Insights For Success

Strategy, Innovation, Leadership and Security

business model

9 most important questions to determine if a project is worthwhile

GeneralEdward Kiledjian

George H Heilmeier was a DARPA director and developed 9 questions to help the agency determine the worthiness of project being submitted to it for funding. These 9 powerful questions as referred to as the "Heilmeier Catechism" and have become a core operating paradigm for DARPA [Defense Advance Research Projects Activity] And IARPA [Intelligence Advance Research Project Activity].

These questions are so powerful, they are used in the business world day in and day out. I first learned about these questions while having lunch with a VC in San Francisco. He explained that many of his peers also use these questions when determining the funding worthiness of a proposal.

There have been variations to the questions but I recommended sticking with the original 9:

  1. What are you trying to do? Articulate your objectives using absolutely no jargon.  What is the problem?  Why is it hard?
  2. How is it done today, and what are the limits of current practice?
  3. What's new in your approach and why do you think it will be successful?
  4. Who cares?
  5. If you're successful, what difference will it make?   What impact will success have?  How will it be measured?
  6. What are the risks and the payoffs?
  7. How much will it cost?
  8. How long will it take?
  9. What are the midterm and final "exams" to check for success?  How will progress be measured?

This is a variation on the journalists who, what, where, when, why and how strategy. Obviously answering these questions will not change the world or guarantee the success of a project. They will greatly reduce the risks you take by ensuring the key concepts are thought off and understood

Major shift in loyalty incentives needed for programs to survive

GeneralEdward Kiledjian

Users have a love or hate relationship with loyalty programs. You either love them, because they deliver amazing value, or hate them because you think they’re a worthless scam.

A 2014 McKinsey report showed that companies with loyalty programs (55 publicly traded North American & European companies were surveyed) had the same or less growth than those that had no loyalty programs : 4.4 vs 5.5% per year since 2012. Companies with strong visible loyalty programs seemed to also have EDITDA margins 10% less than companies without loyalty programs in the same sector.

On the flip side, companies with strong and vibrant loyalty programs seemed to have better market capitalization. In fact over a 5 year period, companies with loyalty programs outpaced those without. This may stem from the hope that these loyalty programs will help those organizations drive long-term growth.

The future of loyalty is upon us

No the future of loyalty points isn’t bitcoin, but rather the technology that allows bitcoin to work: the blockchain.

The easiest way to think about these 2 parts is that the blockchain is the operating system and bitcoin is simply one application running on that operating system.

What is the blockchain?

The blockchain is a public ledger that records every legitimate transaction permanently. Once recorded, the record cannot be altered, deleted or changed. Blockchain uses a distributed consensus model, which means no one person, government, group or organization can force changes onto it.

The blockchain is what allows complete strangers who have never met and will probably never meet to conduct a trust-based exchange completely transparently without having to trust each other and without having to go through a central trusted third party (government, bank, notary, lawyer, etc.)

The other characteristic of the blockchain is that it can enable trust-based transaction while maintaining total privacy and anonymity. It can but it doesn’t have to. It all comes down to how it is used.

The blockchain is moving beyond Bitcoin

Until recently, no conversation about the blockchain was possible without talking about bitcoin. People often confused one for the other, but this is changing. Large financial companies are evaluating use of the blockchain to simplify cross-border transactions while improving trust and reducing costs.

If someone is able to marry absolute verified identity to blockchain technology then we could even see very old school lawyer based (expensive) processes move to this medium and become much cheaper and digitally fast (think of marriage, voting, buying/selling of property, etc.).

I believe that in the next 5-10 years the blockchain will become the holder of digital truth, it will completely change many traditional business processes and will provide a level of digital truth that is unmatched even in the real world.

What does bitccoin have to do with loyalty?

Gift cards moving to blockchain because of fraud

The National Retail Foundation says that gift cards have been the number one requested gift for 8 years in a row. CEB TowerGroup say 125 billion dollars have been loaded onto gift cards in 2014.

Like all items of great value, there are bad people out to steal and the industry is constantly challenged with fraud. Until the recipient uses the card, anyone in the chain can steal money from it by copying the unique identification number (processor, distributor, retailer, giver).

How bad is fraud? the National Retail Foundation says 78% of retailers have been victims of gift card fraud.

Benefits of the blockchain for gift cards

Using blockchain technology could eliminate gift card fraud or theft. Each transaction is given a unique identifier, which means someone can’t use the incoming gift card identifier to spend the money. It also means the receiver can verify that the transaction is authentic and that no one else has used the received gift card, since everything is recorded in the blockchain. Once the blockchain powered gift card is stored in a digital wallet, the only person that can spend it is the true owner of the wallet since all transactions are protected by an owner-known private key. The blockchain would prevent “double spending” of a card so a fraudulent bad actor can’t sell a used gift card to an unsuspecting victim.

What’s the motivator for brands and companies

In addition to helping curb fraud, it is also much cheaper to perform a blockchain based transaction (typically about 1 penny). This includes the full life cycle of a transaction from issues, transfer to use. Compare this to most modern plastic card-based systems that cost about $1.50 per transaction.

Blockchain gift cards and the user experience

The technology may be advanced and the protection fantastic but the experience can be simple. Companies have started using bitcoin and blockchain in the back end to improve security while being completely transparent to the end users. The user receives a card and uses it as normal.

Back to Loyalty Programs

If I have airline miles, but would rather trade them for coffee loyalty points, I have to go through one of the traditional trading platforms. These platforms have preset transfer amounts and take a huge cut of the transaction.

In a world where loyalty points are digitally held in a blockchain backed system, I see the rise of highly competitive, open and transparent marketplaces where customers could trade or sell these loyalty points using an open market (supply and demand) system.

The traditional loyalty points systems will be converted to merchant issued currencies. Instead of issuing Aeroplan miles for every mile flown, Air Canada could issue Air Canada cryptocurrency that a traveller could then use to buy upgrades, tickets, amenities, on board goodies, etc. Once we move to this model, these different branded cryptocurrencies could be traded like any other currency. I could trade Tim Hortons cryptocurrency for Air Canada cryptocurrency at a fair market rate.

Trading the branded cryptocurrencies

Trading various branded cryptocurrencies in a fair, open and transparent market means everyone will see the real time value of the branded cryptocurrencies they hold.

It could be used as a market measurement of trust in a company. If the market believes that XYZ airline may go under, then its branded cryptocurrency may be severely discounted, whereas a trusted brand’s cryptocurrency may be much more expensive and used as the “gold standard” for value measurement.

Instead of wasting money on expensive consultants to conduct brand valuation, companies could look at the fair market trading value of their cryptocurrency. The company can then use this as a means of measuring its marketing or PR investments.

How it benefits the customer

Branded cryptocurrencies become a fraud-resistant, immediately tradable commodity. This means I can sell the thing I don’t want and get more of what I want immediately.

In the traditional loyalty model, I conduct a transaction with a merchant (e.g. Fly on Air Canada) but only receive my loyalty rewards in the future (could be days, weeks or months later). In the branded cryptocurrency world, I would receive my “points” immediately when I check into my flight at the gate and can then use this currency to buy goodies on the flight. If I stay in a hotel, I could use their cryptocurrency immediately in the hotel restaurant. This means customers are incentivized to use points faster then and there. It’s better for the customer. It’s better for the merchant. It’s better for the brand.

Financial benefits to companies issuing branded cryptocurrrencies

When a loyalty point is issued, it becomes a liability on the books for that company. Some new entrants are claiming that branded cryptocurrency may change this.

The founders of Ribbit.me claim that if a company issues branded cryptocurrency on the blockchain using an algorithm, it creates an asset for the receiver without a countervailing liability for the issuer because the liability lies with the blockchain itself. If this turns out to be true (and only time will tell if governments will approve this), then companies will be able to take millions of dollars of liabilities off their books.

Conclusion

I believe the market will force companies to adopt this new model, and it will be a significant shift for many.

Ultimately it will democratize the world of loyalty programs and be better for every participant involved.

  • It will improve trust
  • Completely get rid of fraud
  • Drive down transaction costs
  • Force companies to be responsive
  • Create a fair trading open and transparent marketplace that would allow customers to have more of what they want and divest from things they don’t

Pushbullet takes customers hostage

GeneralEdward Kiledjian
Image by PSParro used under Creative Commons License

Image by PSParro used under Creative Commons License

Pushbullet is an immensely popular multi-platform (Chrome, Firefox, Windows, Mac, Android, IOS) app that allows you to push content from one device to another one (or multiple other ones). As a free service, it quickly became a de facto app on most power-user devices. Watch any technology podcast and you are sure to hear at least one of the hosts talk about it every now and then. It has over 170,000 installs on the Google Play store. Over 1.4M users on the Chrome browser. So by any account it can be considered a success. Except when it comes to profitability.

As a free app, it didn’t make any money and the developers had to assume the charges for all the development and back-end infrastructure.

Through a blog post on the company’s website this week the developer announced that they would launch a free tier at $5 a month ($40 a year). Most users understand that a non-profitable service won’t be around so they don’t mind paying a small fee to keep them going but never hold your users hostage.

What went wrong?

  1. In order to create the Pro-tier and encourage users to become paying customers, they removed functionality from the free product.

  2. They made the announcement November 17, 2015 and the new tier became effective December 1, 2015. They gave their users 2 weeks to decide on what to do.

  3. They chose to charge $5 a month for their service which seems to be more than their customer base is prepared to pay.

Typically Reddit is a good barometer of a company’s biggest supporters / detractors. In this case reading [this] Reddit thread about the changes is enlightening and disquieting for Pushbullet.

The Overcast model

Overcast is my favourite IOS (iPhone and iPad) podcatcher. I bought version 1 as soon as it was released because everything the developer (Marco Arment) releases is fantastic. Overcast v1 was a fantastic app that offered a great feature set (especially at the pro level). In v2, Marco changed Overcast to a patronage model. This means the app is free with its full feature set for everyone, but the developer asks fans to please support him with any amount they feel comfortable with. Why did he do this? Because the 80% of his customers not paying for the pro version ended up with an inferior product.

The LastPass model

LastPass was my preferred password manager until they got acquired by LogMeIn. Their pricing model was to offer customers free access the product on one platform (desktop or smartphone) and then offer a premium tier with unlimited device support and additional functionality. Their base product is solid, secure and extremely competitive as a product. Their premium add-ons like unlimited device support and 2-factor authentication are nice incentives to entice customers to upgrade. Additionally they price the upgrade to $1 per month which makes the upgrade a no brainer for most.

Conclusion

I believe that the Pushbullet approach was ill-advised and crafted by inferior executives that don’t understand the market they are competing in. Even if Pushbullet were to reverse course, there will be “bad faith” held against them for a while. If they maintain their pricing model, they may end up losing too many customers and going under.

The lesson is to know your market and figure out the pricing strategy at the start of your business. Too many internet startups concentrate on “the good idea” and then end up folding or getting sold for pennies on the dollar.

Microsoft Office kills productivity (part 1)

BusinessEdward Kiledjian

The future of productivity

In addition to my day job (as the CISO of a large multinational manufacturer), I do a tone of pro-bono work with startups. My goal is to share my knowledge and expertise and hopefully help these crazy entrepreneurs start something that becomes massively successful.

Even though many of these startups are on the cutting edge of technology, most still rely on old productivity paradigms that have plagued us for the last 30 years.


Microsoft Office kills productivity

Reflect on your current productivity workflow. Take the time to list the tools you use most 

  • Write down why you use it
  • Write down what you expect that tool to deliver
  • Write down how that tool falls short of being the perfect tool
You'll very quickly realize that the tools you though were perfect may not actually be fit for purpose. 

One example I love sharing with people is the fact that Microsoft Office launched in 1983. Office was created during a very different time when users where transitioning from paper to computers. In order to make the transition as painless as possible, the Microsoft Office interface was designed in a very specific way to feel comfortable and familiar. 

When you open Microsoft Word, you are greeted with a "paper imitating" interface. As we think about Microsoft Office and the reason it is designed the way it is, I want you to think about your current workflow. How often do you print documents these days (on paper)? Most of our information is prepared, stored and transmitted digitally. So why then are you working with a tool that forces you to think about elements that may no longer be relevant like:

  • margins
  • line spacing
  • etc

Most modern companies prize efficiency and these antiquated elements are irrelevant and thinking about them is a waste of time. 

Another product I want to pick on (and pick on really bad) is Microsoft Powerpoint. The entire Microsoft Powerpoint paradigm is based on the concept of slides. Most employees in the workforce today haven't worked with physical slides or transparencies. So why then are we using "productivity" tools that perpetuate this antiquated presentation model? 

In order to become truly productive, we need to give up on these antiquated concepts of efficiency that are actually holding us back and making us less productive.

Anytime you are faced with choosing a tool, you need to take a step back and remember that the only important concept in modern productivity is powering the free-flow of ideas and sharing of those ideas. Anything else that slows down this simple 2 step model should be shunned. 

Most of us are knowledge workers and we are paid to come up with great ideas not do the work of a graphic artist and waste time on layouts (which we do badly anyway).

How are you going to get your work done in the most effective and efficient way?

Part 2 coming shortly...

Do honesty and integrity have place in today's workplace?

BusinessEdward Kiledjian
Image by Marilyn Peddle used under creative commons license

Image by Marilyn Peddle used under creative commons license

Spend enough time working with board level executives and the question you will see the most often is "what defines a leader?" What are the qualities organizations should look for when choosing a leader or develop in their rising stars?

The simple answer is that a leader must:

  1. Be a visionary
  2. Have integrity, honesty and values in line with the company
  3. Have the ability to motivate employees even when times are though
  4. Be a change agent (and create a culture where constant change is rewarded)

Trust is job one

A leader must quickly and without any doubt be trusted by his/her people. Employees must truly believe that the leader is acting in the best interest of the company, of the team and of its members. 

Trust can only happen in an environment of integrity, honesty and shared values.

In values we trust

Anytime you take over a new team, you should quickly have a discussion with your team about your values. These are your personal values not some mumbo jumbo you read on the internet. Once you share your values, you need to act consistently using them. This act of being congruent with your declared values is the start of integrity and honesty.

It is by understanding your personal values that your employees will understand how you make decisions and why. It is also how your employees can themselves make decisions congruent with your directions and plans. 

It is easy for me to write about values but I have found it is another things for leaders to truly determine their actual values. It takes a lot of honest introspection. The main question is "what is most important to you about..." using this approach will help you to uncover your values. As yourself:

  1. What is most important to you about work ethics
  2. What is most important to you about employees
  3. What is most important to you about success
  4. etc

Think in terms of Key Goal Indicators. What is the desired outcome for each of these values and how do you measure them using SMART. For those hidden under a rock for the last 20 years, SMART is an acronym for:

  • Specific
  • Measurable
  • Achievable
  • Realistic
  • Time-bound

Don't just tell  your team, colleagues or boss that one of your values is team work. Explain what team work really means and how you will verify it. It could mean that you want people to non play "politics", not gossip, be inclusive of all team members, be honest, not backstab, etc.

The other aspect of the values discussion is explaining how it will impact the organization. How will your value of honesty impact the organization? If you are a manufacturing manager, maybe it means providing accurate production information to supply chain and finance so their predictions are more accurate thus leading to lower costs and better organizational decisions.

You should also explain how your values will be used to make decisions. If your employees know how you will react to different situations, they can often make the right decision before you even get involved. And when you do get involved, your decision shouldn't surprise anyone. 

You should explain how your values will be used to evaluate your employees. You've  talked about your values. You've explained your values and you've given clear understable examples pertinent in your work setting. Now explain how these values will be used to evaluate your employees at performance review time. Here you convey your expectations of the employees and it is a final validation that they understand your values. 

What about honesty and integrity?

I spent a good portion of this article talking about values when it wasn't even in the title of this article. Why? Because it is the criteria against which your integrity and honesty will be evaluated everyday. 

Don't believe me that Integrity, honesty and trust are important? Here's an interesting tidbit:

“Ten years ago, we at DDI released a monograph, The Psychological Contract of Trust, on the
trust levels in the workplace for the 1990s. In the monograph, we reviewed how the psychological contract of trust that had existed for years during the 1950s, 60s, and 70s had been decimated by greed, short-term focus, global competition, and, at times, the unethical behavior of leaders; the 1980s brought a rampant “merger mania”; then there was the inflation and subsequent bursting of the Internet-fueled technology bubble over the course of the 1990s and into the new millennium.

As these phenomena unfolded, employee commitment, enthusiasm, and passion declined
precipitously. No longer did employees believe that their current employers represented long-term career options”
— https://www.ddiworld.com/DDIWorld/media/white-papers/trustmonograph_mg_ddi.pdf?ext=.pdf

DDI World defines the relationship between integrity and values as:

“Integrity means adhering to a code of ethics or a set of values, and it is a vital aspect of every personal and professional endeavor. It means matching our actions with our beliefs across a variety of situations ”
— DDI World

There are literally hundreds of surveys available discussing the important of trust, integrity and honesty. Here are some stats to wet your palate:

  • 66% of highly engaged employees have no plans to leave their current employer, versus 12% of disengaged employees have no plans to leave their company
  • According to a survey conducted by the John F. Kennedy School of Government at Harvard University in late 2007, 77% of Americans lack confidence in their leaders
  • According to Warwick Business School in the UK, outsourcing contracts that are managed based on trust rather than on stringent Service Level Agreements and penalties are more likely to lead to Trust Dividends for both parties—as much as 40% of the total value of a contract
  • A 2002 study by Watson Wyatt showed that total return to shareholders in high-trust organizations is almost three times higher than the return in low-trust organizations
  • With regard to trust, Gallup’s research shows that 96% of engaged employees, but only 46% of disengaged employees, trust management. Without getting into a chicken or the egg discussion, clearly trust has an impact on employee engagement which has an impact on their on the job performance

Honesty & Integrity..... and of course values

I cannot overstate how important the content of this article is. The impact of leading with honesty and integrity against clearly defined values is huge to employees, customers and suppliers. It impacts every aspect of your business and will directly impact the long term viability of your company.

Replacing employees that quit because they don't trust you costs 2-3 times the annual salary of an employee. How would a client react if they were convinced you lead with honesty and integrity with everything you did? How likely are they to continue shopping around or nickle and diming you.

Amazon.ca is a good example of a company lead by honesty and integrity. In Canada, their pricing isn't always the most competitive but often times I shop there anyway because I know that if I experience any issues, I will be taken care of quickly and fairly. Trust, a novel concept.