Wednesday, December 31, 2014
Checking the Principles for Responsible Investment in 2014
I attended a confab of local investment pros at the Commonwealth Club in December 2014, appropriately enough just before Christmas. The Principles for Responsible Investment (PRI) initiative released its progress report for 2014 back in October, so naturally it takes money managers almost two months to figure out what it means. It made for the perfect segue into how asset managers implement ESG criteria.
Experts from Bernstein Global Wealth Management, BlackRock, Nelson Capital, and TriLinc Global held forth on how they manage money. I have no business relationship with any of those firms, although I have invested in BlackRock's iShares securities in past years. I also have no relationship with the sponsors MSCI, Parnassus Investments, and Industry Capital. I tried very hard to launch a career as a portfolio manager with large investment firms, and every firm I encountered said my military background was a disqualifier. I must therefore be very skeptical of what professional money managers have to say about how they apply theory in reality.
The panelists admitted that the $45 trillion figure quoted in the event's title was just a guess. Well, there goes their credibility right down the tubes. Analysis comes from data, and leading practitioners who can't cite reliable statistics from PRI or elsewhere should stay off the platform until they can get their stories straight.
The "responsible investing" rubric covers ESG criteria and impact investing. It started with negative screens that eliminated objectionable stocks from actively managed portfolios. Money managers tried to address the concerns of some institutional clients' investment policy statements that prohibited owning stocks exposed to alcohol, gambling, and other controversial sectors. The evolving thesis is that reducing a company's ethical and environmental risks will raise its valuation. It is a compelling thesis addressing the supply side of providing attractive investment products. I need to see matching demand data proving Millennials and others want to buy responsible investments.
I have known about the Sustainability Accounting Standards Board (SASB) since 2013. It has not yet overtaken FASB in prestige. Advocates could probably use a hearing in front of the SEC to make that happen. Public companies will hesitate to adopt SASB standards without a regulatory push. CFOs already have a full plate with Sarbox compliance and IASB rules for their multinational operations.
I suspect that the extra effort going into responsible investing causes a larger tracking error when portfolio managers measure their alpha against a benchmark. Tweaking the benchmark is not a satisfactory solution. Independent studies of the tracking error acceptable in risk budgets will inform responsible investing decisions.
A large body of evidence substantiates the weakness of divestiture as a response to unpalatable investments. Someone else always comes along to buy what others throw away. The current trend among overly sensitive portfolio managers to divest from carbon-heavy energy companies is a perfect case. Oil and gas stocks still make money, and plenty of people will buy them even if fourth-generation Rockefellers turn up their noses.
Stock exchange listing requirements can play a leadership role in responsible investing. Solid ESG regulations can deter companies from exploiting regulatory arbitrage by listing on a less restrictive exchange. Exchanges in multiple countries will have to adopt ESG guidelines simultaneously.
Responsible investing has a future. Alfidi Capital does not yet have an ESG policy. That may change in 2015.
Experts from Bernstein Global Wealth Management, BlackRock, Nelson Capital, and TriLinc Global held forth on how they manage money. I have no business relationship with any of those firms, although I have invested in BlackRock's iShares securities in past years. I also have no relationship with the sponsors MSCI, Parnassus Investments, and Industry Capital. I tried very hard to launch a career as a portfolio manager with large investment firms, and every firm I encountered said my military background was a disqualifier. I must therefore be very skeptical of what professional money managers have to say about how they apply theory in reality.
The panelists admitted that the $45 trillion figure quoted in the event's title was just a guess. Well, there goes their credibility right down the tubes. Analysis comes from data, and leading practitioners who can't cite reliable statistics from PRI or elsewhere should stay off the platform until they can get their stories straight.
The "responsible investing" rubric covers ESG criteria and impact investing. It started with negative screens that eliminated objectionable stocks from actively managed portfolios. Money managers tried to address the concerns of some institutional clients' investment policy statements that prohibited owning stocks exposed to alcohol, gambling, and other controversial sectors. The evolving thesis is that reducing a company's ethical and environmental risks will raise its valuation. It is a compelling thesis addressing the supply side of providing attractive investment products. I need to see matching demand data proving Millennials and others want to buy responsible investments.
I have known about the Sustainability Accounting Standards Board (SASB) since 2013. It has not yet overtaken FASB in prestige. Advocates could probably use a hearing in front of the SEC to make that happen. Public companies will hesitate to adopt SASB standards without a regulatory push. CFOs already have a full plate with Sarbox compliance and IASB rules for their multinational operations.
I suspect that the extra effort going into responsible investing causes a larger tracking error when portfolio managers measure their alpha against a benchmark. Tweaking the benchmark is not a satisfactory solution. Independent studies of the tracking error acceptable in risk budgets will inform responsible investing decisions.
A large body of evidence substantiates the weakness of divestiture as a response to unpalatable investments. Someone else always comes along to buy what others throw away. The current trend among overly sensitive portfolio managers to divest from carbon-heavy energy companies is a perfect case. Oil and gas stocks still make money, and plenty of people will buy them even if fourth-generation Rockefellers turn up their noses.
Stock exchange listing requirements can play a leadership role in responsible investing. Solid ESG regulations can deter companies from exploiting regulatory arbitrage by listing on a less restrictive exchange. Exchanges in multiple countries will have to adopt ESG guidelines simultaneously.
Responsible investing has a future. Alfidi Capital does not yet have an ESG policy. That may change in 2015.
Tuesday, December 30, 2014
Alfidi Capital at Data Connectors San Francisco Tech Security Conference 2014
Data Connectors has a full schedule of tech security road shows across America. I attended their Tech Security Conference this December when it rolled into San Francisco. I had to get my fill of cyber defense knowledge while I filled up on free coffee. My completely subjective reaction to the many highly qualified IT presenters will now follow.
The electronic recycling industry is seriously big business. It gets bad press when some recyclers resell hardware without wiping hard drives. That's how pirates access unencrypted personal data. The best recyclers chop up every electronic component, recover metals, and process hard cases into plastic pellets. The State of California Department of Toxic Substances Control (DTSC) knows all about processing hazardous e-waste. Recyclers in this state must register with DTSC. They should also apply OHSAS 18001 and the relevant ISO standards if they're serious about recycling. Clearing and overwriting old hard disks are less complete safeguards than physical destruction. I'll remember that the next time I turn in an obsolete laptop for recycling.
WiFi networks should have commonly available design templates. Lack of such templates is one reason municipalities have been stymied in their efforts to create free WiFi infrastructure. Wireless Networking in the Developing World has obvious solutions for countries that do not have to overcome legacy land line infrastructure. The Network Startup Resource Center (NSRC) published a number of administrative guides for Internet architecture. Public domain WiFi design is an under-resourced area in telecom. More attention from open source designers would speed WiFi adoption.
Cyber security pros should talk more about being proactive. Lockheed Martin's Cyber Kill Chain process is the best definition of how business intelligence fits into cyber security. Brian Krebs' Spam Nation offers insights into unwanted emails as attack vectors. Enterprises developing their own apps still leave them riddled with vulnerabilities for the sake of convenience. They should change that approach before the huge amounts of bandwidth their apps require for sharing files and videos become attack vectors.
Experts on hand claimed the titles of CIO, CTO, and CISO are becoming interchangeable. That is lamentable. I say they should be distinct in an enterprise. Come on, it's simple. The CIO is the overall IT boss with the CTO, CISO, and Chief Data Officer (CDO) as direct reports. The CTO's portfolio includes the IT infrastructure, SDLC, hardware LCM, and the lead effort on DevOps. The CISO handles security for the network and devices. The CDO develops the data supply chain and supports the CTO's DevOps. I totally disagree with one speaker who claimed a CDO can replace a COO. Really? Maybe in some software firms, but not in the rest of the economy.
One person mentioned that poor data center architecture invites external threats. NIST's Advanced Encryption Standard (AES) is at best a partial solution; data centers cannot ignore physical security. Perimeter barriers and physical gaps are not scalable security measures in large organizations. None of the speakers mentioned knowledge management (KM), but that drives security classification and network access privileges. There is no one universal technology stack but several baselines exist. An open UMA is one way to manage access to parts of a stack but IT people need a fuller understanding of that protocol's privacy implications.
Email retention policies can look to legal guidance that varies by sector. California's email retention requirements are clear for its state government agencies but less clear for the private sector. FINRA and the SEC have detailed guidance for data retention in the financial sector. Once again, there is no universally applicable standard. The EU invalidated its Data Retention Directive this year over privacy concerns. I cannot locate any industry association source for a data retention standard.
Data loss prevention (DLP) requires data loss detection (DLD). If you don't know something's gone, you won't know how to recover it. The SANS Institute has a white paper on DLD and DLP open source tools; use their search function with those phrases for good info. A Web search of "DNS vulnerability" brings up reports from the SEI CERT, IANA, and a few tech experts. Prolexic's Quarterly Global DDoS Attack Report provides regular threat updates. The IT community has learned to police itself of spoofing with the Open Resolver Project. Plenty of thieves want to get their hands on enterprise data.
Collaboration opens up a whole new can of worms now that the cloud and BYOD are norms. Cloud Security Alliance members should have some idea of how to use ISO 27001. US-based multinational enterprises must also know ITAR and other US government export controls apply to their cloud services, as does FISMA if they do business with Uncle Sam. The financial sector figured out collaboration long ago with its FIX protocol, so IT pros should check with the FIX Trading Community to watch information exchange done right.
The Ponemon Institute's annual Cost of Data Breach Study makes the IT community's case to CFOs for investments in network security. Advanced persistent threats (APTs) have a defined life cycle that only a conscious actor can maintain. NSS Labs and ICSA Labs do plenty of independent testing for platforms at risk of breach. The Anti Virus Information Exchange Network (AVIEN) and the Anti-Phishing Working Group (APWG) share knowledge in the fight against cyber crime.
I have noticed that the "Ed Snowden look" of scraggly facial hair and wire rim glasses is popular among techies. It's even in ads for tech sector companies. Brogrammers can relate to that image but it may turn off women who want IT careers. Getting more women - especially attractive ones - into cyber security would be a really great thing. Attending these Tech Security Conferences is the place for them to start. I'd be happy to escort them in myself, if you know what I mean.
The electronic recycling industry is seriously big business. It gets bad press when some recyclers resell hardware without wiping hard drives. That's how pirates access unencrypted personal data. The best recyclers chop up every electronic component, recover metals, and process hard cases into plastic pellets. The State of California Department of Toxic Substances Control (DTSC) knows all about processing hazardous e-waste. Recyclers in this state must register with DTSC. They should also apply OHSAS 18001 and the relevant ISO standards if they're serious about recycling. Clearing and overwriting old hard disks are less complete safeguards than physical destruction. I'll remember that the next time I turn in an obsolete laptop for recycling.
WiFi networks should have commonly available design templates. Lack of such templates is one reason municipalities have been stymied in their efforts to create free WiFi infrastructure. Wireless Networking in the Developing World has obvious solutions for countries that do not have to overcome legacy land line infrastructure. The Network Startup Resource Center (NSRC) published a number of administrative guides for Internet architecture. Public domain WiFi design is an under-resourced area in telecom. More attention from open source designers would speed WiFi adoption.
Cyber security pros should talk more about being proactive. Lockheed Martin's Cyber Kill Chain process is the best definition of how business intelligence fits into cyber security. Brian Krebs' Spam Nation offers insights into unwanted emails as attack vectors. Enterprises developing their own apps still leave them riddled with vulnerabilities for the sake of convenience. They should change that approach before the huge amounts of bandwidth their apps require for sharing files and videos become attack vectors.
Experts on hand claimed the titles of CIO, CTO, and CISO are becoming interchangeable. That is lamentable. I say they should be distinct in an enterprise. Come on, it's simple. The CIO is the overall IT boss with the CTO, CISO, and Chief Data Officer (CDO) as direct reports. The CTO's portfolio includes the IT infrastructure, SDLC, hardware LCM, and the lead effort on DevOps. The CISO handles security for the network and devices. The CDO develops the data supply chain and supports the CTO's DevOps. I totally disagree with one speaker who claimed a CDO can replace a COO. Really? Maybe in some software firms, but not in the rest of the economy.
One person mentioned that poor data center architecture invites external threats. NIST's Advanced Encryption Standard (AES) is at best a partial solution; data centers cannot ignore physical security. Perimeter barriers and physical gaps are not scalable security measures in large organizations. None of the speakers mentioned knowledge management (KM), but that drives security classification and network access privileges. There is no one universal technology stack but several baselines exist. An open UMA is one way to manage access to parts of a stack but IT people need a fuller understanding of that protocol's privacy implications.
Email retention policies can look to legal guidance that varies by sector. California's email retention requirements are clear for its state government agencies but less clear for the private sector. FINRA and the SEC have detailed guidance for data retention in the financial sector. Once again, there is no universally applicable standard. The EU invalidated its Data Retention Directive this year over privacy concerns. I cannot locate any industry association source for a data retention standard.
Data loss prevention (DLP) requires data loss detection (DLD). If you don't know something's gone, you won't know how to recover it. The SANS Institute has a white paper on DLD and DLP open source tools; use their search function with those phrases for good info. A Web search of "DNS vulnerability" brings up reports from the SEI CERT, IANA, and a few tech experts. Prolexic's Quarterly Global DDoS Attack Report provides regular threat updates. The IT community has learned to police itself of spoofing with the Open Resolver Project. Plenty of thieves want to get their hands on enterprise data.
Collaboration opens up a whole new can of worms now that the cloud and BYOD are norms. Cloud Security Alliance members should have some idea of how to use ISO 27001. US-based multinational enterprises must also know ITAR and other US government export controls apply to their cloud services, as does FISMA if they do business with Uncle Sam. The financial sector figured out collaboration long ago with its FIX protocol, so IT pros should check with the FIX Trading Community to watch information exchange done right.
The Ponemon Institute's annual Cost of Data Breach Study makes the IT community's case to CFOs for investments in network security. Advanced persistent threats (APTs) have a defined life cycle that only a conscious actor can maintain. NSS Labs and ICSA Labs do plenty of independent testing for platforms at risk of breach. The Anti Virus Information Exchange Network (AVIEN) and the Anti-Phishing Working Group (APWG) share knowledge in the fight against cyber crime.
I have noticed that the "Ed Snowden look" of scraggly facial hair and wire rim glasses is popular among techies. It's even in ads for tech sector companies. Brogrammers can relate to that image but it may turn off women who want IT careers. Getting more women - especially attractive ones - into cyber security would be a really great thing. Attending these Tech Security Conferences is the place for them to start. I'd be happy to escort them in myself, if you know what I mean.
Monday, December 29, 2014
Sunday, December 28, 2014
The Limerick of Finance for 12/28/14
The euro is hitting the rails
Greek observers are biting their nails
New political mess
Brings currency stress
Expect chaos if next bailout fails
Greek observers are biting their nails
New political mess
Brings currency stress
Expect chaos if next bailout fails
Saturday, December 27, 2014
The Haiku of Finance for 12/27/14
Cheaper gas pump price
Refining from huge supply
Demand hit speed bump
Refining from huge supply
Demand hit speed bump
Friday, December 26, 2014
Thursday, December 25, 2014
Wednesday, December 24, 2014
The Haiku of Finance for 12/24/14
Yuletide spending spree
More debt no one can afford
Buying household junk
More debt no one can afford
Buying household junk
Tuesday, December 23, 2014
Alfidi Capital Attends Location and Context World 2014
San Francisco is my usual location, in the context of finding material for some provocative blogging. That's all the reason I needed to attend Location and Context World this December. I couldn't go wrong with exposure to three days of expertise that blended real-time data, geographic information systems, and mobile apps. I expect location based services to emerge as a subset of the data sector. Pioneering a new sector means launching a new conference series like this one to cover it.
The pre-conference CIO workshop had a bunch of us overachievers generating ideas for retail use cases, enterprise cultural approaches to user privacy, and deployment methods for location tracking. The 14 of us generated and critiqued 287 ideas in three hours. That was about 20 ideas per participant, and I'm pretty sure my ideas were the most articulate. My suggestions: CX by location; loss prevention risk factors; Big Data analytics linking back-end streams. I don't know if any of my CIO-related comments will end up in a Gartner or Forrester report, so I'll share them below.
Linking opt-in protocols to customer rewards and loyalty programs is always a compelling incentive to get users past that first data input hurdle. Enterprises should specify in their privacy policies that they own location data for a user who enters their store. User data can be abused if taken out of context, and accusations of racial profiling come to mind as a potential liability. Cross-referenced data for demographic elements other than race can counter those charges. Opting out in an environment of ubiquitous computing is hard, so the only way of doing so completely may be to just turn off one's smartphone when entering a store. Opting out of anything after completing a transaction is probably impossible because a user's data history is so easily monetized. Some CXs can cross the line between convenience and invasiveness. Only a Chief Privacy Officer can draw that line where outliers of use case data won't cross it. Life cycle management (LCM) needs more attention; LCM will accelerate, become more complex, and incorporate Cloudonomics. Finally, I don't know whether retailers have though about how the WiFi spectrum may get crowded indoors with POS terminals, multiple smartphones, and in-store surveillance competing for airwaves.
The first day's analyst roundtable on transforming customer and employee interaction made me wonder whether developers in mobile, enterprise, and Big Data truly work together on integrated products. The app sector needs consolidation. I want "data sector" enterprise players to look seriously at vertical integration with data merchants. Where is the evidence that mobile apps successfully manage workflows? Mobile displays need simple dashboards, but handling workflows means tapping through several layers of deep dives. Furthermore, mobile use in field services will need customizable dashboards that make workflows take a back seat to troubleshooting. I can already see mobile power users getting heavy volumes of push notifications from the enterprise as a workflow method. The difficulty is that responding to those notices forces mobile field reps to be reactive instead of proactive problem-solvers. There goes mobile empowerment, thanks to workflow requirements. Enterprise systems must inevitably be dumbed down for mobile users. It's sad that field reps won't have much autonomy once some combination of push notices and simple dashboards constrict mobile use.
I suspect the difference between "proximity marketing" and "location marketing" is negligible. One of those terms will win out when the tech media start hyping one. Beacons are a hot item in enabling infrastructure and their makers don't care which term wins. I don't know whether beacons really eliminate the need to spam mobile users by allowing consumers' digital lives to follow them into the physical world. Many users consider ads on their Facebook news feeds to be spam. Cueing up those ads based on social media actions means beacons are still in the spam chain by enabling proximity marketing pushes. Here's my suggested critical path for beacon adoption: 100 CustDev use cases . . . improvements in conversion rate and shopping basket size . . . Cloudonomics ROI of proposed beacon solution. Inserting hyperlocal data into a customer journey map will define the CustDev segment that makes this adoption work.
Enterprises have discovered telematics and it's not just for automobiles. Ambient energy sources for IoT devices must have a sufficient power budget for edge computing. Geospatial precision matters for remote devices and lidar sensors have found a market. Context doesn't matter so much for remote IoT devices but it is very important in defining a retail UX. Little Data is really Big Data sliced into location and context.
Jonah Berger's STEPPS concept helps location marketers reverse engineer a successful word-of-mouth campaign template. Pre-store engagement metrics work backwards from the POS, not just from social media channels. The "near-store" effort requires geo-targeting. Proximity triggers (geo-fences, beacons) lead to higher conversion rates. This quantifies the value of marketing campaigns incorporating location because a customer's actions at each gateway (pre-store, near-store, in-store) are tracked. Forrester advises us to measure "mobile moments." The thought leaders at this conference proposed using measuring media actions in pre-store moments, mobile app actions in near-store moments, and beacon cues in the in-store moments.
A couple of panel participants discussed how their enterprises tested in-store apps before a national rollout. The biggest retail chains devote DevOps to internal labs and make acqui-hires for IT talent. One IT mercenary claimed that data mining could generate frictionless growth by reducing subscriber churn in membership services. That is an efficient tactic for SMBs who do not have the funds to deploy beacons and sensor farms. The SMBs that know the total cost of ownership (TCO) of a plug-and-play location-based solution can easily figure the ROI of a full deployment, just like that mercenary IT dude.
I sat through one startup pitch from a solution in search of a problem. They had a calendar-based app but were so stupid that they had not thought of a monetization strategy before launching. Every failed '90s dot-com made that mistake. Business models like these suffer from the cold start problem because they have not attracted a large enough user base to offer generalizable AI output. Solving it forces founders to address a chicken or the egg problem with a choice between going for user traction with a basic product or deploying a more advanced product after more AI tweaking. All of the software thought leaders I've seen in the past three years advocate iterative deployments through constant CustDev and A/B testing to get through these two related problems. Startups that haven't figured this out are not worth my time.
The second day's analyst roundtable introduced me to augmented reality shopping. I don't spend enough time in stores to benefit from augmented reality but a couple of years ago I did see some POS concepts enabling consumer choices. Every time someone in tech makes a bullish prediction on smartwatches, I remind myself of the challenges of the watch display's small form factor. It can show one or two data points in large type and probably no more than three more in very small type (four are possible if the background color's shading conveys something substantial). I did learn a couple of cool things. First, retailers may encrypt beacons to work only with their branded apps. Second, a closed-loop service app initiates user contact that will lead to a yes/no sales decision, much like a live sales rep's closed-end question driving a conversion. Thanks, SNL Kagan, for sending a hot babe analyst to explain these things.
Newcomers to location-based services should know that "O2O" means online-to-offline commerce. Tech media have hyped it for several years as a huge untapped opportunity. If it were really so huge, there wouldn't be such a large ecosystem of e-commerce apps corralling consumers into staying online all the time. Think about it. The whole premise of beacons pushing location-based notices is that consumers are never offline. A better approach to keeping customers engaged is "locationomics." Do a Web search for that term. Informa Telecoms and Media organized this conference and claims to have coined the term. No one paid me anything to say that. The Location Forum defines locationomics and LBx Journal covers it regularly.
Tech superstar Robert Scoble came to plug his book The Age of Context. He revealed that smartphones now have installed beacons, which strikes me as redundant if physical stores have their own beacons to query smartphones. A smartphone with its own beacon might be useful for querying a purely mobile vendor (like a food truck or a custom delivery service) but that's a very limited . . . context. Come on, you knew I would deploy that one.
One presenter displayed Beecham Research`s Wearable Technology Application Chart. I think it's the most mind-blowing corporate thing I have seen all month. It reminds me of the rock band Journey's album covers from the early 1980s, the ones with the scarab launching into outer space and doing other trippy things. Hunt down that groovy chart yourself, because I won't repost it here. It's one of those things destined to live on in Web lore.
One irony of LBS I noticed is that virtual reality (VR) minimizes the need for physical movement. VR devices that disrupt travel and commuting mean LBS growth won't be nearly as pronounced. The race between LBS and VR will define which business models dominate the next generation of e-commerce. Competing standards for M2M and IoT interfaces will hinder this dominance until one breakthrough product builds an ecosystem that forces other aspirants to fall in line behind one standard.
The IT people at this conference must be getting chewed out a lot by their CFOs, because some have finally realized that allocating DevOps budgets between incremental opex and capex affects project ROI. CIOs who tie their SDLC and LCM to the enterprise's capital budget are winners in the C-suite. One presenting CTO claimed that incremental changes, personalized workflows, and push notices create context. Okay dude, that's an extremely insular focus that ignores customers and runs into the problems with workflows I described above. Shoppers who "showroom" by comparing in-store prices before making online purchases go around such insular CTOs.
Leave it to Google to deliver a talk that makes sense. The Google rep on hand said cost per visit is a good KPI measuring the cost effectiveness of omni-channel marketing. I'll take that suggestion further along a roadmap to success. Find the most-clicked item on a website (i.e., a retail shopping portal). Maximize that link's visibility in social media and web searches. Use rich media to enhance its details, especially if it has embedded images or video. I suspect this tactic is more powerful than linkbait or figuring the number of positive product reviews needed to overcome a negative review.
The venture investors present did more than just talk their books. They think LBS can multiply the network effect of a first-mover. I had not thought of crowdsourcing as a way to rapidly populate an original dataset, so perhaps that can overcome the cold start problem I mentioned above. Strategic acquirers may indeed want LBS in their data streams but that does not mean they will pay for large exit events from VC-backed LBS startups. Note above how I discussed the tendency of retail chains to develop their own LBS capabilities internally or through acqui-hires. The VCs who expect their startups to achieve billion-dollar exits need to lower their expectations. They may find more success in hardware than software given the attractiveness of beacons. They also need to quit harping on "proxies for growth" like downloads or media coverage. There is no such thing as a proxy for growth. Startups either grow their revenue or become worthless.
Location is easier to define than context. I define context as any monetizable or actionable option nested within multiple data streams tied to identity. This of course makes anonymity impossible but users won't mind giving up their privacy if they get value in return. Combining context with location further precludes anonymity. Go ahead and quote me. I'm pretty sure I'm ahead of Gartner and Forrester. My Google search for "digital context" brought up some Forrester commentary from a World Economic Forum panel on digital context; it offered little detail. Context is a brand new term for thought leaders like yours truly to claim. I generated more details in this one blog article here than most thought leaders on big-shot panels.
There were some really hot babes staffing this conference, especially the show's CEO. Maybe next time the unattached babes in attendance can show me some location-based services up in their hotel rooms. I could fit that into the context of my incredible manliness that women find irresistible. Alfidi Capital is way ahead of other financial sector players thanks to Location and Context World 2014.
The pre-conference CIO workshop had a bunch of us overachievers generating ideas for retail use cases, enterprise cultural approaches to user privacy, and deployment methods for location tracking. The 14 of us generated and critiqued 287 ideas in three hours. That was about 20 ideas per participant, and I'm pretty sure my ideas were the most articulate. My suggestions: CX by location; loss prevention risk factors; Big Data analytics linking back-end streams. I don't know if any of my CIO-related comments will end up in a Gartner or Forrester report, so I'll share them below.
Linking opt-in protocols to customer rewards and loyalty programs is always a compelling incentive to get users past that first data input hurdle. Enterprises should specify in their privacy policies that they own location data for a user who enters their store. User data can be abused if taken out of context, and accusations of racial profiling come to mind as a potential liability. Cross-referenced data for demographic elements other than race can counter those charges. Opting out in an environment of ubiquitous computing is hard, so the only way of doing so completely may be to just turn off one's smartphone when entering a store. Opting out of anything after completing a transaction is probably impossible because a user's data history is so easily monetized. Some CXs can cross the line between convenience and invasiveness. Only a Chief Privacy Officer can draw that line where outliers of use case data won't cross it. Life cycle management (LCM) needs more attention; LCM will accelerate, become more complex, and incorporate Cloudonomics. Finally, I don't know whether retailers have though about how the WiFi spectrum may get crowded indoors with POS terminals, multiple smartphones, and in-store surveillance competing for airwaves.
The first day's analyst roundtable on transforming customer and employee interaction made me wonder whether developers in mobile, enterprise, and Big Data truly work together on integrated products. The app sector needs consolidation. I want "data sector" enterprise players to look seriously at vertical integration with data merchants. Where is the evidence that mobile apps successfully manage workflows? Mobile displays need simple dashboards, but handling workflows means tapping through several layers of deep dives. Furthermore, mobile use in field services will need customizable dashboards that make workflows take a back seat to troubleshooting. I can already see mobile power users getting heavy volumes of push notifications from the enterprise as a workflow method. The difficulty is that responding to those notices forces mobile field reps to be reactive instead of proactive problem-solvers. There goes mobile empowerment, thanks to workflow requirements. Enterprise systems must inevitably be dumbed down for mobile users. It's sad that field reps won't have much autonomy once some combination of push notices and simple dashboards constrict mobile use.
I suspect the difference between "proximity marketing" and "location marketing" is negligible. One of those terms will win out when the tech media start hyping one. Beacons are a hot item in enabling infrastructure and their makers don't care which term wins. I don't know whether beacons really eliminate the need to spam mobile users by allowing consumers' digital lives to follow them into the physical world. Many users consider ads on their Facebook news feeds to be spam. Cueing up those ads based on social media actions means beacons are still in the spam chain by enabling proximity marketing pushes. Here's my suggested critical path for beacon adoption: 100 CustDev use cases . . . improvements in conversion rate and shopping basket size . . . Cloudonomics ROI of proposed beacon solution. Inserting hyperlocal data into a customer journey map will define the CustDev segment that makes this adoption work.
Enterprises have discovered telematics and it's not just for automobiles. Ambient energy sources for IoT devices must have a sufficient power budget for edge computing. Geospatial precision matters for remote devices and lidar sensors have found a market. Context doesn't matter so much for remote IoT devices but it is very important in defining a retail UX. Little Data is really Big Data sliced into location and context.
Jonah Berger's STEPPS concept helps location marketers reverse engineer a successful word-of-mouth campaign template. Pre-store engagement metrics work backwards from the POS, not just from social media channels. The "near-store" effort requires geo-targeting. Proximity triggers (geo-fences, beacons) lead to higher conversion rates. This quantifies the value of marketing campaigns incorporating location because a customer's actions at each gateway (pre-store, near-store, in-store) are tracked. Forrester advises us to measure "mobile moments." The thought leaders at this conference proposed using measuring media actions in pre-store moments, mobile app actions in near-store moments, and beacon cues in the in-store moments.
A couple of panel participants discussed how their enterprises tested in-store apps before a national rollout. The biggest retail chains devote DevOps to internal labs and make acqui-hires for IT talent. One IT mercenary claimed that data mining could generate frictionless growth by reducing subscriber churn in membership services. That is an efficient tactic for SMBs who do not have the funds to deploy beacons and sensor farms. The SMBs that know the total cost of ownership (TCO) of a plug-and-play location-based solution can easily figure the ROI of a full deployment, just like that mercenary IT dude.
I sat through one startup pitch from a solution in search of a problem. They had a calendar-based app but were so stupid that they had not thought of a monetization strategy before launching. Every failed '90s dot-com made that mistake. Business models like these suffer from the cold start problem because they have not attracted a large enough user base to offer generalizable AI output. Solving it forces founders to address a chicken or the egg problem with a choice between going for user traction with a basic product or deploying a more advanced product after more AI tweaking. All of the software thought leaders I've seen in the past three years advocate iterative deployments through constant CustDev and A/B testing to get through these two related problems. Startups that haven't figured this out are not worth my time.
The second day's analyst roundtable introduced me to augmented reality shopping. I don't spend enough time in stores to benefit from augmented reality but a couple of years ago I did see some POS concepts enabling consumer choices. Every time someone in tech makes a bullish prediction on smartwatches, I remind myself of the challenges of the watch display's small form factor. It can show one or two data points in large type and probably no more than three more in very small type (four are possible if the background color's shading conveys something substantial). I did learn a couple of cool things. First, retailers may encrypt beacons to work only with their branded apps. Second, a closed-loop service app initiates user contact that will lead to a yes/no sales decision, much like a live sales rep's closed-end question driving a conversion. Thanks, SNL Kagan, for sending a hot babe analyst to explain these things.
Newcomers to location-based services should know that "O2O" means online-to-offline commerce. Tech media have hyped it for several years as a huge untapped opportunity. If it were really so huge, there wouldn't be such a large ecosystem of e-commerce apps corralling consumers into staying online all the time. Think about it. The whole premise of beacons pushing location-based notices is that consumers are never offline. A better approach to keeping customers engaged is "locationomics." Do a Web search for that term. Informa Telecoms and Media organized this conference and claims to have coined the term. No one paid me anything to say that. The Location Forum defines locationomics and LBx Journal covers it regularly.
Tech superstar Robert Scoble came to plug his book The Age of Context. He revealed that smartphones now have installed beacons, which strikes me as redundant if physical stores have their own beacons to query smartphones. A smartphone with its own beacon might be useful for querying a purely mobile vendor (like a food truck or a custom delivery service) but that's a very limited . . . context. Come on, you knew I would deploy that one.
One presenter displayed Beecham Research`s Wearable Technology Application Chart. I think it's the most mind-blowing corporate thing I have seen all month. It reminds me of the rock band Journey's album covers from the early 1980s, the ones with the scarab launching into outer space and doing other trippy things. Hunt down that groovy chart yourself, because I won't repost it here. It's one of those things destined to live on in Web lore.
One irony of LBS I noticed is that virtual reality (VR) minimizes the need for physical movement. VR devices that disrupt travel and commuting mean LBS growth won't be nearly as pronounced. The race between LBS and VR will define which business models dominate the next generation of e-commerce. Competing standards for M2M and IoT interfaces will hinder this dominance until one breakthrough product builds an ecosystem that forces other aspirants to fall in line behind one standard.
The IT people at this conference must be getting chewed out a lot by their CFOs, because some have finally realized that allocating DevOps budgets between incremental opex and capex affects project ROI. CIOs who tie their SDLC and LCM to the enterprise's capital budget are winners in the C-suite. One presenting CTO claimed that incremental changes, personalized workflows, and push notices create context. Okay dude, that's an extremely insular focus that ignores customers and runs into the problems with workflows I described above. Shoppers who "showroom" by comparing in-store prices before making online purchases go around such insular CTOs.
Leave it to Google to deliver a talk that makes sense. The Google rep on hand said cost per visit is a good KPI measuring the cost effectiveness of omni-channel marketing. I'll take that suggestion further along a roadmap to success. Find the most-clicked item on a website (i.e., a retail shopping portal). Maximize that link's visibility in social media and web searches. Use rich media to enhance its details, especially if it has embedded images or video. I suspect this tactic is more powerful than linkbait or figuring the number of positive product reviews needed to overcome a negative review.
The venture investors present did more than just talk their books. They think LBS can multiply the network effect of a first-mover. I had not thought of crowdsourcing as a way to rapidly populate an original dataset, so perhaps that can overcome the cold start problem I mentioned above. Strategic acquirers may indeed want LBS in their data streams but that does not mean they will pay for large exit events from VC-backed LBS startups. Note above how I discussed the tendency of retail chains to develop their own LBS capabilities internally or through acqui-hires. The VCs who expect their startups to achieve billion-dollar exits need to lower their expectations. They may find more success in hardware than software given the attractiveness of beacons. They also need to quit harping on "proxies for growth" like downloads or media coverage. There is no such thing as a proxy for growth. Startups either grow their revenue or become worthless.
Location is easier to define than context. I define context as any monetizable or actionable option nested within multiple data streams tied to identity. This of course makes anonymity impossible but users won't mind giving up their privacy if they get value in return. Combining context with location further precludes anonymity. Go ahead and quote me. I'm pretty sure I'm ahead of Gartner and Forrester. My Google search for "digital context" brought up some Forrester commentary from a World Economic Forum panel on digital context; it offered little detail. Context is a brand new term for thought leaders like yours truly to claim. I generated more details in this one blog article here than most thought leaders on big-shot panels.
There were some really hot babes staffing this conference, especially the show's CEO. Maybe next time the unattached babes in attendance can show me some location-based services up in their hotel rooms. I could fit that into the context of my incredible manliness that women find irresistible. Alfidi Capital is way ahead of other financial sector players thanks to Location and Context World 2014.
Monday, December 22, 2014
Sunday, December 21, 2014
The Limerick of Finance for 12/21/14
Oil prices swung back to a gain
Short sellers found new kinds of pain
Energy sector stocks
Have survived some shocks
Finding profit is still on the brain
Short sellers found new kinds of pain
Energy sector stocks
Have survived some shocks
Finding profit is still on the brain
Saturday, December 20, 2014
Friday, December 19, 2014
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