Google, Amazon, and Netflix Know Their Most Important Product Is You
Companies succeed when they invest in human capital, which used to just mean a company's employees. Today, it means investing in the company's customers as well.
Michael Schrage examines the various roles of models, prototypes, and simulations as collaborative media for innovation risk management. He has served as an advisor on innovation issues and investments to major firms, including Mars, Procter & Gamble, Google, Intel, BT, Siemens, NASDAQ, IBM, and Alcoa. In addition, Schrage has advised segments of the national security community on cyber conflict and cybersecurity issues. He has presented workshops on design experimentation and innovation risk for businesses, organizations, and executive education programs worldwide. Along with running summer workshops on future technologies for the Pentagon's Office of Net Assessment, he has served on the technical advisory committee of MIT's Lincoln Laboratory. In collaboration with the Center for Strategic and International Studies (CSIS), Schrage helped launch a series of workshops sponsored by the Department of Defense on federal complex systems procurement. In 2007, he served as a judge for the Industrial Designers Society of America's global International Design Excellence Awards.
Michael Schrage: What really launched my serious research into network effects and the economics of network effects was some of the work that I was doing in human capital. And the notion that innovation isn’t just a transaction. Innovation is an investment in the human capital and capabilities and competencies and creativity of your customers. Network effects are basically how customers or users create value for each other. It’s basically an external to the individual user. So an example of a network effect would be if you and I had a phone that would be great for you and I. But a network effect is the more people who use phones, the more valuable the phone network becomes. The more valuable each other become because we can call more people and more people can call us. And heck, there may even be the opportunity to do a conference call which is another form of network effect. So network effects are basically a way that the more people participate in using a product or service, the more valuable it becomes.
There’s no such thing anymore as a non-networked organization. Now admittedly some networks are better than others but we can absolutely make the case that one of the fundamental transformations over the last 50 years is the networkification of large organizations and small organizations not just in OECD countries but all over the world. Networkification has taken over the world. It’s how do you get value from these networks. There’s a wonderful line from the first industrial sociologist, a Frenchman by the name of Frederic le Play. He was the superintendent of Ecole des Mines. And his phrase was the most important product of the mine is the miner. It’s not the coal. It’s not the metal. It’s not the tin. It’s the human capital that allows you to extract the value from the mine. So let’s update this to the twenty-first century. The most important product of the network is the networker. Not the bids, not the bytes, not the bandwidth, not the data. It’s the people and in an Internet of things age the things, the machines, the devices on the network. If we can make networkers more valuable we make our networks more valuable. And that is indeed the recipe for an Amazon, for a Google, for a Yelp, for a LinkedIn, for an AT&T, for a Netflix.
What does Google do to make customers better? It gives them the ability to search and iterate on those searches. And what does Google do? It converts those clicks into more efficient search. That’s the essence of a web 2.0 network effects company. The same holds for the Amazon recommendation engine or for Netflix. So what you’re doing is you’re making – you’re not just giving customers what they want. You’re investing in improving their capabilities. What was another way that Google did that? Google gave you for free Gmail email which enables it to learn more about your social network, what you’re interested in communicating about, et cetera. The same thing with LinkedIn. So the whole notion – that’s why LinkedIn bought a company like Lynda. Not just to improve people’s resume but to improve people’s skills.
So the notion of a network effect here is as we give our customers the ability to do more for themselves they can do more with us and on our network. So in the early days of the telephone all you could do was talk to someone. Then you could do a fax. Then you could do a conference call. Then there were these things called modems that allowed you to send email. You’re increasing the capability of the customer allowed you to get more value from the network. And indeed customers wanted to do so much you had to do what? You had to redesign the architectures and the capabilities of the network. So you have an iterative network development process here. As customer capabilities and capacities increase, you have to change the capabilities and capacities of the network, and vice versa.
The first industrial sociologist, Frenchman Frederic le Play, revolutionized business strategy by recognizing that the coal mine's most essential asset wasn't the raw material extracted from the mine, but the miner himself. Steve Jobs expressed a similar notion, though not exactly the same, when he said his favorite Apple product wasn't a piece of technology, but the team of people he worked to build.
The essence of the message here is that products aren't what help a company innovate. Investing in the human capital on which their business depends helps companies innovate. Bringing that lesson into the present day means incorporating information about the highly distributed digital landscape.
We are no longer just talking about a company's employees. Instead, we are talking about customers who exist on a network — think Google, Amazon, Netflix, and LinkedIn — serving essential information about their habits back to the company. When Google decided to invest in their users by offering free email services, the returns were enormous in terms of both market share and awareness of their customers' habits.
- A huge segment of America's population — the Baby Boom generation — is aging and will live longer than any American generation in history.
- The story we read about in the news? Their drain on social services like Social Security and Medicare.
- But increased longevity is a cause for celebration, says Ashton Applewhite, not doom and gloom.
The calorie is the basic unit of measure of food — and it might be off.
- In a new article in 1843, Peter Wilson argues that counting calories is an outdated form of weight management.
- Research shows that labels are up to 20 percent off true caloric totals; 70 percent in frozen processed foods.
- Not all digestive systems are created equally; humans process foods at different rates under varying conditions.
Researchers hope the technology will further our understanding of the brain, but lawmakers may not be ready for the ethical challenges.
- Researchers at the Yale School of Medicine successfully restored some functions to pig brains that had been dead for hours.
- They hope the technology will advance our understanding of the brain, potentially developing new treatments for debilitating diseases and disorders.
- The research raises many ethical questions and puts to the test our current understanding of death.
The image of an undead brain coming back to live again is the stuff of science fiction. Not just any science fiction, specifically B-grade sci fi. What instantly springs to mind is the black-and-white horrors of films like Fiend Without a Face. Bad acting. Plastic monstrosities. Visible strings. And a spinal cord that, for some reason, is also a tentacle?
But like any good science fiction, it's only a matter of time before some manner of it seeps into our reality. This week's Nature published the findings of researchers who managed to restore function to pigs' brains that were clinically dead. At least, what we once thought of as dead.
What's dead may never die, it seems
The researchers did not hail from House Greyjoy — "What is dead may never die" — but came largely from the Yale School of Medicine. They connected 32 pig brains to a system called BrainEx. BrainEx is an artificial perfusion system — that is, a system that takes over the functions normally regulated by the organ. Think a dialysis machine for the mind. The pigs had been killed four hours earlier at a U.S. Department of Agriculture slaughterhouse; their brains completely removed from the skulls.
BrainEx pumped an experiment solution into the brain that essentially mimic blood flow. It brought oxygen and nutrients to the tissues, giving brain cells the resources to begin many normal functions. The cells began consuming and metabolizing sugars. The brains' immune systems kicked in. Neuron samples could carry an electrical signal. Some brain cells even responded to drugs.
The researchers have managed to keep some brains alive for up to 36 hours, and currently do not know if BrainEx can have sustained the brains longer. "It is conceivable we are just preventing the inevitable, and the brain won't be able to recover," said Nenad Sestan, Yale neuroscientist and the lead researcher.
As a control, other brains received either a fake solution or no solution at all. None revived brain activity and deteriorated as normal.
The researchers hope the technology can enhance our ability to study the brain and its cellular functions. One of the main avenues of such studies would be brain disorders and diseases. This could point the way to developing new of treatments for the likes of brain injuries, Alzheimer's, Huntington's, and neurodegenerative conditions.
"This is an extraordinary and very promising breakthrough for neuroscience. It immediately offers a much better model for studying the human brain, which is extraordinarily important, given the vast amount of human suffering from diseases of the mind [and] brain," Nita Farahany, the bioethicists at the Duke University School of Law who wrote the study's commentary, told National Geographic.
An ethical gray matter
Before anyone gets an Island of Dr. Moreau vibe, it's worth noting that the brains did not approach neural activity anywhere near consciousness.
The BrainEx solution contained chemicals that prevented neurons from firing. To be extra cautious, the researchers also monitored the brains for any such activity and were prepared to administer an anesthetic should they have seen signs of consciousness.
Even so, the research signals a massive debate to come regarding medical ethics and our definition of death.
Most countries define death, clinically speaking, as the irreversible loss of brain or circulatory function. This definition was already at odds with some folk- and value-centric understandings, but where do we go if it becomes possible to reverse clinical death with artificial perfusion?
"This is wild," Jonathan Moreno, a bioethicist at the University of Pennsylvania, told the New York Times. "If ever there was an issue that merited big public deliberation on the ethics of science and medicine, this is one."
One possible consequence involves organ donations. Some European countries require emergency responders to use a process that preserves organs when they cannot resuscitate a person. They continue to pump blood throughout the body, but use a "thoracic aortic occlusion balloon" to prevent that blood from reaching the brain.
The system is already controversial because it raises concerns about what caused the patient's death. But what happens when brain death becomes readily reversible? Stuart Younger, a bioethicist at Case Western Reserve University, told Nature that if BrainEx were to become widely available, it could shrink the pool of eligible donors.
"There's a potential conflict here between the interests of potential donors — who might not even be donors — and people who are waiting for organs," he said.
It will be a while before such experiments go anywhere near human subjects. A more immediate ethical question relates to how such experiments harm animal subjects.
Ethical review boards evaluate research protocols and can reject any that causes undue pain, suffering, or distress. Since dead animals feel no pain, suffer no trauma, they are typically approved as subjects. But how do such boards make a judgement regarding the suffering of a "cellularly active" brain? The distress of a partially alive brain?
The dilemma is unprecedented.
Setting new boundaries
Another science fiction story that comes to mind when discussing this story is, of course, Frankenstein. As Farahany told National Geographic: "It is definitely has [sic] a good science-fiction element to it, and it is restoring cellular function where we previously thought impossible. But to have Frankenstein, you need some degree of consciousness, some 'there' there. [The researchers] did not recover any form of consciousness in this study, and it is still unclear if we ever could. But we are one step closer to that possibility."
She's right. The researchers undertook their research for the betterment of humanity, and we may one day reap some unimaginable medical benefits from it. The ethical questions, however, remain as unsettling as the stories they remind us of.
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