Delta’s Digital Black Swan

Digital black swans: Condolences if you were flying — or more accurately, not flying — on Delta last week. As the tally of cancelled and delayed flights climbed into the thousands, Nick Taleb came to mind — you know, the Black Swan guy. Taleb wrote that black-swan events have three characteristics: “rarity, extreme impact, and retrospective (but not prospective) predictability.”

I don’t know if the power failure at Delta — and the chain of unexpected events that followed it — qualifies as a black swan by Taleb’s standards, but it must have felt that way to CEO Ed Bastian. The day after the failure, he apologized for the second time and ruefully explained that over the past three years, Delta has invested “hundreds of millions of dollars in technology infrastructure upgrades and systems, including back-up systems, to prevent what happened yesterday from occurring.”

Delta isn’t the only airline whose systems have crashed recently, and with more and more companies integrating their systems, it seems like a good bet that digital black swans may become more and more common. In an article for CIO Dive, associate editor Naomi Eide offers some lessons from Delta for companies hoping to avoid similar events. First, she says, beware centralized control points, because when they go down, everything goes down. Regionally dispersed control centers are more expensive, but more robust. Second, ensure redundancy measures are in place and test them regularly. Third, practice recovery plans and responses to worst-case scenarios.

All of this still may not be enough to save your company from a true black-swan event; Taleb made a pretty strong case that they will be with us always. But it may be enough to avoid the growing numbers of gray ones.

Tapping into startup innovation on the cheap: The Bully of Bentonville is a great moniker, but it doesn’t really square with a company that happily plunks down $3.3 billion for a cash-burning startup — with no other bidders in sight. I don’t know if Walmart’s acquisition of Jet.com will pay off, but it is a high-profile example of what seems to be a pronounced uptick in the number of big companies buying up startups to gain access to innovative technologies, business models, and products and services.

In case your company doesn’t have a few billion lying around, a new study by MassChallenge and Imaginatik describes an alternative worth considering. “Corporate executives see enormous potential to innovate by working with early-stage ventures,” says Imaginatik CMO Chris Townsend. “The exact approaches are evolving constantly, but the trend is clear: Startup/corporate collaboration is becoming critical.”

Instead of buying or investing in startups, the study finds that established companies are increasingly entering “flexible, early-stage, open-ended partnerships” with them. The key to these partnerships is strategic intent. “In fact, strategic intent determines not only which startups a corporation chooses to interact with, but also how they build the relationship, and which vehicles, processes, and people are involved,” write the study’s authors. Generally, the strategic intent of the companies that enter these partnerships falls into three categories: improving their core business; staying ahead of disruptions; and gaining access to technical or product innovation.

The study also offers three guidelines for companies that want to play. First, don’t take startup partners for granted — the most promising startups don’t have to come calling, and they won’t have to wait around while your company decides if it wants to partner. Second, prepare by appointing a startup champion to manage the partnership, creating the internal structure needed to work with the startup, and setting strategic objectives for the partnership. Third, move quickly: “Successful startup partnerships depend on being loose, fast, and generous early — allowing both sides to uncover potential and/or fail fast.”

The downside of workplace wearables: In the corporate dystopia that Dave Eggers imagined in his terrific 2013 novel, The Circle, everything that the 10,000 employees of a Big Brother-like company do — from phone calls with customers to what they eat — is monitored, evaluated, and transformed into performance-enhancing, culture-strengthening feedback. Oh wait, that’s your company on wearables!

Freelancer Karen Turner reports in The Washington Post that 86% of U.S. companies will invest in wearables this year — stuff like inventory-tracking armbands, step-saving GPS tags, augmented-reality helmets, and “a Hitachi Business Microscope affixed to a lanyard [that] monitors how and when office workers interact with others.” Sounds great, right?

“Wearables have been long used to help monitor an individual’s health and fitness,” writes Turner. “But now wearable use is becoming increasingly common in the workplace to record, analyze and enhance worker productivity, raising concerns among lawyers and labor specialists who feel that it’s a step toward stripping employees of workplace rights.”

Depending on what your company measures with wearables and what it does with the data they generate, these gizmos might come with legal ramifications vis-à-vis privacy, medical conditions, disabilities, and race, sex, and age discrimination. Plus, adds Turner, there’s the possibility that constant monitoring will create employee stress and erode their trust in management. Hmm, sounds like that wearables investment might require a bit more thought.