Friday, April 30, 2010

What could we learn from software failure?

Currently Queensland Health is enjoying a vast amount of media coverage because it's new pay system isn't working. - 'The scope of the problems are breathtaking' a staff representative said. In past times we have had a massive failure of a new student booking system at RMIT - that one was scrapped costing AU$30M because it just didn't work.

The only reason I highlight those two is because they're big enough to get media coverage. We all know that many many more broken systems are out there quietly squeaking and rattling their way to an early demise - if they were cars they'd be lemons, taken off the road and scrapped. With software it's more difficult, not least because of the money involved but also because the basic need to admit there's a problem. When management has spent millions it can be too bitter a pill to admit failure and take the financial hit, better to let the organisation work through the problems throwing good money after bad.

It's not the decision makers who have to use the horror system and at their level a failure is distinctly career limiting. As the managers don't use systems it's easy for them to paper over the cracks of failure. If someone in accounts has to spend twice as long doing a basic task that will annoy one person but it's better, for the manager, to take that hit rather than risk their own status quo.

Of course the real ongoing cost to the organisation is high, but it's difficult to quantify, especially the intangibles such as staff satisfaction. These points are rarely taken into account when planning a project, yet it's precisely in these areas that most risk lies. With new systems it's too easy to be enamoured with the latest SOA architecture or whatever, rather than the boring nuts and bolts of getting the core business processes running properly. Analysing risk in this way is simply foreign to most people. The reason for that is that in most other fields it would be ludicrous to expect these risks - new trucks do the basics right every time, as do new photocopiers, as do most standard elements of a business. The difference is that most software, beyond the likes of MS Office, is distinctly non standard and managers simply don't even know there will be risk associated with that. No awareness of risk, means no assesment of risk, leading to expensive failure.

The bottom line is that organisations are not effective when it comes to ad-hoc software development. Regardless of whether it's in house or out sourced - they simply don't have the skills to measure the risk and know whether something is likely to be a success or failure.

I'm going to blog extensively about this area and in this first missive I wanted to touch onto two key points.

1) Admitting to a failure is too hard for most organisations
2) Organisations lack the risk analysis skills to decide what is worth doing and what is just too complex.

Monday, August 31, 2009

Anthill VC Panel Discussion

Went along to Venture Capital Design, a panel discussion hosted by Anthill. It was OK, although the lack of microphones and chairs was a little wearing. I found a couple of interesting things :-

1) Convertable notes are a good way of raising finance as debt and then converting it into equity. Not sure of the details, but it sounds like a good way of getting investment without being tied to interest rates and repayments for ever. For a startup the chance of getting debt investment is looking close to zero, but for second round it could be interesting.

2) It's easier (apparently) or as easy to raise big money - ie AU$108M for redbubble as it is to raise small money. I guess there's some kind of clue there about how much a first time entrepreneur is trusted.

Overall though the evening fell between two (non existent) stools. When it comes down to it, there really isn't much common ground between VC and Design. Yes designers need VC, and startups need good design - but they're not part of the same continuum.

Monday, August 10, 2009

DataMovie a finalist in $100K business competition

Enterprize is a $100K competition for businesses run by the University of Queensland. We found out last week that we've got through to the finals, and the press release made it public today - amazing.

The DataMovie team - Jerry Shea, Colin Cooper and myself created a focussed 8 page summary of the DataMovie idea and UQ clearly liked it. Seeing the competition for the prize it's awe inspiring. We're up against carbon nanotubes, cancer drugs and other great ideas - of course our ideas are hot too, it's just an incredible vote of confidence to be selected. It's upto us now to create the best business plan, pitch and presentation to put ourselves in with a fighting chance of the main prize.

In the meantime thanks to University of Queenlands business school for putting on the competition and giving us the chance to pitch our ideas to so many people - we couldn't wish for a better start.

Sunday, August 9, 2009

Replay the Day goes live

Announcing the very first DataMovie release for the general public. It show's a real time excerpt from the ASX of the top 10 shares (ANZ, BHP, Commonwealth, NAB, QBE, Telstra, Westfield, Westpac, Woodside and Woolworths) traded early on 6th August 2009.

The technology used to create this is still in ongoing development, but we have been running real time analysis of the entire ASX100 for many months - the techniques work really well, we're now at the stage where IP protection and commercialisation are concentrating the mind. The P of POC has been well and truly proven.

Being able to animate many many dimensions of data for any stock we want gives us so much capability it can be overwhelming. For instance the YouTube video shows realtime calculuation and diplsay of of Relative Volume. As far as we are aware this is a world first, the first time that relative volume has been shown live in an animated trading chart. And that really is the tip of ice berg, 20 seconds of YouTube goodness isn't big enough to show what we're capable of, so keep watching.

Thursday, August 6, 2009

James Lovelock turns 90

I've been reading James Lovelock's (originator of the Gaia theory) biography and it highlights some fascinating background from one of our greatest scientists. The bottom line is that it doesn't matter how good the science is, without a good address, job title and backing from your peers you have no credibility - the reward for ability, talent and thinking outside the box is somewhere between score and indifference. That wouldn't be a problem apart from the impact that 30 years delay has caused.

Back to lovelock, first off I had assumed he was in his prime, maybe touching 70, but no he's just turned 90 (July 26 to be precise), he was doing his undergraduate degree during the war (WW2), his ideas really do define the phrase 'ahead of his time'. He's also a real hard core scientist, along the way to Gaia - which I'd previously thought was strong on circumstance but weak on science, he invented the ECD, the core device that allows miniscule concentrations of compounds within other gases. He used that to identify the levels of CFCs in the atmosphere and the ozone threat that caused.

As it says in the biography he's published papers from A-Z, anthropology to zoology, he's a genuine scientist/polymath, yet without the validation of a university or research address his papers wouldn't have been published at all. The whole Gaia idea has been circulating for more than 30 years, and even now we're bickering about the best approach to reduce carbon. Brilliance and ability is just not enough to persuade your average man in the street/politician to do something.

My core takeaway from Gaia is that everything is connected, even those little things that don't appear to matter, yep they do, there's a connection there somewhere. Six degrees of seperation isn't just a film or a wish fulfilment idea it's reality.

Thursday, July 30, 2009

Why do traders ignore so much data?

Stock market trading is driven by data, however most systems and the traders that use them, simply ignore huge swathes of data - it's been written off as just too hard. For instance BHP, Australia's most traded share is bought and sold 15-20,000 times a day - and that's just in Australia. Let's think about that for a moment, some of those trades are institutions, some are Mum and Dad investors, some are professionals, some are automated computer (aka algo) trades. So what do systems do to analyse those trading patterns, who is buying in? who is selling? etc, basically the systems do nothing - those 15,000 trades are reduced to 5 figures - Open, High, Low, Close and Volume.

Reducing all the trading data down to 5 figures made it easy (at least easier) to analyse, that was especially relevant when you had to hand draw your charts, and work with paper and pencil. The thing is we don't do it that way any more, my laptop has enough power to store and analyse the ASX100 live so why do my trading tools ignore that power and only allow me to look at history as OHLC? I reckon the answer is cultural, even though trading is meant to be the biggest user of the most advanced technology, at it's heart most traders are still using techniques that have been around for a century. They simply use them on really fast hardware.

As a little taster of what's possible, once you use the raw data you can split out the big institutional trades, identify certain types of algo trading - orders for 11, 12, 11, 12, 13, 12 ,11 etc shares. See if there's a stampede by the bit players into (or out of) a share all kinds of real world knowledge is there for the asking. Of course what you do with it, is upto you.

Tuesday, July 21, 2009

Trading it's not rocket science

Buying and selling shares for profit is the dream of many, fortunes can be made, and as a 'business' it's completely scalable. If you can trade $1000 into $2000, then you can trade that $2000 to $4k and so on you'll be a millionaire in no time. However, doubling your money is unusual to say the least, doing it consistently is the stuff of dreams and not reality. Most successful traders are happy with a consistent set of small(ish) gains, balanced by smaller losses.

To minimise losses, you have to be prepared to sell and take a loss, psychologically that's the hardest part of the whole game. When you lose you lose face, confidence and are humbled by the market, it's a tough lesson. The pain can be managed by trading to your plan, and setting a stop loss, an automated sell, when the share reaches a low threshold. If you don't do that you'll hold on to a losing trade, and your losses will just grow. Buy and hold might work in the long term, but buy low sell high and protect the downside with a stop loss is the real way to make money in the market.

My trading golden rules :-

1) Know when to buy - important, but don't worry about buying at the bottom
2) Know when to sell - crucial, set lower and upper limits and sell, take that loss or profit and plan for it before you buy
3) Manage your money - it's all about risk management, only risk a small proportion of your stake at a time

Treat trading as an education process and expect to pay for that education. If you do that then you'll have the right mind set. Don't expect to make money from the get go, and don't expect consistency early on, but do track what worked and what didn't, Learn from that.