Let's Just Embrace the Term "Big Data" and Move On

Over the past few months, every time I've had a conversation in which the phrase "Big Data" is used, the speaker inevitably does the whole air quotes thing and immediately apologizes for using the term. It's easy to understand why. Like "cloud computing" and "service oriented architecture", it's one of those terms that got co-opted by the marketing department and slapped upon anything vaguely related to its original meaning. If you're at all interested in the underlying technology and its potential value, uttering the phrase "Big Data" makes you feel like you're selling snake oil.

But, snake oil, it turns out, was really effective at treating arthritis and bursitis. Big Data technologies won't cure every or even most of an organization's data problems, but they are really good for a lot of legitimate things. And, we really do need an umbrella term that can sum up in two words a whole set of complex concepts, like processing large volumes of data, handling unstructured data, real-time stream-based analytics, focusing on correlation rather than causality, tolerating messy data, new types of data stores and highly-scalable parallel processing techniques.

For a while, I tried to come up with a new label to apply to this bucket of technologies, approaches, and techniques--"Advanced Data Management," "21st Century Analytics," things like that. And, everytime I trotted out one of my neologisms in conversation, I had to immediately back up and explain what I meant, and eventually I would end up saying, "You know, 'Big Data'."

So, let's take the term back from the snake oil salesmen and embrace Big Data. It's a perfectly useful phrase, and it will save us an awful lot of time pausing and apologizing and explaining what we mean.

Disruptive Technology & the Publishing Industry: A Look Backward

These days, you probably have in your home an example of a technological innovation that utterly and violently reshaped the entire business model of the publishing industry. In fact, if you're like most Americans, you probably have more than one of them. They offered publishers much easier and wider distribution of their products, but in exchange they slashed publishers' per-unit revenues by some 90% and reduced authors' earnings to mere pennies. Predictably, it  set industry veterans to wailing and gnashing their teeth, declaring that the business was doomed.

No, I'm not talking about smart phone or Kindles or iPads or even laptop computers. I'm talking about paperback books. The market disruption they caused happened 70 years ago.

Disruptive Technology, 1940s Style

A Paperback Revolution

The American Paperback Revolution began in 1939 when Robert F. DeGraff founded Pocket Books. DeGraff's books were small (4-1/4 by 6-1/2 inches), printed on cheap paper, and bound in semi-stiff covers. They sold for twenty-five cents. In order to expand their market, Pocket sold the books not only through bookstores but also in drugstores, newsstands, and railroad stations. Two other companies quickly followed Pocket's lead. Penguin Books, which had been operating in England since 1935, opened a U.S. branch in 1939. Two years later, magazine publisher Joseph Meyers began Avon Pocket-sized Books. The industry stalled during the Second World War, when paper supplies were strictly rationed, but after the war at least two dozen more firms raced into the market, including New American Library, Bantam, Fawcett, Popular Library, and Dell.

Let's look at some of the parallels between these two disruptive phenomena in the publishing world: what the rise of paperbacks did to traditional hardback book publishing in the middle part of the 20th century and what eBooks and online journalism are doing to the print publishing world today. (For convenience sake, I'll roll eBooks and online journalism/magazines into a single category called "ePublishing")

Lower Costs

Paperbacks: The low cover price of the new paperback format--twenty-five cents for a paperback compared to between two dollars and three dollars for a typical hardback--made books more affordable for the average reader, but they slashed the per-unit revenue for publishers by almost 90%

ePublishing: While traditional publishers are fighting to keep their prices from being slashed a full 90% (which would be pricing an eBook around $2.50 vs. a $25 hardback), they've been knocked down quite a lot—and, there are plenty of $2.99 and even $.99 options out there competing against them. It's even worse for journalism, where ad revenues online are a mere fraction of those of print.

Wider Distribution

Paperbacks: The distribution of paperbacks, which were sold not only in books stores but also in convenient locations such as drugstores and train stations, caused books to be more widely available than ever before

ePublishing: Now, you don't even have to find a retail establishment. You can download a book from your bed, on a train, or while driving down the road in your car, and you can catch up on the latest news and read your favorite long-form journalism anytime, anywhere, too.

Wailing, Lamentation, Gnashing of Teeth

Paperbacks: Publishers declared it was the end of an era and they were all going broke. Authors echoed the sentiment and, except for a early adopters who embraced the new genre, most "serious authors" rejected paperbacks as both cheapening and an assault on their income.

ePublishing: Ditto.

And the Sky Did Not Fall

Paperbacks: The book publishing industry got along just fine once they factored the economics and distribution requirements of paperback publishing into their business models. Authors learned to how to value and sell their paperback rights, and they became a major chip in their contract negotiations with publishers.

ePublishing: We will see. But it seems likely that the sky will not fall, either.

A Boon to Authors

Raymond Chandler
Grumpy about Paperbacks (at first)

In the end, what appeared at first to be a major threat to authors' livelihood turned out to be an economic boon. We'll use Raymond Chandler, the acclaimed Los Angeles detective novelist and creator of private eye Philip Marlowe, as an example.

At the start of the Paperback Revolution, authors had few options for making money from their books beyond traditional hardback royalties, for the sale of subsidiary rights was not a major factor.

Before paperbacks, the reprint market was limited to a few firms like Grosset & Dunlap, who produced cheap hardback reprints in small print runs--and paid even smaller royalties. In 1940, Raymond Chandler made a whopping $200 from Grosset & Dunlap's $1 reprint edition of The Big Sleep, his first novel, which they produced from the same printing plates used by Knopf, the original publishers. 

The movies industry was in its heyday, and authors could sell the movie rights to their books, but the returns were small tiny compared to the prices bestsellers fetch today. In 1941 and 1942, Chandler sold the screen rights for his second novel, Farewell, My Lovely to RKO Pictures, and those for his third, The High Window, to Twentieth Century-Fox. His combined take from the both was $2,750--a nice bonus, for sure, in 1942 dollars, but not enough to be the foundation for a career.

Enter the new cheap, widely-distributed paperbacks editions. They increased authors' potential audience and allowed them to keep their books in print long after they ceased to be available in hardcover. These developments rewrote the terms of professional authorship in the United States, giving previously-struggling novelists a new means of earning income from the new works and, equally or even more important, from their back catalog of things they had finished work on years before.

The paperback industry had gotten started in the late 1930s, but it was largely put on hold by World War II paper shortages. Still, by the beginning of 1945 nearly 750,000 copies of The Big Sleep and Farewell, My Lovely, Chandler's first two novels to be reprinted in paperback, had been sold. Four years later, over three million copies of Chandler's works had been published. Despite the penny per copy royalty, with large sales the returns on the reprints were becoming significant.

 Chandler had suspended writing novels to pursue income writing screenplays for the studios in Hollywood, a business that paid well but he thoroughly detested. In 1947, he wrote to his agent, "I am a damn fool not to be writing novels. I'm still getting $15,000 a year out of those I did write. If I turned out a really good one in the near future, I'd probably get a lot out of it."

Chandler could not live on the reprint royalties alone, but they provided a significant portion of his income and helped accelerate his return to novel-writing as a full-time profession in the 1950s.

Electronic publishing likely stands to be a boon for both authors and publishers, too, once they figure out how to navigate the new electronic landscape. We'll look at the way some of them are doing just that in an upcoming post.

It's a good reminder of how disruptive technologies often play out in an industry. At first, it seems like the sky is falling, and not every established player adapts their business models correctly to survive the change. Those that are able to adapt, however, often come out on the other side stronger than they were going in.

More Private Exchange Market Consolidation

On Friday, Towers Watson announced that it is acquiring Liazon Corporation in order to further strengthen its position in the defined contribution private exchange market.

In addition to Liazon's technology platform, this gives Towers access to the over 400 brokers that Liazon had cultivated in its network. Perhaps most importantly, Towers now has a footprint in the mid-size employer market, which is where Liazon has played, in addition to its OneExchange solution, which has been focused more on Fortune 1000 customers.

From the big picture perspective, it's a sign of the further consolidation in the once new and fragmented market, and a sign that in the future there will probably be a handful of players in any one insurance market when it comes to private exchanges: health insurance carriers with their single-carrier exchanges and a handful of larger consultants/brokerages with their multi-carrier exchange offerings.

Uh, Oh. Here Comes the Cavalry

By now, every one from the press to Obamacare's critics to the Obama Administration themselves have come to the same conclusion: that the issues with healthcare.gov are not just a few glitches that can be resolved in a few weeks but rather large-scale, fundamental system design problems that are going to take an awful lot of work to fix.

Today comes an announcement from Kathleen Sebelius that they are sending in the cavalry: a "technology surge" that includes a management expert to provide executive-level guidance for the massive project and "additional experts and specialists" that include "veterans of top Silicon Valley companies" to diagnose the issues and help fix them.

Rather than filling me with confidence and making me think "Great, now things are finally going to get done," this announcement left me saying, "uh oh." For, boy, have I ever been there.

It's a natural response to a technology crisis: throw everything you've got at it, bring in strong leadership, and get in as many experts as you can to iron things out. The problem is, they're not, metaphorically speaking, taking a defective car back to the shop to inspect, overhaul, and fix it; instead, they're trying to diagnose what's wrong with the car as it careens down a freeway and repair it without taking the foot off the gas.

When you bring in the proverbial army of experts, the first thing they need to do is get up to speed on the whole project and the whole complex system. They don't have the context, the history, the background into why whatever decisions were made ended up being made the way they were. At best, trying to bring the new experts up to speed just distracts the efforts of the team that's already in the weeds and trying their best to fix the issue. At worst, it throws a whole bunch more cooks--and pushy, confident ones at that--into a kitchen that's already way too crowded.

Any bright software engineer can take a look at the work of another engineer--especially one who is perhaps not as talented--and identify a zillion problems in the technical design and in the code and a zillion things that could be changed to "make it better." (The classic "not invented here" bias.) But, how many of those changes would actually improve the overall system performance versus making just slight improvements that are insignificant in the grand scheme of things?

It takes a very rare engineer indeed to be able to look past all the warts and knots and be able to find the small handful of changes that can bring stability and improved performance to a very troubled system. And, if you quickly determine--as I'm sure many of the experts will--that the whole system was architected wronged, well, how do you fix that, without going back to the starting line and rebuilding the whole thing?

My hope is that all these specialists and experts are truly cream of the crop and that they have the exceptionally rare capability to bring perspective and balance to the fire-fighting operation. My hope is that they can support, mentor, and guide the many teams of engineers as they frantically try to right the ship instead of just second-guessing and distracting them and sending everyone running off in all sorts of new, chaotic directions.

My experience, unfortunately, suggests its far more likely to be the latter and, if so, healthcare.gov is in for a very long, bumpy ride.

IPOs Let Companies Raise Capital: Myth?

"Tweet, tweet. I need capital!"

Over at Slate, Matthew Ygelsias calls out four interesting points from Twitter's S1 filing, and all of them are good ones. His fourth point, though, did make me pause: "IPO's aren't about raising capital."

In a sense, he's absolutely right. Almost all tech IPOs--and Twitter is certainly no exception--are not undertaken because the companies need to raise capital to fund the business. Indeed, they are exit vehicles for the original investors--generally venture capitalists--to get their money out of the business (along with, in most cases, a handsome profit.)

IPOs like Twitter, Yglesias argues, puts the lie to the old myth that the purpose of the stock market is to let firms raise capital. But, I don't quite buy that. The stock market is doing exactly that for tech firms, only in an indirect way.

No one could create a start up in his or her garage, hire a few people and make a splashy demo, and then file an S1 and go public. No one would buy the stock. Instead, early investors are willing to take a risk and invest multiple millions of dollars in the company because there stock market is out there as one potential "exit strategy" so they can have a "liquidity event", as the jargon goes.

An IPO is not the only way for investors to cash in--they could always sell to another larger company, for instance, which frequently happens. But, without the prospect of a potential IPO out in the future, it would be far, far harder for tech entrepreneurs to raise the money they needed to get their big idea off the ground. So, to my mind, at least, it seem the stock market is doing exactly what it has long been rumored to do: letting firms raise capital.

Private Exchange Momentum Increasing . . . But Let's Not Panic

As might have been expected as we approach the open enrollment season, there's been a flurry of news over the past week about the latest big-name companies to shift away from traditional company-sponsored health benefits and send their employees out to an Exchange.

Last Friday, the Trader Joe's grocery chain announced that it was ending health benefits for part-time workers and instead sending them to the public exchanges with a $500 stipend. On Wednesday, Walgreens announced that it was moving 120,000 employees to Aon Hewitt's private exchange. In doing so, it joins IBM and Sears in exploring the private exchange approach, and we can reasonably expect similar announcements to follow from other firms in upcoming weeks.

In a curious side-effect to the news, the stock for both Catamaran, who provides PBM services to Walgreens, and Express Scripts, a peer PBM competitor, plunged 8% and almost 5%, respectively. Investors are worried, apparently, that the move to a defined contribution and exchange-purchase model (whether via public or private exchanges) will be harmful to PBM revenue.

I personally can't see how this makes a difference. Regardless of how members acquire their insurance, they will still need a PBM to manage all the pharmacy benefits.

But, the larger issue is this: the immediate reaction is to see a change in the benefits-funding and sales model to be disruptive to the entire spectrum of insurance operations. This goes hand in glove with what I typically see among payers and other healthcare-related companies when they contemplate the notion of "private exchanges." They tend to blow it up to be a much larger and more mysterious beast than it needs to be.

"Private exchanges" are really nothing new. They're just a different type of sales channel, and payers should look at them that way. From a sales and marketing perspective, they will create huge new challenges for how to reach new prospects and, in particular, ensure that payers can win the loyalty of consumers shopping side-by-side with the their competitors.

But, from an operational perspective, once that member has decided to get coverage from that payer, everything else--the enrollment, new member fulfillment, invoicing and payment, member service--should just flow through the existing operational processes.

The more we are able to see that public and private exchanges are just new sales and marketing channels and not entirely different insurance markets the more effective--and less panicked--we can incorporate them into existing technology and operational processes.

And Suddenly There Were Three . . .

This article from Michael Endler at Information Week on Apple's move to make iWork free on iOS devices got me thinking, and my conclusion is that, suddenly and out of the blue, we might have a new office productivity application battle on our hands.

Years ago Microsoft Office crushed alternatives like Lotus and WordPerfect as the ubiquitous office application suite. Now, suddenly, we've got Google with its Drive (nee Docs) and Apple with iWorks stepping up to potentially give the old gray mare a run for it's money.

My data points are more anecdotal and observational than empirical at this point. Here are just two:

• I'm seeing more and more small businesses--design firms, publications, even health insurance co-ops--using Google Docs to share and collaborate.
• Every time I visit a corporate setting, more an more people are showing up in meetings with iPads, many complete with keyboards to serve as a full mobile computer. In fact, one client I am currently working with recently did away with laptops and issued company-owned iPads (with aftermarket keyboards and cases) to anyone needing mobile computing. And, everyone said that it took a few days of a learning curve but they have no desire to go back to their old slow, clunky (Windows OS) laptops.

I've not done much personally with the iWorks apart from using the Keynote presentation suite (which is pretty slick), but I've consistently been impressed with the progress that Google Docs/Drive has made with each passing year. And the sticker price (free) is a pretty compelling proposition.

So, I wouldn't be surprised if we see a new war for enterprise market share crank up over the course of the next year or two as desktop PCs go the way of the buffalo and we all start shaking out what the productivity devices and productivity software suites look like.