Cultivating creativity through space and collaboration

According to a study carried out in 2012 by the research firm StrategyOne, three out of four people feel that they are not living up to their creative potential. That doesn’t really come as a surprise — in fact, people tend to set their own limits, thinking for example they’re not creative because they can’t draw, or write as good as they wish they did. The truth is, each of us has its own inner creative side and its personal way of creating: and creativity does not only relate to fine arts, like painting or sculpting; creativity shows up in communicating effectively to a counterpart, for instance, or in solving a problem, or in closing an argument. It’s more of an attitude that starts with a connection with our own self.

The focus therefore has to be set on how to make use of that creativity and, in the specific scenario of adidas MakerLab, on how to bring it into a product. The creative process is about getting everybody around the table, gathering different opinions and solutions and setting them up: this is the spark that empowers it. What limits it, on the other hand, is the moment in which one starts showing off and stops questioning themselves and their ideas.

The idea of MakerLab was inspired by the “fablab,” or the “hackerspace concept,” which was started at MIT in the beginning of the 2000s. A hackerspace can be defined as a laboratory within an open community, a space in which people with completely different backgrounds get together, either with the purpose of working on a project or with the simple desire to share and gather knowledge. The concept has been strongly influenced by the worlds of science, tech and arts, but it’s spreading across many different humanistic fields. Above all it consists of a very talented, open-minded and attentive team putting in place a program of activities, from trainings on equipment to workshops on the most varied techniques.

MakerLab was founded at adidas after realising the lack of space for experimentation — a place where every colleague can have access to and could learn hands-on about the use of different tools and techniques related to the product creation. After the opening, which took place just one year ago, the lab has quickly developed into a much broader concept. Now it’s not only a space where people gather into workshops, get inspired and collaborate with other colleagues. For us, it became more of a mindset: an idea incubator where people share their knowledge with workmates in an open-source, experimental environment.

So far, the MakerLab staff has supported dozens of creative activations across Brand, Sustainability, Women’s projects and Digital evolution. There have been many product incubations since we opened. One of the very first questions before opening the space was this: how many people will come? At that time, we thought we would be happy if just a few employees would snoop around and try using the space every now and then, but now it’s packed. We could say that more than 50 per cent of the full product portfolio has benefited from Makerlab in some form or shape during the last year. The usage of the lab and the consequent spark of ideas is trumping direct commercial impact.

We are constantly exploring new materials and researching innovative ways to create a space that is always evolving, adapting to the upcoming needs of the community. Beyond product creation, the community is regularly involved in the company’s strategic events and communications. For example, the solution-finding mindset in the MakerLab has taken the awareness towards sustainability to a different level inside our workplace. Not only by repurposing internal left over materials, but also by facilitating collaboration in theoretical and practical working sessions.

But without a community, the MakerLab would quickly turn into an empty workshop. It is only through the people that the space evolves and becomes a creative place. The interior design can positively influence the warm atmosphere, with the human factor ultimately making the difference. The engine that drives the change is the community, which believes in a democratic way of working — here, people are allowed to make mistakes, fail, experiment and share the accomplishments beyond their expertise or background. These are the core values that would considerably benefit big corporations in the current open-source, sustainable and service-driven world.

MakerLab’s diverse approach to the creative process does not translate into the suggestion that people do not or should not have a particular job role or expertise. It is about ensuring that employees have a space where they are safe and feel free to think outside of their normal protocol, in order to foster creativity and expansion. This makes people able to broaden their skills without putting aside their personal expertise, and breaking down inhibitions.

Big data and Amazon’s trojan horse

We sit down with the head of MIT Media Lab Barak Berkowitz, former CEO of Evi – the creators of the intelligence behind Alexa – to talk about Amazon’s competitors and what Alexa means in an economy dominated by the few.

Why is Amazon and not, Apple or Google, for example, dominating the market right now?

Amazon’s stock price depends on the idea that Amazon is someday control thirty percent of the world’s commerce. There has always been the belief that when it comes to retail, local retail would always overcome online because of the convenience and impulse factors. Thanks to Amazon, there is now a local retailer in your bedroom and in your living room – you can’t get any more local than that. Effectively what Amazon has done is taken a distribution center a thousand miles away and placed a pipeline inside of your living room, ready to talk to you anytime you want. So now you have a sales person from Amazon waiting for your command – how does anyone else compete with that? How can anyone catch up with that amount of data? Alexa is Amazon’s Trojan horse.

One other thing: Amazon have taken a strategy that neither Apple nor Google initially undertook which was to broadly and freely license on a mass scale. These licenses are also very cheap and aggressive and allow individuals to do any integration they want to do.

How are companies going to cope with such a runaway economy?

It seems that at some point these companies will have to share their information with the world. Otherwise the economy will become extremely unbalanced. At some point, Amazon is going to have to share their retail information with the world.

Most of these countries are America-based. If European companies ever hope to compete, they have to accumulate a lot more data than they have today or at least as much as their American and Asian competitors. One of the ways to get there is through sharing: separate companies saying that we’re all going to share our data with one another. These companies do not even necessarily have to be small: the telecoms industry for example sits within the internet space and they house an amazing amount of data – the same goes for the banks. This sort of approach is one of the few ways to counter the continued dominance of the few.

How they will share this data safely is not something I can answer, there are many experiments happening right now focused on analyzing data without decrypting it. In other words, decrypting data without ever being able to know who the individual is who it belongs too or the details of the information it holds – but you are still able to train an AI, analyze correlations and reap the benefits of big data.

Why is there such an interest in voice-activated smart devices at the moment?

Because this technology is not only good source of private data but also an incredibly good use of private data. If you think about owning oil in the previous centuries: those who controlled the oil wells controlled the wealth and could control the price of oil – cutting off supplies strategically to destroy another country. Today the people who own data control the world, and every day that data becomes more important and more valuable.

I don’t think this data harvesting is malevolent in the sense that those who control it right now are purposely doing so as a means to control the world. But they do see it as a way to beat the competition. If the world is going to be run by AIs – which it is – and nothing is done about the distribution and sharing of data then the world is going to be run by only a select few companies.

This technology also sits in the realm of what Arthur Clarke said: “that the best technology is indistinguishable from magic.” And that is clearly where Alexa fits – the iPhone when it first launched fitted into that gap too. These technologies area so natural, easy and subtle, that to use them seems like science fiction. People accept without a thought the values it brings into your life – values that are very innocuous at first but incredibly penetrating over time.

When it comes to education, how will these voice systems affect this area?

Well, it’s hard to imagine a facet of life where these voice systems will not have an impact. These devices are obviously connected to the internet and so are privy to a vast amount of knowledge – and are immediately able to respond to you.

One educational function I can think of off the top of my head is replaying online lectures throughout every room of your house – many of these devices can be synched at once. I’d also be surprised if there isn’t yet a sort of mindfulness, therapeutic help application that helps instill certain healthy behaviors in those who wish to learn them.

Will voice control systems ever suggest something to a user based on the user’s emotions?

Well, you need to remember the way Alexa works: Alexa understands nothing except for a trigger word she’s listening out for. Without the trigger word, it doesn’t have the permission to send anything to the server.

That’s not to say that it can’t be done today. But due to privacy and intrusion reasons, it doesn’t seem like a useful application. If I’m having an argument with my wife, I’m not sure if it’s going to be particularly useful if Alexa starts offering me advice – in fact, I’d probably throw it out of the window.

When it comes to emotions and physiological human outputs, you’re going to see much more of what we already see happening in the wearable’s market. Your watch can already read a lot of your emotions – your heartbeats, their rhythm etc. – and even your mindset based on your movements. You’re going to see the wearable space doing this much more than voice systems. I see the voice system space as a pervasive tool for controlling the world around you, and a pervasive tool for the continuing dominance of Amazon.

What is predictive policing?

“You did it: you created a world without murder. And all you had to do was kill someone to do it.” remarks Tom Cruise as Officer John Anderton in Stephen Spielberg’s retake of Philip Dick’s neo-noir science fiction classic Minority Report (2002). Back then, this kind of technology seemed impossible, but today, this technology has made great strides – and not just towards the dystopian future that Dick imagined.

Omniscience, in particular prescience, is the final frontier of law enforcement. The ability to predict, and thus prevent, crimes before they have even begun is too tantalising a fruit for human endeavour to ignore. Over the past decade predictive policing, and the data-gathering and surveillance that enables it, is now in effect across most major American cities.

But how does it work? Predictive policing uses immense quantities of data on past criminal activity to provide intuitive premonition to police strategists who use the data to delegate differing levels of police resources to certain locations and certain times.

By examining the data: the time, location and motivation of past crimes, police are able to gain newfound insight into where and when a crime was likely to be committed. In Los Angeles, for example, the algorithms used were twice as effective as the current means of investigation and planning.

The brain behind predictive computing came from an unlikely place: University of California’s anthropology professor Jeffrey Brantingham. Brantingham, along with his colleagues, combined anthropology with criminology. Their model, which used algorithms used to estimate earthquake aftershocks, relied on cities being divided into specific hotspots. By chance the algorithm worked, and, when it was fed data of past burglaries, was successfully able to predict a section of the city where a quarter of the next day’s burglaries would occur.

The model has continued to be proven true time an time again, and is now part and is now integrated across the world. However, as with any algorithm, if the data entered is biased, you will see biased results – data has already been shown numerous times as being racist or misguided. On other hand, if the data is accurate and unbiased but appears to be racist, we could discover uncomfortable truths that we as a society must address as soon as possible.

So what is predictive policing? It is another example of the power of data, testament to the predicability of human beings and perhaps the biggest leap in law enforcement capacity that we will see in our generation.

The Venture Client model

Imagine it’s 1993 and a startup approaches you. It offers a new kind of phone that is mobile, meaning that is not fixed to a building, weighs five kilos, breaks off every two minutes, and costs ten thousand dollars. Would you want your whole company’s communication to rely on that technology? Probably not. You don’t know how the product will evolve, nor if the startup will still be around in two or three years. Also, your business units may not adopt the product, it might not even function as expected and the startup team may not be able to execute and scale their product to your needs. However, at the same time, you would hate to miss out on the opportunity to revolutionize your communication.

At the BMW Startup Garage, we solved that dilemma by being an early client of startups with groundbreaking technologies that might potentially have a huge impact on our business. We call this approach the “Venture Client” model. A model wherein we become a client of a startup when it’s still a “venture” to do so. This approach differs from the one of an incubator or accelerator in many ways, and comes with great competitive advantages: Venture Clients not only gain early access to promising new technologies at low cost and basically free of risk, they also benefit from gaining strategic insights into new technologies and markets, customization, pricing and time-to-market advantages.

At the BMW Startup Garage, we look for technologies that our current suppliers or partners do not offer. We select interesting startups and commit to purchasing an early version and even prototypes of their products and, to foster quick adoption, the purchased technology is immediately applied by business units in a real product or process. In addition, we provide startups with valuable client feedback and enable them to learn about the BMW Group. Gaining an early, paying client while learning about its needs is extremely valuable to startups. Working directly with the business unit establishes a virtuous cycle that speeds up product and business development. It’s not anymore about insourcing or outsourcing — to us, this is a complete rethinking of how innovation works.

Since starting the BMW Startup Garage in Q1 2015, this approach has delivered great results. On one hand, startups provide key technologies that allow us to accomplish strategic innovation goals fast. For example, some of our startups provide critical autonomous driving technology. Other startups help us innovate cost critical processes. Already some are radically innovating our logistics procedures, with the potential of saving us millions per year.

To startups, having an early-stage client relationship and working on-site alongside BMW Group engineers has proved to be essential for their success: thanks to this proximity they learn a lot about the complexity of innovating products, processes and business models within a corporate. And benefiting from the continuous feedback, they can fastly iterate their prototypes in the right direction, testing these in a series of short-term development cycles. One of our startups has already grown from 5 to over 50 employees and has successfully closed a B – round since starting their relationship with the BMW Group.

In addition to providing startups with a purchase orders and supplier numbers, we train them on BMW Group procedures, such as our quality, purchasing and development processes. Something that wouldn’t have happened if we had put them into an accelerator or an incubator, far from where the business happens. An extremely important element of the Venture Client model is to have startups work on a real, paid project directly with the business unit. Ultimately, what we’re trying to do is to establish and nourish a long-term relationship with the young companies we work with.

It’s true that there are many different approaches out there. For example, your corporation could decide to work only with startups that are mature and bigger, that have already proven their business model: startups that basically use venture capital not to prove or scale a product, but to expand in a certain market. There’s a fundamental difference though. In this case you’re just a normal client — which means you’re losing the innovation impact that you have as venture client. Think of platforms in the B2C world like Facebook or YouTube, where early adopters were able to ask for a new feature and had developers implementing their needs and suggestions. We want that to happen as much as possible in the B2B space too.

There is a quote by Henning Kagermann, head of Acatech, the German Academy of Technology, which goes:“Big companies have just as many ideas as startups do. The problem for big companies is not ideas, but corporate culture and speed.”

In most cases it’s not really just about having the idea. I think, it’s above all about execution capability, which is significantly depends on the resources one can assign to an idea. And here is one of the most powerful (and often overseen) advantages of startups. A startup has better and more resources to execute. Startups have a highly specialized team (i.e. the founders) and more money (i.e. the venture capital) than a corporation to execute and act on specific ideas. It may sound as a paradox but, as a corporation, you have a lot of money overall, yet little for each individual specific problem. For example, you may have an idea for a specific sensor, but you wouldn’t be able to assign tens of millions to develop it. A startup with venture capital, however, can, because it can sell that sensor globally to many companies. (Here again, the advantage of being a Venture Client: you get that sensor customized, ahead of your competition and at a better price. You want that sensor just for you? No problem: just acquire that startup, yet now with the certainty that the sensor works.) Also startups do not only have the idea and resources, they also have its intellectual property (IP). This is particularly the case for deep tech, B2B startups. While in a corporate, you might have a great idea, but you probably won’t have the IP you need to legally execute it, hence you can’t actually turn it into a working product.

A crucial aspect of the Venture Client is to find and attract the right startups to work with. At the BMW Group, we look for companies and products that fit our innovation strategy, and we actively seek them where they are. For instance, if we’d need a cybersecurity technology, we would probably go and look into Israel’s ecosystem, where some of the best cybersecurity startups are born. But our system is designed so that it can go both ways: startups can also approach us with solutions to problems we have not thought about. It’s important to know what you want and what your company needs: you shouldn’t pursue an interesting technology or product only for the sake of it. It has to fit your company’s strategy.

Yes, you might argue that purchasing from startups is nothing new. Corporations have been doing this forever. But the Venture Client model is different: firstly, the Venture Client process enables you to scale the amount of startup innovations you can integrate. Secondly, a Venture Client uses a different process, and acts as a fusion of the purchasing, innovation and venture processes. We become early clients of their products when they are not mature, and openly sold in the market. We do this without interfering with their entrepreneurial spirit, team, processes or culture. We do not demand exclusivity or rights to their IP or equity. Which means that these startups keep being owned by their founders, they remain 100% independent from the corporation.

In a time dominated by buzzwords, where startups are easily becoming just another marketing tool, for the BMW Group, they’re an innovation tool. An ever more powerful one.

Predicting crime with technology

We as human beings are engineered to predict risk. When we shake hands with a stranger, we are evolutionarily programmed to detect on their fingers traces for attraction or fear. Director of JVP Venture Capital discusses the ever-growing power of “Predictive Policing” and how technology is surpassing our own human predictive capabilities.

Speed is not a strategy

Technology changes, the Ubers of the world scaling rapidly and upending industries, thus we must unfetter our actions from corporate decision processes and unleash our entrepreneurial geist.

I’m a fan of the “Lean Startup” concept. Iterating rapidly with customers, minimum viable product and all of that. Of course, an aircraft engine manufacturer must approach this methodology differently than a Silicon Valley startup, and companies like GE are discovering how to adapt lean startup methodologies. My colleagues and I often advise corporations to do so.

But the quest for speed can go too far. Many business leaders have become enchanted by the notion that “execution beats strategy.” Sure, beautiful strategy often fails in execution. Spending too much time on strategic analyses and 200-slide decks prevents us from making things happen. Get out and execute!

This feels right, but when misapplied this insight suggests we don’t have to do the hard work of real strategy development. This is a dangerous misconception. The ironic result of rapid, non-linear change in the economy is that companies must both iterate fast in the near term, and have better, longer-term foresight. Real strategy cannot emerge without foresight.

I’ve seen many examples at corporations of “long-term strategic plans” that are really just operating plans extrapolated out a few years. That’s not a strategy, it’s a long-term operating plan — a dysfunctional notion in a rapidly changing world. It’s a good idea to have a great operating plan, but it’s not a strategy. Imagine combining speed with an operating plan. This results in rapidly iterating on what you already do. That works fine, until customers no longer want what you’ve got.

Real strategy converts the mission of our company — why we exist — into our vision for our future. What kind of company do we aspire to become and how do we hope to win the game in the future? In which markets and capabilities will we invest, how might we position ourselves to thrive as the world changes? These are fast moving targets, so strategy must rapidly evolve. As such, real strategy can’t emerge without foresight.

While we can’t predict the future in detail, we can discern its contours. Foresight isn’t about prediction, it’s about defining multiple plausible futures. What are the trends and forces we can discern and what implications do they have for the future? Then, applying foresight means identifying leading indicators to track how the world is actually trending.

In the mid-2000s, my consultancy, Clareo, conducted a major foresight program with a large resources company. At the time, hydraulic fracturing (“fracking”) was just emerging in a few fields in Texas. We couldn’t find a single expert in the global energy industry that believed that fracking would amount to anything significant. They were all wrong. To be clear, we did not predict the fracking revolution, either; however, we did advise our client to closely track fracking so they could be ready before the competition.

It’s dangerous to view strategy as linear: do a lot of research and analysis, construct a brilliant strategy, then implement. In a fast moving world, this rarely works. As nineteenth century German military strategist, Helmuth von Moltke the Elder, advised, “No plan survives contact with the enemy.” Remaining competitive for the long term is about acting rapidly in constant contact with customers, but it’s also about looking farther ahead than anyone else in your marketplace.

Salesforce CEO Marc Benioff argues that a company’s strategy emerges from many tactical activities across the company rather than being defined in detail by senior staff. Threats and opportunities can emerge at any moment, so speed is of the essence. Benioff and his team have sometimes made acquisition decisions in a matter of hours, breathtaking compared to most corporations.

This does not mean that Salesforce doesn’t spend serious time on strategy. Benioff is in constant contact with his Senior Vice President for Strategic Planning, Peter Schwartz, a pioneer of scenario planning. Schwartz and his team think hard about Salesforce’s future, as well as their clients’ futures. They consider many plausible futures toward which the world might evolve and track leading indicators to understand where the world is trending. As a result of ongoing strategic thinking and internal dialogue, Salesforce has been able to be both strategic and opportunistic. Seizing or foregoing opportunities as they arise, with a clear idea of why.

Like Salesforce, the best companies are strategically opportunistic. Great opportunities aren’t great for every company. If a company doesn’t know what they hope to become in the future, it’s tough to know what to prioritize in the present.

Business needs a renewed commitment to thoughtful, flexible strategy. This doesn’t mean traditional competitive analyses that assume value chain stability. The world is changing too fast for that. Companies require broad views of marketplace change, the trends and forces offering foresight, as well as the agility to act fast as opportunities and threats arise.

Francis Bacon loved metaphors. A seventeenth century pioneer of the scientific method, he explored the ideal relationship between genius and method. Genius is “fleet of foot”, while method is “slow and prodding.” He cautioned that genius can move quickly in the wrong direction. Heeding Bacon’s advice, combine methods of good strategy with the genius of entrepreneurial speed and intuition. Strategy without entrepreneurial action is an academic exercise. Entrepreneurial speed without effective, flexible strategy is a game of luck we’ll eventually lose.

This article was originally published in Forbes.

The “Cryptoboom” is the new gold rush

Yes, we’re living the era of the “cryptoboom” — witnessing the daily birth of new digital coins, with their dangerous fluctuations and their feared amount of speculation. This era, though, comes with a powerful force that is pushing us to rethink the structure of our financial institutions. It might seem a frightening challenge, but it can actually be turned into a golden opportunity.

But first, a step back: how did we get here? To understand this phenomenon we need to go back to 40 years ago, when the 37th U.S. president Richard Nixon cancelled the direct dollar convertibility to gold, turning de facto the American currency into the new economic unit of account, with other countries following the example. Today we’re living in a new gold rush, with Bitcoin being the most precious ‘metal’ of them all, the one with the highest value.

Started in 2009, Bitcoin relies on a public ledger, a database that records and validates chronologically every transaction: the blockchain. This technology makes it more than just a coin, turning it into a golden bridge towards a new model: a universal currency that will be able to shake the present financial system from the ground up. Everybody, from governments to large corporations and banks, all have to learn from and adapt to this new set of currencies, in what might be one the biggest challenges in human history.

So, what makes Bitcoin so powerful? Well, first of all, Bitcoin is decentralized and owned by the people, with no central banks. Secondly, unlike cash, it can’t be endlessly ‘printed’. We can’t print trillions of dollars of Bitcoins, as governments did when faced an economic crisis in the past — these new digital currencies don’t provide us with similar shortcuts, which is something that might ‘force’ us to rethink our financial processes as a whole.

I think that cryptos will lead to the collapse of big financial institutions as we know them today. The status quo will have to change, as it’s clear how its efficiency is compromised: let’s just think of how governments sum up trillions of trillions of dollars in debt, adding up a new deficit every year. I don’t see a way this system can heal itself, even if you gathered all of the world’s best economists into one room. It’s unsolvable.

Are Bitcoins going to replace our current currencies as we know them? I don’t think so. If you look at the Bitcoin as a mean of exchange or as a replacement for the U.S. dollar, you’re wrong: that’s not going to happen. We’ve been using coins and cash since ancient times, that has never changed. I think Bitcoin goes beyond being a ‘replacement’. It’s not the ‘coin’ itself that really matters here — it’s the blockchain. Even if Bitcoin disappeared, the underlying technology behind it would give us the opportunity to create something with a long lasting shelf life that could replace the our current currency models. Once this revolution happens, when our financial institutions begin to crumble, we’re going to see the rise of a new breed of institutions and the wider adaptation of triple entry accounting.

The starting period is chaotic, as with the beginnings of any gold rush. Today we see alt-coins, currencies built using Bitcoins as an open source, such as Ethereum and Ripple. And then we have a widespread of tokens, which do not come from the same underlying protocol as Ethereum or Bitcoin do — they come on top of it. You do not have to modify the code of some particular protocol to get a blockchain from scratch, which means it’s fairly easy to create a new currency. That’s why you see all these coins popping up like crazy all over the world, and making this area so speculative.

Cryptocurrencies, it is argued, are not reliable means of exchange because of their instability — just think of the fluctuation Bitcoins experience on a daily basis. Well, this fluctuation is unsurprising, as it also happens with FIAT currencies and with the hyperinflation we have witnessed across decades in many countries. To me, there’s no difference between cryptos’ fluctuation and that of the FIAT currencies’. It’s just a matter of time until we find a stabilizer, and that very moment is edging closer and closer. Eventually, the markets will decide.

And as with any gold rush, a fight has to be expected. Governments are trying to regulate cryptos, or to create their own: Estonia, for example, or Russia, or Sweden. Everyone in power knows that whomever wins this battle will become a significantly powerful country. Like in the past: the United States of America was so powerful not only because of their economy — but because of the Dollar. Which is why today everyone is trying to win this gold rush. But let’s keep our eyes open. In a gold rush era, the people who made money were not the people who were really trading and digging gold; the ones making the most money were those who sold shovels. What we need to understand is who will be selling the shovels of cryptocurrencies.

What is Blockchain?

Civilisation as we know it is built on trust. Commerce, the way we trade and interact with each other, owes its entire existence for the human capacity to believe one another’s word. Trust is hard earned, poignant and fragile, but as the printing press closed the knowledge gap, the engine the power gap, and the internet geographical gap, blockchain is going to bridge the one gap many would never of even thought could be filled – the trust gap.

As a society, our most important transactions are entered into ledgers. When a house is built, it is recorded in this way, then when an extension is added, that information is recorded too. Over time more and more data is recorded and when one goes to purchase the property, untangling and retrieving this data is a long, drawn out affair. The other most crucial issue with this system? It can be modified at will.

Which is why we trust title companies and other intermediaries (middlemen) with these editable ledgers. Trust services in general, ranging from banking to notaries, will no doubt face problems related to price and volume and in many cases their very survival as cheaper and more secure and efficient networks arise to meet society’s needs. Blockchain technology is the securest of these networks and in being so challenges the status quo in a truly exceptional way. The rise of this technology likely marks the end of the need for third party trust organisations entirely.

Through the use of cryptography, blockchain provides an open, decentralised database of any transaction involving value, creating a record whose authenticity can be verified by the entire community. Money, music, patents, anything that holds value to anyone can capitalise on this new system.

So how does it work?

The current status quo only exists because of the current trust gap: we simply do not trust the ledgers that we have. The secret of the blockchain ledger, on the other hand, is that it has a unique and unhackable key attached to every recorded piece of information.

The next part of the process is that every record is written and stamped by the trusted party that wrote that record. When the next record is written, everything from the first record, including the key and the contents of the second record, generate a new key for the second record. And so it continues. We can see who wrote the record, and a recording system that is centred on co-dependency is created – chaining the records together.

Finally, blockchains usually exist in communities as participants of blockchain in particular industries often will operate along the same chain. There will be an healthcare, a real estate, financial services chain, and many more as this technology is more widely adopted. This allows each participant to have a copy of information so they can write to the ledger with one other. It helps with sharing and transactions, but most importantly it makes the entire process immutable. If someone interferes with one of the blockchains, an algorithm can identify the anomaly and thanks to the shared community, can replace it with a verified, carbon copy of the correct ledger. Over time, new blocks of transactions are written and stack up and, eventually, collections of trusted, verified information and agreements culminate into a distributed, immutable, ledger.

What is blockchain? It is a decentralised ledger system that will change how human interaction works. In the words of World Wide Web Hall of Fame inductee Marc Andreessen, “The consequences of this breakthrough are hard to overstate”.

A year of consolidation

At the beginning of a new year, maybe it’s time to take stock. 2017 was a good year but not the most impressive one when it came to high-tech deals. An EY report projected a year-over-year decrease of 9% in volume and 34% in value.

There have not been major changes nor unexpected twists. It has been a year of consolidation, at least for the Big Five, Alphabet (Google), Amazon, Apple, Facebook and Microsoft. These US-based super competitors had all already started to explore new business areas and their 2017 acquisition activities reflect this double strategy: strengthening the advantage in their own fields and the purchasing of new firms in order to open new ways into new markets.

Google, for instance, have bought the Swedish firm Limes Audio to improve Hangouts’ audio quality, end distortions and echo on video calls. Yet they have also continued to invest in AI by buying two specialized startups such as the Bulgarian AI Matter and the Indian Halli Labs. They have increased their arsenal as far as AR/VR is concerned too: securing VR game studio Owlchemy Labs.

But the search engine giant is not happy with just providing its operative system, Android, to billions of smartphones all over the world. Now the Mountain View giant wants more: to make it in the lucrative smartphone market. It withdrew the not particularly well received Nexus line and launched the new Google branded smartphone Pixel. And of course there is more to come, since in September it sealed a $1.1 billion deal with Taiwanese HTC to transfer its 2,000 unit strong R&D team under Google’s umbrella, and the newly acquired researchers are likely being put to work on the next Pixel project. Christmas sales confirmed that Google is becoming serious competitor to both Apple and Samsung as Pixel 2 sales surpassed those of both the iPhone X and Galaxy Note 8.

This surprise leads us to Apple. The company was involved in nine M&A operations. Some of them don’t add much to what we know about the Cupertino giant. The recently bought music recognition app Shazam, for example, with its finely honed algorithms, its huge database and its AI technology seems to perfectly match the needs of Apple Music, which is constantly dwarfed by Spotify. But Shazam is a valuable ally in a more important war against Google and its new ambitions as a smartphone manufacturer. Pixel 2 has a new app, Now Playing, which is able to recognize the music being played in the nearby, even when the phone is offline.

In 2017, Apple also bought Workflow (an automation and scripting app) the AI firm Lattice Data (a $200 million operation, according to rumors) and the small French AI startup, Regaind, which has developed software for facial and photo analysis that makes it possible to recognise the emotions of the person pictured, assess technical and aesthetic values and search for very specific photos. While all these acquisitions seem to help Apple to enhance their products which we already know about – one other acquisition suggests new paths the computer giant may take in a near future. Vrvana, a Montreal based AR/VR startup that was acquired by Apple last month, have developed a headset called Totem that can create hugely credible mixed reality experiences. Its website reads that can offer the highest field of view “at the highest resolution, faster than the human eyes can perceive”. This is not the only sign of Apple’s move into the AR/VR space: the recently launched iOS11 contains ARKit, a platform which helps developers to create AR/VR apps for the iPhone. Rumor has it that Apple may present its own headset by 2020, and it seems that this acquisition has re-ignited them.

Speaking of smartphones, one cannot help thinking about the world’s most dominant social media, Facebook. Mark Zuckerberg’s brainchild has been less active than Apple and Google but completed two of its main aims. The first was the acquisition of Ozlo, an AI conversational startup that could prove useful to Messenger and its 1.2 billion users, since it would transform the chatting app into a chatty assistant able to answer questions through the combined use of AI and machine learning. Two months later, Facebook bought a another, more anonymous social media, tbh, with around 5 million users, mainly Americans and high school students.

Microsoft, for its part, have conducted 9 acquisitions covering many areas: from a living photo app startup Swing Technologies (to maximize the photo and video experiences of Skype users to turn it into a Snapchat competitor), to cyber security with the Israeli tech firm Hexadite, to virtual reality (AltSpace VR) and 3D gaming (Simplygon), as well as container management cloud computing (Cloudyn, Cycle Computing and the open source company Deis) in order to boost its own public cloud Azure.

The list is incomplete but before seeing what Amazon has done in 2017, let’s visit the other tech megafirms not to be forgotten. Oracle, whose M&A operation revealed how much cloud computing counts in its business strategy (in fact, all software maker 2017 acquisitions targeted firms operating in this tech sub-sector) when they acquired Apiary and Wercker, paid $850 million to get hold of Moat, the digital cloud measurement and analytics platform, and spent approximately $1.2 billion to buy Aconex, the cloud based construction management software.

The billion dollar threshold was passed, twice, by Cisco Systems, who spent $3.7 billion to acquire AppDynamics Inc – a company which delivers well reputed software in application and business performance management. Another takeover confirmed that Cisco is pushing hard to make it into the collaboration software market: that of Broadsoft – bought for $1.9 billion. The software maker has developed communication systems and tools that help people work together. Viptela ($610 million), another company acquired by Cisco, built its reputation delivering software-defined, wide area networking (SD-WAN) solutions.

Hewlett Packard Enterprise didn’t rest on its laurels either; it completed the acquisition of three American companies (in the first three months of the year) and injected many resources into these operations. While is not known how much it paid to acquire Cloud Cruiser, a leading provider of cloud consumption analytics software, we know that it offered $650 million in cash to absorb SimpliVity, a company specialized in hyper-converged infrastructure, which means combining networking, storage and computing capabilities into just one system. HPE spent $1.1 billion dollars to bring home Nimble Storage, an all-flash and hybrid-flash storage solutions provider. As HPE CEO and President Meg Whitman explained, the move was meant to complement and strengthen the company’s 3PAR products in the high-growth flash market and to make Hybrid IT simple for its customers.

In June came a very big news: Verizon bought Yahoo (and AOL) for $4.48 billion with the aim of creating a new company, Oath, a Verizon subsidiary which is “a diverse house of more than 50 media and technology brands that engages more than one billion people around the world,” – a Verizon press release said. The telecom giant is trying to grow into the digital ads market, so far dominated by Google and Facebook. The American conglomerate made clear that it’s not competing to simply be the number three.

As in 2016, it was a deal involving an automotive chip maker that would turn out to be one of the most expensive acquisitions of the year. In 2016 it was that of NXP Semiconductors by Qualcomm ($47 billion), and in 2017 was that of Israeli MobilEye by Intel ($15.3 billion dollars) to boost the latter’s Automated Driving Group.

Although not as expensive as those just mentioned, the $350 million deal between the German software giant SAP (the buyer) and the US-Israeli firm Gigya is worthy of a mention. The move aims to strengthen the former’s e-commerce division, Hybris, since the acquired “customer identity and access management” company is currently used across hundred of sites in order to check 1.3 billion customers identities.

Another tech subsector whose M&A marketplace has shown a feverish activity is Fintech, where technology meets money. According to the first three Pulse of Technology reports (Q1, Q2, Q3)released this year by the global consultancy group KPMG, 220 M&A operations have been sealed in the first three quarters of 2017, for a combined value of $12.6 billion. FirstData has been one of the most active players in this market. The payment technology solutions company from Atlanta has acquired CardConnect, a payment processing technology provider with over 67,000 customers whose transactions total more than 26 billion per year. The firm paid $750 million to seal the deal and other $760 million to buy another former distribution partner, BluePay. The ratio behind those operations was explained by FirstData CEO, Frank Bisignano, “We believe BluePay’s best-in-class integrated Card-Not-Present solutions, combined with CardConnect’s cutting-edge ISV product suite acquired earlier this year, clearly sets First Data apart from the competition in the high growth integrated payments space”.

The Fintech news of the year, however, was one of marriage: a marriage between D+H and Misys in a $4.8 billion operation led by Vista Equity Partners. The two companies now form Finastra, a new titan of the financial software’s market, a giant which would be the third largest financial services technology company in the world, with over 9,000 customers in 130 countries, including 48 of the top 50 banks globally.

This merger almost eclipsed other noteworthy operations such as the $230 million acquisition by Paypal of TIO Networks, a Canadian internet technology company which operates a bill payment platform. Or the takeover of British bank account-based payment systems firm Vocalink by Mastercard. Through this $750 million purchase, Mastercard secured all of the companies that were under Vocalink’s umbrella. Gems such as BACS which operates the platform governing direct debit/credit payments between bank accounts in the UK. Or Faster Payments Scheme Limited, the guardian angel company making fast and safe all internet, mobile and telephone payments across Britain. But this acquisition also allowed Mastercard to get hold of LINK, the 72,000 unit strong ATM network in the UK. Even in the tech field, M&A are not always driven solely by technological purposes, and sometimes physical assets may provide another key to success.

Amazon, the fifth king of the tech Savannah, offers an intriguing example. In fact, in August the e-commerce giant closed an impressive $12.3 billion deal to buy Whole Foods, the supermarket chain world leader in natural and organic food, with over 91,000 employees and 473 stores. Strangely enough Amazon, the company which pushed out of business hundreds of physical libraries and malls all over the world, now seems to appreciate the importance of brick and mortar shops. Purposefully or not, the move closely resembles that made by a direct Amazon’s rival, Alibaba. In 2016, the Chinese e-commerce colossus had paid $290 million to secure a third of Sanjiang Shopping Club Co., a regional discount supermarket chain. Last November, it offered $2.9 billion to take slightly more than a third (36.16%) of Sun Art Retail, a leading hypermarket operator in China with 446 complexes in 224 cities.

Just like Amazon, Alibaba sees new business opportunities in going offline or at least trying to fuse online and offline retail. Since 2015, it has invested over $9 billion in brick and mortar stores. Why? One reason may be that those stores are an incredible source of data on consumers’ tastes and habits, especially in China, where – as Reuters news agency notes – 85% of sales are made in the offline retail market.

In China there is not only Alibaba. Another tech giant which is worth more than a passing mention is Beijing ByteDance Technology Ltd. Western tech consumers may not know it but this group is becoming huge. Its flagship app is Jinri Toutiao, a news aggregator powered by AI technology with over 120 million daily users. But ByteDance has a worldwide appetite. It already owns TopBuzz, an English/Portuguese language app for the North American and Brazilian market, that uses AI to suggest user-tailored news. Earlier this year, ByteDance bought Flipagram, a video creation app which allows its 200 million users to combine music with personal pictures and videos. Last November, it went further and spent between $800 million and $1 billion to acquire the teen lip-syncing app Musical.Ly with around 60 million users, mainly based in the States. The 2017 of ByteDance doesn’t end here, since it has closed a strategic cooperation deal with Cheetah Mobile, the Chinese internet and mobile app publisher with 600 million active users, mostly from overseas markets. The deal led to the acquisition of News Republic, the app aggregating news from over 1650 media partners. ByteDance/Toutiao is becoming a global actor.

Like Geopolitics, the tech market seems to be a two-horse race: it’s US versus China and there’s no room for other competitors. European tech firms of course exist but quite often they can’t fully blossom and reach a considerable size to be the mouth instead of the mouthful. According to Bloomberg news agency, in 2017 there have been $680 billion of acquisitions targeting European companies. Tech firms are a good slice of this cake.