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Intervention by Denise Caruso Read Intervention by Denise Caruso, Executive Director of the Hybrid Vigor Silver Award Winner, 2007 Independent Publisher Book Awards; Best Business Books 2007, Strategy+Business Magazine

archive for June, 2008


by ~ June 18, 2008

Today’s USA Today features two cover stories that are interesting in their own right, but even more telling taken together.

One headline reads, “Report: Feds need better privacy protection for data.” The article states that “the government does not have adequate privacy protections for the personal information it collects, shares and stores as part of the effort to fight terrorism, according to a new report by a U.S. watchdog agency.” This revelation is neither shocking nor newsworthy to anyone familiar with subject matter. But thankfully, the significance of privacy problems are now disturbing to the popular consciousness as well. The article continues:

Committee Chairman Joe Lieberman, I-Conn., says citizens can be left vulnerable to identity theft, stalking, discrimination, unwarranted surveillance or loss of employment if their personal information isn’t properly secured.

The second article discusses how credit card issuers encouraged consumers — particularly in lower income households — to spend with their credit cards and then pay off the debt with equity (which turned out to be “phantom equity”) in their homes. Things have gotten severe. Sen. Robert Menendez is cited in the article saying, “We cannot allow the credit card problem to become the next foreclosure crisis.”

This situation, as stated in the article, “was no accident.” Card issuers have become expert at targeting their prey. They’re also exceptional at managing their own risk, while ignoring others’. The article cites several examples of this behavior; here’s one of them:

When banks extend more credit, younger consumers and the financially inexperienced are more likely to take on debt, a 2002 study by Amar Cheema, of Washington University in St. Louis, and Dilip Soman, of the University of Toronto, found.

Subprime borrowers, many of whom have little experience with credit, tend to use more of their available credit than others do. “Generally, these are consumers who have (greater) need for credit,” says Myra Hart, a senior vice president at Equifax.

During the boom, banks focused on getting more plastic into these borrowers’ hands: New cards issued to subprime consumers rose 137% from 2003 through 2006, Experian data show.

Ironically, companies like Experian helped target consumers in the first place.

In the face of the market upheaval, it’s easy just to throw one’s hands in the air in frustration. Clearly, a great crime has been committed. An entire nation has been robbed. World markets are shaken. But who’s responsible? Nobody. And everybody. The insidious nature of this crime is that we all collaborated to commit it — and without a master plan. Can such collective action crimes be avoided? Or is the commons forever doomed to be the scene of tragedy?

If such outcomes are to be averted, we must first acknowledge to role of the “stage” or “playing field” on which such tragedies play out. Game theorists use games like “prisoners’ dilemma” to demonstrate how the structure of a game largely determines its outcome. By adjusting the rules of the game, researchers can alter participants’ tendency to collaborate or defect. On a societal scale, it’s clear that the playing field in current use promotes an atmosphere of exploitation rather than cooperation.

A lot can be done to improve this situation. As a society, we need to insist on rules that promote stable relationships with cooperative outcomes. As I discussed on the Burton blog, exploitation is a predictable outcome of asymmetrical relations. But so much of mankind’s modern economic and social growth has come at the sacrifice of time-honored ceremonies for instinctual trust and establishing equilibrium in relations. In the context of the mortgage crisis and credit crunch, processes for empathy, reciprocity, signaling, reputation, demonstrations of skill and other natural pathways to trust are decidedly anachronistic. In the absence of such ceremonies, institutions instead rely heavily on your digital information as the basis for trust. And in doing so, as Sen Lieberman put it, make you “vulnerable to identity theft, stalking, discrimination, unwarranted surveillance or loss of employment.”

The issue here is not data protection: that approach attempts only to steady a playing field that is highly flawed. The issue is how to reintroduce pathways to social trust into today’s globalized, diverse, and complex civilization.


by ~ June 18, 2008

If you’ve got some discretionary travel budget (that is, if you’re paid in Euros or Canadian Dollars), you might want to get over to San Diego next week for Burton Group’s Catalyst conference. Among the compelling topics covered at the conference, ‘social trust online” (my term) will be taking center stage — and during prime time for the conference. I’m particularly interested to hear Bob Blakley’s presentation on “A Relationship Layer for the Web.” Here’s the abstract:

In real life, we are introduced, we form relationships, we disclose information in the context of those relationships, and we act.

In the Web 2.0 world, we are introduced, we disclose information, and we act.

The relationships, and the expectations they create and embody, are what keep us safe. The absence of relationships makes us unsafe.

We need a relationship layer for the web. Without it, the Web 2.0 Identity layer will remain a vestigial organ. This talk will describe what relationships look like in real life, how they might be modeled in the online environment, and how they would add value to environments which already have identity built in.

And by the way, for those of you familiar with Bob’s Flickr stream, he’s in fact a keen observer of “real life.” So this should be all the more engaging.

Bob’s presentation is followed by Gail Reynolds of Aetna. I love the title of this presentation: “Who Are You, How Do I Know, And Why Do I Care?” Here’s an abstract of the abstract:

What happens if “your” online presence is your estranged spouse, who wants to introduce your liver-function test as evidence of alcoholism at an upcoming child custody hearing? Or what happens if your daughter’s online presence is really you impersonating her to find out what she’s being treated for? Must each company be an identity provider for its constituents? Will consumer-owned identity trends grow? … The face-to-face storefront paradigm evaporates with millions of widespread constituents, and one erroneous decision could permanently tarnish a corporate reputation.

Eve Maler will then talk about the Vendor Relationship Management (VRM) project, which is something Doc Searls and his crew at the Berkman Center have been working on for quite a while.

On a side note, I won’t be speaking at the conference — for the first time in 8 years! But I will be doing a lot of talking. Catalyst is great for networking. So if you’re in San Diego next week, look me up!


by ~ June 16, 2008

Thanks to a Mumblr blog posting by an Indian management consultant, I recently read the Infosys annual report. Most of the report looks like the average annual report. But tucked in the back, they include what they call an “intangible assets score sheet.” “The score sheet (found on page 135) uses numerical proxies to try to get to the core of the three major categories of intangibles, including:

  1. External structure: They focus exclusively on clients, using metrics such as growth in revenue, numbers of clients and revenue from repeat business.
  2. Internal Structure:  They focus on R&D, technology investment and efficiency. Efficiency is measures through sales and G&A expenses compared against staff and revenue levels
  3. Competencies: They focus on staff levels, age of employees, attrition and value added for different kinds of employees.

This is an amazing start that begins to show make intangibles more tangible to the average analyst. Given the power of intangible information shown in the contest I described in a recent post on XBRL, companies need to learn how to “show” their intangible value to their stakeholders.

Some additional things that I would like to see in this kind of report:

  • External: Metrics around key external relationships with suppliers and partners
  • Internal: Metrics around internal process strength
  • Competencies: Metrics around training expenses and recruiting costs

Infosys is not the first to do this. I will profile others in the future. Do you know of other cases of intangibles reporting to shareholders? Post a comment or send me an email and I will add them to future posts.


by ~ June 12, 2008

Business Performance Management magazine recently published an interesting article by Anand Sanwal, about OpEx as Investment. He describes and advocates an approach to managing what he calls “discretionary operating expenses.” These “expenses” include spending on marketing, sales, IT, operations, R&D and innovation.

He shares statistics from the Corporate Portfolio Management Association (CPMA)  that roughly 25-40% of corporate operating expenses are, as Sanwal calls them, “discretionary.”

After reading the article, I got on the phone with Anand and had a fascinating conversation. His concepts were developed through his work as VP of Corporate Portfolio Management and Strategic Business Analysis at American Express, Continue reading »


by ~ June 9, 2008

Paul Krugman’s opinion piece in the New York Times, “Bits, Bands and Books”  talks about one of the paradox of the intangibles economy: to monetize intangibles, it is often necessary to give away part of your offering.

He quotes Esther Dyson who said in 1994 that the digital content products such as software, books, music, and movies, would eventually be distributed for “free in order to sell services and relationships.” Krugman marvels at how fast this has happened and explains how the Grateful Dead were pioneers of this new business model because they allowed people to tape their performances in the logic that they would make up the difference through sales of “hats, T-shirts and performance tickets.” This business model is slowly being adopted by many authors and performers.

But Krugman rightly asks the question about what this means to traditional content intermediaries like publishers of books or of newspapers like the New York Times. This kind of business has been basically facilitating the movement of content between creators and consumers. Digital media, including the internet, has disintermediated much of the role of these publishers. Or has it? What is the true function of a publisher in today’s world? Or, put another way, what is their knowledge capital and how could they change the business model and get paid another way? Continue reading »


by ~ June 6, 2008

The debate over propriety in the blogosphere got just a bit nastier recently in reaction to an article in The New York Times Magazine by Emily Gould. In the article, Emily recounts the experiences that led to both fame and infamy during her stint with Gawker. The piece apparently galvanized a nation. As Simon Dumenco puts it:

A May 25 New York Times Magazine cover story about the hazards of oversharing titled “Blog-Post Confidential” by former Gawker blogger (circa 2006 to 2007) Emily Gould, inspires such vitriol that the Times shuts down the comments function on the online version of her piece after accruing hundreds of frequently vicious comments.

The thing about blogging is that it’s always fun until someone looses an eye… or their identity.

In reflecting on Gould’s and her own experiences, Melissa Lafsky muses whether blogging about your life unavoidably ruins your life-an astute restatement of the observer’s paradox for the Internet age.

One of the best treatments of this topic in publication today is Daniel Solove’s book, “The Future of Reputation.” It’s available online free of charge, so I encourage anyone with even passing interest in this topic to read the book. And you might also want to think twice before mentioning those little details about your life!


by ~ June 1, 2008

Friday’s Wall Street Journal included an interesting article by Robert Lee Hotz entitled “Revenge of the Freeloaders.” Hotz discusses the findings of a study that used an economics game to explore the social dynamics of anonymous groups. Apparently, attitudes of free-loaders (those that chose to go-it-alone, rather than join a group) differ widely across cultures. Notably, the study showed how people are often more interested fairness than monetary gain (a concept at the heart of the Law of Relational Risk.) And faced with limited resources, when a loners retaliate against group pressure, they generally target the most generous contributors of the group, assuming them to be the ringleaders.

At first reading, the results of the study may seem foreboding for those of us interested in anonymous (or pseudonymous) online interactions. But in fact I’m thrilled to see this kind of primary research into our instinctual preconditions for collaboration. As I understand it, the researchers in this study used a basic public-good game as the basis for social interactions. So it would be of great value to devise more sophisticated games that can help scientists delve further into the psyches of collaborators and freeloaders. It’s also nice to see this kind of research getting such high level of media attention.