All Things Online: How the Internet of Things Changes Everything

24. September 2013

Date: 24-09-2013
Source: Foreign Affairs

As models wearing Google Glass tromped down runways in New York earlier this month, it might have been tempting to see wearable digital devices — including experimental headgear (what looks like a pair of eyeglasses without lenses that immerse the user in the Internet), smart watches (Web-surfing computers in the form of wristwatches), and running shoes and athletic apparel with built-in data sensors — as just the latest fad. In fact, they represent a more profound change that is reshaping major industries, even as it blurs the lines between humans and computers.

What has made such devices possible is the interplay between two of what the McKinsey Global Institute has identified as among the most disruptive technologies of the coming decade: the mobile Internet and the Internet of Things. The mobile Internet is the ability to access the Web on mobile devices. The Internet of Things is a set of technologies that incorporates the physical world into the virtual one through networks of electronic sensors and devices connected to computers. The applications of a mobile-ready Internet of Things go beyond clothes: Tiny detectors that can gather and relay data about location, activity, and health (how well an object or device is holding up) have already been incorporated into everything from bridges and trucks to pacemakers and insulin pumps. Read the rest of this entry »


McKinsey looks set to stay top of the heap in management consulting

21. September 2013

Date: 19-09-2013
Source: The Economist: Schumpeter
Subject: The future of the Firm

IT IS one of the engines of global capitalism. Not only does McKinsey provide advice to most of the world’s leading companies (and governments). It also pioneered the idea that business is a profession rather than a mere trade—and a profession that thrives on raw brainpower more than specialist industry knowledge or plain old common sense.

Yet McKinsey’s name has suffered a succession of blows in the past 15 years. The Firm, as it calls itself, was deeply involved in the Enron debacle: the energy company’s boss, Jeff Skilling, was a McKinsey veteran who praised the consultancy for doing “God’s work”, and the McKinsey Quarterly published articles on Enron as enthusiastically as Hello! runs pieces about the Beckhams. In 2010 Anil Kumar, a McKinsey consultant, admitted passing inside information to Raj Rajaratnam of Galleon, a hedge fund. Last year Rajat Gupta, a former McKinsey managing partner, was also convicted of passing inside information to Mr Rajaratnam.

Life is getting tougher for professional-services firms. Midsized consultancies are already suffering: Monitor Group went bankrupt last year—Deloitte later bought it for $120m—and Booz & Co and Roland Berger are agonising about their futures. If the legal profession is anything to go by, worse is to come: Dewey & LeBoeuf collapsed last year after borrowing heavily in a dash for growth, and other elite law firms are struggling to win business.

So, are McKinsey’s best days behind it? Two new publications offer some interesting answers. “The Firm”, by Duff McDonald, is a generally admiring book that nevertheless asks hard questions about the organisation’s future. “Consulting on the Cusp of Disruption”, by Clayton Christensen and two colleagues, is a penetrating article in the October Harvard Business Review, arguing that the comfortable world of the strategy consultancies is about to be turned upside down.

McKinsey’s success depends above all on an unimpeachable reputation for integrity. It cannot continue to serve most of the world’s leading companies (including working simultaneously for competitors) if its consultants are willing to spill secrets. Mr McDonald argues that the firm’s size makes it impossible to avoid repeats of the Kumar problem. It is now a giant factory with 1,200 consultants rather than the cosy club of old. The firm has to keep growing, not least to provide its partners with the $1.5m or so a year that they earn. But every time it grows it puts its most important asset at risk.

McKinsey’s success also depends on its ability to remain at the cutting edge of business. But in recent years it has seemed to be on the wrong cutting edge. Mr McDonald points out that whereas McKinsey has led the “financialisation” of basic industries such as oil and gas, it has had little if any role in shaping the giants of the internet economy, such as Apple and Google. The new lords of business are engineers in hoodies, not MBAs in pinstripes.

Mr Christensen focuses on a bigger subject: how the forces that have disrupted so many other businesses, from steel to publishing, are disrupting consulting. The big three strategy consultants—the other two are the Boston Consulting Group (BCG) and Bain—are masters of opacity. But Mr Christensen argues that light is being let in on the magic. Companies are getting better at measuring results and demanding value for money. They also have access to more business expertise than ever before: the big three have more than 50,000 living alumni.

The big three have been masters at bundling lots of different services into a single, high-priced package. But clients no longer want to pay fat fees for a bit of strategic advice from a senior partner and a lot of humdrum work from neophytes. Mr Christensen says low-priced competitors are beginning to dismember the consultants’ business. Eden McCallum cuts costs by deploying freelancers, most of whom once worked for the big three. BeyondCore replaces overpriced junior analysts with Big Data, crunching vast amounts of information to identify trends.

McKinsey clearly faces a more difficult market than it is used to. But it has overcome serious challenges before—such as in the 1980s, when it lost the intellectual high ground to BCG and then Bain before regaining it. The firm is fixing some of the problems from the Gupta era. It has elected two successive managing directors, Ian Davis and Dominic Barton, who have worked hard to restore its professional ethos. Mr Barton urges companies to embrace “long-term capitalism” rather than “quarterly capitalism” and corporate responsibility rather than financial engineering: the very opposite of the Enron-era McKinsey’s gospel.

Old boys (and girls) everywhere
McKinsey also has two huge assets: talent and knowledge. It retains an unrivalled ability to recruit hundreds of clever young people and turn them into an army of problem-solving worker ants. It also has an enviable network of alumni, many of whom are happy to hire their old employer: in 2011 more than 150 ex-McKinseyites were running companies with more than $1 billion in annual sales. The firm has also invested heavily in knowledge for decades: perhaps no other organisation has as much interesting data on global capitalism.

Though lesser firms may be facing disruption, McKinsey dispenses a special sort of consultorial fairy-dust that is hard to replicate, and as much in demand as ever. The global ruling class is seized with a toxic combination of status-obsession and status-insecurity. Decision-makers also fear being swept away by one of Mr Christensen’s disruptive forces. They seek constant reassurance and reaffirmation from prestigious institutions. McKinsey knows better than almost anyone how to exploit this peculiar mindset. That will guarantee the Firm a solid future, even if no one can prove that its advice actually does any good.


Worries That Microsoft Is Growing Too Tricky to Manage

10. September 2013

Date: 09-09-2013
Source: The New York Times

Microsoft MissionSEATTLE — At a time when many people in business believe the number of products at Microsoft should be getting smaller, it is about to become a lot bigger.

Microsoft’s $7.2 billion acquisition of Nokia’s handset and services operations, when the deal closes early next year, will increase the company’s head count by 30 percent and add a big, new hardware unit to a dizzying variety of businesses — an unusual situation in an industry where focus is often prized more than breadth.

It’s a concern to everyone from academics to Microsoft alumni. A list of missed opportunities and disappointing investments at the company in the past decade in areas like smartphones, tablets and Internet search have led to the belief that a more focused, nimble collection of mini-Microsofts could respond more effectively to the never-ending flow of disruptive technologies nibbling at its foundations.

“It is very hard to be a broad-based tech conglomerate,” said David Yoffie, a professor at the Harvard Business School.

Thirteen years ago, Microsoft’s competitors and a federal judge demanded that Microsoft be split up because of its market power. But trying to do too much rather than wielding too much power is the issue now. Read the rest of this entry »


The web giants pumping us for data

2. September 2013

Date: 02-09-2013
Source: The Guardian

As society becomes more networked, the information available to the Googles, Amazons and Facebooks of this world will increase exponentially

Rich resources … Like an oilfield, big data offers potentially huge profits for the corporations tapping into it.

Should you be looking for an example of hucksterish cynicism, then the mantra that “data is the new oil” is as good as they come. Although its first recorded utterance goes as far back as 2006, in recent times it has achieved the status of an approved corporate cliche, though nowadays “data” is generally qualified by the adjective “big”. And if you want a measure of how deeply the cliche has penetrated the collective unconscious, ponder this: a Google search for “big data” turns up more than 1.5bn results. And a search for “data mining” turns up 167m results.

The idea of big data as a metaphor for oil is seductive. It’s also revealing in interesting ways. Given that the oil business is one of the biggest industries in the history of the world, for example, the metaphor hints at untold future riches. But it conveniently skates over the fact that oil wealth overwhelmingly benefits either ruling elites in corrupt and/or authoritarian countries, or huge corporations in democratic states.

But at least oil is a physical, non-renewable resource that is extracted from the earth. Big data, on the other hand, is extracted from the activities of people and machines. As society becomes more and more networked, and as the so-called “internet-of-things” evolves, the amounts of data available to be “mined” will increase exponentially. And, unlike fossil fuels, these data reserves are infinitely renewable.

“Big data”, says Kenneth Cukier, co-author of the best book on the subject to appear so far, “will transform how we work, how we live and how we think”. He argues that, at least in the case of data, “more is not just more; more is different”, by which he means that quantitative abundance can lead to qualitative change. The availability of huge amounts of data turbocharges machine learning; for example, turning hitherto impossible tasks – like accurate, instantaneous language translation – into delivered realities.

The key question about any major technological development is: who benefits? The answer in the case of big data is: huge corporations – the Googles, Amazons and Facebooks of this world, which are the only outfits (outside of the US National Security Agency) with the computational resources to mine, analyse and process the data torrents unleashed by us as we go about our networked lives. The companies don’t talk about it this way, of course. Instead they have soothing patter about how their analytical capabilities enable them to serve you better: how the ability to analyse the web searches conducted by you and your friends enables them to provide better search results, for example; or how analysis of your online behaviour enables Amazon to suggest products that you might like; and so on.

All true, of course, but skilfully avoiding the awkward fact that you are the resource that is being mined and that the playing field that is cyberspace is tilted in favour of the corporations who have come to dominate it.

Which brings us to another aspect of the subject: open data. Since 2005, activists have been campaigning for “open government data” initiatives – demanding the publication of public datasets in machine-readable, freely reusable formats. The argument for this is impeccable: the data is collected by public bodies; it should therefore be available to the public that paid for it. The motivations behind the campaigns are likewise admirable: if the data is available, then civic-minded geeks can do useful things with it.

The open government data campaigns have been surprisingly successful in both the US and the UK. Huge swaths of public data are now available. I can download a vast spreadsheet containing details of every contract worth more than £500 entered into by my local authority, for example. And in many cases, people have already developed useful services on top of public data. For example, busitlondon.co.uk provides a helpful online tool for planning a journey by bus in London.

There’s lots more in that vein, and it’s all good stuff. At first sight, therefore, open government data looks encouraging. But there are a couple of flies in the ointment. The first is that there is a difference between open data and open government. The current Hungarian administration, for example, has been quite good at publishing public data, but is morphing into one of the most secretive and authoritarian regimes in Europe.

And then there’s that awkward question again: who benefits? Certainly the public, to some extent. But there are signs that open government data favours private companies bidding for local authority contracts. The companies know what it costs the authority to collect the refuse, for instance; but their own finances are opaque, so it’s impossible to judge whether they would really be more efficient than a public body.

And the moral? Be careful what you wish for.