Zenefits, Uber and Facebook: Who Loses When Innovation & Regulation Collide?

ZenefitsUberFacebook or These companies have dominated tech headlines in the past few days for the issues they are dealing with regarding policy and regulation. In the case of Uber it's been the case pretty much since inception. Some of the coverage positions the regulators as the bad guys stifling innovation: 'Damn those luddites!'. Some paint the technology companies as the villains; 'Travis Kalanick is the evil baron of our time!'. In the case of Zenefits it does seem like there was a lot of negligence and disregard for regulation.

The more thoughtful commentary cuts to the fundamental issue here and that is the conflict between the purpose of government and the purpose of business. The most crucial determinant of a system's behavior (the government or the business in this case) is the system's purpose. I talk more about this in my ebook which is currently free on Amazon. Fundamentally, both sides of regulation (government) and technology (business) pursue their own separate goals. There will always be friction between what was (and how regulation dealt with that) and what is about to be (and the inadequacy of old regulations to deal with this). That will never not be the case. Another example is the inadequacy of utility industry regulation in dealing with consumer energy data in a time when every device captures and stores data.

In all these cases what needs to happen is a shift from the ‘all regulations are constraining’ trope towards helping create enabling regulations. What gets missed in the conversation is the nature of regulation; some are enabling and help to bring the innovation or benefit to life while some are constraining by putting bounds around how much can be impacted as a result of the innovation or technology. The goal is to help inform more enabling regulations, with emphasis on the word inform not influence, and also foster an acceptance that some constraining regulations are actually for our own good! The simplest examples of constraining regulations that have been hugely beneficial that I can think of is traffic control through lane demarcations. Imagine a world where there were no lane markers on the roads because car manufacturers felt it would limit how much driving people could do...

Enabling regulation comes about by utilizing a framework where regulators

  • look at the macro system,
  • make projections about where things are going at the subsystem level (and this is where the technologists or innovators can help)
  • Engage with the citizens they are trying to serve
  • futurecast about what technology wants

and factor in all this information to create policies that enable the government achieve its ultimate aim of creating a thriving citizenry that benefits from the  innovative/new technology that the other side of this conversation is selling.

It starts from working towards the same goal or shared purpose. A greater goal When goals are at odds (as is the case in the 3 examples above) the only real losers are the consumers; they miss out on the benefits the technology can provide while the regulators and businesses are distracted. During these regulation battles the businesses keep figuring out ways to run outside of the regulations (a systems trap called 'Rule Beating') to continue growing while the regulators keep regulating.

A shared goal that will yield benefits for all the subsystems involved, especially the most important element ; you and I.

One can always dream...

Why LinkedIn Needs To Pull A Netflix (And Why Amazon Is Doing So).

Netflix has been a darling of the stock market with a market cap that has grown to ~$40Bn over the last 5yrs (image below). The company did this by disrupting the movie rental industry (biggest victim being Blockbuster Movies along a few thousand mom and pop movie rental stores) with its watch and return all you can/pay a flat fee business model. 


Netflix stepped up its game (and better served existing customers with improved technology in the form of algorithmic filtering/selection and the move to streaming. This was great for us but was just a sustaining innovation. Not much happened to the stock price but these innovations, which weren't internally developed but were as a result of overall technological improvements, kept Netflix at the top of the game capturing more and more customers.

And then along came ‘House of Cards’ and the era of data driven original content. Using data/intent and interest algorithms, Netflix green-lighted a series that a lot of people actually doubted would succeed. Competitors missed the shift that was happening because the competition (Netflix) did not look like whom they'd competed with all along. "There's no formula...there's no textbook on the shelf that you pull down and say, 'How do you run an Internet movie distribution company?' We're writing that textbook."Even when Steve Swasey (Netflix VP of Communication) said this  in 2012 talking about the show competitors missed Netflix's bigger ambition to be a full production and distribution house.

Binge watching sessions, Emmy wins by several original shows created using this mix of data/intent/interest (by Netflix and Amazon) and, most recently, the movie rights bidding wars at the last Sundance festival (with the movie writers as benefits) finally signaled to movie houses and the TV/movie establishment that they’d been disrupted by Netflix. Similar to how Blockbuster (and even Redbox) did not know what hit them...

Which brings me to LinkedIn.

LinkedIn came into the market as the network of people; people get jobs through the people they know riding on the wave of social networks and greater internet access (technology not created by LinkedIn but key to its success). People could brand themselves and very soon companies could as well.

LinkedIn knocked companies like Monster out of the game; Monster’s stock price crater coincides with Linkedin’s IPO and it currently has a market cap that is 1.8% of LinkedIn's market cap. Since then Linkedin has added more engaging content through the acquisition of Pulse (where you are reading this now) & Slideshare, mobile apps for recruitment and career training (through the acquisition of Lynda). But these are all sustaining innovations.

LinkedIn needs to disrupt another industry and I believe it should pull a Netflix and get into publishing original career development booksEspecially as we all wonder about the future of work and our roles in the New Economy (if the robots don’t take over). Think about it; LinkedIn has data on the job vacancies, talent pool and their interests/skills gaps and a huge market opportunity. Data, interest, intent and predictive capability. Despite the wrong declarations on the death of books, the global book publishing industry will grow to $128.3Bn in 2019 from $120Bn in 2014. The ability to target career needs using advanced analytics and provide the books/content to bridge the skills gap will enable entrants  to capture market share from (and dare I say disrupt) the incumbents.

It’s a great opportunity for Linkedin to utilize its strength and get into adjacent markets where innovation is lacking and much required.

I’ve read 4 books this year, all based on personal recommendations and I even walked into a store to buy one. Like a lot of people, I will always buy more books than I can possibly read and recommending books that meet me at my point of need will always make me open my wallet. Why else do you think Amazon is opening over 300 stores? Because Amazon knows the market is huge, technology is ripe and it's time to disrupt the book publishing industry.

One Wearable To Rule Them All...

My Amazon search for 'Wearable Tech' turned up ~7000 distinct pieces of wearable device from brands as varied as the use cases they all try to serve. There are wearables to measure your well being, mental state and every single thing you do or can imagine doing. There are wearables to measure your pet's activities and well being. For a phrase that did not show up until a few years ago (see google trend graph below) it has definitely become a huge market.

Are we heading for a time when we'll have 15 devices on us to measure everything? Hopefully not. I, like you, want some of the functionality and benefits that these devices provide but how about I get them all in one wearable?

So here's a business opportunity for an interested entrepreneur. I present 'The One Wearable To Rule Them All'; the iFitBone.

  • You wake up from a fantastic night of sleep because your iFitBone, which understands your circadian rhythm and is in tune with your body clock, also controls your home thermostat. This ensured that as your body temperature dropped with the your stage of sleep your home adjusted to keep you as warm or as cool as required.
  • Your iFitBone wakes you up from said fantastic sleep in time to enable you get ready for the meetings you have on the day. You get dressed (or are assisted) and head out of the house which automatically enables the map functionality in your (self driving) car.
  • You stop off at the gym on your way and iFitBone, already synced to your gym system and exercise history, suggests the perfect routine. You do just the right amount of reps and laps based on the health records that (no surprises) have already been provided to iFitBone.
  • You drove by your Starbucks your pumpkin spice latte is already at the counter. It's a short drive from there to your office building and it already knows where your meetings are directing you to the nearest available parking spot as your car pulls up.
  • As the day winds down your iFitBone confirms your ticket for the immersive museum experience you'd signed up for a few months prior and you'd forgotten. Your car drives up as you settle in for a great night...

You get the point. All this technology is here and continues to improve. Some folk even want it embedded under their skin. Not me though, I'm too squeamish for that.

I do want one and only one wearable. Someone should get working on that...

In technology, things change but things stay the same

In 1971, 44 years ago, Intel introduced the first 'computer on a chip'.

In 1981, 34 Years ago, the operating system DOS 1.0 was fired up.

In 1991, 24 years ago, the world wide web was opened up to the general public. Amazon was launched 3 years later.

In 1997, 18 years ago, IBM released Deep Blue (which beat Gary Kasparov in chess) which had the 32-bit copper chip that also powered the Sojourner Rover/Pathfinder mission to Mars. Also in 1997/1998 Google (essentially the gateway to the world wide web that was publicly released 5 years prior) was born.

In 2007, 8 years ago, Apple released the iPhone

One looks at this timeline and three things pop into mind pretty quickly. 3 things that give us a sense for where technology or (more precisely) technology companies are going.

  1. Every one of these major technology releases was the beginning of a 'platform' business. One or a few companies were the 'platform' providers of that technology. These platform providers are still some of the biggest companies in the world right now.
  2. Each release of a technology led to an ecosystem of businesses built around that platform. Many of the best companies around the platform also became huge businesses.
  3. The platform defining technologies have benefited greatly from Moore's Law which explains the exponential accelerating rate of the reducing cost and increasing capacity of computing power over the last 5 decades.

We are getting closer to 5th decade of  said Moore's Law (even though some thinkMoore's Law is stalling/no longer applies) i.e. computing power will exponentially increase and get cheaper over the next few years. Even cheaper than it currently is. This is why we are hearing more about Artificial Intelligence (AI), Machine Learning (ML), Virtual Reality (VR), The Internet of Things etc. all technological advancements that are benefitting fundamentally from exponential reductions in processing power at cheaper costs.

Apple (with cars), Google (with cars/robots and AI), Facebook (with AI and VR) and Amazon (with Alexa and Voice Control) are all banking on the increased predicted capacity and have all picked a platform to 'own'. Of course IBM (with Watson), Microsoft (with Hololens) and Intel (with Skylake, their new processor) are also banking on becoming the next platform business.

What's odd about that list up there (save Facebook) is that it's the same companies in that timeline I've drawn above.

And it is truly odd that as things change (at the platform level), things seem to stay the same in the technology industry...Not sure how I feel about this... what do you think?