Point: Develop new products and services by applying innovative analytics to unused data.

Story: Three companies presenting at Techstars Demo Day last week illustrate a category of innovation that is based on new uses of data. First, Retel Technologies is a new company that helps retailers understand patterns of behavior at store locations. Many retailers have security cameras on site, but they rarely look at the data generated by those cameras because of the sheer volume of data. The raw data is typically viewed only in the event of a robbery. Retel, however, developed a cost-effective human-aided video data analysis service that extracts workplace performance analytics from all that unused video footage. For example, the system can help spot problems such as dirty tables at fast-food locations, employee theft, and capacity bottlenecks (such as a shortage of  cashiers during certain hours). Retel provides its clients monthly reports to help managers see trends, behaviors, and time-of-day patterns that can help them better manage their stores.

Second, a new company named Next Big Sound uses the realtime flow of events in social media to help band managers. The music industry is undergoing big changes, but sales of concert tickets are the highest they’ve been in ten years, and people are buying more music than ever. Giving band managers data can help them make better decisions. For example, real-time data from Twitter can be captured and analyzed to show who’s talking about which band and where they are — data that can provide great insight into a band’s fan base. Next Big Sound collects a host of both social media and web data to provide real-time marketing analytics that bands can use in variety of ways. For example, band managers can use the data to pinpoint the demographics of fans, scout new concert locations, and improve online ad placement. They can even suggest that a band mention people or events in the local area or give a shout-out to high-profile fans at a concert.

Third, Mailana is a company that uses communications analytics to help people leverage their social connections. These days, people are inundated by connections to other people. It’s not hard to have hundreds or thousands of connections in the form of entries in e-mail address books, friends on Facebook, colleagues on LinkedIn, and followers on Twitter. But who among the hoard of connections are the true trusted friends that one can really count on Mailana uses data on frequency and patterns of communication to automatically identify a person’s inner circle of most-trusted friends. Furthermore, Mailana helps people merge inner circles — a good trusted friend or a good trusted friend is far more valuable than a casual forgotten connection to another causal forgotten connection. Mailana helps people build and use the high-value core of their social graph.

In each of the three companies, innovative use of data provides new value.

Action:

• Inventory the data sources around you, your company, and industry
• Consider the potential analytic value of the data — what you might learn from that data? (or what might you learn more quickly?)
• Leverage low-cost computing and workflow technologies to extract new and actionable knowledge

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Point: Organizing innovation investments into broad themes focuses energy and enables collaboration

Story: Until 2008, Hewlett-Packard Company (HP) Labs ran hundreds of research projects. Then new HP Labs’ director Prith Banerjee reduced the total number of projects and organized research into eight cross-cutting themes: Analytics, Cloud, Content transformation, Digital commercial print, Immersive interaction, Information management, Intelligent infrastructure and Sustainability. They then invited universities to submit research proposals within these core themes. In 2008, HP selected 45 projects at 35 institutions to receive HP Labs Innovation Awards. Winners in 2009 will be announced on March 16.

Similarly, Boulder venture capital firm Foundry Group invests in five themes: Human Computer Interaction, Implicit Web, Email, Glue, and Digital Life. The commonality among these five themes, besides the tie to software/internet/IT, is that the themes are horizontal rather than vertical. The themes cut across industries, just as HP’s the areas do. The Foundry Group’s goal is to identify underlying technology protocols and standards that have the potential to win big. When evaluating whether to invest in a new company, “our first question is, does it fit our investment themes?” said managing director Brad Feld. “We focus on broad horizontal themes where we can create market-leading companies.” For example, the Foundry Group invests in Lijit Networks, Inc. because Lijit’s search infrastructure services apply to any online publisher and because the search methodology uses people, their content, and their network connections to produce search results with unprecedented relevance.

Both HP and Foundry Group seek and invest in “big ideas” that have the potential to transform the marketplace. Investing horizontally means looking at transformational ideas that can lead to opportunities in many industries. For high-risk research and venture investments, choosing horizontal areas is a better risk management strategy for three reasons. First, it makes success less dependent on adoption of the idea within a given industry. Second, you avoid running into a major stumbling block, such as regulation or a big competitor, that could derail your success in a single industry. Third, it helps create agility by creating core innovations that can be adapted to a range of verticals, as needed. A horizontal approach lets you have more “irons in the fire” without being scattered. The grouping gives you a diversity of opportunity without the burden of a scattered approach.

Action:
* Aggregate and focus your R&D or project investment efforts into horizontal thematic areas
* Become an expert in those themes to seek out and nurture the big ideas
* Look for opportunities that cut across industries
* Avoid the temptation to be pulled in different directions that would dilute expertise or investment

For more information: HP Labs reports on its restructuring and open initiatives by Dean Takahashi

HP Labs’ eight theme areas

Foundry Group Theme Investing by Brad Feld

Silicon Flatirons Interview Series