Is bigger data better? Helping “HiPPOs” make big data decisions

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Hippo_CC_Caitlin_smallWhen are data-driven decisions better than those coming from HiPPOs (Highest-Paid Person’s Opinions)?

At the annual Thought Leadership Forum in Melbourne, Ross Dawson delivered an insightful keynote speech on this topic. He says that in domains where sufficient data is available and the decisions are definable and tractable, algorithms will surpass human judgement.

What is new compared with longstanding analytic practices is the rapidly growing volume of data and the diversity of sources. In a study by Andrew McAfee and Erik Brynjolfsson of MIT, companies using data-driven decisions and predictions were shown to be 6% more profitable than their competitors using human intuition and HiPPOs.

Yet Dawson doubts the effectiveness of algorithms in situations which cannot be clearly defined. “A prominent example is an organization’s strategic positioning. Any data-driven model of industry structure and potential decisions will be based on implicit assumptions by the creator of the algorithm.” And McAfee and Brynjolfsson emphasize that human insight is still very much needed. Humans see the opportunities and the challenges. And they ask the right questions, which will eventually be answered by data and algorithms.

Data can show the way consumers navigate through a website, which products they look at and which ones they buy. The products on the Amazon site are placed and shown accordingly, optimized for each customer. Often the many small decisions, following a well-defined model, are the ones done perfectly by algorithms. And those millions of good decisions on which books to show, for which customer, add up to a substantial profit. Even if the algorithm is occasionally wrong, it rarely matters.

However, it’s a different story if there is only one significant decision to make, especially one which is hard to define. Then humans want to get involved.

Combining both worlds

Dawson points out that big data needs interpretation and communication in order to be able to support human decisions. And while many jobs will be replaced by algorithms, a growing number of jobs will be needed to mediate between data, algorithms, and human decision-makers.

This appears to be in line with managers’ views. In a study of C-level executives by the Economist Intelligence Unit in September 2014, nearly half believe big data to be a useful tool, while only less than a quarter believe it will revolutionize the way businesses are managed. The biggest named obstacle to using data more extensively is the lack of managers’ understanding of how to apply data in their functions, while the most named solution to this is to create enterprise-wide teams to assess and propose approaches.

“The true professional is one who can communicate data in a way that changes the thinking of the highest-paid person,” Dawson says. “This is a human art requiring relationship skills that far transcend those of computers.” These people need to understand human cognition and empathy as much as they understand the data. Let the HiPPOs and trained professionals decide—and keep them well informed with qualified data.

For more on this topic read this post by Ross Dawson.

Image source: Caitlin

The rise of crowdsourcing in Malaysia

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I was recently in Kuala Lumpur to do twin keynotes at the National Crowdsourcing Conference organized by Digital Malaysia, and meet with government officials to discuss how Malaysia can best tap the potential of crowdsourcing.

The Star of Malaysia, the largest English-language newspaper in the country, interviewed me while I was there for a feature section on crowdsourcing. Here are excerpts from some of the articles:

The main article Captivate the crowd looks at the big picture of crowdsourcing and its potential:

Collaborating with others through crowdsourcing can put previously unachievable goals within reach.
…
In fact, as an individual, you too can stand to benefit from the use of crowdsourcing ­platforms. No matter what your ambitions may be, they could very likely become a ­reality if you can successfully capture the interest of the crowd.

“You can start to look for further work opportunities where you can get paid for things you’re good at,” says Ross Dawson, chairman of ­network ­economy experts, Advanced Human Technologies.

“You could also see if there are ways to contribute to something out there. Try it and see what works.”

Alternatively, you could even look for ­others to help you accomplish a dream project such as creating a short film or ­performing a charitable deed.

Although unpaid contributions tend to get better crowd responses, a paid crowdsourced project can still do as well if the ­crowdsourcing platform used has been well designed.

“It’s about how you design it to get people to want to contribute. People should enjoy the process, then it’d be easier to get them involved,” says Dawson.

“There should be a sense of community, and people’s schedules should be respected. You should give as much flexibility as ­possible because that’s valuable to people.”

Crowdsourcing: Opening up to possibilities gives an overview of crowdsourcing in Malaysia.

Crowdsourcing brings about a whole new range of opportunities that Malaysian organisations can benefit from, but few have actually taken advantage of this potential.
…
Ross Dawson, chairman of Advanced Human Technologies says it will take around four to five years before Malaysia will be able to fully leverage on the power of crowdsourcing.

“Realistically, it will take that long to develop a world class (crowdsourcing) platform here,” he says. “Companies (here) need to be aware that there may be many different ways to use crowdsourcing. This is very important for Malaysian organisations if they want to be competitive and growing in a globalised economy. We’ll increasingly see a gap between those organisations who take advantage of such opportunities and those that don’t.”

However, Dawson feels that the nation is off to a good start so far and believes that great possibilities lie ahead for Malaysia due to its knowledge based economy and the abilities of its workforce.

“I would say that Malaysia is on par with other countries in this region. One of the advantages that Malaysia has is that the English language is pretty widely spoken here,” he adds.

A third article summarizes How to best carry out crowdsourcing, drawing on interviews with both Ross and Carl Esposti, CEO of Massolution, who also spoke at the event, as well as from Chapter 4 of my book Getting Results From Crowds on how to use crowds. (Available as a free download from the book website).

I have some more engagements coming up soon working with the directors of major Malaysian organizations. Malaysia is one of the most dynamic countries in South-East Asia, and the initiatives in crowdsourcing undertaken by the government provide ample evidence of their forward-looking mentality.

The crime of the century: Stopping the potential of connectivity

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Recently I gave the keynotes at the Sydney and Melbourne relaunch events of Nextgen Group, which has restructured and rebranded with the acquisition of 70% of the group by Ontario Teachers Pension Plan (OTPP) from Leighton Holdings. The group provides networks, data centers, and hosting services, including a 100Gbps link between major Australian cities, and is building a submarine fibre cable linking Australia to Singapore.

The theme of my keynote was The Future of a Connected World, showcasing some of most interesting implications and potential of connectivity.

To provide some context for the future I spent a moment looking at the past of connectivity, which unfortunately is not always as happy a story as the future. Following is a brief excerpt from my keynote speech:

One of the most important dates in our connected world was January 1, 1984, when the US communications monopoly AT&T was forcibly broken into 8 ‘Baby Bells’. In the following 12 years 44 state-owned telecommunications companies were privatized and exposed to competition for the first time.

Yet even after all of this deregulation and heightened competition it was still an enormously lucrative business.

In 1997 Qwest President and CEO Joseph P. Nacchio was quoted by BusinessWeek saying: “Long distance is still the most profitable business in America, next to importing illegal cocaine.”

The truth is that prior to 1990s connectivity pricing was insanely high relative to true costs, driven by a combination of national telecoms monopolies and excessive international exchange costs.

This was an extraordinary crime, holding humanity back from its potential.

People who were far from their family members could only afford to speak perhaps once a year, often trying to call on Christmas day for a few minutes but not getting through because the lines were jammed. The potential of human connection was cut off.

Businesses were severely constrained in being able to communicate with – or even set up – remote offices. Communication was often by mail, leading to massive lost opportunities on all fronts.

As new, cheaper communications technologies have emerged, telecoms firms in the main have tried to do all they can to maintain their super-normal profits, with a few last holdouts such as international roaming only now finally being normalized.

So fortunately, extortionate telecoms pricing is now largely history.

However, lest we forget, it was long an extraordinary crime holding back human potential.

Leadership in enterprise technology must come from all organizational functions

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Recently I gave the opening keynote at SAP Australia Users Group Summit on Leadership in Enterprise Technology.

One of my central themes was that leadership in enterprise technology no longer resides just with the CIO and IT function.

The Future of the CIO is absolutely a critical frame, not least because I believe the CIO has primary responsibility for guiding boards of directors and top executive teams to understand the importance of technology in their organization’s future.

There is a divergence between organizations in which technology is being marginalized and treated as a commodity, and those in which its role at the heart of strategy, new business models, and value creation is recognized. The CIO must drive this recognition and the resulting investment.

Yet every leader and every organizational function – including HR, Marketing, Finance, Procurement, Sales, Supply Chain and more – also has the responsibility to shape the future of technology in the enterprise.

Technology is no longer just a support function. It is embedded into the core of almost every aspect of how organizations create value, internally and externally.

Each business function needs to build richer relationships with other internal functions and external capabilities. Just as organizations are shifting to create and tap value across broad business ecosystems, business functions need to widen their ambit and the scope of their value network.

From this technology-based opportunities for value creation become evident, along with an increasing recognition that executives from across the organization must provide leadership in shaping enterprise technology.

Certainly the CIO must be at the heart of shaping the role of IT, but they must increasingly be a channel and conduit for energy and insight across the organization in tapping the potential of technology.

Exploring the future of investment management

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[Find out more about Ross Dawson’s keynotes for the asset management industry]

Recently I was in Amsterdam for the International User Community Meeting of SimCorp, a leading provider of software for the investment management industry. I gave the keynote on the Future of Investment Management and ran a half-day Executive Master Class on Creating the Successful Organisation of the Future.

Prior to founding Advanced Human Technologies most of my working career had been in financial markets with Merrill Lynch and capital markets with Thomson Financial, with my final role as Global Director – Capital Markets.

My initial client base when I established my company was largely in financial services, and I began to focus on the investment management industry, for a number of reasons.

In the later 1990s my work and research was split between the fields of knowledge management and intellectual capital on the one hand, and futures methodologies such as scenario planning on the other.

I felt that one of the most important applications of our increasing understanding of intellectual capital was in asset management. Clearly information on non-financial indicators was often more important than historical financial data in making investment decisions, and I worked with a number of institutional investors on their efforts to value intangible assets of companies in which they were investing.

As I developed my expertise and experience in scenario planning, I saw there was an opportunity to apply scenario approaches to financial portfolio and risk management. I worked on applying qualitative scenario methodologies across several kinds of financial institutions, including asset managers and fund trustees.

In my book Developing Knowledge-Based Client Relationships, one of the key themes was that of adding value to client decision-making. Many of the case studies in the book examined how to enhance the cognitive and process aspects of financial portfolio decision-making, and I worked in applying that with a number of organizations, including the research departments of investment banks.

Having spent most of the last decade on broader issues such as the theme of living networks and examining the future of work, organizations, media, and government, it was a bit of a homecoming for me to speak at the SimCorp event.

Because I had not been deeply exposed to the industry for some time, in my keynote I spoke about high-level themes such as how changing information flows and distribution mechanisms are creating a wide variety of new opportunities in investment management.

Especially after running a highly interactive Executive Master Class with the most senior attendees at the conference, I found myself rather surprised to find that in fact the industry has changed very little over the last decade. Virtually the same issues – including talent, pricing, fee transparency, active vs. passive management, and distribution structures – are being discussed today.

There is a reasonable case to make that the investment management industry will change less than many others in years to come. The weight of capital to invest will inevitably increase, and there will be strong demand for capable fund management.

However there are certainly disruptions in store in investment management, and the industry currently hardly shines in its structural innovation. One of the speakers at the event noted that two-thirds of investment management firms ban social media in the workplace, a staggering statistic for companies that live off information flows.

In coming back to the industry I certainly see opportunities to help firms consider the future of the investment management industry, including identifying forthcoming disruptions and emerging opportunities.

I also see that there can be great value in applying what I have learned over the last decade and more in futures studies to the investment management process. I will be developing and sharing more content and ideas around the future of investment management in coming months.

The Future of Healthcare: Power shifting to the patient

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Ross Dawson recently did the opening keynote speech at Australasian Long-term Health Conditions Conference in Auckland, New Zealand.

NZ Doctor reported on Dawson’s keynote in an article titled Technology shifts the ‘power’ to patients:

Technology is driving a shift of power from institutions and professions towards consumers and individuals, according to futurist Ross Dawson.

A keynote speaker at the Australasian Long-Term Conditions conference being held in Auckland today, 29 July, and tomorrow, 30 July, Mr Dawson wowed delegates with examples of technology changing the way we live and work.

In one case, the brain of a paralysed woman was hardwired to a robotic arm and by thinking, she was able to instruct the arm to pick up a mug so she could drink through the straw.

By 2017, half the people in the world will have smartphones and half will have downloaded a medical app, Mr Dawson says.

Smartphones and other portable devices such as smart-watches, essentially powerful computers, can gather real-time health information.

That’s putting power with the consumer, Mr Dawson says.

The article goes on to describe how social media and smartphones are shifting power in health:

Social media and smartphones are driving the shift of power and increasingly consumers have expectations of good service, irrespective of who is delivering it.

Mr Dawson spoke of smart homes, wired to understand the health needs of occupants, sensing whether someone was in trouble and reacting accordingly.

Such technology would enable people to live longer in their own homes before needing rest home care.

The article goes on to look at Dawson’s comments on remote work, monitoring patients’ medicine-taking, and changing health behaviors.

More details can be found in the complete article.

The role of the futurist as a leader

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When I was in Amsterdam recently for client engagements I also gave a keynote to the Dutch Future Society about the role of the futurist.

It was a fascinating evening. Given the audience of futurists and those well engaged with the future, my presentation went further out than usual, and the ensuing conversation went beyond that, to issues including the nature of humanity, the ethics of the future, and more.

After the event I was interviewed by Stephan Verveen. The interview, embedded below, covers quite a few of the points raised during the evening.

Freija van Duijne, President of the Dutch Future Society, also wrote a nice post The role of a futurist, keynote by Ross Dawson which summarized my presentation. She noted:

The role of a futurist as a leader

A futurist’s aim is to encourage leadership on all levels. That is, helping people to think in a rich and structured way about tomorrow in order to act to day. Futurists are involved in sense making, giving people the ability to deal with information. Everyone is overwhelmed by the infinity of signals. Futurists help people to open their minds and think of things that they did not think before.

A vital point here is that the role of the futurist is not to provide outsourced thinking about the future.

The role of the futurist is to help everyone to become their own futurist, to think more broadly, to be open to different ideas, to stimulate and provoke into taking useful action.

We are at a critical juncture in human history, when actions we take – or do not take – today will shape our collective future to an extraordinary degree. The future is not predetermined. By understanding the nature of change we can act to create a better future.

Futurists, in grappling with these issues more than most, have a responsibility to help others to think forward and understand the potential impact of their actions.

In fact, in that all of us need to be our own futurists, we all have a responsibility not just to think about the future and how we will act. We also need to help others to think forward and in turn to act better today.

The case for the death of cash by the hand of digital currencies

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Recently I gave the opening keynote at the ATM and Branch Automation Seminar run by Payments Consulting Network.

In my keynote I spoke about the broader trends in technology, society, and business, and then looked at some of the uncertainties impacting ATMs and branches. Clearly one of the most important is the future of cash.

I noted that while I’m happy to predict the timing of the death of newspapers, I’m not prepared to make firm forecasts on the death of cash. The uncertainties are simply too big.

There are many payment mechanisms that are replacing cash, notably mobile wallets and contactless cards, and in many developed countries there is clear evidence that these are beginning to reduce demand for cash.

However this does not mean cash will die.

It is a useful futurist exercise to ask specifically why cash might be resilient and still be used for a long time to come. The more important reasons for people continuing to use cash include:

– Black market. Cash is the preferred means of payment for illegal activities. €1 million in €1,000 notes weighs just over 1kg. Beyond organized crime, the informal economy is often significant, with for example estimates of the share of Italy’s economy that is undeclared ranging as high as 50%.

– Personal anonymity. Many individuals engage in transactions that they don’t want their spouses, for instance, to be aware of, or simply don’t like what they do being tracked by banks, credit agencies, or anyone else.

– Concern about financial system. During the 2008-2009 global financial crisis cash issuance went up substantially, driven by fears that banks were not secure places to hold assets. It is interesting to note that in many countries the amount of cash issued continues to rise, while retail cash transactions start to decrease, suggesting an increasing role of cash as a store of value. As much as 60% of the cash float in Switzerland is in CHF1,000 notes, which are rarely used for purchases.

– Immediacy. Recipients of cash can use the funds immediately, leading to discounts for cash payment. Payment processing is getting faster, often to next-day, and in many countries there is a push for real-time payment processing, however the timeframe and scope for that is not clear.

– Habit. Many people are used to cash and like it.

These are indeed solid reasons for many people to like cash. This would seem to provide ample reason for cash to continue to exist indefinitely.

HOWEVER… it turns out that digital currencies such as Bitcoin have the potential to address almost all of these issues.

Bitcoin provides anonymous, immediate transactions. It is transacted entirely outside financial institutions.

Its existence and value is independent of governments that issue fiat currencies. As trust in governments’ financial situations erode, this suggests that people will seek to move away existing currencies.

The last few years’ experience suggest that Bitcoin is a solid, well-tested platform. If we start to get critical mass in acceptance of Bitcoin and well-designed mobile and web Bitcoin wallets it is absolutely possible for it to be a significant rival to cash for peer-to-peer payments.

On the point of habit, it is worth noting that people wanting something doesn’t mean that it will be available. Just as demand for printed newspapers doesn’t mean that there is an economic model for printing them, cash will only have value if people or shops still want to accept it.

Just as check processing systems are likely to be shut down as check usage drops to sufficiently low levels, if cash usage erodes enough, many retailers may not want to accept it and it may not be worth continuing to support as a payment mechanism.

There are however three major challenges for Bitcoin completely replacing cash.

– Volatility. If Bitcoin gathers greater acceptance, given there is a finite number of possible Bitcoins, there will undoubtedly be price overshooting as people join the system, and subsequent price adjustment. As a result, it is highly unlikely that Bitcoin prices will stablize for the foreseeable future. Since one of the major uses of cash is as a store of value outside of the financial system, Bitcoin will not meet those needs well.

– Ease of use. Buying, storing, and transacting Bitcoin can be complex and unwieldy. For broad-based uptake of Bitcoin extremely easy-to-use interfaces to the currency would be required.

– Government regulation. The Canadian tax office recently released a fact sheet on Bitcoin; other government agencies are beginning to grapple with the many implications of Bitcoin’s rapidly rising usage. It is possible that some governments will seek to effectively ban Bitcoin, or regulate it to a degree that makes it unattractive to many people. It can still be valuable to those who seek anonymity, however it could never be a de-facto currency if it is not within regulated use.

This is of course a very simple analysis, and there are many other issues to consider. However there remains a real case that cash could in fact die – or have very low levels of usage – before long. The very important reasons listed above for cash to continue could all be massively eroded by digital currencies.

In short, digital currencies such as Bitcoin MAY be enormously disruptive to cash and payments. The thought experiment is very useful, though uncertainties still abound.

Payments are at the heart of business and society, and it matters enormously if they fundamentally change. There are many other dimensions to the changing payments space, and I will be closely following its evolution.

 

Could online lobbying be the future of government?

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Recently I spoke on the potential of crowdsourcing at the EngageTech conference, an event focusing on how government can best use technology to engage with community and citizens. One of the very interesting conversations that emerged at the event was on how interested and informed citizens are on government decisions.

It’s a truism that representative democracy is not very democratic.

One of the primary reasons that we elect representatives is that the vast majority of people do not have the interest or time to have informed opinions on the many things on which government must decide and act. However the rise of a hyper-connected world has fundamentally changed the relationship between citizens and government.

People have the opportunity as never before to be well-informed on the issues that interest them. The newspapers and TV stations that supposedly informed us pre-Internet were never better than adequate, and very rarely even that. We are better informed than ever before (and happy to debate it with anyone who disagrees).

Moreover, we now can have our opinions or input heard in a way that was never possible before. Switzerland, which has more referenda than any other country, is in the vanguard in e-voting, allowing easy remote participation in government decision-making. Of course the challenge is that citizens’ input to any particular decision will be swayed by the degree of participation of advocates of different approaches.

But this is certainly not sufficient reason to discard this kind of participation. Arguably all elections are subject to the same issues: degrees of participation in voting, extent of knowledge about the issues at hand, and influence by partisans. Is the fact that the proponents of a particular view can muster widespread online – or offline – engagement sufficient reason for their stance to become policy?

As a straw man, I suggest that it is entirely viable for public policy to be shaped – issue by issue – by online lobbying and engagement with voters and citizens. Yes there would be potential problems in this system, but these would not necessarily be worse than the current very broken system we have in most “democracies” around the world.

Let us imagine a world in which all major issues are open to debate, discussion, and lobbying in the public sphere, leading to participatory decision-making. For all the potential flaws of this system, it could well be better than what we have today.

Keynote at Critical Horizons conference: The potential of a connected world

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Recently I spoke at the Critical Horizons Regional Futures conference held in Bunbury, Western Australia, which “examines emerging global trends and how they might affect regional communities in the South West Region of Western Australia”. It is fantastic that a non-urban region runs a regular event to examine its future. It is clear that the attendees from across business and government had a keen appetite to explore the future and what they need to do to create a prosperous region in years to come.

The regional economy is still largely driven by mining and to a lesser extent agriculture (including the delightful Margaret River wines). It is experiencing many issues common to regional areas, including the loss of younger people to cities. However it has a particular context in its location. Australia is one of the most urbanized countries in the world, and Perth is the most isolated city in the world. Bunbury is over 2 hours drive away from Perth. It took me 10 hours door-to-door to get here from Sydney – by far the longest it has taken me to get to a speaking gig in Australia.

The region’s geographic isolation means the topic of my keynote here, Power to the People: Thriving in a Hyperconnected Society, is immensely relevant. I discussed the overwhelming trend of how a connected world is shifting power from institutions to individuals. However, I also covered the implications for regions of the emerging global talent economy. Crowdsourcing tools on one level provide access to extraordinary talent that can be harnessed in ways limited only by imagination. Yet a connected world also provides opportunities to provide services, both in existing domains, and especially in managing projects.

To the extent that they are useful (usual disclaimer: my slides are created to accompany my speeches, not to be viewed on their own) here are the slides for my keynote (minus the Flash animations).