Revelations about Apple and Google tracking the movements of mobile devices has caused quite a stir. It seems their mining of data and ability to construct complex algorithms that can predict future behavior incited outrage on the part of privacy and civil rights groups. In a bit of a twisted irony, it turns out that the very apps that have enabled smart phones have also provided a wealth of data for inquiring minds who want to know.

The confluence of social media and cloud computing is shaping a new world order, where marketers have access to relational databases and a litany of information that has until now been seemingly unfathomable. The implications are extraordinary, as emerging technologies will propel mind numbing analytics about how we work, live and interact.

Consumers are fearful of things like electronic medical records which evoke an emotional response about our privacy, even though they are nearly certain of advancing medical science and improving patient outcomes. Business owners must embrace the potential of a new universe of analytics that will open a window to insight on customers unlike any we have ever seen.

The current debate centers on whether such mining is legal and ethical and how it could be abused. Attorneys search the Facebook pages of potential jurors to determine their biases. Cellular phone providers track which users are most likely to switch carriers based on the behavior of their friends. While these unseemly usages of data may threaten our sensibilities, social norms are shifting to the point that privacy is becoming an expectation of a past era.

Physicists at Northwestern University tracked the movements of over 100,000 people and 16 million records, and assert that they can predict (within 93% accuracy) the location of a user at a given time in the future[i]. Those with an entrepreneurial bent will find productive uses of such information and will find legal ways to exploit it. Microsoft, Apple and Google rank in the top 10 amongst the world’s most valued companies because they are the ones that allow us to organize our information.

Those seeking competitive advantage will invest more heavily in technologies and analysts who not only tell us how our customers have behaved but how they will behave in the future, and react to the stimuli we produce. Decisions ranging from inventory selection, marketing spend, labor utilization, etc. will be driven by more precise data, promoting further improvement in U.S. productivity.

The use of such data will become the keys to the castle.  As Bill Gates once said, “be nice to the nerds, chances are you’ll end up working for one.”

[i] The Really Smart Phone by Robert Lee Hotz Wall Street Journal April 23, 2011

This week, I want to expound on a series of unrelated events shaping our world:

Last year, a deluge of rain in Australia and Canada, and drought in Argentina and Russia sparked a worldwide rise in food prices.  On Dec. 17^th, after months of poor supply, Tunisian produce vendor Mohammed Bouazizi was mugged by police and then set himself on fire in protest.  Reaction to his plight set off a revolt in the Middle East. Beyond the radar to us overly indulgent Americans is that the world is on the verge of a global food shortage.

Ironically, the U.S. growers have reaped the rewards of higher prices for U.S crops and futures contracts. Wheat prices were up as much as 74%, (corn 87%[i]) and net farm income is up 20% this year. Demand is rising for dairy, meat and poultry to support a burgeoning global middle class.[ii] Spring planting of key crops will dictate food prices later in 2011 but farmers may be hesitant to plant in a period of high fuel and fertilizer costs.

While unrest continues throughout the Middle East, social states who provide strong entitlements such as UAB, Kuwait and Oman will likely not be threatened. Similar protests in oil rich Iran or Iraq would be more unsettling to world markets.

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As Motorola revealed its Xoom tablet this week, the Microsoft vs. Apple war took on a new dimension. The real war may be tablet vs. PC as a new generation of devices operating on Honeycomb-Android (Google) and other operating systems hit the market[iii].  Electronics makers are currently developing over 100 designs of new models, many of which sport more business friendly applications.

The second generation of iPads has been somewhat under wraps but is expected to be lighter, faster and include a camera and video conferencing capabilities. Apple’s advantage is its burgeoning iTunes and App Exchange platform.  Apple only spends about 7% of revenue on R&D, about half of what Google and Microsoft[iv] spend, providing a significant competitive advantage. I was in a meeting last week with 7 other people; everyone had a tablet.

Meanwhile, Microsoft (Office 365) and others are developing new Small Business Enterprise applications to better leverage the combination of mobile devices and low cost cloud computing options. The paradigm shift to storing all documents on the internet is emerging as a revolution coined as “cloud productivity.”

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Cisco’s new “telepresense” conferencing systems are all the rage, providing a far more realistic teleconference then the 1^st generation systems. With concerns over fuel costs and the environment, more companies may be moving towards adopting such technologies.

If you want to see an amazing video on future technologies, see “A Day Made of Glass…Made Possible by Corning” on YouTube.

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It is expected that the U.S. post office will eliminate Saturday delivery by the end of 2012.

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It is “hurry up and wait” for small businesses looking to minimize their insurance costs.  The health care bill requires that each state set up “health care exchanges” by 2014[v]. Most states are dragging their feet, and waiting to see what legal challenges emerge.  California has already pushed through legislation but other states are dragging behind.

It is expected that “exchanges” once enacted may actually bring about market conditions that will lower costs for small groups (in the neighborhood of 50 lives)  who will be better able to leverage buying power and have more predictable premiums. Let us pray.

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[i] Hungry for a Solution  Bloomberg Business Week 2/11/11

[ii] The Kiplinger Letter Vol 88 No.

[iii] Motorola’s Xoom Starts Tablet Wars by Walter Mossberg WSJ 2/24/11

[iv] Mobile Wars Bloomberg Business Week 2/21/11

[v] The Kiplinger Letter Vol. 88, No. 7

When the Internet was first thrust upon us, we didn’t know what to make of it. Nor did we know which of the entrants of the budding new market would win the beauty contest.  Our intuition was that someone (such as AOL, Netscape, Microsoft, Google, and Yahoo) would, and that the technology would be a game changer.

There are times when a technology is bigger than the first-to-market entrant who introduces it to us.  A current case in point is Toyota, a company who has been vilified in light of their massive quality and public relations problems. Yet Toyota has my attention, as they are braced to create disruption.

I recently bought a Lexus hybrid. I didn’t really buy it for environmental reasons, although reducing my carbon footprint was certainly a bonus. I bought it because I wanted all the toys, Lexus service and quality and was intrigued by the concept of 35 miles to the gallon (in a volatile world where the price of oil is at risk).

At its core, strategy is about managing trade-offs, and this technology provides the potential for consumers to gain the most, and give up the least.  I believe hybrid technology will emerge as a breakthrough, cross-over technology adopted by the majority of drivers in the U.S. in the next 5-7 years.  Electric cars are novel, yet inconvenient.  Americans are not going to adapt to sitting at charging stations for 2 hours, nor will they settle for a lack of power.  U.S. oil producers will not support any material shift to hydrogen, or corn, or recycled Twinkies, or whatever.  While the Prius was perceived as small and sluggish, the Lexus (a Toyota brand) is neither, and proves that the underlying technology can appeal to the masses. Toyota is way ahead of the pack in hybrid technology and I believe the day will come when it will provide a significant competitive advantage.

Of course this post is not about hybrids at all, it is about identifying breakthrough technologies that can disrupt an industry. Often, fortunes are made by the purveyor of a technology, as well as others who create alliances or business that can feed off it.

There are entire cottage industries being built to support such technologies, including the myriad of developers creating apps for The App Exchange (SalesForce) and Apple App Store.

Will Apple beat Microsoft in business computing (the answer is already clear in consumer products)?  Will cloud computing completely alter the technology landscape in ways we can’t even comprehend? Which mobile technologies will change the way we work and live?

What changes in health care technologies will revolutionize the way we care for the sick?  What emerging technologies could reshape your industry? What new delivery systems will improve the way your customers do business (or consume products)?  The answer will come based on who can create the best balance of trade-offs and win the beauty contest.

Many business owners are asking, just what should I expect in 2011 and beyond in terms of growth and demand?  Recent 2011 forecasts from Kiplinger’s include:

*        GDP Growth 2.8%
*        Unemployment Ending 2010 at 9.5% and slightly lower in 2011
*        Prime Rate 3.25%
*        10 Year T-notes 3% by late 2011
*        Inflation of 1.5%
*        Crude Oil $75-%80 barrel in early 2011

Demand and pricing is scattered.  The deflation debate seems to have softened as prices are stable and flat (projected to rise 1-2% next year). Upward pressure on raw materials and commodities such as cotton and copper are higher.  Providers of some consumables such as gasoline, coffee and cereals are raising prices, while prices for electronics, computers and automobiles are eroding. [i] A battle could be brewing over “rare earth” elements 95% of which are controlled by China. Materials such as Lithium, used in micro-electronics and products such as iPhone batteries could skyrocket.

The jobless recovery continues.  While the addition of 151,000 jobs in October was encouraging, it would take 20 years of growth at that rate to return back to the level of employment before the recession. Over 2% of Americans have been out of work for a year or more, and with the eventual waning of unemployment benefits, the future is bleak for the unskilled.  As a whole, soft employment and tepid housing prices will offer little in the way of a significant recovery; and the economy will be split between growing and sluggish industries.

The most creative and opportunistic will flourish.  Forms of social media and online marketing are practically free, providing impetus for those with a great idea to get the message out quickly and cheaply. Those with cash will buy up competitors and commercial real estate.

Venture Capital investment has exploded from the depths of a cataclysmic drop to less than $4 Billion in Q1 of 2009 to a projected $11 Billion by Q4, 2011.[ii] With multiples exceeding 6x, this is still a great time to sell a business.

The Federal government is about to enter a phase of complete stagnation. Splintered ideology will not provoke much in the way of bipartisanism and compromise.  Consider health care. A complete repeal of the health care is unlikely, and Republicans will push for less costly reforms. But Parma, and the medical community are gearing up for the addition of  nearly 30% of Americans who are uninsured and offer the industry new volume. In the absence of legislative movement, the administration will be forced to rely on regulatory actions led by political appointees and their cronies.  Early signs are that the Fed’s attempt at “quantitative easing” is not moving the needle very much on lending.

Emerging markets continue explosive growth in Singapore, China, India and Brazil (representing 75% of global GNP growth in 2011).[iii] Infrastructure stocks continue to boom. Cloud computing enables continued strength in the technology sector.

There is momentum behind the return of low level call center jobs to the U.S. as “rural outsourcing” is hot in information technology and other sectors. Small town America offer substitutes for outsourcing,  including Indian Tribes offering U.S. based alternatives, at only 10-20% premium from their Asian counterparts[iv] .

There is plenty of room for optimism. Competitors are weakened, and companies with strong balance sheets and cash flow should prosper.  Well run companies will invest based on relatively stable macro-economic assumptions. The strong will get stronger. Focus on being one of them.

[i] The Kiplinger Letter November 19th 2010

[ii] Money Tree Reports

[iii] The Kiplinger Letter November 19th, 2010

[iv] Rural Outsourcers” Vs. Bangalore