Mobile Payments Data Race Heats Up

Square (mentioned on this blog in 2010) came out with a big announcement this week to digitize our credit cards and loyalty cards with a iPad-based Register for the retailer and a Card Case mobile wallet on your smartphone.  It's potentially very disruptive to credit cards.  It's also billed as a cash register / credit card terminal killer.

This comes on the heels of Visa's strategic investment in Square last month.

The Real Story is in the Data
The big story here, however, is about the underlying transaction data and its value to the Square model.

As Square explains: "Know Your Business.  Know how many cappuccinos you sell each day. Download full reports that give you insight into your sales patterns and inventory."

It's early days but Square's genius is in its simplicity - at locations using the Square Register software on an iPad, you only have to use your credit card once to activate your payment information in your Card Case.  Then, in the future, you theoretically don't have to bring your phone with you as long as you've already been a customer at the retail location.  No need here for NFC so you can wave your phone (Google NFC rumour) near a payment terminal.

The key features of the Square mobile payment solution include:

Receipts

With Square Register, sellers can automatically generate and send digital receipts to customers, enabling them to track and store their purchase history right on their phone. This eliminates the need for costly, wasteful paper receipts.

Card Case

Card Case, a feature of the Square app for iPhone and Android, enables customers to access Directory and Menus, and open Tabs at their favorite merchants, making purchasing instant and effortless. Card Case can be activated through a text message invitation from Square after making a credit card purchase at a participating merchant.

Tabs

Similar to one-click purchases made popular by online retailers, Tabs make payments instant and effortless in the real world. Once a customer opens a tab on their phone, sellers can verify a customerʼs identity with a stored profile and photo on Square Register and approve their purchase with just one touch. Tabs eliminate the need for cash or credit cards at checkout, enabling customers to leave their wallets at home. 

But don't forget the story here is about the data.  Square's privacy policy hints at their plans:

Information We Collect

When you register for or use a Square account, we collect the following information:

• When you register: we collect your name, location, phone number, email address and other related information.

• When you access your Square account to settle funds: we collect bank account and payment card numbers, and information about financial institutions where you conduct business.

• When we verify your identity and underwrite your application for an account: we will request additional personal information to confirm your identity and manage our risk. We may ask you for your driver’s license number, social security number, birth date or other personal information. At times we will obtain information about you from third party verification services and credit bureaus.

• When you use our service: we record your account transactions, transaction location, and we may collect information about your computer or access device.

Using Personal Information

We use your Personal Information to provide you the features and functionality of the Service, and may share it with our trusted third parties, to ensure that you have a safe, high-performance experience when using the Service. When you use the Service, including accepting a payment, requesting funds, contacting customer service or requesting technical support, in addition to many other interactions with Square, we will apply the information that we have collected. Knowing this information allows us to verify your identity, communicate with you and enforce our agreements with you, as well as secure the best possible experience for all Square members by ensuring compliance with US state and federal laws and our own policies. We may also use this information to measure how our members use the Service, and improve and enhance our offerings to you. [my emphasis]

The plan could be far reaching.  Just imagine what Square can eventually do with all this transaction data.  Not only does it serve it up to the retailer, but it can potentially start delivering Groupon-like deals to you, the consumer, through it's Card Case app.

As Square focuses on smaller retailers first, it can arguably be following Christensen's disruptive innovation process, taking root initially in simple applications at the bottom of a market and then relentlessly moving ‘up market’, eventually displacing established competitors.

Square is perfectly aligned with the trends in data mining.

Recall Joel Stein's Time Magazine article in March 2011 "Data Mining: How Companies Now Know Everything About You" 

"In the past few months, I have been told many more-interesting facts about myself than my Social Security number. I've gathered a bit of the vast amount of data that's being collected both online and off by companies in stealth — taken from the websites I look at, the stuff I buy, my Facebook photos, my warranty cards, my customer-reward cards, the songs I listen to online, surveys I was guilted into filling out and magazines I subscribe to."

Also related to the Square story, the McKinsey Global Institute (MGI) this month published their report on Big Data: The Next Frontier for Innovation, Competition, and Productivity   This is an important summary of the value of data and analytics for competitiveness which deserves its own review.  MGI validates the importance of Square's data play:

"Big data will help to create new growth opportunities and entirely new categories of companies. Many of these will be companies that sit in the middle of large information flows where data about products and services, buyers and suppliers, consumer preferences and intent can be captured and analyzed."

Square (and Visa) has made a clear statement that the data arms race is on.

IBM's Jeopardy! Challenge Will be a Lead Story in 2011 Trends

In the spirit of the New Year's predictions of new business trends, here's a quick rundown of what I consider to be some top trends to watch in 2011.  While they may not appear to be related on the surface, look deeper and you'll see some very interesting links and themes in the these key trends.

But, before you read on, I highly recommend watching Hans Rosling's visualization of 200 years of data in 4 minutes.  Data visualization will be the emerging story of business intelligence in 2011 and the video itself is amazing.

Key Trends for 2011:


Tablets will become common in business . On the consumer technology side, it's easy to see how Gartner's forecast of 55M tablets to be sold in 2011 will come true.  In hospitals, in the sales force, business-driven tablets are disrupting the laptop landscape and hopefully RIM should be competitive in the Boardroom.

Cloud computing goes mainstream. Expect cloud computing to become more prominent.  Apple will be at the party in 2011 with its massive new data centre likely powering iTunes in the cloud.  Google even launched ebooks in the cloud.

Mobile Commerce.  PayPal and Facebook (soon to surpass 600 million users) will be big players in micropayments in 2011.  Location-aware commerce will continue building momentum.

Even Groupon (which is reportedly raising $1B after turning down Google's offer of $6B) is offering mobile coupon redemption.

China will continue to dominate. China will continue its march to dominate automotive manufacturing.  The United States trade deficit with China ($28B in August 2010) is increasing and the Economist is forecasting 2019 as the year that China overtakes America as the largest global economy. 

Debt crises continue to deliver uncertainty.  Consumer debt in Canada and the United States will continue to be a concern.  Eurozone countries like Ireland, Portugal, Greece and Spain will continue to struggle with their own debt loads, although China looks to provide $6B of debt help (although ironically Apple's iPhone contributed $1.9B in a U.S.-China trade deficit in 2010.

And finally, in the business intelligence arena... Jeopardy!  You might be wondering why a game show would signal a major trend for business.   The reason - this year, I'm excited about IBM's Watson project.  I've always been fascinated by the power of asking the right questions to improve business performance and forecasting a industry's vital signs for business plannning and budgeting.   In February 2011, Watson will take on the humans in a round of Jeopardy!   IBM demonstrated previously that it could build a machine to beat grandmasters in chess.  The fact is IBM is now building the next generation question answering intelligence.

According to IBM's intro to the DeepQA Project :

"The DeepQA project at IBM shapes a grand challenge in Computer Science that aims to illustrate how the wide and growing accessibility of natural language content and the integration and advancement of Natural Language Processing, Information Retrieval, Machine Learning, Knowledge Representation and Reasoning — along with massively parallel computation — can drive open-domain automatic Question Answering technology to a point where it clearly and consistently rivals the best human performance."

IBM has hinted about the future DeepQA doctor.  At some point, Watson will be able to diagnose complex medical conditions.

Clearly we won't see all this in 2011, but the Jeopardy! match is just the beginning.  Although I'm focused on advancing real world business intelligence and performance management in the banking sector with current leading edge tools such as Oracle Business Intelligence and IBM's Cognos, I can imagine one day soon feeding DeepQA a year's worth of mortgage banking data and asking Watson to create realistic forecasts of future financial performance.  Realistically, this will be 3-5 years but who knows....maybe this will make be in a future version of IBM's Cognos. 

Frankly, most of these "predictions" are pretty safe bets because the leading indicators are already out there.  Globalization, mobile commerce, and 'big data' are the key themes of this century and they'll continue to increase in importance.  These trends impact literally every industry business model today, from banking to manufacturing.

If you'd like to explore these ideas further with me and and the next wave of business intelligence, please contact me directly. I look forward to connecting with you!


Happy New Year!

Alan Wunsche
alan@wunsche.com

P.S. Have we connected yet on Twitter? You can follow me at www.twitter.com/AlanWunsche

MasterCard Labs Announcement - is this a new era of Open Data?

Following in my recent series on payment technologies and potential disruptions in the marketplace, there was a very interesting announcement from MasterCard about its new MasterCard Labs (NYTimes article: MasterCard Wants Programmers to Use Its Payment Technology) initiative.

In MasterCard's news release of April 15 (MasterCard Launches MasterCard Labs; Names Garry Lyons Group Executive, Research & Development) and accompanying video (http://www.youtube.com/watch?v=wKa1yy1a0fc) MasterCard reveals plans to open up its payment platform for developers.

The NYTimes article only hints at the immense significance of the MasterCard announcement:

So far, MasterCard has identified about 20 of its services that developers will be able to use in their applications. They include payment technology, bill payment systems and data streams like consumer spending patterns, which could be used to send coupons.

This is significant because it's a response to PayPal's November 2009 announcement to open up its platform to developers (PayPal Seeks New Ways to Use Its Payment System),  allowing developers to embed PayPal in their own apps.

Here's the important aspect: Allowing external developers access to its own data on consumer spending patterns, MasterCard is opening up its data outside its own systems.    Leading platform providers such as Facebook and Twitter already allow access to data and functionality through their API's and have cemented their role as infrastructure providers in the new web....they understand the importance of openness and it sounds like MasterCard does now as well.

Other news here (MasterCard Spending $10s of Millions, Hiring Engineers for its New Labs) points to a new development focus.

Looking forward for financial institutions, will having an open platform be a competitive necessity to ward off disruptive payment technologies from the likes of Square (Square Aims to be Credit Card Value Disruptor)?   Even beyond financial institutions, I would argue that every company should be thinking about its information strategy in a new light and asking the question: "Should we be more open with our data and how can that be a competitive advantage to us?"

If you'd like to explore these ideas further with me, please contact me directly. I look forward to connecting with you!

Alan Wunsche

alan@wunsche.com

P.S. Have we connected yet on Twitter? You can follow me at www.twitter.com/AlanWunsche

Mobile Payments to reach $633B by 2014

As a follow up to my previous post Square Aims to be Credit Card Value Disruptor, thanks to GigaOM for the following information:

The worldwide market for mobile payments will grow to $633.4 billion by 2014, up from $68.7 billion in 2009, according to a new report by Generator Research. Meanwhile, mobile payment users will grow 600 percent, to 490 million in 2014 from 81.3 million last year. Using your phone or your phone number to exchange money is convenient for everyone but especially the “underbanked.” Whether it’s payment dongle Square launching this week, Zong raising $15 million late last month on the strength of its virtual goods business on Facebook, or the fact that my dinner party companions last night settled the bill usingVenmo, mobile payments are finally part of the present rather than the hazy projected future.

Looking at the report details by Generator Research reveals a treasure of details for business leaders developing plans in the mobile payments arena:


Figure 1: Mobile Subscribers – Worldwide (In Million, 2009 – 2014F)
Figure 2: Mobile Payment Users and Penetration – Worldwide (2009 – 2014F)
Figure 3: Mobile Payment Users – Regional (In Million, 2009 & 2014F)
Figure 4: Mobile Payment Volumes – Worldwide (In USD Billion, 2009 – 2014F)
Figure 5: Mobile Payment Volumes – Regional (In USD Billion, 2009 & 2014F)
Figure 6: Mobile Payment Volumes – Growth by Region (In Percent, 2009 – 2014F)
Figure 7: Mobile Payment Opportunities for Key Stakeholders
Figure 8: How NFC Payments work
Figure 9: Subscribers with NFC Capable Handsets — Worldwide (In Million, 2009 – 2014F)
Figure 10: Penetration of NFC Devices — Worldwide (In Percent, 2009 – 2014F)
Figure 11: Mobile Payment Users — Worldwide (In Million, 2009 – 2014F)
Figure 12: Mobile Payment Volume — Worldwide (In USD Billion, 2009 – 2014F)
Figure 13: NFC Payment Volume — Worldwide (In USD Billion, 2009 – 2014F)
Figure 14: NFC Payment Volume as a Percentage of Mobile Payment Volume — Worldwide (In
Percent, 2009 – 2014F)
Figure 15: Contactless Mobile Payments Services in Japan
Figure 16: DCMX Users (In Million, June 2009 – December 2009)
Figure 17: Consumer Spending Behaviour for Contactless Payments – Japan (2008)
Figure 18: Contactless Payment Trials on NoWcard Buses for Over-the-Air Ticket Sales to NFC enabled
Handsets by the UK’s Department for Transport
Figure 19: Mobile Payment Volume — The US (In USD Billion, 2009 – 2014F)
Figure 20: Micro-payment Opportunities in the US (In USD Billion, 2009)
Figure 21: Basic Value Chain of Mobile Payments
Figure 22: Bank-centric Model
Figure 23: Bank-centric Model – Benefits and Drawbacks
Figure 24: Collaboration Model
Figure 25: Collaboration Model – Benefits and Drawbacks
Figure 26: Operator-centric Model
Figure 27: Operator-centric Model – Benefits and Drawbacks
Figure 28: Peer-to-Peer Model
Figure 29: Peer-to-Peer Model – Benefits and Drawbacks
Figure 30: M-PESA Users – Kenya (In Million, March 2008 – September 2009)
Figure 31: Monthly P2P Transactions Value – Kenya (In USD Million, March 2008, March 2009 &
September 2009)
Figure 32: DCMX Users (In Million, June 2009 – December 2009)
Figure 33: GCASH Users (In Million, 2007 – 2009)
Figure 34: Apple App Store In-app Payments Model
Figure 35: Application Downloads from Apple’s App Store – Performance in the eighteen months
since launch
Figure 36: Drivers and Inhibitors – Mobile Ticketing and Coupons
Figure 37: Major Business Deals and Partnerships – Mobiqa
Figure 38: Major Business Deals and Partnerships – NeoMedia Technologies
Figure 39: Major Business Deals and Partnerships – Cellfire
Figure 40: Mobile Ticketing and Coupons Users — Worldwide (In Million, 2009 – 2014F)
Figure 41: Mobile Ticketing and Coupons Volume — Worldwide (In USD Billion, 2009 – 2014F)
Figure 42: Basic Value Chain of Mobile Ticketing
Figure 43: Mobile Ticketing – Business Model I
Figure 44: Mobile Ticketing – Business Model II
Figure 45: Basic Value Chain of Mobile Coupons
Figure 46: Mobile Coupons – Pay per Redemption Business Model
Figure 47: Increase in Revenue of Go North East (In GBP Million, 2006 – 2009)
Figure 48: Go North East’s Contribution to Go-Ahead’s Bus Revenue (In Percent, 2005 – 2009)
Figure 49: Benefits of Planet Funk’s mobile coupons campaign
Figure 50: Mobile Payment Volumes – Regional (In USD Billion, 2009)

LIST OF TABLES

Table 1: Regional Break-out of Mobile Payment Users (In Million, 2009 – 2014F)
Table 2: Regional Break-out of Mobile Payment Volume (In USD Billion, 2009 – 2014F)
Table 3: Regional Drivers – An Overview
Table 4: Challenges for Different Mobile Payment Platforms
Table 5: Assessment of Challenges for Different Mobile Payment Platforms
Table 6: Regional Challenges – An Overview
Table 7: Comparison of Mobile Payments Business Models
Table 8: Top Applications with In-app Payments available from Apple’s App Store (November 2009)
Table 9: Opportunities and Benefits of Mobile Ticketing and Coupons for Stakeholders




If you'd like to explore these ideas further with me and make sure that your company is ready for this next wave of business intelligence, please contact me directly. I look forward to connecting with you!

Alan Wunsche
alan@wunsche.com

P.S. Have we connected yet on Twitter? You can follow me at www.twitter.com/AlanWunsche

Square Aims to be Credit Card Value Disruptor

This is an update to my initial blog post (April 7, 2010): Is Square the Bank of the Future?

Today (May 11, 2010), Fast Company has published: "Square Brings Credit Card Swiping to the Mobile Masses, Starting Today"

I highly recommend this article and the accompanying article "Getting Square: A Guide to the New Mobile Credit Card Payment System for iPhone and Android" to better understand Square's business model.

Here are some highlights:

With Square, anyone can accept credit or debit card payments by downloading the app and plugging a little plastic cube into the headphone jack of an iPhone, iPod Touch, iPad, or Android phone. After a quick swipe of the card through the reader, the merchant turns the device over to the customer to sign his or her name on the touchscreen using a finger instead of a pen. The customer can add a tip, either by percentage or a particular amount, and then enters their phone number or email address. In the best case, the receipt message will buzz in the customer's pocket as an email or SMS text message while walking away with their purchase.

Customers are charged as usual by their banks or credit card companies, and Square settles up the net funds with merchants each night instead of at the end of the month. The swiper and application are both free and include access to an online dashboard with analytics that help merchants track exactly what they've been selling.

Square shares very little about you with the merchant, and doesn't even keep your credit card number on file. Although a phone number or email address is needed for the transaction, that is not shared with the merchant, only with Square. [Alan: Square can therefore become a CRM service provider] 

At the same time, Square gives the merchant just enough to recognize repeat customers and offer them incentives. In the dashboard, a merchant can customize a notifier for, say, every tenth visit by the same customer or any time a customer spends more than $100. This notification will appear on screen after the swipe and allow the merchant to offer a discount or giveaway. [Alan: Square can enable loyalty]

Did the Machines Take Over the Stock Market?

Dow Jones Industrial Average (May 7, 2010)

Business analytics as a core process in financials services is quickly being transformed into automated decisioning as the power and ubiquity of computing is increasing.

There are obvious benefits but there are also risks, as we saw in yesterday's stock market plunge.

In today's (May 7, 2010) NYTimes, the article "Surge of Computer Selling After Apparent Glitch Sends Stocks Plunging" states:

"The glitch that sent markets tumbling Thursday was years in the making, driven by the rise of computers that transformed stock trading more in the last 20 years than in the previous 200." 

The old system of floor traders matching buyers and sellers has been replaced by machines that process trades automatically, speeding the flow of buy and sell orders but also sometimes facilitating the kind of unexplained volatility that roiled markets Thursday.

“We have a market that responds in milliseconds, but the humans monitoring respond in minutes, and unfortunately billions of dollars of damage can occur in the meantime” 

 It will be important to get to the root cause of this near disaster but this quote would cause anyone concern:

"The source remained unknown, but that jolt apparently set off trading based on computer algorithms, which in turn rippled across indexes and spiraled out of control."

For a short while, traders started to distrust what they were seeing.

“There was no pricing mechanism,” Mr. Clancy said. “There was nothing. No one knew what anything was worth. You didn’t know where to buy a stock or sell a stock.” 

Did the machines really take over?


Alan Wunsche
alan@wunsche.com

Can Google's "Recorded Future" Help Predict the Future?

Timeline view of news about man-made disasters in Thailand

While it's been said that you can't predict the future, there's no denying the holy grail for business is to predict the most likely future scenarios and to provide the business with strategic flexibility that will anticipate a variety of possible outcomes.  Software vendors such as SAS and Cognos provide predictive analytics tools and the explosion of data analytics will fuel demand for these solutions. 

Not content to just knowing everything about the past, Google Ventures recently announced an investment in startup company Recorded Future.

According to Google, "Recorded Future extracts time and event information from the Web. Recorded Future offers customers new ways to analyze the past, present and the predicted future."

The company explains it this way:

"At Recorded Future, we compute a momentum value for each entity and event in our database," one blog post explains. "The momentum value indicates how interesting a certain event or entity is at a particular time, and is continuously updated. In computing the momentum value, we take into account the volume of news around an entity or event, as well as what sources it is mentioned in, what other events and entities it is mentioned together with, and several other factors.

"The momentum measure is used to present the most relevant query results in our web user interface, but it can also be analyzed using statistical methods to predict possible future changes in momentum, which in turn can be valuable, e.g. for trading decisions."

It's too early yet for Recorded Future and any predictions that Google will become the next SAS, but this kind of tool will inevitably make its way to scenario planning for big business.

If you'd like to explore these ideas further with me and make sure that your company is ready for this next wave of business intelligence, please contact me directly. I look forward to connecting with you!


Alan Wunsche
alan@wunsche.com

Can Relationship Analytics Predict your Ability to Pay?

What does your relationship network say about who you are and how you will act?

What is the connection between your network on the web and a company's strategy to grow their revenues?

My bet is on analytics.

My bigger bet is that data analytics is the next competitive weapon in the era of integrated big data.

Having information systems today that create and store transactional data in massive data warehouses (i.e. "big data") is just table stakes. Companies are in a global data race and the first ones to integrate externally available data with their internally generated data will gain unique competitive advantage.

Once they have the data integrated, these future analytical competitors (read about the analytical ninjas they are hiring in this Wall Street Journal article) will mine it and make better and faster strategic and operational decisions than their competitors.

Databases and decisions.

Companies are making big investments into data analytics technologies, processes and skills to integrate data into their core processes.

Take for example Visa's ability to predict your divorce: "How Visa Predicts Divorce". The article vividly describes Visa's able to mine your purchases and predict if your life's about to change.

Let's take a look into the not-so-distant future.

Banking Analytics

Imagine a bank that can make you a new banking product offer because it knows what you buy and how you are influenced. What about a bank that assesses your credit risk and your ability to pay based not only on your credit score but on the friends you keep on Twitter and Facebook? This is not far-fetched as recent studies have proven strong correlation.

Or, maybe the bank knows that you're a high saver and that your friends have recently signed up for a new savings product you'll also like. Instead of waiting for your friends to recommend it, what if the bank proactively marketed it to you?

Consumer Automobile Analytics

Imagine a car dealership that has mined your relationship network and knows your best friend's sister is highly satisfied with her latest van. The dealership also knows your lease is coming up for renewal and you've recently had your second child. It's time for the next highly targeted offer.

Real Estate Analytics

Imagine a real estate broker who knows, because she has researched your LinkedIn profile and your home address based on your foursquare.com or gowalla.com accounts, that you've recently changed jobs. She tweets you about a great place you should look at that is much closer to your new job. There's a good bet that you'll consider it and thank the agent for helping you reduce your commute.

Real estate has now become an information business.

I know this is imminent because companies like Rapleaf are mining the social web and packaging it for sale to consumer-oriented companies. Before changing its website recently, Rapleaf boasted it had amassed a database of some 350 million profiles...and counting.

Databases and decisions. Neither of these are found on your company's balance sheet but they are both critical corporate assets for your future competitiveness and your future revenues so they need to be managed accordingly today.

Back to my big bet - data analytics, and the broader business intelligence competence, is the next competitive weapon in the era of integrated big data and always on connectivity.

Is your organization ready? Do you have an integrated analytics and business intelligence strategy or are your functional groups working in silos?

If you'd like to explore these ideas further with me and make sure that your company is ready for this next wave of business intelligence, please contact me directly. I look forward to connecting with you!

Alan Wunsche

alan@wunsche.com

P.S. Many thanks to @akumar for sharing his LinkedIn network analysis (picture above) on Twitter!

P.S. Have we connected yet on Twitter? You can follow my tweets at www.twitter.com/AlanWunsche

Is Square the Bank of the Future?

Square (www.squareup.com) is a glimpse into the future of payment business models and technology and it's here now.

Banks, credit card companies *and* retailers of all sizes need to look at this very closely because it's a potential partner and a potential disruptor to today's payment systems

I believe we're seeing an evolution (if not a revolution) in mobile payments and credit card payment systems in general and here's why I think that:

Square is a payment service that allows anyone with the Square-capable device and app to accept payments anywhere.

Square takes any credit card and facilitates the transaction. At the time of the transaction, the application can act as a straight credit card processing device but it can do a lot more. According to Square's website it could let you, the retailer, know beforehand that this is a frequent customer and that 10th coffee is on the house. Later, you can see all your transactions on the web. At the time of purchase, the buyer can enter in their phone number or email address and get an SMS text or email receipt delivered to them.

But, the really fascinating component of this business model (read the fine print on the website) is that the retailer needs to set up an account at Square *and* the funds go into a Square account, to be pooled with all other Squared accounts. Notice the funds don't go to a traditional bank, at least not directly.

So Square is:

1. a potential disruptor to traditional banks because the funds aren't transferred from credit card to a bank account; and

2. a potential disruptor to customer relationship management systems because it provides high value customer relationship management and loyalty programs baked right into the service.

Last night, Square Inc sent me their latest beta tester email update...

On Tue, Apr 6, 2010 at 9:57 PM, Square wrote:

On April 3rd we opened parts of Square to the public.

https://squareup.com/features

The way we opened, with a focus on the US, iPad, cash, and items,
surprised a few. Here's why we did what we did.

We're testing the rails.

Building a beautiful, safe, and secure product that moves people's money isn't easy. We intend to get it right the first time, and we're taking the time to make certain everything works as expected. From taking a payment, settling to a bank account, giving a receipt to a payer, even to how we answer our toll-free number, every step and detail along the way must be beautiful, immediate, transparent, and friction-free.

As the iPad is new on the market and more optimized for traditional retail use, we can efficiently and securely ramp up our card processing and at the same time get Square in front of payers everywhere.

We want to learn.

We've been in a limited beta on the iPhone and iPod touch for 3 months. In those 5 months we've learned a lot. While giving everyone the ability to take card payments is exciting, we're even more excited about Square receipts and the analytics Square provides to all sellers. We didn't want them to be dependent on just one payment device however, so we implemented a way to give them for cash, too. The iPad presented an intriguing way to get the Square experience to more sellers and payers immediately and learn very quickly what people like, and what they don't.

We could've done better.

We weren't upfront with our plans to you, our current beta users and the massive list of folks who expressed interest in accepting cards with their iPhones. In the future, we'll be more thoughtful about reaching out to people when we edit our direction even slightly.

Thank you.

Thank you for your patience as we build Square in the best way we know how: with your feedback. The entire Square team is working hard to integrate your feedback and get the full Square experience to your iPad, iPhone, and Android device before the end of April. We're excited to discover all the ways you'll use it.

Jack Dorsey
Square CEO

Notice the comment: "While giving everyone the ability to take card payments is exciting, we're even more excited about Square receipts and the analytics Square provides to all sellers."

Square's innovation should excite you and scare you. Here's why:

Don't look at Square as just a payment service provider, although it is one.

Don't look at Square as just a valuable web-based customer relationship management service for retailers, although it is one.

Look at Square as the next huge transactional data aggregator, because it is one. Imagine Square's transactional database as it grows, being able to mine and sell location-based insights, tied to credit scoring from credit card data and detailed purchase data.

If Square grows quickly, it'll have an extremely valuable service but an even more valuable database of transactional data down to the micro-level purchase. Imagine then being able to sell that data to anyone who wants to target their next marketing campaign!

Finally, look at Square as your next bank, because it could be one. Once you have your funds on deposit there, why not open up a Square chequing account or Square Visa of your own... I imagine it won't be hard.

Now, why didn't I think of this?

Alan Wunsche

alan@wunsche.com

P.S. Have we connected yet on Twitter? Please follow my tweets at www.twitter.com/alanwunsche

Update on "the economic edge '09" - Canadian Chamber of Commerce

I attended the Canadian Chamber of Commerce's 'the economic edge' conference yesterday. (http://www.chamber.ca/index.php/en/upcoming-events/C159/the-economic-edge/)

It was an incredibly insightful and inspiring day discussing the competitiveness of Canada, the productivity imperative, and the critical importance of investing in technology, R&D, and commercializing Canadian innovation. In a globally competitive marketplace, we discussed how "Brand Canada" needs to be improved. Hosted by the Honorable Perrin Beatty, we were joined by Prime Minister Harper to close the day.

The Globe and Mail has initial coverage here: http://www.theglobeandmail.com/report-on-business/crash-and-recovery/economy-number-one-priority-stephen-harper/article1332815/

Please contact me at alan@wunsche.com to discuss directly and also see my Twitter feed at www.twitter.com/alanwunsche for individual tweets.

Coca-Cola innovates delivery and generates new usage data (#innovation @cocacola)

As reported by Innosight in this month's issue of Strategy and Innovation, Coca-Cola is introducing the Freestyle dispensing machine. It's not only an innovative and versatile product dispenser, it's also a data generator, allowing for the device to communicate directly with Coca-Cola.

According to Coca-Cola's press release:

Coca-Cola North America today revealed that "Coca-Cola Freestyle™" is the brand name and logo for its new proprietary fountain dispenser entering market testing this summer. The fountain’s brand name captures its ability to deliver unprecedented beverage variety to suit any consumer taste -- all packaged in an innovative and interactive fountain experience.

"Coca-Cola Freestyle brings to life the refreshingly positive outlook that has always been associated with Coca-Cola," said Chandra Stephens-Albright, Senior Director of Marketing and Business Development for the brand. "It brings back the magic of the fountain of the past, re-imagines it for the future and then takes it a step farther by celebrating the idea that consumers can truly have their say at fountain -- with choices tailored completely for them."

The new self-serve fountains -- which represent a complete departure from equipment The Coca-Cola Company has offered before -- have been in development for nearly four years. The sleek new units being tested are touch screen operated, enabling consumers to select from more than 100 calorie and no-calorie brands – including varieties of waters, juices, teas and sparkling beverages that have never been sold in the United States.

The Coca-Cola Freestyle dispenser uses proprietary PurePour Technology™ to make dozens of branded beverages fresh to order, in the same amount of space as the current eight-valve machine. It will be tested in select quick-serve restaurants in Orange County, Calif., and Atlanta this summer before a wider introduction currently planned for early next year.

The particular exciting part of this story is the data side. The new dispenser helps Coca-Cola enhance its new product testing process and helps its retailers manage inventory. InformationWeek describes it here:

Freestyle will let Coke more easily test new drink flavors and new beverage concepts, such as adding various vitamin combinations to flavored waters and juices. The dispensers each contain 30 cartridges of flavorings that mix up 100 different drink combinations. The cartridges are tagged with radio frequency ID chips, and each dispenser contains an RFID reader. The dispensers collect data on what customers are drinking and how much, and transmit that information each night over a private Verizon wireless network to Coke's SAP data warehouse system in Atlanta. The company will use the data to develop reports that assess how new drinks are doing in the market, identify differences in regional tastes, and help fast-food outlets decide which drinks to serve.

Test marketing via Freestyle will be a lot cheaper than the model Coke's been using: bottling and bringing to market new products that sometimes don't gain traction and get canceled after a year or two. "This is a huge jump from our current fountain dispensers," says Christopher Dennis, Coke's IT director of e-business transformation. "It's like going from the dial phone to the BlackBerry."

Besides collecting data on what customers are drinking, Freestyle also lets Coke know what flavor cartridges each dispenser holds, so the company can advise outlets on when to order more. Coke also will use the wireless network to send out new drink formulas to the beverage machines with instructions on how to mix them up. And should the soda company ever need to recall a flavor cartridge, the network also lets it instantly disable dispensers across the nation.

Finally, here's a video by the mobile technology supplier that partnered with Coca-Cola.

I suppose that pretty soon machines like these will have their own twitter accounts!

Canada's Innovation Gap (#innovation #Canada @globeandmail)

An excellent article by Konrad Yakabuski in the July 1 issue of the Globe and Mail describes why Canada is lagging in its innovation imperative. The key vital sign for Canada is a 20% drop in Canadian R&D spending as a percentage of GDP since 2001.

Other numbers mentioned in the article:

- 3.5% of Finland's GDP is spent on R&D, compared with less than 2 per cent in Canada

- 100, number of engineers employed in R&D by General Motors of Canada

General Motors of Canada Ltd. currently employs about 100 engineers engaged in R&D activities, according to spokesperson Stew Low. It has promised to spend "almost $1-billion" on R&D in Canada over the next seven years as part of its $10.6-billion bailout by the federal and Ontario governments. But even that amounts to barely 1 per cent of annual sales, based on GM Canada's pre-crash revenues.

Also cited is the report "Business Innovation in Canada" recently published by the Council of Canadian Academies. The report addresses the key questions:

• How should the innovation performance of Canadian firms be assessed?
• How innovative are Canadian firms, and what do we know about their innovation performance at a national, regional and sector level?
• Why is business demand for innovation inputs (for example, research and development, machinery and equipment, and skilled workers) weaker in Canada than in many other OECD countries?
• What are the contributing factors, and what is the relative importance of these contributing factors?

A few highlights from the report's 14 point summary include:

• Canada has a serious productivity growth problem. Since 1984, relative
  labour productivity in Canada’s business sector has fallen from more than
  90% of the U.S. level, to about 76% in 2007. Over the 1985-2006 period,
  Canada’s average labour productivity growth ranked 15th out of 18
  comparator countries in the OECD group.
  
• Canada’s relatively poor productivity growth is due mainly to weak growth
  of multifactor productivity (MFP), which measures broadly the effectiveness
  with which labour and capital are used in the economy. The problem is not
  caused by shortcomings in Canada’s workforce or inadequate capital
  investment (with the exception of significantly lagging investment in
  information and communications technology (ICT)).
  
• Investment at the leading edge of technology (which represents the indirect
  acquisition of innovation) has also lagged. Empirical evidence suggests a
  correlation between investment in machinery and equipment and MFP
  growth. The most significant and puzzling area of lagging investment has
  been in ICT where average investment per worker in Canada was only about
  60% of the U.S. level in 2007. Investment in ICT is an important driver of
  productivity growth, particularly in many service-producing industries that
  are the main source of job growth in advanced economies. The ICT
  investment picture is consistent with the view that Canadian businesses on
  the whole — but always with notable exceptions — are technology
  followers, not leaders.

It's an important article at an important time, as the world struggles to emerge from recession. One can only hope that this article is a wake up call for Canada on Canada Day!

Vital Signs Framework for Performance Management (Part1) #vitalsigns #innovation

What are your organization's vital signs? Are they clearly aligned to your strategy? Are they fully integrated?

I get asked by corporate clients to help align strategic objectives to performance measures in the context of a planning, budgeting, forecasting project. Over the past couple of years, I've been developing a concept of corporate "vital signs".

Depending on the scope of the engagement, I begin an assessment with one key question: "how healthy (along a variety of dimensions) is the organization/business unit/functional group?" The analogy comes from the human body metaphor for gauging the health of a person but I've taken some liberty to expand it to include not only health but competitiveness, process performance, the culture of the organization, effectiveness of the leadership team, and the skill sets of the people.

The concept of vital signs is even more important in today's turbulent times. Take for example the measuring of business health (think about the bank stress tests: "Banks Needs at Least $65B in Capital") to assess the state of the economic recovery.

Play this quick mind game: If I asked your key stakeholders to list your company's vital signs in relative importance, what would they say?

Use this definition: Vital signs are a limited set of internal and external performance and risk indicators that satisfy your stakeholder needs. Vital signs can be planned, forecasted, measured, and analyzed against your strategic objectives. Note this definition is more than standard scorecarding because it looks externally as well as looking at the risks.

In the true spirit of growing economic value, would your Board, as a proxy for shareholders and stakeholders say "revenue growth" is a vital sign to indicate that your business model is competitive and that you are serving more customers? Or would it say that "operating margin" is a vital sign to indicate that you are running a lean operation? They are very likely to point to strategic risk but would they know how to measure it?

Would the management team look at "% revenues from products/services introduced in the past 2 years" as an indicator of innovativeness?

Would your employees say that "% customers highly satisfied" is a vital sign for how well you serve your customers?

What about your customers? Maybe they'd say that your company's vital signs should be your ability to solve customer problems or "% of customer problems resolved on the first call".

Would the public, as your ultimate stakeholder, insist it is your "carbon footprint"?

The fact is you may be saying "yes!" to all of these questions and you would be right. Depending on your stakeholder's perspective, there's a vital sign that's more important to them because it drives their decisions as they interact with or do work for your organization.

Clearly a hospital's vital signs are different from a car manufacturer's vital signs which are different from a professional services firm's vital signs.

How are these vital signs best identified? How do you know you've got the right ones? In future posts, I'll describe what I call the "Vital Signs Framework" for identifying and integrating your vital signs into the strategic and operational management process.

Acer Netbooks to run #Google #Android OS and threaten #Microsoft OS revenues

The Globe and Mail reported here that Acer will be selling netbooks with Google's Android free operating system (OS). The vital signs on this move mean that although today 80% of netbooks run the Windows OS today and Microsoft gets $15-$20 (U.S.) per machine for the OS software, this move can be viewed with a risk lens.

In a classic disruption described by Christensen and Raynor in Innovator's Solution, Google has moved over the years from offering a software with much less functionality to one that can hit at the core of Microsoft's cash cow operating system. Microsoft's core business is very likely at risk.

This is a very good example of the need for CFO's and corporate planners to start building risk drivers into their driver-based operating budgets. In this case, the volume [# of netbooks sold with the MS operating system installed] is a driver for Microsoft's budgets and the price rate is $15 per installation. While Acer's move was anticipated for some time, with this announcement those revenues are suddenly at risk and should be offset with a risk volume driver [# of netbooks sold that will sold with Google Android instead of an MS OS] to reflect the anticipated reduction in volume.

Future of Work | @Deloitte @Time

Any discussion about the innovation of management processes necessarily leads to the future of work, how work gets done and how to retain talent that will ensure the organization is agile, flexible and able to compete in the fast-changing global environment. Time is the latest to publish their insightful Future of Work online.

Deloitte's innovative employment practices are featured:

It's a shift, in other words, from a corporate ladder to the career-path metaphor long preferred by Deloitte vice chair Cathy Benko: a lattice.

At Deloitte, each employee's lattice is nailed together during twice-a-year evaluations focused not just on career targets but also on larger life goals. An employee can request to do more or less travel or client service, say, or to move laterally into a new role — changes that may or may not come with a pay cut. Deloitte's data from 2008 suggest that about 10% of employees choose to "dial up" or "dial down" at any given time. Deloitte's Mass Career Customization (MCC) program began as a way to keep talented women in the workforce, but it has quickly become clear that women are not the only ones seeking flexibility. Responding to millennials demanding better work-life balance, young parents needing time to share child-care duties and boomers looking to ease gradually toward retirement, Deloitte is scheduled to roll out MCC to all 42,000 U.S. employees by May 2010. Deloitte executives are in talks with more than 80 companies working on similar programs.

Time also mentioned labour trends in their report with these indicators:

According to consulting giant McKinsey & Co., nearly 85% of new jobs created between 1998 and 2006 involved complex "knowledge work" like problem-solving and concocting corporate strategy. Job opportunities in mathematics and across the sciences are also expected to expand. The U.S. Department of Labor spotlights network systems and data communications as well as computer-software engineering among the occupations projected to grow most explosively by 2016. Over the next seven years, the number of jobs in the information-technology sector is expected to swell 24% — a figure more than twice the overall job-growth rate.

P.S. For those noticing the title, it's an experiment with tags for updating this post on my twitter feed: www.twitter.com/alanwunsche

Googlenomics [@Wired]

Wired Magazine's "Secret of Googlenomics" article explains the math behind Google's AdWords, Google's online unique advertising auction.

The entire article by Stephen Levy is a great read but what I found particularly interesting is the following passage because it describes how every bit of data has potential value:

Keywords and click rates are their bread and butter. "We are trying to understand the mechanisms behind the metrics," says Qing Wu, one of Varian's minions. His specialty is forecasting, so now he predicts patterns of queries based on the season, the climate, international holidays, even the time of day. "We have temperature data, weather data, and queries data, so we can do correlation and statistical modeling," Wu says. The results all feed into Google's backend system, helping advertisers devise more-efficient campaigns.

To track and test their predictions, Wu and his colleagues use dozens of onscreen dashboards that continuously stream information, a sort of Bloomberg terminal for the Googlesphere. Wu checks obsessively to see whether reality is matching the forecasts: "With a dashboard, you can monitor the queries, the amount of money you make, how many advertisers you have, how many keywords they're bidding on, what the rate of return is for each advertiser."

Wu calls Google "the barometer of the world." Indeed, studying the clicks is like looking through a window with a panoramic view of everything. You can see the change of seasons—clicks gravitating toward skiing and heavy clothes in winter, bikinis and sunscreen in summer—and you can track who's up and down in pop culture. Most of us remember news events from television or newspapers; Googlers recall them as spikes in their graphs. "One of the big things a few years ago was the SARS epidemic," Tang says. Wu didn't even have to read the papers to know about the financial meltdown—he saw the jump in people Googling for gold. And since prediction and analysis are so crucial to AdWords, every bit of data, no matter how seemingly trivial, has potential value.

Innovating through a Recession

Professor Andrew Razeghi (www.andrewrazeghi.com) of Kellog School of Management has written a compelling piece called "Innovating through a Recession, When the going gets tough, the tough innovate" - it's available as a download here: PDF Download

Taking lessons from history and the Great Depression, Razeghi provides insights into how NYTimes, Fortune, Kraft (Miracle Whip), Motorala, Texas Instruments, La-Z-Boy, and Apple innovated and succeeded when others pulled back on their efforts.

He also shows how companies like Vlasic reduced their prices in the hopes of making it up on volume but in the end it damaged their brand.

Razeghi's 7 Principles:

1. Listen to the market.  It's quieter when it's less crowded.  Unmet needs abound.

2. Invest in your csutomers  Now they need you most.  Loyalty hangs in the balance.

3. Rather than reduce price, offer more value to your customers and demand greater value from vendors.

4. Increase communications with your customers.

5. Move longer-term projects forward not back.  Now is the time to grab market share.

6. In recession, not all costs are create equal.  Maintain or increase investment in "good costs"; prune "bad costs"; use judgment on "it depends costs".

7. If you don't have money at least spend the time.

- "Now is the time to unleash corporate creativity.  The greatest mistake you can make now is to mortgage your future by failing to innovate"

It's a very good piece for innovators looking for inspiration in challenging times.  I highly recommend it.

Vital Signs: IMF World Economic Outlook Update (January 2009)

At the WEF Davos January 2009 Meeting, the session called "Rebooting the Global Economy" began with Matthew A. Winkler (Editor-in-Chief, Bloomberg News, USA) providing a rundown of the International Monetary Fund's (IMF) latest outlook. Going to the source January 2009 World Economic Outlook Update, the IMF gives us this summary:

"World growth is projected to fall to ½ percent in 2009, its lowest rate since World War II. Despite wide-ranging policy actions, financial strains remain acute, pulling down the real economy. A sustained economic recovery will not be possible until the financial sector's functionality is restored and credit markets are unclogged. For this purpose, new policy initiatives are needed to produce credible loan loss recognition; sort financial companies according to their medium-run viability; and provide public support to viable institutions by injecting capital and carving out bad assets. Monetary and fiscal policies need to become even more supportive of aggregate demand and sustain this stance over the foreseeable future, while developing strategies to ensure long-term fiscal sustainability. Moreover, international cooperation will be critical in designing and implementing these policies."

For those of us who lead strategic planning efforts, we work through a rigorous process of establishing a range of possible future scenarios (reference "Managing Amid Uncertainty"/PDF by author Michael Raynor of The Strategy Paradox) and build strategies that are consistent with those scenarios. We use macro economic factors and more industry specific factors.

The IMF's report provides the following macro economic factors:

• Global growth in 2009 is expected to fall to ½ percent when measured in terms of purchasing power parity and to turn negative when measured in terms of market exchange rates.
• The global economy is projected to experience a gradual recovery in 2010, with growth picking up to 3 percent.
• Financial markets are expected to remain strained during 2009. In the advanced economies, market conditions will likely continue to be difficult until forceful policy actions are implemented to restructure the financial sector, resolve the uncertainty about losses, and break the adverse feedback loop with the slowing real economy. In emerging economies, financing conditions will likely remain acute for some time—especially for corporate sectors that have very high rollover requirements.
• Growth in emerging and developing economies is expected to slow sharply from 6¼ percent in 2008 to 3¼ percent in 2009, under the drag of falling export demand and financing, lower commodity prices, and much tighter external financing constraints (especially for economies with large external imbalances).
• The IMF's baseline petroleum price projection has been revised down to $50 a barrel for 2009 and $60 a barrel for 2010 (from $68 and $78, respectively, in the November WEO Update), and risks to this projection are on the downside.
• In the advanced economies, headline inflation is expected to decline from 3½ percent in 2008 to a record low ¼ percent in 2009, before edging up to ¾ percent in 2010. Moreover, some advanced economies are expected to experience a period of very low (or even negative) consumer price increases. In emerging and developing economies, inflation is also expected to subside to 5¾ percent in 2009 and 5 percent in 2010, down from 9½ percent in 2008.

References: IMF World Economic Outlook Update 28 January 2009, PDF)

The World is Your Think Tank

In a recent paper, "The World is Your Think Tank - How to Harness Idea Flow and Top Talent for Competitive Advantage" I wrote about a new business model that can harness both internal and external talent more effectively, including references to Dell, IBM, and Innocentive :

To compete against Asian organizations, North American companies need to continually become more competitive and innovative. As the world becomes increasingly “flat” and hypercompetitive, labour advantages will tip the scales in favour of companies in developing nations. A key determinant of future success for western European and North American organizations will be the ability to attract creative, problem-solving talent.

The world is your think tank proposes a new HR-finance innovation management team and decision-making model to successfully translate idea flow into cash flow. This new model uses an enterprise-wide process for tapping the creativity of employees and the global talent pool. Only the organizations with access to the best ideas and the best-integrated idea management processes will achieve long-term survival.

Organizations must also take the crucial next step of managing the idea flow so they can identify and bring the best ones to fruition. By tightly integrating the HR and finance functions into a new role that sparks and manages idea flow, global talent from anywhere can be transformed into cash flow and balance sheet value.

As the financial crisis has resulted in a global recession in 2009, I am even more convinced that both the HR organization and the CFO have significant responsibilities to ensuring that the best ideas are surfaced and acted upon.