Mark Zuckerberg is “Misinformer of the year,” says Media Matters, highlighting Facebook’s starring role in the unfolding “tech backlash.” Overall, 2017 “was a terrible year for the tech industry,” Farhad Manjoo of The New York Times declared recently. Other tech observers chimed in: Silicon Valley is “under regulatory siege,” it has “lost its humanity,” has become “too predictable,” and most of its innovation (funded by over $160 billion in venture capital) is “driven by the latest hype cycle, not the real problems we face.”
Erel Margalit is a leading Israeli venture capitalist who for more than twenty-five years has successfully invested in bothtechnological innovation and innovative solutions to real social problems. “People in Silicon Valley and other business leaders need to realize that they can affect significant change beyond just their own companies,” Margalit told me recently.
Giving back to society through philanthropy is how high-tech tycoons have tried to “change the world” beyond what their companies do, in some cases pledging to donate at least half their wealth to charity. It’s possible, however, to multi-task and actively invest in business and social innovation at the same time, as Margalit has done. His social profit investment model has taken him from building corporations to improving left-behind communities to exporting his country’s expertise and entrepreneurial drive and to exploring regional and global cooperation.
The commitment to pursuing both business profit and social profit came early for Margalit. His mother was an educator and his father a social entrepreneur, establishing the first community center in a small town in northern Israel. After earning a PhD in philosophy from Columbia University, Margalit joined the Jerusalem Development Authority in 1990, where he led an initiative to convince high-tech companies from the U.S. and Europe to open R&D or manufacturing facilities in Jerusalem, helping jump-start the city’s economic and technological development.
In 1993, Margalit founded Jerusalem Venture Partners (JVP), which became a very successful investor in high-tech startups—a dozen went public on NASDAQ and more were acquired by larger companies. By creating independent Israeli companies and the infrastructure to support them, “we brought hope to a young generation who were familiar with Jerusalem’s impressive history but needed a current story, a story that appeals to today’s generation,” says Margalit.
To further invest in its community beyond creating independent companies, JVP established the “media quarter” in Jerusalem, turning the British Mandate-era National Mint building and the Ottoman-era storehouses around it into an innovation and cultural hub, housing startups, an accelerator (of the Hebrew University student union), and performing arts organizations, in addition to JVP headquarters.
The success of the media quarter in Jerusalem led Margalit and his partners to realize that “if we can transform a city with innovation, we can transform a country,” he says. They took their vision to the southern city of Beer-Sheva where, together with the local university, government agencies and other entrepreneurs, they created another innovation hub. This one has been focused on cybersecurity and helped attract large multinationals who opened their cybersecurity R&D centers there, sometimes after acquiring Israeli startups. “We showed that with public-private partnerships,” says Margalit, “a place like Beer-Sheva [in the Negev desert] where camels used to roam, now has a story to tell as a world leader in cybersecurity.”
Later, when Margalit served in the Israeli parliament between 2012 and 2017, this community development vision has expanded to include a total of seven regions in Israel. These include a food tech innovation hub in the Galilee region in the north of the country and a digital healthcare hub in Haifa, Israel’s third largest city. For Margalit, this is all about rallying the business community—in Israel and from around the world—to innovate and make a business profit while increasing social profit in regions that are left behind and are used to thinking small. “The very process of innovation and change gives hope to these places,” says Margalit.
The idea is to make communities think and act like startups. Ambition drives startups and thinking big moves communities forward and helps them retain their members, even attract new ones. “It gives life meaning,” says Margalit, “when you can create something new in your own community and do it in a way that invites others.” For him, creating in the community means not only starting new businesses, but also innovating in all aspects of the life of the community including education, arts and culture.
Some members of the community start their lives in conditions that don’t give much hope for meaningful and productive experience. Making social profit also means helping disadvantaged youth to “experience success,” instead of living under a burden of “other people looking at them as failures,” says Margalit.
So fifteen years ago, Margalit started Bakehila (“in the community”), a non-profit that since its founding has impacted over 25,000 children in impoverished neighborhoods in Jerusalem. Today, the organization is developing new programs aimed at fostering the next generation of social leaders in Israel and is expanding its operations into more neighborhoods in additional disadvantaged communities across Israel, including Arab communities. It has successfully concluded a number of “social exits,” with three communities now running their own program operations independently.
Late last year, Margalit returned to his position as Chairman of JVP. The venture capital fund recently launched a new initiative, JVP Play, bringing together early-stage startups and large multinationals to collaborate on product development from idea generation to market introduction. The JVP Play process increases the startups’ chances of success and provides global players an entry into Israel’s innovation ecosystem.
“Entrepreneurs can build bridges,” says Margalit. Not only between innovators and their potential customers, but also across conflict-ridden regions such as the Middle East, or those that could benefit from more home-grown innovation such as Europe.
Pursuing his belief that “innovation is a bridge,” Margalit recently participated in a regional development conference in Qatar, attended by government officials and business leaders from Afghanistan, Algeria, Morocco, Lybia, Kuwait, Oman, Tunisia, Jordan and Qatar, as well as China, France, Canada, Australia, and Germany. He sees as a “dramatic development” the fact that “innovation is beginning to become a word that is being used in our own region. It’s thirsty for water, for jobs. When you have jobs, you have hope.”
Margalit has known France’s Emmanuel Macron since the latter’s days as an investment banker. “I want France to be a start-up nation,” President Macron told a business audience in Paris last year. A few months ago, Margalit presented to French officials a number of specific proposals for encouraging closer working relationships with Israel, the original start-up nation. “If France wants to become a European leader, it needs technology and innovation, in needs to become a start-up nation,” says Margalit.
In the U.S., Margalit sees a trend towards “opening up to international innovation.” When a country opens up to outside innovation, he says, it doesn’t lose jobs, it becomes a center for something bigger, for global collaboration, driving economic growth.
But also driving social profit, and possibly, steering Silicon Valley towards new places to invest in and apply its creativity. In “Now Tech Moguls Have to Work to Appear Not-Evil,” Bloomberg’s Shira Ovide suggests that Silicon Valley companies “must persuade, with actions, that they’re doing more good than harm.”
Following Margalit’s social profit model is one such possible action and some in the Silicon Valley community have already started on this journey. A great example is the Rise of the Rest, Steve Case’s initiative to encourage entrepreneurship outside Silicon Valley, which recently created a $150 million VC fund with Jeff Bezos, Eric Schmidt and others as investors.
This is a step in the right direction but as Margalit has shown throughout his career, creating startups in left-behind regions is just one aspect of a multi-dimensional solution. “Most innovators don’t go into business just to make money,” says Margalit, “they go into business to do something meaningful with their lives. But if you stay isolated once you’re successful, you are wasting those energies. Instead, you should invite others to participate in your life and your success.”
Data is eating the world, one buzzword at a time.
In 2017, The Economist declared in “Data is Giving Rise to a New Economy”: “Data are to this century what oil was to the last one—a driver of growth and change.” And IDC estimated that by 2025 we will create 163 trillion gigabytes of data, ten times more than in 2016.
Also in 2017, the Harvard Business Review Press published an updated and expanded 10th anniversary edition of Competing on Analytics: The New Science of Winning by Tom Davenport and Jeanne Harris. More than 150,000 copies of the book have been sold and it has been translated into over 12 languages. Launching a data appreciation movement, the book has served as a catalyst for the establishment of numerous analytics departments in large enterprises and many new “business analytics” undergraduate and graduate training programs.
It is not often that the originators of a new business and/or technology buzzword get to review the evolution of their creation ten years later. Typically, the latest new new thing is promoted by technology vendors, industry analysts, and consultants, all eager to differentiate themselves from the competition and to establish (thought) leadership in a new market segment, product category or world-changing technology. The most important function buzzwords serve is to provide a new rationale and a new incentive for potential customers to buy new products and services. Failing to do so, technology vendors predict, will ensure that they will be “disrupted” by their competitors.
Buzzwords, however, have been only a superficial veneer of seemingly “revolutionary” (did I mention “disruptive”?) change on top of a steady evolution of computer technology since the late 1940s, driven by the increasingly sophisticated and varied use of the key product of computers, i.e., digital data. It is easier for sellers and buyers of technology-based products and services to promulgate and consume “the new new thing,” especially when it’s encapsulated in a nifty buzzword, rather than engage in a long-drawn discussion of what the new stage in the evolution of data and its uses really represents.
The new edition of Competing on Analytics provides a useful overview of the latest stages of the evolution of data or what the authors call the “3 massive changes in how analytics is practiced since 2007.” When the first edition of the book was published ten years ago, it highlighted the successful companies of the “Analytics 1.0” era, the ones using mostly descriptive analytics to help them understand better and derive lessons from their past performance. Data was mostly used to support (or not) business decisions.
But in 2007, a number of new companies, all Internet-related businesses, were already defining the “Analytics 2.0” era, analyzing data created online, unstructured as opposed to structured data, external as opposed to internal data, helping them understand better where in the future their business will be. “These companies competed on analytics perhaps more than any of the others we wrote about in the first version of this book,” write Davenport and Harris. (By using the term “analytics,” they were smartly applying to what was before called “business intelligence” or “data mining,” a term popularized at the time—in a different context—by Google Analytics).
The business of these new companies reflected a new appreciation for data not as a by-product of computer technology, but as the product itself, as what their business was all about, including expecting their customers to pay for their services with data rather than dollars. What they did with the data—developing new tools and techniques for storing, processing and analyzing huge volumes of data—represented a new stage in the evolution of applying computers to statistical analysis, a process that started with the very first digital computers (e.g., simulation).
The new appreciation for data-as-the-business led to the creation of a new breed of data analysis experts—”data scientists”—with both software engineering and statistical analysis skills. As data was the product they became the new product managers and as the data was at their fingertips, they excelled at experimentation, simulating the potential risks and rewards of multiple business scenarios. The role became the “sexiest job of the 21st century” (as Davenport and D.J. Patil wrote in the Harvard Business Review), driving the rapid proliferation of “data science” training programs and research centers.
Around 2011, the data appreciation movement reached all businesses (and non-profits and government agencies) in the form of a new buzzword, “Big Data.” Calling this stage “Analytics 3.0,” Davenport and Harris describe it as data and analytics becoming “mainstream business resources” and the use of data for the creation of “new products and services.” This latter aspect of the new—mainstream—appreciation of data, of data as a business, became known as another new buzzword, “digital transformation.”
“Big Data” was quickly eclipsed by this and other buzzwords—“Internet of Things,” for example—all marking new aspects, new uses, new applications, of the 70-year-old digital enterprise of generating and accumulating new streams of data and, most important, trying to “monetize” it (yes, another buzzword), i.e., to profit from it.
We have now entered the “Analytics 4.0” era, the “rise of autonomous analytics,” write Davenport and Harris. To my mind, it’s the best example so far in the evolution of data appreciation. While “what has been will be again,” it sometimes arrives with a slight (never “revolutionary”) improvement. The buzzword today is “Artificial Intelligence” (or “cognitive computing,” as IBM, the inventor of “data processing” in the 1950s, calls it).
The new new thing (such as getting computers to excel in object identification) has very little to do with what the pioneers of AI meant when they started using the term in the mid-1950s and everything to do with data science (combining statistical analysis and computer engineering) and big data (specifically with using “crowdsourcing”—yet another buzzword—to label millions of online photos which then are used to “train” computers in object identification). A more accurate label would be “advanced machine learning” but this does not meet the required “sexiness” quotient of a successful buzzword.
It doesn’t matter what label or buzzword we use, as long as we understand what’s really behind it, understanding that helps reduce hype and obfuscation and improves the chances of success when deploying the new new thing in a business context.
That’s the role books like Competing on Analytics play, guiding business executives through the challenges of understanding and adopting new tools and technologies. In general, they guide their readers to put less of an emphasis on the new technology and more on the people using it and how it could be integrated smoothly with existing work processes. Davenport and Harris write: “The star companies of Competing on Analytics didn’t always use the latest tools, but they were very good at building their strategies and business models around their analytics capabilities. They made data and analytics an integral component of their cultures.”
What has not changed in the last 10 years, according to Davenport and Harris, are the challenges of developing the right organizational culture, the role of leadership, and focusing on pressing business problems. All these are “still the hardest today,” they write.
My conclusion? Competing on AI is no different from Competing on Analytics. Technology steadily evolves and advances in computer technology have driven a steady evolution in data appreciation. Human nature does not evolve and people must always be taken into account when embracing the latest stage in the evolution of technology.
“The Sony attack was a wake-up call to most of us practitioners,” says John Graham, referring to the 2014 breach of Sony Pictures computer systems when hackers stole a rich trove of confidential documents and posted them online. Malicious and destructive intent increasingly characterizes cyberattacks. And the victims of these attacks could be random: “The [cybersecurity] game has changed,” says Graham, “with what I would call drive-by’s, where the attacks are not targeted specifically at us as a company.”
Graham is chief information security officer (CISO) at Jabil, provider of advanced manufacturing solutions to technology and electronics companies worldwide. Before joining Jabil in 2013, Graham has served in senior cybersecurity, risk management, compliance, and IT management positions at First Data Corporation, McKesson, Capgemini Consulting, SunTrust Banks, and HP. Last year, Graham was selected as the Information Security Executive (ISE) of the Year Award winner for the ISE Southeast Region.
To be a successful Chief Information officer (CISO) today, “you have to be a good translator,” says Steve Martino. This means translating the business strategy to the risk the company is willing to take. Instead of talking about “malware” and “DDoS,” CISOs should explain to their companies’ boards and business leadership what security technologies and trends mean in terms of risk to the business and the resources and processes required to mange that risk.
Martino is vice president and chief information security officer at Cisco. He leads the company’s Information Security organization and has more than 30 years of experience in security, IT operations, product development and operations, marketing, and sales.