Holiday Test and Learn

During a presentation to marketeers, Innohead did a real-time Test and Learn simulation. Using their smartphones, participants was asked to fill out a small survey. For instance, a question is about to what degree you "like to experience frightening things".

Respondents were then randomly exposed to an offer of going to either Burning Man-festival in Nevada, or, to go on a shopping trip to Milan, Italy.

It quickly turned out frightening experience-types were much more likely to want to go to Burning Man. Testing can be easy.

Financial Institution Adopts Narrative Sign-up Form Based on Innohead Advice

Nykredit, a Danish financial institution, was advised by Innohead to try out another type of sign-up form. Experiments have indicated that so-called narrative sign-up forms may yield higher sign-up rates. One study at lukew.com, quotes increased sign-up rates in the range 25-50%.

Nykredit's narrative sign-up form is shown below.

The title is "Become a Customer in Nykredit Bank". The text reads "Hi, my name is [name] and I would like to hear more about switching to Nykredit Bank. I live at [address] in [zip code] [town] and can be reached on [phone no] or via [email]".

A smart website owner would create the new style form and then A/B test it against the old style.

T.Rex in the Canteen

One of our clients has an awesome canteen. When eating there, tangible ideas about the food chain and your place in it somehow drips into the mind.

Innohead Is Growing

The new logo

Innohead is growing: We welcome Rune Haahr Petersen onboard. He holds a MA in History, wrote about Danish Missionaries in India, is smart and sings bass in a choir. His idea of fun is to visit The National Archive and record the historical prices of grain auctions to study the price transmission mechanisms. Rune is initially focused on servicing a big client in the transportation sector, that needs to get their marketing intelligence infrastructure up to speed.

The revamped website launched on www.innohead.com using the new logo from Eagle Logos and a crowd picture from Istockphoto. Over time we might swap in pictures of street crowds, city lights seen from the sky, satellite pictures of houses and so on. Oh god, how Internet Explorer can be a pain when designing websites.

We are experimenting with a Reinforcement Learning-based marketing campaign manager. A bit like the Tic Tac Toe-player, it learns from its mistakes and successes. Imagine focusing on email frequency: If you email someone too often, they will become irritated and unsubscribe. On the other hand, if you email too rarely, they will start to forget you. Experimenting with various email frequencies on an automated basis, the Reinforcement Learner will conduct a large number of experiments and learn from these continuously. We are in talks with a NGO to allow us to play with their donor base using this approach.

Nothing is certain yet, but we hope to land a mobile network operator as a new customer.

A Test of the Recommender Engine

Score! The first results from The Product Recommender Engine arrived.

A group of customers received a business-as-usual email of product highlights. Some of these customers returned and bought some more stuff. Let's call that conversion rate index 100.

Another group received customized emails, recommending specific products, based on the product purchase history as decided by The Engine. These customers converted at a rate of index 157. Money was made.

Innohead is now in the process of packaging the recommender algorithm as a standard component on the platform. I wonder who else, besides booksellers, could use the system?

Logo Fight!

Innohead is picking a logo. 16 designers submitted a range of logos in the competition. From that, I and Lars picked 8. 

Which logo do you prefer? 

Please go to the competition on 99designs and help us choose. The 99designs voting page: http://99designs.com/logo-design/vote-uoshhc

Fun in Startup Land

I'm very excited. Innohead has their first few customers onboard with a subscription model and the rest of 2011 looks good, financially speaking.

We have our first hire, genius programmer Lars Bojsen-Møller, onboard too. Lars holds a MSc in Computer Science and Mathematics, played the piano since age 6 and loves Nick Drake, stands 192 cm tall, is pale and prefers to meet in late.

My mom sometimes asks me what the company does: "You do these logarithms, right?" Here is a rundown of the two core activities:

a) Customer Data Warehouse. We gather all the data we can find in a client company and feed it into a specialized warehouse. Call center interactions, website visits, product transactions, survey responses and so on. We use MongoDB as the database engine behind it. Love it.

b) Continuous Analytics. Based on customer data, we predict

• what leads might become valuable customers, 
• which customers might be open to buy more and what they might buy, 
• which customers might be at risk of exiting the company in the near future

These measures can be used to estimate Customer Lifetime Value, the value one can expect to earn over the lifetime of the customer.

Predictions are based on modern statistics and machine learning methods, labeled artificial intelligence in the old days. In many ways, there have been a fruitful convergence between machine learning methods and statistics, in that we are starting to understand how to analyze some of the machine learning algorithms in statistical terms.

Picking from the customers, we have

• a bank running a lead scoring algorithm
• a television provider and 
• a lottery running customer exit scoring models and Customer Lifetime Value measures
• a financing and major appliances company running a product recommender

In February, we take a look at

• an insurance company
• an electricity distributor
• a transportation company

Innohead just launched a $300 logo design contest for Innohead on 99designs. They create the contest, I pick the winner. I might ask for your help in that respect.

Running a startup company is great fun. Does your boss suck? Do you want more freedom? Can you create real value? Then think about doing a startup.

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On Denmark's Industrial Future As Seen From The 1880's

I was moved to write a brief response on an article about Denmark's future economic growth. It appeared in Weekendavisen February 5th 2010. Translation:

In a Weekendavisen article, CBS associate professor Mark Lorenzen is presented as a proponent for the view that Denmark's future economic growth should not be based primarily on risky high tech, but rather on the so-called creative sectors.

During the 1880's, the Confederation of Copenhagen's Industry was still governed mainly by the interests of the applied arts. The confederation's view was fundamentally, that "although the location of our country must be said to be favourable for great industrial development, our people is probably unfit for such activity given their soft character and indolent temper, since they are used to easily find food on our fertile lands". (Vagn Dybdahl in "Erhvervshistorisk Årbog 1980").

This state of affairs can arise again.

Slideshow Paradigm Shift: Don't Go To The Next Slide, Zoom To The Next Object

The guys from www.prezi.com have made a wonderful new way of creating slideshows. The whole nature of a slideshow is changed to a trip over a map, following a path.

The freedom in throwing away the "slide" part of shows is simply brilliant. Mindmaps, cooperative creation, news ways of integrating pictures... This is a paradigm shift in presentation. I heard the guys at TED invested some money in this. Check it out!

SpinVox - My Voice Is My Keyboard

Let's test SpinVox, the hyped voice-to-text service.

I set up an account, dialed a US phone number from a cell phone in Denmark. Then I read a random section from the bestselling book "The Reader".

Here is the email sent back from SpinVox:

You've received a new memo:

----------
"I wanted simultaneously to understand Hannah's crime and to condemn it but it was too terrible for that. When I tried to understand it I had the feeling I was failing to condemn it as it must be condemned. When I condemned it it as it must be condemned there was no room for understanding but even as I wanted to understand Hannah failing to understand her meant betraying her all over again. I could not resolve this. I wanted to pose myself both tasks."

- spoken through SpinVox.
----------

Applause to SpinVox, I am impressed. Now we all have to think about how to use this new capability. How about processing call center voice streams, create a text corpus and then text datamine successful encounters versus less successful ones as measured by sale?

Update:

I asked my friend Jillian to talk to SpinVox in Spanish. This is the unedited email I got back:

Ha recibido un nuevo memo:

----------
"Hola un saludo como estas. Tengo que dejar este mensaje para Nils porque el me pidio que hablara con el. El tiene algunas preguntas acerca de que si puedo hablar español o no y ahora podra ver que en realidad puedo hablar el idioma. Un saludo un beso. Un abrazo chao."

- via SpinVox.
----------

Jillian told me that this was a pretty good translation.

---
Picture credit: robgallop

Science Killed My Marketing Job

This is a marketing analytics scenario.
*****
Jeremy traded US stocks for a few years, but is now thinking about broadening his trading to oil, gold and international stocks.

On wsj.com, he reads about the virtues of diversification through the use of international stocks. Next to the article, a BankCorp banner shows a picture of a cool, confident investor who trades stocks in Deutsche Bank and China Telecom from his cell phone. Jeremy does not click on the banner, but a cookie is placed on Jeremy's computer and he makes a subconscious association between BankCorp and trading.

A few days later, Jeremy hears that Bet24, the large bookmaker traded on the Austrian stock exchange, is undervalued and decides to act on the information. Now he needs a financial services provider right away. Jeremy does a Google search using the keywords “stock trading” and “austrian stocks”. Next to the organic search hits, the Google Adwords ads shows a BankCorp ad as the third advertisement, specifically mentioning the possibility of trading Austrian stocks. Jeremy clicks on BankCorp's ad because he has seen the name before.

On BankCorp's landing page, their trading platform's international stock trading capability is emphasized at the center of the page. The website registers what AdWords ad led to the website, along with Jeremy's search keywords. Jeremy is from New York City, a fact that is revealed and registered through his IP address. Finally, it is noted that Jeremy was once exposed to a wsj.com international stock ad.

Jeremy is curious about the price of real-time price feeds, the range of available stock exchanges and types of tradable commodities, but it also occurs to him to search for what kind of guarantee he has that his money will be paid back in the case of default. More than 4 minutes have passed.

Jeremy decides to sign up for a trial trading account, answers a question about trading experience and investable assets, hands out his name and email address. While playing around on the trading platform, he carries out a few simulated trades on Austrian stocks.

Inside BankCorp's systems, an algorithm is triggered by the arrival of a new sales lead. The algorithm can access records of past lead profiles and correlate them to the rate of lead to client conversion and to the average revenue generated by client-lead profile pairs.

Based on Jeremy's search keywords, his New York City IP address, the time spent on the bank's website, the pages he visited, the survey responses and the type of simulated trades carried out on the trading platform – from this data – it is inferred that he is likely to become a valuable customer. The algorithm decides that an experienced sales representative with special knowledge about stock trading would do well in contacting him.

Three months later it is determined for sure that Jeremy indeed did become a valuable customer. He conducted a high number of trades and generated a lot of revenue for the bank over this period of time.

A second algorithm is now triggered in BankCorp. The algorithm is interested in the relation between the wsj.com ad, the Google AdWords ad on Austrian stock trading and the value of clients such as Jeremy. The marketing database shows that he and other valuable clients were exposed to a combination of the wsj.com and Austrian stock trading ad. The algorithm set a series of decision in motion. Firstly, it decides to increase the bids on Google keywords containing the terms “trading” and “Austrian stocks”. Secondly, it decides to increase relative spending on the wsj.com marketing channel, while spending less on smartmoney.com. Thirdly, it decides to increase relative spending on the cool-confident investor rich banner ad, while spending on other banner ads are decreased slightly.

BankCorp's CEO is pleased to know, that the days of knowing what half of the marketing budget was wasted, are finally over.



Credits

Picture by Tony

Sony Reader and Mac

The Sony Reader is not designed to run on the mac, but there is a simple workaround.

###[October 30, 2009] Update: The Sony Library has finally been released for Mac. So the text below might not be relevant anymore###

It is possible to download DRM-protected EPUB and Adobe Digital Editions formatted books to a mac and then transfer it to Sony Reader via usb.

Just once, one must go through the following process.

The two pieces of software, Sony Library and Adobe Digital Editions, must be installed on a Windows PC computer. Connect the Reader to the PC. From within Adobe Digital Editions, authorize the reader.

Now install Adobe Digital Editions on the Mac. Buy an EPUB or Digital Editions book from, say, www.booksonboard.com. The book can now be read on the mac through the Adobe Digital Editions software, while the file itself is found in Documents/Digital Editions/.

Connect the Sony Reader to the mac. Drag and drop the .epub or .pdf file from the mac folder to the Sony Reader. Done.

Do I think that Amazon, Sony and the book publishers are doing a good job of making it as painless as possible to buy and read ebooks? No. Please give us one open standard for ebooks, get rid of digital rights management and make all books available to everybody all the time through a new revenue model. 60 years from now, I do not want to discover that my precious ebooks are lost, since the rights management server has perished and no current technology can read the proprietary format.

Business Management Through Customer Lifetime Value

A company's customer base can be thought of as a collection of stochastic future cash flows, not unlike a portfolio of securities. Managers then evaluate the effects of business decisions against expected changes in the present value of customers' cash flows. This is customer lifetime value analysis.

The figure above shows the event histories of a random sample of newspaper customers. Yellow marks a period of rebate subscription, while green marks a full price subscription. Red denotes a period of no subscriptions - the customer has churned. Read more in "Analyzing Customer Lifetime Value Using Tree Ensembles" (link).

Analysis based on the customer lifetime value concept must typically account for two main aspects of customer behavior: The lifetime of a customer and the monetary value generated while active.

Given a set of customer attributes, such as demographic data and past transactions, a model of customer lifetime value can be created. The model seeks to relate customer attributes to lifetime and value.

An example of a basic quantitative approach is to model value through a linear regression model, while lifetime is estimated based on, say, an exponential distribution.

A customer lifetime value model has several exciting applications.

• Resource Prioritization. Sensible lifetime value estimates can serve as a basis for organizational resource prioritization: Customer service level design, marketing spending, sales force pay and so on.
• Novelty Detection. Detect and react to changes in the marketplace by monitoring the formation of new patterns in customer lifetime value. Are former valuable clients all of a sudden churning at higher rates? Are new groups of high value clients forming?

Businesses can differentiate valuable customers at an early point in customers' life cycle, monitor the customer base evolution and act on their data on a systematic basis. Such businesses stand to harvest great rewards.

God, Tax and AI

Today, while walking to a client meeting, I was approached by a man.

Man: Are you interested in talking about God and such?

Me: No, not really. I am more interested in making money.

Man: Is it not strange that the Large Hadron Collider recreates circumstances similar to those during the Big Bang, the creation of our universe. The Hadron Collider was built by intelligent people, then, why shouldn't there be intelligence behind the Big Bang?

Me: I am interested in artificial intelligence and hope to one day build a machine with an intelligence surpassing that of humans. However, I would not want the machine to care about its creator. I would want it to solve problems.

Man: Surely a machine would have no conscience, as man, as is witnessed by his enactment of the laws of society.

Me: Who says that man has conscience, that it is not an illusion? Anyway, I think a machine could be programmed to have conscience. ...And when I look at the tax legislation in this country, I really cannot see that as an expression of conscience.

Reinforcement Learning - Tic Tac Toe

Based on Sutton and Barto's "Reinforcement Learning", I did a simple python implementation of tic tac toe.

The algorithm has no knowledge of tic tac toe, except it knows when it has won or lost. By playing against you and itself it gradually learns how to play well.

This particular implementation does not take "exploratory" steps, but it would be simple to implement.

Python code

Information Diet

Reddit, digg and slashdot, New York Times, Financial Times, Wired, Facebook - you are all quarantined for one week. You take up too much of my non-work time.

Python Particle Simulation

Here is how to do a basic particle simulation in Python using PyGame.

The movie below shows a basic 2d particle simulation emulating particles that are attracted to each other, while simultaneously avoiding getting too close to each other.




See the Python source code.

Running on a Mac with Python 2.5? Install pygame and pyobjc from http://rene.f0o.com/~rene/stuff/macosx/. OS X 10.4 versions also work in OS X 10.5.

Why Toyota Discontinued the Electric Car

Toyota discontinued sales and production of the purely electrical vehicle RAV4-EV in 2003. The Toyota website states:
"Although a significant marketing effort was undertaken for the RAV4-EV, we only sold about 300 vehicles a year" and "[...] technical issues tied to electric vehicles remain a major hurdle [...]".

There was no conspiracy against electric cars, no technology was being held back to serve oil or state interests. If any individual had knowledge of such technology, its sale would yield instant wealth.

For the electric car, it was mainly a question of battery efficiency that had to improve beyond some threshold. Surely, the higher price of oil now provides a strong incentive for technologists to develop and reintroduce the electric car again. Tesla Motors Roadster is in production, while Mitsubishi's i MiEV will hit the market later. In Denmark, it has been decided to waiver the usual 180% tax on cars, if it is an electric car.

Toyota RAV4-EV

Written later after watching Who Killed The Electric Car.

On the other hand, the individual car company benefits from engines that need spare parts. Electric car engines, it is said, need less maintenance and spare parts. If hydrogen became the future main power source for vehicles, rather than electricity, oil companies could possibly transform their existing infrastructure.

On Obama's Elitism

During the election campaign in California, Obama was quoted for a remark relating poverty, fundamentalism, guns and bitterness; a remark that was interpreted as elitist.

Here is a hilarious comment from someone bitter.

In Time magazine, April 28, 2008, "A Bitter Lesson":

"I think them remarks is the absolute truth," said Bill Williams, 60, a bearded disabled veteran from Waynesburg who attended an Obama town-hall meeting near Pittsburgh. "We like our faith and our guns. I went to church when things were bad, and I went out and I hunted for my family food, where I didn't know whatever to put the gun in my mouth or to shoot an animal. So, yeah, he was right on the money. And was I bitter, and am I bitter? Hell, yes, I am."

The Hotel Club

Is it really such a good idea to own a home? Why not instead be a member of an exclusive club that owns hotel rooms in the world's most interesting cities?

My stuff is easy to move around, so why stay in one place, when fun is found elsewhere? A laptop, net access, clothes, good health, imagination and a loaded credit card. That's all you need.