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November 23, 2004

Decision making biases

I recently heard Malcolm Gladwell (he of Tipping Point fame) give a talk about his upcoming book - Blink.  For those who have not heard him before, he is a fantastic speaker who is able to light up a room with his deep intellect and fascinating factoids.   Blink is about decision making in various situations and in his talk he focused on decision making around hiring.

He started his talk with an anecdote about Abbie Conant.  For those who don't know her, this is a fascinating story.  Abbie was the first female trombonist ever in a major orchestra.  The Munich Philharmonic (which is one of the oldest and prestigious orchestra in Europe) had an opening for a lead trombonist and decided to hold an open audition.  Abbie applied for the audition and due to a typographic error was cataloged as "Applicant #16 - Herr Conant" rather than Abbie Conant.  In an another twist of fate, the selection committee for the philharmonic decided for the first time to institute a black screen between the auditioning musicians and themselves.  This was done because one of the folks auditioning for the spot was related to a senior musician in the orchestra and the selection committee wanted to avoid any suspicion of bias in their decision.  Even though Abbie did not feel she did that well in the audition, the selection committee overwhelmingly felt that she was the best trombonist and offered candidate #16 - "Herr Conant" - the job.  All hell broke loose when they discovered that "Herr Conant" was actually a woman.  And that began a saga of almost 13 years where the philharmonic did everything they could to get rid of her even though she was the best trombonist.  The enduring legacy of Abbie however is that more and more orchestra's started to do blind auditions after this episode and ratio of male to female orchestra players which was 95:5 prior to Abbie is now close to 50:50. 

Couple of insights from this anecdote:

a. People have no idea of the extent of their biases: most orchestra conductors prior to this event claimed that they are just looking for the best musicians and that men are just naturally better musicians than women.  Most of them honestly did not feel they were biased in any way.

b. People start making their mind very early - Contrary to the notion that people would make up their mind on the quality of a musician after he/she starts playing, the reality is that they were making up their mind as early as just noticing the gender of the person.

Another interesting statistic that Malcolm offered is that more than 25% of Fortune 500 CEO are taller than 6' 4".  Only a quarter percent of the male population in America is over 6' 4"!!! Are taller men just better CEO's or are CEO selection committees biased towards height?  What does height have to do with their ability to be a good CEO?

These biases raise some challenging dilemmas for people like me (VC's).  A very high factor in doing diligence in management and founders are:

a. Do I know them personally?
b. Do I know someone who knows them personally and can vouch for them?

VC's take pride in saying that they never do deals that come in over the transom or work with folks
who did not come to them by means for a referral.  Is there a danger that by applying these arbitrary criterion's that we are missing out on a whole section of society e.g. minorities and women?  How relevant is the fact that they were referred to me to the trait of being a successful entrepreneur?

I don't have any answers but I am definitely thinking more about these questions . . .

Posted by Venky Ganesan at 12:22 PM in management | Permalink | Comments (1) | TrackBack

November 17, 2004

Rumors of the death of IT jobs have been greatly exaggerated

I was in India recently on a personal visit  and had a chance to witness first hand the boom in IT and BPO jobs.  There was a buzz similar to ones I had felt in Silicon Valley in the 90's and to the ones folks say they feel in China.  I am happy that globalization and technology has bought an economic lifeline for India.  However dear readers (especially my American IT brethren) fret not for your IT jobs and please don't dissuade your children from thinking of IT as an option.  The cold hard facts of economic data don't support the hot air of technology Pandora's and trade unionists.

NASSCOM (the trade association of IT companies in India whose sole goal is to trump up the size of the industry to curry better favor from the government) claims that Indian IT software and services exports were $12 Billion in 2003-2004.  They expect that the BPO and IT sector will grow to $62 Billion by 2008/2009.  This is their "most optimistic" estimate however let us take it as fact.  Now let us make an adjustment to this number - since most people who outsource to India do so for a cost advantage, let us assume that people get a 3x advantage by outsourcing to India.  This is again a very agressive estimate since very few people get a 66% reduction in cost after they take into account communication and travel costs.  Even with that assumption, we only get a economic total of $186 Billion dollars .  While this is a big number for most of us, it is not a big number in the context of the American economy. 

The US economy is around 11 Trillion dollars growing at 2-3% a year.  Assuming 2% growth, the US is creating $220 Billion of economic value every year.  In 5 years by growth alone the US is going to create a Trillion dollars in economic value.  Even if all of India's outsourcing growth came from the US it would still be only 20% of the economic growth the US has created and less than 1% of the US GDP. 

The real challenge to all jobs is productivity.  Rather than worrying about red herrings such as India and China, we need to figure out how we can constantly upgrade our role in the value chain and make ourselves more productive.  I predict we will create 50% more IT jobs by 2009

Posted by Venky Ganesan at 05:15 PM in software | Permalink | Comments (2) | TrackBack

November 16, 2004

Photoluminescence spectroscopy for explosives detection

University of Florida researchers have discovered a way to use photoluminescence spectroscopy to detect explosives from a distance. The basic idea is to shine a laser at the object and look at the spectrum of radiation emitted by the object. TNT and other explosives (including plastic explosives and nitroglycerin) have a common and specific well-defined signature corresponding to the presence of two nitro groups.
The development provides instantaneous results, gives no false positives, can be used remotely and is portable -- attributes [Professor Hummel] says will make it indispensable at all levels of law enforcement, from local police to homeland security. “ If I see a ship approaching, I’d like to know if it’s packed with explosives,” Schau said. It’s in the field of remote detection that this is exciting. This really looks like it may give us a leg up on that.” Sample collection for explosives is familiar to anyone who has recently passed through an airport: a swab brushed across an object, such as a suitcase, clothing or even a person, or puffs of air blasted across a filter that can trap tiny amounts of airborne explosives. The advantage of photoluminescence-based explosive detection is that it can be remotely applied, and requires neither time-consuming and expensive machines nor trained dogs, said Hummel, who has applied for a patent on the technique.

Posted by Narasimha Chari at 09:44 PM in Current Affairs, innovation, security, technology, Terrorism | Permalink | Comments (0) | TrackBack

November 15, 2004

Skype API

Skype recently announced a partnership with Siemens to enable cordless phones to use Skype to dial out (in addition to using the PSTN):

Skype's free Internet telephony software works with Siemens phones via the Gigaset M34 USB adapter, an open interface adapter that is plugged into the USB connection point of a users' PC. It communicates with the phone’s base station to either make or receive a Skype call. The handset then enables users to gain cordless access to the extensive Skype features including, free Skype to Skype calling, buddy lists, the Skype Global Directory and conference calling.

Skype has also recently opened up an API enabling hardware devices and software applications to integrate with Skype's software. A couple of interesting applications called out:

Call-center and IVR solutions
Although Skype has so far been designed primarily with individual communication needs in mind, it can be used to provide business-class calling services through the Skype API. Businesses can provide Interactive Voice Response (IVR) solutions where the software answers the inbound Skype call and provides the user with automated choices and selections in combination with a back-end system. This could be used for ticket booking, payment, pizza ordering and many other services. The IVR system can be either fully automatic or a combination of operator/automatic usage.
For service monitoring purposes, the calls to operators can be recorded and later screened using regular audio manipulating tools on a standard PC. The information can be automatically stored and emailed.

Phone handsets
Skype provides access to its functions from software a well as hardware devices. The Skype client software can be used with any audio hardware compatible with the operating system, such as headphones and a desktop microphone, or a dedicated USB headset or even telephone-like handset. However, all of these require the user to still work with Skype software and sit behind a computer.
Users may want more freedom both in home and business environments and not to be tied to a computer. This is why Skype has joined forces with Siemens as its first Preferred Cordless Phone Provider to give users a chance to move about freely. The Siemens M34 Gigaset USB Adapter plugs into the computer’s USB port and connects to a Gigaset base station that in turn is connected to one or more cordless handsets. The handsets have access to basic Skype functions like placing and answering calls and navigating the contact list.
The Skype API gives other hardware manufacturers an opportunity to build similar solutions in their existing or upcoming products. Note that for using all these functions, a computer running Skype is still required.

Posted by Narasimha Chari at 05:34 PM in communications, innovation, marketing, Product Management, software, technology | Permalink | Comments (1) | TrackBack

Demand prediction, scan-based trading

Interesting BI example in an NYT article about Wal-Mart:

A week ahead of the storm's landfall, Linda M. Dillman, Wal-Mart's chief information officer, pressed her staff to come up with forecasts based on what had happened when Hurricane Charley struck several weeks earlier. Backed by the trillions of bytes' worth of shopper history that is stored in Wal-Mart's computer network, she felt that the company could "start predicting what's going to happen, instead of waiting for it to happen," as she put it.
The experts mined the data and found that the stores would indeed need certain products - and not just the usual flashlights. "We didn't know in the past that strawberry Pop-Tarts increase in sales, like seven times their normal sales rate, ahead of a hurricane," Ms. Dillman said in a recent interview. "And the pre-hurricane top-selling item was beer."
Thanks to those insights, trucks filled with toaster pastries and six-packs were soon speeding down Interstate 95 toward Wal-Marts in the path of Frances. Most of the products that were stocked for the storm sold quickly, the company said.

The article also mentions scan-based trading, a term with which I was unfamiliar:

Eventually, some experts say, Wal-Mart will use its technology to institute what is called scan-based trading, in which manufacturers own each product until it is sold. "Wal-Mart will never take those products onto its books," said Bruce Hudson, a retail analyst at the Meta Group, an information technology consulting firm in Stamford, Conn. "If you think of the impact of shedding $50 billion of inventory, that is huge."

Here's some more on scan-based trading:

Scan-based trading (SBT) is not so much about coordinating data as it is about shifting financial risk from seller to supplier. Not only must a vendor such as American Greetings pay for the inventory of cards that will sit on the retailers' shelves right up until the moment of sale—such vendors also must bear the burden of making sure there are no holes in the tracking of products and transactions.
The idea behind these systems is simple enough. Rather than paying for products from suppliers as they are brought into the store, the supplier retains "ownership" of products on the shelf. Sales information is sent automatically from retailer to supplier. When the supplier receives that information, an invoice for goods sold is automatically created and an order is submitted to replace the sold merchandise.
In theory, everybody is supposed to come out a winner. The retailer loses the financial risk of carrying inventory while reducing its administrative and order management costs. The supplier gets daily alerts to replenish its wares—which means more sales—and is able to gather nearly real-time data about the performance of products store by store. This data can be used by the supplier to improve forecasting, production planning and product targeting.

Posted by Narasimha Chari at 05:10 PM in innovation, marketing, Product Management, technology | Permalink | Comments (2) | TrackBack

November 10, 2004

Bush Lessons

Politics is not a normal topic for this blog.  Regardless of how you feel about the end result, the recent presidential elections offer too many learnings on leadership that are applicable to companies and life that they are worth noting.  First a few caveats, I am not a Bush supporter, my knowledge base or interest in politics is minimal, and I posess no unique expertise or insight over topics in the political realm. 

Learning #1 - TEAMS matters and the best team wins

Duh! Yes this is under the "master of the obvious" column but worth still repeating.  Most non-partisan observers would agree that John Kerry won the three debates and on a one on one basis is probably the better person.  However Bush had the better team both in 2000 and 2004 and that showed in the final results.  I would also argue that the fact that Bush understood the importance of teams and made sure to recruit the best one makes him a better leader.  This is a challenge talented individuals face.  Either their individual brilliance makes them discount the value of team or their ego comes in the way of bringing other strong players on to their team.  Lesser talented individuals both understand the value of teams and also don't feel threatened by having strong individuals around them

Lesson #2 - Conviction and Persistence Matters

Again regardless of how you feel about the decision to go to war in Iraq, Bush has shown incredible conviction and persistence around this decision.  I honestly don't know if it was the right decision or not but by atleast sticking with it, Bush has given himself the best chance to see it through and thus maximize the chances of it being the right one.  Too often we see companies and leaders changing directions every quarter based on the way the wind blows which results in them never seeing anything through.  Sure if you are blind in your persistence you could be wrong and digging a deeper hole every minute.  However to the extent you believe you are going to make more right decisions than wrong, it is worth sticking with them and seeing them through.

Learning #3 - Power is taken not given

In 2000, Bush won by the smallest of margins possible.  Even that could be argued was only achieved through a friendly supreme court.  However Bush did not govern like a man with a muddled mandate.  He acted with the notion that regardless of how it happenned, he is President now and is going to act on that basis.  He pushed a tax cut in early 2000 and then leveraged 9/11 to make two more tax cuts.  He led the country into wars with Afghanistan and Iraq, abandoned international treaties like the Kyoto accord and was comfortable taking unilateral foreign policy decisions.  These gutsy actions reflect someone who might have won the popular vote by 75% rather than someone who actually *lost* the popular vote.  Too often we see folks in companies especially founders vacillate and dilly dally around decisions because they are not sure if they have the ability or authority for the position they are in.  Rather like Bush they should just assume the power and act without doubt.

Posted by Venky Ganesan at 10:03 AM in Current Affairs | Permalink | Comments (0) | TrackBack