Nov

6

Of Mice and Men and NEDs

Filed Under B2B, Big Data, Blog, data analytics, Financial services, healthcare, Industry Analysis, internet, Search, semantic web, Uncategorized, Workflow | Leave a Comment

Of the eighteen Boards of Directors of ventures various that I find that that I have been involved with over the years, none gave me any confidence about answering the most simple question. “Are you really sure that you know exactly what is going on here?” My sample includes a listed London FTSE quoted company; Dutch, Benelux, US and UK incorporations; corporate cultures that went from start-up to a hundred years of history, experience as both an executive and non-executive board member. As a result, one residual conclusion that sticks with me is the thought that being a non-executive/external director (NED) in a re- regulating networked business world is as isolated and thankless a high risk position as I can imagine. My heart goes out this week to the could not have known/should have known non-executives on the board of Tesco. How could you sit there and not know that the operating margins were fraudulent, bellow the so knowledgeable commentators of the Press. Easily, I think privately. In the cocoon of corporate culture which is the Board who do you believe if not the CFO? And how do you check a suspicion without evidence which even forensic accountants find it hard to unearth?

In the event, I found that I asked the hardest questions I could devise, tried manfully to test the evidence, used my powers of judgement of events and personality as widely as possible and seem fortunately never to have been lynched by the investors and staff who I was pledged to protect. And then, back in May this year, it slowly dawned on me that our world was changing in ways that might make all of this much easier. In a totally different context I found myself looking at the work of a UK company called Aging Analytics. It was a software-based consultancy in the health sector which found itself collaborating with the Center for Biogerontology and Regenerative Medicine to answer a question posed by a Hong Kong-based investor in regenerative medicine. This company, DKV (Deep knowledge Ventures) asked its consultant how it could reduce the risks in investment decision-making (and as I know well, most risk investors are highly risk averse). The answer was a programme called VITAL, and DKV were so pleased with it (or so PR cute) that they appointed it to their board as a non-executive director. (http://www.marketwatch.com/story/deep-knowledge-ventures-appoints-intelligent-investment-analysis-software-vital-as-board-member-2014-05-13.) At the time the story made headlines and then got lost, but it stuck with me as an example of how Artificial Intelligence will be used to buttress our insecurities.

VITAL has access to all of the data derived from the investigations and due diligence that DKV conducts. At the same time it has the open web and closed subscription services used by DKV to consider. And it is constructed as an algorithm to bring weighted judgement to categorisation like “most likely to succeed” or “closest to corporate investment criteria”. In some ways it is hard to imagine why such procedures do not take place in every PE or VC context. At the great NOAH investment show next week (www.noah-conference.com) I expect to see some hundreds of information and eCommerce investments unvisited and unblessed by such due diligence. And emotionally I understand why people want to rely on human experience (nous, hunch, gut, empathy), since so much of what makes these investments work derives from the people running the company, and not the algorithmic likelihood of success. And yet…

Transfer this thinking over into the true role of the non-executive director. Would risk reduction take place if data access internally for a programmatic Director was matched by access to market comparatives and trends, expected performance profiling and weighted risk comparison? For a decade now we in the information marketplace have been trying to understand workflow and support its automation. From accomplishing this in relatively straightforward areas – were the first in tax and accounting? – we have gone on to create complex systems for handling IP, financing the purchase of aircraft, or managing a continental marketplace in heavy industrial plant, to name only a few that I have encountered In recent years. Readers here will know that I think the PR market is ripe for more mechanisation. Yet how will the poor non-exec ever know that these systems are still effective, or need replacement, or are wasting resources? It will be hard enough of executive directors, with their minds diverted by growth forecasts, margins and capex control, to form a view. The view of the executive director will always be warped by performance criteria, which is why the non-exec is vital. But how can he perform if he does not have help in processing what can be known against the key issues of risk, governance, and, as the world’s bankers now know, compliance.

And then there is something else. Once we start installing intelligent systems which monitor risk and control compliance, the friendly neighbourhood regulator will be round. Asking for access. Online. Just for his own performance monitoring, you understand. So the role of the independent director becomes that of the artificial intelligence whistle blower. Of course, businesses will resist and complain, just as the truck drivers did when we forced them to install tachographs and other measuring devices in their cabs 30 years ago. Now that measurement is a fact of life. So it will be with risk monitoring. In time governments and regulators will mandate and specify some of the qualities they need in the output. And non-executive directors will once again grow confident in the knowledge that, while they still do not know everything, they know enough to protect staff and investors to a level that will make 2014 seem like the Wild West in retrospect.

Sep

7

Milking the Disintermediators

Filed Under B2B, Big Data, Blog, data analytics, Financial services, healthcare, Industry Analysis, internet, mobile content, Publishing, Reed Elsevier, semantic web, STM, Thomson, Uncategorized, Workflow | Leave a Comment

Remember those days when intermediary businesses in information markets were going to be taken out of the loop by savvy operators who could increase margins by collapsing processes in the service cycle? In the far-off nineties, before bookshops had disappeared and while libraries were still functioning as they had for the previous century, this disintermediation stuff was really hot. We spoke of “disintermediating the disintermediators”, and even “re-intermediation” – well, I did at least, and I rather hoped that you might have nodded off through some of this, since it is all changing again now, and in ways that demonstrate that we were not always entirely right in our prognostications. No, let me rephrase that – I was more often wrong about this than I am now comfortable about admitting.

There are many reasons for this but the most obvious is the most painful – pure failure of imagination. I convict myself of the crime for which I have so often harangued others. A simple failure to remember that when one relationship in a chain changes, it changes everything else in the chain. A month of illness and recuperation and holidays has given time to catch up on a backlog of reading – and thinking. And reminded me to remember my roots. As a farmer’s son in the Cotswolds, the bane of our lives on small farms was the regimented slavery of milking cows at 6am and 4pm. Now that slavery is abolished, as avid followers of the UK radio soap The Archers will be aware (North Americans can start here: http://www.cbc.ca/news/canada/new-brunswick/robot-milkers-gaining-in-popularity-at-dairy-farms-in-n-b-1.2756987). Think through these changes in terms of the chain relationship idea, and we end up in a discussion about the future of farmers and the way we organize access to and curation of the land in our society.

So what we have to discuss is whether, in information, and often entertainment, markets our intermediate role is worth saving. Whether we call ourselves publishers, or information service solution vendors, matters not a whit. Do we do enough to stay in the loop as other relationships change in our client base, and other players threaten to subvert our value by combining it with theirs? When as a law publisher online I crowed that I had “captured” the user desktop all I was actually saying was that I had beaten the law firm’s library budget to a pulp. Very many law firms don’t have librarians any more, but, in recession, many have found that more and more legal process can be outsourced in commercial law. And, as I have noted here before, as outsourcers like Obelisk (www.obelisksupport.com/) band together the unemployed lawyers to provide a service base to re-align where the work is actually done, and outsourcers to corporate counsel like Axiom (www.axiomlaw.com) replace much of the service value that private law firms once offered to corporate customers, the tectonic plates are moving in that most conservative world of law, just as re-regulation after recession is creating a new marketplace around risk management and compliance. So, take the most conservative of professions, with highly protective union rules around membership and practice, which you would think would entomb change through mummified procedure – and even here we can see real evidence that within comparatively short periods of time, far-reaching change is massively afoot.

Then look at the organization of medicine, and medical advice. Or PR, and the ability of marketing department analytics to subvert much of the value of the PR businesses. Or insurance. Or construction and BIM, and planning processes. Or engineering design. Or property transactions. Or almost any field in the world of work or transactions that you can imagine. From the taxi drivers who resent Uber to the private drivers who park with RingGo, these changes in relationships are live on the streets of London today, yet we still take each change as a piecemeal development and not as a link in a fundamental shift. And we are very good at describing over-arching movement, but not at all good on detecting what those movements may mean on the ground. If you are still reading in the next few months I shall want to write about the Internet of Things, about M2M, about “Big” metadata, about ubiquitous computing, about semantic analysis, about additive manufacturing, about open and linked data etc etc. But I am now more determined than ever to describe those things in the clothing of work and business as it is now.

So what is the Future of Law Publishers , in the sense that I have used them as an example in this piece? Well, I think that the logic of what I have been looking at this month implies that they themselves will be dis-intermediated. Clearly the small players will successfully cope with the diminishing ranks or practitioners who want texts in some form or other, until that small market becomes a self-publishing function. I can imagine that the large players, like Thomson-Reuters, Lexis or Bloomberg BNA, will be able to migrate through acquisition into the workflow outsourcing business. Their data is becoming highly commoditized, and they have too little expertise to allow them to customize. So I see them as becoming service bureau, providing cloud-based services either to their former clients, or to their client’s clients. The decisions they make for their clients will be insurable and a good number of their employees will be legally qualified. Gradually, in some service areas, it will be hard to tell them apart from law firms. And that is a prevalent conclusion from research in these areas – only our physical, non-networked world could have sustained these separate service functions in the value chain. Put them all in the same virtual network, and inexorably they mutate into one solution. Before the summer break, I wrote about this here under the title “If its a Service, Outsource it…“. Reviewing that piece I now realize that we are seeing the first stages of a much more fundamental re-alignment. And it cannot be postponed or delayed because media and information corporations so wish it.

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