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Thanks to all of you that read and follow my blog, I am pleased to report that Big Data to Big Profits has been named a top blog in Big Data in and Analytics by Feedspot. This is especially an honor, given the many large, corporate, and multi-author blogs that are also on the list. Here is the link with all the winners: https://blog.feedspot.com/big_data_blogs/  Congrats to all of the winners and a special thanks to Feedspot for their kind recognition!   About Russell Walker, Ph.D. Professor Russell Walker helps companies develop strategies to manage risk and harness value through analytics and Big Data. He is Clinical Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management of Northwestern University. His most recent book, From Big Data to Big Profits: Success with Data and Analytics is published by Oxford University Press (2015), which explores how firms can best monetize Big Data. He is the author of the text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management through business case studies.
Professor Walker has developed and taught executive programs on Enterprise Risk, Operational Risk, Corporate Governance, Analytics and Big Data, and Global Leadership. He founded and teaches the Analytical Consulting Lab, Risk Lab, Global Lab, and Digital Lab, all very popular experiential learning classes at the Kellogg School of Management, which bring Kellogg MBA students together with corporate opportunities focused on data and strategy. He also teaches courses in risk management, analytics, and on strategies in globalization. He was awarded the Kellogg Impact award by Kellogg MBA students for excellence and impact in teaching.   You can find him at @RussWalker1492 and russellwalkerphd.com and bigdatatobigprofits.com   #bigdata #analytics #blog @feedspot @IBM @AWS #bigdata #IBM #awscloud #cloudera #zdnet #venturebeat #datafloq #reddit #hortonworks #databricks #bigdataweek #venturebeat #gigaom #dataversity # #analytics #businessanalytics #data #dataintegration #datamining #ibms #bigdata #datascience #datascientist #teradata @IBM @awscloud @cloudera @zdnet @venturebeat @datafloq @reddit @hortonworks @databricks @bigdataweek @venturebeat @gigaom @dataversity @anuj_feedspot
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With Super Bowl LIII upon us, I thought I’d share a bit about why Super Bowl XVIII remains my favorite Super Bowl. Really, it was Super, featured the launch of the iconic Apple Macintosh, and offers a few lessons in leadership!

Building a Team: A First for Tampa: This was the first Super Bowl to be held in Tampa. Everyone was excited about the game. Tampa was on the national scene, finally! Growing up in Tampa in the 1970s and 1980s gave me a firsthand view to how a city and region can dramatically transform because of an influx of people and investments. It was exciting to see new buildings constantly and to meet new classmates from northern cities and to ask them about cold and snow and then to silently question if it might have killed a few of their brain cells. Tampanians or Tampeños, as Tampa natives are known, always looked suspiciously at people who lived in the cold. Now, Tampa was on the national stage to showcase everything that was great about the Next Great American City (our tagline at the time)! The whole marketing of the event was an example of great regional participation, unmatched in any other Super Bowl. The Super Bowl XVIII poster even made reference to the industries of the region, its great assets of climate, water, natural beauty, and attractions. Walt Disney World participated in the halftime show, and everyone worked so the region had a tremendous and positive showing to the nation. Streets were landscaped with new oaks and palms all over town. In our classes in St. Lawrence elementary school (located just a few miles from the stadium), we had homework assignments requiring that we report on the game and its impact to the people of the city. I have never been part of something that was so important to a city. I remember that participation and remain amazed by it. When a team of 3 or 4 can’t come together at work (who are getting paid), I think, how is it that a region of millions could do something harder (and not get paid) and be successful? It was simply amazing to see what happens when people really care and feel pride!

Lesson: Pride matters a lot! Instill it in your team.

A First for a Major Upset and Blowout: The Washington Redskins were highly favored going into Super Bowl XVIII. They beat the Don Shula-led Dolphins in the previous year, in Super Bowl XVII, a win that has long upset me (kinda still does, really). I have always rooted for the Florida teams. Now, the Redskins and their stinky Hogs (nickname of their potent offensive line) were headed to my hometown. I was really looking forward to seeing them lose to the Los Angeles Raiders. Lose they did, and by the largest margin in any Super Bowl, up to that time, 38-9.

I like watching upsets (well, when my team wins) and seeing a convincing win like that is all the more impactful and cherished. At the time, as a young boy enthralled with football, I collected NFL felt pennants. I wanted a pennant of the Raiders and of the Redskins to commemorate the game. These were only available at the stadium and the surrounding stands. I decided to buy the Raiders pennant before the game with my limited funds (I had money only to buy one). The vendor told me I should by the Redskins pennant because it would go up in price after their sure win. I disagreed with his outlook. I asked him to give me a Redskins pennant after the game for free if the Raiders won and if I bought the Raiders pennant from him. He agreed. I collected my free pennant after the Raiders beating of the Redskins. I felt happy. My team won, and I got something for free, only because I believed and asked.

Lesson: Ignore the pundits. Negotiate when you can.

An Amazing Apple Super Bowl Ad: The famous 1984 advertisement that leverages the name 1984 to invoke the famous book 1984 aired for the one and only time during that Super Bowl. It launched the Macintosh or Mac brand for Apple. How did McDonald's not Trademark Mac? I am writing this on a Mac Book Pro. The brand began on Super Bowl Sunday in 1984.

The advertisement shows a young lady destroying “big blue brother or the blue man,” a reference to IBM, presumably. What an intellectually deep advertisement! Big Blue is not even in the PC market today.

It remains a classic even today, having won countless awards, and could be shown today with much correct. However, with the rise of tech giants, the message might be the same, but Apple might be one of the firms being attacked with the hammer, today. How things have changed! Let’s take a look at Apple’s stock since 1984.

  • If you had bought $1000 worth of APPL the day after Super Bowl XVIII, Jan 23, 1984, and reinvested all dividends, that $1000 would be worth nearly $400,000 today, for an annual return of nearly 20%. Corrected for splits, a stock in 1984 would be about $0.42; it closed at $166.52 last Friday. That is a 396x increase. In that time, the DJIA went from 1200 to nearly 26,000, an increase of nearly 22x.

Lesson: Time value investing works. Specific equities (at least some) beat markets over the long term. Be brave to go very long, like Steve Jobs. Beating the average requires “thinking different.”

High Prices, Graybar and Volunteers: There are many things about Super Bowl XVIII that remain vivid for me. I was able to attend the game with my father. My father’s employer worked with Graybar, which provided our tickets. Graybar is the electrical firm set up by Elisha Gray, the other inventor of the telephone. His historic home and former workshop, where he did his great work, are just blocks from my home in the Chicago suburbs – the world is small and interconnected. We can never escape or deny this. It was hard to get tickets locally; everyone wanted to go. Many Tampanians or Tampeños volunteered to be ushers, performers, greeters, and the like to attend. Tickets went for a face value of $60, a 4x mark-up from the tickets to the Tampa Bay Buccaneer games, which we regularly attended. It seemed liked a huge premium, but worth it!

I understand that Super Bowl LIII tickets are on the order of $2500-$3000, which makes them at least 15x-30x of the price of a regular season games of today. Surely, the game is about corporate sponsorship more than ever. That is a massive inflation in the price of Super Bowl tickets. Good, for the NFL, I guess. Bad, if you want to attend a game.

Lesson: Examine how you are connected to the people and places around you. Watch the Super Bowl at home; the prices are too high.

Hispanic Celebration: Tampa is home to a vibrant Hispanic (most traditionally Spanish and Cuban) population. Tampa even moved its annual Gasparilla parade in 1984 from February to January to correspond with the Super Bowl festivities. The parade celebrates the legend of the Spanish pirate, Jose Gaspar that buried his treasure near Tampa. I loved that the game was played in Tampa Stadium, which is just next to West Tampa and the significant Hispanic community that makes West Tampa so special, even to today. The game had special significance because of Hispanic participants, too. Super Bowl XVIII was a second Super Bowl win for Raiders head coach, Tom Flores and Raiders QB, Jim Plunkett.

Tom Flores and Jim Plunkett - Famous Hispanic, Super Bowl Winners! Great face mask!

Tom Flores was the first significant Hispanic coach in the NFL. Jim Plunkett was born to Mexican-American parents and also is of Hispanic heritage. Each won in Super Bowl XV and repeated in Super Bowl XVIII, yet neither is in the Hall of Fame today. How does that happen when the league says it is more focused on minorities and their contributions to the league? With so few Hispanics in the league, it seems a few seats in the Hall of Fame should be easier to come by. Consider this. Bill Parcells wins one Super Bowl and has Scott Norwood give him another (in Tampa, btw, in Super Bowl XXV), and has the Packers destroy him in a third, yet he beats Flores to the Hall of Fame. If the Hall of Fame means anything, Flores should be there, along with Jim Plunkett. Flores is a two-time Super Bowl winning coach and not included in the Hall of Fame. Jim Plunkett has an amazing personal story, overcoming a family life of many challenges including low family income and blindness in his parents to win a scholarship to Stanford. He struggled early in his NFL career, moving from one losing team to another. His success late in his career is inspiration for all people that success can really be just around the corner. What perseverance and dedication to fight through the challenges and doubters and strive for excellence! You can always have a new day - tomorrow! Two NFL icons that belong in the NFL Hall of Fame.

Lesson: Hispanics matter, and not just in election years. And success is really a reward for hard work, perseverance, and courage. Have those in excess.

Enjoy the Super Bowl!

Professor Walker provides keynote talks, seminars presentations, executive training programs, and executive briefings. Click here to learn more about his talks, references from clients, options for customized talks and programs, and details on scheduling a program for your organization.

Recent talk topics enjoyed by clients have included:

“From Big Data to Big Profits: Getting the Most from Your Data and Analytics”

“Leveraging Artificial Intelligence and Machine Learning at Work”

“Digital Strategy: From Data to Dominance”

“Success with an Inter-Generational Workforce: From Boomers to Millennials”

“FinTech, Payments, and Economic Trends and Outlooks in Consumer Lending”

“The World in 2050: Risks and Opportunities Ahead”E

“Digital Disruption, Automation, Analytics, Data Science, and the Big Data Wave”

About Russell Walker, Ph.D.

Professor Russell Walker helps companies develop strategies to manage risk and harness value through analytics and Big Data. He is Clinical Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management of Northwestern University. His most recent book, From Big Data to Big Profits: Success with Data and Analytics is published by Oxford University Press (2015), which explores how firms can best monetize Big Data. He is the author of the text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management through business case studies.

Professor Walker has developed and taught executive programs on Enterprise Risk, Operational Risk, Corporate Governance, Analytics and Big Data, and Global Leadership. He founded and teaches the Analytical Consulting Lab, Risk Lab, Global Lab, and Digital Lab, all very popular experiential learning classes at the Kellogg School of Management, which bring Kellogg MBA students together with corporate opportunities focused on data and strategy. He also teaches courses in risk management, analytics, and on strategies in globalization. He was awarded the Kellogg Impact award by Kellogg MBA students for excellence and impact in teaching.

He serves on the Scientific and Technical Council for the Menus of Change, an initiative led by the Harvard School of Public Health and the Culinary Institute of America, to develop healthier and more environmentally friendly food choices. He is a former member of the board of the Education and Technology Committee to the Morton Arboretum. He was a board member of the Virginia Hispanic Chamber of Commerce, where he developed support programs for Hispanic entrepreneurs and worked with US senators on US Latino matters.

You can find him at @RussWalker1492 and russellwalkerphd.com and bigdatatobigprofits.com

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BIG DATA TO BIG PROFITS by Russell Walker, Ph.d. - 5M ago

I enjoy maps. Each tells a complex story. Here are some of my favorites to reveal realities about our country, its economy, people, prospects and nuances. Not much commentary from me. I'm letting the maps speak. Enjoy!

Light Pollution


Where Tornados Have Occurred Where We Don't Live Major River Systems of the US. Mississippi is the Biggest! School Performance Job Growth The Federales' Stuff What Happens South of the Ohio River? Check out Wyoming! Millennials Comfy at Home GDP by State Impact of Tax Law on Housing Prices How Much You Need to Buy a Home Monthly Hours to Pay Mortgage Hispanics are mostly in the West and Florida, where there is greatest economic growth. Income Growth Greatest in West Economic Communities in the US - Based on Our Transactions Our States, if States where based on our economic activity Americans are Moving West and to Florida Long Term Growth - West and Florida Taxes - That is Why People are Moving! Tax Deductions are Big in North! Leaving the Rust Belt for the Sun Belt The Two Halves of GDP Half of Americans Live in the Dark Counties Real Estate Prices The Top 1% Poverty...We still have it 2016 Presidential Election by Precinct 2018 Congressional Swing to the Left Where Hurricanes Have Landed Economic Mobility in Chicago is on Par with the Deep South


Where We Live Who We Are? Ancestry by County Diversity is not in the Mid West or North US at Night Our Forests Football Fandom Baseball Fandom College Football Fandom Men - Head to the City. Ladies - Head out West

Professor Walker provides keynote talks, seminars presentations, executive training programs, and executive briefings.

Click here to learn more about his talks, references from clients, options for customized talks and programs, and details on scheduling a program for your organization.

About Russell Walker, Ph.D.

Professor Russell Walker helps companies develop strategies to manage risk and harness value through analytics and Big Data. He is Clinical Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management of Northwestern University. He has worked with many professional sports teams and leading marketing organizations through the Analytical Consulting Lab, an experiential class that he founded and leads at Kellogg.

His most recent and award-winning book, From Big Data to Big Profits: Success with Data and Analytics is published by Oxford University Press (2015), which explores how firms can best monetize Big Data through digital strategies. He is the author of the text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management through business case studies.

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Amazon recently made the news by publicly announcing that it is targeting hard to sell items, so called Can't Realize a Profit (CRaP) for removal from its all-powerful sales channel.  Such items are believed to be those that have a low revenue for the cost to ship. Essentially, the shipping costs outdoes the contribution margin of the item. That sounds easy and makes sense. However, Amazon and its sellers will soon find that removing CRaP and even identifying CRaP is not so easy.

sThe challenge facing Amazon and its sellers reminds me of a problem I was assigned by a professor once in a class. He asked us to calculate the cost a grocery store incurred in selling one package of chewing gum. Indeed, the revenue of the one pack of chewing gum did not even justify the labor needed to check out the customer at the register or even the HVAC costs of the people involved in touching the gum package, if we assigned labor and all costs using activity based accounting rules. Stocking, store space, and especially management overhead dwarfed the opportunity offered by chewing gum. Still, the store sold hundreds of thousands of dollars of chew gum each year. Chewing gum is an excellent example of a marginal revenue opportunity. It is rarely the reason a person comes into the sore, but it offers attractive revenue when other costs are considered fixed. Accountants can have field day with what is fixed and what is activity-based. In my mind, fixed costs can't be turned off. Removing the chewing gum did not reduce management overhead or property taxes on real estate of the building. Those should be treated as fixed costs for the business to overcome. If everything is assigned activity-based costs, surely you end up with less profit, even if profit per item goes up, as marginal products and their revenue are left on the table.

Warehousing Costs

Any item that makes it into an Amazon warehouse should rationally incur some costs associated with the facility. There is need for special analysis here. A small item that stays in the warehouse only a short time, rationally, should be allocated the smallest warehouse cost. A large item that rarely sells and stays there a long time, should be charged more "rent." In this, a little wisdom from Aldi is appropriate. Aldi and Trader Joe's select products using a metric like turns x revenue per square foot. They want to move items quickly, even if the revenue is low. It works the same way at Amazon. Warehouses are just like stores. The real estate is valuable and an item should not take up a lot of space. With such a metric, the chewing gum starts to look very attractive at the store. Amazon should consider a metric that involves the residence time of the item and the consumption of space (or volume) at the warehousing to achieve a fair cost for warehousing. If bottled water moves quickly, it might not be such a bad product.

Shipping Costs

Shipping costs are easier to identify, especially at Amazon. The product goes into a box and has a direct and assignable shipping costs. The problem is not just the product, but the Amazon model. If each item is sent via UPS on non-regular delivery, then yes, there are products with very high costs per margin. However, assume, there is a regular, weekly, or otherwise low cost delivery mechanism. This is how Amazon can delivery lower revenue items for a profit. Shipping costs are a real challenge, as the Amazon Dash Button promised the ability to order things like water detergent not by the bulk, but by smaller regular quantities. The idea is great. It is that the current Amazon shipping model does not support that. Let me also say, with gas prices low, any struggles in shipping will only get worse when gas prices get higher. Amazon might consider something like a post office model. Delivery is made to a neighborhood on some schedule. In doing so, the costs begin to appear fixed and not marginal, so bulky items can more easily be shipped.

More is Better...Not Always

Retailers like Costco figured this out, kinda. If an item has low margin, sell 5 gallons as the minimum order. It increased the profit per transaction. The metric to optimize was profit per transaction. 7-11 did it with the Big Gulp and Double Big Gulp. However, not everyone wants or needs a Double Big Gulp or a pallet of pasta to last 5 years. Part of the value of a store is that it allows a customer to buy just want they want.

Beware of Synergy

I understand why Amazon might want to raise the price on low margin, high weight or bulky items, like bottled water, kitty litter, potting soil, and paper towels. However, if I can't buy bottled water online, my next best option is Costco. And, I, like most Americans, have never bought just one item at Costco. In such a decision to remove CRaP, Amazon will be pushing customers to competitors. It might feel right at the product level, but is it right at the customer level? What else will I buy at Costco that I would have bought at Amazon?

Department Store Model

From the early days of Sears and Montgomery Ward's, the big question has always been, what does the department store need to carry to bring in more people? More departments attract more people and add more marginal revenue (hopefully at trivial cost of labor and expense). What additions are worthwhile? Sears seemed to have everything from photography sessions to car repair. It is hard to say these were highly synergistic. Indeed, it was a grasp to extract more revenue from its highly attractive real estate. Amazon should think of its online channel with the same mindset. What is the next best offer to make to a customer? Marginal revenue can be hard to evaluate on its own, because it might not overcome allocated fixed costs. However, in the totality of operations, it is attractive.

Advice for Amazon Sellers

Don't look like CRaP. Cut packaging weight. Can you use plastics or disposable containers over glass? Consider drop shipping or delivery through retail outlets. Maybe Amazon warehousing is not the best channel for your bulky item. Here in Chicago, the Chicago Tribune newspaper once offered Icelandic water delivery. Great way to leverage an existing delivery network to sell a bulky item.

Recognize the synergistic impact of your item and know the velocity of sale of your item. Analysis of an items should consider these aspect, not just size and shipping.

Solutions

The "best" thing to sell is a small sized, low weight, high margin item, say, a piece of jewelry. It is also very helpful that the item sells quickly and therefore spends little time in the warehouse. The "worst" thing to sell is a low-priced, bulky, heavy item that rarely sells and requires lots of warehouse space and labor. Consider the vast space in between. Suppliers will want to shrink and cut the weight of their products. Amazon is caught between a store and a shipping firm. Which one is it? Maybe some items are best picked up a the local Whole Foods or delivered at a special fee from the local Whole Foods. Amazon will want to move some items to pantry boxes, or a new model for lower cost delivery.

Managing CRaP at Amazon will require a constant and dynamic approach to considering customer behavior, shipping costs, energy costs, and labor.

I found this random CRaP bag on Amazon. Buy it before Amazon gets rid of more CRaP!

Professor Walker provides keynote talks, seminars presentations, executive training programs, and executive briefings.

Click here to learn more about his talks, references from clients, options for customized talks and programs, and details on scheduling a program for your organization.

About Russell Walker, Ph.D.

Professor Russell Walker helps companies develop strategies to manage risk and harness value through analytics and Big Data. He is Clinical Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management of Northwestern University. He has worked with many professional sports teams and leading marketing organizations through the Analytical Consulting Lab, an experiential class that he founded and leads at Kellogg.

His most recent and award-winning book, From Big Data to Big Profits: Success with Data and Analytics is published by Oxford University Press (2015), which explores how firms can best monetize Big Data through digital strategies. He is the author of the text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management through business case studies.



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There is an open debate among economists and business leaders on why digitization leads to a near winner take-all business model. We see the dominance of one search tool in Google and Netflix over other movie providers. In decades past, it was common to have a movie theater in each community and local bakers everywhere. In other business models, especially those driven by personal relationships and locality, we have seen many scores of offerings simultaneously. In fact, achieving scale for the seller was very hard. In markets that are not digitized, like the famous Spice Market of Istanbul, dozens of vendors sell the same items. Why? Because, it is a market driven by relationships and physical constraints, making scaling difficult.

Interestingly, in the digitization realm, there is not exactly one winner take all. We often see a place for a second player or follower, which is often lesser in size and or capability. However, the second player has a role and rarely, it might even overtake the leader as Facebook overtook MySpace.

Let's not overlook the immense power of the digital king. Being the digital leader has massive benefits. It is driven by four major principles. Let’s examine these:

  1.  Data Dominance – Digital models that dominate do so because the business model exploits data in a major way. Netflix knows something about our media interests. Google search processes and locates sites (presumably) better and faster than competitors. The business grows, evolves, and improves based on constant measurement and data-driven decision making. This was not the approach to business before the late 1990s. Digitization brought data and data is the blood of digitization.
  2. Customer Convenience –Successful digital models make it easier for the user to do business. Order food from Instacart – it's a breeze! File your taxes on Turbo Tax or get a mortgage on Rocket Mortgage – all of these have perfected easy to use customer interfaces that also overcome problems of proximity. Not more need for bank branches or tax return centers. The business is geophysical in nature or somehow overcomes the proximity challenges, like Instacart does with delivery. One click and you can have almost anything from Amazon. If only Staples had put a real Easy Button on its whole business model, it might be a digital leader today. Digitization forces a business to examine the process of a transaction and in that the transaction is simplified, standardized, and improvements to customer experience are identified.
  3. Digital Allows Customization – This benefit is often overlooked. One can easily forget that Netflix was started as just an economic play to disrupt movie rentals by eliminating late fees. The data exhaust of user searches and orders allowed for customization to take hold. Marketing exerted itself over operations. Amazon sold books and CDs and is now a store of most anything. Specifically, it is trying to be the store of what you want. Customization is expensive without data. Digital models make customization attainable, and allows the digital leader to grow by earning more business from the same customers.
  4. Economy of Scale Kicks In Big Time – Once a process is digitized and supply and demand are appropriately connected, it becomes easy to add new supply and demand on the margin. Adding new products or suppliers at Amazon is easy. Adding a new supplier at a physical store is a decision to take something else off the shelf. Adding a new driver at Uber is easy. Hiring a worker at a taxi cab firm is a major decision. Growth happens marginally for digital firms and the costs of marginal decisions approaches zero, but the marginal revenue is much higher. This reality make the digital king hard to overthrow.

Why Do Second Place and Lesser Digital Players arise at all? There are success lessons in their very existence.

We see Lyft rise to compete against Uber and Bing to compete against Google search. Why? Often, the digital leader disregards some business, like smaller buyers and sellers. Or the success of the digital leader leaves room for a value player. Let’s examine some ways a second digital player can arise when a digital leader is in place.

  1. Suppliers support and demand an alternative channel – Jet and eBay offer suppliers an alternative to Amazon with some slightly different terms. Sometimes this comes with more attention or more status for the products being sold. Suppliers like multiple channels and choices. Still, empirically, we see that these are much smaller markets than the digital leader. LinkedIn is a great alternative to Facebook. It is, however, professionally focused, so it has some limits in its offerings over Facebook.
  2. Customers identify with alternatives – Remember when Pepsi sold its self as the Taste of a New Generation? Indeed, people often want to be different. You shop on Amazon? I don’t – that makes me special or my tastes special. At a core level, humans have different tastes and one of those is how and where we do business. It is part of human expression. Even the digital king can’t win over the customer who just wants to be different. And the attractiveness of being different is why the king of beers is losing customers to local craft beers.
  3. Second brands must focus on value (and might actually have it) – Just as Toyota once was a second tier brand in the US and had to focus on value, new and small entrants must do the same in the digital space. Second tier digital players often exist because they do offer a value that the digital leader does not offer. Jet has great prices. eBay does, too. However, the model is a little different from Amazon. Selection and shipping are different. If you conform to the model, you get value. Like YouTube, it has value over Netflix (just not the same content or in HD). Indeed, value is a reason for second tier digital players to arise. It also can restrict their growth, as new offerings must connote value. Often the interface, technology, and perception of it is constrained by a value focus.
  4. Focus on demand and supply that is not easily scaled – eBay is a great example of connecting the small scale seller and the small scale buyer. If you want to sell one item, eBay is the place for you. If you want to buy one hard to find collectible or replacement part, eBay is great. However, this business is not so easy to scale. A seller might have just one item to sell. Buyers might also be singular in demand. YouTube is an example of this. It allows any media producer to get started, but it is not a great fit for a media company making thousands of films. Digital leaders often ignore the hard to scale supply and demand. However, it is still a business opportunity and as eBay has shown a great place to build a digital marketplace.

Professor Walker provides keynote talks, seminars presentations, executive training programs, and executive briefings.

Click here to learn more about his talks, references from clients, options for customized talks and programs, and details on scheduling a program for your organization.

About Russell Walker, Ph.D.

Professor Russell Walker helps companies develop strategies to manage risk and harness value through analytics and Big Data. He is Clinical Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management of Northwestern University. He has worked with many professional sports teams and leading marketing organizations through the Analytical Consulting Lab, an experiential class that he founded and leads at Kellogg.

His most recent and award-winning book, From Big Data to Big Profits: Success with Data and Analytics is published by Oxford University Press (2015), which explores how firms can best monetize Big Data through digital strategies. He is the author of the text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management through business case studies.

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By now, you have probably heard that the yield curve has got flatten and will likely invert in 2019. What does this mean? Specifically, economists and investors look at the yield of the 10 year treasury note and subtract that rate from that of the 2 year treasury note. Rationally, investors want higher rates for long term notes as compared to short term ones. So, we expect the 10 year note yield to be higher than that of the 2 year note (with credit quality and other factors being the same). The difference in these rates, we call the yield curve. It is expected to be positive, when long term rates are expected to be higher (and there is an outlook for growth). When the differences of the longer-term note approaches that of the short-term note, we see a condition in which bond buyers are hoarding all available long-term bonds. In essence, they expect long-term rates to fall below current levels in the bond market. This has been a rather reliable predictor of a downturn in the economy in the next 12-20 months. In following plot, I have the yield of the 10-year note minus the 2-year note and the effective funds rate. It seems the rising of the effective funds rate creates some compression in the yield cure. It also seems to me that the Federal Reserve never gets the interest rate right. It seems they go too high when trying to fight inflation. Well, the argument is that they fight inflation with rate increases. This was the prevailing wisdom coming out of the 1970s when inflation was a huge issue. Most governmental banks, including the US Federal Reserve, target an inflation rate around 2% (plus or minus). The red ovals show when sharp increases in the federal funds rate corresponds to compression or flattening in the yield curve. With the exception of the mid 1990s, notice that recessions followed a year or two later. No Bueno for 2019 and 2020! It looks like the Federal Reserve overdoes it on the funds rate. Maybe they caught wind of this and back off increases in 1995, giving us a nice period of growth in the late 1990's. Again, rapid increases in the funds rate brought compression in the yield curve in 2004/5. We might well be in this period again. I question if inflation is properly measured. For instance, digital solutions, on-line ordering, Uber services, innovation in flying, have all reduced the costs to buy things, look for items, hire drivers, fly, and the cost savings of these services have changed what and how we purchase. That is a reduction in price and deflation in the costs of what we buy. For instance, in 1997, I purchased a Honda Civic for a bit over $15,000. Today, a far more efficient and technically advanced Honda Civic is available for around $19,000. In 21 years, its price grew about 24%. That is abysmal inflation and surely deflationary when one considers that the 2019 model offers more features. In fact, we see such reduction in prices largely because we buy things from lower labor cost countries and firms have reaped benefits from innovation and costs savings in scaled business models. The Federal Reserve says they look at the changing basket of goods purchases, but then how are they constantly overdoing it on the funds rate when it matters most? Is the Federal reserve capturing the movement to car services, like Uber and Lyft, over even owning a car? I think we experience deflation in various items, like travel and many services, due to the gig economy. And now, energy costs are way down historically (thanks to the spat with Saudi Arabia and Iran). Yes, food prices are up and many labor services that are not gig oriented are showing price increases. For sure, measuring inflation is not as easy as it sounds. And, I think the Federal Reserve should poll people on what they buy, not what we think they buy. Ask a credit card company to formulate a price index. I like to look at the Real Median Household Income. This is median household income corrected for inflation (and inflation might not be properly measured). There is recent good news, the "median" American family makes more than ever. However, there was a long stretch when real median household income was down and at best flat. In the next plot, you can see that the rising of the federal funds rate seems to also correspond to the reduction in the real median household income. Let's hope this coming year it is more like 1995 and we have a healthy stretch of growth ahead of us. If it is like 1995, the Federal Reserve should realize that they over did it and back off rate increases (as they did post 1995). Here's a great graphic that captures the commentary of the Federal Reserve governors in relations to the flattening yield cure. If we have a recession, it will be initiated by funds policy of the Federal Reserve. A little inflation might actually help local economies that have not seen housing prices move much and give employers a reason to share earnings with workers through wage increases. Perhaps Santa will bring a funds rate reduction, too! That's on my list to Santa! Professor Walker provides keynote talks, seminars presentations, executive training programs, and executive briefings. Click here to learn more about his talks, references from clients, options for customized talks and programs, and details on scheduling a program for your organization. About Russell Walker, Ph.D. Professor Russell Walker helps companies develop strategies to manage risk and harness value through analytics and Big Data. He is Clinical Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management of Northwestern University. He has worked with many professional sports teams and leading marketing organizations through the Analytical Consulting Lab, an experiential class that he founded and leads at Kellogg. His most recent and award-winning book, From Big Data to Big Profits: Success with Data and Analytics is published by Oxford University Press (2015), which explores how firms can best monetize Big Data through digital strategies. He is the author of the text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management through business case studies.
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As the end of 2018 soon closes, all eyes are turning to the prospects for economic growth in 2019. As seemingly always, growth comes from the US housing market or results in reinvestment in the US housing market. In either case, we see growth in or through the US housing market. People make more and buy more expensive homes. People make more because people are buying more expensive homes. It is like the chicken and egg problem. It doesn't matter, which comes first, economic growth or housing growth. Each needs the other to grow. There are some strong head winds to housing in 2019, and certainly not all parts of America are seeing the same housing market prosperity. Rising interest rates and changes in tax policy will hit real estate in 2019 negatively. Is there enough income growth to overcome these headwinds? I have not seen it. Let's examine some interesting graphics and data to reveal what has happened and what might happen in 2019. First, what does it cost to buy a house in various parts of the US? The variation is tremendous, which exposes that our economy is really local not national, yet we have national interest rates and nearly a singular national mortgage policy. Homes are a driver or certainly derivative of the local economic condition. Next, let's consider the new tax law that caps mortgage interest deductions and state and local taxes. It is expected to have a highly negative impact on  urban areas, with high local taxes and low to moderate economic growth. It's not looking so good for the Northeast and Midwestern cities. Let's look at the projected impact of the tax change more closely. Here is graph that shows the areas of the US that have benefited in the past from generous tax deduction from mortgage interest and local taxes. Almost all urban areas are hit hard in the new tax policy. But, it is fair to say that the cost of living is different across the country. It costs less to live in rural, small town areas than in San Jose, for sure. Let's look at that: Again, urban areas, not surprisingly, are most expensive. Let's examine how personal income has performed across the US. Yes, urban areas have grown, but there is also growth in the west and Florida. The rust belt states and much of the middle of the US have seen lower personal income increases. The US has been experiencing a long-term migration of people to the west and Florida. The availability of highways and affordable air condition made this migration attractive. People also moved to get more valuable land, for new and better paying job, and to get away from the snow. Today, there are many reasons for people to leave the Northeast and Midwest: large state debts, slow income growth, and now abysmal real estate appreciation. Check out the population growth since 1950 by state. Here is the famous Case-Shiller index. Indeed, the winners are those in the west and Florida. Many under-performing places in the Northeast and Midwest. Here is a nice graphic that shows the number of days one needs to work to afford housing in location. In pricey places, Americans must work more to own a home. Obviously, don't retire where it is pricey to own property. As we enter 2019, housing prices are hottest in the west and Florida, but there has been some slowing of the housing marketing due to the increasing interest rates. We should expect property values in the Northeast and urban Midwestern cities to be hit hard due to the impacts of the new tax policy. Increases in the interest rate (to control inflation, presumably) will not help in any of these areas. Since most Americans have their personal wealth tied-up in their home and other real estate, expect 2019 to be a challenging year, unless you are in a delightful spot in the west or Florida. Perhaps interest rates should be significantly lower in places like Chicago, Detroit, and Cleveland in order to spur people to move (or stay). Maybe higher interest rates would regulate growth in California or areas that need to examine housing solutions. The one shoe policy for interest rates does not work in such a varied housing market. Policy makers should look more closely at the impacts of interest rate policy on local communities. Professor Walker provides keynote talks, seminars presentations, executive training programs, and executive briefings. Click here to learn more about his talks, references from clients, options for customized talks and programs, and details on scheduling a program for your organization. About Russell Walker, Ph.D. Professor Russell Walker helps companies develop strategies to manage risk and harness value through analytics and Big Data. He is Clinical Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management of Northwestern University. He has worked with many professional sports teams and leading marketing organizations through the Analytical Consulting Lab, an experiential class that he founded and leads at Kellogg. His most recent and award-winning book, From Big Data to Big Profits: Success with Data and Analytics is published by Oxford University Press (2015), which explores how firms can best monetize Big Data through digital strategies. He is the author of the text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management through business case studies.    
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With the recent passing of President George H.W. Bush, a letter surfaced, which was sent from President Bush to the CEO of IBM, Sam Palmisano, a friend of the Bush family. I found it to be an excellent summary of how a leader should be guided by values and a great reminder of the humility and inclusiveness needed in a leader, during good times and bad. It is good advice for everyone. Here are the President's lessons:
  1. Don’t get down when your life takes a bad turn. Out of adversity comes challenge and often success.
  2. Don’t blame others for your setbacks.
  3. When things go well, always give credit to others.
  4. Don’t talk all the time. Listen to your friends and mentors and learn from them.
  5. Don’t brag about yourself. Let others point out your virtues, your strong points.
  6. Give someone else a hand. When a friend is hurting show that friend you care.
  7. Nobody likes an overbearing big shot.
  8. As you succeed, be kind to people. Thank those who help you along the way.
  9. Don’t be afraid to shed a tear when your heart is broken because a friend is hurting.
  10. Say your prayers!!
  Words of wisdom for all of us!
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BIG DATA TO BIG PROFITS by Russell Walker, Ph.d. - 6M ago

Facebook has never felt the heat it is feeling now. How did this happen? They are a darling promising marketers the reach to nearly every person through customized media. Success was rolling in as more and more advertisers saw the light and loaded up on ads. And, why have Amazon, Apple, Microsoft with its LinkedIn and Google stayed out of the fray? It boils down to the volatile mix of the realms of personal, political, and professional media (the 3 P’s) at Facebook that has created a super storm. Facebook has simply missed the expectation of constituents in these realms, especially by mismanaging its platform for politics. Let’s look at these major realms and automated algorithms got things wrong. Personal: Facebook overtook MySpace (does anyone remember them?) because they gave control to users on their data and properly reacted when MySpace said member data was corporate data. Facebook had solutions for companies, advertisers, and naturally that grew the base. It was innovative and helped people met long lost friends. Facebook seemingly could not miss. Earth to Zuck…people think everything about them is their property, including their data on Facebook. When Facebook let Cambridge Analytica and others use and access user data in the name of profits, users concluded that Facebook did not respect or protect user data. Users felt cheated, used, and abused. Sellout! We expect better from our favorite cereal brands and Facebook did not even hit that mark. After Facebook realized they were had by smart(er) data people, they were clearly embarrassed and wanted to show it was evil work by others, and not really Facebook misdeeds that created the maelstrom. Really, it was lack of attention and poor protection of user data that allowed others to access user data. Data hacks and data scandals did not help restore trust after the 2016 misdeeds. This means allowing political parties, Russians, Cambridge Analytica, and post cover-up work by the FBers when the FBIers showed up pissed off everyone. That all equals No Bueno. People expect to own, control, and have the ability to influence data about themselves.   Political: At some level, all firms have a political leaning, either because it helps the firm or because it reflects the politics of the people of the firm. Expressing the political view is a challenge and a decision that must be taken carefully. The challenge for Facebook is that its community is the US, the World, and about anyone that signs up. Expressing any political slant will result in many very unhappy employees, users, advertisers, and governmental officials (that might want to retaliate). Microsoft seems to have kept politics down in LinkedIn. Amazon, Google (maybe, but there are claims of Googlers censoring conservative ads), and Apple seem to have stayed out of expressing politics in their digital platforms. Once you express politics on a platform, you will offend some people. And given our split country, you are likely to offend millions of number of people. Politics and business are not a good combination. Facebook seems torn. It wants to be a community that can discuss politics and strive for good and maybe be a replacement for government or even democracy (at some level), but that causes problems for business. Americans like their business and politics separate. Advice for Facebook: Good business stays out of politics and good politics should not look like a business, unless you run a foundation ;) . Professional: Companies, advertisers, media agencies, and every cupcake store and lemonade stand wants to advertise on Facebook. But when the advertisement platform does not work on Black Friday and Facebook does things like trying to cover-up the Russian campaigns or smear Soros after his attack, you have to wonder what God-view control Facebook has over its platform and who might be in the bullseye next. Business is business. Keep it clean and do what is good for business. Lying, covering-up, and trying to convince members and governments that you are not political is a problem, especially after the fact. Get back to helping cupcake bakers and lemonade stands reach neighbors. It was wonderful when it worked. It was also nice to catch-up with old schoolmates. Thanks for that. The best thing for Facebook would be to get out of politics. Stop trying to be a form of government, remove political advertisements, do not extend support to political parties, and get out of the business of selling, picking, predicting, or even being in politics. But the money and power were too much to turn down in 2016 and being part of the election felt great. The fallout is showing that cost was much greater than imagined. Personalized media became the problem, even thought it was a holy grail to marketers. We learned that FB did not even know how to protect, manage, or even optimally connect to its users. Others did it better, especially with political messages. The promise of Facebook to advertisers, media creators, and even to members was that its algorithms would identify, recommend, and feed content that users would most want. It all sounded great when it was focused on the benign: sports, general news, company advertisements, classmates of the past, and fun stories. When the algorithms began to spread politics and then censor politics, and FBers picked some politics over others it became a huge problem. Does FB play favorites in the business advertisements, too? Can it? Sure. Will it ever do it? Who knows? It played in politics. Now, we know that the people with God-view can make changes that impact what millions of people see. Policies, censorship, and content approval are the name of the game. What is fair is harder for Facebook to define. The use of algorithms was gamed. Now, Facebook is in a battle to show it is concerned about the user experience, when it was previously concerned about profits from its platform. Facebook recently missed investor expectations and has also missed user expectations. Mind your P’s, Facebook. Professor Walker provides keynote talks, seminars presentations, executive training programs, and executive briefings. Recent talk topics enjoyed by clients have included: “From Big Data to Big Profits: Getting the Most from Your Data and Analytics” “Leveraging Artificial Intelligence and Automation at Work” “Winner Take All - Digital Strategy: From Data to Dominance” “Success with an Inter-Generational Workforce: From Boomers to Millennials” “FinTech, Payments, and Economic Trends and Outlooks in Consumer Lending” “The World in 2050: Risks and Opportunities Ahead” Exceptional executive training programs have included: “Digital Disruption, Automation, Analytics, Data Science, the IoT, and the Big Data Wave” “Master Course on Operational Risk: Measurement, Management, Leadership” “Complete Course in Risk Management: Credit, Market, Operational, and Enterprise Risk” “Cyber-security Training: Prevention, Preparation, and Post-Analysis” "Managing Your Brand and Reputation in a Crisis." “Strategic Data-Driven Marketing” “Enterprise Risk Management and the CRO” Professor Walker has provided these talks and programs to leading firms and governmental organizations. Click here to learn more about his talks, references from clients, options for customized talks and programs, and details on scheduling a program for your organization. About Russell Walker, Ph.D. Professor Russell Walker helps companies develop strategies to manage risk and harness value through analytics and Big Data. He is Clinical Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management of Northwestern University. He has advised the World Bank, the Department of State, SEC, IFC, multiple US Senators, the Bank of England, and leading corporations.
His most recent book, From Big Data to Big Profits: Success with Data and Analytics is published by Oxford University Press (2015), which explores how firms can best monetize Big Data. He is the author of the text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management through business case studies. Follow me at @RussWalker1492, bigdatatobigprofits.com and russellwalkerphd.com
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With the Thanksgiving holiday upon us, it is valuable to reflect on the origin of Thanksgiving and its importance for our nation and families today. Abraham Lincoln made his Thanksgiving proclamation on October 3, 1863, during the midst of the great Civil War. He knew division and the importance of reconciliation like no leader before and figured a day of “Thanksgiving and Praise” would help the divided country immensely. Although not at the scale of some 160 years ago, we see division in our country today. Each day, we read about some hard feelings after the election, and it is likely that many of us will encounter political discussions during the holidays with family and friends. Of course, there are lots of other planes of disagreement in families, too. Overcoming disagreement of opinions with loved ones can be hard, so I thought looking at Lincoln for his wisdom would help us, as he was a master of overcoming disagreement. Leaders are constantly challenged with disagreement and forced to make hard and unpopular decisions, challenging their character and morals. Asking “What Would Lincoln Do?” challenges us take the high road and offer our most thoughtful and caring approach in overcoming disagreement and in giving “Thanksgiving and Praise.” I should also add that as an avid photographer, I have long admired the photographs of Lincoln. Nearly every picture of him evokes a man deep in thought – careful of word and action, mindful of more important goals, and considerate of others, especially those in need of his protection and guidance. In short, he reminds us of what a leader must do. Here are a few Lincoln quotes that remind me of “What Lincoln Would Do.” These are also great lessons in leadership.
  • Remember to make the world a better place than you found it.
“Die when I may, I want it said of me by those who knew me best, that I always plucked a thistle and planted a flower where I thought a flower would grow.”
  • Remember that work and effort are critical in achieving your goals.
“Things may come to those who wait, but only the things left by those who hustle.”
  • Remember to thank those that labor for you. Also, if you want to amass capital, invest in labor!
“Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration. Capital has its rights, which are as worthy of protection as any other rights.”
  • So true, then, now, and always:
“A house divided against itself cannot stand.”
  • Disagreements can and should be forgiven.
“No matter how much the cats fight, there always seem to be plenty of kittens.”
  • Reach out to that cousin, colleague, classmate, business partner, political adversary, and (yes) protester with a different point of view.
“I destroy my enemy when I make him my friend.”
  • Don’t be offensive and don’t take offense.
“We should be too big to take offense and too noble to give it.”
  • Focus on doing your best and ignore the critics.
“If I care to listen to every criticism, let alone act on them, then this shop may as well be closed for all other businesses. I have learned to do my best, and if the end result is good then I do not care for any criticism, but if the end result is not good, then even the praise of ten angels would not make the difference.”
  • Often the hardest thing to do is to challenge yourself with another person's views.
“I don't like that man. I'm going to have to get to know him better.”
  • Remember to compliment the cook, host, and everyone that will make your family’s Thanksgiving special.
“Everybody likes a compliment.”
  • To the people unhappy with the election results, a reminder that you mostly control your own emotions and feelings:
“A person will be just about as happy as they make up their minds to be.”
  • To those helping in the kitchen:
“If I had eight hours to chop down a tree, I'd spend six sharpening my ax.”
  • To President Trump and all leaders (in governments, businesses, and all forms organizations):
“Nearly all men can stand adversity, but if you want to test a man's character, give him power.”
  • Remember to give thanks. It is what Lincoln would do and asked us to do!
“I do therefore invite my fellow citizens in every part of the United States, and also those who are at sea and those who are sojourning in foreign lands, to set apart and observe the last Thursday of November next, as a day of Thanksgiving and Praise.” To you and yours: Happy Thanksgiving! Professor Walker provides keynote talks, seminars presentations, executive training programs, and executive briefings. Recent talk topics enjoyed by clients have included: “From Big Data to Big Profits: Getting the Most from Your Data and Analytics” “Leveraging Artificial Intelligence and Automation at Work” “Winner Take All - Digital Strategy: From Data to Dominance” “Success with an Inter-Generational Workforce: From Boomers to Millennials” “FinTech, Payments, and Economic Trends and Outlooks in Consumer Lending” “The World in 2050: Risks and Opportunities Ahead” Exceptional executive training programs have included: “Digital Disruption, Automation, Analytics, Data Science, the IoT, and the Big Data Wave” “Master Course on Operational Risk: Measurement, Management, Leadership” “Complete Course in Risk Management: Credit, Market, Operational, and Enterprise Risk” “Cyber-security Training: Prevention, Preparation, and Post-Analysis” "Managing Your Brand and Reputation in a Crisis." “Strategic Data-Driven Marketing” “Enterprise Risk Management and the CRO” Professor Walker has provided these talks and programs to leading firms and governmental organizations. Click here to learn more about his talks, references from clients, options for customized talks and programs, and details on scheduling a program for your organization. About Russell Walker, Ph.D. Professor Russell Walker helps companies develop strategies to manage risk and harness value through analytics and Big Data. He is Clinical Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management of Northwestern University. He has advised the World Bank, the Department of State, SEC, IFC, multiple US Senators, the Bank of England, and a host of corporations.
His most recent book, From Big Data to Big Profits: Success with Data and Analytics is published by Oxford University Press (2015), which explores how firms can best monetize Big Data. He is the author of the text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management through business case studies. Follow me at @RussWalker1492, bigdatatobigprofits.com and russellwalkerphd.com
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