Wednesday, July 28, 2010

The math of risky hiring

Here's an interesting post on how one should think about risky hires.  Essentially he takes the financial theory of volatility or "beta" and links it to making choices between safe 'low beta' hires and riskier 'high beta' ones.  He points out that the rational hiring manager will only be willing to take a risk on a 'high beta' candidate if the expected value of that candidate's output exceeds that of a 'low beta' candidate.  He then draws the appropriate conclusions for those seeking jobs for which they are not 'perfectly' qualified.  More here.

Mobile + Social Nets drive massive change in Communications + Commerce

Mary Meeker of Morgan Stanley recently gave her annual "State of the Mobile Internet" presentation and the themes that she reviewed were illuminating.  What was most interesting wasn't Apple's latest antics or regulation or the  'investment' story but specifically her item number 3:  Next Generation Platforms because of what it says about what adoption of mobile tools and the spread of social networks is likely to do to the way institutions organize and manage their businesses.  Linked In, Facebook, even demonstrate that the boundary between being 'inside' an organization and 'outside' is blurring.  I can sell for a company using its tools, processes and collateral without being an employee.  As an employee, I can join Facebook or Linked In groups that offer me far more professional fulfillment than my employer and indeed, I may end up being more loyal to them, to the profession or the tribe than to those who pay me.

The ubiquity of mobile devices and their always on access and applications radically enables many, many different types of working relationships that blur the distinction between insider and outsider.  Historically if a company wanted something done and done right, it needed to completely control the individual executing the task - that person needed to be closely supervised, trained and use specialized tools to deliver the company's solution into the market.  The mobile internet undermines that model decisively.

We are working with a small transportation technology company:  Freighthunter who has developed a PDA based application designed to manage the error fraught shipping and receiving interface between enterprise vendors and their customers.  Essentially what FH has done is to create a standardized workflow that any trucker, no matter who he works for can utilize when delivering to a given buyer for a given vendor.  The most clever part of the vision is that before the driver arrives at the delivery point he can use the solution to view customer specific training:  say 10 minutes on how to deliver to Walmart.  When he gets to the customer site, he follows a specific customer/vendor workflow, for example a WM and P&G joint receiving workflow that is spelled out for him on the PDA - if he doesn't follow it to the letter, he doesn't get paid the service premium.  Finally, the tool enables that specific paired relationship's variables, metrics and tasks to be executed in real time.  The result:  the Walmart/P&G order/bill of lading/delivery/receipt relationship is managed perfectly by a person who doesn't work for either company and may not even have been exposed to them before that day.

How will that person get hired to deliver for WM/PG?  Through a brokerage that will look more and more like a social network - with rules for membership, professional standards and visibility into each member's performance against those standards.  Those that don't cut the mustard won't be allowed to remain part of the group.  And the group will interact with its clients through ubiquitous client specific applications and training loaded Just In Time on that person's mobile device at precisely the moment that they need it to execute the service.

That's the power of the mobile internet:  deliver specific, high quality vendor/customer outcomes through any qualified service provider.  It's a big wave that could overturn a lot of old freighters out on the Openwater.

Playing Mahjong

I learned to play Mahjong last night while we were cowering in the basement from the latest tornado watch in my little corner of Tornado Alley.  It was on my computer, Windows System 7, unfashionable but functional.  Mahjong is a traditional Chinese analog to western card games.  I'd played with the Mahjong pieces in Singapore when I was a boy, but the rules to the actual game were in kanji characters or even less comprehensible Singlish - I never learned the game because I couldn't understand the instructions.  Last night, I learned how to play without reading more than two or three lines.  No Kanji, no struggling with the rules - if I broke them, the computer game told me.  The workflow was constrained by well, not exactly 'business rules' but 'game rules'.

Computer Mahjong is about as complex as most customer facing business processes that front line employees are expected to execute.  It illustrates just how powerful a little training, a little software and workflow constrained by rules can be:  something that was too hard to figure out given hours of time in the 1970s is mastered in minutes in the midst of a tornado warning in 2010.

This suggests to me that any customer, partner or employee relationship can be enhanced, indeed transformed with a combination of training, tool and workflow deployed via mobile tool.  The leverage available to organizations with imagination is virtually incalculable.  Out on the Openwater.

Biometric Voice Signatures and Organizational Transformation

Trade Harbor  is an Openwater portfolio company specializing in delivering low cost voice authentication solutions primarily for the financial services industry.  Their primary insight is that current mechanisms to do business on line by capturing digital signatures are insecure and ultimately inadequate.  If my dog knew how to key in my credit card numbers (front and back) he'd be able to sign 'his' signature and that new 4 foot long mega chew toy would be winging its way mouthward, no questions asked.  Trade Harbor was designed to eliminate this problem.

But the more interesting opportunity with a voice signature application is its ability to drive organizational change and ultimately strategic positioning in the consumer financial services industry.  A reminder:  organizational change is nothing more than changed behavior by employees, partners and customers.  And it is strategically directed and focused changes in behavior that drive advantage.

So back to voice signatures:  The current mechanisms for authenticating customers into voice, web and even personal interfaces are appalling.
  • Appallingly obtuse: "give me your site key!"; "no, for this account your user ID is your account number unless you changed it", "your password must include both alpha and numeric fields", "what is your shared secret?  I'm sorry sir, I can't tell you which one you chose, you need to tell me". 
  • Appallingly insecure:  most people keep their userids and passwords on post-its, the more organized have them all crisply organized on a single 3X5 card for easy theft.
  • Appallingly unresponsive to variations in risk:  authentication to check an account balance is treated the same as that to make a trade.  
  • And appallingly expensive:  the lack of trust in the authenticity of the customer leads to challenge questions, snail mail confirmations, denied purchases, angry customers and burned out customer service representatives "yes sir, I know that I know who you are and that you need to get money out of the ATM today because you're in Khazakstan, but we must send the new pin to your home address.  Yes sir, I know that you aren't there and that the Yak Herd Hotel won't take a credit card."
This lack of trust means that the barriers to customers purchasing a new service from their existing provider often differ little from those required from a brand new customer.  From the customer's perspective, brand loyalty delivers little if any convenience or enhanced trust.  The bank that you have done business with for 20 years still doesn't know who the heck you are and doesn't trust you farther than they can throw you.  "User ID and password, please".  And that makes sense since the current system is shot through with fraud that costs consumers, vendors and banks more than a hundred billion dollars every year.

With Trade Harbor's VSS the paradigm can change.
  • The VSS can deliver far higher real 'field' levels of security than any UserID/Password/Physical Token combination can or ever could.
  • Try as they might, people can't forget or misplace their voices, a critical factor with a rapidly aging customer base.
  • A bank could stop treating customers like Pavlovian dogs ("site key!, ID!, Password!, Shared Secret!, rollover!, sit!; good boy!!") and start treating them like human beings:  "Hi!  All we need is your full name, your address and your voice."
  • VSS can be 'tuned' so that the authentication threshold for transferring money to a third party can be far higher than that for providing balance information.
  • And Voice is the only biometric that both has enormous signal complexity (making voices fiendishly difficult to replicate) and a ubiquitous capture tool (landline, mobile, or PC microphone).
So what?  Well a financial institution that makes it far easier for its customers to interact with it will have a compelling competitive edge.  VSS can drive down process costs and reduce fraud levels.  It also can make it much easier for existing customers to purchase services inside the firewall.  But most importantly, VSS offers marketers significant opportunities to differentiate services and increase sales.  Some examples  
  • Automated challenges to a customer's mobile phone so check and card transactions that exceed the fraud threshold can be validated by a simple automated call to the customer's mobile rather than rejected. 
  • Stronger VSS non-repudiation guarantees, protecting volume erosion from low service/low price competition.
  • Enhanced security feature bundles, yielding premium prices for true peace of mind.
  • Youth cards with flexible spending limits:  the student can spend up to $100 a day on her own but if she needs to spend more, the responsible party can approve it with a voice signature.
  • Corporate cards that support only certain transaction categories can be overridden with a voice signature from the appropriate executive.
  • Disbursements of cash, tickets, vouchers and other money equivalents can be delivered remotely via UPS or Fed-ex by simply requiring a voice signature be collected by the driver prior to disbursement.
And since more people have access to mobile telephones than flush toilets, the VSS is truly a world-beating solution.  The only question is which global financial institution will gain the enormous branding and executional leverage available to those that are the first to launch their ships out into the Openwater.

Using Web 2.0 Technologies for Cost Effective Healthcare Interventions

Imagine taking your child to the doctor and getting an antibiotic prescription.  A few minutes later you get a text message on your I Phone or Blackberry:  “Important Message from Wellpoint about your child’s medication:”.  You click on it and a video pops up:  “Hi, I just wanted to remind you how important it is to make sure your child completes the full course of antibiotics prescribed to him.  This is because……”  Or you get an email entitled:  “Important Medication Information from United Healthcare", you click on the link and:  “Hi:  We’ve noticed that you haven’t refilled your Statin prescription.  Your Doctor prescribed this prescription because studies have shown that it reduces heart attacks by….percent.  But sometimes patients have difficulties with certain medications:  they have stomach aches or other side effects.  Usually your doctor can resolve this by modifying your dosage or therapy.  Would you like us to let him know you’re having problems?  Or would you like more information?  Or would you like to speak to someone about your medication?” 

These types of compliance interventions have historically been difficult to do.  They relied on telephoning patients at home in the evening and no one is happy to have their dinner interrupted to discuss their Gall Bladder medication.  The call center staffers were poorly paid so it was hard to deliver consistent, high quality messages.  And of course all interventions had to be three way conversations:  between the PBM and the patient to get agreement to seek intervention and between the PBM and the physician to get her approval.  Understandably, the cost per successful intervention was high, limiting the scope of communication.  Yet with all these drawbacks I saw the program succeed when I worked for the CEO of Eckerd.  We had a program like this that created so much value that we were able to sell a Design, Build, Operate decision support and intervention center to a leading managed care company for more than $100,000,000.

The good news is that with video enabled mobile devices, ubiquitous high speed networks and web services, the major operational drawbacks of intervention programs are mitigated.  Email and text messaging mean that messages can be sent and viewed at the member’s convenience.  The message is delivered once by highly skilled professionals via reusable video rather than poorly paid staff reading from a script.  Consumer responses can be done in real time and at the patient’s convenience and because it is video content, it can be reused and delivered at a cost per message far, far below that of traditional ‘live’ interventions.

Short 2 to 4 minute video messages can be driven by adjudication edits or retrospective utilization review results.  And the capability can be made available directly from providers, enabling them to deliver more, higher quality information to your customers about their diagnoses, treatments and required patient follow up at the point of delivery.  Member call centers can use them to support and enhance telephonic communications.

The real challenge is not in producing the interventional content.   We estimate that the ‘consumer’ relevant messaging for drug therapy and related topics probably equals roughly 1,000 topics.  This content, if supported by the right Medical Schools and Pharmacy Schools could be created in a reusable format, allowing different providers, insurers and physicians to utilize it and make it their own by using their own branding and introductions.  Here’s an example of what we’ve done with the concept in the Investment Advisor space.  We have developed a content configurator that allows common, clinically approved content to be branded and ‘owned’ by a wide range of institutions see here (it isn’t in HTML so it’s not pretty) PW: demo, Userid:  demo.  By creating this content once, Wellpoint and providers have the opportunity to dramatically improve the effectiveness of data driven interventions at a tiny fraction of the cost.

The real sources of competitive advantage are three-fold:
·         Intelligently tying the automated intervention content into execution and analytical systems so that the right message gets to the right patients in time for them to act upon it
·         Connecting this messaging in a consultative and professional manner to the involved healthcare professionals – primarily physicians and pharmacists
·         Pushing the toolset out into the provider community so that the right interventions and education are presented at the point of delivery

While this is relatively inexpensive when compared to other sources of healthcare innovation there will be investments:    A large library of ‘use cases’ that define which data events will trigger which innovations and interactive options  must be developed.  Tools must be created that will sit on top of adjudication and retrospective utilization engines.  Providers and insurance company staffers will need to be given tools and training that will allow them to easily and accurately convey this rich new communication medium to their constituents.

We’ve been working with the creator of the $100 Million first generation high speed retrospective DUR system described earlier and our collective experience tells us that direct to consumer wireless video intervention is a far, far bigger opportunity to deliver value, credibility and market differentiation than anything that has ever come before.  I urge anyone who funds or delivers healthcare services to seriously consider re-prioritizing their investments to deliver this type of solution sooner rather than later.  By doing so you may be able to save the lives of many people who are currently stranded out on the Openwater. 

Monday, July 19, 2010

Shared social responsibility - a model for charities?

Tyler Cowen describes an experiment that tested four different models of pricing:  fixed price, customer set price, fixed price with half to charity and customer set price with half to charity.  The economists found that by far the most lucrative option for both the business and the charity was the customer set price with half going to charity.  It has rather dramatic implications for fundraising of all sorts.

Just in case you're stuck helping your kids raise money for their scout troop:  out on the Openwater.

Thursday, July 8, 2010

Triffin's End Game

Now here's an interesting quote:
We know the dollar is going to depreciate, so we hate you guys, but there is nothing much we can do.” – Luo Ping, director general, China Banking Regulatory Commission

The current rush to the dollar and away from the Euro is being done by sophisticated players who understand that the dollar is no more a reliable long term store of value than the soon to be lamented Euro.  But they're stuck.  And taking the view of short term speculators everywhere, they expect to be the ones to get out of the building before it collapses.

The problem is that there are so many people and the exit is so very small.  And what about us?  You know, the guys who live in the building?

Kevin Williamson at NRO has more here.