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Branding matters. Whether it is for business or for a region. As we begin a serious conversation regarding branding the greater Washington region, it is important to clarify what exactly a brand is.

Many evaluate brand strength by two factors: awareness and ubiquity. Take Google, which has become so synonymous with the act of conducting an online search that it has actually been adopted as a verb in the English language. Google it and you will see.

“Silicon Valley” is now used as shorthand for a region where innovation occurs, rather than the corner of California where the semi-conductor industry got its start.

People look at brands as something that prompts the brain to immediately “know it when they see it.” This assumption — the belief that with a catchy name and enough money a brand can be created — wastes a lot of money and time. As a business owner and policy maker, I have participated in branding exercises, gathering in a room with outside consultants to brainstorm on the catchy name for a business or the perfect logo.

However, a successful brand is not simply the outcome of a creative process. It is a successful execution of a business strategy to provide something valuable to a customer. A brand is a shorthand descriptor of a business’ value proposition.

Consider Google and its ubiquity. It is successful because it provides a search technology perceived as better than its competitors. It offers something of high value, not easily replaced. Imagine the countless decisions that go into creating a business supporting such a high value: hiring top-level creative minds, training them in a strong culture of innovation, investing in emerging technologies, ensuring the resulting software works predictably, and investing in real estate and office surroundings to encourage creativity and employee commitment. All of these are examples of the thousands of business decisions that Google must make, each measured against a common business value proposition: being the best search engine for its customers.

Silicon Valley differs from Google in that its brand has value because of a community’s concerted action. It’s a culture, a shared enterprise, where, after years of customary practices, a common value proposition has emerged. Silicon Valley focuses on individual entrepreneurship, strong connections between research and development and business, legal rules encouraging free movement of technology workers, compensation approaches that reward risk-taking, and a capital marketplace that embraces these values. The value proposition is clear: go to Silicon Valley to be part of a productive innovation culture.

As our capital region now asks the branding question, I am confident that the time is ripe for us to look into the mirror and discover what our true brand is. My work with the 2030 Group, TandemNSI and elsewhere has shown through data that there is a model of D.C. entrepreneurship — a unique way of doing business well; we have a very strong value proposition.

For anyone wanting to change the world and leverage proximity to the regulations and rules that shape our society, greater Washington is the place to be. To build our region’s brand we must proudly exclaim and celebrate this unique value proposition.

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Cybersecurity in the greater Washington region is an area of economic opportunity and regional strength, yet there was no single, publicly available list of cybersecurity businesses operating here. Now there is.

The TandemNSI Cybersecurity Industry List was compiled by TandemNSI, a community I launched three years ago to link government agencies and entrepreneurs who want to work with them. Through our work, we see an endless stream of opportunities for greater regional corporation, and the numbers in this new census are enlightening.

There are 967 cybersecurity businesses operating in the Washington area: 45 in D.C., 332 in Maryland and 590 in Virginia.

The census tallied businesses providing cybersecurity products, services or solutions and doesn’t include those supporting the cybersecurity industry such as lawyers, real estate brokers or human resource professionals, or businesses where cybersecurity is an ancillary offering. The census focuses solely on businesses driving the industry — the core resources against which supporting activities are arrayed.

An accompanying report entitled “The Cybersecurity Industry in the Greater Washington Region” explains the methodology used in the census, and provides insight to help those interested in growing our region’s cybersecurity industry.

Most of the businesses that met the criteria to be included in the count were service or solution-oriented. Product-oriented cybersecurity companies are a small percentage of the overall number of businesses we found — 38 out of 967.

This composition matters. Generally, service-based businesses aiming to scale up and grow quickly are limited by how easily they can hire and train new people. A business with an innovative product, on the other hand, is able to grow more rapidly because productive capacity is often as easy as making another copy. The most rapidly growing businesses in our national economy are more often product-oriented.

The heavy focus on service and solution-based cybersecurity businesses in the region is less surprising given the relationship they have with the federal government. At least half received money from the federal government under a direct contractual relationship to provide cybersecurity services or solutions. And it appears that the percentage is likely significantly higher, given that many others are subcontractors and therefore not easily identified through public sources.

The data unveils clear evidence of an untapped opportunity: despite tremendous commercial talent engaged in cybersecurity in our region, it is not concentrated in product-oriented innovation. And our region’s largest local customer — the federal government — has made it plain that product-oriented cybersecurity innovations are of high interest. It has opened offices in Silicon Valley and Boston because it is looking for innovation in places it perceives to have a higher concentration of product-oriented cybersecurity businesses.

Two immediate challenges: first is how to help our region’s large service and solution-oriented businesses acquire product-oriented businesses and facilitate integration into the federal government’s goals. Second, how to reshape our region’s strong cybersecurity talent into product-oriented innovators.

Both challenges will require significant investment and commitment. Before being able to solve a problem, it first needs to be identified. Now that we have a baseline against which to measure, we can build a stronger industry.

This column originally appeared at WashingtonPost.com.

 

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Verizon may have given Yahoo’s stockholders one billion reasons why cybersecurity matters last week when it hinted it could push to reduce its purchase offer for Yahoo.

The prospect of Yahoo’s stockholders losing $1 billion (or more) as a result of a cyberattack is a bellwether moment in quantifying the need for cybersecurity. Let me explain why.

It was widely reported a few months ago that Yahoo was the target of a sustained and successful theft of the online credentials and information of 500 million Yahoo users. The attack occurred in 2014 and was only disclosed by Yahoo two years later. Initial press coverage focused on the question of how attackers could have pulled it off and it served as yet another example of the insidious threat of cyberattacks.

Yahoo’s data theft was quickly subsumed into larger stories of cyberattacks that seem to occur with greater frequency, even though it was one of the biggest ever.

Meanwhile, the electoral cycle become more and more colored by state-sponsored data theft. The Department of Homeland Security brought to public attention an ongoing conversation in the cybersecurity industry: could our voting machines be hacked? The United States government accused the Russian government of cyberattacks to undermine our presidential election.

Yet people seem somehow numbed to the magnitude of the problem. I suspect that for many, the issues of data theft don’t register because there is no direct effect on their pocketbooks. After all, the expenses of addressing theft are usually high, but borne by the business. Costs usually come out of operating income or cash reserves, so stockholders don’t usually feel the pinch.

Costs to consumers are rarely passed on. Consider what liability a credit card holder has for charges made on his or her account after a data theft, and how differently that consumer would view the crime if it had direct and personal effect.

Yahoo may be the moment where that calculus changes.

Because Yahoo was in the middle of a sale transaction with Verizon when the news of the breach was released, the disclosure may have given Verizon some legal ammunition to reduce the amount of its offer for Yahoo.

If the purchase price for Yahoo drops, that reduction will be a loss for Yahoo stockholders. They will get less for their shares in a sale to Verizon and be directly harmed by the hack in a way that few have been. This will officially mark the moment where a data breach has a direct and immediate effect on stockholders.

With our corporate laws, the most likely remedy available to the stockholders would be to sue Yahoo’s board of directors and management. This in itself is not unique; boards get sued all the time, and generally have the benefit of insurance to pay claims that succeed.

However, in certain circumstances, such as in infamous accounting frauds like MCI, Worldcom and Enron, board members can face personal liability if they are found to be grossly negligent. When this occurs, board members have to pay damages out of their own pockets.

Even if consumers don’t care about cybersecurity, …

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People starting a business or looking for a job are often told to “network.” They dutifully follow that advice, attending countless networking events and drinking many coffees — and yet accomplish nothing.

Sadly, the advice is flawed, because it doesn’t distinguish between networking and building a network.

I am a member of FounderCorps, a regional organization of serial entrepreneurs — and they know a thing or two about networking.

Unquestionably, these entrepreneurs differentiate between going to an event simply to meet people and working to build a network. Member Pat Sheridan, co-founder and chief executive of the product studio Modus Create puts it this way: “Networking is helping people, not meeting people. It’s building trust through a demonstration of your value as a helpful resource.”

Giving to get is a consistent theme. “It’s engaging with people on a meaningful level, where you seek first to help and provide value for the other person,” says Tien Wong, chairman of tech services companies Tech 2000 and Lore Systems.

People who are overtly transactional when they are with others are probably not going to be good at building networks. Eric Koefoot, founder of the media monitoring firm PublicRelay, points out that he avoids those who are “too self-serving and/or have an agenda.”

“Just taking is not networking,” says Alex Murphy, founder of the business consultancy Epic59.

By the same token, networking should have an outcome. Daniel Gonzalez, a principal at the real estate firm Avison Young, has a colorful analogy. “When networking, I always figure out as soon as possible whether this is only a ‘Barney Relationship’ or whether there is more to it. You remember that purple dinosaur? His song was ‘I love you, you love me…’ Networking should be about action, so assess quickly whether you can help each other. If not, and you still like each other, call it what it is: friendship — a Barney Relationship — and don’t force what’s not there, business-wise.”

Understanding that networking should have an outcome doesn’t mean that the first time you meet someone you should expect to achieve anything. Building a relationship takes time. “As the Chinese say, ‘once a stranger, twice an acquaintance and maybe three times a friend’,” says Terry Hsaio, founder of the communications firm Hook Mobile.

If done well, networking is worth the effort. Stefan Midford, CEO of the workforce management firm Natural Insight, says the technique provides value to an entrepreneur in three ways. To succeed, you must network “up” to mentors or leaders you want to follow, network “with” peers who have similar challenges and network “down” with start-up entrepreneurs to share and contribute back.

These FounderCorps members agree that the most important lesson is that you must be an effective networker to be a successful entrepreneur. “It is a core ingredient, on par with persistence,” Murphy says. “All business is relationship-based,” Sheridan added.

Here in the greater Washington region, where there is always another networking event to attend…

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Last week Donald Trump uttered something that businesspeople often think, but rarely say. During the presidential debate, he boasted that not paying taxes is “very smart.” The resulting conversation and outrage is important for us to understand, because the system is faulty.

Let’s not beat around the bush here. Americans are driven by a sense of fairness, and the burden of taxes is no exception. The reality is that many Americans do not feel that the tax system is fair. According to Pew Research Center only 54 percent of Americans think they pay a reasonable amount in taxes, while six out of 10 think “rich people and corporations do not pay their fair share.”

In the 1950s, taxes paid by corporations funded as much as a third of the federal budget. Last year, that portion was approximately 10 percent. During the same period, the portion of the government supported by taxes automatically withheld from wages dramatically increased. Something has changed the tax base and where the money comes from.

There are many ways to look at taxes, and data can be found to support many arguments. It can be very confusing, particularly when issues of ideology are added to the conversation.

Trump has essentially highlighted something Americans already suspect: the federal tax code has far too many tax expenditures. Tax expenditures are deductions from an individual or corporation’s tax bill and are intended to subsidize specific behaviors. They end up reducing a taxpayer’s overall tax bill. Examples of tax expenditures include the residential mortgage tax deduction, child care credit, energy exploration subsidies and business entertainment. In fact, last year’s federal budget itemized 169 specific tax expenditures.

Politicians love tax expenditures because their cost is not easy to measure. Specific expenditures are usually linked to a tangible item or outcome, for example a bomber or school lunch program. Their cost is clearly seen.

Tax expenditures are harder to quantify because they do not show up in a budget as a spending item. Their true cost can only be seen after the fact, and quantified if at all as a “but for” number — the amount of tax that would have been paid were the tax expenditure not in place.

Because of the broad range of tax expenditures now in use, just about every American taxpayer benefits from at least one of them.

However, it is only the very poor and very wealthy who are most likely able to use tax expenditures to reduce their tax liability to zero. These savvy tax filers are merely applying the deductions and subsidies available to them under the law. That is how Trump can claim to be smart.

By raising this issue, he brings to light a more important truth: tax breaks…

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The first generation of Americans to grow up in a digitally connected world both rely on and distrust the connectedness they take for granted.

I engage with millennials in my work as a business school lecturer and investor. Digital natives are now the largest demographic in our society, slightly edging out baby boomers. Their views on the digital world — both the veracity of the information they receive and how they manage their own digital persona — are illuminating and somewhat disheartening.

In speaking with them, it strikes me how clearly they distinguish between the real world — a world of physical connection with close friends — and the digital world.

“I do not think that who we portray ourselves to be online is who we are in the real world,” offered Jennifer Rosen, a student at University of Maryland. “People dress, pose and post in a certain way so that they can try to establish an image of themselves.”

“I believe that who we are on the Internet is not a true showing of who we are actually are as a person,” added Greg Cistulli, a student at Christopher Newport University. The Internet does not provide us with insight into others, he says, because “people only put what they want others to see.”

I hear this type of commentary a lot. Millennials use the Internet as a promotional tool, as a way to stay connected on a superficial level with a broader group of people, and not as a way to create “real” relationships. In a way, they view social media more like a large, multiplayer video game than as reality.

Yet, it is a game they feel that they must play, because the digital world is engrossing. “I know that if I leave my phone away from me for even a few hours I feel like I missed quite a bit in life,” says Deepak Salem, a student at University of Maryland.

Evan Monroe, a student at Christopher Newport University put it best “More often I find myself communicating” through digital means such as texting and Snapchat “instead of face-to-face conversations or even phone calls.” Yet he doesn’t welcome this tendency. “I believe that this is the future we are moving towards and I do not believe it is for the better.”

Digital natives also stay informed through their connectedness. A study released last year by the Media Insight Project proved that digital natives get most of their information about the world around them from social media. In one sample, the study found that out of 24 sample news items, 20 were sourced to digital natives through social media. They may have friends in the real world, but that is not where they get their news.

This is troubling. Digital natives gather news from an information source that they may not even trust for veracity. As one digital native described it to me, “there are very few occasions when I think that something is completely true on the Internet.” So the doubt exists, but the time and patience needed to fact check or use critical thinking doesn’t.

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A sure-fire way to commercial success is giving people something new they truly and desperately want. Innovation — the connection of something novel with a need — has become a heady concoction that a growing number of organizations pursue.

The Pentagon continues accelerating its effort to source innovation from more places — for instance, it opened its latest innovation-focused office in Austin, Tex. last week as it has done in both Silicon Valley and Boston. CEOs of large businesses and heads of not-for-profit organizations often tell me about their need for innovation.

Many ask whether large organizations can learn to pivot, and embrace innovative change the way smaller companies and individuals seem to be able to.

Let’s look at what innovation means. Some describe it as the process of combining entrepreneurship and technology to create something new, but that definition shortchanges the fresh ideas that don’t

necessarily use technology. It would also imply that large organizations probably couldn’t be innovative, since entrepreneurs generally do not like working in large organizations.

Others tie innovation to commercial outcome, but this devalues the multitude of opportunities for innovation to positively change an organization without necessarily turning a profit. Innovating for social benefit is not profitable in a monetary way.

Instead, innovation is the conversion of a creation into something that satisfies a need. This is an important nuance. Creativity on its own doesn’t need to influence or sway others; it’s a human behavior. Innovation, however, makes users respond and act in a new way, see things differently, feel differently — and, to want to feel that way again.

So innovation can be large or small, broad or narrow in focus and application. Innovation is a naturally occurring phenomenon when people are given an opportunity to be creative and then share their new ideas.

The first trick is establishing conditions for people to dream, to wonder and ponder. This “fuzzy thinking” is the process of gathering information and considering alternatives in a somewhat wandering, less directed path.

The second challenge is…

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The connection between customer and company is ephemeral. When it’s strong, a product or service can achieve almost a cult-like status. When the connection is weak, a business can lose its way. I was reminded of this by Apple’s release of the iPhone 7 and a Bruce Springsteen concert I attended; these seemingly disconnected things have an important lesson for entrepreneurs.

When Apple released its iPhone 7 last week, the ghost of Apple founder Steve Jobs was surely looking on, but the more corporeal world provided little more than a collective yawn. In comparison to the launches of earlier versions of the iPhone, where the media and customers breathlessly recited the amazing innovations included in the latest release, the reaction to this most recent iteration was surprisingly muted.

As a result, some opine that Apple lost its way when Jobs died. Certainly, he ran Apple more like a consumer design company than a technology company. The beauty of products, the connection the user feels when “unboxing,” giving the customer something unexpected — all made Apple unique. Apple understood that how a customer feels about a product is as important as what it does.

An emblematic story of this approach was shared by Walter Isaacson in his biography of Steve Jobs. The visionary had his engineers autograph the system board for the fledgling Apple Macintosh. When engineers pointed out that no one would ever see their signatures buried in the device, Jobs reminded them that although the user might not ever spot it, the engineers themselves would know it was there.

Connection between customers and company. Engineers thinking about consumers they will never meet. Asking whether a device felt good in the hand, or if a smiling icon would be more welcoming than the “c-prompt” that used to greet users when they logged in to their home computer. (If you are old enough to remember c:\, then you know first-hand how Macs didn’t just “think different” but were different.) That was the Apple that Steve Jobs ran.

Enter Bruce Springsteen. I recently joined 50,000 fellow fans for a concert at Nationals Park. I will admit to being at best a casual follower of his music, yet I have never seen such a connection between an artist and a crowd. You know that feeling when you come into a room and you can feel that everyone knows each other and likes one another? It was like that. Close, intimate and connected.

Struck by this experience, I did a bit of digging, and found that stories of personal connection between the 66-year-old and his fans are many. A fan dressed as Elvis coming up on stage and joining the band with Springsteen singing backup. Someone seated in the upper decks suddenly finding himself in the first row through two free tickets from The Boss. Fans with signs asking for Springsteen to play their favorite song and him using their request as a playlist.
I see similarities in Apple’s history and Springsteen’s concert.

It’s all about empathy. Apple and Springsteen put themselves…

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“The world is going to go to self-driving and autonomous,” says Uber Chief Executive Travis Kalancik, noting that if Uber didn’t lead that trend “the future passes us by basically, in a very expeditious and efficient way.” As if glancing into the rear view mirror to make sure no one was gaining on it, Uber promptly introduced the first autonomous cars into its Pittsburgh fleet and purchased a self-driving truck start-up.

Meanwhile, Ford Motor Co. announced its intention to produce autonomous cars without pedals and steering wheels by 2021.

Collectively, these statements and actions led me to ask – why is there an implicit assumption that the technological change of autonomy is inevitable? And, if its adoption is inevitable, shouldn’t we also be addressing the inevitable challenges that will result from its widespread adoption?

Technology blinds us into having a belief in its inevitability — we get so caught up in the coolness of it all. Or, perhaps the progress is a reflection of a freely moving, creative society.

In our excitement about technological advances, we often leave ourselves short on thinking through its implications.

The most obvious question raised by widespread adoption of autonomous technologies is the effect on employment. At the very same time it’s running compelling national TV ads to attract human drivers, Uber is planning those drivers’ technological replacement. A trucking company that uses the autonomous technology just acquired by Uber may become more efficient, but it will also displace truck drivers, one of the largest remaining high-paying jobs available without a technical education.

What role will humans play in autonomous transportation businesses? Will they become minimum wage-earning night watchmen, sitting in a truck cab while the truck itself drives 20 hours a day? Will there still be a need for a “driver” in an autonomous taxi to make sure that they are kept clean and undamaged?

Another question relates to how we will live in harmony with autonomous transportation technologies. Consider the underlying assumption that autonomous cars will be safer and cut down on traffic. Yes, autonomous cars will likely be able to travel more closely together, thereby cutting down on the stop-and-start driving that creates a traffic jams. And the safety expectation is based on the simple reality that humans are often really bad drivers. Those assumptions make technical sense.

However, how will autonomous cars and human drivers co-exist on our highways? Will we outlaw cars driven by humans? Set up special lanes for autonomous cars? Or, just accept the inevitable free-for-all that will undoubtedly occur? The next time someone cuts you off on the Capital Beltway while texting and drinking coffee, consider how computer software might address this moment.

Finally, consider the issue of legal liability for…

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More and more people agree: cybersecurity is in our region’s DNA and can continue to be a boom for greater Washington.

But venture capital is pivotal in providing the accelerant for rapid growth of technology companies, and it I fear that the lack of sufficient risk capital is strangling some promising startups.

Overall, the greater Washington region is the eighth-largest venture capital market in the country. For 2015, approximately $1.4 billion of venture capital was invested here.

This capital was provided by 351 investment firms and of those, 252 were from outside of our region — with the remaining 45 indigenous to our market, according to Pitchbook, a well-respected source of market data.

Turning more narrowly to software, approximately $700 million in venture capital was invested in 2015. The most active software investors were

a blend of angel groups (NextGen Angels, Blu Ventures and Baltimore Angels), government funders (Virginia’s Center for Innovative Technology and Maryland Technology Development Corp), and institutional venture investors (Grotech and New Enterprise Associates). Not surprisingly, deal frequency tended to highlight angel groups, due to their role as often providing seed capital to new businesses.

The two most active early-stage investors in software are very different in their funding and approach. Virginia’s CIT is a state-funded activity that makes seed investments, operates an accelerator program — Mach37 — and has a technology commercialization fund to jump start new companies. Blu Ventures is a group of highly experienced entrepreneurs using their own money to invest and play a hands-on role with companies where their operational expertise will be meaningful.

Narrowing the focus to cybersecurity start-up funding reveals some interesting data.

In our region approximately $430 million in cybersecurity software venture capital deals took place in 2015 — roughly a third of all venture capital funding.

Although the absolute number of cybersecurity venture investing appears to be a large percentage of overall software investing, one deal (Tenable Network Security) was $250 million of that amount. The remaining $170 million was spread through 24 deals. Pin those deals on a map of our region, and the clusters become obvious: substantially all of the transactions were among companies located in Northern Virginia, Baltimore and Howard County.

Apparently, venture capital firms are making…

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