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Very interesting post. It looks like Pearson are making the operational and organizational shifts necessary to build their digital capabilities in-house. Please check out this article:
It is therefore interesting that you point that the changes they have made are not radical enough in the inside, because from the outside it looks like they are finally making the necessary moves and sending a big message not only to the outside but the people in their organization.

On May 2, 2018, MAB commented on Goldman Sachs – A Technology Company? :

Thanks for your blog post. I enjoyed reading it. In order to answer your last question, is human capital a bank’s greatest asset? I do believe you did a great job covering that, and I would add that yes, is still is. As you can see the strats team’s importance is growing in the firm and although, it will no longer be their biggest asset, it might still be their most important asset. As you pointed out, it will no longer be pure trader, but the strats people – either the full engineers or the hybrid engineers/trader, engineers/investment bankers, etc. These people will not only build the engine, but also make the tricky/advanced decisions on the data that the engine/machine provides (the ‘Art’ part). As per JSG’s comment above, I do believe that another important talent that would have their role slightly shifted but still largely similar is the human relationship builders i.e. the advisory people. I am therefore confident that although people at Goldman Sachs might look very different and fulfill very different functions in 20 years time, people will still be its greatest asset and driving force.

Thanks for your post Rob. It is very interesting to see that AIG is investing in the Cyber insurance space and partnering with an array of institutions to develop a competitive advantage. You seemed to suggest that they would be doing the right thing by recruiting and acquiring talent in the space. However, do you think that this should be done within the firm or as a separate unit?

AIG does definitely have the insurance expertise to make it in the Cyber insurance space but does have the adequate cyber expertise and infrastructure to do so successfully. Aren’t they jumping into an industry they may not understand? They have done so in the past, and hopefully they are learning. I do think that they should build the organizational capability from the inside – whether it is is a separate unit or not.I would therefore disagree with the strategy to partner with other institutions to do so, as the capability is primordial and the understanding of the industry into the details is what should drive business decisions in the insurance space. Otherwise, we are at a risk of insuring something we don’t understand and at a risk of magnifying a beast such as it was the case with the credit crisis with CDOs. Partnerships do not offer the accountability required and I fear that very much.

On May 2, 2018, MAB commented on New York City’s Digital Future :

I actually attended a talk over the past year, whereby someone from one of those NYC government agencies was presenting to us some of their initiatives – more particularly their digital initiatives. After the talk, I talked to a few people that knew the inside of this particular agency and they said that although the initiative was a great effort and really cool project, the issue remained with the agency in itself. The adoption of technology within those agencies is stifled by politics and bureaucracy and as those agencies are too slow to adopt changes, they have to play catch-up with technology. I don’t know how much of that is true as I haven’t worked there, but I can see how challenging it can be to wanting to take advantage of digital opportunities for the city if the organization wanting to do so themselves is not embracing those opportunities at their fullest – they need to drive technology and endorse it in their organization model (as it is not a business). It is only when they do so that they will attract the right talent and be able to build the resources, culture and processes necessary for the successful implementation of such initiatives. Those initiatives that you cite look great on paper, but you need the right teams enforcing them. I would love to hear if you know more about whether there has been the appropriate organizational change within those agencies to drive the changes at the city level. Thanks.

On May 2, 2018, MAB commented on Deloitte: when audit turns digital :

Thanks for your post YZ. I really liked it. The big 4 auditing firms need to embrace technology, and turn into an opportunity before they are disrupted by a challenger. Auditing is largely still done in a manual format – from the reading above, it seems you believe that a reason for that is that first: the type of talent they have does not allow them to do so, second: they haven’t invested in the technology and third: even if they do so, the human auditor would still be needed for key analysis and decision making. Although I agree that machines will not fully replace human auditors because of the reasons above, I believe that one of the main reasons it was historically immune and that may not longer be the case now or in the future is that auditing is shifting from being a relationships business to a transaction one. With certain countries adopting mandatory audit rotations (a limit of certain years with a certain firm), the nature of the audit business is changing. The key analysis and decision-making in auditing is still needed, but I wonder what percentage of the business consists of analyzing, making decisions and exercising judgement on those findings that sit on grey areas and may not be performed reliably by machines? My guess is that a lot of jobs are at risk in the gathering of data and the basic auditing functions, as machines are taking over; but I would love to hear what you think on that point?

I therefore think that there should be more urgency for Deloitte to adopt technology and to shift their business model accordingly – and I do agree that those firms that do not lead that change will suffer the consequences.

Interesting blog post Lama. I also appreciated your points on the importance to change the internal culture and attract talent, to instigate changes and for Emirates NBD to embrace the opportunities that lie ahead through digital innovation.

Nonetheless, I would be interested in your opinion as to where Emirates NBD has truly prioritized digitization or is it a marketing ploy? Is the 1billion dirham invested in the right places? What has been the internal response?

Interesting comment PD. I like your analogy to GE, as Emirates NBD is internally very resistant to change. The BSSE theory of disruption does tell us that it is very hard to change the culture, without changing the resources, processes and priorities. It seems that priorities at the top-level might appear to be changing, but it is at the middle- and lower- level that EmiratesNBD needs buy-in. The business model would need to change. I do believe that the business model is what makes it the hardest to change here. If you look at how Emirates NBD is organized, different units operate as profit-centers, and that makes them very reluctant to implement the changes that will disrupt their profitability – especially if their jobs are on the line. As you correctly pointed out, there is a lot to turn from the GE case.

Nevertheless, according to the theory, the best way for Emirates NBD is to disrupt itself by creating a separate unit that will disrupt it internally – similar to how Netflix disrupted its DVD delivery model.

Interesting comment.
I agree that robo-advisors will not fully replace financials advisors. This is partly because in Private Wealth Management/Private Banking, there is usually a division of roles between the Relationship Manager (RM) and the Investment Advisory (IA) team. One of the reasons for that division is that the firm wants to maintain the client relationship within the institution even if they lose either the RM or the IA. Another reason is that it enables the IA to specialize in financial advisory and the RM is able to focus on the building and maintaining relationships, understanding the clients’ needs and catering for them.

Given that separation of roles, I do believe that these Robo-Advisors threaten more the IAs rather than the relationship manager. The roles for these Relationship Managers for High Net Worth individuals might shift and it might one day disappear, but that won’t be for at least another twenty years and that will happen when the High Net Worth Individuals of our generation, the millenials, will be good with trusting their money to machines without any personal interaction with a human being.

It is true that today these robo-advisors are passive investments, but that is shifting slowly and will shift even more as those machines develop the skills to invest actively. If that happens, what these robo-advisors will do is create demand for a new role of investment advisors, who will build, improve and monitor the algorithms that those advisors use, but would also understand and interpret the data that those algorithms produce. Is investing an art or a science? Or is it both? I think that in searching for that alpha, it is both – this will be even more so the case in the future, as machines -unlike humans – might be making decisions from the same/similar data-set, and have similar investment rules guiding their decision-making.

Currently, robo-advisors are covering the investment part of the MS’ service. But once they build the capability to interact, understand humans’ needs and invest accordingly, then it is a different ballgame. Although, this may take a while for it to happen.

To answer your question, I do not believe that MS is at a risk of cannibalizing its own business in the near future – for the reasons cited above. However, even if one day, it might do that, MS is better off cannibalizing and disrupting itself, rather than wait to be disrupted from the outside.

As finance become digitized, it would be interesting to see if the law will catch up on that. It seems that since Trump got elected, finance is re-deregulating itself and that would mean that robo-advisers would not be liable for any scandal. I would also argue that companies will be able to hide behind the technology, blaming the algorithms and not those who designed those algos. I think unless there is a criminal intent, whereby it could be proven that harm was done in a purposeful way, then it would be able to go after those who built those algos and the institutions owning them. But for the near future at least, I think robo-advisors are safe from compliance and legal action. Although, I would be interested to hear more from lawyers or any expert in this subject matter.

Very interesting post. I do agree with Disney that going Direct-to-Consumer and acquiring Bamtech to offer streaming services may be the way to go. This seems like an appropriate strategy to bring together its ESPN franchise and the rest of Disney. As we saw in strategy last year, ESPN didn’t share a ‘Mickey’ with the rest of the organization, and it seems that bringing the value proposition into a direct-to-consumer umbrella might be the solution. However, I am very concerned with the acquisition of Fox. Although in theory it should be bringing more content to Disney as it looks to build its own D2C platform, there are many challenges ahead and making it a Disney-Fox exclusive platform might not be the best solution, as it is going to be challenging not only from an organizational point of view but also from a content point of view e.g. how do you reconcile the R-rated Deadpool with other Disney superhero franchises. Fox would need to remain a separate unit, in a similar way to Pixar. However, this might mean that there might redundancies in having both operate separately and Disney won’t experience some of the synergies it is looking at exercising with the premium pricing it has paid for Fox. What do you think about that? I would be curious if you see Disney’s acquisition of Fox as an appropriate response to digital innovation? I would be curious to know if you have any insights as to the internal response of such acquisition.

Yes. It looks like Toutiao is looking to expand globally, but it is to be seen – as their plans are not very clear. The Chinese government’s move on closing their website was a definetely a setback for them.

I agree on the existential risk of giving people what they want. However, it does work and people are addicted to the app. Furthermore, there could be regulations on that in the future, with Facebook scandal unfolding, and the negative aspects of influencing people in certain ways emanating in the public eye. Nevertheless, Toutiao claims that they do not feed what people want to read or content that feeds off what their beliefs and convictions to reinforce them, they do claim that instead they provide content that might be of interest to the reader and do provide content that the reader wouldn’t have expected. The want vs. interested in is interesting. However, I don’t have any proof as to what extent this is true. I think we would never know as the algorithm is a black box to us. I do believe though if they have mastered a way to provide content that can make a person more well-read or more well-informed, and not necessarily a puppet to certain beliefs, then this means they have high chances of making a mark in other markets, in lights of what is happening with Facebook. Although, it is going to be a challenge in Western markets, as it can be argued that Chinese companies are usually discriminated upon in those markets.

It is very interesting. I do wonder though, whether Deepmind could have been used for more targeted approach whereby personal data was not collected on the patients, but as you mentioned the necessary data for profile were collected to help improve diagnosis of patients, and learn about how to treat patients better. You could then use machine learning to improve the accuracy of diagnosis, and maybe one day artificial intelligence to prevent mistakes from happening or predict the probability of certain conditions to develop.
I also wonder how different Watson for Doctors and DeepMind Health are different. Do you have any idea on that?

On April 10, 2018, MAB commented on AltSchool: Learning about Learning :

Thanks for sharing. Altschool seems to be pivoting by partnering with public schools, because it struggled to create value. Last year, it closed some of their schools: . There has been complaint by parents that their kids are being experimented on and it seems that there a lot of implementation challenges: . Nevertheless, I do believe that data and machine learning could be very useful for schools to help students improve their learning and personalize their learning. It just needs to be done in conjunction with the current schooling systems. A good company to look at is Knewton who provides such a solution.

On April 10, 2018, MAB commented on Using data analytics to optimize employee engagement :

Thanks Lama. It is very interesting as it looks like Peakon creates value for their clients and clearly capturing some of it through their SAAS model. It looks like the data collection needs to be done in an active way whereby the employees input the data. I would be interested to find out if there are passive ways to collect the data, because that will make the service offered by Peakon more meaningful, as it wouldn’t rely on the client’s employees. Furthermore, it would bring in more data, and with machine learning, you could create even more value for the client company. However, as per the comments above, there might be legal complications with privacy issues and possible employee backlash.

On April 10, 2018, MAB commented on Spotify may know you better than you realize :

Thanks Raina. Are you suggesting that Spotify’s machine learning capability helped it beat Pandora and other competitors? How much do you attribute to machine learning and how much to other factors such as the business model?

Interesting – I am wondering whether there is an opportunity for Consultancies such as Accenture to crowd-source externally (not only leveraging that capability, but actually sourcing consulting talent); similarly to HourlyNerd but in a more professional-network with additional curation. The know-how would be crowdsourced in a for-need-basis, and ideas/recommendations could be crowdsourced with specialists working in a team. So if Accenture builds this capability internally, they could prepare themselves better to shift to external crowdsourcing – if necessary. And possibly, look into disrupting their business model by serving lower-end consumers with a crowdsourced solution.

Lama, I second all our classmates in saying I love this. It is an amazing idea. I read the Brainly postwhich looks similar: . Do you think you can capture value by getting parents to sign-up for their kids? As this is where I see that the most challenge lies i.e. in the value-capture, because your platform truly creates value through crowdsourcing. Tokenizing the whole process could also gamify it and increase use-engagement and possibly the opportunity to value-capture.

On March 27, 2018, MAB commented on Amazon takes on Hollywood :

Thanks Y – I would be interested to know how successful they were with crowdsourcing as opposed to sourcing projects internally? Would you have more information on that? Also, it does look like with $10k, they might be capturing most of the value created. It would make sense that they are doing so, as they can. I would be interested to also know how many participants there are in this crowdsourcing?

Hi Pasha,
I believe that there are 3 important elements to ensure the integrity of the process:
1. Your friend cannot write a recommendation for you. It would have to be a colleague of yours that you have worked with directly i.e. a member of your team or who you interact for work e.g. your counterpart within the organization or outside of the organization. It is like reviews on Amazon or some travel platform that make sure that you bought product or used the service prior to commenting. So unless you are friends with all people you interact with in your professional life, then you can’t rig it. You can skew it if you are friends with everyone and everyone likes you, but that usually means you are a likable person and companies would love that. Also assuming that the participant in providing the information on you is also someone you and other people are going to provide information on, it is likely the feedback will be honest, as this tool is not only for recruiting but also as importantly for training.
2. There needs to be at least 10 counterpart, and the interesting part in the data and the value of the data is the aggregation of all the information from all the participants. It is the crowdsourcing part that creates the value.
3. Those recommendations need to be anonymous – to ensure integrity. But that doesn’t mean that such information can’t be updated nor challenged.
Hope that helps. Would be happy to hear more about what you think about those suggestions?

On March 7, 2018, MAB commented on UberEats, yet another food delivery app ? :

What do you think of UberEats competitors? It seems that you have identified the potential of UberEats to leverage the Uber platform – nevertheless, I still struggle to see the true value creation? And until there is value creation, can you capture value and thus become profitable? I really doubt. So I buy in your view that Uber may be digging its own grave, in a race to the bottom. However, so was Amazon – yes, Amazon were lucky with AWS, but they turned their e-commerce around – so it can be done.

On March 7, 2018, MAB commented on Who’s Eating OpenTable’s Lunch? :

Very interesting article. I really like how Opentable created value for both the diner and the restaurant. Although I can see cross-side network effect with more restaurants attracting more diners, as you pointed it multi-homing on both sides is very easy, especially on the diner side. This makes it very easy for a company like Yelp with a very good network to tap in it and produce the same service and value creation benefits as Opentable. I would be very curious how it pans out. As those platforms capture less and less value, the platform offering reservations might become an ancillary service.

You mention that it is a winner takes all market? Could you please elaborate? I don’t know a lot about it but I am curious to know more about the complexity about having a platform operating services delivery for all the restaurants in a certain geography? Also there might be cross-learning around geographies, but other than that how a platform in city X is able to leverage its advantage in City Y? It seems Grubhub and co. are there to face many more challenges. Looking forward to see how it pans out.

I agree that is possible. But, then what are the legal implications of that? It needs to be more a professional kitchen possibly, and these businesses will be built around the platform business model, and able to deliver a better integration and experience for the end consumer.

On March 6, 2018, MAB commented on Examining Stanford as a platform :

Hi Pasha. I really liked your work, especially about the second point about established universities.
As for the first point, I agree that there might be some network effect with more talented students joining increasing the benefits for other/future students. But doesn’t this have a limit? There might be some negative network effect if too many people are admitted are at Stanford, because the value of the brand might get diluted? or even if you kept the same standard, if you have too many Stanford students, is there a point where value to you decreases?

On March 6, 2018, MAB commented on Instagram – The Unstoppable Value-Creation Machine :

Thank you Mike! In theory, I do believe that it could be a winner takes all market; but I believe that there could be enough room/opportunity for differentiation here (i.e. the value proposition is not commoditized), and that means we are more likely to end in a winner takes most market (and not takes all). What do you think?