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What Is an Actuator?

Follow us @CITOrg or @dihrie or this blog for current information on the new Smart City Actuator.

In a previous post we announced the Smart City Works Actuator and described the types of technologies we will be evaluating. But, hang on a minute, what the heck is an actuator anyway? In the spirit of “practice what you preach”, one of the things we teach innovators is how to describe their business in a 3 second sound bite (in case TV news ever asks…). So here is my sound bite for an actuator: it is a combination accelerator and incubator, with built-in path-to-market opportunities. Well…ok…so what is an accelerator and an incubator, and how are they different? This chart from AlleyWatch provides a nice summary.

accel-v-incubatorTraditionally, accelerators are intensive training programs for newly formed or forming businesses, combined with some initial equity investment and extensive mentoring, and designed to position products in the market and secure early customers. Critically, the long-term success of an accelerator depends on the business success of the companies that participate.

Traditional incubators tend to be more like co-working spaces where early-stage companies of varying maturities can conduct business and collaborate with peers. Generally the success of an incubator is less directly tied to the success of the companies located there, with the implications that there is typically no seed funding or equity stake for the incubator and less of a focus on a large mentor network. More recently, these “traditional” models are converging, with accelerators providing co-working types of spaces for their graduates, and incubators more actively mentoring and even investing in a few companies using the incubator spaces.

One other distinction is important, the goals of the accelerator or incubator. Three types of programs have emerged:

  • Commissioned corporate-focused engagements designed to address specific innovation needs of large enterprises, that typically disappear when the needs are sufficiently addressed
  • University-based programs, often in conjunction with faculty research and educational programs; and
  • Independent operations that may be focused on economic development or investment returns.

As examples, Stanford and Carnegie-Mellon have well-known university-based entrepreneurship programs, as do many others. Stanford’s program is loosely associated with Y-Combinator, an independent accelerator operator focused on investment returns. TechStars is an independent accelerator operator with a large number of “franchisees” around the globe; roughly half of their business is from custom programs sponsored by specific corporate partners. In the Washington, D.C. area, AOL Fishbowl and others provide independently operated incubator space, and 1776 represents a network of such spaces. In this categorization, CIT is an independent accelerator operator (MACH37 and EMERGE) with an economic development mission.

So, back to Actuator. The Smart City Works Actuator is a combination accelerator and incubator. That is, we expect to work with both newly forming businesses and somewhat more mature early stage companies. In our other accelerator operations, CIT has found that even the more mature of these companies can usually gain significant value from the intensive training opportunities and strong mentor network associated with accelerators in the AlleyWatch figure, while startup companies that graduate from the accelerator program continue to need the extended time frames and community support more typical of incubators. The Actuator is designed to provide both. There are also differences in the funding models indicated in the AlleyWatch figure; those will be the topic of a later post in this series.

The remaining portion of the Actuator sound bite is “built-in paths to market.” One of the reasons that Corporate engagements via accelerators or incubators have become popular is the implicit path-to-market that a Corporate sponsorship implies. Corporations typically engage because they have difficulty innovating on their own, and are looking for additional products or capabilities to fill out their product lines. And in the end, many successful entrepreneurial companies are in fact acquired by Corporations; it is tempting therefore to focus primarily on this strategic path-to-market and ignore others.

But this path is not without issues of its own, and many other paths to market exist as entrepreneurial companies enter their rapid growth phase. The accelerator approach of seeking external funding to fuel growth is of course an option. In addition to these however a core component of our Actuator is engagement with a range of testbed, pilot, and early deployment opportunities. We are putting in place a set of working agreements with Virginia Universities, State Agencies, localities around the Commonwealth and private organizations such as the Gramercy District, all leading towards direct opportunities for our Actuator cohort ventures to show their capabilities functioning in the real world.

The tagline we use for this type of emergent ecosystem is Capital, Curriculum, Community. But if someone asks  you what an Actuator is, just tell them: its a combination accelerator and incubator with built-in path to market opportunities.

Next (Thursday 3/2): How did the Smart City Actuator Originate?

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The Innovation Kill Chain

[First published on m37accelerator.wordpress.com on March 16, 2015]

Caution: Satire Ahead

There is a dangerous threat to our economy and way of life springing up in seemingly every industry. Almost half the Fortune 500 were booted from the list between 1999 and 2009. Some prognosticators say this threat could result in even more than half of the Fortune 500 going away over the next decade, with a conservative economic impact of more than $2 trillion to our current productive capacity. What is this threat? Disruptive Innovation and the provocateurs inflicting it upon us, the Disruptive Innovators, or Dis-sInners as I like to call them.

Fortunately we are not helpless in the face of this scourge; we can fight back. The reason is that these Dis-sInners proceed, no matter the industry, in a very well-known set of steps before they can succeed. If we can disrupt their insidious designs at any step along the way, they will fail, and this is what I call “The Innovation Kill Chain.”

The seven steps of a typical Dis-sInner attack are as follows:

  1. First, they will conduct surveillance, to understand their target, evaluate competitive strengths and weaknesses, and position for the eventual attack. While this stage is hard to detect, we can take comfort that our highly efficient current business structure is very difficult to disrupt.
  2. At stage 2 the Dis-sInner will typically expose themselves by creating a legal paper trail (articles of incorporation and similar) that reveal both their true identity and business intent. Paranoid companies could develop a standing research capability to discover and track these perpetrators, but it is hardly worth the effort since they will never amount to a true threat to our overwhelming market share.
  3. The third step in the Innovation Kill Chain involves the Dis-sInners planning to undermine the value of your core Intellectual Property. Here the well-prepared defender can become more proactive by filing extensive patent coverage that will allow for future lawsuits should the Up-Startup ever amount to anything. Remember, you have deep pockets and they don’t, so it does not matter whether there is actual economic value in your IP portfolio; all that matters is the ability to create expensive legal proceedings at critical times.
  4. Inevitably, some Dis-sInners actually start building prototype products and begin looking for “beta customers”. By all means, this is your opportunity to appear forward leaning while still containing the threat. The most successful defenders step forward at every request…but then stretch out the process through the various tricks of bureaucracy we all know so well. Should a Dis-sInner persist, extensive product feedback involving meaningless features and tangential use cases is often an effective counter-measure.
  5. Only a few of the most Advanced Persistent Threats will make it to the point of seeking funding, but for these we recommend the essential Enterprise FiresaleWall. Your Corporate Venture Fund can be a key player in this process. Remember, that these early-stage APTs have not yet taken over key parts of your market, and a well-timed lowball offer can often shortcut their efforts at Escalation of Visibility.
  6. It is inevitable that your market position will eventually be breached. There are only two types of market leaders, those that know they have been disrupted and those that don’t yet know it. This is where a top notch Chief Innovation Prevention Officer (CIPO) earns their keep. “Off the street and on the shelf” are truly words to live by. Early warning can give you plenty of time to squeeze every last penny out of those previously lucrative markets. And your best customers will surely want to stay with a market leader, even in the face of punitive long term contracts.
  7. Once a breach has occurred it is time for forensics and damage control. Here, behavioral indicators can be useful in ferreting out the Inside Your Market Threat. Do not succumb to the temptation to point fingers and re-organize; instead watch the Up-Startup and match their every move. One very effective defense, particularly in the Government space, is to partner with the enemy! As a prime contractor, you will have locked up the Dis-sInner market potential and control their destiny through the amount of business you let trickle-down their way.

Knowing your adversary, and the common steps they take in seeking to disrupt your business is the most effective way to stay prepared and stay ahead of this insidious threat.

CTO SmackChat: The Dreaded “Pivot”

First published 04/21/14 on MACH37.com

Your startup is a success! Family and friends have seen you through to the point where an angel investor got excited, and your first alpha customer really likes where you are heading. The beta tests are under way and the feedback is coming in.

One customer says he would be interested in buying if your product could provide two additional capabilities not in the beta version. Another indicates her problem is not exactly the one you are addressing but she sees how it could apply by changing the domain slightly and taking some additional inputs into account. Some feedback says it seems similar to what they are already using. There is a request to show the output on a map background. And, your marketing guru says that several customers are really struggling to solve a problem that one component of your solution could make dramatically easier. Should you pivot, or stay the course? Add features or simplify? Expand to related problem areas? What feedback do you rely on to make those decisions?

A couple things are clear. As a startup your resources are stretched way too thin simply trying to address one market. Expanding to a second problem area before succeeding in the first one makes it much more likely that neither will succeed. The second notion is integrity of a core product offering. If every customer has a different set of implemented features, your business is really a service business built around customizing features rather than a product business.

But the harder trap for most entrepreneurial technologists is falling in love with your own ideas. After all, you thought it up, and your whole career has been built on confidence in your technical ideas. You probably know better than the customer what is really possible from a technical standpoint, and what the hard problems are that you know how to solve. In the end though, the right answer is always what customers will pay for. And in our example above I would be inclined to listen to the marketing guru who seems to be close to some potentially paying customers: perhaps it is time to change the product idea, get rid of a bunch of the features that are not helping differentiate it, and focus on the one core bit that could help several customers solve a critical problem.

There is no science behind when to pivot and when to stay the course. An important indicator is slow or flat sales (or interest) combined with some customer pull along a different development vector than the one you are following. As the divergence grows that market signal gets stronger that the pivot is upon you, but in the end you need to make a judgment call and work with your own company leadership to ensure it is the right one.

Behaving Well

In a previous post I listed five considerations for assessing acceptable behavior in collecting information: Utility (why); Transparency (how, when, where); Security (appropriate); Boundary (what); Accountability (who). With NSA so much in the news, it is interesting to compare NSA performance in these categories with the comparable assessment of Facebook or Google (or, many other public internet companies). Here is how they stack up for me.

Utility – why are they collecting data? OK, for NSA that’s easy, National Security. Clearly an important goal, and one that  I strongly support, especially when I look at other places in the world where it is not a given. Google or Facebook? The party line explanation seems to be that they collect data in order to better serve the needs of their customers for customized information services. A more cynical explanation is that they collect data in order to monetize your private information to their benefit. We’ll grade these as red/yellow/green. Grades: NSA – green. F/G – yellow.

Transparency – how, when and where is data being collected?  Yeah, nobody has been very good here. NSA is limited by law in some aspects of their data collection, and have said publicly that they have an extremely good track record in meeting the requirements of the laws. Also, under intense current scrutiny the Administration has explicitly vowed to increase transparency and many previously hidden aspects are now public. FaceGoo? I think chances are 100% that they have fairly substantial data about me as an individual and a US citizen. I have a pretty good idea what it might contain, but they are not very forthcoming about it. And there are few laws that require them to be. So, overall, seems more likely that the commercial folks have a lot more data on me than the Government folks, but neither are what I would consider “transparent”. Grades: NSA – red, moving to yellow perhaps involuntarily. F/G – yellow at best.

Security – appropriate to the information they hold. NSA would have scored higher before the Snowden affair. I’m guessing they patched some of those holes in the interim. And, since it is their core business hard to believe that (headlines to the contrary) their security is anything less than world class. How secure is my information on the FaceGoo? OK, let’s ignore Heartbleed for a minute. Even so, well, let’s see…somewhat vulnerable? Yep, that seems to fit. Grades: NSA – green, with an asterik. F/G – yellow at best.

Boundary – what are they collecting? “It’s only metadata”. And FaceGoo? Brings to mind that old song by the Police: “Every step you take, every move you make, I’ll be watching you”. Short answer is anything that might have value. Grades: NSA – yellow. F/G – red. No stopping them!

And finally, Accountability – who is responsible, who provides oversight, who answers the phone when you call to complain. Rest easy, it’s Congress and those special court things that provide extensive oversight to the national security apparatus. Face/Goo? I read somewhere that there’s this guy in California, the Facebook Chief Privacy Officer, who can get up in the morning and change the privacy rules for half the worlds population. He’s accountable to, well, shareholders for continued profitability of the company relative to his actions. As far as his accountability for your privacy? That one’s kind of complicated. There are a lot of laws that vary significantly around the world. Don’t worry though; he’s on it. Grades: sorry gang, RED all around.

Zero for red, 1 for yellow, 2 for green. Final score out of a possible 10? NSA – 6, F/G – 3. Both are failing grades. And because of the special power and authority we grant to our Government it is essential that we collectively continue to discuss, search for and enforce appropriate limits on our Government, particularly the Intelligence and Law Enforcement functions. Personally though I think the unfettered Corporate collection and use of personal information, in a way that does not align with either my public or private interests, is a much greater threat to both privacy and liberty. And the possible paths to remedy this situation are much less well defined.

Massive Surveillance System Revealed!

NSA surveillance and privacy has become a hot topic. Bruce Schneier gave the ShmooCon Keynote on this topic. Julian Assange addressed SXSW on this topic. We are intensely suspicious of Government surveillance, and perhaps rightly so; the Government is in a unique position to collect, and potentially abuse, personal information. But, as a country, we are actively discussing oversight of this surveillance, and how it relates to privacy. Adm. Mike Rogers, the nominee to lead NSA and CyberCommand testifies about providing additional transparency. Some actual bi-partisan legislative changes may be in the works.

However, there is an even more insidious surveillance system, one that impinges our privacy every day in almost every aspect of our lives. It collects detailed personal data about who you are, how much money you make, where you are at any given time. It seeks to collect enough information that unaccountable external groups can repeatedly influence your behavior without you realizing what is going on. Some of the members of this cabal include FitBit, Google, Facebook…well, ok, the secret is out. In fact, this describes our current e-commerce system. The scope is even wider than that, including also your activities in both the real world and the internet, whether or not you approve or engage (other than clicking “Agree” on one of those 40-page user agreements).

Yet, there is no outcry. No headlines or Congressional hearings. Well, the FTC is a little concerned. And the CIA is trying to figure it out…their CTO, Gus Hunt, says that FitBit can identify you with high accuracy just by how you walk. Saying that this type of pervasive, invasive surveillance is bad when the Government does it, but OK if companies do it, seems hopelessly naive. We should have a set of standards that apply to both Government and industry, perhaps with some explicit differences in expectations given the different nature of these entities. So here is my list of considerations for assessing acceptable behavior in collecting information:

1. Utility (why)

2. Transparency (how, when, where)

3. Security (appropriate)

4. Boundary (what)

5. Accountability (who)

In a later post I’ll explore these considerations in more detail with respect to NSA and to commercial collectors of information, to grade their performance.

The End of the Information Age

The Bronze Age. The Industrial Revolution. The Information Age. Surely we live in the Golden Era of the Information Age. The Internet of course has brought us here, and it is nearly a clean sweep. Governments can no longer control information, no matter how they try. Things like cars and watches and refrigerators are rapidly becoming purveyors of information. Biology, even quantum mechanics are being described in the language of information, and it seems to be able to handle these and more. Perhaps we are approaching the ideal of late 19th Century physics when some believed their theories could explain all physical phenomena…25 years before relativity and quantum mechanics rained on their parade. Maybe we’ve finally gotten it this time! Well, probably not.

Just like those physicists of the late 1800s, there are a few bothersome loose ends with Information as The Thing of Things. Now I don’t understand quantum mechanics any better than you do, but it seems to point to the idea that maybe information is…probabilistic. Or if we think about the graph theory of all information, with Google as the index, things like the Dark Web or even separate spheres of political discourse raise the troubling thought that maybe information is…discontinuous. Maybe there are disconnected islands in the information graph.

Today NPR ran a story (http://www.npr.org/2014/02/27/282939233/good-art-is-popular-because-its-good-right) describing an experiment by Princeton professor Matthew Salganik seeking to determine whether the popularity of music is related to quality. His finding was that, above some minimal quality threshold, it was pretty random. Like the butterfly sneeze in the Brazilian rainforest or the Big Bang, small initial random variations seemed to propagate and be magnified. In the case of music the propagation mechanisms were social interaction. So perhaps information is…random. Or, local.

All of these hints lead me to believe we have not found the answer to everything simply by invoking information. So, what might the post-information age look like? What comes next? Clearly this is speculation extrapolated from a flimsy foundation, but here is my guess. Maybe someday we will emerge into the Energy Age. Not an age describing fossil fuels and dominated by Big Oil, but an age where the unifying principle is the amount of energy consumed in an operation or a process. Already we measure data centers not in storage capacity or processing speed, but in watts per square foot. Things like the carbon footprint of our daily lives eventually depends on a single common measure of the energy consumption of, say, recycling that beverage can as opposed to throwing it out. Maybe social networks can be measured in the energy efficiency of their information transmission. Even quantum mechanics points to the total entropy of the universe.

Finally, what good are such speculations? They fundamentally call into question what we know, and what is knowable. They challenge the conventions we use to describe the world we experience and the hidden world beyond that we can only hypothesize. While the Information Age is a wonderful thing, and has much left to teach us about the world, it is not the only view, and probably not the final one either.

CTO SmackChat: Minimalism

First published 02/11/14 on MACH37.com

By now, most entrepreneurs have adopted the lean startup principles advocated by Eric Ries in his book The Lean Startup. A key concept is the Minimum Viable Product, the mechanism used to convey your core product ideas to potential early users, and test key market assumptions in an iterative process to ensure that what you finally deliver both solves a problem and can generate enough paying customers to build a business. Of course the hard nut with this concept is figuring out “minimal” and “viable” in a world where your startup may be created based on a good idea and not much else.

I have experienced first-hand a number of the traps that technologists tend to trip over with this concept. The classic one of course is building products that are never quite ready to ship because they need just one more feature. Early in my career I developed a number of highly optimized protocols for satellite-based networks; it turns out that only satellite builders determine the protocols that fly, and the best technology is often not the winner. Complexity is another dangerous siren song – after a few meetings where it takes half an hour for even the friendliest, most perceptive customer to go “aha!” you begin to wonder about the guy who made millions selling those plastic electric outlet covers to prevent toddlers from sticking their tongues in the outlet.

One of my startups embodied all of these traps in a single great idea. Well before iTunes perfected the concept, we built and tested a very efficient delivery system for selling individual movies, songs and other content onto end user devices. At the time, transmission costs were high and credit card transaction costs were also high. We conceived a closed loop where content was aggregated at a central point, shipped over satellite to every TV station in the country, and streamed over the unused bandwidth in HDTV to a small receiver gizmo connected to end user devices that would decode the signal and securely aggregate single transactions into a monthly billing. The actual system was tested in New York, Trenton, NJ, Baltimore and Washington DC, and overnight we could stream enough content to make the top 100 movies, 1000 songs, and other content instantly available to millions of users. Even the back end worked, but in the end I believe I was the only person ever to complete an actual purchase and pay for it on my credit card.

So how do you figure out the Minimum Viable Product? Especially when a company is just starting, the key notion is to get your idea in front of potential customers and see if it solves a problem they care about. At this stage it doesn’t take a lot of development, but just enough to be able to describe the problem and how you address it, the value proposition for the user, and enough of an indication of what a user would see and do to make it feel real. The acid test at this stage is finding a potential customer who indicates that if you can build it, they will try it and eventually buy it. That establishes the “viable”. Beyond that, the “minimal” is driven almost more by schedule than by features. How long will that first customer wait before they forget about you? How much do you have to demonstrate in terms of solving the core problem to entice your customer to take those next steps down the development path with you? In the end, both “minimal” and “viable” are defined by your early customers, not by you. Your job is to make a guess that is close enough to keep those early customers engaged until you are actually in a position to deliver something.

David Ihrie is CTO of MACH37 and has been the lead technical person for six startup companies. He has a BS in EE/CS and an MS in Management specializing in the Management of Technological Innovation, both from MIT.

CTO SmackChat: Technology is not Innovation

First posted 01/08/14 on MACH37.com

In his excellent book “The Idea Factory: Bell Labs and the Great Age of American Innovation”, Jon Gertner quotes Jack Morton, who worked at the Labs on the development of the transistor in the 1940s, saying “[Innovation] is not just the discovery of new phenomena, nor the development of a new product or manufacturing technique, nor the creation of a new market”, but all of these working together to deliver things that make a difference. Or, as one of our investors puts it succinctly: “a business without customers is just a hobby”.

As technologists, we of the nerdly persuasion tend to believe that the tech is the key ingredient in the success of any startup. At MACH37 we talk to a lot of incredibly smart technical people, some with potentially game-changing ideas…but, technology is not innovation. For a startup to deliver products that make a difference it takes a great technical idea, but also someone who knows how to build a business, someone who knows how to turn an idea into a product, and people who can find customers, understand their problems and sell them your idea. Innovation is a team sport.

So, how important is the tech? As we evaluate startups and talk to investors, a large majority consider it essential to have someone with deep technical domain expertise, as well as product development skills, as part of the initial entrepreneurial team. Many of those same people will tell you however that the initial technology contributes maybe only 10% or 20% to the success of the business, that the ability to pivot is critical, that technology almost never creates new market segments. My own rule of thumb is that your going-in idea is always wrong.

Making sense of the contradictions can be maddening…being passionate about your ideas but willing to turn on a dime; knowing what is necessary but not sufficient; being game-changing in a way that’s not too ground-breaking. This is the first of a series of posts to explore these contradictions from the technologist’s point of view. How many features make a product? When do you abandon Rev 1 and start over? When does one product become two? How do you know what customers really want? How far ahead of the market or the product can you be? And once you delegate the product design, and customer interaction and hands-on coding, how do you continue to add value to your organization?

David Ihrie is CTO of MACH37 and has been the lead technical person for six startup companies. He has a BS in EE/CS and an MS in Management specializing in the Management of Technological Innovation, both from MIT.