employ a deep systems approach to organizational design.

The primary challenges not only had to overcome the organizational challenges, but also the many — in some cases more difficult– in computing.

–allowing adaptability without needing to reprogram– essential for differentiality and affordability

–providing the ability to align interests between the individual/project/unit/ and org

–prevent empire building and all that comes with it — easier said than done

I worked on our system design for many years.. after two leading online learning networks. One key was interoperability between units and orgs, which required either a fairly predatory approach with entrenched vendors — very expensive integration, or adoption of ‘universal’ standards.

In the end I embraced the W3C standards for the semantic web– followed for years and they moved in the direction we needed to go, eventually providing most of the functionality we needed. Several start-ups embraced early and finally Oracle offered a major product, making it more doable — slowly but almost surely, adoption is occurring. Google just embraced a video standard for example.

An interesting related article by Jenny Zaino discusses two important benefits of a good semantic design– meritocracy, and crisis prevention.

Realize you are speaking organization and not only computational here, but given the intrusion of the beast into virtually every organization, unlike many in KM, I found these issues necessary to address in computing.

Thanks for the discussion – MM

Alternatives to the CKO continued…..

Alternatives to the CKO, continued….

This post is a continuing discussion (Chief Knowledge Officer, or CKO) in response to Franz Dill’s post on his blog; The Eponymous Pickle.

There is so much history surrounding this issue (CKO) that I would write a book series about it if I had time. After years of running a management consulting firm, which we then converted to a knowledge systems lab and incubator, I found myself working increasingly as a citizen volunteer attempting to convince the U.S. Government to adopt advanced knowledge systems. The conversation began in the mid-1990s and then reached decision levels when so many of the world’s leading thinkers and analysts joined our online learning network from ’97 to 2000. Among dozens of other topics, we offered a high quality global news filter on KM, complete with intel briefs, and companion discussion list. With each major crisis since that time we’ve been able to confirm that with a state of the art semantic system in place those crises could have been avoided, and most probably would have been. The result is that if the U.S. had invested tens of millions a decade ago, we may have saved trillions of dollars by now, and thousands of lives.

KM started as a sincere early science that combined the research in learning organizations with information technology, which became far more complex for everyone with the commercialization of the web. Unfortunately, KM became a trendy buzz phrase and consulting practice before the majority offering services could even define it. Global self- accredited organizations sprouted up and many universities began offering PhD programs in KM before it had matured into a professional practice. In fact, of the many doctoral theses I reviewed on related topics in the1990s, a work in progress by Michael Sutton then at McGill University was among the most interesting, for it looked at the university programs themselves, which required deep consideration of the science and practice. I recall a pleasant meeting with Dr. Sutton and his wife when they visited Sedona, AZ during this time. Dr. Sutton is now assistant professor at Westminster in SLC — his completed thesis is available here (5+ MB pdf – a must for serious students and practitioners) .

Early on I found that the members of the Special Librarian’s Association (SLA) were among the most skilled at the functions organizations actually needed as the web grew exponentially; particularly those specializing as digital librarians. It may not be surprising then that Dr. France Bouthillier was Michael Sutton’s Dissertation Advisor. Dr. Bouthillier is a professor in Library Science and Information Studies at McGill University, which is one of the stronger programs worldwide. Academic KM programs have improved substantially in the past few years, although significant overlap still exists in KM, Organizational Management, Library Science, and CS, among others. It became obvious to me in our small pioneering lab that not only did we need better educational programs, skills, and tools, but more importantly we needed much improved system design.

When I joined the U.S. Gov CIO WG on KM, I quickly discovered an enormous difference in competency and culture within the agencies, some of which were predominantely focused on turf protection, careerism, and agency power rather than their true mission; as was clearly evidenced in the Katrina experience. I also discovered that some of the CIOs were focused on hardware, with very little if any understanding of the many other areas affecting organizational management, learning, productivity, and innovation; so it was foolhardy in many cases for the CKO to report to a CIO, which was the case for the entire U.S. Gov effort.

I then learned that any multi-agency effort — where the real need existed, must be placed on the WH agenda for any actual movement. After Katrina revealed blatant flaws in the system, I wrote a business case and submitted to agency heads, members of Congress, and many other leaders. We finally succeeded in achieving a mention for a generic KM system in the Katrina report, making the WH agenda for the first time, but nothing happened. Meanwhile, most other leading countries have adopted some variation of a national knowledge system, with the EU now leading the world in related investment. Australia recruited me a decade ago to discuss designing and managing their national system; an impressive $200+ million effort that was more advanced in many ways than the U.S. now — particularly in human systems, cross agency, and community-wide efforts. Australia has a smaller population, but is similarly dispersed and happened to sail through this global recession better than most — as did Canada — even given the more commodity based economies this connection is probably not a coincidence, based on my understanding.

So we continued to advance our own applied research, which includes a module that performs the functions of a CKO in the digital work environment we deemed necessary in what has been frankly a very chaotic working environment (a virtual CKO of sorts, although it does require a human to operate, set policy and security issues, and approve business unit modules.). Rob Neilson is one of our advisors — he was grandfathered in and approved by the DoD because he joined when he was consulting — now KM advisor to the Army. Rob was a pioneer in the CKO role where he held the position at NDU — although a decade old now and not nearly as deep as we have gone with functionality in the design since – his paper on the role of the CKO is still popular.

To say that it was challenging to overcome the design challenges in knowledge systems is a vast understatement; technical standards, meritocracy, alignment of interests, behavior, propogation throughout the organization, security issues, IP, rating systems, metrics, and more; each of which had serious challenges, and all interconnected both in terms of technical and organizational architecture. Did I mention culture?

We are focused on the corporate market now, where interest has been strong, particularly since the financial crisis provided ample motivation for smarter systems, but I am hoping that the Gov and Edu markets will finally embrace the state of the art and focus on their true mission rather than constructing barriers to improvement. There has been an effort to create a CKO for the U.S. Government, similar to the new CIO and CTO roles. I’ve been told by senior U.S. staffers that the CIO doesn’t have budget authority, which is the point where most of the turf problems are created — decisions on standards, silos are created, etc. I am not certain how effective a person with a title can be if they have no budget authority, if architecture is very poorly designed, and the tools are primitive relative to need. My position has been that far more can be accomplished by enterprise design.

A well designed architecture not only encourages departments to ‘talk’ to each other, but provides the opportunity and functionality within system parameters (regulations), improves on economic efficiencies/sustainability, improves innovation, and enhances security substantially. When properly designed such a system can actually manage the learning yield curve of an organization with ‘valves’ for quality and quantity, and provide rich metrics to visualize the process and results in the entire organization. That’s what is possible today. It seems to me that the recent evidence is abundantly clear justifying such a system, as we have been saying now to all who would listen for over a dozen years.
A very important topic that deserves a brighter light with a deeper explanation and historical background.

Mark Montgomery
Founder & CEO – Kyield
Web: http://www.kyield.com
Blog: http://kyield.wordpress.com
email: markm@kyield.com
Twitter: @kyield

SCENARIO 3: Roger the electrician at the hydro dam

Semantic Scenarios for the Intelligent Enterprise
A Kyield Hypothetical Use Case
October, 2009

SCENARIO 3: Roger the electrician at the hydro dam 

A hypothetical yet plausible scenario is presented that demonstrates the value of a state-of-the-art knowledge system deployed in a highly tailored, mission-specific environment, resulting in a very high triple bottom line ROI.

Summary: An energy industry employee normally unassociated with the term ‘knowledge worker’ proves essential to his employer, community, and national security. On a routine task in the field, Roger notices something odd, which initiates a series of data transactions. A ‘near miss’ between personal mobile phones has potentially catastrophic consequences.  The data reaches the appropriate team member in the decision chain, who begins the investigation. Fortunately for downstream residents, the facility was included in a test of the DHS prototype; a highly defined mission-oriented system with precision semantic intelligence embedded in every file entered into the system. The fully automated DHS system embraces interoperable standards, allowing less costly integration with powerful programs, essential allies, and global partners.  A classic case of well connected dots along a data trail with short cuts made possible only by highly relevant semantic intelligence embedded within a logical, holistic design.

Go here to download the full use case.

Mark Montgomery
Founder & CEO – Kyield
Web: http://www.kyield.com
Blog: http://kyield.wordpress.com
email: markm@kyield.com
Twitter: @kyield

MM: Is the U.S. Killing Its Innovation Machine?

Harvard Business Publishing has shared an intriguing series on U.S. competitiveness that frankly overlaps many of the issues we discovered early on in the Kyield voyage, much of which I think we’ve addressed in the architecture. The series is certainly worth your time regardless of where you live, work, and conduct business.

One of the articles in the series is ‘The U.S. Can’t Manufacture the Kindle and that’s a Problem‘, by Willy Shih. I agree with Willy generally, although I wanted to make a further point on cause, so I posted in the comment section and am sharing here as well:

MM: The Kindle is in good company. I have often compared the U.S. cultural view on globalization to the New Zealand experiment with a purist view of free market economics. In the case of the U.S., the prevailing view in business schools and media was heavily influenced by investment banks on Wall Street that had a bit too much skin in the game of M&A.

While I too am a purist at heart within my fantasy land, I am a realist in business and economics. The question by a poster here is one I hear often within global corps where managers often find careers ending prematurely if they question the religion: What difference does the country make?

In macro economics, which all companies ultimately depend upon, should therefore be keeping a close eye on, and in my view should have a proactive program to ensure functioning markets beyond the next quarter; unsustainable trade imbalances are not a good thing, particularly when the world’s largest economy becomes the world’s largest debtor nation. Even those benefiting the most from growth in Asia should be far more concerned than they have been — I am thinking of one board in particular and the damage done from their voice.

However, innovation is a much different story — culture matters, but location matters not. We released our white paper ‘Unleash the Innovation Within’ almost a year ago, which became among the most popular in our history within a short period of time. We concluded a few years ago that a holistic approach was needed to address the many structural issues in the modern organization relating to innovation, which by the way also affects crises prevention, governance, information overload (productivity), and continual learning.

Perhaps the real question that should be asked is: why is it that the U.S. cannot adopt state-of-the-art systems that would improve innovation and reduce crises?

Mark Montgomery
Founder & CEO – Kyield
Web: http://www.kyield.com
Blog: http://kyield.wordpress.com
email: markm@kyield.com
Twitter: @kyield

PWC on innovation

An exceptional article by PWC worth your time, particularly for large organizations:

Getting beyond novelty

How discipline and failure foster innovation

By Christoper Wasden

MM: Wasden spends quite a bit of time discussing the tension in the process of innovation, particularly the need for failure and how successful innovators quickly move beyond failures. I especially found the focus on discipline and markets to be refreshing, which is almost entirely missing in the U.S. policy of large scale R&D investments, for example; and big pharma which has a similar culture.

Some of the suggestions here are not universal — for example the quick failure model we and others employed in the mid 90s worked well for e-commerce and software applications, but it didn’t work for Thomas Edison, nor has it worked for Kyield.  Many of the best inventions and innovations require a long-term effort, and if killed off quickly — would never be born. Kyield’s key patent for example wasn’t even filed for nearly a decade after some of the lessons were learned from the predecessor; speaking to many issues, not least of which include the persistence often required for revolutionary innovation to hatch, rather than the incremental innovation promoted by entrenched vendors who were leading innovators during their own revolutionary times. While the ‘kill quickly’ formula isn’t applicable for every situation, there is a great deal of value here for almost anyone involved with innovation.

Mark Montgomery
Founder & CEO – Kyield
Web: http://www.kyield.com
Blog: http://kyield.wordpress.com
email: markm@kyield.com
Twitter: @kyield

HBR- U.S. innovation continued

This is my post in a continuing debate on U.S. competitiveness and innovation found here at the Harvard blog.

The current trajectory leads eventually to a much larger global crisis than we are still currently experiencing. The total liabilities will catch total net worth (should have been asset value) in the U.S. at some point in the future — a junction that jumped forward a decade or more in the past 18 months– this means the U.S. will be in a crisis until the balance sheet provides at least a small measure of solvency given future liabilities. We’ve been playing a game of chicken for far too long between socio-economic ideologies, neither of which frankly are credible from an economic perspective.

Shall we discuss (advertising) editorial influence on mass media? Economic diversity? The real cost of social elitism? Root causes of bubble economics — pension funds and endowments chasing 30% returns with 20% of the world’s investment capital rather than historic levels in the single digits? How many economists understand what that does to markets? If we want to discuss protectionism elsewhere, can we avoid discussing the cost of ancient guilds? Were you as shocked as I when the ACM announced university ratings and only one U.S. school made it in the top 10– Russia and China with 2 each, no doubt achieved at a fraction of the cost? Anyone game for predicting the future cost of system-wide moral hazard that has been realized? Unbroken monopolies? Predation? Cultural management?

The worst case scenario is that entrepreneurs stop innovating– many of the best have already taken that route, some by choice, most by markets– I deal with them daily. The reaction has been to institutionalize the entrepreneurial function in an attempt to make MBA grads VCs and entrepreneurs out of scientists; and we wonder why our economy is challenged?

In order to do this topic justice and deal with the root causes– everything else is noise, we’ve got to look at what creates the trade imbalance– part of which is certainly outsourcing, but more importantly are the barriers to innovation in the U.S. — as is often the case the most valuable data is not visible. I do agree with those who suggest that outsourcing contains a high probability of losing key IP, but then frankly that threat dominates the lives of innovators everywhere now, or should, certainly to include the U.S. where the cost of defending IP has not been viable for small shops or individuals for many years– unaffordable justice is as comparatively destructive to the economy as unaffordable health care or failed education; perhaps more so. Outsourcing is necessary in a global economy, and does have many benefits, not least of which is a higher probability of peace, but inability to protect original work and take to market is already having catastrophic consequences. Where would the U.S. be today without the tech giants of the previous generations?

The innovation conversation needs to begin with the very frank understanding that the U.S. dominated tech innovation and venturing for decades — from seed to maturity — but in the past decade it has quickly become hyper-competitive globally. We’ll need to disperse with dogma and comfortable assumptions such as ‘data collected has sufficient embedded intelligence to make wise decisions’, particularly within the time frame required to make those decisions, even assuming that those making the decisions are sufficiently unconflicted and able. It is with some irony that we realize while drowning in a sea of data that none of us are necessarily even in the loop on some of the more important trends occurring, which is why first hand experience is so important. All venture capital data for example is voluntary — the sector is hidden by confidentiality for good reason, but the secrecy also does great harm in spreading ignorance –politicians and the social elite combine with the guy on mainstreet who think wrongly that some brilliant scientist at a university will partner with an entrepreneur to correct decades of very bad behavior.

In the late 90s when we were operating a global learning network for thought leaders, the most eager to learn about venturing and economics were not from the U.S. at all — even when we pleaded for regional professors to engage, but rather almost everywhere else– Mongolia to Thailand to South Africa to Brazil. In the U.S. and much of Europe everything we and others did in our incubators was perceived as a threat to entrenched interests. Most of the world lacking those same type of entrenched interests saw only opportunity.

A decade later the FRB was quite comfortable with its assumptions regarding systemic risk in financial institutions, yet even after it had become obvious that their strategy (and many others) was clearly wrongheaded (after Ben B became Chair), a public liaison informed me that he “wasn’t allowed to elevate information on systems designed to prevent systemic crises”. In other words, it was the policy of the FRB apparently to remain ignorant of knowledge systems outside of their (academic) silo. Similar situations are found in most crises I have studied, to include in venturing where we’ve been holding up a red flag for a dozen years. The audit rule that led to Enron.. the Asian contagion.. the dotcom bubble.. institutionalization of venture capital.. the housing bubble.. I missed the SEC rule allowing IBs to leverage up to 50 to 1 on mortgage securities– I was too busy designing systems to prevent crises…

One credible sign of a failing system is one that defends against improvement — in the U.S. there is no effective manner to sell new innovation to the governments, including systems that would make the government smarter and more functional– I’ve been trying for a dozen years, during which time I turned down offers from other governments foolishly.

I spent much of the past decade founding and operating an early stage tech VC while working on designing more functional knowledge systems. Among those I found before my peers, but unfortunately didn’t profit from (we’ll save alignment of interests and incentives for another day, despite the importance), were Google and Skype. Unlike most firms sprouting up in the past decade (VC radically changed when institutionalized in the 90s), we were not geographically strategic. What we discovered was that the Internet had changed the game in ways far beyond what most were considering in the U.S. Not only were collaborators disbursed worldwide with around the clock functionality, but the technologies and even business plans were very quickly becoming of higher quality in other countries. The smart kids and adults were learning at a much faster pace. I myself am a product of sorts of self-learning using the Internet, quickly catching up and passing the majority of post docs in my fields of interests.

During the past decade many other countries have proven more likely to support locally produced innovation than the U.S., particularly at the critical early stages with real dollars from real customers, during a time when the U.S. flooded VCs with capital and freeism as the primary adoption model (“sling spaghetti against the wall to see what sticks”) — extremely destructive to functional markets. Market after market in the U.S. embraced what I will call blind globalization, losing local support and bias as our culture became mobile, cities began to all look similar, and the soul of many communities were gutted. Franchises and global giants dominated, which requires much different skills of managers than independent businesses– not creativity or innovation — a very poor environment for creating business leaders or entrepreneurs.

What’s worse, I noticed a sharp decline in the level of competency in the venture firms, entrepreneurs, and senior managers in global companies– in VC we experienced a generation who had never built a real business, yet those were precisely the individuals institutions felt the most comfortable placing money with — for those willing to shell out $3k you too could learn that PE was no longer about competency, but rather relationships. We have thousands of people in venturing who are incompetent now. As IPO markets sprouted up around the world and capital poured into regional venture firms, real entrepreneurs became some of the world’s best VCs in other countries.

Innovation is a very complex topic that is less influenced by R&D dollars than lobbyists would have us believe. We’ve identified well over a dozen essential elements for markets to be successful in venturing, involving macro global issues (including markets), micro local issues, internally in the venture, and of course the interconnected relationships. Even though I refer to the elements as essential, exceptions occur missing one or two, and they are not the same in each case, particularly recently in emerging markets. No market in the U.S. still has all of the essential ingredients due to both local and global macro issues. The probability of the next Intel emerging from the U.S. is substantially less in my view than in several other countries, and the list is growing rapidly.

Imagine if you will a tech titan that experienced change within a decade from market dominance, manageable debt, and large reserves, to a market with dozens of competitors, many of which now have healthier balance sheets, equally competent workers, newer infrastructure, and much healthier markets. That scenario more closely resembles in my view what the U.S. is faced with today, and no where is it more challenging than for emerging innovation that is still the underlying engine of our economy; particularly of the type the economy desperately needs. We need revolutionary improvement in our systems, complete with much smarter learning systems, far more effective incentives, realignment of interests, and cultural management that places a priority on self-preservation rather than self-destruction.

Radical perhaps to some, but may well be too timid given the challenge.

Mark Montgomery
Founder & CEO – Kyield
Web: http://www.kyield.com
Blog: http://kyield.wordpress.com
email: markm@kyield.com
Twitter: @kyield

HBR debate continued

Steve Hardis contributed an interesting article in the Harvard debate (Is the U.S. killing its innovation machine) on U.S. competitiveness titled: Beware of Government Solutions for America’s High Tech Sector.

My comment to the HBR blog is shared here as follows:

While I can appreciate Steve’s commentary on the negative impact of government on innovation, I disagree that reinforcing the past will work moving forward — indeed our approach has been outdated for over a decade.

I don’t see many here involved with tech transfer, or innovation for that matter, but I can say that the reality I see in the trenches doesn’t support either big government or global corporation’s view on innovation. Since our universities serve primarily government and corporations now, particularly in research, then I suppose we shouldn’t be surprised at the content of the sermons, regardless of merit.

The U.S. enjoyed a dominant role in technology innovation that has only occasionally been challenged within certain sectors in the post war period. That dominance was achieved largely through a command and control structure with gatekeepers on information and capital, increasingly through institutions suffering from the extension of the dysfunctional bureaucracy. In the past decade and a half, much of the world has improved significantly while the U.S. has deteriorated.

Business professors need to invest a bit more time reading scientific journals. MIT provides the bulk of its publication online for free as a matter of policy, but is no longer within the top five in computing worldwide. One can argue about ratings models, but the actual work I consume tends to support the ratings — not only is our K-12 system declining rapidly, so too are our universities relative to the world. As is the case with our investment in education and healthcare, we are investing increasingly more in higher education with deteriorating returns. The same is true with the bulk of investment in R&D both in the public and private sectors. (MM: suggesting a cultural problem).

Moreover, our financial markets have lost much of their credibility from seed to maturity, while much of the world has emerged as direct competitors, now leading the U.S. in many areas.

After 15 years in the trenches, it has become obvious to me that we need a more fundamental revolution in our thinking about models of incentivizing innovation. The models of the past will clearly not work moving forward– the ground has shifted, the environment completely changed, and the dominant markets have become hyper-competitive.

This debate has been interesting, is long overdue, but is not yet itself approaching competitive solutions, in large part due to lack of incentives for those with the knowledge to engage. As is so often the case today in our society, we hear primarily from those with conflicts; not those with solutions.

Mark Montgomery
Founder & CEO
Kyield

HBR Debate: Revamping DARPA

Professor David Patterson from UC Berkeley enters the HBR debate on U.S. competitiveness: Revamping DARPA is vital to Preserving the U.S. Lead in IT.

My comment on the blog:

David,

I appreciate your frustration, having heard much the same from many.

However, I would suggest that we have larger issues at work here than just failed tweaking of the DARPA model.

Our economy is suffering not from insufficient centralization, but rather lack of diversity. While I am one that agrees that DARPA can and should play an important role, it is a very minor issue in the grand scheme of things.

What we need is an entirely new research model that is less dependent upon DoD funding, and frankly less dependent upon universities and federal labs. Many if not most of the essential innovations that can benefit society I see on the horizon would be best served by smaller independent labs free from institutional conflicts.

The world has changed dramatically since DARPA was envisioned. Given the systemic failure all around us, we should be debating the fundamentals of the systems, and designing all new models tailored to the current environment.

Mark Montgomery
Founder & CEO
Kyield

HBR continued.. Capitalism or Wall Street

Andy Rappaport posted an article to the HBR debate on U.S. competitiveness: Outsourcing, the Culprit is Capitalism, not Wall Street

My comment:

Valuable comments. One of my primary criticisms of Wall Street in the past decade, and some of their largest clients, has been an enormous unproductive use of capital.

While Alan Greenspan has earned his criticism, at least his ideology was based on a belief that large investors would choose self-preservation over systemic suicide, rather than the more cynical view that has so often been rewarded in recent years. I long ago tested self-regulation in micro markets, so was not surprised, however sickening. But the FRB did not direct the fire hose of gasoline even if they provided much of the fuel, and refused to manage the blaze, much less prevent it.

At precisely the time when the U.S. badly needed to redirect investment — both public and private — to improve upon future competitive pressures already well under way, instead Wall Street elephants brokered trillions in unproductive, counter productive, and self-destructive assets.

At the early stages in technology venturing, deployment of capital wasn’t much better as a similar misguided philosophy of activism and emotional dysfunction ruled.

I personally find the excess in outsourcing to be sourced in a similar failed ideology — that somehow the end justifies the means — that to kill the golden goose is somehow justified. The convenient emotional delusion aligning with short-term greed and peer pressure within careerism simply doesn’t mesh with the math — my 8th grade math teacher hobbling on two crutches from his WW2 contributions knew better.

Jeffrey Liker raises a very interesting point — we developed a state of the art holistic system with a global leader in mind, and when I presented it to the chairman of the board — he said that their internal scientists had looked at the issue (for the sake of this point let’s call it knowledge systems), and deemed it impossible. Of course the same was said of his founder decades earlier, and neither were accurate fortunately, but I agree Jeffrey — the only reason I have been able to find at all for those in government and global companies in refusing to adopt holistic systems makes me very uncomfortable indeed — which is that they don’t want to prevent crises, improve performance, and increase both meritocracy and accountability.

One final comment that I haven’t seen raised here, and it should be raised. I firmly believe that one of the key drivers of excessive outsourcing has been what is largely invisible protectionism; that is the implication by governments in a few of the highest growth markets that goes something like this: if global companies want access to these markets — representing the vast majority of growth worldwide — and don’t want to face a government backed if-not-owned competitor, then we best see not only factories dotting the skyline, but research centers as well.

While the U.S. is certainly far from pure in trade, I do believe that the comparison to the NZ experiment in free trade is valid. We all know that trade is rarely free, but to ask (demand) that U.S. tax payers subsidize the exportation of future competitors whether through R&D deals with global corps, universities for decades, and/or tax incentives — is well beyond acceptable for this son of a lifer in the military who sacrificed in two wars, bringing his grief home to his family.

The problem isn’t capitalism — the problem was the scum that too often rose to the top of firms feeding off of capitalism, creating a culture that would not allow cream to rise to decision levels across their sphere of influence. I was so ashamed that I almost relocated permanently in protest. It has been a disgrace.

HBR debate… pleasing Wall Street

Ed Catmull posted an article in the Harvard debate: Pleasing Wall Street is a Poor Excuse for Bad Decisions.

My comment on Ed’s article is as follows:

It’s been clear to us for 15 years that misalignment between compensation incentives and the long-term needs of organizations, investors, communities, and individuals were increasingly competing for the prize of chief cause in systemic crises.

Let’s not forget the impact of stock options — both negative and positive, and the interconnected relationship with markets — from regional housing markets to Wall Street brokers to the formation of bubbles.

What we’ve found in our long-term effort, which trust me was far more difficult in my small private lab than the challenges discussed here and by my peers, is that to deal effectively with the highly complex issue of alignment of interests in large organizations, several other issues must be dealt with simultaneously, creating an exceptionally high bar for resolution in the digital work place environment that is infamous for incremental improvement at best. A few of the key issues I found in our research:

1) A holistic systems approach was essential, without which it may require dozens if not hundreds of years in an incremental model– my best guess is never.

2) Privacy / IP protection and transparency must be tailored by mandate in the vast majority of organizations; even those not required by regulation to do so.

3) The system must be interoperable so that it can be integrated with partners, to include in many cases public and private, R&D partners; without which new adoption is probably impossible anyway.

4) The system must be adaptable to quickly changing forces in the global economy, with the ability to tailor down to the individual.

5) A substantial menu of compensation models (psychological and financial) is required for tailoring to specific needs (for example the model described by Charles) — one size or model that normally dominate debates on motivation and compensation is based on either conflicts or ignorance– having nothing to do with the variety of cultures out there. Wall Street is a tiny minority culturally, despite the global impact.

6) Alignment of incentives is but one very important consideration in overcoming a host of interconnected issues facing large organizations today, all of which influence the other, requiring embedded intelligence on the individual worker, original work, communications, project teams, business groups, and organizations, among others.

Unfortunately, despite humbling interest in next generation intelligence systems, particularly in the past year, when we approach industry leaders we have been faced with a similar response to that by Vint Cerf when he and his partner presented their DARPA project to the then CEO of AT&T: “It’s impossible, and even if it were not….”, which is almost like saying survivability is impossible — from what I’ve observed in looking at our ever growing series of man caused crises — it may not be possible not to adopt far more intelligent systems design. Fortunately it is quite doable and far more strategic to the interests of many than they apparently understand.

After many conversations with decision makers in the private and public sector, I can confidently share that each needs to look at a mirror when it comes to adoption policies of long-term R&D in their own organizations, for that is the problem, assuming of course we want others to take the often brutal long-term approach to overcoming the most difficult problems, particularly in a manner free from conflicts that can actually lead to solutions. Thanks again for the contributions.

Mark Montgomery
Founder & CEO
Kyield
markm@kyield.com
Santa Fe, NM

Drucker on long term values

“Whether a business should be run for short-term results or with a focus on the long term is likewise a question of values. Financial analysts believe that businesses can be run for both simultaneously.

Successful businesspeople know better. To be sure, every company has to produce short-term results. But in any conflict between short-term results and long-term growth, each company will determine its own priority.

This is not primarily a disagreement about economics. It is fundamentally a value conflict regarding the function of a business and the responsibility of management.” — Peter Drucker, HBR 1/2005

Patterson gets personal at HBR

In response to David A. Patterson’s commentary directed at me in the HBR debate: Is the U.S. Killing Its Innovation Machine? He is Pardee Professor of Computer Science at the University of California, Berkeley. This blog debate is in response to his article: Revamping DARPA Is Vital to Preserving the U.S. Lead in IT.

My response to professor Patterson:

Resistance to change, fear of criticism, spinning results, avoiding accountability, clinging to past models — these are all symptoms commonly found in failing institutions. I wish I could claim to be the first to make such an observation, but actually the same can be found in the writings of the Founding Fathers of the U.S. among many others.

Actually my personal view is closer to my friend who sadly passed this past year who was deeply involved in tech transfer and commercialization at Berkeley for many years. Jay Morrison quite often shared his frustrations with me on just how challenging his job was with tech transfer at Berkeley, even if his professional passion and deep love of his community provided a regional bias.

In our many communications, I never recall Jay claiming that start-ups were natural at UCB…, rather we talked about heavy lifting — nor has it been in the few I reviewed at UCB — or the thousands of cases I have observed worldwide, to include Google. One thing nature does not have is self-serving bureaucracies, although certainly the actors are conflicted… although insufficiently evolved to claim otherwise.

It requires no courage to promote the university system, or to call for more R&D– certainly not here, nor does it lead to a better system. I certainly gain nothing from it. The power of universities in our society is indeed impressive, which is why so few dare cast a deserved stone on the pristine surface of academia. Tough love is an accurate description of my intent and role. I believe strongly in learning– institutions should (must) earn their credibility on a case by case basis– not just from peers, but those who support them. I have audited too many institutions for blind admiration, and consumed far too many dissertations with wildly inconsistent levels of quality awarded with the same degree, yet am still often impressed and amazed at the quality of a few.

I am free from both emotional and career bias, so on this topic I am more credible than a product of a university, and certainly any official.

I’ve been spending quite a bit of time reviewing Peter Drucker’s work in celebration of his life and contributions, having shared with my own personal network that we could have well used his advice and thought leadership over the past few years.

Rather than provide quotes, I would invite others to revisit his work as well– for your own learning opportunity– I share his view on life long learning rather than a one time event that lasts a lifetime… look closely at his observations on decentralization, bureaucracy, measurement, and accountability. It might also be worthwhile to review his and many other’s work on the natural inclination of entrenched organizations and cultures to protect the past rather than create the future.

My opinion based on thousands of cases in one of the more active careers in small and emerging businesses, to include counseling many university leaders on same, is to embrace diversity and competition. Small independent labs free from conflict, bureaucracy, and bias are simply that — they provide an advantage in some technologies that we would be foolhardy to ignore, particularly today with networked computing. Small and emerging business create most of the jobs, most of the wealth, and the vast majority of competition. Universities are not at all effective at creating businesses. Many are tragic. Too claim otherwise simply ignores an enormous wealth of brutally earned truth. Entrepreneurs deserve much better.

My own Kyield emerged from a self-funded lab, and served hundreds of university thought leaders who benefited from our pro-bono work and contributions, including the editor of this publication (MM: HBR — speaking of late ’90s) and most others worldwide. Would you have me be dishonest in what we learned? What purpose would that serve? What religion? What master if not the truth?

I’ll stand firmly by my position, even if (especially when) surrounded by those with direct conflicts of interest, yet still provided the podium — precisely how this debate was born, which threatens the very engine that supports governments and universities.

HBR debate … Think U.S. Tech Isn’t Healthy?

Laura D’Andrea Tyson contributed to the HBR debate with an article titled:  Think U.S. Tech Isn’t Healthy? Look at the Data.

A rich comment section followed. This is my contribution:

A very constructive debate that is no doubt having a broad positive impact, so you should all be proud of your public contributions — it’s badly needed from my perch. Many leaders have been having these discussions privately for years where I fear it did little good.

I believe Gary Pisano has it correct when he focuses on the trade imbalance. If all other theories to include promoting outsourcing were valid for the U.S. as a nation — rather than just global corporations and other nations, then the disequilibrium would surely have eased long ago.

I’m afraid what we have is a classic conflict between the fiduciary responsibility of leaders in publicly traded corporations on U.S. markets, and the reality of global economics with dysfunctional global regulatory bodies that lack the structure and ability to resolve such conflicts.

Some of the questions in these comment sections reveal a deep confusion that is prevalent in our society — many don’t understand how one can embrace global trade, yet complain about the results. The truth as I see it is that although we have a global medium with few restrictions, and we certainly have an interconnected global economy; we all still live in nation states, complete with an extremely complex web of trade law, currency policy, taxation, IP law, and wildly differing enforcement levels. We also have still quite different cultures, radically different cost of living, debt levels, environmental laws, subsidies….

Taken to its logical end state — the trade imbalance reflects structural impediments to market forces; otherwise markets would correct. One can argue that we are experiencing just such a correction now, and would have earlier if not for manipulation by the FRB, but then they have no control over the currencies of others, and we have little control over the silent barriers to market access. I believe that is why we are seeing intentional downward pressure on the dollar, which is at best a temp measure.

Higher educated and better trained workers in healthcare and house building does not balance the trade deficit — alt energy can help, but until we see common policy in currency as well as subsidies, and equal access to markets, it would require a remarkable miracle indeed for technologies deployed globally to correct one nation’s imbalance, particularly when that nation has much higher costs, yet the workers use the same automation, with unequal currency values.

Competitive taxation is a no brainer — an arms race type of investment with borrowed money very risky. A trade war would be foolish and self-destructive, but is a great concern to me given the scenario. We cannot spend our way out of this situation, and I see no technology on the horizon that has the potential to reverse the imbalance, particularly given that it would surely be deployed globally almost immediately today, thereby neutralizing any nationalist affect, even when the U.S. continues to pay most of the bill for global basic research.

This is not a happy situation. I did not complete my own book on global economics and innovation precisely because I could not foresee a transition that works for the U.S. given the challenge, short of magical enlightenment by trading partners, combined with a willingness to significantly downsize U.S. liabilities, and quick transformation of our learning ecosystem and culture. Quite a bit to ask even of an optimist — even if possible.

Mark Montgomery
Founder & CEO – Kyield
Web: http://www.kyield.com
Blog: http://kyield.wordpress.com
email: markm@kyield.com
Twitter: @kyield

SFI 25th Anniversary Celebration

It certainly wasn’t planned, but our decision to relocate to Santa Fe earlier this year combining with many years of work that included overlapping interests with Santa Fe Institute (SFI), several shared relationships, and the ‘invisible hand’ of chance all apparently had something to do with my attending this year’s annual conference at SFI. I’m glad I was able to attend for a number of reasons.

The conference celebrated a convergence of related events in time — 25th anniversary of SFI, with a theme of evolution in a nod to the bicentennial of the birth of Charles Darwin (Feb 12, 1809), but the underlying theme and lecture by the conference organizer — David Krakauer, chair of faculty — was the evolution of evolutionary theory, and I would add semantics of evolution (meaning), which is where the conference debate itself evolved by the end. Today’s use of the word ‘evolution’ seems to be limitless, although no other English word seems appropriate to describe a similar process in economics, sociology, technology, etc. etc. etc. One can certainly argue that everything man caused is by extension evolutionary, as we are biological life forms, but it doesn’t do much good when drilling down for learning.

Among the lectures for this two + day conference were: Darwin and Turing (Daniel Dennett), Malaria (Caroline Buckee), agent based paradigm (Robert Axtell), conflict (Jessica Flack), 2009 response to the H1N1 pandemic (Laureen Ancel Meyers), evolution of evolutionary theory (David Krakauer), web engineering (Graham Spencer – Google), evolution of human languages (Murray Gell-Mann), and a group led by J. Doyne Farmer on whether economics is a branch of evolutionary theory, or something else entirely.

I made a comment on the economic question that went something like the following… I moderated a very similar forum (in our GWIN Pro network) virtually a decade ago that included some of the participants cited (Krugman’s paper of a decade ago for example– I exchanged a few emails comparing biology and economics with Krugman during that era), and I have since come to the conclusion that economics is more like God, and biological evolution more like nature. The income and cost disparities were widely known (financial crisis was near the core of the debate), so from a crises prevention perspective– the financial crisis appeared intentionally self-destructive (aggregate). Before markets can work and behavioral economics can be credible, participants must have a choice (Alluding to the earlier comments by Doyne that implied a correlation between monopolies and crises – at least I took it that way).

Please understand the context in which I used the word God here; taking from Stewart Brand’s opening lecture when speaking about managing the world’s ecology — similarly in economics (directly interconnected to ecology), we are essentially acting as a God and so had best become good at it. I am not speaking here in the spiritual sense, but rather power and intent. I was surprised at the positive response to my comment.

I also attended the business network meeting, which was a much smaller sub-group primarily of reps from corp giants who are willing and able to pay the substantial annual subscription. SFI has gone through a change in management and reevaluation during the past year, including the business network. SFI was intentionally founded as an ongoing experimental work in progress, and has apparently gone through an important period of evolution itself recently.

From my perspective there are three primary strengths of SFI, which I have followed for 15 years or so off and on, consuming much of what is made publicly available.

1. The model is a very small core supported by external faculty around the world, and an independent institute that intentionally explores areas that are overlooked by academia, which tends to herd towards trendy science. So SFI is neither conventional nor large and bureaucratic– for that reason alone they attract many of the world’s leading scientists. Most of the big contributions to science, including Darwin, were largely outcasts of the academic mainstream at the time.
2. The interdisciplinary focus allows researchers to learn from each other and work together on many of the really big problems facing the planet, often temporarily so that they maintain their long-term job — usually at a major university. I have invested a great deal of time and design on this issue.
3. The location now on top of a small hill overlooking Santa Fe with the southern Rockies staring down provides an excellent mix of culture, nature, solitude, and peers.

It’s not by accident that LANL scientists enjoy the area so much. A long rich history combined with modern art, culture, and excellent food doesn’t hurt, and importantly what everyone cites over and over again — 15 minutes to anywhere in town is actually more like a half hour, but certainly influences me. It has always seemed obvious to me that smart people attempting to get things done cannot enjoy long commutes, raising many questions….. did I mention climate?

The conference wound up on Sat. (11/14/09) night with a VIP dinner of the combined SFI and SF Symphony Orchestra, which is also celebrating its 25th anniversary this year, and like SFI and most other non-profits, no doubt experienced some tough times in the past year with funding.

It turns out that Felix Mendelssohn (a German music prodigy who found success in England) was also born in early Feb of 1809, so after dinner at the Eldorado Hotel, everyone walked a block down the street to the Lensic Theatre to enjoy a concert of Mendelssohn’s music with actors playing Darwin and Mendelssohn.

It was the first time I had been in the Lensic or attended a concert by the Santa Fe Symphony — very impressive for a city of any size. As if nature were conspiring with the synchronization of the events, when the concert ended we walked into the street to find it snowing; beautiful with the lights of SF and a fitting end to an enjoyable few days for many.

Mark Montgomery
Founder & CEO – Kyield
Web: http://www.kyield.com
Blog: http://kyield.wordpress.com
email: markm@kyield.com
Twitter: @kyield

Preventing the next Fort Hood tragedy, by design

The recent tragedy at Fort Hood was only the latest in a series of crises that would likely have been prevented if the U.S. Government had adopted a logical holistic system design when I first began making the argument more than a decade ago. Since that time we’ve witnessed trillions of dollars and tens of thousands of lives lost; 9/11 and two wars, Katrina’s turf battles and incompatible communications, the mortgage bubble and global financial crisis, and now the Fort Hood massacre. The current trajectory of systems design and dysfunction isn’t sustainable.

“The care of human life and happiness, and not their destruction, is the first and only object of good government.” – Thomas Jefferson

While this particular tragedy is still under investigation, patterns are emerging that are very similar to previous crises, including 9/11. So let’s take a closer look at this event relative to what is currently possible with organizational design and state-of-the-art technology in order to better understand how to prevent the next crisis, for it will surely occur unless prevented by a logical holistic system design.

Crisis prevention by organizational design

It is true that some crises cannot be prevented, but it’s also true that most human caused crisis can be, particularly those that are systemic, including all cases cited here. In fact many tragedies are reported to have been prevented by intelligence agencies without our detailed knowledge, some of which would undoubtedly help inform our democracy if declassified, but we are still obviously missing preventable catastrophic events that we can ill afford to endure as a nation; economically or otherwise.

“In times of change, learners inherit the Earth, while the learned find themselves beautifully equipped to deal with a world that no longer exist.” – Eric Hoffer.

In each of the cases mentioned here, including Fort Hood, actionable evidence was available either on the Web or within the content of digital files residing on agency computer networks, but were not shared with the appropriate individuals or partners in the decision chain, usually due to careerism, turf protection, and justified fear of retribution.

It is difficult for leaders to understand that members in a hierarchical bureaucracy are often punished by micro social cultures for doing the right thing, such as sharing information or taking action to prevent tragedy. A good report from the field on 9/11 is Coleen Rowley’s Memo to FBI Director Robert Mueller in 2002.

Interests are not aligned: Denial does not a better system make

“The really valuable thing in the pageant of human life seems to me not the State but the creative, sentient individual, the personality; it alone creates the noble and the sublime.…” – Albert Einstein

The reality is that interests of the individual and that of the organization are often not well aligned, so system designs need to include intentional realignment. However, in the case of the Fort Hood massacre, red flags were so prevalent that many of us are asking the logical question: How explicit must a threat be before the systems will require action?

Red flags were hidden from those who need to know

In the case of Fort Hood, as was the case with 9/11, the U.S. Government apparently again experienced a data firewall between agency cultures, supported in previous cases by fear-induced interpretation of regulations and defensive micro cultures within agencies. The Washington Post reported that an FBI-led task force was monitoring emails of the suspect Army Maj. Nidal M. Hasan, some of which were shared with a Washington field office, but were not shared with the military, to include apparently Hasan’s supervisors who clearly were in the camp of ‘need to know’. A properly designed architecture as described in our recent hypothetical use case scenario for the DHS would have automatically alerted those in the decision chain who were pre-determined to ‘need to know’ when certain phrases are present, including the base commander and security officer in this case who may have prevented the tragedy in a manner that did not compromise the subject’s rights to privacy or freedom of religion.

“The status quo is the only solution that cannot be vetoed.” – Clark Kerr

One such semantic phrase for example that should probably be immediately shared with base commanders and counter terrorist experts would be: “communicating with known terrorists”. No one in the chain of command, including criminal investigators, should be empowered to prevent that information from reaching those in a position to prevent tragedy, whether a national security threat or localized. Indeed, logic suggests that local surveillance might be necessary in order to define the threat, if any.

Crisis Prevention by Technical Design

Among the many academic disciplines influencing modern enterprise architecture are organizational management, computer science (CS), and predictive theory, which manifests in the modern work place environment as network design, computer languages, and mathematical algorithms. The potential effectiveness of these disciplines depends primarily on three dynamically interrelated factors:

1. Availability and quality of the data

“A popular government without popular information, or the means of acquiring it, is but a prologue to a farce or a tragedy, or perhaps both.”

– James Madison

The problem reflected in the decades-old phrase GIGO (garbage-in garbage-out) used in computer science influenced the holistic semantic design of Kyield more than any other factor. Rather than attacking the root of the problem at the source and investing in prevention, CS in general and consumer search in particular have teetered at the edge of chaos by combining clever algorithms and massive computing power to convert unstructured data (GI) to relevance (GO). While search and conversion of unstructured data has improved substantially in the past decade, it cannot compare to a logically designed QIQO (quality-in quality-out) system. Evolving to a QIQO environment from GIGO in organizational computing requires a holistic solution that is focused on prevention, improving work quality, and enhanced innovation.

It became apparent during several years of extensive applied R&D shortly after the commercialization of the Internet and WWW that embedding intelligence in files would result in far more functionality and efficiency, particularly within enterprise networks.

Without availability of high quality data that provides essential transparency while protecting privacy, the potential of enterprise computing is severely hampered, and in some cases has already become more of the problem than the solution. Once essential data is collected containing carefully tailored embedded intelligence, the task of preventing crises can be semi-automated.

2. Interoperability through data barriers

“It doesn’t work to leap a twenty-foot chasm in two ten-foot jumps.”

– American proverb

Unlike other industries in previous technical revolutions, the U.S. has generally embraced a laissez-faire approach to technical standards, resulting in proprietary standards that are leveraged for market share. Unfortunately, the result in technology has been much like that in finance, although largely invisible with costs of inoperability transferred to customers. Unfettered innovation can have tragic consequences. In the network era, inoperable systems have increasingly contributed to some of our greatest challenges; including failure in crisis prevention, cost and inefficiencies in healthcare, and reduced innovation and productivity in the workplace. So in our case, even though voluntary standards are less than ideal, we’ve embraced the W3C standards for public transactions.

3. Data constructs and analytics

“Our major obligation is not to mistake slogans for solutions.”

— Edward R. Morrow

Once the essential data is collected, many of our current great challenges in organizations become within reach:

• Red flagging can be automated while protecting jobs and privacy.
• Realignment of interests between the individual and organization.
• Accountability and meritocracy is far more achievable.
• Original work by individuals and teams can be protected.
• Information overflow can finally be managed well.
• Creativity and innovation can be enhanced.
• Predictive and ‘what if?’ modeling /algorithms are much easier.
• Formerly essential unknowns about the org become known.
• The organization can become more adaptive to change.
• Cultural management and continuous learning is manifest.
• Rich visual metrics of formerly unknown patterns become routine.

Crisis Review

To his credit Secretary Gates has called for a system-wide review of the Fort Hood tragedy, which will coincide with reviews by the Army, White House, and Congress.

However, it would be irresponsible not to emphasize that the underlying stresses that likely contributed to this tragedy are directly related to failure in preventing previous crises. The result of previous failures to adopt logically functional systems is that our macro-fiscal situation in the U.S. is now so degraded that future prevention requires a much greater effort than would have been the case a decade ago.

Preventing systemic crises and related security (economic and warfare) are the foremost reasons for our government agencies to exist, and was the primary motivation for creating Kyield, even if the holistic design provides many other side benefits. The system problem has now been solved by design; but it has yet to be adopted.

“I am not an advocate for frequent changes in laws and constitutions, but laws and institutions must go hand in hand with the progress of the human mind. As that becomes more developed, more enlightened, as new discoveries are made, new truths discovered and manners and opinions change, with the change of circumstances, institutions must advance also to keep pace with the times.” – Thomas Jefferson

Mark Montgomery
Founder & CEO – Kyield
Web: http://www.kyield.com
Blog: http://kyield.wordpress.com
email: markm@kyield.com
Twitter: @kyield

Maya in the global parcel delivery business

A few months ago we decided to produce a series of papers in story telling format to better communicate the value of our Kyield system for decision makers in large organizations, rather than the normal highly technical use cases written and consumed primarily within the scientific community: ‘Semantic Scenarios for the Intelligent Enterprise’.

I just posted a new use case in the series:  Maya in the global parcel delivery business.

While these cases are hypothetical in nature, they are based on countless conversations to include formal audits in my consulting firm that pre-date the commercialization of the Internet, and even productivity software, but involve highly sophisticated state-of-the-art technology– we are finally resolving these complex issues even if the world has yet to deploy them. In this case I have attempted to demonstrate several very important issues impacting all of us, using the stage of a fast growing emerging market and mobile workforce to illustrate the challenges and potential. A few of the issues I attempt to demonstrate include:

1. The structural problems with intellectual property today, particularly in a wired world lacking security.
2. Importance of innovation in the workplace, or more often lack thereof, and why.
3. How to align interests between the individual, organization, and investors; critical as we’ve seen in the past 2 years.
4. The consequences of not providing meritocracy and transparency in a hyper-competitive global economy.
5. The benefits of attracting gifted team members in almost any industry, regardless of formal education.
6. A lesson in how not being too greedy can indeed be the most profitable strategy, even in the mid-term.

I hope you enjoy the format and content. Feel free to email me with your thoughts in private: markm@kyield.com

Happy holidays to you and your family– MM

Web 3.0 Leaders Look to the Year Ahead

Jenny Zaino at SemanticWeb.com asked a group of us to provide predictions for 2010. An interesting mix and worth a close look, particularly for those seeking input from the front lines of Web innovation.

Systemic failure requires new holistic cure

As I scanned mass media’s response to the latest terrorist incident, I found very little evidence from representatives of our democracy either in government or journalism who understand the complex issues involved with prevention of systemic crises.

Among the most informed voices I found on this latest terrorism incident is Eugene Robinson at the Washington Post who is one of few who apparently can see the broader problem with respect to counter terrorism. After asking a series of logical questions in his column, he suggests:

“If that’s how the system works, we need a new system.”

Mr. Robinson is correctly stating a fundamental truism; systemic crises require systemic solutions, or a new holistic system designed for the specific challenge. He closes the column with another statement demonstrating wisdom:

“I can’t escape the uneasy feeling that we’re fighting, and escalating, the last war — while the enemy fights the next one.”

Drawing from multiple disciplines in system design

From a system complexity perspective, which is invaluable during the design phase, I often compare large organizations like the U.S. Government to biological systems; one of several disciplines we draw from. In neurology for example, which is a highly complex system, a small percentage of mature adults have been found to experience something comparable to what has been occurring in the U.S. Government called multiple system atrophy (MSA). Unfortunately for MSA patients, no cure has been identified, so doctors can only treat symptoms.

Similarly, we have witnessed a crisis management structure in the U.S. for some time that only addresses symptoms, demonstrated in grand fashion during and after the financial crisis where meaningful reform has failed, despite an extremely dangerous crisis.

Unfortunately for U.S. citizens, one of the symptoms of a dysfunctional organization system is one that successfully defends against improvement. When one symptom is addressed, others tend to pop up in unexpected and often unrecognizable formats, until finally the patient dies from ‘complications’ associated with the underlying disease that has gone untreated.

Obstacles to adopting new systems, or cures

It’s no accident that new correcting systems are rarely adopted by our federal and state governments, and increasingly society as a whole. The protectionism manifests in powerful lobbies representing groups who have interests aligned with the status quo; not the country or its citizens.

We witnessed this protectionism visibly in another highly complex system—healthcare reform, which failed to address the fundamental problem of unsustainable costs already twice as high as any other peer country, and spiraling upwards out of control.

The current healthcare reform efforts may or may not eventually lead to lower costs, but clearly the inability to address the disease even in the midst of crisis (ICU) signifies not just a messy system often associated with our democracy in the past, but rather a failing system. I wish it were not so, but that is what the evidence suggests to me when comparing to a wide variety of other systems.

The best method I have found to measure system failure in states or countries draws from another discipline in economics where the purity of mathematics tells no lies. The U.S. has the capacity to balance the budget, but the system has failed to do so for decades, with the one exception being a temporary tax revenue windfall from the dotcom bubble in the Clinton era. Unless we adopt new and better systems, we will fail; it is indeed a mathematical certainty.

The current system so protects the status quo that it all but assures that new systems will not be adopted, particularly any system that is effective, thus either killing innovations or neutralizing functionality in the adoption process.

The protectionist strategy was clearly crafted incrementally over decades purposely to prevent precisely what is now desperately needed. Incremental reform is the favored tactic for maintaining the status quo in the least disruptive manner, whether in politics or information technology. Generations to come will live with the consequences.

Good news bad news prognosis

The good news is that I believe a cure exists for what is ailing the U.S. Government—I have called the system Kyield, which was designed at great personal cost and sacrifice. The bad news is that the inventor and majority owner (me) isn’t corruptible (actually my wife and my mother think this is good news — whether this is good for the patient or not remains to be seen), so it is highly unlikely under the current contracting or grant schemes that the cure will be administered to the ailing patient.

So it will require a non-traditional form of adoption outside the normal government contracting infrastructure for Kyield, or I suspect any other potential cure, to reach the ICU in an undiluted, effective form.

Related articles:

How to prevent the next Fort Hood tragedy, by design.

A use case scenario developed specifically for the DHS:

(MM: As I was preparing to post this piece to the blog President Obama held a press conference, blaming “human and systemic failures” in the Detroit incident, saying that the current U.S. system “is not sufficiently up to date.” Otherwise, “the warning signs would have triggered red flags, and the suspect would have never been allowed to board that plane for America.”  This is essentially what I have been saying for over a decade, including recently to members of his senior staff. )

Mark Montgomery
Founder & CEO – Kyield
Web: http://www.kyield.com
Blog: http://kyield.wordpress.com
email: markm@kyield.com
Twitter: @kyield

Automation of the modern day ‘factory floor’

I have written an op-ed on how to overcome the series of systemic failures we’ve experienced over the past dozen years, and submitted to a major publication.

In that process I shared the piece with a few people in my network, including an old friend and mentor who was on the founding team of one of the most important technology companies in the past century — ever, actually. In that discussion, I found myself using the factory floor automation in the industrial revolution to describe what semantic technologies can do, and specifically Kyield. My friend suggested that the ‘systemic failure’ in the recent terrorism incident may be as much human as data, to which I replied:

Of course it’s a human problem — just as errors on the factory floor were (in the industrial revolution – so it is with knowledge workers in the information revolution), which is a big reason why so much of (the work) was automated and made transparent to others. Similarly now with robotics entering surgery — we don’t want incompetent workers hiding their mistakes — covering up, protecting turf, their buddies, legacies, or organizations when it can cost large numbers of lives (or the global economy).

This is not to say that we want to replace large numbers of workers with automation, but rather put them to work in a less devastating and more productive manner. We really don’t need dozens of highly paid terrorism experts deciding which visa to yank, when in fact much (more) complex issues are already fully automated elsewhere in our society. Rather they should be trained to operate the CKO module in Kyield for example so that they can more effectively manage their organizations for continual improvement relative to their mission.

I would add that we also cannot afford, nor should we, to allow large numbers of mistakes like a Doctor’s handwriting on prescriptions continue to kill people. Similarly, we should not continue to promote by our apathy, or allow lobbyists to manipulate the process, over now curable diseases such as misinterpretation of data or lack of interoperability that determine the fate of wars, economies, and large numbers of lives. Moreover, we certainly cannot afford activism into enterprise systems like we observed in the housing bubble and meltdown.  We can’t afford it (status quo) economically or morally. Fortunately, it is no longer necessary relating to enterprise networks, which determine to a large extent how modern organizations function– meaning our society.

Mark Montgomery
Founder & CEO – Kyield
Web: http://www.kyield.com
Blog: http://kyield.wordpress.com
email: markm@kyield.com
Twitter: @kyield

Embedded meaning in art!

Since I am limited by what I can share with explicit technology, I thought perhaps a soft piece might demonstrate through art what is at its core ancient trade craft.

My wife Betsy took up an art form a couple of years ago that intends to extend meaning from the individual artist specifically to the recipient of the piece, focusing on issues that have meaning between the two individuals. In one piece she created for the two of us, Betsy captured a hike in the high Sierras to remember our vacation that summer.

By using a combination of paints, sand, recycled materials, and a tiny bit of native materials, the result is a remarkable visual that instantly reminds me of that particular hike and our week’s vacation up in the Sierra; one of many we’ve been on in our nearly 30 years together. This visual form of communicating specific meaning between the two of us is highly effective in calling up a stored memory, but would not mean nearly as much to those who did not share the same experience.

In her most recent work in progress displayed here, the recipient is an old friend who teaches art to children. The vase on your left is a mosaic of photos sent by our friend of the children and their work in her studio, with the arms embracing the vase suggesting that the children are protected by good stewardship. The vase on your right depicts Betsy’s recent work. As a third person not involved, I may be interpreting this a bit differently than intended, which is fine of course, but I suspect that the two of them will interpret the visual meaning quite similarly.

This art form makes use of a universal language (vision-shapes, textures, colors, images, etc.) to communicate a specific message between two people that is based on shared knowledge and experiences stored in memory. In this case the shared experience dates back more than 30 years to a very unique time and place, with a significant recent update of information (‘catching up’) shared between the two in an e-reunion. The visual communication embedded in the art is heavily influenced by recent text exchanges in the shared non-universal language of English, which then recalled spoken English stored in memory from 30 years ago.

Those who have invested a great deal of time studying computing languages on the Web will probably already see the parallel to the direction of the Semantic Web. Yesterday I took a break from my work to watch Betsy completing the final phase of this piece, and I was struck by the similarity of her art with my work in Kyield.

I could see many commonalities between the two mediums, not least of which are dynamic relationships, adaptation, change of entities, updates, and mixed use of universal (visual) and ‘proprietary’ (English) languages. While substantial differences exist to be sure, we can learn from this much older form of  expression, as well as the parallel innovation of personalization.

Mark Montgomery
Founder & CEO – Kyield
Web: http://www.kyield.com
Blog: http://kyield.wordpress.com
email: markm@kyield.com
Twitter: @kyield

Systemic failures, by design

I submitted this op-ed to several leading publications since writing it on January 4th, all of which either declined or failed to respond. See my note below, thanks. — MM

~~~~~

Over the course of the past dozen years the U.S. has experienced a series of dangerous and costly systemic failures throughout our security and regulatory framework. The unfettered bubble in technology, missed opportunities to prevent 9/11—leading to two ongoing wars, the tragic response to Katrina, the largest financial crisis in history, the Fort Hood massacre, and the ‘underwear bomber’ incident on Christmas Day all share one commonality.

In each of these cases, data had been collected by U.S. government agencies that contained a high probability of either entirely preventing or substantially mitigating each event, if only the information had been recognized and acted upon within the window of time allowed by circumstances. In case after case, repeated warnings by recognized experts, sourced internally and externally, were ignored or suppressed.

Concurrent with this series of historic failures, advances in the multi-disciplinary area of knowledge systems has dramatically improved our ability to predict and prevent crises. In the specialized field within computer science generally known as semantics, digital files are embedded with pre-defined meaning and executed in an automated or semi-automated manner that can reduce or eliminate common human failures, regardless of cause.

This technology is successfully deployed today in other large scale data environments where human errors, conflicted decision making, lack of interoperability, and misinterpretation of data have long been associated with systemic failures. When combined with rich meta data in each digital file describing the interrelationships of topics, organizations, and people, these type of human-caused systemic failures simply need not occur.

For example, if a state-of-the-art semantic architecture had been deployed prior to 9/11, the Phoenix Memo would have contained sufficient embedded intelligence to automatically elevate the red flag warning not just within one agency where internal conflicts are common, but also notify pre-selected decision makers in partner agencies with built-in tracking to ensure accountability as well as instant audit reporting; significantly increasing the probability of preventing two wars.

In the Fort Hood massacre, a logical semantic system should have required an alert to the base commander and appropriate security personnel about Maj. Nidal Malik Hasan, who apparently displayed a red flag warning on a continuing basis. In the most recent incident on Christmas Day, a properly designed system would have profiled not just yet another youth succumbing to militant religious extremism, but the quality and relationship of the information source, which would then have automatically placed Umar Farouk Abdulmutallabon on the no fly list.

Within the financial regulatory arena, a properly designed system for banking regulators around the world would have automatically linked the incoming data from university and independent researchers that clearly displayed dangerously spiking discrepancies between earnings and mortgage levels in multiple regional markets, thereby making it difficult if not impossible to ignore, or later deny knowledge of a multi-trillion dollar financial crisis in the making.

In our highly complex, interrelated, and rapidly changing world, these types of crises are simply too dangerous not to prevent, which is why so many countries around the world have targeted semantic systems research and development as a high priority.

In order to achieve a higher level of functionality required to prevent these types of crises, leadership must first acknowledge that misalignment of interests exist throughout their organizations; not just in sharing data, but also in the design and adoption of enterprise systems. More than a decade of attempting to improve knowledge systems in federal agencies has repeatedly demonstrated that effective solutions cannot emerge from the institutions implicated in the systemic failures. Despite tens of billions of dollars invested over the past decade, U.S. government agencies are still a decade behind in state-of-the-art functionality in knowledge systems.

In understanding the breadth and scale of both the need and potential of improved knowledge systems, we should reconsider that during the past decade the U.S. national debt more than doubled, the number of jobs created stands near zero, and the U.S. stock markets delivered the worst performance in 200 years of history, providing investors with a negative return.

The direct correlation between a series of systemic failures and the precipitous decline of the American economy could not be more evident, so no greater priority exists, for all other goals depend in varying degrees on successfully overcoming this challenge.

We are wasting precious time.

Mark Montgomery is founder and CEO of Kyield; a holistic enterprise system with a mission to enhance innovation and productivity in the digital work environment while mitigating or eliminating human-caused crises. A former business consultant and venture capitalist, Mr. Montgomery has been involved with knowledge systems research, development, and testing for 15 years. He is inventor of the patent-pending design for a semantic enterprise system licensed by Kyield.

~~~~~~

The publications that declined this op-ed include the Washington Post, New York Times, Wall Street Journal, and the Financial Times. I also sent the piece to the all of the major television networks that obviously struggled to find experts within their normal guest lists who understand the issues, but to date while several visited our web site, none have replied.

One of the few individuals who has replied is also perhaps the best informed. Peter Baker’s article in the NYT ‘Obama’s War Over Terror‘ is the most revealing I’ve read to date on recent internal dynamics in the U.S. government. Near the end of this long article Peter quotes John Brennan: “A lot of the knuckleheads I’ve been listening to out there on the network shows don’t know what they’re talking about.” In this regard I am in complete agreement with Mr. Brennan. The coverage on counter terrorism in mass media has quite often been embarrassing, and frankly damaging, for a misinformed democracy cannot correct course.

Mark Montgomery
Founder & CEO – Kyield
Web: http://www.kyield.com
Blog: http://kyield.wordpress.com
email: markm@kyield.com
Twitter: @kyield

Newsletter: Transforming the Enterprise

We published a new email newsletter for Kyield customers and partners titled ‘Transforming the Enterprise‘. In the first issue we summarized very briefly the past decade, with updates on recent activity. Those who are interested in the semantic enterprise, analytics, crisis prevention, innovation, and information management will likely find the newsletter valuable. And for those interested in Kyield the newsletter is a must have time saver that consolidates links to news, articles, and papers. A subscription box and links to the archives are available on our web site here: http://www.kyield.com/newsletter.html

Systemic Failures in Cyber Security

My reaction to a piece by George Hulme at Information Week’s security blog titled: National Cyber Security: Are we focused on the right stuff?

Clips from George’s post:

“Sensitive information is stolen daily from both government and private sector networks, undermining confidence in our information systems, and in the very information these systems were intended to convey,” said Blair in prepared remarks outlining the U.S. intelligence community’s annual assessment of threats.

“It’s a systemic problem throughout the software industry. Pick a major software maker – any one – and you are going to find security flaws a Navy armada could pass through.”

“As it stands now, it’s the software companies customers that pay the tax in the form of unending patch updates and attacks on their systems.”

“And it’s time to put more ideas on the table. And we should be open to consider anything, as the status quo of software quality can’t stand as it is.”

My response and comment:

I’d like to offer a very important point that most are missing in this and other similar issues.

You correctly describe the problem as systemic, which is a term we’ve been using for well over a decade to describe a myriad of problems, including security in computer networks.

If the problem is truly systemic, and I think it is, then it can only be addressed successfully with a systemic cure. Central to the core of this challenge is the anonymity of the Internet, which identifies computers, networks, and web sites, but not the humans that abuse them.

Despite populism, comfort zones, and conflicting business models, human identity is a corner stone of the Internet that was never built into the system design, and so ever since all manner of temporary brace has been employed to shore up the fragile architecture.

Unfortunately I think part of the cause was the culture the technology emerged from, which then created a large industry of maintenance/security firms, but what we really need is a stronger architectural design from the ground up.

Mark Montgomery
Founder & CEO – Kyield
Web: http://www.kyield.com
Blog: http://kyield.wordpress.com
email: markm@kyield.com
Twitter: @kyield

SFI video lectures on innovation

I came across a very interesting two-part lecture series on innovation this week that was conducted near my home last summer at the Santa Fe Institute.

The professor giving the lecture is Andrew Hargadon, who currently holds the Endowed Chair in Entrepreneurship at UC Davis. Professor Hargadon Blogs here, and a brief interview on the series is located here.

SFI is kind enough to offer the two videos freely on the web, each of which is about 90 minutes in length. I watched both lectures within 24 hours of writing this so they are still fresh. I agree with about 90% of the lecture series and highly recommend it, but my recommendation will come with a brief critique and a warning regarding the other 10%.

The central point of the lecture from the historical review of innovation is that our history books are filled with innovators who are often mis-credited with inventions that were largely copied, stolen, or slightly improved versions of other’s work. In several cases he unveils the essential contributions of others who were generally not credited properly and lack celebrity, which is appreciated.

What bothers me about the message Andrew projects is that it’s very similar to the message coming out of finance in leading MBA schools a decade ago, which is sourced in cynicism– that there is no room for ethics or justice in business, that product quality is much less important than exploitation skills or market power, and creativity only matters relating to exploitation of others. While that has been largely true in the past, I reject that philosophy outright for the future, and particularly sourced from universities. Indeed, it is precisely because of that philosophy in so many of our MBA schools and board rooms that U.S. business is doing so poorly, and why Silicon Valley is experiencing a sea change, or a “nuclear winter”, as one leading VC partner described the valley before we both left.

Our society is quite skilled in pronouncing the obvious after the fact, supported by all manner of measuring tools, but we are severely challenged in measuring the invisible, which is often far more important. For example, while we understand the value to society of exploitation of other’s work in the past, does anyone have a clue to the enormous cost? What is the cost of not inventing? What is the cost of not sharing the most valuable science with those who exploit? Do we really think the smartest people in the world are fools? Apparently so.

The problem for venturing came to a head in the late 1990s as me-tooism reached epidemic proportions when the smartest people were exploited by the creatively challenged. Silicon Valley has been in various phases of decline ever since. The synonym for exploitation is ‘abuse’. It’s difficult to build the type of sustainable networks called for in this lecture when abusing partners or customers as the lecture also calls for. We are a networked world, increasingly aware, and SV no longer has a monopoly on venturing.

The culture of Silicon Valley often misses a key point that threatens their future. While they expect and demand enormous incentives for their work, many seem to misunderstand that the rest of the world needs incentives as well, and without the rest of the world’s support SV is toast; so a rethink of philosophy, culture, and modeling is past due. To some extent the same is true for the U.S., but truthfully my experience has demonstrated that most of this cultural problem is restricted to very few boardrooms in monopolist corporate cultures, very few business schools, a handful of VC firms, and a few firms on Wall Street. Everyone else in America seems to get it.

While it’s true that Microsoft and the early Apple were of these types of cultures, as were many others, I don’t think many thought leaders would agree that Apple isn’t focused on product quality today (Hargadon worked at Apple in the early 1990s), or much question that Microsoft needs to focus on authentic internal innovation in order to thrive in the future. The world today is much different than just five years ago and barely recognizable to the world of a decade ago.

I would like to see professors of entrepreneur programs focus less on exploitation and more on increasing structural integrity within innovation networks, which is essential. In Kyield for example we have focused on providing real incentives and protection for intellectual contributions, which builds trust, without which brilliant and creative people at best stop subsidizing those who have been trained only to exploit their work, and at worst begin to undermine the system in place, which is precisely what is happening to SV.

That said, the bulk of the lecture series is very good to excellent on the topic of innovation and the need for building strategic networks. While I disagree with Hargadon’s claim that “the network is the innovation”—to imply that Einstein and DaVinci are more irrelevant than an MBA student is ridiculous—it is a message that needs to be better understood, particularly in networked industries or regulated markets like computing, pharma, and energy, which is Hargadon’s specialty. More independent or stand alone innovations still require networks, but of a different kind.

The most valuable aspect of the lecture is the occasional focus on the enormous need for scientists and policy makers to focus research on markets, or the actual needs of people, rather than what scientists and politicians project from a conflicted chair. Our basic R&D system is wasteful and inefficient due in part to the culture and in part to poor investments that are simply impossible to adopt, whether for social, technical, or economic reasons. Granted that basic research is usually not intended to result in products, rather a better understanding, but it’s also true that the primary sponsor is broke in part because of the lack of accountability throughout the system. Fiscal discipline is absent in all of the scientific disciplines.

Part 1 of the lecture

Part 2 of the lecture

Mark Montgomery
Founder & CEO – Kyield
Web: http://www.kyield.com
Blog: http://kyield.wordpress.com
email: markm@kyield.com
Twitter: @kyield

An OS for human organizations

I am working on a new paper describing how Kyield has evolved into an operating system for organizations. We just released a new presentation that provides an introduction and executive briefing:

Kyield Presentation Transforming the Organization

(3-5 minute pdf)

Toyota’s failure to act on the dots

It seems that every few weeks we hear of another major series of tragedies leading to a crisis that could have been substantially mitigated, if not entirely prevented. Among the most disturbing to discover, and most costly, are those involving safety issues that either threaten or cause loss of life.

Often has been the case during the past decade when the organization involved has been a government agency, but this quarter Toyota wins the prize for failure to act on the digital dots in the enterprise (in fairness Toyota should share the prize with NHTSA—also the front runners for the annual prize—it’s still early in the year).

In the case of  Toyota, we may never know how many digital red flags existed within the enterprise network, but the clear pattern in other cases suggests that the probabilities are high that warnings were common within communications, documents, and web servers indexed by enterprise search engines. Similar to previous events, these problems were known for years by the corporation and the agencies charged with regulation, yet they collectively failed to prevent loss of life, resulting in personal tragedy for a few and far reaching economic destruction in one of the world’s premier corporations.

While growing too fast may have contributed to this problem, it was organizational system design that allowed it to become one of the worst crises in the company’s history, and a serious threat to the future. Toyota has done a good job with innovation in product design compared to most of its competitors, but failed in adopting innovation in organizational management that would sustain their success.

When will leaders of the largest organizations finally understand that failing to invest in how organizations function is often the most expensive mistake executives will ever make? Given the size and impact of industry leaders, combined with the systemic nature of the global economy, these types of failures are unacceptable to growing numbers of communities, companies, and consumers.

An article in the WSJ sums it up well with this quote:

Liu Jiaxiang, a Toyota dealer in Shenzhen, said sales at his stores in southern China have been “steady” since late January. “What keeps me awake at night is a possible long-term erosion of customer confidence in the Toyota brand” because of the recall problem, he said.

Denial is a powerful force in humans, particularly when combined with peer pressure, social herding, politics, bureaucracy, contradictory information, and sheer inertia that seems unstoppable at times. It’s also true that cultures of invincibility have a consistent track record of experiencing crisis and decline soon thereafter.

Mr. Toyoda, if this post finds you, I invite your team to revisit our publications and jointly explore how our holistic semantic enterprise platform could have reduced or prevented this series of recalls. Even if  Toyota had deployed Kyield when your domain first appeared in our Web logs, we almost certainly could have contained this event to a multi-million dollar product defect issue, rather than the multi-billion dollar corporate crisis that it has become.

Mark Montgomery
Founder & CEO – Kyield
Web: http://www.kyield.com
Blog: http://kyield.wordpress.com
email: markm@kyield.com
Twitter: @kyield

Hidden costs of complexity in the enterprise

Often is the case when consuming fresh evidence that the truism is reconfirmed: what is not visible is far greater than what is; in terms of opportunity, risk, and cost. Few concepts are so profoundly transformative when this string of characters begins to take shape in the mind’s eye.

Unlike biological evolution where logical adaptation occurs over many generations, the dominant complex systems on earth today are driven by technology, evolving very rapidly, and of course subject to human manipulation.

From competitive advantage to utility tax

Similar to healthcare, education, and finance where complexity creep has been manipulated for long periods until surpassing sustainability, enterprise software has become primarily a game of ‘heads I win; tails you lose’ for those paying the bills. While the first generation of enterprise software provided a strong competitive advantage to early adopters, the bulk of systems have long since resembled a tax on admission.

Today most leading enterprise systems offer a competitive advantage to very few organizations where innovation is focused on optimizing commoditization, scale and capitalization; not products, service, or improvement. The result is a breakdown in product design, tragically to include a negative influence on innovation for customers worldwide.

The tipping point for market dysfunction in the enterprise occurred more than a decade ago when most of the innovation began to be outsourced to consumer ventures in Silicon Valley that serve a very different purpose for a different customer. Even if the majority of SV VC firms and young social networking entrepreneurs understood the needs of organizations, globally adopted consumer technology cannot provide a competitive advantage to organizations. It should be obvious that if everyone is using the same rigid programs with little if any adaptation or customization, then the advantage falls only to those with scale.

Another sign of market dysfunction in IT more generally is visible by comparing cash generation of industry leaders with their competitors. A recent article in the WSJ revealed that nine tech companies generated $68.5 billion in new cash during the Great Recession while the other 65 competitors in the S&P 500 generated $13.5 billion combined.

The war chests at IT leaders tells a different story for each company, including recent product success at Apple, the power of the network effect with Google on the Web, effectively managed monopolies, and an economy dominated for many years by investment banks, weak regulation and judicial enforcement, and last but not least; apathy in enterprise customers. I argue that this level of consolidation of market power isn’t good for anyone, including the stockholders of those with the largest war chests as the dividends are either very small or non-existent, with the majority performing poorly in stock appreciation.

Need for ‘market farming’

It’s essential to understand the difference between proprietary applications and proprietary standards, particularly relating to network effect, market power and systemic risk. IT architecture in the network era is of course global and largely unregulated outside of minimal anti-trust enforcement, with voluntary standards bodies, so it should not be surprising then that proprietary standards still dominate enterprise computing, or that proprietary systems are manipulated for self gain. That is after all the fiduciary duty of public companies with bonus incentives, stock options, and careers dependent upon same.

Of course it’s also true that given government’s terrible track record in regulating technology, combined with nationalist conflicts that too-often suffocate innovation with protectionism, very few of the vastly divergent stakeholders in the ecosystem favor increased regulation, which leaves us with the heavy lifting of systems design and market education to attract intelligent decisions by early adopters in an environment that is predatory to new entrants. Markets do eventually depend upon well-informed customers acting in their best interest, even in expert professional roles; particularly in markets dominated by lock in.

From the perspective of a consultant and venture capitalist who coached hundreds of businesses of all sizes on defending against predation, it is an understatement that enterprise customers need to take a far more proactive role as experts in market farming. The financial incentive to do so is certainly sufficient, as is the risk in not doing so. Until such time that more effective global governance of standards is enforced, however, national governments, non-profits, consumers, and especially CIOs have a special responsibility to be proactive as ‘market farmers’ within the IT ecosystem.

Ownership of data

In the modern world, data represents knowledge, security, identity, health, and wealth. Those who control proprietary standards within the network effect in an unregulated environment not only can extort a high price of entry to the utility, but can also greatly influence if not control ownership of data. We see that often today on the public web (see LinkedIn’s license agreement for an example).

Our position with Kyield is that while we have every right and indeed a responsibility to protect our proprietary intellectual capital within our platform, we do not have the right to extend the power enabled by the platform over others. I would even go so far as to say that we have a responsibility to defend customers from others doing so to the best of our ability. Our power should only extend to the borders of our internal systems, beyond which we should embrace universal standards, so we do, even though they are far from perfect and extremely slow to evolve relative to need.

Networks are not new, they are just much larger, contain data representing far more than ever before, and are of course global. Nations created standards for electric grids presumably to prevent the electric companies from owning every appliance maker, if not their economy. The ‘extend and conquer’ strategy is predatory, obviously very dangerous to the global economy, and should therefore be regulated and aggressively enforced. Nationalist conflicts and protectionism have prevented proper regulation.

It’s my personal position that no one should have power over the languages used for public transactions, nor should any company or group of companies (or any entity including governments) have influence, power, or ownership of data other than the original owner of that data or those who have been granted the rights of use. Ownership and control of data is I believe a fundamental right for individuals and legal entities. It would surprise me if the U.S. Supreme Court failed to better clarify data standards and ownership at some point in the near future.

Of course standards bodies have a higher calling not only to manage the standards process properly within meaningful time constraints, but also consider the influence of conflicting interests on their financial model, as well as sustainable economics relating to adoption. I recently suggested to the W3C for example that their Wiki was insufficient for communicating the benefits of the languages the body created and approved. The response was that they didn’t have the bandwidth and that communications was up to vendors. The response fell well short of what leaders in science have been teaching for many years, suggesting to me that significant change was needed in the model and culture.

With very few exceptions, during the 15 years I have been observing the evolution of computing standards, it has been confirmed often that the IT industry is no more able to self-regulate than the finance or healthcare industries. I wish they could, but wishing doesn’t make it so.

Beauty of simplicity

Those who doubt the need for reducing complexity in our society probably haven’t spent much time working pro bono for a worthy cause that cannot be saved due to entrenched interests owing their existence to manipulated complexity. I have seen the dilemma many times during my career manifest in legislation where the individual interests of the few manipulate the outcome for the many, thereby threatening the whole, to include themselves eventually of course, with little or no apparent understanding of the impact of their self centered activism. The current political situation in the U.S. is obviously not what the Founding Fathers (and Mothers) intended, and indeed feared most.

A very similar dynamic evolved in computing over the past few decades, which I began to recognize in the mid 1990s when we converted our consulting firm to one of the first commercial Internet labs and incubators. It was only when I trained to become a network engineer and object oriented programmer that the degree of manipulation and systemic risk became apparent.

“Complicated systems and their combinations should be considered only if there exist physical-empirical reasons to do so.” –Albert Einstein

There have been reasons for the increasing complexity in enterprise software, but have been primarily limited to protecting cash cows and extending market share in the global network ecosystem. While economies of scale and Moore’s law pushed hardware costs lower, software costs escalated while arguably delivering less value, despite a massive reaction by open source. The parallel evolution in healthcare, education, and government in the U.S. was very similar; we were all paying more for less.

The problem today of course is that our collective resources can no longer afford even the status quo, much less the trajectory, from the costs due to manipulated complexity. In enterprise software, manipulated complexity also creates a very high maintenance cost now exceeding 20% of product cost per year in some cases, and of course a much higher level of security risk. This is a dangerous game and largely unnecessary.

One of the elements I liked best when reviewing the papers of the Google founders and later their early beta was the elegance of simplicity. Google was among the first substantial efforts in the Internet era to reduce a highly complex environment to a very simple interface designed for humans in their own natural language, and it worked very well indeed.

Ironically I found Google while searching for raw IP in an effort to achieve something similar for the enterprise, but enterprise data had not been converted to simple HTML like the public web, rather was subject to incompatible languages and data silos, and of course HTML lacked the ability to provide the embedded intelligence we were seeking, so we had a long wait for standards to catch up to the vision often associated with the semantic web. I like to think we used the time wisely.

Simplicity for the enterprise has not yet arrived at the station, but the train is full and fast approaching.

Diabetes and the American Healthcare System

I am pleased to share our just completed healthcare use case for our series: Semantic Scenarios for the Intelligent Enterprise.

We selected diabetes mellitus (type 2) as a scenario to demonstrate the value of the Kyield platform to healthcare. Given the very high cost of healthcare in the U.S. currently with an unsustainable economic trajectory, it’s essential that costs be driven lower while improving care. Diabetes type 2 has direct costs exceeding $200 billion annually in the U.S. alone, the majority of which is entirely preventable.

The most obvious method to overcome this significant challenge is with far more intelligent HIT systems. It is not surprising that the legislation appears to be perfectly matched for the Kyield PaaS– nor is it entirely accidental as our mission aligns well with the needs in healthcare; an R&D process that began more than a decade ago.

This was a challenging scenario to develop and write due to the complexity of the disease, large body of regulations, incomplete standards, and varying interests between the partners in the ecosystem.  A bit of extra personal motivation for me was that my father died a few years ago from complications from diabetes, which was diagnosed shortly after my brother died of ALS. Ever since the shocking phone call from my brother informing me of his “death sentence” in the summer of 1997, I have followed ALS research; among the most complex and brutal diseases.

Diabetes type 2 is also complex, but unlike ALS and many other diseases, diabetes type 2 is largely preventable with a relatively modest change in behavior and lifestyle– modest indeed particularly compared to the later stage affects of the disease in absence of prevention, which we highlight in this use case. It’s difficult to understand after watching my father’s disease progress for a decade why anyone would not want to prevent diabetes– it literally destroys the human body.

I hope you find the case interesting and valuable. I am confident that if followed in a similar path as outlined in this scenario, the platform will contribute to significantly more effective prevention and healthcare delivery at a lower cost.

Kyield Diabetes Use Case Scenario (PDF)

 

Mark Montgomery
Founder & CEO – Kyield
Web: http://www.kyield.com
Blog: http://kyield.wordpress.com
email: markm@kyield.com
Twitter: @kyield

New Semantic Health Care Platform

Kyield Unveils New Semantic Health Care Platform

Read the release at Business Wire or the diabetes use case scenario

Kyield AWSE

Russell E. Borland: A partner, mentor, and friend

This string of words are of the type one hopes to avoid, but is inevitable if we live long enough.

I received a call from Russell Borland’s wife Loretta yesterday sharing the painful news that Russell had suddenly passed from this earth this Memorial Day weekend at their home in northern California.

Russell and I had been friends since he was a regular customer of a business my wife and I owned in Washington nearly 30 years ago; one of very few who also became close friends. When I first met Russell he was working for a start-up software company few had yet heard of.  The early 1980s were busy for us both; I was running a more traditional small business while Russell was deeply engaged at Microsoft with young teams in developing products that most of us have been using every day since.

We found commonality in many areas; including a passion for learning, work, meritocracy, and justice. If not for his practical side, Russell could have been a great professor as he enjoyed teaching and mentoring inquisitive minds, including my own. During conversations he was a living encyclopedia; one with a healthy sense of humor, irony, and satire that cannot be replicated with computers.

Russell was exceptionally intelligent even for academics who like himself  “received entirely too much education”, and because of his intellect he thought labels were a necessary evil for categorization; although he was unimpressed with social classifications that often lead to injustice.  Not only did he not wear his PhD from the University of Washington on his sleeves, I only discovered it after we had been friends for two years. Oh how many have I known who could learn much from Russell Borland?

When it came time to convert my consulting firm to one of the first incubators in the Internet era, I called Russell first and he became an angel investor and advisor that lasted through many challenging times until this day. Our first major venture was a small business network that helped shape future billionaires and countless mom & pops throughout the world. He was still working in Redmond when he officially joined our board—an approval that he noted with displeasure took months. By then Russell had long since traded business management for crafting books, spending the bulk of his career at Microsoft Press as a master technical writer authoring more than a dozen titles.

When Russell retired from Microsoft in the late 1990s, his longevity was surpassed only by Bill Gates and Steve Ballmer.  He had helped build one of the greatest successes in human history, and observed the many side affects, some of which weighed heavily on his soul at times; providing a level of wisdom rarely found.  In his capacity as angel investor and advisor to our ventures, Russell contributed similarly.  He wasn’t a marketer or social butterfly, rather he was intensely interested in product development, innovation, and improving the world, realizing better than most the great challenges we face on this earth as well as the commitment necessary to overcome great obstacles.

Despite our long lasting friendship through good times and bad, when it came to business Russell was a pro. He understood and disclosed his limitations, did not hesitate to contribute where he was strongest, and never to my knowledge withheld the truth; all of which are essential for entrepreneurs.

On a personal level Russell enjoyed reading novels and spending time at his historic farm house with his wife Loretta and their dogs. He was involved with several canine groups, including field trials and the Humane Society—another passion we shared. A self proclaimed recluse in retirement, Russell loved long trips on his Harley, visiting old friends and meeting new people all across the U.S.

While this tragic news comes as a shock—we had discussed improving health care several times this past week, and his passing is a great loss, we take comfort that our old friend passed quickly on a nice Spring day at his peaceful home. I will miss my old friend. I am a better person for having known him.

Mark Montgomery

Clear Choice: Semantic Structure or Systemic Crises

I was recently approached by a consultant who came out of “big oil”. This person was writing a book on credibility and making the ancient pitch that perception is reality—all that mattered was the perception of the oil industry.

We exchanged about a dozen emails on the Gulf disaster, innovation, and crisis prevention, until I honestly admitted that it was a distraction to my work, that these were archaic arguments, that denial and arrogance were yet again proven resilient, and that the oil industry culture and by extension government regulators were very poorly informed (actually to the point of being self destructive).

Among other serious problems, the institutional cultures in government and industry are suffering a delusion that experts in specific disciplines hold the keys to the innovation door. From a business perspective, I see this crisis as a major opportunity for alternative energy and smaller oil companies that are more innovative. From a macro global economics perspective, I see the argument for more engineers and entrepreneurs at decision levels like in China instead of lawyers like in the U.S. (one of few lessons from China the U.S. would be well served to follow).

Of course the individual didn’t take it well: “for someone who claims they know a lot about innovation—you sure have a closed mind”.  I do have a closed mind on some issues, or actually no time, for conflicted debates attempting to persuade me that the sun didn’t rise this morning given that I witnessed same with my own eyes. The live cam of the oil spill would seem to negate attempts at denial, but no—we’ve just seen the blame game move from oil partners to industry/government partners.

From my financial newsletter when oil exceeded $140 per bbl (copyrighted)

My view is that all of the actors involved lost credibility based on the evidence, not perception, and should no longer enjoy the privilege to be in the decision chain. Credible leaders would step aside and seek wisdom outside of their failed system. I suspect that the attempt at persuading me was part of a large damage control effort from other giants in the oil industry who will no doubt be harmed from the reaction to this crisis; part of the macro problem today in not knowing who is working for whom, particularly in consulting and increasingly academia.

Enter the polymath

Whether dealing with systemic risk on Wall Street, the FRB, MMS, or an oil rig, one of my favorite quotes is often ignored, but should be kept front and center:

“We can’t solve problems by using the same kind of thinking we used when we created them.” – Attributed to Albert Einstein

Not normally thought of as a polymath, rather a genius physicist, Einstein’s actual writings demonstrating the ability to apply lessons in one discipline to another suggests to me otherwise. While we hear a great deal of talk and hype about interdisciplinary approaches today, we do not see much evidence of the polymath philosophy in our institutions, including at the highest levels of government and industry. That is a very serious problem (for more on polymaths, I recommend reading Abbie Lundberg’s review of the book ‘The New Polymath’).

When working to solve the vast majority of difficult problems today, the complexity requires a broad perspective that is sufficiently deep in multiple disciplines to be able to combine the fragments in a coherent, functional system of solutions. Most of the decision makers in large organizations like BP and the U.S. Government, even those in engineering, have long been bureaucrats by necessity—otherwise they wouldn’t have survived.

“Look at the oil spill problem. Everyone thinks it’s a technological problem. It’s not. It’s a management problem.” – UC Berkeley engineering professor Robert Bea.

I first came across Robert Bea’s work about a decade ago when I dove deep into the study of systemic crisis and prevention. His summary report on the Deepwater Horizon disaster can be viewed here.

While Professor Bea is an engineer with significant experience in the oil industry, his breadth of knowledge becomes obvious when reading his reports, to include Katrina, which was an event I studied closely.

“It’s an attitude of independence, an attitude of being willing to be very, very deeply immersed in data, an attitude of healthy skepticism, an attitude of being able to question other people’s findings,” –Kathleen Tierney, Natural Hazards Center at the University of Colorado at Boulder.

“He’s a giant in our industry,” said J. David Rogers, Missouri University of Science and Technology. “Bob has the big-picture view that you just don’t see much anymore. We’ve become a culture of specialists. And those aren’t the kind of people who can figure out failures.”
(Quotes from a profile on Bea at SFGate)

He may not represent a classic polymath, but Bea does provide the breadth of experience and knowledge rarely found. Unfortunately, like every other well conceived report on crises, his reports have been largely ignored within the same type of phenomenon that enabled the crises to occur, representing an ever larger negative spiral of systemic crises, which taken together appear more like a series, or even perhaps a single event in hindsight.

The collapse of the Deepwater Horizon and continuing oil gusher from the Gulf seafloor is the latest preventable disaster calling for structured multi-organizational systems. Until we hardwire structured data in a logical, adaptive organizational architecture, accountability is not possible in large organizations; and without accountability all manner of human manipulation and error can and will occur.

Founder & CEO – Kyield
Web: http://www.kyield.com
Blog:http://kyield.wordpress.com
email: markm@kyield.com
Twitter: @kyield

Structurally Engineered Enterprise

I am working on a related article so attempted a visual demonstration of what a properly designed enterprise should look like in the current era given the complexities facing organizations, as well as current technical capabilities.

The good news is that we’ve finally reached the technical ability to deliver fully functional enterprise systems. The bad news is that the legacy infrastructure most enterprise systems are dependent upon is structurally deficient and even dangerous from a systemic risk perspective, raising a serious question about the incremental adoption model employed in IT for decades. Far less uncertain is whether a competitive advantage can be achieved by organizations when a super majority are using the same IT systems; simply isn’t possible without extensive and very costly customization.

Unfortunately, despite what is achievable or even essential, most organizations are far from achieving a properly engineered enterprise today.

Mark Montgomery

Founder & CEO

Kyield

http://www.kyield.com

Unleash the innovation within™

Why Kyield is not supporting the mHealth Summit

After struggling with a very difficult decision, we have decided not to attend the mHealth Summit hosted by the Foundation for the National Institute of Health.

From the mHealth Summit web site: “The mHealth Summit: A public-private partnership of the Foundation for NIH, is an unprecedented event that will bring together researchers, policy-makers, collaborators and visionaries from around the world to exchange ideas, novel approaches, research and findings surrounding mHealth issues both in the United States and in developing countries.”

Mission statement of the Summit:

“The mission of the mHealth Summit is to explore the use of mobile technologies to improve public health, particularly regarding underserved populations; health research, training, and education applications; and delivery systems, in the U.S. and around the world.”

To the best of my knowledge, the Kyield healthcare platform is the most novel in the world relative to meeting the mission and objectives of the Summit, but the mHealth policies contain a fatal flaw that may prevent those who engage from achieving an economically sustainable model, without which it will be impossible to achieve their stated goals. The applicants for the mHealth technology presentations were required to be free to consumers (see quote at bottom of article).

While the proposed model for our semantic healthcare platform is currently “free” to consumers, professionals are well aware that this is a misleading statement. The consumer of course pays for the service, but may do so through insurance premiums or taxes. In fact we simply cannot know yet which economic model will prevail as it depends in part on choices made in the future by regulators, consumers, and industry partners, aka the market.

An additional troubling issue is that Bill Gates has agreed to be the keynote speaker. I clearly recall as an early booster to Microsoft in the early 1980s when Bill was battling the destructive economic force of “amateurs” providing free open source software. He correctly argued then that an industry built on free services could not support the essential ecosystem required of the challenge and also achieve the vast potential of the technology. I and many others supported Microsoft then in part due to their economic model, which was dependent upon a very diverse ecosystem of primarily small business developers to serve customer needs. The Microsoft model was then a powerful force in helping the economy emerge from a deep recession, particularly in Washington State following the Boeing crisis.

I argue strongly that healthcare technologies cannot be supported financially by advertising, government, and/or philanthropic models alone. Indeed, it is a tragic mistake to use the mHealth platform in an attempt to force this unrealistic economic idealism on emerging novel applications. Regardless of location, patients need not more dependence on gatekeepers with conflicting interests, but rather empowerment to make better decisions based on actual data, certainly to include economic choices that lead to sustainable systems. The novel innovations the Summit sponsors are seeking similarly do not need charity, but rather viable and sustainable economic models with the flexibility to test various models free from ideology or strategic conflicts.

The leading cause of unsustainable healthcare costs in the U.S. is the lack of functional markets due to just this type cultural influence. Whether sourced from idealism or strategic conflicts, the results are the same. Are medical devices and pharmaceutical ventures required to provide free services to consumers to be included in this mHealth global network? Are doctors and hospitals required to provide free services? Are foundation staff members required to work for free? I assume not.

Free is not a sustainable economic model. In the near term the model serves the interests of predatory pricing strategies by those very few entities that can afford historic price wars. In the long-term free economic modeling leads to dependency on entrenched interests, which is precisely how our healthcare system became unsustainable. As the decision maker for Kyield, I therefore cannot in good conscience support or participate in the mHealth Summit.

Mark Montgomery

Founder & CEO

Kyield

PS: The actual mHealth Summit language for Research Technology Demonstrations (after a paragraph of technologies sought):

“Technologies must have a demonstrated health research application, and be alpha/beta prototypes or available to consumers free of charge. Commercially available technology are not eligible for this technology demonstration session, but can be shown on the exhibit floor…”

The laws of physics eventually wins, even in cyberspace

“If a more advanced life form were given the task of providing to the human species a tool that possessed the potential to save itself from itself, it would have invented the Internet. What remains to be seen is whether the species is sufficiently evolved to properly manage the tool.”

– My thought for the day published in Comlink, 12/31/1996

The net neutrality issue is finally being debated, thanks not to populist politics, but rather the supply and demand dynamics of electromagnetic spectrum. Unfortunately, I believe activists and advocates have been exploited all along on this issue, often apparently without their awareness.

I beg people to not limit their scope or the debate to consumer publishing and communication, which may account for the super majority of time and bandwidth, but a tiny portion of impact. The modern Internet increasingly represents the service economy worldwide—meaning the majority of the U.S. jobs and economy, the marketing and transaction mechanism for global trade, banking, education, and e-government. Even raw commodities are substantially included in this debate as the pricing, marketing, education, trade and logistics are increasingly conducted over the Internet. Internet economics and global economics are now substantially the same issue, so this is much less an access and free speech issue today than one of global economic security—one cannot function without the other.

When was the net neutral?

For a very brief time following the commercialization of the Internet, the medium was a reasonably level playing field. Small businesses around the world were able to sell products through an uncorrupted distribution channel in a manner that was sustainable with modest upfront investment and could scale with organic revenue. From 1995 through 1997, or before the trillion dollar herd stampeded, a very diverse and functional economy was in its infancy. It was then a classic pay as you go system that was mutually beneficial to customer and vendor. The burgeoning sustainable economy was then substantially replaced by the largest price war in human history, and quickly transformed into a battle of manipulation between institutions, regions, and nations as the scope and scale of the opportunity and threat became apparent.

This historic and relatively pure medium, which I referred to as phase 1 of e-commerce (IJHIT- ISBN 0-9624990-8-0), lasted less than three years. As institutional investors began to study growth rates in cases like our incubator, even relatively challenged MBA analysts of the type that tend to filter institutional investments could see the best opportunity since the wheel, but few could see the collective damage of their individual behavior. To do so would have been career suicide anyway—truth wasn’t politically correct in this era.

Companies like Amazon were founded that would require several billion dollars in funding before break even, and many years of profits in the best of the best to earn back their ‘start-up costs’. Amazon was at least charging for products with a real business model; many that followed were pure capital predators, some of which went beyond giving away free services that cost tens of $millions to paying more for eyeballs than the profit margins of advertisers could pay for.

What drove the predatory insanity?

Some pension funds saw the medium as the answer to decades of under-funding amidst cost of living inflation that was increasingly self-created. University endowments began to achieve academic Nirvana where in some cases funds became so large with such high returns that the most expensive institutions could have provided free education, but did not—rather salaries, bonuses and overhead grew. Dorm rats who lusted for rich parties paid for by others were drawn to capital centers where get-rich-and-out investors manipulated relationships from seed to exit in what appeared to me to be systemic fraud. Governments surrounding the capital centers on the coasts became so fat on the feast that their self-destructive engines would soon redefine unsustainable. Fly over states suffered with an increasingly difficult moral dilemma—participate in the frenzy or starve? Does this sound like a level playing field?

It can be a very difficult emotional process for humans to voluntarily wean themselves from harmful or self-destructive practices, particularly after entire ecosystems become dependent and those involved are getting very rich, but at some point it must substantially find some equilibrium.

Bubbles tend to occur in clusters—the culture and skills tend to move from one bursting bubble to the next until people wise up. The financial crisis finally ended the price war, with a few exceptions like social networking that continued to be funded at worse odds for success than the regulated casino industry.

Who doesn’t like free?

The free or nearly free addiction model has been exploited since trade was invented. Unless tightly restricted and regulated—preferably with highly ethical folks involved, free empowers consolidation of power in those who control forms of duopolies and oligopolies, to include (eventually) national governments and financial centers with corporate partners. Sound familiar? Free invites and then demands manipulation, for it lacks the governing forces that enable diversified and dynamic markets to correct. For a good example look at the destructive forces of health insurance when healthcare costs appear free and unregulated; any such system will eventually fail when corrective action is not allowed in some form—whether competition, regulation or more commonly necessary; both.

In contrast, pay as you go empowers consumers and small businesses that create jobs in a diversified, sustainable ecosystem that ultimately government and institutions depend upon, without which they too eventually fail. To my knowledge no model has yet been crafted that works better than the simple exchange of currency for products and services.

Whether dealing with unaffordable housing, healthcare, or bandwidth, subsidies deemed necessary due to injustice are most appropriately dealt with by co-ops, non-profits, and governments—preferably in that order, NOT startups or corporations. Private corporations, particularly publicly traded giants, should not be in the subsidy business, as they are in the best position to expand dominant market share from one industry to another, precisely what anti-trust was intended to prevent. The inevitable result of market manipulation is some form of privatization of profits at the public expense with increasing influence over the political process.

Pay as you go is the most just referee I have found, sporting honesty, transparency and adaptability as virtues, which is no doubt why those threatened by same resist the simple model.

Why tail wagging the dog is bad for everyone

Having tested the hypothesis of self-regulation in the modern economy, with our global economy nearly collapsing, one would think the lesson would still be fresh, but we’ve seen the result with reform attempts regardless of party. The biggest risk moving forward however may well be a conclusion by the masses that regulation isn’t necessary, or worse—even possible. Lord help us.

We are still employing primarily industrial policy and tools for a computer driven economy, with only modest exceptions recently in real-time reporting by the SEC. While it’s true that national power in a global economy has been severely eroded, multi-nationals are not a viable alternative to functional government. We cannot expect multi-nationals to manage the global economy—management is legally bound to serve corporate interests within the limits of regulation, period—everything else is noise. I have yet to observe a viable alternative to functional government, rather only conflicted claims and ideological spin to the contrary.

The bandwidth proposal by Google and Verizon is nothing more than another long overdue wakeup call to national governments within a global economy that is increasingly conducted via the Internet and Web. When governments charged with the responsibility fail to regulate in some rational form, those with the greatest interests at stake tend to do so. This phenomenon is as predictable as the water wars in the wild west, the shadow banking system peddling 120% L to V paper, or states defending against open borders. That organizations would move to protect their interests should not come as a surprise—by law, public corporations in the U.S. are compelled to do so, regardless of claims to the contrary—we call it fiduciary responsibility.

Mark Montgomery

Founder & CEO

Kyield

Complex Adaptive Healthcare

My wife Betsy and I attended a very interesting lecture last night hosted by the Santa Fe Institute by Dr. Tim Buchman, Ph.D., M.D., who is an external professor at SFI. (NOTE: This lecture is now on video online here )

Dr. Buchman’s day job is Founding Director of Emory Center for Critical Care and Professor of Surgery at Emory School of Medicine. The title of of Dr. Buchman’s lecture was: Secrets of the Heart: The Electrocardiogram, Complex Systems Science and Fundamental Laws of Biology.

As is often the case at SFI, the lecture brought together several pathways of interest that reminded me of the Arc de Triomphe de l’Étoile that so fascinated me as a child, where every type of vehicle comes together at variable speeds, volume and noise levels, carrying all types of cargo, yet despite the chaos and occasional fender bender, traffic flows and life continues.

The Arc de Triomphe network analogy works well for the mega-disciplinary approach required of my work with Kyield—including our semantic healthcare platform, as well as the complexity of human biology, with the Arc serving nicely to visually simulate the cellular traffic (blood), even if lacking in muscular pump function. The beauty of complexity research at SFI is that researchers are increasingly able to confirm theory with mathematics and evidence from testing in real world environments like an ICU.

Those who have studied complexity and chaos may already be aware of the importance of nonlinear dynamics in healthcare, although confirmation of research in this area is fascinating. For example, the old assumption in medicine that the ‘normal’ heart and respiratory rhythms regulated by devices in the ICU is the most beneficial turns out to be false. The lecture revealed compelling evidence that heart patterns are to a surprising degree predictive of mortality, and that after two weeks in the ICU with a ‘regular’ rhythm (synchronized), patients have an EKG pattern that is less than optimal for longevity, which is one reason why extended stays in ICU are best avoided when possible.

Dr. Buchman reports that to date research shows that the human body performs much better over time, to include quality of life and duration, with ‘irregular’ rhythms, or lack of synchronicity. To date it appears that forecasting optimum variations have failed—important lesson being that variables in exercise, or cardiorespiratory rhythms, is essential—the body appears equipped to adapt to variable activity much better than synchronization. For this reason, in Dr. Buchman’s ICU, the respirators now intentionally represent an asynchronous system. It’s probably a safe assumption that intentional asynchronism will play an increasingly important role in medicine moving forward.

This lecture was timely for me as it reinforced the importance of providing our rationally designed semantic healthcare platform to optimize care in real-time, as well as improve the quality of data for predictive medicine and future discovery. Mobile health aligns very well with the needs of patients, payers, and researchers in many ways, not least of which is providing anonymous data for prevention, which is key to driving costs lower and improving quality of life—potentially on a massive scale.

I spoke to David Krakauer after the lecture—chair of faculty at SFI and brilliant guy, who said that the lecture will be up on their web site soon. I will share on Twitter when it becomes available. Professor Krakauer reminded me of another good resource on this topic at ReyLab (Institute for Nonlinear Dynamics in Medicine) run by Ary Goldberger, M.D. at Harvard.

Mark Montgomery

Founder & CEO

Kyield

Realizing the theory: Yield Management of Knowledge

Since I have now responded to a related USPTO elections/restriction letter, I feel a bit more freedom in sharing additional thoughts on the underlying theory that has served as the foundation of Kyield:

Yield Management of Knowledge: The process by which individuals and organizations manage the quality and quantity of information consumption, storage, and retrieval in order to optimize knowledge yield. –(me)

(Please see this related post prior to attempting to categorize)

Background: The cyber lab experiment

The theory emerged gradually over several years of hyper intensive information management in my small lab on our property in northern Arizona (we are currently based in Santa Fe after a year in the Bay area). The experimental network called GWIN (Global Web Interactive Network) was designed after several years of previous high intensity work in our incubator, which followed a decade in consulting that was also drawn from. The GWIN product was entirely unique and intentionally designed to test the bleeding edge of what was then possible in computer and social sciences. We were particularly interested in filtering various forms of digitized intelligence worldwide as quality sources came online, conversion to useful knowledge, weaving through academic disciplines, and then mix with professional networking.

The network was open to anyone, but soon became sort of an online version of the World Economic Forum (photo), with quite a few of the same institutions and people, although our humble network even in nascent form was broader, deeper, larger, with less elitism and therefore more effective in some ways.

Our first computer lab and office

I was quite proud that membership was based primarily on interest, effort, and intellectual contributions; not social status, guilds, political views, market power, or wealth, even if the norm in our membership.

My late partner and friend Russell Borland and I learned a great deal from GWIN, as did many of our members and those who followed our work closely. The first thing one should understand is that while we worked with various teams of remote programmers to build products, and served thousands of people worldwide daily who provided about half of the content, I operated the lab solo onsite. Given the volume, work hours, lab efficiencies, and short commute, I was likely consuming as much data personally as any other human, which is fundamental to the construct of the theory; how the brain functions in dealing with overload, human-computer interaction, and what tools, languages, and architectures were needed in order to optimize knowledge yield.

Need to emphasize data quality, not quantity

The vast majority of solutions for improved decision making in the networked era have been computing versions of HazMat crews attempting to clean up the toxic waste resulting from information overload. Reliance on the advertising model for the consumer Web created a system design essentially requiring lower quality in a populist manner, aided and abetted by search and then social networking.  While the advertising model is certainly appropriate for many forms of low cost entertainment, for serious learning and important decision making envisioned in yield management of knowledge, an ounce of prevention in the form of logically structured data is worth potentially far more than a ton of cure.

It became obvious very early in our lab (1996) that the world needed a much more intelligently structured Web and Internet, for consumers as well as the enterprise. In studying search engines closely at the earliest stages, they were by necessity applying brute computing force, clever algorithms, and exploiting content providers in an attempt to deal with the unprecedented explosion of data, and noise, while providing what investors needed for such risk. What we really needed of course was logically structured data that was controlled by data owners and providers, which would then (and only then) provide the opportunity for knowledge yield. Further, the languages used for the structure must be non-proprietary due to the overwhelming global market power that would result for the winner due to the network effect.

Need for independent standards

In the enterprise market, proprietary languages can and do thrive internally, but the integration required in sharing data with essential external partners is similar to the brute force applied in search—crisis clean-up rather than prevention, complete with disempowerment of customers who create and own the data. Most organizations increasingly rely on shared data, whether regulatory or partnerships, even if private and encrypted, so proprietary data languages are not well aligned to the enterprise in the increasingly networked, global economy.

Finally, there are fundamental and unavoidable conflicts between large public companies that dominate markets with proprietary languages, their fiduciary duty, and the minimal sustainable requirements of our globally networked economy. A few examples of these conflicts can be clearly observed today in failure to deal effectively with network security, personal privacy, protection of intellectual property, and information overload. Evidence of the challenge can also be observed (and felt by millions of people) in economics where policies of multinationals favor the largest emerging markets due to market access. Of course the lack of functioning governance of what has become an essential global medium empowers these phenomenons.

It is my personal position that the intellectual competition should be intentionally focused on optimal use of the data to achieve the mission of the customer (whether individual consumer or enterprise), not protectionism, and that vendors should be the caretaker of data on the behalf of data owners, which requires a different economic model than the free ad supported model on the consumer Web.

So in order to realize the goal of the theory, we really needed a much more intelligent and highly structured Internet and Web that is based on independent languages in a similar method as the underlying protocols (TCP/IP and HTTP), and not supported by advertising alone.

I am speaking here of data communication in global networks, not individual applications. If we had the former we need not worry about the latter, at least in the context of network dynamics.

A word of caution on standards

A ‘Semantic Web’, which should make this possible, has yet to emerge, but when it does, the day-to-day mechanisms of trade, bureaucracy and our daily lives will be handled by machines talking to machines.

– Tim Berners-Lee, 1999

One of the most significant risks with independent universal standards is unintended consequences.  While the stated vision of most involved is for more efficiency, transparency, empowering individuals and organizations, less bureaucracy, and lower costs, the nature of universal languages favors organizations that control data. One of the primary challenges in Web 1.0 and 2.0 has been data silos and private sector exploitation of data owned by others, which is largely driven by the revenue model. The primary challenge of Web 3.0 and 4.0 could be increased government control at the expense of individual liberty and private sector jobs, or perhaps worse; a public/private duopoly or oligopoly. From the perspective of an entrepreneur attempting to create jobs, I see such risk increasing daily.

Introducing Mawthos

Louis V. Gerstner, Jr. was perhaps most responsible for moving software towards a service model in his turn around of IBM in the mid 1990s, which was a brilliant business strategy for IBM at that time (we exchanged letters on the topic in that era), but it has not been terribly successful as a model for creative destruction, rather it has primarily seemed to exchange one extortion model (propriety code) for another (combination of proprietary code, consulting, and open source). Unlike a giant turn around, we were focused on more revolutionary models that provided value where none existed previously, so our first effort was an ASP (Application Service Provider), which emerged in the mid 1990s. In 2001, this paper by the SIIA is credited with defining and popularizing SaaS (Software as a Service), which has evolved more recently to an ‘on demand’ subscription model that is often bare bones software apps like those developed for smart phones.

While I have been a big proponent of a cultural shift in software towards service, I have rarely been a proponent of the results sold under the banner of service in the software industry, recognizing a shift in promotions and revenue modeling, not culture. In reviewing this article I recalled many public and private discussions through the years debating the misalignment of interests between vendors and the missions of customers, so thought I would introduce yet another acronym: Mawthos (Mission accomplished with the help of software), which is a slight jab at our acronym-fatigued environment, while attempting to describe a more appropriate posture and role for enterprise software, and the philosophy necessary to realize the theory Yield Management of Knowledge.

Mark Montgomery

Founder & President

Kyield

Save the Web: vote with currency, not clicks

When the Web was first commercialized, it was relatively easy to support web sites with a mix of paid subscriptions, e-commerce, and advertising. The diverse mix reflected an organic model that essentially required serving the interests of the customer. A rational ecosystem was soon emerging that tempered the more destructive dynamics of the network effect.

Then a trillion dollars flooded the medium from venture firms, investment banks, billionaires, multi-nationals, university endowments, and pension funds. Not to be left out, governments and non-profits joined the stampede and the greatest price war in human history ensued. Within a couple of years, if one didn’t have a Web site competing to give intellectual capital away for free; subsidized entirely by other means, it just wasn’t socially acceptable—knowledge wanted to be free. Well folks, much like freedom, knowledge isn’t free.

By the late 1990s when the then wealthiest person on the planet (Bill) said something like “let’s sling it (capital) against the wall to see what sticks”, all rationality had left the planet. I was embarrassed by and for my society. It was the perfect storm for a new emerging model where content providers by the billions—eventually every organization and human in the world it seemed, would feel compelled to compete in giving away their most valuable intellectual capital for free. And we all took the bait.

Fundamental economics

The small town newspaper model was no accident, rather it evolved over generations into a self-supporting medium that served the interests of the community above all else. With a mix of classifieds, banner advertising, and paid subscriptions, editorial was relatively free from any group of dominant forces. Yes, eventually many became entrenched monopolies that abused power, forced personal ideologies on others, and by extension threatened free speech, particularly when the same owner acquired local radio and TV stations. The model needed competition badly, not from halfway around the world, but rather from the local community. Instead of supporting sustainable competition, and reducing dependency, most people slammed the door on the paper boy/girl. Petty, ignorant greed is at it again, but this time it’s happening on a massive global scale.

Free global web sites supported by any means other than their communities are open to manipulation, predation, extended ideology, and ultimately, as ironic as it sounds—threatens our very freedom as individuals, communities, and nations.  Self-supporting economies are the primary defense of independence, freedom, and liberty, and are almost always more effective at regulating communities than the enforcer of last resort; aka the military.

As consumers of information on the Web, we have all been exploited by the largest price war in human history. For a decade and a half  now we have consumed and then demanded free intellectual capital that required enormous investment to produce, quite often at the expense of our neighbor’s job or business that formerly supported the local community in a myriad of ways that cannot be replicated by a global computer network. It may not be obvious, but one free article, software application, or brain surgery, when performed well, can represent generations of investment, save lives and jobs, and yet we demand it for free.

Predictably, driven by the free model in a global computer network, the highest levels of intellectual capital are increasingly unaffordable by the majority, and moving offshore where billions of others can be exploited. This trend represents a massive transfer of wealth that supports everything meaningful in society, including ultimately I fear; world peace.

The Web isn’t evil, but reliance on a free model always has been—representing a wolf in sheep’s clothing. Support your neighbor by voting with currency, not clicks. The next job, industry, or nation could be yours.

Mark Montgomery

Founder & CEO

Kyield

Myths and Truths about Innovation

In my daily filtering of news and intelligence, I usually find one or more quotes on innovation that blatantly abuses the term for some other agenda. While such efforts are obvious to me, they are obviously not obvious to many or presumably such attempts would not receive so much digital ink. It’s an issue that has bothered me for many years, with almost daily reminders so this morning I am taking a bit of time to clear the air.

What innovation is, but is rarely reported to be

• A highly complex system when functioning well
• An essential foundation for economic security and job creation
• Reflected by a substantially new  improvement, method, or function
• Rarely revolutionary, although often disruptive & threatening to some/many
• Can also be defined as invention and/or V/V, but often is not
• Individually can range from extremely simple to extremely complex
• Can be sourced either from individuals or within group (s)
• A creative process usually requiring discipline and inspiration
• Often described by great innovators as a spiritual experience
• Substantially dependent upon cultures and tools
• Affected by incentives and disincentives; macro and micro
• Driven by motivational factors, which must be tailored
• Increasingly dominated by digital workplace architecture
• Substantially a bottom up process, not top down
• Impacted by CEO leadership within and across organizations
• Copied every day by predators worldwide
• Harmed by unstructured/open systems in the long-term (exploitation)
• Often killed internally by combination of apathy, dysfunction, and fear
• Usually dependent upon wisdom of customers and distributors for adoption
• Often requiring salesmanship for adoption
• Normally requires substantial investment to market in sustainable manner
• Highly susceptible to distractions, noise, and multi-tasking
• Negatively impacted by organizational layers
• Damaged by large administrative budgets (5% good – 40% fatal)
• Often killed by industry eco-systems due to protectionism

What innovation is not, but is quite often spun to be

• Related to R&D budget size, unless a super collider, space shuttle, etc.
• Related to politics, with rare exception
• Nearly as impacted by physical location as many claim
• Necessarily related to degrees and formal education
• Protected by society, justice system, or organizations
• Better in large organizations—quite the opposite is usually true
• Necessarily recognized by customers, particularly until tested
• Helped by bureaucracy in any way, shape, or form
• Usually assisted by ubiquitous IT, unless theft is factored as beneficial
• Necessarily of higher quality in academia, gov, or corp labs
• Easy, durable, or normally of a short duration
• Helped by exploiting the most creative
• Necessarily adopted even if badly needed or invaluable
• Impossible to measure, track, visualize, and incentivize
• Well served by current IT systems and/or most organizations

Mark Montgomery

Founder & CEO

Kyield

The Enterprise Needs a New Marketing Wheel

Prior to immersing myself in the many disciplines surrounding IT and computer networking, I was a business and organization consultant who earned most of a modest income assisting mid-market companies compete with market leaders. Most of my time, however, was invested with small and emerging companies and communities, with a particular interest in remote tourism.

Similar to my current role, I then collaborated with many professors and universities, including Cornell Hotel School and NAU, which was close to my home at the time. While some in technology may believe that the world of hospitality is low tech and therefore not challenging, the truth is that the travel industry was among the first to widely deploy main frames for high volume, large scale global networks with advanced algorithms to manage inventory, which has a shelf life of a single day in lodging, or in the case of airlines—a single flight.

Researchers and managers in tourism and hospitality also faced a range of human resource and environmental challenges long before other industries. For example, remote eco-tourism destinations not only must reach a global audience with a very small budget, but need to train entry level staff with advanced technology, multi-lingual cultures, and currency swings, among many other challenges. In fact the hospitality industry has been training and preparing entry level workers for other industries for centuries, with surprisingly advanced work in human resources, cultural management, and relationship marketing, which are all frankly more primitive in comparison across much of technology.

When my colleague Franz Dill (Kyield advisory board) posted a message on his blog about a video presentation on mapping remarkable relationships, I experienced a rather strong moment of serendipitous nostalgia. In the video clip, Julie Anixter shares a remarkable experience indeed with the Four Seasons Hotel in Washington D.C.

Julie’s presentation brought back a flood of memories from my consulting days, including a mutually beneficial relationship in the 1980s between our own small inn in the other Washington and their sister property in Seattle. Shortly after opening, we discovered that the concierge at the Four Seasons was referring guests to our inn who wanted to explore the Cascade Mountains. While the Four Seasons was priced much higher, with an investment that was more comparable to the entire village surrounding our inn, the values and product we both embraced were actually quite similar, which I later often referred to as stewards of the customer’s entire experience. This mutually beneficial relationship lasted until we sold our property.

About a decade later, just prior to opening our small tech incubator in the wilds of northern Arizona, NAU invited me to write an article in their journal: World’s Eye View on Hospitality Trends.  In the proposed article, they challenged me to not only write an article describing the Marketing Wheel, but also to visually demonstrate the process and philosophy, with a particular emphasis on small business. As most reading this will no doubt be aware, small business has generally faced increasingly unjust and unfair conditions in the U.S. for decades. In fact due to regulatory, legislative, legal, economic, and scale complexities that are carefully managed by conflicted interests between Wall Street, Silicon Valley, and the Beltway, one of the few survival options left for small business has been to deliver exceptional service, creating the type of remarkable human relationships demonstrated in Julie’s video. While few can afford the time investment made in this case, the basic lesson of exceeding expectations and making a personal connection is much needed, particularly in a virtual world where relationships are often superficial at best.

So on this nostalgic journey to the past, I searched for the Marketing Wheel article, coming up empty, but I did find the graphic representation shared here, which I think reflects a philosophy much needed today in business, and particularly within the often toxic environment of enterprise software.

Much of the software industry has seemed to thrive off of relationships based on the unremarkable model of extortion through market power, leaving me wondering if this situation persists due to the absence of a Four Seasons culture in the marketplace? Lodging is after all an essential commodity that similarly thrives from the extortion model, until that is an exceptional experience comes to town, particularly one offering competitive pricing; at which time the customer’s entire experience changes dramatically. I wonder….

Mark Montgomery

Founder & CEO

Kyield

Preparing for the big data storm in mHealth

Imagine the gasp from the family physician when he is confronted with the first text message from a patient asking whether they are dying due to the asynchronistic patterns displayed by their new mobile app, which is being downloaded by the millions daily.  Or consider the cardiologist who suddenly has the opportunity to observe a continuous mobile data stream 24/7/365 sourced from multiple sensors on 95% of her patients, creating more data in a day than the previous decade.

For some time now I have been thinking about structures, classifications, compression, security, scaling, and synthesis of data for the anticipated big data storm just beginning to form in mobile health. Even with a healthy dose of de-hyped skepticism, the mobile health data storm promises record sustained winds, with much higher gusts.  An extension of the Internet and Web, which is often compared to a global electric grid, mobility also contains dynamics more comparable to solar winds or sea plankton, complete we intend with personalized recipes that will positively impact human behavior, diagnostics, and therapies.

While specific outcomes can only be fully understood with high-scale testing, several assumptions warrant serious consideration, including:

• Several billion people worldwide will be introduced to lab-quality, real-time data for the first time
• To avert chaos, mHealth data must be highly structured from inception
• Care givers will quickly become far more conversant in computing
• Care facilities and organizations will be transformed, with multiple new disruptive models emerging
• Multi-dimensional visualization of human physiology will become ubiquitous from global to nano scale
• Self-managed care will rapidly scale, as will expectations
• Sensory implants and implanted sensors will normalize
• Advanced data management engines will become essential cores of healthcare organizations
• The gap between life science research and health care will begin to close
• The velocity of discoveries will rapidly expand

In looking out to this new galaxy, it’s relatively easy to see far more dramatic change than is commonly discussed. Medicine has avoided much of the revolutionary change affecting other industries from rapid technological evolution, in large part by regulatory management, leading to a model that is no longer affordable. How might health care change when ‘democratized’ by billions of people? Who knows; a considerable amount is probably a fair guess. I am far less certain of how mobile health will change regulation than the necessity to properly manage the data, or the need for data structure, in order to optimize decision making and realize the potential of personalized medicine.

The mobile phenomenon is much different than the emergence of enterprise networks, the consumer web, or big data found within intelligence and research, but is rather more like a hybrid that borrows from each, with the extraordinarily complex individual human brain increasingly in the driver’s seat. It should prove to be a journey full of adventure, hidden obstacles, and exciting discovery.

Large scale job growth requires new ecosystems

In July of this year Andy Grove wrote a thought provoking article: How America Can Create Jobs. I reread the article this week, which led to spending my Saturday writing this article.

These are complex issues that often require a lifetime of immersion to understand, if ever, with both experiential and intellectual exposure. Generally speaking an economist is not qualified to discuss job creation—rather they are an excellent source for analyzing the impact and results. A career in one company or even one industry will not necessarily provide a good understanding of the topic, and a career in academia has proven to be more of a negative for understanding job creation than a positive, despite the confusion in media and academia.

Most jobs are created a few at a time by small business, born from need by entrepreneurs to make a living and/or fierce desire for liberty and then only grow under the right conditions, or environmental factors. I call the process, art, and science of crafting viable entrepreneur environments market farming, not to be confused with economic development, which often manifests in the form of government welfare programs. When ‘toxic chemicals’ are introduced to markets, which we’ve often seen from a variety of sources in the U.S. in recent decades, the result for job creation is very similar to toxicity in agriculture; barren fields. A good example of a very toxic application for markets is the current realization of moral hazard in housing, where those who chose not to abuse the system are being punished, and are also being required to subsidize those who chose to abuse the system.

Another example still infecting markets today are thousands of smaller companies throughout our economy who made a daily choice for decades to play by the rules  and are now required to subsidize in a multitude of ways larger competitors who threatened our entire system. Moral hazard is at its core an extremely dangerous threat to the very motivation that binds our entire global economy together. Despite the wishes of many, voluntary markets are much superior to compulsory, even if highly dependent upon regulatory enforcement. Some lines are best never crossed, most of which have been crossed recently, which is negatively affecting job creation currently more than all other factors combined.

Markets can also be damaged by excessive harvesting, over grazing, subsidies, mandates, too many citizens dependent on government, market dominance, over consolidation, strategic interests, capital droughts, capital floods, excessive taxation, dysfunctional politics, fiscal imbalances, excessive debt, excessive greed, and last but not least; customers who don’t understand how to farm markets.  Markets have always been more fragile than most understand; otherwise society wouldn’t be so intent on destroying them.

Bubbles do not a durable economy make

I was highly critical during the formation of the excesses in the dot-com era, excessive outsourcing to Asia, the strategic venture capital model that emerged in Silicon Valley, and the expansion phase of the housing bubble. Most of my conversations were private; some were protected by confidentiality, and none were terribly popular. The red flags I raised almost certainly damaged my businesses and career, but in hindsight proved accurate. Note the ironic moral hazard (still) at play here…

The dot-com bubble was the result of a combination of excessive capital entering venturing from institutions chasing higher returns on far too large of a scale, and a new global medium that threatened to completely change the game throughout large sections of our economy. The combination of the Internet and Web didn’t alter fundamental economics nearly as much as disrupt and rearrange specific segments, but the growth and then enormous values attracted everyone from authentic entrepreneurs to fraudulent opportunists to entrenched institutions threatened with extinction; a process that continues.

I argued then that the historic over-investment in the medium completely disrupted a natural organic process well underway before the stampede of capital flooded (fragile) fertile fields of emerging commerce. If not for the dot-com bubble America would be much stronger today with a much greater number of strong companies poised for the future. Unlike housing, which was far more national, the dot-com bubble was primarily caused by Silicon Valley, Wall Street, the relationship between the two and their investors. It was enabled by the SEC and the White House which viewed the capital gains from the bubble as a positive (capital gains can be positive, but not in pump and dump schemes that just leads to higher government spending based on unsustainable bubbles).

India and China may have been negatively impacted from too much investment later, but in the earliest stage of web commercialization, public forums like the Asian Internet marketing discussion list were full of authentic, hungry entrepreneurs who were far more eager to learn than the majority of their western counterparts. Essentially what I witnessed in those early days of Asian e-commerce were not investors, observers or academics—but doers. During the dot-com era, while the U.S. was overflowing with prospectors infected with gold fever, Asian entrepreneurs were becoming the tool makers of the future with national support from policy, strategic investment, and trade negotiations that leveraged their strongest asset; the fastest growing and potentially largest markets in the world.

In the U.S. our policy favored entrenched interests, including capital and job flows to Asia, which remains true today. Most government agencies for example at the local, state, and federal level are still financially rewarding multinationals that are sending assets and jobs to Asia while cutting in the U.S.  BRIC countries must indeed think we are self-destructive fools—one need not start a global trade war to make wise decisions at home, and avoid suicide.

Lethal prescription for U.S.; easy money instead of fiscal discipline

One of the byproducts of the dot-com era was excessive centralization of wealth, particularly in and around Silicon Valley, Manhattan, and a few other cities, creating a negative spiral of protecting assets (again attempting to keep unsustainable bubbles inflated-improper use of capital) instead of ‘creative destruction’ that favors job engines and long-term wealth creation. It also created resentment in flyover states that did not participate in either destructive strategic capital wars, or fraud, which was caused by moral hazard from the S&L crisis that I think contributed to the housing bubble.

The rise of Asia combined with the wealth effect of technology and the real estate bubble provided a potentially lethal combination to the U.S.  At the precise time the U.S. (and EU) should have been saving more, and retooling for a changing global economy to become more competitive—just the opposite occurred; cost of living in the U.S. went ballistic, as did the cost of infrastructure, healthcare, education and government; making it increasingly difficult for authentic entrepreneurs to build real, long-lasting companies in the U.S. (monetary easing?).  So venture capitalists, institutional investors, and multi-nationals focused primarily on two strategies for profit making, depending on their internal strengths; scaling in emerging markets and financial engineering. Most I’ve talked to privately don’t feel they had any choice, but they are wrong—I didn’t participate in the self-destructive mayhem nor did most others.

Until very recently, when the first real economic correction began in generations, Americans could party their way through a public university, obtain a degree, and if nothing else popped up get a job with a government agency and be set for life—our institutions are filled with mediocre and apathetic cultures because of it. The more gifted and/or driven students could join the stampede of financial engineers on Wall Street (or increasingly Silicon Valley) to harvest some of the excessive currency that had been printed over the years, get rich quick, and retire. Brilliant scientists could remain in academia forever, consult on the side, and sell some IP to obtain wealth without assuming much if any risk. While I am exaggerating to make a point, this is hardly the type of incentive structure, culture or environment needed to build new industries or strong companies like the early Intel, which after all moved the bulk of its manufacturing operations out of the Bay area long ago due to a suicidal cost trajectory from this very culture.

Market manipulation eventually fails; market farming eventually works

The problem that few in Silicon Valley would admit publicly until very recently, is that California is just too expensive and prices need to fall dramatically in order to be competitive; an extreme case of the same disease facing much of the U.S. and EU.  A large portion of the capital invested in California is strategic and protectionist, and not free to flow to opportunity. For several years while I was a VC based in AZ, CalPERs mandated $8 billion per year in just one program to be invested in venture capital firms located within California borders, representing a classic predatory bubble maker, resulting in good companies starving throughout the U.S. while many undeserving ventures partied hard in California. Most states were either unwilling or unable to play capital warfare (this is still the national U.S. policy).

I was born in California and we liked living there otherwise but over decades we’ve seen a great deal of market manipulation under the guise of market capitalism. Populism mixed with political and market manipulation has now devastated the world’s strongest economy. The place that taught the world about the importance of creative destruction failed to practice the discipline; otherwise capital would have flowed to opportunities in flyover states. Instead, other states were viewed as competitors and Asia was viewed as the answer, but California was over estimating its own community and underestimating others.

The good news is that many other areas in the U.S. have become far more competitive on costs with relatively competitive human capital, particularly for tech manufacturing of the type Andy Grove discusses. The bad news of course is that healthcare, education, public policy and bureaucracy are acting like chains of economic repression to emerging companies, either directly or through our dysfunctional banking system. Perhaps worse is that entrepreneurs have been lectured rather sternly for the past several years through policy that bigger and incompetent is far more highly valued by the U.S. now than smaller and competent, even though entrepreneurs create jobs, so we should not be surprised at the result.

Enough of the past; what about the future?

As Andy Grove suggests I think accurately, one of the key problems facing the U.S. today is our lost ability in scaling companies. Where I disagree with Andy is that he argues against new business as the primary answer to that problem, which probably reflects the fact that I am a founder of a start-up in a new emerging ecosystem and he is founder and advisor to an entrenched giant that emerged 40 years ago. I am certain, however, that the U.S. needs more creative destruction, not less, and that cannot be achieved through entrenched institutions—they simply have too much to protect and usually fail to cannibalize voluntarily, which results in economic stagnation.   Job creation on the scale the U.S. and EU need today requires new ecosystems—they will not emerge from entities threatened by same, or quite possibly even regions or markets they dominate (update– see this article and this article for a post doc EDU).

What we need today is what Intel had in the beginning, as I recall portrayed to me a couple of years ago by a mutual friend Les Vadasz over lunch in Palo Alto. In the early days of Intel, several essential ingredients existed, without which they may not have survived, the most important being a customer willing to take a chance with a young company.  This simple dynamic of mature supporting emergent is prevalent in Asia, improving in the EU, Canada and others today, but has become almost completely absent in the U.S. culture. The fact that the first major customer for Intel was based in Japan may tell us something about how clubby U.S. industry was even in 1969; otherwise Intel would probably have found its initial customer in the U.S.

I have immense respect for the founding team at Intel, not only because of the great technology and wealth created that supports industries, governments, and foundations, but the manner in which they created it. They not only created a new ecosystem but taught many others how to farm markets, learning the hard way over time the high cost of toxicity to market farming.

Today however, we should not look to market leaders for job creation, but rather young companies attempting to create new ecosystems, like our effort in leading the semantic enterprise. Whether we call it opportunity, liberty, creative destruction, or simply progress—emerging companies are the job engines of our economy, particularly when built upon new technology ecosystems that only occur every generation or two. There is no alternative to the new company and ecosystem. Any culture or nation that fails to embrace this truism does so at their own peril.

 

How can information technology improve health care?

I recall first asking this question in leadership forums in our online network in 1997, hoping that a Nobel laureate or Turing Award winner might have a quick answer.  A few weeks earlier I had escorted my brother Brett and his wife from Phoenix Sky Harbor airport to the Mayo Clinic in Scottsdale, seeking a better diagnosis than the three-year death sentence he had just received from a physician in Washington. Unfortunately, Mayo Clinic could only confirm the initial diagnosis for Amyotrophic lateral sclerosis (ALS).

In my brother’s case, the health care system functioned much better than did the family; it was the dastardly disease that required a cure, along with perhaps my own remnant hubris, but since his employer covered health care costs we were protected from most of the economic impact. I then immersed myself in life science while continuing the experiential learning curve in our tech incubator. It soon became apparent that solving related challenges in research would take considerably longer than the three years available to my brother, his wife, and their new son. Close observation of health care has since revealed that research was only part of the challenge.

Symptoms of an impending crisis

During my years in early stage venture capital, symptoms of future economic crisis in health care appeared in several forms, including:

• R&D failed to consider macro economics
• Technology that increased costs were most likely to be funded and succeed
• Technology that decreased costs were often unfunded and/or not adopted
• Cultural silos in scientific disciplines were entrenched as effective guilds
• Professional compensation packages were growing rapidly
• Regulatory bureaucracy was devolving
• The valley of death was expanding rapidly
• Trajectory of HC costs and customer means were in opposing X formation

Over the course of the following decade, while observing my father’s experience with diabetes—including billing, it became obvious that few stakeholders in the life science and health care ecosystem were provided with a financial incentive for preserving the overall system; meaning the challenge was classically systemic. Clayton Christensen sums up the situation in health care succinctly: “clearly, systemic problems require systemic solutions.”

12 years to design an answer

When looking at the challenges within information technology and health care first as individual systems, and then combined as a dynamic integrated system, we came to several conclusions that eventually led to the design of our semantic healthcare platform.

Ten essentials:

1. Patients must manage their own health, including data
2. Universal computing standards; likely regulated in health care
3. A trustworthy organization and architecture
4. Simple to use for entry level skills
5. Unbiased, evidenced-based information and learning tools
6. Highly structured data from inception
7. High volume data meticulously synthesized from inception
8. Integrated professional and patient social networking
9. Mobile to include automation, analytics, and predictive
10. Anonymous data should be made available to researchers

Probable benefits

While we must build, scale, and evaluate our system to confirm and measure our predictions, we anticipate measurable benefits to multiple stakeholders, including:

• Higher levels of participation in preventative medicine
• More timely and accurate use of diagnostics
• Reduced levels of unnecessary hospital visitation
• Higher levels of nutrition
• Lower levels of over-prescription
• Reduced levels of human error
• Improved physician productivity
• Reduced overall cost of health care
• Much greater use of analytics and predictive algorithms
• Expedited paths to discovery for LS researchers

In May of 2010, we unveiled our semantic health care platform with a companion diabetes use case scenario, which is written in a story telling format, and is freely available in PDF.

Thoughts on the Santa Fe Institute

A topic of considerable thought, discussion and debate for many of us long before a series of ever-larger crises, the Santa Fe Institute (SFI) chose the theme of complexity in regulation for their annual meeting this week. Prior to sharing my thoughts on the important topic of simplifying regulation in a future post, which will be covered more extensively in my book in progress, I want to focus a bit on SFI.

I was fortunate to attend last year’s 25^th anniversary meeting at SFI, but this year I was only able to view the final full day via webcast, which was excellent. The official SFI about page can be found here, although having written many of these descriptions myself; I’ve yet to write or read one that captures the essence of the organization, people, or contributions, so please allow the liberty of a few additional lines in first person.

I have been following SFI regularly for over 15 years, and since moving to Santa Fe nearly two years ago have had many interactions. SFI essentially pioneered complexity as a discipline, but has also been a leader in what I refer to in my own work as a mega disciplinary approach to discovery, without which frankly many researchers and their cultures can become blinded, and discoveries stalled, with R&D performing substantially below potential.

One of several strengths at SFI is their ability to draw from a very broad universe of scholars, each of whom is a leading expert in a specific discipline, but also share an interest in complexity theory—which affects everything else, as well as the need to work across disciplines to optimize learning.

The intimate size and environment of SFI is no doubt partially responsible for attracting so many leading scholars to contribute and engage. After living in Santa Fe, visiting the campus and attending multiple events, with a great many exchanges with larger institutions for 30 years, I can certainly understand the appeal for permanent faculty, visiting scholars, post docs, and business network members.

This year’s event was organized by Chris Wood and David Krakauer, who are two individuals at SFI I have had the pleasure to get to know recently (forgive my informality here; it comes natural). David heads up the faculty and Chris divides his time between research, administration, and running the SFI business network. These two represent a diverse faculty and also make an interesting combination, with Chris being the calm diplomatic type while David exudes sufficient rebelliousness at times for me to wonder, despite his brilliance, how he prospered at Cambridge (due to my own rebel instincts and frustration with academia), until reflecting on his current role. It is precisely the challenge when shepherding deep diversity that brings out the best in people; one of several skills David demonstrates when leading groups.

A good way to learn more about SFI from afar is to view a sample of their research online, including videos. Their model, however, like many—is not perfect, as the institute is substantially dependent on donations in what has been a very uncertain time and economy of late, so for those who may be seeking a worthy tax deduction this year, I would urge you to consider a donation.  For larger corporations and foundations, I recommend exploring the SFI business network, which is similar in many respects to the experimental virtual network I operated in the late 1990s, but also benefits from the physical conference interactions throughout the year, not just with SFI scientists and staff, but also with other business network members. Several of our network members have also been business network members of SFI, so I have known quite a few over the past dozen years, including Franz Dill on our Kyield advisory board who represented P & G for many years at SFI. For corporate and foundation executives in particular, I highly recommend viewing a short video interview with SFI Vice President Nancy Deutsch to explore relationship options.

Unlike universities and federal labs that grew large physical empires with massive overhead, the small size of SFI, fewer conflicts, independence, location and talent attract exceptional human quality, providing a rare situation certainly worth preserving and improving. My hope for SFI is that the community and entity will continue to adapt, evolve, and forge a strong and diverse financial structure that could become a model for the future.

While it may not always be obvious to some of my colleagues in business and finance, the independent theoretical research produced by SFI is essential for thinking through and eventually helping to overcome the world’s most pressing challenges, which is from my perspective excellent long term strategic alignment for any mission statement.

Mark Montgomery

Founder & CEO

Kyield

Regulatory Failure on the Web; Consequences and Solutions

I have argued consistently since the mid 1990s that the global medium (combined Internet and Web) increasingly reflects the global economy, and that rational, functional regulation is essential. I started this journey then with a very similar ideology to Alan Greenspan’s before the financial crisis; that self-regulation should be sufficient to prevent systemic crises, but in practice it has failed to do so.

Most of the actual regulation in computer networking today is accomplished via manipulation of architecture in one form or another, but technical standards on the web are voluntary, as the Tech Review article The Web is Reborn highlights, which was apparently in response to the article The Web is Dead at Wired earlier in the year. In the U.S., we are really reliant primarily on one form of regulation on the web, other than proprietary architecture and voluntary standards, which is social. Social regulation has evolved with the consumer web, occasionally demonstrating some power—as was recently demonstrated with Facebook security issues, but social regulation has also proven to be self-destructive at times, particularly regarding sustainable economics and jobs. Few if any consumers can see how their actions on the web are impacting their own regional economy or industry, meaning that the blind is often leading the blind towards dangerous hazards in a similar fashion to the housing crisis. Ignorance is being exploited.

Two eras, opposing needs, yet same reaction

In order to provide some context with continuity, let’s begin with the PC revolution about 30 years ago when the lack of interoperability allowed Microsoft to extend its growth from the operating system into productivity, communications, and eventually networking, forming one of the strongest strategic partnerships and business ecosystems in history.

During the PC era, regulation was essentially outsourced to industry, which employed a combination of proprietary computer code, strategic alliances, and the failure of others to work together in a competitive manner to establish the standard, which of course led to a monopoly. The political, social and cultural dynamics at play were very interesting at the time, dominated by the view still common today that the only other option was government, which couldn’t be relied upon to regulate technology.  It turns out that many other forms of regulation exist that can be learned from in natural sciences, physical sciences, social sciences, and architecture, among others.

Among the most important business lessons in the PC era was that Microsoft bet against the abilities of others to work together, and when combined with strong execution was rewarded at historic levels. At the time I clearly recall arguments from investors, customers, government officials, and even competitors agreeing with Microsoft that the PC revolution was too young for external regulation (which I heard again this week regarding the web), so “let the best man win”. I myself said much the same then—not having the benefit of observing this case (and many others) in what is a very complex, quickly evolving environment.

In hindsight, I believe we were correct regarding regulation in the PC era, but only for a very brief time—less than a decade; that’s how fast the big innovation door opened, scaled, and began to close. Our society cannot respond that quickly. This was new territory, just as the web would be a decade later.

In a very similar manner to the PC era, the lack of regulation on the early web fostered a highly innovative environment during the very early days, but the era peaked much quicker on the web due to the toxic flood of capital during the inflation of the dot-com bubble; and the web was very quickly taken over by entrenched interests. Opportunity still exists of course, but the dirty secret few discuss is that the failure rate for new IT ventures is very likely at an all time high—no credible statistics exist on the entire ecosystem to my knowledge; only portions thereof. Of course knowledge, experience, relationships, resources and luck play a big role on outcomes, as usual, but lack of effective regulation generally favors and rewards predatory behavior.

The PC was sustaining innovation; the web is disruptive innovation

It’s important to understand that in the pre-network era, economic alignment was primarily positive for everyone except direct competitors to Microsoft (or Intel in semiconductors), which was managed masterfully by a brilliant entrepreneur who became the world’s wealthiest human, and supported by many other brilliant people. The world needed a standard for interoperability, and since few were negatively impacted, the increases in productivity from authoritarian rule were viewed largely as positive within the social regulation realm, even if only for a brief time. In hindsight, government regulation failed not only to prevent the monopoly, but also in resolving it. Government was then and still is today complicit in the creation and protection of the monopolies, regardless of how they form, particularly in the U.S. and EU within the IT cluster, which is I think driving future industry leaders to other countries.

Once monopoly power sets in, it can be very destructive, including to the long term company culture within the monopoly itself, which provides a strong case to manage market share very carefully. The largest impact, however, is invisible, which usually manifests as aborted innovation within the specific market and industry, lack of adoption of competing technologies, and failed investment, which is evident today in most consolidated industries, reflected by very poor economic performance.

Failed regulation often leads to market failure, which is a real possibility for the web unless a sustainable economic structure is formed. This is essentially the argument behind the claim the “Web is dead”—with Chris Anderson suggesting that the Internet was moving over to wireless devices where a more viable economic structure is forming; customers are far more likely to pay for services rendered in the iPhone structure than the web structure.

As I have often argued since the commercialization of the web, the advertising industry is not nearly large enough to compensate for the economic displacement of industries from the disruption, particularly in the service dominated economies in the West. Silicon Valley, Madison Ave, Wall St. and D.C. cultures still don’t seem to fully understand this reality and equation, or presumably policy would reflect it. China and Germany on the other hand seem to understand the issue with abundant clarity, and are exploiting the situation brilliantly, as is India and others. A nation does not want to be dependent upon a service economy in a global economy that is increasingly delivering services over an ad supported medium; particularly a nation deep in debt that is challenged educationally.

The often misunderstood lesson here is that the PC ecosystem was not a disruptive innovation, but rather a sustaining innovation—meaning that it threatened very few. In direct contrast, the web is very disruptive—not only to specific companies, but to entire industry clusters, regional, and national economies, which affects everyone on the planet.

Despite this extremely important difference, regulatory schemes reacting to the two very different situations are essentially the same, and will very likely result in a similar outcome unless regulation improves quickly, particularly relating to technical standardization. As market share becomes more dominant in corporate cultures, so does hubris—the cultures become increasingly less influenced by voluntary standard processes or social regulation. Eventually, as we’ve seen in our recent past, the monopoly cultures can even directly challenge the authority of sovereign governments, and the potential exists for global companies to actually dominate national policy. Currently Ireland provides a fine case study of why such a situation should be avoided.

I maintain that the winner-takes-all approach of the PC era would be catastrophic for the web and the global economy, perhaps even leading indirectly to civil disruption and conflict. Many wars have been fought over far less economic disruption, so in a very real sense this issue is one of national and global security.

So is the web dead or reborn?

The web is primarily lost in a sea of confusion from lack of structure, which is largely due to the lack of effective regulation, which is in turn due to spin from those who benefit from the lack of regulation, and perhaps the impact of that spin on the ideology within our culture.  As in all previous standards wars free from effective regulation, a continuous battle rages, albeit somewhat more rational given the global nature of the beast than in previous sector or geographic standards wars.

In an invited letter to the editor in an upcoming issue of a leading publication, I will argue for functional regulation of the web relating to the creation and enforcement of technical standards, which are necessary to achieve security, privacy, and a host of other essential issues, including some degree of certainty for investors and entrepreneurs like myself. It is far more important that credible independent standards exist than what the specific standards are, which is lost on the academic CS community almost entirely. The current scheme is without power, glacial, and entirely without dependability, the latter of which is synonymous with credibility outside of academia.

I will save my detailed suggestions on how such a regulatory body might be structured for my book, but there is an emerging regulatory scheme on the web worth noting within the largest industry. The U.S. health care legislation, as messy as it was, did empower the HHS to determine technical standards for electronic health records, which was tied to funding and reimbursement. While substantially less than perfect, this standards process does appear to have the ability to gain traction due to a combination of initial funding, need for interoperable data, and leverage from other governments around the world to achieve a functional global standard.

Just one example of how this may occur is the relationship between life sciences, government regulation over drugs and devices, and the delivery of health care, all of which will require interoperability in order to function with any degree of efficiency. In the current environment, the health care technical standards process appears to be the most functional regulatory path towards adoption of a more intelligent web, aka the semantic web.

While we are all aware of the messiness of democracy, this alternate path towards regulation of standards on the web should not be viewed as a substitute for a rational, long-term solution. Welcoming luck once it occurs is one thing; depending on it for survival quite another. Our economy is too fragile and complex to depend on luck alone. Conflicted interests simply cannot be trusted, whether corporate, academic, or otherwise.

Mark Montgomery

Founder & CEO

Kyield

Semantic enterprise elevator pitch (2 min video)

What do Watson, House, and our Education System have in Common?

As I was reading articles about Watson winning Jeopardy, I was thinking about one of my wife’s favorite TV shows; House. The main character, Dr. Gregory House–played brilliantly by Hugh Laurie, is an emotionally unstable genius who leads a team of physicians in a diagnostic unit at a fictional teaching hospital in Princeton, New Jersey.

In most episodes of House, the diagnosticians torture this viewer, the patient, and the patient’s family, with a game much like Jeopardy when each of the experts draw on their memory over days and weeks to match symptoms with disease and therapy. As if this isn’t painful enough for someone who has been focused on applying semantic technologies to improve healthcare efficiencies, the team invariably nearly kills the patient multiple times during the diagnostic Q & A before House has an epiphany when his pain-killer addicted mind finally connects the dots between Jungian philosophy, tropical parasites, chemical toxicity, and/or genetic disorders to miraculously save the patient (usually).

I have actually found myself talking over the TV at times (very rare otherwise), suggesting some version of “put those symptoms in a database”, or “structure your data and stop torturing your patients and viewers”, and “save a million dollars per patient in unnecessary healthcare costs”.

Of course this frustration comes only after a half-century of witnessing our education system—and by extension our society, favor memorization techniques rather than the more essential understanding of how to improve, innovate and solve problems. Most of our challenges as individuals, organizations, a planet, and species depend not only on the quality of data far beyond the abilities of any single human expert–or even group–that would be best categorized as hubris, but rather the integrity of the collective knowledge, and more importantly what we do with it, aka the decision process.

While a sharp memory is essential in solving real-world problems such as diagnostics in highly complex environments, memory is a task that is much better performed by computer networks than humans, particularly with properly structured data sourced and updated from human experts. Unfortunately, the vast majority of institutions can no longer afford Watson, House, or our education system, which is among the best arguments for the semantic web.

In the real-world, Dr. Gregory House and his team would be employing Watson for diagnostics to free up time for improved therapy, research, and caring for additional patients.

Mark Montgomery
Founder & CEO
Kyield

Is social networking for the enterprise a revolution or ruse?

A slightly edited comment in response to a good article from Knowledge@Wharton: Is Business-centric Social Networking a Revolution — or a Ruse? ( via http://eponymouspickle.blogspot.com/ ) .

****~~~~****

Most professors I know are using twitter, but not for the consumer noise most are familiar with, rather to share information easily and quickly. Similarly, on Facebook the most intelligent people I know have the most friends. It’s a more functional replacement for email that bogged us all down– that isn’t discussed here, and should have been.

The author also misses several other points in this otherwise good piece, not least of which is the need to share information with customers and partners, monitor feedback, and importantly; introduce advanced analytics that wouldn’t be available otherwise.

I am not kind to the hype in software, and consumer social is absolutely in bubble territory, but we need to remind ourselves that collaboration–indeed computing, was originally designed for the workplace. That the enterprise market is relying primarily on consumer innovation (not just in collaboration or social–look at Apple) speaks to the dysfunction of organizational cultures more than how humans work best together, and with which tools.

Truth be known, and few if any have studied this issue as long or detailed as I have:

• boards are often the last to know that their companies are failing
• true meritocracy doesn’t exist in most organizations due to lack of structured information (meaning false assumptions and/or missing information dominates)
• the interests of the knowledge workers and organizations are often misaligned, which can be improved substantially with properly structured data
• virtually all human caused crises can be prevented with properly structured and designed networks, including many multi-billion dollar cases we’ve identified in private companies in the past five years
• large bureaucratic enterprises are among the least innovative orgs on the planet, due primarily to cultures that protect and defend instead of working together to improve, and smothering creativity of individuals in the process

Yes, consumer social software is primitive for enterprise use. Yes, it is largely a waste of time to use tools designed for different purposes, but it’s equally true that most don’t understand how to use the tools. No, the functionality needed in the enterprise is not simply an incremental evolution of existing platforms.

It’s best for leaders of large organizations to seek revolutionary improvement given the extremely poor performance of many in crisis prevention and innovation.

Here is a generic short video on structured data for the enterprise that provides a summary on why revolutionary change is needed. Those silos exist in large part due to incompatible languages and high costs of integration in legacy systems. If you want to learn about hype in software, and the damage done to customers and society, take a look at lock-in and (its) relationship to voluntary data standards, comparing say to interoperability in the electric grid or plumbing infrastructure for comparison.
http://semanticweb.com/semantic-web-elevator-pitch-for-enterprise-decision-makers_b17651

This article clearly supports the status quo. How’s that working; and for whom?

Either organizations are about people or they aren’t. If they are, as I am absolutely certain, then we’ve just scratched the surface of what is already possible, and those who refuse to adopt technologies that provide a tailored competitive advantage will continue to suffer the consequences. That has been true since the invention of the wheel, if not before. And all along the way some Neanderthals have successfully convinced their tribes that starting fires is a waste of time, or learning how to use a microscope was too laborious given the obvious fact that their current tools (eyes) worked just fine.

Now excuse me while I click the twitter button above and share this article with chief influencers and on Linkedin that includes all manner of customers to Wharton.

Mark Montgomery
Founder & CEO
Kyield

Unacceptably High Costs of Data Silos

Above is a screen capture of an internal Kyield document that displays an illustration of the high costs of data silos to individual organizations, regions, and society based on actual cases we have studied; in some case based on public information and in others private, confidential information. This is intended for a slide-show type of presentation so does not go into great detail. Suffice to say that human suffering, lives lost–human and otherwise, and wars that could have been prevented that were not are inseparably intertwined with economics and ecology, which is why I have viewed this issue for 15 years as one ultimately of sustainability, particularly when considering the obstacles of silos to scientific discovery, innovation, and learning as well as crisis prevention.

Mark Montgomery
Founder & CEO
Kyield
http://www.kyield.com

Clever is Cute as Sustainable is Wise

If the financial crisis confirmed anything, it is that the majority of humans are followers, not leaders, and that leaders throughout our society have yet to capture the significance of technology to their members and organizations.

One of the primary causal factors cited by thought leaders in studying crises is poor leadership, to include those who accept misaligned or conflicted interests. When we see “skimming off the top” in others we label it corruption, yet few see it in themselves at all, or choose to ignore it, resulting in the same outcome. While balance is obviously needed for survival—indeed managing that balance well is key for modern leaders, when we over-emphasize short-term profits, we then elevate the influence and power of those who are skilled at winning very short-term battles, rather than long-term wars. I have personally experienced that strategy in organizations and observed it in many others; it doesn’t end well.

One problem with the short-term leadership model is that the skills for software programming, instant trading, manipulating markets, or otherwise amassing great wealth quickly, does not necessarily translate to good leadership in a private company, government, or stewardship in philanthropy. Indeed, in my own observations and those of many others, quite the opposite is often true, yet our information institutions instruct society to emulate the clever rather than the wise. Should we be surprised then at the trend line of manipulation, polarization, and ever deeper crises?

Unlike the early days of the industrial revolution, in the second inning of the information revolution we now understand that most of the challenges facing the human species are long-term in nature, so we must realign our thinking and structures accordingly, including financial incentives and leadership development. Alas, since the long-term has been greatly compressed by consistent failure of short-term behavior, our entire species must now learn to act in the short-term on behalf of our mutual long-term interests. Easier said than done in our culture. The good news is that it’s quite possible…tick-tock, tick-tock, tick-tock.

The process of identifying, mentoring, and recruiting strong leaders often consists of conflicting advice that tends towards self-propelling cultures, regardless of organizational type. In addition to skill sets and track records sketched from misleading data, leaders are often selected based on ideology, dysfunctional networks, and susceptibility to peer pressure, instead of independent thought, good decision making, and wisdom.

Given the evidence, a rational and intelligent path would be to reconstruct our thinking and behavior surrounding the entire topic of leadership and organizational structures, and then tailor that thinking specifically for the environment we actually face, with tools specifically designed for the actual task. For many cultures, such a path begins by emerging from deep denial and embracing evidence-based decision making. Once emerged from the pit of denial, they soon discover among other truths that resources are not infinite after all, personal accountability is not limited to the inefficiencies of organizations, and that both the problems and solutions we face are inextricable from computing, organizational management, and personal accountability. Only then will the path to sustainability began to take shape in the vision field in sufficient form to differentiate the forest from the trees.

Yet another of the many disciplines related to this topic defines psychosis as a “mental disorder characterized by symptoms, such as delusions that indicate impaired contact with reality”.  An appropriate translation of insanity might be “refusal to adopt tools and models designed to achieve sustainability”, aka survival.

If this sounds familiar in your organization, it could well be traced to your leadership development model and process, for leaders are the decision makers who have budget authority. Perhaps it’s time for your organization to redefine strategic from clever to wise, and synchronize the organizational clock with present-day reality?

Mark Montgomery
Founder & CEO
Kyield
http://www.kyield.com

Mini-review: Ideas and Opinions

I picked up Ideas and Opinions off the shelf this morning scanning for a quote by Einstein, and so it reminded me to share with others the value of one of the greatest polymaths, as well as this collection by him. The publisher (Wings, 1954) states: “Ideas and Opinions represents an attempt to gather, so far as possible, in one volume the most important of Albert Einstein’s general writings.”

I have been an admirer of Einstein’s writing since a teenager, but those who are not familiar with his publications may be surprised at the breadth of his interests shared for wide consumption in common story telling format.

Following are just a few examples of uncommon quotes found in this wonderful collection of wisdom by Albert Einstein.

“Knowledge is dead; the school however serves the living. It should develop in the young individuals those qualities and capabilities which are of value for the welfare of the commonwealth.  But that does not mean that individuality should be destroyed and the individual become a mere tool for the community, like a bee or an ant.”

“If there is anything that can give a layman in the sphere of economics the courage to express an opinion on the nature of the alarming economic difficulties of the present day, it is the hopeless confusion of opinions by the experts.” (1934)

“Perhaps I am over-pessimistic regarding state and other forms of communal enterprise, but I expect little good from them. Bureaucracy is the death of any achievement.”

“The benefits that the inventive genius of man has conferred on us in the last hundred years could make life happy and carefree, if organization had been able to keep pace with technical progress….. in the hands of our generation these hard-won achievements are like a razor wielded by a child of three.”

“To act intelligently in human affairs is only possible if an attempt is made to understand the thoughts, motives, and apprehensions of one’s opponent so fully that one can see the world through his eyes.”

“If you want to find out anything from theoretical physicists about the methods they use, I advise you to stick closely to one principle;  don’t listen to their words, fix your attention on their deeds.”

All quotes above by Albert Einstein from the book Ideas and Opinions.

-MM

Innovation in the Enterprise

One of the better reports on innovation in the enterprise was published by PWC, so I wanted to share a link to it and provide a few comments.

Generally speaking this report supports most of the claims we’ve made at Kyield during our applied R&D journey, including knowledge systems, the power of semantic search, an integrated systems approach to the innovation challenge, and what the role of the CIO should be, among others.

What I do not see discussed is the importance of meritocracy, although to be fair to PWC they discuss it elsewhere in detail; nor is there much discussion on the need to protect the ideas of the best and brightest in social environments, without which those ideas are likely to exit and become disruptive.

In the digital world, despite the needs of individual members of the ecosystem, one cannot (nor should not attempt to) silo innovation from crisis prevention or meritocracy, meaning also the need to embrace management of internal cannibalism. Let’s not forget our important lessons of the broader needs of the economy with respect to creative destruction, or we will indeed likely continue to see a continuation of jumping from one systemic crisis to another. So while they have done better than most revealed publicly, it does not appear that they have completely mapped the innovation genome.

That said, this report by PWC is worth serious time and reflection. Their domain is after all, like thousands of other market leaders, frequently found in our web logs.

Mark Montgomery

Data Integrity: The Cornerstone for BI in the Decision Process

When studying methods of decision making in organizations, mature professionals with an objective posture often walk away wondering how individuals, organizations, and even our species have survived this long. When studying large systemic crises, it can truly be a game changer in the sport of life, providing motivation that extends well beyond immediate personal gratification.

Structural integrity in organizations, increasingly reflected by data in computer networking, has never been more important. The decision dimension is expanding exponentially due to data volume, global interconnectedness, and increased complexity, thus requiring much richer context, well-engineered structure, far more automation, and increasingly sophisticated techniques.

At the intersection of the consumer realm, powerful new social tools are available worldwide that have proven valuable in affecting change, but blind passion is ever-present, as is self-serving activism from all manner of guild. Ideology surrounding the medium plays a disproportionate role in phase 3 of the Internet era, to include crowdsourcing, social networking, and mainstream journalism. Sentiment can be measured more precisely today, but alignment is allusive, durability questionable, and integrity rare.

Within the enterprise, managers are dealing with unprecedented change, stealthy risk, and compounding complexity driven in no small part by technology. Multi-billion dollar lapses sourced from multiple directions have become common, including a combination of dysfunctional decision processes, group/herding error, self-destructive compensation models, conflicting interests, and poorly designed enterprise architecture relative to actual need.

Specifically to enterprise software, lack of flexibility, commoditization, high maintenance costs, and difficulty in tailoring has created serious challenges for crisis prevention, innovation, differentiation, and global competitiveness. It is not surprising then, given exponential growth of data, which often manifests in poor decisions in complex environments, Business Intelligence (BI) is a top priority in organizations of all types. BI is still very much in its infancy, however, often locked in the nursery, subjecting business analysts to dependency on varying degrees of IT functionality to unlock the gate to the data store.

Given the importance of meaningful, accurate data to the mission of the analyst and future of the organization, recent track records in decision making, and challenges within the organization and IT industry, it is not surprising that analysts would turn to consultants and cloud applications seeking alternative methods, even when aware of extending the vicious cycle of data silos.

Unfortunately, while treating the fragmented symptoms of chronic enterprise maladies may provide brief episodic relief, only a holistic approach specifically designed to address the underlying root causes are capable of satisfying the future needs of high performance organizations.

The dirty dozen fault lines to look for in structural integrity of data

1. Does your EA automatically validate the identity of the source in a credible manner? (Y/N)
2. Is your IT security redundant, encrypted, bio protected, networked, and physical?  (Y/N)
3. Are your data languages interoperable internally and externally? (Y/N)
4. Is the enterprise fully integrated with customers, partners, social networking, and communications? (Y/N)
5. Do you have a clear path for preventing future lock-in from causing unnecessary cost, complexity, and risk?  (Y/N)
6. Are data rating systems tailored to specific needs of the individual, business unit, and organization? (Y/N)
7. Are original work products of k-workers protected with pragmatic, automated permission settings? (Y/N)
8. Does each knowledge worker have access to organizational data essential to their mission? (Y/N)
9. Are compensation models driving mid to long-term goals, and well aligned with lowering systemic risk? (Y/N)
10. Is counter party risk integrated with internal systems as well as best available external data sources? (Y/N)
11. Does your organization have enterprise-wide, business unit, and individual data optimization tools? (Y/N)
12. Are advanced analytics and predictive technologies plug and play? (Y/N)

If you answered yes (Y) to all of these questions, then your organization is well ahead of the pack; even if perhaps a bit lonely. If you answered no (N) to any of these questions, then your organization likely has existing fault lines in structural integrity that will need to be addressed in the near future.  The fault lines may or may not be visible even to the trained professional, until the next crisis of course, at which time it becomes challenging for management to focus on anything else.

Mark Montgomery
Founder & CEO
Kyield

markm at kyield.com

Copyright © 2011, Mark Montgomery.  All rights reserved.

Overcoming the Enterprise Differentiality Paradox

The low cost of replication with digitized products has long been known to be seriously disruptive in the music and publishing industries. However, the conflict between low cost replication of business software, rigid architecture, and customer differentiation relative to the broader economy is not generally well understood, although vitally important.

When enterprise software matured to the point of early adoption in the 1970s, it provided a substantial competitive advantage to those in a position to leverage wisely. Followers of the early adopters did so largely due to the perception by decision makers—based on compelling evidence—that adoption was essential to their future, and so the great commoditization cycle in enterprise software had begun. In the early 1980s a very similar pattern began with front office software, captured primarily by Microsoft, with commoditization slowly gaining strength in the 1990s.

While front office software could be neatly packaged and sold in storefronts or through consultants for desktop installation, back office systems for operations required on-premise customization and integration with incompatible systems, meaning a very large investment with ongoing maintenance, and high costs for adaptation. Within a few years, custom applications were increasingly sold as products, exploiting the nearly free replication costs, but this benefit was not without cost as wider adoption of back-office products soon began to erode the competitive advantage; the commoditization cycle was in motion.

In addition to the direct impact of commoditization on the software industry, which is well understood in business and finance, another dynamic was occurring that was considerably less visible and largely misunderstood, which is the impact on organizations when the vast majority worldwide are using the same operating and decision systems. As software systems became more ubiquitous, competitors in industry after industry were increasingly using similar systems, which began to extend the software industry’s commoditization to customers, and by extension the broader economy. This dynamic extension of commoditization evolved in conjunction with globalization and consolidation of industries over the past two decades. Indeed, the commoditization of business software acted as a catalyst to global consolidation of industries as business software customers were increasingly competing on price rather than value added differentiality. Competing on price alone with reasonably good management dictates outcomes that are primarily due to scale, particularly when automation systems are very similar between competitors; not quite singularity in the enterprise given the current maturity of technology, yet trending in that direction. Lack of differentiation does not a robust, durable economy make; competing on scale and price alone is a race to the bottom for everyone but market leaders.

This situation may at first appear attractive for business software vendors and their investors, particularly market leaders, as managing a commodity that has become essential can be a lucrative annuity. Dancing with complexity in technology, however, contains considerable risk of broken toes, particularly with software, which is anything but a finite resource. History has proven that substantial risk exists for incumbents that commoditize their customers.

Enter the Internet and Web, followed by cloud computing, and much smarter mobile adoption. Taken together with advances in hardware, software, semantics, analytics, and organizational systems, the opportunity to introduce truly adaptable enterprise computing in near real-time has finally arrived. It’s been a long voyage; one full of discovery and adventure, which I hope will prove to have been worthy of our patience.

Mark Montgomery
Founder & CEO
Kyield

New Mexico Analytics Cluster project

I wanted to share a project I initiated earlier this year that we have temporarily named the New Mexico Analytics Cluster.

Essentially the project relates to organizing the broad analytics cluster here in NM into a functional global leader worthy of the science and technology. Initial feedback from quite a few of the related companies, labs, and individuals has been useful and generally positive, so we thought it was time to initiate a modest public exposure with a blog.  A brief slide presentation is linked that provides more detail.

Thanks, MM

Is the customer’s customer a tipping point for enterprise IT?

In early 1996 we spun out a radical concept from my consulting firm on the newly commercialized web that attempted to level the playing field between small business and large. The vision was grander than the technical capabilities at the time, but despite our many weaknesses it became a niche market leader.

Even though we had recent experience representing clients who were competing with market leaders, I was still surprised by the response in some sectors. In our attempt to partner with multinationals, we found primarily fear and defense, including in finance. It was quite clear that the majority of leaders in the corporate world were not terribly thrilled with our efforts. From my perspective, however, given the advantages of incumbents, the long-term risk was far greater to most of their companies if such efforts did not succeed. Having been on all sides of this issue, I was closer to the challenges than they were (and had deeper intel).

Fast forward to 2008. During the initial wave of the global financial crisis I had a private email exchange with one of the leading economic editors, who is a respected centrist thought leader I had known for over a decade. While we have very different backgrounds and experiences, we were in agreement that the initial reaction to the crisis, even though understandable, were misguided. Due to a myriad of factors, including consolidation, centralization, internal financial conflicts, expediency, scale, political activism favoring large institutions, and technology, the small business engine was already in trouble in the west, buoyed primarily by easy credit and the housing bubble in previous years. Based on the evidence in previous recessions, we had very little confidence that the existing financial infrastructure could serve the needs of small business, particularly in current form. One need only travel in the rural U.S. or observe a few SME P&Ls to conclude in hindsight that we were correct.

Fast forward to the present day. On Meet The Press last Sunday, David Brooks sent a warning that I fear will go unheard in the very ivory towers that need to heed the message: “I was up on Wall Street the other day. I know political risk better than they do; they are vastly underestimating the source of political risk out there. We could have a massive problem in the next couple of years.” The source Brooks is referring to, of course, is the American citizen and consumer.

A headline on Wednesday (6/1) at CNBC echoes the disconnect: Wall Street Baffled by Slowing Economy, Low Yields. These are not isolated cases, but rather symptoms of a greater problem at work in the decision process found in every crisis over the past 15 years. I don’t know what data these analysts are consuming, or what tools they are using, but their systems and methods continue to fail them if these and other reports are true.

A glance at the quarterly reports of even the largest consumer companies would reveal a combination of inflation and weak spending that is beginning to negatively impact earnings. Given the massive scale and tight margins facing most of these companies, it should serve as a long over-due wake-up call that it’s time for the IT industry cluster to execute competitive, cost effective solutions to help the customer’s customers compete. This is not an immediate crisis begging for knee jerk reactions, but rather a trend long in the making, dealing with underlying structural problems in the economy that are essential to overcome.

One does not need to search far and wide to discover a variety of profitable methods and models to extend high-end functionality to the SME market, provided of course one is looking, not consumed with protectionism, and obstacles are removed. Regardless of what sector of the economy each serves, ultimately there is no escaping the impact of macro economic conditions, to include the impact of technology on customers of customers.

Dispelling myths about industry clusters

I was interviewed this week about the New Mexico Analytics Cluster project with an article to be published within the next week, so I wanted to post relevant material to the blog. If you have an interest in economic development, venturing, entrepreneurs, tech transfer, job creation, and building tech businesses or clusters, you might find this post of interest: Myths and truths about industry clusters . -MM

Designing a prosperous cluster of synergy between tech, business

An article on our tech cluster project was published in the Santa Fe New Mexican newspaper Saturday, June 18th, written by Nico Roesler. This is a complex topic that is challenging to communicate for veterans, particularly in a simple format for the general public, so we appreciate this effort by Nico, Jane and the Santa Fe New Mexican. In the photo next to me is Pat Medvick, who is a long-term resident of the region, working as a computer scientist and software development leader at LANL for many years, then working at PNNL before returning to N NM where she was recently involved with a large data project based in the region, and teaching advanced programming at a local college.  Pat and I met a few months ago at a local software developer’s meet-up, along with many others, thanks to the efforts of Eric Renz-Whitmore at the NM Tech Council. – MM

Too Big to Fail or Too Primitive to Succeed?

Our economy very nearly experienced a financial version of Armageddon due to the gap between a primitive governance structure and highly sophisticated tools employed by a few with interests that were deeply misaligned with the needs of sustaining our national and global economy. We have all since unwillingly experienced the negative impacts of untamed technology while experiencing few of the benefits of the tamed; whether for resolution of the current crisis or prevention of the next.

Given the systemic nature and scale of the financial crisis, and in consideration of the poor ongoing economic conditions, it’s clear that the financial industry, political process, and regulators have all fallen short of achieving the individual mission of each, particularly in consideration of current technological capabilities.

For the past several months financial institutions have been attempting to convince regulators that they should not be labeled a Systemically Important Financial Institution (SIFI). The process of implementing the 2010 Dodd-Frank law in the U.S. has resulted in spin offs in an attempt to avoid increased U.S. regulation, while the new global rules for multi-national banks on top of Basel III, including surcharges and increased capital ratios, is resulting in a comprehensive rethink of the fundamental assumptions surrounding the global banking model.

Observing this dynamic invites a mental imagery of bureaucrats, politicians, and academics in team competition, each applying favored remedies such as duck tape over economic journals in a futile attempt to plug giant leaks in the hull of a Nimitz-class aircraft carrier.

When basic human greed clashed with globalization, networking, and technology, the combination introduced a complexity far beyond the organizational structures and tools available to regulators or corporations. Indeed, the reaction we’ve observed suggests that remedies employed to manage this crisis were designed for a war fought over seven decades ago during the Great Depression; an era when state-of-the-art technology was represented by the IBM Type 285 Numeric Printing Tabulator– capable of tabulating 150 cards per minute. The hourly sales of IBM today are approaching the annual sales of 1933, and billions of records are now run in seconds, yet our archaic regulatory system is employing printing presses in response to the largest financial crisis in 75 years.

A great deal has been learned in recent years beyond traditional economic theory about the systemic nature of networks, social behavior, contagion, and the global economy, with considerable investment in basic and applied research focused on technologies specifically designed to prevent systemic crises.

In the era of high performance computing on an increasingly interconnected planet with ever expanding pipes, economic tipping points can be reached very quickly that can bankrupt even the previously most wealthy nation on earth, particularly in a weakened economic condition suffering from structural problems. Focusing on SIFIs is of course essential, even if tardy by decades, but the emphasis should be on managing real systemic risk, which requires a very specific data structure that ensures data integrity, enhanced security, system-wide automation, modernized organizational structures, and continual, real-time improvement.

Without deep intelligence on the constantly changing relationships in a carefully constructed semantic layer, and automatically managed by pre-configured data valves, systemic risk is impossible to manage well, or even I argue at a level that is minimally acceptable.

Sophisticated new multi-disciplinary systems have been designed specifically to address the modern challenges in systemic risk management, but have yet to be built out and deployed. Policy makers should insist on the new generation of technologies to better protect citizens and the economy; regulators should embrace and promote the technology for it’s impossible to meet their mission otherwise; and financial institutions should adopt the technology due to rare ROI and sharply reduced levels of risk.

On Her 235th Birthday, America Desperately Needs Lean, Open, and Secure Governance

Baby boomers like myself clearly recall the tumultuous years leading up to the Bicentennial of the United States.  The world we grew up in was near the peak of the industrial revolution, dominated by the aftermath of the Great Depression, WW2, and the Cold War.  We were raised in a culture that had witnessed first-hand the power of a unified government, which led to the victory of fascism in our parent’s generation, followed by a round trip to the moon in our own. In the childhood of my generation, nothing was impossible with sufficient government power.

By 1976, however,  America had endured the 1960s cultural revolution, the Vietnam War,  a serious energy crisis, stagflation, and Watergate.  We were experiencing the shocking end to the post war boom, with new revelations that success had a price, military power had limits, government was not always trustworthy, and our industrial economy had a soft underbelly leaking oil.

By the late 1970s, interest rates were skyrocketing, inflation seemed out of control, the Cold War was threatening to become white hot, and U.S. public debt had risen to the shocking level of $900 billion, representing one third of U.S. GDP.  During the next decade of economic expansion led largely by financial engineering and services, the U.S. debt more than tripled in dollar terms, rising to nearly 60% of GDP.

During the 1990s, with the commercialization of the Internet and exponential adoption of computer networking worldwide, the global economy began to shift, but the information revolution did not result in taming the industrial revolution—at least in the short-term, but rather acted as a catalyst in shifting heavy industry from West to East in our never ending quest for growth and scale. The dot-com bubble provided a very brief respite from accumulating debt in the form of capital gains, but it was a one-time gain.

By the late 1990s it became apparent that the unfettered Internet, in ironic contrast to the core message in The Wealth of Nations, offered such disruptive efficiency that many industries would be radically transformed, including the service economy that had become dominant in the U.S.

Meanwhile, global companies became too big to fail, increasingly divorcing themselves from U.S.interests in what became the primary global strategy for risk reduction and growth, which only compounded the challenges facing the U.S. economy.  By extension, regional and national economies dependent on the industrial revolution or services would also need to adopt the efficiencies offered by the new medium in order to avoid eventual bankruptcy.  In modern parlance, the trajectory of our national budget was increasingly in misalignment with the needs of our economy, the super majority of our citizens, and our collective future.

Rather than downsize to meet the new reality and future obligations, the post 9/11 economy witnessed increased liquidity that  “saved the economy” (Alan Greenspan), combined with post war guarantees in banking, systemic corruption, and ideological activism to enable the mega housing bubble, followed by the inevitable correction and almost certain economic depression if not for historic levels of Keynesian intervention. Rather than invest massive stimulus in converting to a sustainable trajectory, however, most of the spending was targeted at populist programs that continued to expand government overhead, thus increasing long-term liabilities, primarily in very temporary form that now leaves regional economies facing an even more challenging future, and citizens faced with much greater national debt; short, mid, and long-term.  The promises made by government during and after the Great Depression were obviously not only unfunded, but increasingly unfundable.

The most recent example of kicking the can down the road has been unprecedented life support from the FRB in financing 70% of the U.S. debt in QE2, while once again warning Congress and the White House to get its long-term fiscal house in order.  The result, once again, was to witness excess liquidity flow to the most speculative markets, not the fundamental investments required to transition to a sustainable economy, confirming that we have yet to address the underlying structural problems.  The cost of avoiding another Great Depression by stimulus and liquidity has been to advance U.S. insolvency by more than a decade; and quite probably more than two.

Port of Call in the Voyage of Fiscal Denial

Regardless of how one interprets the voyage, the destination that our culture is finally beginning to awaken to is tragic. Under what most believe to be an optimistic forecast, the Congressional Budget Office (CBO) warns us that public debt will rise from around 70% of GDP currently to 84% by 2035, with interest payments rising to 4% of GDP from 1% at current levels. This “extended-baseline” scenario is dependent upon a great many things that have not occurred in the past, however, nor are expected by most, including low inflation and a relatively disciplined Congress. The more consensus forecast, or “alternative fiscal scenario”, projects public debt to rise to 100% of GDP by 2021 and 190% by 2035. However, anyone observing financial crises can attest that these events do not occur on an even gradual basis, but rather reach a tipping point.

The warning I offer today is that economists have based their forecasting on comparable situations in very small economies relative to the U.S., not the world’s largest that also manages the global currency, not to mention the only global military power.  Every forecast, scenario, and metric I have observed in economics is based on a very different history than the situation we face today, all of which assumes the post war experience of a stable U.S. economy.

To capture the situation, consider that while each have proposed different remedies, the best economic forecasters of our time, to include investors, Nobel Laureates, current and past FRB chairs, and regardless of party or ideology, all essentially agree that this unsustainable trajectory has nearly reached its pinnacle.  All are raising red flags, and none can (or have to my knowledge) deny that when the herd finally changes course in bond markets, as we’ve seen most recently in Greece, the stampede is swift and brutal.

Lean, Open, and Secure Governance = The Semantic Enterprise

The Levin–Coburn Report found that the financial crisis was the “result of high risk, complex financial products; undisclosed conflicts of interest; and the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street.”

The U.S. Financial Crisis Inquiry concluded that the crisis was caused by:

• “Widespread failures in financial regulation, including the FRB’s failure to stem the tide of toxic mortgages”
• “Dramatic breakdowns in corporate governance”
• Key policy makers “ill prepared for the crisis, lacking a full understanding of the financial system they oversaw”
• “Systemic breaches in accountability and ethics at all levels”

In early January of 2008, former GAO Director David Walker suggested that four types of deficits caused the underlying fiscal problem: budget, trade, savings, and leadership. While these four causal factors are without question, I suggest that all of our deficits depend upon the integrity of governance structure, including our increasing deficits in knowledge, competitiveness, security, and happiness.

The only reliable method to achieve a sustainable governance infrastructure in the network economy is with semantic enterprise architecture, which is based on many years of research and testing. For a brief video description of the semantic enterprise, see my elevator pitch, and for a more in-depth discussion, view this keynote at the recent SemTech conference by Dennis Wisnosky on the transformation of the DoD.

HANA and Kyield for Better Outcomes

HANA and Kyield

Data Speed combined with Data Quality and Human Intelligence

By partnering with Kyield, an excellent opportunity exists for SAP that could establish a “killer app” anticipated by CSFB and others across the entire enterprise, providing important added value for customers that have pre-existing investments in SAP, as well as help drive new investment in SAP products, particularly with HANA.

As Thomas Wailgun succinctly frames the issue at ASUG News: “Just because you can do it faster doesn’t necessarily mean the business outcome will be any better.”  Better outcomes depend on two challenges that Kyield has overcome:

1. Improved data quality sourced from human intelligence.
2. Improved human intelligence and decision making (based on improved data quality).

About Kyield

Kyield provides the foundation IP required for the world’s most advanced organizational operating system. Through a combination of proprietary technology, tradecraft developed over 15 years of applied R&D, and real-time analytics, Kyield can deliver breakthrough adaptability, enhanced innovation, crisis prevention, and higher productivity across the enterprise.

The Kyield IP acts as an organizational operating system on top of a tailored semantic layer of enterprise intelligence.

Adaptive Data Management Engines

• Enterprise-wide, units, and individual
• Data ‘valves’ for volume and quality
• Differentiation / continual improvement
• Yield management of data / knowledge
• Holistic focus on innovation
• User friendly automation
• Continual improvement
• Deeper security

Advanced Real-time Analytics

• Deep knowledge worker intelligence
• Visual performance metrics
• Crisis prevention
• Innovation enhancement
• Predictive modeling
• Algorithm / model menus
• Third-party algorithm / model menus

Kyield is based on my theory yield management of knowledge, which emerged over time from our small pioneering lab and incubator in the 1990s. The IP and associated trade craft has continually matured, now representing the brain for structured data (semantics) in the enterprise, with the ability to manage knowledge yield for individuals, business units, and the entire organization. The benefits of Kyield include much higher customer value in critical areas of decision making, crisis prevention, enhanced innovation, knowledge worker productivity, and continual improvement. My core U.S. patent application status as of 7-21-2011 was “Dispatch to FDC” in the Public PAIR.  The Notice of Allowance was mailed on 6-14-2011.

Mark Montgomery

Founder & CEO

Kyield
http://www.kyield.com

Clarifying Disruption: Operations vs. Innovation

Part 1 of Series

The word disruption has multiple meanings in global business with the most commonly used definition some variation of “the act of interrupting continuity”.  Within the context of logistics, supply chain, manufacturing, IT, and other business operations, disruption is obviously an experience managers work diligently to avoid.  A good example of a recent operational disruption was caused by the Sendai quake and tsunami; a natural disaster which was unpreventable, but predictable and therefore can be mitigated with careful risk management planning.

In the context of innovation, however, and long-term economic survival, disruption can be paradoxical when “the act of interrupting continuity” of tightly controlled markets, stale products, and outdated business models is not an evil, but rather can be a savior to businesses, ecosystems, and economies, preventing eventual operational disruption, or as we’ve seen in many cases—complete failure.

Animal Instincts

Central to the theme of disruption in innovation is the nature of our species.  We humans tend to be creatures of habit even when presented with evidence that the behavior is self-destructive in the long-term.  In similar fashion, individuals and organized groups such as governments and corporations often refuse to change behavior even when continually presented with evidence that the cost of the short-term comfort zone may well be long-term survival, and of course fear and greed are ever present.

While resistance to change is often strongest in absolute monopolies, similar cultures are commonly found anywhere deep disequilibrium exists in the tension between security and progress, speaking to the need for competition.  Entire industries or regions can become static relative to the world quickly today, displaying little evidence of awareness in decision making.  Mix in a heavy dose of risk averse corporate cultures, conflicting (real and perceived) interests internally and externally, a bit of PR spin, and regional translation leakage between multiple native languages, confusion surrounding the issue of disruption becomes the norm rather than the exception.

History is overflowing with examples of the high costs of failing to intentionally disrupt the status quo with innovation.  A few recent cases that come to mind include:

Government

• Failure to disrupt poor U.S. fiscal management and lack of accountability (in part with innovation) over a long period now threatens operational disruption
• Failure to disrupt the U.S. healthcare and public educational system has greatly exacerbated the U.S. fiscal challenge, reflecting why prevention of negative spirals with continual improvement is so important

Mobile Technology

• Nokia’s failure to maintain leadership in smart phones is now significantly impacting not just Nokia, but Finland’s national economy
• Rim’s response to the iPad, which seemed unable to take the risk to cannibalize, failed to physically disrupt by tethering the Playbook with the Blackberry phone
• Border’s failure to embrace disruptive digital publishing ended with liquidation

Offensive and Defensive Strategies

The need to disrupt static cultures, reform or replace decaying business models, and introduce competitive products is well known in management circles of course, so many kinds of offensive strategies, tactics, and systems have been crafted to overcome this age-old challenge, including motivational techniques, educational tools, recruitment practices, incentives, internal R&D, outsourcing, partnering, spin-offs, join ventures, acquisitions, IP licensing, and strategic venture capital. Quite a few companies have prospered through multiple business cycles employing a variation of all of the above in a persistent quest to achieve and maintain an optimal balance between growth and risk over the short-term and long.  The number of companies achieving mediocrity upon maturity is far greater, however.

One common method of defense is the formation of cartels, particularly with commodities or commoditized products that are susceptible to innovative new comers or companies moving into their markets.  Cartels and oligopolies can generate high margins for long periods of time and form very strong barriers to innovation, but eventually market and trade imbalances combined with innovation and conflicting interests of the members begin to fragment the cartel and erode market power, opening a window for competition that has proven to be healthy for incumbents, markets, and economies.  When economies stagnate, it’s generally a sign that incumbents have too much market power, usually achieved in part by manipulating the political processes, which is just one reason of many why corruption should be avoided.

The word cannibalism is sometimes used to describe what is often a difficult internal corporate process of intentionally replacing aging products that are still providing a significant portion of cash flow, with more competitive products. Another term used to describe disruptive innovation in the broader economy is creative destruction, popularized by Joseph Schumpeter in the 1940s, which describes the theory of replacing the old with the new in the entrepreneurial process. In the modern global economy, situations and cultures that allow progress without disrupting entrenched interests are quite rare.

In part 2 of the series, we’ll explore how innovation is beginning to revolutionize the innovation process in the digital enterprise.

Key patent issued

My key patent for Kyield was issued today by the USPTO as scheduled earlier this month.

Title: Modular system for optimizing knowledge yield in the digital workplace

Abstract: A networked computer system, architecture, and method are provided for optimizing human and intellectual capital in the digital workplace environment.

To view our press release go here

To view the actual patent  go here

I will post an article when time allows on the importance of this technology and IP, and perhaps one on the experience with the patent system. Thanks, MM

Background of patent #8005778

I am working on multiple articles relating to the patent I was issued last week, at least one of which will be posted here in the next few days, but in the interim I thought some might be interested in the common English portion of the patent. I hadn’t visited this section in some time–from early 2006.

Patent #8005778

Title: Modular System for Optimizing Knowledge Yield In the Digital Workplace (USPTO link to patent)

FIELD OF THE INVENTION

The invention relates to the management of human intellectual capital within computer networked organizations, and more particularly to managing the quantity and quality of digital work flow of individual knowledge workers and work groups for the purpose of increasing knowledge yield, or output.

BACKGROUND OF THE INVENTION

The volume of data transfer and related human consumption of information is growing exponentially in the network era, resulting in a condition commonly referred to as information overload. The result for the modern organization is an ever increasing challenge to manage the quantity and quality of information being transferred, consumed, and stored within computer networks.

Enormous amounts of structured and unstructured information is being consumed by knowledge workers that is redundant or irrelevant to the knowledge worker’s job, or the mission of the organization, creating serious challenges for organizations while reducing the return on investment for information technologies and knowledge workers.

Systems deployed previously attempting to reduce information overload and increase knowledge worker productivity have been designed primarily to address either the symptoms of the problem, or a specific portion thereof; including desktop productivity suites, higher performance search engines, and reducing unsolicited e-mail.

In recent years, computer standards bodies have been approaching the challenge by improving machine to machine automation and structure to documents with XML, RDF, SOAP, and OWL, commonly referred to as the Semantic Web.

Emerging positions within networked organizations attempting to optimize the digital workplace include the Chief Knowledge Officer (hereinafter “CKO”) who is responsible for improving the value of human and intellectual capital to better achieve the organization’s mission.

Despite these individual and collective efforts, the problems associated with information overload continue to grow exponentially. According to research firms IDC and Delphi Group, the average knowledge worker spends about a quarter of his or her day looking for information.

A related serious problem for knowledge workers affecting productivity and innovation is that intellectual property converted to digital form is simple to copy and distribute, providing disincentives for creative problem solving, the sharing of knowledge and intellectual property, and therefore improving work quality.

Given the complexities of the digital workplace environment, it would be beneficial for organizations to employ a holistic metadata system including modules to manage the knowledge yield for the entire organization, for each work group within the organization, and each individual member of the organization so they can continually optimize his/her knowledge yield for the continuously changing work environment.

From the trenches: on tech analysts and software patents

On analyzing technology

One of the most destructive messages our culture broadcasts is that proposed solutions that cannot be reduced to 140 characters shouldn’t move forward. If that policy were enforced in decades past, most of the important technology companies wouldn’t exist today. Concepts can be compressed, but that doesn’t necessarily mean they will be understood. Most of the simple problems were solved long ago. Unfortunately, very few are capable of understanding complex solutions prior to a polished end product, including the world’s leading analysts who passed on most of the big wins early on. So if we intend to move forward as a species, we better craft a new policy and improve methods for developing solutions to the actual complex problems we face. My advice to other founders has long-been to ignore the noise, focus, and do your best to attract employees, partners, customers, and investors who have done their homework and have the capacity; much easier said than done with next gen tech across the ever expanding valley of death.

Most analysts who have studied Kyield, reported on it, and/or attempted to label our work were not prepared for the task and could therefore not be in a position to grasp it. This was not entirely unintentional on my part as I learned the hard way long ago to withhold enough information to make reverse engineering difficult. While many are familiar with the potential benefits of exposing and promoting trade craft and IP, few are aware of the risks involved, and those tend to be the ones we need to be concerned with as they are often employed by giant competitors in one form or another. The world has changed; the biggest threat to incumbents are start-ups with ground breaking technology and/or strong innovation, and as we’ve seen in many cases– almost any tactic is employed when enough power or money is at stake. This is obviously a serious problem for anyone who must divulge sufficient information in order to build products, and by extension everyone who depends on a dynamic and diversified economy.

Software patents

I’ve been waiting on standards to mature since the mid 1990s and on the patent application process since April of 2006. Both systems are dysfunctional as they are manipulated (largely by exploiting weaknesses) by mature incumbents who are threatened by invention and innovation. That doesn’t mean, however, that we need less protection for original creative work, rather that we need more protection, of a different type, and much improved.

IP theft and copying of original work products is an enormous problem that is doing massive damage to our economy today, which is unfortunately largely invisible to the super majority of citizens. The IT industry has frankly been an enabler both in choices on architecture and in attempting to manipulate the legal and political system (often with great success). The IP challenge is symptomatic of structural challenges in the U.S., and increasingly related to economic deficits, education, and healthcare. The incumbents and gatekeepers who have de facto veto power through the political process, legal system, and technology are often threatened by any actual improvement to the system, so they tend to be extremely proactive in their defensive tactics, representing a classic negative spiral to broader society. IT has been commoditized across the world in systems we all use and innovation has been severely curtailed, with very little ability for most to establish differentiation, which is essential for survival in a market economy. This situation directly impacts every major challenge facing our world today.

Some software companies, software developers, venture capitalists, and academics have publicly denounced intellectual property rights for software and processes. While each of the common arguments have valid points, we don’t see many independent inventors claiming they need zero protection, and they are the stakeholders who matter in this debate–for the future of everyone else. I suspect that large numbers of authentic creators have simply opted out due to the lack of protection and justice–I have heard from many creative inventors and engineers through the years who are otherwise employed.

I agree that we need foundational reform in IP, part of which is reflected in Kyield, but I see a much higher probability of technical innovation providing solutions to these challenges than our current political system. Indeed, with the current state of our political system, the primary risk is that legislation surviving the dysfunctional process tends to compound challenges for small, independent inventors, as small and micro entities have lost power in our political system. Those arguing against patents seem to be missing two crucial points:

1. No other viable option currently exists to protect original work beyond encryption with specific apps, while most of our challenges are systemic
2. Software is increasingly the primary medium to affect and deliver improvements in our society and global economy

I too almost gave up on the patent system–it has been among the most frustrating experiences of my life, both in dealing with the system itself and the byproducts created by a failing IP/legal/political system. Any system that averages many millions of dollars to defend a patent no longer serves individual inventors, obviously. However, I came to the conclusion that as dysfunctional as our patent, legal, and political systems are, the probabilities of real reforms surviving are substantially enhanced with patent protection as it is unlikely that any of the other models for reform will work, quite a few of which have now been tested. We obviously need a new IP system that is based on sound technical infrastructure with properly aligned incentives and protection for the individual inventor. Our Kyield system represents a substantial leap forward in the right direction, but it’s only a cornerstone in the foundation (for IP in society-it is a holistic knowledge system).

The chief obstacle to real improvement is that technical gatekeepers are also patent trolls who are threatened by improvements to the system. All decision makers need to think long and hard about this situation, not least of whom are those focused on internal defense instead of solving the problems of others. Eventually this deteriorating situation will have negative consequences for everyone. The most obvious immediate threat is a stagnating global economy. With global market power comes global responsibility. The IT industry has a lot of maturing to do before it can live up to its responsibility in the global economy, as do both developed and developing governments.

I have studied the topic of IP systems in detail with the various hats of a citizen, entrepreneur, consultant, incubator operator, venture capitalist and inventor. I see no viable, sustainable alternative to a functional personal property rights governance structure.

–MM

Interview with Jenny Zaino at Semanticweb.com

Just wanted to share this interview and article with Jenny Zaino over at Semanticweb.com on my recent patent and related IP.

Manage Structured Data and Reap the Benefits

A detailed paper on this topic is nearing completion and will post a brief and description in the next few days.