Savvy Avi

EvoTech in Design Challenge 2012

2012-02-05T18:40:00.001-08:00

I think I work pretty hard with a demanding job at Jumptap, EvoTech in the evenings and weekends and being a new father. Then I met the 2012 System Design and Management (SDM) students in “boot camp” and was reminded that one can be even busier.

A team of SDM students worked on EvoTech in their design challenge 2 assignments. We asked them to focus on EvoCloud a telemedicine offering we want to pair with our endoscopy camera. They came up with interesting findings: possible NGOs to contact, connections to telemedicine player in India, evaluation of 3G coverage and quality in Africa, a mockup and a fresh look at a new market.

In the picture below SDM fellows presenting their work on EvoTech (left to right): Steve Ajemain, Bhushan Desam, Mike Meyer, Sascha Boehme, Andy Campanella, Rajesh Nair, Jake Whitcomb.

Evotech partnered with IDEO.org

2011-12-26T15:03:00.000-08:00

IDEO.org, IDEO’s branch for social venture work, has chosen Evotech for a 5 week project. We have a talented team: a mechanical engineer, a designer and a management consultant, working to improve EvoCam’s design and market strategy. It’s a great show of confidence for Evotech, and will no doubt improve our readiness to go to market. Read more in IDEO’s blog post.

Working on Evotech part-time, progress comes slow. For every grant, business opportunity or competition won, we’ve lost at least two. However, so far, every achievement is several times bigger than the one before it, and that means we are moving in the right direction.

Should you build a website for your early stage venture?

2011-11-26T16:13:00.000-08:00

Over the Thanksgiving weekend I built a website for Evolving Technologies. Check it out. www.evotechmed.com.

At Evolving Technologies, an early stage venture, we were debating whether it makes sense to have a web presence at such an early stage. After all, we are not looking for customers just yet. Some of us argued that we should be focused on a short list of strategic tasks that doesn’t include maintaining a website.

However, we found out that, contacts you talk to expect to be referred to a url. It is also useful in email introductions. What’s more, today with good content management solutions it only takes a day to build a reasonable website, it’s fun and it allows you to show case the things you’ve been working on. So we got one, hope you’ll enjoy it!

Technology Dissemination to Developing Markets Supported by MIT

2011-08-07T13:25:00.000-07:00

A small office, off the infinite corridor, hosts MIT’s International Development Initiative program (IDI). IDI’s mission is to help ideas, worked on at MIT, become products and reach people in developing economies creating a social benefit.

Most ideas never make it into products. The gap between good ideas to good implementation is even wider when the intended user is many miles away from the inventor. IDI helps to bridge the gap, many times by flying the entrepreneurs to the destination markets where they refine and test their ideas.

This summer IDI granted its Technology Dissemination Fellowship to Evotech, the affordable endoscopy venture I am part of. We are using the grant to develop a medical light source to work with our endoscope. With the grant we hired an intern from MIT who works on prototyping and especially on the light’s electric board. We also used the fellowship to purchase components needed for the device and its development: a refurbished scope, LEDs, circuit boards, heat sinks etc.

In a humanitarian trip to Uganda in March of 2011, Medicine for Humanity, used our endoscopy to treat Vesicovaginal Fistula patients with great results. The treatment of two patients was made possible by evoCam (our endoscopic camera) and had it not been available the patients would have been turned away. In three other cases, evoCam was used for evaluation, sling/stent placement and for training of local physicians. However, the number of cases treated was limited by the absence of a dedicated light source. Mbarara university hospital had only one light source shared for all the operations. Moreover, during a power outage that occurred the physicians were not able to operate. Even though Evocam can work off a laptop battery, the hospital’s light-source used a socket. This trip refocused our priorities. Making a small, battery-enabled light-source to work with Evocam became our top priority. Now with the help of IDI, our light source is becoming a reality. We hope that soon, it too, would be put to good use by one of our NGO partners.

Image shows a 5mm Laproscope mounted on an evoCam prototype (photo taken by Bill Near)

Frugal Innovation in Healthcare

2011-04-11T20:30:00.000-07:00

I have been working on EVOCAM a low cost endoscopy system with my partners at Evolving Technologies. Using frugal innovation techniques we developed a light, portable endoscopy prototype for a fraction of the price of existing solutions.

Recently Medicine for Humanity physicians used our system to operate in Uganda. To allow training to continue from afar, after volunteer physicians returned home, we are planning to add a tele-medical feature to our device.

I joined the team after they already had a working prototype and focused on market research, creating a concise massage and preparing a parametric engineering evaluation that exemplifies how EVOTECH is positioned in the market place. Basically everything it takes to turn a good idea into a good business plan. I am currently working rendering another EVOCAM out of MIT’s hobby machine shop.

Together we took EVOTECH into MIT’s $100K business plan semi-finals (still competing) and to a bunch of other competitions in MIT and outside.

Here is a link to a video about it in MIT TechTV http://techtv.mit.edu/videos/12021-evocam-procedure-captured-by-video-conferencing

Physicians operating in developing regions rarely have access to MIS equipment to perform medical procedures that are routinely performed in the developed world. This could really make a difference.

If you like our idea (and 25/4/2011 hasn't passed yet) please support us by voting in http://globalchallenge.mit.edu/teams/view/186

Prioritizing Software Feature Development

2011-03-30T07:35:00.000-07:00

A Product Manager’s key responsibility is focusing the product direction. It is always the case that there is more work than resources especially in startups. Hence a good way to prioritize work can really be useful.

Using SaaS, software typically resides on vendors’ servers, it is easier for vendors to release updates at more frequent intervals, and with agile development practices, applications are updated almost continuously without traditional version control. Software hosting also allows vendors to collect valuable information about customers’ usage patterns. The available information is unprecedented in scope and immediate in availability. With a continuous deployment model and immediate customer response, the feedback loop between development and customers has never been faster.

However, in order to fully leverage the fast feedback loop, companies must use the right performance metrics. This is what my research is about and I’ll speak about it in CE2011 conference this July at MIT.

You can read my article at ESD working paper series.

Agile or Waterfall: What's Best for Your Software Project?

2011-03-02T16:33:00.000-08:00

When HubSpot’s development team started working it was clear to them that they are going to work agile. It was equally clear to Raytheon’s air traffic control development team that they should use traditional methods like waterfall (and CMMI). And if Raytheon would have decided on agile I would never fly again. However, these projects are in two ends of the spectrum for many in the middle the answer isn’t obvious.

I recently went on a business trip to San-Jose California to help establish MIT’s product realization lab. I met with managers in Cisco software and E-bay and learned that this is an important issue. In fact, E-bay uses both methodologies depending on the project.

To come at the right conclusions development teams should consider organizational, product and industry characteristics. I developed this questionnaire with 8 questions. By filling it out and summing the points, one can arrive at the most suitable method for a given project.

Questionnaire

Rank each question in a scale of 1 to 4

Industry related questions (uncertainty, time to market)

1. How uncertain are costumer needs in your project?

1 being high uncertainty and 4 low uncertainties

2. How important is time to market?

1 being critical and 4 not critical

Product related questions (reliability, dependencies, maturity, and type)

3. How important is reliability (or safety) of the product?

1 being not critical and 4 critical

4. How would you describe the impact your project has on other projects/products?

1 being a standalone project and 4 being part of a cross-functional product

5. How would you describe the maturity of the product?

1 being new product (no legacy systems) and 4 being maintenance of mature product

6. How would you describe software type of work?

1 being not algorithmic / analytic intensive and 4 being algorithmic / analytic intensive

Organization related questions (disparity, culture)

7. How close is the development team?

1 being co-located and 4 located in multiple time-zones

8. How would you scale the organization’s culture?

1 being developer centric and 4 developers as back office culture

Score of 8-16 recommendation: Agile

Score of 24-32 recommendation: Waterfall, Spiral or another traditional method

Score of 17-23 recommendation: ?!?

Some tips on how to answer the questions. Consider a diverse set of projects and rate yourself in comparison to them. Examples: car brake control software needs more reliability and safety than help-desk software. Time to market is more critical for a startup with cash for 6 months than to a fortune 500 company.

Finally, a warning: this questionnaire was not validated by empiric research (yet).

Is Quora going to make it?

2011-02-12T09:59:00.000-08:00

Is Quora going to make it? They have got a good chance. Many Silicon Valley executives think they will. Is Quora going to contribute to the body of global knowledge? I am doubtful.

Like Wikipedia, Quora is a crowd sourcing platform that leverages users to do the work. Unlike Wikipedia, Quora is for profit. Its users work, not for the benefit of human knowledge but for the benefit of Benchmark Capital. It has a smart business model. Users answer questions to promote their online reputation as experts on a topic (guilty as charged, I do it too). Users also write questions because it is an easier way to show online presence than answering, it only takes a sentence or two.

People write questions to join the online clatter; usually they are not looking for answers. Also, in other search and answer websites like Answer.com or ehow.com the questions are simple, like “What is the best way to get from Philadelphia to NY?” Google “How”, “Philadelphia”, “NY”, and “travel” and you are likely to find this question. Questions on Quora are much longer and therefore the likelihood of finding a specific question by googling is much smaller. Quora will prove itself useful only when many of its users will actually use it to seek information.

Much of the same happens on Twitter, where every Tech-Crunch post on startup investments, acquisitions or ousting of a CEO immediately gets re-twitted thousands of times making an hyperbolic could of chatter. We get it, you are on top of things, and you have a RSS reader. At least Twitter has found a way to provide real value: Clover food trucks update their whereabouts on Twitter; Sarah Palin uses it to create new words in English; and Egyptians use it to stir a revolution. Time will tell if amid all the noise, Quora will provide value as well.

Finally, some related links:

Who decides what is true on Quora? http://chinacensorshipwatch.org/tag/quora

Some take it humorously http://www.quora.com/Whats-the-best-way-to-deal-with-guys-who-flirt-with-your-girlfriend-on-Quora

Me on Quora http://www.quora.com/Avi-Latner

10 Recommended Readings on Business and Policy

2010-12-28T11:12:00.000-08:00

Piles of business and policy books are published every year. While almost any book has something worthwhile in it, only a small fraction are good. And for every profound idea there is a load of simplifications, unbiased assertions, after the fact reasoning and hype.

When considering what to read I know what to avoid. For starters, I’d avoid anything with a title similar to this blog title – anything with a number in it: “365 days of success”, “8 new roles of money” (from the Kiyosaki who brought us rich dad poor dad) or “101 ways to turn your business around”. I also avoid biographies and autobiographies. They tend to present a simplified view where the fortunes of companies and nations are over attributed to one person. This view is misleading and even dangerous when people start believing in saviors and messiahs. Autobiographies have all the flaws of biographies and they are also biased and are too often just pure narcissism. Finally, I won’t read a book about a company written from within like “the McKinsey way”. That’s just PR; Reading a book like that is as absurd as watching a TV channel in anticipation of a commercial brake.

Finding good stuff is much harder. Here are my suggestions:

1. Nudge

When faced with many choices people often don’t exercise free will to their advantage. People just don’t have the time (and often the skill) to think through all the options. Therefore policy makers (and business managers) should gently nudge people to a convenient default. Just think about how much you know about your pension fund investment policy. Didn’t convince you? Read the book, Thaler and Sunstein do a better job.

2. Caching the Rabbit

Spear, a MIT ESD professor, asserts that operations is more important than strategy. Few companies maintain a sustainable competitive advantage because of strategic decisions. And yet strategy is the talk of the day. Like many other management scholars in the 90s Spear studied Toyota. Spear tried to go beyond specific methods like lean, JIT and Kazan and looked at how Toyota created a culture of continuous process improvement.

3. The Upside of Irrationality

A former MIT professor, Ariely, doesn’t talk about big decisions, complex systems or strategy. As a behavioral economist, Ariely and his colleagues do small experiments to reveal human reasoning. However, these small experiments have important implications on big decisions like the effect of large bonuses (negative). There are probably more profound readings on this subject as Ariely and the whole discipline is based on Kahneman and Travesty’s work. But Ariely’s curiosity and humor make this book especially fun to read.

4. The Halo Effect

We are built to prefer neatly tied stories of cause and effect. Therefore we draw the wrong conclusions from success and failures or as Rosenzweig calls them delusions. Being aware of these pitfalls is the common thread to many of the writers in this list: Rosenzweig, Taleb, Ariely, Foley and Godwill. Rosenzweig does the best job at pinpointing the problem.

5. The Black Swan

At times, Taleb’s attempt to show his wit gets the best of him. But he has a profound idea on the effects of the rare event. This idea is beautifully symbolized by the black swan. If the black swan phenomenon and the effects of randomness become mainstream concepts of business management we will all benefit (all but traders and hedge fund managers).

6. Outliers

More than anything, Malcolm Gladwell, is a compelling story teller. Gladwell composes together fascinating academic research into a cohesive narrative. However, the plot is sometimes too nicely laid out for the sake of drama (happens much more in Blink).

Outliers examines the cases of Gates and the likes to show how a rare combination of circumstances of both luck and skills create extraordinarily successful people.

My take on it is that every industry titan owes his future to the roll of a dice. The only difference is that some like Gates, Brin or Jobs recognize the role luck played. Others like Trump and most Israeli tycoons think they were meant for greatness.

7. The March of Folly

Some decisions are proven wrong in retrospect. Follies are decisions that had “wrong” written all over them from the beginning. This classic book shows the impact of groupthink throughout history. Something to think about the next time you step into the corporate boardroom.

8. Freakonomics

This book is light, fun and full of interesting anecdotes. Years after reading it I still remember the examples of the economics of drug dealing, sumo fraud, children names and kindergarten incentive schemes.

9. Fool’s Gold

A 2010 list of business books isn’t complete without a book about the financial crisis. Tett, a Financial Times reporter, provides a good overview of the short history of derivatives.

10. The Tipping Point

Tipping points are part of game theory and system dynamics as well as chaos theory which studies infinitesimal changes in starting conditions that cause a great change in the finite state. In this book Gladwell shows real life examples of tipping points from crime in NY to epidemics in Baltimore.

Could System Engineers Succeed where Economists Failed?

2010-11-10T22:18:00.000-08:00

Engineering System D ivision (ESD) at MIT hosted a talk this Tuesday about the financial crises with Charles Ferguson, director of Insider Job. Ferguson identified the securitization chain as a major cause of the 2008 meltdown. A while back, the issuer of a loan held it to maturity and bore the risk. More recently, risk bearing moved downstream from the issuer to the investment bank and on to investors and insurers.

Faculty members in ESD deal more with fighter jets and supply chains than finance. However, system thinking and system engineering methods are great tools for investigating financial systems. The securitization chain acts like a physical supply chain and the meltdown happens to be a bullwhip effect just like in any supply chain.

Using System Dynamics is also a powerful tool. Risk assessments of mortgage backed securities were faulty because the risk models had narrowly-defined boundaries. Cash incentives for short term gains, deregulation, shorting on one’s own instruments and the dependence of rating agencies are all reinforcing loops working in the same direction.

This could be a great subject for a thesis, should I ever do a PhD. In the meanwhile I drew some casual loops.

Digital Life - Art of Display

2010-10-23T17:19:00.000-07:00

TNS, a market research firm, conducted an extensive research on the use of mobile, internet applications and social media around the world. What's really cool about it, more than the findings themselves, is the way the findings are presented.

Sometimes, visualization is what matters most.

http://discoverdigitallife.com/

Poker Playing Ninjas and the Eerie Ways of Software

2010-10-12T22:13:00.000-07:00

It seems that agile is the predominant methodology in software development, especially in shrink-wrap software and web. It certainly stands behind some mammoth success stories of late. However, agile is not a fit-all method, in many software domains it just won’t work well. More than that, agile seems more like a philosophy, a way of thinking, than a complete methodology.

Software is a new field and it is going through some phases. Agile is one of those. Let’s look at the language used in new wave development methodologies. Programmers are action figures; they are “cowboys” or “ninjas” or simply “heroes”. Programming is a dangerous, masculine, activity like rugby (scrum) or an extreme sport (extreme programming). Planning is a poker game, specifications are paper in an electronic paperless world and all we need is dialog (agile manifesto). Could it be that this juvenile lingo is a product of an engineering field that is in its adolescence?

When considering what methodology to use, the type of system, its use and the culture should be considered. Some of it is shown in the illustration (I use “waterfall” as a name for the traditional, more structured methods: waterfall, spiral or other).

This post is influenced by Professor Leveson’s class “software engineering concepts”. Leverson is a world expert on software requirements, embedded software safety and a self proclaimed cranky old lady (she isn’t - it’s just her regular joke).

Other SDMers have given thought to this subject: http://abstractsoftware.blogspot.com/2010/10/agile-processes-so-whats-architecture.html

http://fglaiel.blogspot.com/2010/07/hidden-cost-of-agile-software.html

AA Problem

2010-09-21T21:15:00.000-07:00

AA stands for Attention Allocation not Alcoholic Anonymous. Sorry for the deceiving eye catcher.

PTT presentation is work I did in 2005 in the purely abstract edges of Operation Research. I uploaded a PPT presentation. The presentation is lighter and more colorful than the actual article. Warning you have to be a bit of a geek to press the link above.

For the super geeks I put a link to the full article. It’s called “Attention Allocation to Partially Observable Heterogeneous Customers – with Imperfect Treatment”, Catchy?

Full AA Problem article

Sleepless Summer Nights - Certificate Design Challenge

2010-09-16T18:19:00.000-07:00

Another System Design and Management certificate program started this summer. The event ended with a robot design challenge which I managed along with Hamid and Kandarp. With just three organizers there was lots of work but it was a rewarding experience.

This is a part of an article that appeared in the SDM alumni newsletter:

“Certificate students spent the last two days of the workshop completing the Design Challenge (DC) Competition. SDM Fellows - Kandarp Bhatt, Avi Latner, and Hamid Salim - designed this challenge using the latest LEGO Mindstorm NXT kit with several stages of events having increasing difficulty. A primary premise of this particular exercise was that the events stressed different (sometimes conflicting) performance requirements, forcing teams to perform critical design tradeoffs. This year's teams exhibited outstanding inter-team collaboration during the long hours of the DC process.

First place Design Challenge winners were: Nick Biersdorf, Brad Hitchler, David Kapparos, Lisa Steinhoff, and Steven Stone.

As has been the case with other DC exercises, these weary but happy participants found it the highlight of their week.”

Source: http://sdm.mit.edu/alumni_newsletter/#summer

Tips on Getting Started with a Thesis

2010-09-13T21:14:00.000-07:00

A thesis is one of the advantages System Design and Management has over other professional degrees such as MBA. However, it is not structured like course work and it can take a lot of work to get started on the right thesis.

There are three key decisions to a thesis: a topic, an advisor and a company (optional). Since you’ve got to start somewhere I started by choosing a topic and then pitching to professors hoping they would use their connections to find a company. It didn’t work.

After several iterations I changed strategy and started with a company. Getting a company to collaborate wasn’t easy, but once that was done the other pieces fell neatly into place.

Another option is to work without a company. An advantage to this approach is that you are more independent. Keep in mind that an independent thesis must rely on publicly available data sources. In engineering most of the data isn’t public but the front end of systems (finished product, website, mobile apps, standards, interfaces etc) is available.

If you do start with a company here are my tips:

· Find a connection in a company that you’d like to work with

· Work your way within the company to find the right person

· Don’t work with a company that thinks of you as a nuisance; establish a vested interest in your research. A great way to establish company commitment is to get financial sponsorship. However even companies that are open with their data are less keen to open their wallets. Set realistic expectations. If you approached the company you have less leverage than if it was the other way around.

· Talk with the company sponsor to understand the pains, needs and opportunities they have. Then choose a few directions and write a proposal document. For each direction the document will include:

o How the research will help the company

o What is the academic angle: thesis name and contribution to research body

o What skills and interests will a potential advisor have? It has to be more specific than just software. For example a thesis on a software company may need one or many of these skills: software strategy, operations and measures, process improvement, statistics etc.

· Circulate the document in the company to see which direction they like most. At the same time circulate it in the university to find potential advisors. Align an advisor and company’s interest and zoom in on one subject.

· Congratulations, now you can start working.

Oh, this is only based on my experience; take it with a pinch of salt. Others may have had different approaches.

From Online Service to Mobile App

2010-08-25T21:31:00.001-07:00

Service companies use branches, phone, kiosks and web as direct channels to customers. In recent years service companies added a new channel - the smart phone application. Smart phones differ from PCs in screen size, ease of typing and input, connection speed and use context. Keeping these changes in mind, mobile apps shouldn’t be a replica of their online counterparts. One difference is that the mobile app has to be leaner. Another difference is that mobile apps should have unique features, such as location based features, taking advantage of mobile capabilities.

As a case study, I compared the online website and mobile app of Citibank’s card services. As shown below the mobile app has fewer pages (17 vs. 84) and has fewer levels (4 deep vs. 6 deep).

Companies rushed to create iPhone and android apps often not doing it “right”. Mobile operation system defragmentation and rapid market changes make doing it right all the more challenging. That may be the reason why Citibank’s iPhone app got a poor ranking of 2.5 out of 5. Surely in coming years the industry will mature and mobile apps will improve.

Figures (top to bottom): Citibank Credit Card Online Service (Prepared with PowerMapper), Citibank Credit Card Mobile App, Van diagram comparison of features

SDM featured in “The Upside of Irrationality”

2010-08-12T20:03:00.000-07:00

Dan Ariely a behavioral economist from Duke mentions System Design and Management in his new book “The Upside of Irrationality”. In his book, a sequel to the New York Times bestseller “Predictably Irrational”, Ariely intertwines research with personal stories including stories of his time as a “lowly assistant professor at MIT”.

The story begins with “here is a story of a time when I lost my own temper” and describes a dispute between Ariely and a revered professor of finance, a former dean of Sloan, code named Paul, over a scheduling conflict of SDM classes. SDM students are described as curious and, reportedly, Ariely enjoyed teaching them.

This story is just an anecdote used as a preface to a chapter on fleeting emotions followed by impulsive acts. Ariely and his fellow behavioral economists construct amusing research to expose how we humans continuously fail to behave rationally. In these experiments subjects fold origami frogs, build Lego robots, put their hand in close to boiling water, and speed date.

The World of Zero Growth

2010-07-24T11:51:00.000-07:00

Jay Forrester, the founder of System Dynamics, a man regarded by many as a legend, was a guest lecturer in SDM’s System Design class. At 92, Forrester is still relentless at finding the true implications of public policies through system dynamic simulations and working to correct policy.

His work in the 70’s and onwards on the limits to growth led him to believe that people are consuming and growing beyond the world’s capacity and that disastrous consequences will follow. The implication of this belief is harsh; humanity should stop striving for growth and instead maintain a net growth of zero.

Most extreme opinions are a product of dichotomous “black and white” thinking. This case is entirely different. Extensive research, innovation and his boldness to face an unpleasant revelation created this extreme view.

Forester realizes that it is futile to lobby for such changes. Policy makers cannot radically change the direction of policy without a strong support of constituents. The public will come to support a change only if it understands Forrester’s models and calculations. To “make” the public capable of understanding, Forrester started a K-12 system dynamics education system.

Modern economy is based on the assumption of continuous growth. The “time value of money” ($100 today is worth more than $100 next year, since it could be invested and grow in a year) is dire to the existence of the stock market, banks and any form of investment. Policy makers, capital markets, technology innovators, business schools and even the basic human desire all strive for improvement of productivity and growth. Can we even imagine a world with no growth? Dare we undertake such a radical social experiment? Can we afford not to?

Source: image from Berlin Museum by Cornelisz Anthonisz http://www.smb.museum/smb/babylon/show_text.php?page_id=1&lang=en

eMbrace venture

2010-07-12T08:33:00.000-07:00

eMbrace venture which I am a part of started as a project in Product Design and Development class. It is mentioned in the last SDM pulse in an article by the class's professor Qi Van Eikema Hommes:

“one team in this year’s class started out with a technology—an RFID tracking device—rather than a need. Team members wanted to design a web-based system to track everything from documents to parts and information. In class, the students were urged to find out why the world would want their system. Using techniques learned in class, they interviewed and observed people, ultimately identifying a need among parents who sometimes lose their young children in busy areas. The team felt that these parents would like anyone who finds their child to be able to contact them quickly. Based on this need, the students developed an attractive RFID bracelet for kids and a companion web-based tracking system. The team is now exploring the possibility of collaborating with Verizon to produce such a system.”

Read the full article at

https://docs.google.com/viewer?url=http://sdm.mit.edu/docs/sdm_pulse_summer_2010.pdf

SLAM dunk

2010-06-20T15:27:00.000-07:00

Molded after the popular Sloan experimental courses (e-Lab g-Lab) SLAM lab (System Leadership and Management) is a course offered only to SDMs. Students consult Cambridge technology firms with strategic decision making. The course, offered in fall, has a summer preparation course adequately called pre-SLAM lab. During the summer course, the class is presented with cases about MIT spinoffs: E Ink, A123 Systems, Ember. All the cases have been written by Harvard Business School. I think I have spotted a pattern: MIT incubates companies and HBS writes case studies about them.

Professor Michael Davies, who teaches the class, is the most charismatic lecturer I have had so far at MIT. Pre-SLAM class is always entertaining but when class ends I am not always sure what I’ve learned. One lesson I did pick up is that even very smart people can make stupid decisions. People are ‘prisoners’ of their own history and tend to bias strategic decision with emotional ‘reasoning’. I have seen it in politics and history (The March of Folly) and now I see it in business.

Who Are You?

2010-05-23T03:42:00.000-07:00

As a blog writer I am interested in viewing who, if at all, is reading my blogs. I installed a tracker. I use tracemyip.org but Google analytics and probably many other sites provide similar services.

So now I know a lot about you. I don’t know your identity but what I can tell is your approximate location, through IP address, the links or search words you used to get into my blog and even your browser, OS and screen resolution.

I was surprised to find out that in several months I had a few hundred readers. In a typical day I have two or three readers one of which is a first timer. 70% of the readers come through SDM, which for me means more of my blogs should be SDM related. Other readers either come from Google search with searches related to my latest post title (“up on the bridge”, “performance based bonuses”, “credit defaults” are some examples), from LinkedIn or from looking me up directly (probably family and friends). The last category of entries to my blog is crawlers; the web is swamped with crawlers.

I was disappointed to find out that a majority of the readers spend as little as 15 seconds in my site. If you got this far are not a typical reader! It takes at least 30 seconds to read 3 paragraphs. I will experiment with adding pictures to see how it affects the time spent on each page starting with this entry.

Pitfalls in Performance Based Bonuses

2010-04-18T08:09:00.000-07:00

Performance based bonuses (PBB) is an effective management tool but quite often it causes unintentional effects. PBB are supposed to improve productivity by compensating employees according to their contribution to productivity. However organizations are complex systems and it is impossible to measure an employee’s contribution accurately. Companies are forced to use performance models that are a simplification of reality. As a result, employees are focused on maximizing performance under the model which not completely aligned with the benefit of the company. In banking, for example, the bonus models underemphasized risk, causing a worldwide catastrophe.
Leaving the financial crisis aside, there are other common pitfalls. It is simple to construct performance-based contribution for sales representatives. The more they sell the more they earn – simple. It is much harder to construct a model for back-end functions, say an IS developer. This is where it gets messy.

Measurement by schedule

The two most common schedule bonuses are a bonus for timely completion and a bonus for accurate planning. Combined together these two bonuses can cause a funny outcome. Well funny for a bystander, not nearly as funny for the company. This is especially true when the manager that plans the task and dictates a timeline is measured for performance according to her own predictions and plans. More often than not, that is the case. Obviously, if a manager is measured by meeting her own timeline she has a strong incentive to insert large buffers to the plan. This by itself is not a serious problem. In the worst case, the manager’s team will finish ahead of time and will still be congratulated for a job well done. However, what happens if the manager is also measured for accuracy of plan? In that case, finishing before time is not desirable. The team gets the feeling that they are expected to utilize all the allocated time and will slow down the intensity of their work and even be “quietly” idle at times. At the end, everyone is happy all the tasks are “green” (finishing in time), the predictions self-fulfill, workers don’t have to work and the manager gets a hefty bonus.
Corporate has managed to create an inhibiting bonus system. When executives look at their colorful dashboards (that show goals), everything looks fine. I call it the self-fulfilling paradox of over planning.

Measurement by defects

Imagine a defect found in UAT (user acceptance tests) that comes down to a discrepancy between the code, the functional specification and the data model. Who should be assigned the defect? Many times it is easier to fix the defect than to answer this question, especially when the answer affects income. The focus shifts from solving the problem to assigning blame. The defect is tossed around from one person to the other. Such a defect is likely to have more than one “parent”: the data modeler for not synchronizing with the functional specification, the analyst that has an overall responsibility for the design, and the QA who did not spot it. Should you assign it to multiple people? That would add a serious complexity to the defect handling process. Wouldn’t it be easier to just assign the defect to the person who is most likely to solve it?
What about when an employee detects a defect that he is responsible for, in which case the resolution involves formally opening a defect on oneself? Say, a developer who found a problem with a code piece that is already in production. Nobody but him noticed it so far. If he gets lucky maybe nobody will until such a time when he has the chance to slide the fix into the next patch. When it affects his bonus, the developer has a strong incentive to let it slide.
Rewarding for opening defects can cause a profusion of pettiness. In matters of form and documentation there are countless ways of doing things and therefore there are many opportunities to open defects. I have seen this turn quick informal feedback loops into a red-tape burdening communication.

So what to do

‘How to do it right’ is a hard question. One thing is for sure, trying to develop a measurement system that takes everything into account is not the right approach. Additional complexity to measurement systems increases maintenance cost. Time spent on maintaining complex metrics can out-value the increase in accuracy.
Metrics should be used as a reference but the ultimate bonus decisions should be left to direct managers. Especially in parts of the organization that are not profit centers. There is no substitute for good and honest management trusted by subordinates to make decisions based on insight and integrity.

Sparking the Entrepreneurial Spirit

2010-04-03T18:55:00.000-07:00

As engineers, many of us at some point contemplate founding a start up. For most, it is nothing more than a thought and for a sound reason – we know the start up success rate. However, if you are anything like me a dormant entrepreneurial seed lingers in the back of your brain. Product Design and Development, a foundation course in MIT’s System Design and Development program, encourages experiments in that direction.

The course reviews the product development process starting with deriving user needs and on to designing a concept and prototype. Interesting guest lecturers come to speak to class such as industrial designer Matt Kressy who talked about rapid prototyping and Yoav Shapira a startup VP who talked about agile development. Class teaching is followed by a semester long project to come up with a new product. Each group receives $800 to create a prototype. At the end of the course there is a competition and the winners receive a small budget to continue with the product development. In the past, at least one commercialized product came out of the course.

Although the course is best suited for small scale physical products my team chose to focus on a physical device that provides a software based service. Our idea may not amount to anything more than a prototype and a grade but at the very least, for a while, it sparked our entrepreneurial spirit.

System Dynamics in Financial Regulation

2010-03-18T21:46:00.000-07:00

Another nail to the coffin

There is much hustle in Brussels as the EU market commissioner proposes steps to curb swap trading. The German chancellor presses for tighter EU regulations on hedge funds. In the UK, we are told, regulators seek tools to “burst dangerous asset bubbles before they are built”. Four banks, including JPMorgan Chase my employer, face trial over sale of derivative to Milan municipality, allegations that echo the role investment banks had in fueling Greek debt. It’s interesting that in the Greek and Italian stories the banks are cast as villains and public sector as a defenseless simpleton. But what is really amazing is that all these stories are reported in just one Financial Times edition. Things are moving at a dizzying pace. Financial policy is going through an overhaul.

Aiming at the wrong target

Meanwhile in the US, where the villains are the same but the simpletons are the homeowners, there is talk of a new regulatory body, the Consumer Financial Protection Agency. Though reckless mortgages are a real issue, it is not the most pressing one. Leverage and structured derivative products should be the main concern. While mortgages happened to be the raw material for structured products in the last crisis they may not be the building block of the next one. Creating a new agency is a more dazzling legislation than strengthening existing agencies (SEC, Federal Reserve) but is it a better policy?

Talking of new bureaus, Sloan professor Andrew Lo proposes to create a “financial industry crash safety board” that will investigate financial crises in the same manner as plane crashes. I am skeptic that will work or that it is necessary since there are numerous people probing into the last crisis anyway. But, I am proud to see that our professors publish such columns. Maybe that is why he is too busy to answer my email requesting to take part in his research group (-:

Sources

http://www.ft.com/cms/s/0/77069b0e-32bb-11df-a767-00144feabdc0.html

http://online.wsj.com/article/SB10001424052748704625004575090310653549910.html

http://www.ft.com/cms/s/0/011cbf2e-2599-11df-9bd3-00144feab49a.html?nclick_check=1

The Hunt for a Thesis

2010-03-06T11:20:00.000-08:00

The thesis is one, of several reasons, that made me choose the System Design and Management program and not an MBA program. I have been looking forward to it with much anticipation.

Now that I have started the thesis seminar, I quickly found out what’s the hardest thing about starting a thesis.

It’s not finding a subject. Ideas come easily, every week I think of a new idea that gets me hipped.

It’s not finding an advisor. There are plenty of experienced professors willing to advice.

Unless the research subject is theoretical or not case-specific, which is not my desired direction, the hardest thing is connecting to a company that is willing to share data for research. Sponsored students are lucky (not just because of money) they have an established relationship with a supportive company.

No worries, with patience and persistence even hard things reach a successful conclusion.

SDM from up on the bridge

2010-02-25T17:10:00.000-08:00

I am taking the first spring semester as a long distance student in MIT's System Design and Managment (SDM) program. The long distance option, which I am grateful for, poses some challenges. A month into the semester, I am still trying to improve the interaction with the classroom, faculty and fellow students and maintain a balance between school and work.

Setting up a work station

I am using my home office (/living room /dining room/ guest sofa) from which I connect to the ‘bridge’. I find it useful to work with two screens. One displays the class, the mike controls and my video (I want to see how I appear to people looking at me from the classroom). The other displays the presentation slides and notebook (OneNote). The webcam is positioned above the main screen and when I look at the other screen, I am not facing the webcam.

Class participation

The video and sound quality are good. Material is always available before hand on the web. So keeping up with the studies is easy. The ability to participate depends on how each professor handles the interaction with the bridge. Raising my hand to answer a question is frustrating since the professor faces class and the bridge participants are behind him. I should stop being polite and just start talking.

Group assignments

The ideal group for a distance student has a majority of commuter students. Commuter students, like distance ones, hold a job and therefore prefer meeting in the evening via videoconferencing. However, unlike distance students they are often on campus and therefore have a direct access to on campus resource. If a group has a majority of distance students it would work best if most of them are at the same location.

On campus study area

All the SDM study rooms have VOIP telephones, star telephones and large LCDs to accommodate video conferencing. However, the cords for most star-phone are hopelessly entangled and therefore they are not frequently used. I swear, next time I come to campus I go to each room and untangle the star-phone cords. SDMers over in campus keep them neat!

What to avoid

Just some funny behaviors that I try to avoid while “live” on the bridge. I always remember that I am watched by around 50 people.

The peep hole/ fish eye look – you don’t want to have the camera zoomed straight on you.
Eating lunch in class.
Background mayhem – the kids playing in the background (I don’t have kids) or a crowed of colleagues that spontaneously stops to chat behind you.

So what is this blog about?

2010-02-15T18:03:00.000-08:00

This blog is about management, technology and finance. And when the muses strike about art. Most of what I will write about would not be completely original, rather it would be contemplation about and reviews of publications, books and articles. After all between a job, studies, family and other activities who has the time to come up with original thoughts - only the very lucky ones: philosophers, writers and columnist.

As an MIT student of System Design and Management (SDM), I also hope to write some insights about the program. I need some perspective in order to organize my thoughts and so it will probably take a few months.

Another aspect of being a business (& eng) student is that I find myself reading case studies instead of the things I would normally read. Case studies will probably not be much of an inspiration, I hope they will at least be educating. I also hope that the change in my reading habits would not “dry” up my blogs.

Credit Default Swaps

2010-02-14T08:03:00.000-08:00

Until reading James Rickards' FT article (need to be a registered FT user to view) about the financial crises in Greece I had a feeling there is something fundamentally wrong with CDS trade, but I didn't understand exactly what.

Other columnists say that derivative trading increased risk because: 1. they gave institutes the false sense of security in risk handling - relaying pseudo science mathematical models, as if they were the absolute truth. 2. They increased interconnection between financial institutes strengthening the domino effect 3. They made the investments more complex, harder to understand and thus less transparent.

While all the above-mentioned reasons are true Rickards introduces a simpler flaw with CDS. A regular insurance has a insurable interest. An insurance company giving a person life insurance has an interest in keeping the person alive since that way they will not have to pay the insurance. CDS traders, on the other hand, have an interest to exacerbate any crises since they are not liable for the insurance. As mediator between the two sides of the swap, they earn their income on margins on transactions and the more transactions (like in a volatile situation) the better.