Category: Innovation

Digital society has already arrived for billions of people, but the implementation of digital health is just beginning.

We’re now starting to understand which digital solutions can help solve healthcare issues, like tracking digital biomarkers for example. We’re also realizing that our digital society can create new healthcare problems. Brain hacking?

If we ignore the critical gap between digital society and digital health, it will only grow over time. The ideas below put an emphasis on being proactive.

1. Prevent upstream digital health problems.

It took time, but we’re making progress in dealing with upstream problems such tobacco, environmental toxins, and food safety. There are also far-reaching challenges upstream when it comes to digital society.

This includes health issues related to social networks, digital devices, and artificial intelligence. When the business models of these industries conflict with healthcare outcomes of society, the business models will win.

While there are still not enough research studies, the ones that have been completed are coming up with some disturbing results.

“All screen activities are linked to less happiness, and all nonscreen activities are linked to more happiness. Eighth-graders who spend 10 or more hours a week on social media are 56 percent more likely to say they’re unhappy than those who devote less time to social media.” — Jean M. Twenge

The above analysis is related to The Monitoring the Future survey, designed to be nationally representative in the US, with more than 1,000 questions for 12th-graders every year since 1975 and eighth graders since 1991.

One of the additional challenges with the digital world is that we should expect legal rules to be consistently behind the curve. Regulators are currently not equipped with the right skills, incentives, and resources to keep up with changes in digital technology.

Thus it is up to the private sector, both consumers and businesses, to be proactive. Tech employees are starting non-profits focused on identifying potential harm of digital platforms. Business leaders are taking a stand about digital advertising. Investors are communicating that social purpose must be tied to profits. We need more of all of the above — being passive is not a solution.

2. Avoid private sector monopolies for public goods.

Healthcare companies save millions of lives every year. That shouldn’t stop us from identifying clear evidence of business model misalignment which can lead to adverse health outcomes, even death. This challenge already exists in healthcare, and it is absolutely relevant for digital health.

The history of patent law describes a very complicated balance between stakeholders. Most people want innovation. There is disagreement on the right mix of incentives.

As part of this debate, it’s always important to check on the final results. The story of rising insulin prices in the US is one example. A quick glance at the chart below makes it clear that the current mix of incentives is not leading to desired outcomes. The system is being gamed.

It’s easy to blame the companies, and they are absolutely part of the problem. They are also responding to the incentives of the system.

With digital health, this challenge becomes even more relevant because digital health products and services should be highly deflationary over time. If we see rising prices for digital health services in the future, that would be a massive failure of incentives.

A single private company owning a patent on a multi-billion dollar revenue life-saving treatment is a private sector monopoly resulting in less competition. When the state uses its powers of coercion to enforce this patent, it makes a value judgement that society is better off in having a private sector monopoly instead of competition. Given the long history of abuse by private sector monopolies across a wide variety of businesses, we typically expect a high level of price regulation to accompany monopoly power, and healthcare should not be exempt.

Many life-saving drugs were initially supported through government funded research. The pricing of these drugs has a massive impact on the healthcare outcomes. And we know that a monopoly will naturally lead to overpricing precisely because of a lack of competition. So at the very least, the burden of proof should be on the company to maintain a monopoly, not society. Also, it would be incompetent for society to outsource the pricing of drugs to monopoly holders of patents.

This logic applies to the owners of digital health patents, except with even more potential for misalignment. The burden of proof for digital health patents should be extremely high, not low.

Moreover, once a digital health patent is granted, that monopoly pricing power needs to be regulated. In the digital world, it’s not enough to expect modest price inflation. We know that competition in the digital world results in severe price deflation and this should be the benchmark for any price regulation of digital health monopolies.

3. Ensure user friendly data portability.

Forgetting about distribution channels is easy. In the digital world, however, these channels have direct relationships with customers, and importantly also customer data. Digital super-aggregators enjoy some of the most influential market power ever witnessed in the history of business.

There are already problems in healthcare with the market power enjoyed by distribution channels. The potential for abuse of power in digital health distribution is even more significant. It’s mostly a good thing that companies like Amazon are entering healthcare aggressively. But let’s not assume that the company and others will be immune from increasing market power.

Specifically, we need to have more clarity about healthcare data portability. It’s tempting to use the word healthcare data ownership, but the topic is not that simple. There is a difference between ownership, control, and privacy. While the infrastructure and nuances of those issues will need time to sort out, the most obvious starting point is data portability.

Patients should have the right to access and transfer the data being gathered about their health. This will become even more important in the future as the amount of passively collected digital healthcare data will increase exponentially. If an algorithm is analyzing your health from a video camera recording, does the algorithm need your permission? Would you want the right to access that data output if you choose?

Regulators will be way behind the curve on this issue. In addition, most users of healthcare are likely to choose convenience over control. At the very least, we need to ensure that there is an option for user-friendly digital data portability if someone decides to switch health providers.

Moving forward

When it comes to digital healthcare, we can’t wave a magic wand and say “let the government deal with it, it’s not my problem.”

It would also be irresponsible to take the view that large companies will solve these challenges on their own.

All stakeholders have to work together for meaningful progress in digital healthcare. It’s part of Capitalism 2.0 where we all have a role as patients, healthcare specialists, caregivers, employees, public servants, non-profit leaders, business executives, startup founders, social impact innovators, and investors.

3 Rules for Digital Health in a Digital Society was originally published in Fusion by Fresco Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

While it’s inspiring to think about becoming an interplanetary species, there’s plenty of opportunity in bringing space back to Earth.

Why bring space to Earth?

The dream of space has always been about leaving Earth. So it seems counterintuitive to focus on the opposite. It’s almost too practical.

And yet it’s already happening. Private sector innovation is leading to improvements in both launchers and satellites which monitor our planet from space — creating exponential growth in data back on Earth. Cost, variety, and most importantly, speed of iteration, have been transformed.

As an example, our portfolio company Spire went from no satellites in 2012 when we first invested to 40 by 2017, with applications in areas including shipping and weather.

The infrastructure is now at critical mass to start opening up to partners for building external applications. Instead of building and launching your own network of satellites, you can get access to the data directly.

There are also many under appreciated applications on Earth which will be critical to successfully becoming an interplanetary species. Take digital healthcare as an example: portable diagnostic devices, telemedicine, and augmented reality are just three of the obvious areas of overlap.

Can space eat the world?

The space ecosystem up until recently has been primarily focused on space infrastructure. The massive opportunity going forward is to connect this amazing group of innovators to other sectors of the economy and society.

20 years ago, the Internet was viewed as a separate industry by most people. Very quickly in the past few years, the consensus has come around to the idea that “software is eating the world”.

The space industry has a similar potential for impact across society. But whether that potential will be realized is still unclear. Whether that impact will be positive or negative is also unclear. It’s up to all of us to figure it out — together.

Start with talent

Our team at Fresco Capital recently held an event in Singapore about expanding the ecosystem, which included a panel about talent.

One of the panel participants was Lynette Tan, Executive Director at Singapore Space and Technology Association. After this panel she wrote an overview about some of the opportunities in the sector. Here is a key takeaway related to building the talent part of the ecosystem:

“The integration of space technology into our daily lives also means new modern disciplines are now required. With the avalanche of data from and flowing through space systems, programmers, computer scientists and big data experts are all likely to find increasing demand for jobs seeking to monetise these assets.”

The talent needs described above are clearly cross-disciplinary.

But that’s not all. If we’re going to build successful applications, there will be a need for design, user experience, and sales, to name a few obvious categories that are not traditionally associated with the space industry.

That’s great news in the current environment of concerns about technology replacing humans in jobs. Space applications are a potential growth driver of new jobs across the entire economy.

Of course, there’s the challenge of aligning our education system with these job opportunities, but that’s worthy of an entirely separate discussion on its own.

Practical public / private

At the International Astronautical Congress (IAC) just held in Adelaide, there were representatives of both the public and private sector from all over the world.

On one of the industry panels, a private sector member was the living embodiment of the entitled capitalist, saying something to the effect of “the only role of government is to get out of the way.” This view has the benefit of clarity, but it has the much larger drawback of being completely impractical.

At this same conference, I had a chance to share a panel with members of both the European Space Agency (ESA) and NASA, as well as give a presentation to an audience of country representatives from all over the world. Overall, I found these public sector members to be very self-aware of their organizational constraints and refreshingly open minded about finding creative solutions.

Here’s the reality: government to government space agreements and negotiations move at a snail’s pace. The private sector can move faster in theory.

Unfortunately, there are several roadblocks. Export restrictions. Import restrictions. Talent restrictions. Mostly because space is considered to be a strategic industry, which is understandable.

This creates an opportunity for private sector companies operating in applications because the regulatory environment is completely different from the traditional space industry. Obviously, there are still regulations and restrictions when it comes to data and applications. But the level of freedom for the private sector is significantly greater when operating in this application layer as compared to space infrastructure.

It’s important to recognize that governments will continue to play a key role in developing the space industry. At the same, the private sector has a unique opportunity to innovate around applications.

Connecting space to applications

It’s no accident that some of the most exciting private sector entrepreneurs in the space sector have an Internet background. But this cross-over shouldn’t be limited to billionaires who have the capital to start investing in space infrastructure.

One of the lessons from the development of the Internet is that eventually infrastructure and applications do get connected.

Sometimes this is through open standards and co-operation. HTTP is everywhere and yet invisible to almost every user.

Conversely, even a single company can dominate a key connection layer with regulators struggling to catch up.

We could all sit back passively and hope that things “just work” in the evolution of connecting space to applications. That when a billionaire decides to set up either a for profit or even a non-profit, they will be mindful of other stakeholders.

Alternatively, we could be proactive and intentional in building these connections with a mix of co-operation and competition. And in the process, just like the Internet, we may discover that the number of applications related to space are infinitely larger than we ever imagined, right here on Earth.

Bringing Space Back to Earth was originally published in Fusion by Fresco Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

Photo credit: Li Yang

It’s no secret that global companies have been building Silicon Valley Innovation Outposts, but as Steve Blank cautions, many companies will find that they will simply get entertainment value in the form of Innovation Theatre instead of tangible benefits.

So for everyone involved in or thinking about global corporate innovation and Silicon Valley Innovation Outposts, below are the top 5 signs of Innovation Theatre with a suggested solution to fix each problem.

5. There is no fast track decision making and/or budgeting process for experiments.

A typical scenario is a large company speaking with a startup and saying all the right things. Then, once it comes time to actually close a pilot deal, the big guns from global headquarters (GHQ) are brought in with the 53 page due diligence questionnaire and the external legal counsel identifies 1,000 and 1 risks which need to be negotiated. Rightfully, the startup is thinking WTF. Big guns make sense when scaling up across your entire company but they are weapons of startup destruction at the pilot stage.

Solution
Create a fast track for pilot deals with startups. You have to go through the corporate process to create the fast track once, either using a pure internal approach or with an external partner. But once you go through this process, then when you engage with startups you can move at something resembling startup speed because the fast track is already in place.

4. You have no dedicated system for keeping track of startup ecosystem interactions and information.

Corporate and startup introductions are frequently made over reply all email chains with random unrelated subject lines like “Re: Running 5 Min Late”. In addition, companies commonly have various employees in different departments writing internal research reports at regular internals that nobody has time to read. That’s not a system, that’s Innovation Theatre.

Solution
You need a dedicated system, and hacking Salesforce for the purpose would most likely make a bad situation worse. There are now dedicated systems just for this, such as Kite, which focus on the needs of corporate innovation. If that feels like too much as a first step, keep it simple with a lightweight funnel tool like Pipedrive which can get you started for the cost of one meeting per month at a trendy coffee shop in SF (disclosure, we are investors in both Kite and Pipedrive because these are real tools solving real problems for real people like you).

3. Your front office team consists of people from a single ethnic group and gender.

Let’s say your front office team consists entirely of white men. This lack of diversity will leave you with a competitive disadvantage when it comes to finding true innovation. Put simply, it’s a dumb business decision. But lack of diversity is not limited to teams of white men. Many companies from other countries also have very homogeneous teams. A team of all Chinese or all Indian or all Japanese men is similarly challenged when it comes to diversity.

Solution
Diverse perspectives give you a competitive business edge. The obvious step is to hire from a more diverse talent pool. But if corporate hiring, budget or cultural hurdles are delaying the process to infinity, then at the very least find some external partners who have a diverse team to fill your gaps.

2. You manage tours of famous places and companies in Silicon Valley.

Even CEOs of global multinationals love selfies at famous places, famous events and especially with famous people. But if top leadership is spending time at tours of Facebook, Google and Apple campuses, unfortunately that’s simply startup tourism. Which came first at Google, world leading innovation or free food? Better not to confuse correlation with causation.

Solution
Spend more time in the trenches talking to actual startups. The reality is that you won’t have enough time to do everything directly yourself because there are simply too many options, so the most effective strategy is to find partners who can help guide you to the relevant startups for your specific needs. Your selfies won’t be famous now, but if you meet the right startups those selfies will be much more valuable in the future. And, more importantly, you’ll be much closer to the edge of innovation.

1. Getting distracted by the surface level Silicon Valley lingo.

The people in Silicon Valley have their own lingo. It starts with their speaking speed: faster than fast. They also randomly sprinkle in words like big data, machine learning and blockchain, which all started with some meaning originally but have become overused buzzwords with the passage of time. Finally, everyone picks up the habit of name dropping and can figure out a pathway of connections to at least someone from the PayPal Mafia. It’s all too easy to get distracted by this lingo and miss out what’s going on underneath the surface. Coffee shop lingo talk without any outcome is an all too common form of Innovation Theatre.

Solution
You need someone either on your team or an external partner who knows how to cut through the bullshit and find the brilliance because Silicon Valley has plenty of both. Someone who can connect you to the right people at the right time and, most importantly, people you can trust.

Beyond Entertainment

When building your Silicon Valley Innovation Outpost, make sure to avoid Innovation Theatre so that you can get tangible benefits. If you want entertainment value, go watch Silicon Valley, the show. It’s cheaper, and funnier.

Planners from all over the world try to replicate the success of Silicon Valley with varying levels of success. Everyone from New York City (Silicon Alley) to London (Silicon Roundabout) to Hong Kong (Silicon Harbour) to Moscow (Skolkovo) has mimicked Silicon Valley in an attempt to build their own version of the lucrative startup hub.

The problem is that Silicon Valley has unique features that have allowed the region to become the world’s center of gravity for innovation. Simply copying the things that allowed Silicon Valley to become such a success won’t work, as some regions have already discovered. The tech hubs need to play to their strengths and evolve in their own unique ways.

Silicon Valley’s Recipe for Success

It’s easy to see why governments want to create their own version of Silicon Valley when looking at the valuations the California region is blessed with. There are now at least 74 startups there valued at more $1 billion each. The total value of these so-called “unicorns” is $273 billion.

The reasons for Silicon Valley’s success are many and most of them can’t be easily copied. Geographically, the region is perfectly located near San Jose, San Francisco, and Oakland. Historically, Silicon Valley has experienced decades of success with well-established companies like Google, Facebook, Apple, Fairchild Semiconductors, Intel, Tesla, and other esteemed companies.

In Silicon Valley, everyone knows somebody who has gotten rich off of stock options they think they’re smarter than…which in turn propels them to take a risk at a startup. Perhaps most important for the region’s growth is this competitive and creative culture that continues to allow so many companies to thrive. Not to mention, an endless supply of elite students from Stanford and Berkeley graduate (and dropout) each year to create the next crop of potential tech giants right in the Valley.

But this formula can’t be bottled upon and shoehorned in anywhere. The wealthy people in San Francisco might work at Google and the likes, yet in Hong Kong and New York, the upper class tend to come from finance, and in Los Angeles it’s Hollywood—hopefully you get the idea. This still doesn’t stop governments and business people from trying to replicate Silicon Valley without taking culture and demographics into account.

Being Unique: Playing to Your Region’s Strengths

Every would-be tech hub has its own unique characteristics and features that need to be taken advantage of. If you go to a Starbucks in Los Angeles, you’re likely to bump into a celebrity or similar entertainment personas. For Hong Kong or New York City, odds are high that you’ll fall into a conversation around recent market performance and SEC developments.

Playing to a specific region’s strengths helps lead to success. Modeling a hub exactly from Silicon Valley in areas that don’t carry the same characteristics becomes a major disadvantage. New York, Hong Kong, and London are better suited to be fintech startup hub than Silicon Valley. Los Angeles is better suited to be an entertainment startup hub than Silicon Valley. Playing to those unique strengths make more sense than trying to replicate Silicon Valley.

Fostering Growth

Government benefits are a welcome way to help foster startups, yet they’re only the baseline and not the endgame. All those helpful benefits (friendly tax policies, real estate deals, subsidies, incubators, etc) only go so far. The barriers of entry to create a tech innovation center in the vein of Silicon Valley are so high that these benefits are simply the table stakes. A bigger, greater hook is needed for regions to succeed.

Regions need to embrace what makes them unique and build off of that. With everyone trying to copy Silicon Valley, there’s plenty of room for new players with their own strengths. Any place that simply tries to do exactly what Silicon Valley is doing will pale in comparison to the original.

There has been an explosion of hardware startups over the past few years led by the Maker Movement and startup programs like Hax (where I’m an advisor). I’ve seen and worked with well over 100 hardware companies in the past five years. In that time, I have observed that hardware startups think differently than software startups. They shouldn’t. All hardware companies are software companies. The sooner they realize it, the sooner they’ll become successful.

Look at today’s most successful hardware companies. Apple and Tesla build amazing, innovative hardware. And at its heart, a Tesla is an iPad on wheels.

It’s okay if you don’t believe me. But I just upgraded to version 7.1 of their software, which includes self-parking and summon features. It means my car self-drives in parking lots. It’s not even software in disguise. It’s just software. They didn’t send me any new hardware, just an update over WiFi.

Software isn’t Second Priority

It’s tied for first. Obviously a hardware company needs an amazing design and has to worry about manufacturing. The economics of a hardware startup are different. But a great hardware solution needs great software.

If you were going to build the connected camera (as if your iPhone didn’t suffice), designing and engineering a perfect, beautiful camera wouldn’t be enough. People want to frame their pictures, or share them online. Your camera has to have a user-friendly social element or you’ve missed the boat. And if you don’t want to design your own social software, it needs to integrate deeply with Instagram, Facebook, and Twitter.

People, including me, are spoiled. We expect a great software experience wherever we go. If you’re building an IoT product, it’s not enough to connect something to the internet. Users need utility from your software too.

Software can never be an afterthought.

This area is where hardware companies miss out. If they don’t prioritize software, they’ll be unsuccessful. I saw this happen with a company in the pet space. After their successful Kickstarter campaign, they delivered an awesome hardware solution with so-so software. Once they upgraded their software and then built an app that augmented the experience, they were able to draw in new users to their hardware as well as keep the existing customers who purchased their hardware more engaged. Lastly, the additional software opened up way more monetization opportunities besides the hardware. (Nobody besides Apple makes money on hardware.) Only once the company realized that software was the key ingredient did their hardware solution become successful.

What Separates Leaders from Followers

Most fitness trackers do the same thing. They count steps, measure progress, and suggest goals. But if you use a tracking device, I’ll bet it’s a Fitbit.

It should be. Fitbit has the best solution for helping you stay fit and lose weight. It’s simple to compete against your friends (and yourself) as you work towards fitness goals. I find myself walking more so I can catch up with my competitive friends. I take particular pleasure (and taunt them) when I beat my friends on the the leaderboard.

Products are supposed to get a particular job done. The job isn’t to count steps, or else there’d be little distinction between the trackers. Fitbit has invested time, energy, and resources into building a data analytics solution to solve the real job: helping people lose weight. And why are they so successful? Because they invested in software that accompanies their hardware.

In my experience, I’ve never invested in a hardware company. I’ve only invested in hardware or IoT companies that are software or big data companies in disguise. It’s a massive differentiator.

Hardware’s Maturation

Consider this: Intel, a global hardware leader, has more software developers than Facebook. Intel is a software company that happens to produce hardware.

If it’s good enough for world-shaking market leaders, it’s good enough for your hardware startup. Go become a software company as well.

The Internet of Things (IoT) changes everything.

That’s one of the least hyperbolic statements I can make. Existing businesses will be disrupted and their business models will be changed forever. In fact, IoT and the Lean Hardware movement are already a driving force behind why The Nature of the Firm is no longer a tenable thesis.

Let’s talk about why that’s the case.

Meet The Connected Dishwasher

Put yourself in the shoes of Philips, consumer products manufacturer. Philips makes dishwashers. One day, they’re going to throw a sensor and wifi chip into the newest dishwasher model and call it a “smart” appliance.

We’ll have the thing we never knew we needed: the connected dishwasher. (But trust me, I will buy one.)

It’s not so simple though. Philips can’t put some chips into an appliance and call the project complete. They need to design an app that consumers could conceivably use. Then, they need an API so that Smart Things or some other home automation software can control it.

Philips was a consumer hardware manufacturer. But with the connected dishwasher, is it still?? Or is it a software company? Is it an App and API company? Of course not. Philips will continue to build appliances and outsource that kind of work to someone else.

But there’s more work left. The dishwasher needs to communicate to the power grid if it’s going to be “smart” and cycle at the most opportune times. Does that make Philips a data communication company?

And what happens when the dishwasher needs servicing? Luckily, its sensors can determine when repairs are needed before something breaks. The dishwasher “calls” a service provider and tells them what part it needs. Or better yet, a technician could log in remotely and fix the problem with software. No in-person visit required.

Philips is now solving problems the same way Tesla “repairs” my car! Doesn’t that strike you as a big leap for a consumer appliance company?

Dishwasher-as-a-Service

I say “DaaS” only partly tongue-in-cheek.

Because when Philips walks down this path, it will transform how the company does business. Its existing models aren’t compatible with its business needs. The dishwasher company will become a service company.

Not only that, but Philips isn’t competing against its old peers anymore. The company enters a field where it doesn’t have any core competencies: home automation.

The consumer isn’t buying a dishwasher. In their mind, they’re buying another home smart device, no different from a new Beats Pill in their mind. Besides every other consumer appliance manufacturer, Philips now has to compete with Apple, Bose, and Samsung for the same top of mind and share-of-wallet.

The other dishwasher companies don’t seem like a big threat anymore.

Where Do We Go Now?

History repeats.

Today, we’re in a mobile-focused world. Before that, it was the web. Then PC, and then Mainframe. Right now, people think IoT is geeky. They believe it can change “infrastructure,” whatever infrastructure means to them. But what they don’t realize is that IoT is probably the driving force of the next era of computing. We already have more IoT sensors connected to the internet than people In the next five years, the number of sensors will outnumber people by a factor of 10.

Philips and companies like them will have their business models disrupted. They’ll walk down new paths, completely unprepared for the risks that they’ve introduced.

But that’s where the massive opportunities lay. Startups can fill the gap. Investors can finance them. Someone will profit from the demise of the Old Guard.

The next era is coming, and it will either be the IoT era or an era driven by it.

Keep your eyes peeled for opportunities.

—

Photo from: https://pixabay.com/en/network-iot-internet-of-things-782707/