Applying Lean Startup in an Enterprise with Steve Sanderson

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I had the pleasure of hearing Steve Sanderson speak at the Austin Lean Startup Circle last night.  Although I’m a big fan of the Lean Startup, with a working wife and two little kids it’s rare that I prioritize a Meetup over some family time before the kids go to bed.  But I really wanted to hear what Steve had to say about applying lean startup methodology at Rackspace.

If you don’t know Steve, he was VP of Product at a couple of companies, most recently Food on the Table, and was featured in the Lean Startup book and on Eric Ries’ blog.  A little less than a year ago he made the switch to Rackspace to be their Resident Lean Startup Expert.  I was curious to know what that meant and any challenges he faced.  There aren’t a ton of people working to apply these principles in a larger enterprise and since I’ve now had the opportunity to run a innovation lab at two medium-sized companies (Bazaarvoice and Indeed) I want to see how other people view the challenges.

I loved how he started by pointing out that there are a couple of different contexts for applying these principles, and he ordered them from easiest to hardest:

  1. A Startup.  Easiest because there are fewer people, there are no products already operating at scale.  There is no revenue and brand to protect.
  2. A Innovation Lab inside an Existing Organization.  Harder than a startup (there is revenue and brand to protect), but you only need to persuade and convince a limited number of people, and protect them from the rest of the organization.
  3. Existing Teams inside an Existing Organization.  Hardest.  There are existing products running at scale.  There is revenue and brand to protect.  There are a lot of stakeholders to get onboard.

I appreciate that Steve was drawn to Rackspace to pursue the hardest challenge – working on the organizational change required to make these principles part of the product culture in an existing organization.

Steve started with some tips for effective organizational change.  Things like:

  • Have an internal sponsor / partner
  • Establish relationships (He used the expression build rapport, and talked about interviewing people – my preference to accomplish this is to take people to lunch).
  • Understand where value is created and exchanged, internally and externally
  • Take a step back from the acute symptoms and look at the big picture
  • Start small, and build upon wins
  • Use evidence that these principles work, rather than words to persuade
  • Be accountable for these changes

When he mentioned the need to protect the brand and revenue I suspected he was a fan of Marty Cagan, and he confirmed this later in his talk.

I had a chance to ask a couple of questions, but I still would love to know how he feels about the challenges of implementing dual-track agile, which is really necessary to get lean-principles running in a team that is also responsible for operating one or more products/features at scale.  Since Steve is based here in Austin I’m going to see if I can chat with him further to go into more detail about this.  I will be sure to share what I discover.

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JPMorgan Chase to set up an Innovation Lab

I noticed a new job announcement this morning from JPMorgan Chase seeking a Head of Chase Labs:

The Head of Chase Labs will lead a new team focussed on digital product innovation across banking, credit and consumer payment product groups. This team will operate within the overarching product and business strategies, and will drive new digital product and service development that will enhance the Consumer and Community Banking proposition and drive the P&L.

The responsibilities of the role look pretty interesting:

  1. Create new payment products in line with the company strategy.
  2. Do market research, and lead the innovation team through rapid prototyping and validation (customer-centric approach).
  3. Manage the innovation process and pipeline.
  4. Collaborate with others in the payments and commerce ecosystem (companies, startups, and VCs).

Chase is a little late to the innovation labs game.  In the financial space there are already some great labs up and running:

Capital One Labs

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Capital One Labs has sites in Washington DC, New York and San Francisco.  They run an API and a developer portal encouraging third-parties to build on their platform.  They’re big fans of the Lean Startup philosophy (hosting the Sept DC Lean Startup meetup), and sponsors of the Launch series of hackathons.  They’re also hiring (developers, product managers and more).

Mastercard Labs

 

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Mastercard Labs have been running since 2011.  They have sites in existing MasterCard facilities in Singapore, Dublin, Purchase (N.Y.), and St. Louis.  They don’t seem to have an online presence, but they mention their focus is mobile, e-commerce, and person to person payments.  Some of their projects are Simplify Commerce, and QkR.

Intuit Labs

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Intuit Labs has been around for a while and really sets the standard for excellence.  They have a ton of projects already under their belt:

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It also looks like Visa is setting up a lab.   Lean Startup has taken over the consumer/financial space!

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People Lab: The Next New Thing in HR

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A while back Nordstrom Innovation Lab posted a great video of the team working inside a Nordstrom store to rapidly prototype and iterate on a iPad app for sunglass shopping:

When I went back to re-watch recently I noticed an interesting thing on their website:

Interested in checking out our new People Lab? Apply here.

This instantly reminded me of Google’s People & Innovation Lab (if you haven’t heard of it, here’s a good intro).  My guess is that the good people at Nordstrom were inspired by Google’s PiLab.  Here’s Nordstrom’s description:

This is a dedicated, full time team that will focus on learning, coaching, experimenting and designing tools, resources and workshops. Our primary role is to bring a data driven, human centered, innovative lens to our People, Culture and Leadership practices. This includes everything from supporting teams that are redesigning our Recognition program and Hiring/Onboarding Processes, to designing resources for teams and leaders, to collecting and visualizing data and metrics about our culture and people, and running Innovation Bootcamps, Design Thinking Workshops, and other coaching.

And here’s a description of Google’s PiLab:

The PiLab plays the unusual role of conducting applied research and development within People Operations, Google’s version of Human Resources. Doing R&D in HR isn’t a particularly common practice, but when your employees build virtual tours of the Amazon and tools to translate between 60+ languages, you need creative ways to think about productivity, performance, and employee development. The PiLab’s collection of industrial & organizational psychologists, decision scientists, and organizational sociologists have as their mission to conduct innovative research that transforms organizational practice within Google and beyond.

Google’s PiLab did the analytical work on management that resulted in the Project Oxygen results.

A look around the Nordstrom People Lab website reveals some awesome content:

  • The Nordstrom Labs Hiring Handbook.  I sent it to my team at Indeed Labs because it really resonated with our approach.
  • Details on the upcoming Nordstrom Innovation Bootcamp.  “Innovation Bootcamp is designed to be a fast paced, experiential introduction to tools, mindsets and techniques for conducting customer ethnography, brainstorming ideas, and rapidly prototyping ideas in order to test them.”  The suggested reading list (below) is awesome.
  • Moodometer.  A pilot app for measuring the mood of employees.  Screen Shot 2014-02-10 at 9.37.54 AM

I look forward to seeing more great stuff on innovation from both labs at Nordstrom!


Nordstrom Bootcamp Suggested Items to Read/Watch


p.s. If you’re interested in knowing what ultimately happened to that Nordstrom iPad app, Josh Seiden followed up with them and wrote about it.  There’s also a great talk here by the one of the Nordstrom Innovation Labs members Jeremy Lightsmith (slides/PDF).

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Kauffman Foundation joins the Lean Startup Movement

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The venerable Kauffman Foundation has jumped on the Lean Startup bandwagon.  They just launched the Kauffman Founders School, “an online educational resource dedicated to entrepreneurship.”

The school is organized as a series of topics, each presented by an expert in a handful of short videos.  First topic is Startups, presented by Steve Blank.  If you’ve already seen a talk by Steve then you won’t find much that’s new here – except that the presentation is more polished.

Since I love what Steve has to say, I had high hopes for the rest of the series.  The second topic is Founder’s Dilemmas by Noah Wasserman, HBS professor and author of The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup.  I haven’t read his book and personally, I find the short-clip format to be distracting.  The videos in this topic are selected sections of  Noah’s speaking to his HBS classes.  Unfortunately it comes off as a teaser or trailer for some other video that has the real content. 

Fortunately the rest of the topics contain well-produced videos – each with an important point or insight, and I would recommend them for new founders.

And two more topics coming soon:

  • Surviving the Entrepreneurial Life
  • The Lean Approach
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Bill Gates: 3 Myths That Block Progress for the Poor

If you haven’t already read the 2014 Gates Annual Letter: 3 Myths That Block Progress for the Poor, go do so now.  It’s probably one of the more important things you’ll read all year.

Here are some highlights:

Myth 1: Poor Countries are doomed to stay poor

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The global picture of poverty has been completely redrawn in my lifetime. Per-person incomes in Turkey and Chile are where the United States level was in 1960. Malaysia is nearly there, as is Gabon. And that no-man’s-land between rich and poor countries has been filled in by China, India, Brazil, and others. Since 1960, China’s real income per person has gone up eightfold. India’s has quadrupled, Brazil’s has almost quintupled, and the small country of Botswana, with shrewd management of its mineral resources, has seen a thirty-fold increase.

I am optimistic enough about this that I am willing to make a prediction. By 2035, there will be almost no poor countries left in the world. (I mean by our current definition of poor.)2 Almost all countries will be what we now call lower-middle income or richer. Countries will learn from their most productive neighbors and benefit from innovations like new vaccines, better seeds, and the digital revolution. Their labor forces, buoyed by expanded education, will attract new investments.

Health aid is a phenomenal investment. When I look at how many fewer children are dying than 30 years ago, and how many people are living longer and healthier lives, I get quite optimistic about the future. The foundation worked with a group of eminent economists and global health experts to look at what’s possible in the years ahead. As they wrote last month in the medical journal The Lancet, with the right investments and changes in policies, by 2035, every country will have child-mortality rates that are as low as the rate in America or the U.K. in 1980.

Myth 2: Foreign Aid is a Big Waste

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Many people think that development aid is a large part of rich countries’ budgets, which would mean a lot can be saved by cutting back. When pollsters ask Americans what share of the budget goes to aid, the average response is “25 percent.” When asked how much the government should spend, people tend to say “10 percent.” I suspect you would get similar results in the United Kingdom, Germany, and elsewhere.

Here are the actual numbers. For Norway, the most generous nation in the world, it’s less than 3 percent. For the United States, it’s less than 1 percent.

You may have heard about a scandal in Cambodia last year involving a bed net program run by The Global Fund to Fight AIDS, Tuberculosis and Malaria. Cambodian officials were caught taking six-figure kickbacks from contractors. Editorial writers trotted out headlines like “How to waste foreign aid money.” One article mentioned me as someone whose money was being wasted.

But the press didn’t uncover this scheme. The Global Fund did, during an internal audit. In finding and fixing the problem, The Global Fund did exactly what it should be doing. It would be odd to demand that they root out corruption and then punish them for tracking down the small percentage that gets misused.

There is a double standard at work here. I’ve heard people calling on the government to shut down some aid program if one dollar of corruption is found. On the other hand, four of the past seven governors of Illinois have gone to prison for corruption, and to my knowledge no one has demanded that Illinois schools be shut down or its highways closed.

Here is a quick list of former major recipients that have grown so much that they receive hardly any aid today: Botswana, Morocco, Brazil, Mexico, Chile, Costa Rica, Peru, Thailand, Mauritius, Singapore, and Malaysia. South Korea received enormous amounts of aid after the Korean War, and is now a net donor. China is also a net aid donor and funds a lot of science to help developing countries. India receives 0.09 percent of its GDP in aid, down from 1 percent in 1991.

Myth 3: Saving lives leads to overpopulation

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When children survive in greater numbers, parents decide to have smaller families. Consider Thailand. Around 1960, child mortality started going down. Then, around 1970, after the government invested in a strong family planning program, birth rates started to drop. In the course of just two decades, Thai women went from having an average of six children to an average of two. Today, child mortality in Thailand is almost as low as it is in the United States, and Thai women have an average of 1.6 children.

The planet does not thrive when the sickest are allowed to die off, but rather when they are able to improve their lives. Human beings are not machines. We don’t reproduce mindlessly. We make decisions based on the circumstances we face.

Great job Mr and Mrs Gates on doing the hard to work to improve lives around the world, and doing important work to dispel all-to-common myths.

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The Art of Innovation

Ever wonder who is really good at Innovation?  Clearly Apple comes to mind.  But what about when Apple goes looking for a little help?

If you have a problem, if no one else can help, and if you can find them, maybe you can hire IDEO

IDEO is the small silicon valley design firm that Steve Jobs and other corporate leaders turn to when they’ve got a tricky project (such as the first Apple mouse).

Since they do their work on behalf of other customers most people have never heard of IDEO, but for those with even a casual interest in product design, IDEO stands up there with Charles and Ray Eames as icons of design.

In 1999 ABC Nightline News aired an episode The Deep Dive, where they gave IDEO a simple design brief: redesign the grocery cart – in 5 days.  It’s a great watch:

More that 10 years ago Tom Kelley, general manager of design firm IDEO, inspired by the interest in the ABC Nightline special, wrote a book about IDEO, called The Art of Innovation.

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Even though its a bit dated (loaded with admiration for the Palm V PDA!) it’s an easy read and a book that I’m likely to use again as a reference.  I’m not going to write up a summary – if you want one I would suggest this one by Gary Natriello at Columbia University.

Readers walk away from great business books with some new ideas to try out right away – and this is no exception.  For me the advice about running a great brainstorm and the exhortation to get out of the building and observe people (“Innovation begins with an eye”) touched a nerve and were worth the price of admission.  This is also one of the few books I’ll be returning to occasionally to improve the culture of creativity and innovation where I work.  I would highly recommend it for those interested in new product innovation.

As someone from a very technical background (Math and Computer Programming) I was pleased to discover that Tom has a new book dedicated to bringing out the creative side in all of us – Creative Confidence.  I look forward to reading it in the coming weeks.

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The Future of Commerce

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“Online commerce currently accounts for only about 6 percent of all commerce in the United States. We still buy more than 90 percent of everything we purchase offline, often by handing over money or swiping a credit card in exchange for the goods we want.”

Last Week The New York Times wrote a great piece about EBay, Amazon and the future of commerce: EBay’s Strategy for Taking on Amazon.  It provides a good tour of the current state of online vs traditional commerce and the approaches that different players (Walmart, Amazon, EBay, etc) are taking.

The most interesting question for me is whether traditional brick-and-mortar companies can capitalize on their existing local infrastructure in two ways:

  1. Provide buyers a nearby physical location to view and purchase an item right now.
  2. Provide buyers the ability to order an item online an receive it in a couple of hours.

Both of these satisfy an immediacy that consumers are willing to pay a premium for.  Many retailers (online and offline) are trying to cater to these desires:

“In select cities, eBay has also recently introduced eBay Now, an app that allows you to order goods from participating local vendors and have them delivered to your door in about an hour for a $5 fee. The company is betting its future on the idea that its interactive technology can turn shopping into a kind of entertainment, or at least make commerce something more than simply working through price-plus-shipping calculations. If eBay can get enough people into Dick’s Sporting Goods to try out a new set of golf clubs and then get them to buy those clubs in the store, instead of from Amazon, there’s a business model there.”

Just this morning I reserved online and visited my local Barnes and Noble because I decided I wanted “The Launch Pad” and I was willing to pay $16 instead of $11.99 for the privilege of starting the book today.  There’s a ton of consumer surplus in the value of books, and if a retailer want to capture a little bit more of it and satisfy my desire for immediate gratification – power to them!

 

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Why People Hate New Ideas

“Don’t worry about people stealing your ideas.  If they’re any good you’ll have to ram them down people’s throats”  – Howard Aiken

There are many bad reasons why people hate new ideas – and a few good ones.  Scott Berkun explores both in his book The Myths of Innovation.

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In the chapter “People love new ideas” (note the irony), Berkun exposes the myth that good ideas are recognized and supported early on.  The reality is quite the opposite.  When Alexander Graham Bell showed Western Union (which operated a national network of telegraph cables) his telephone prototype, they kindly showed him the door.  Why?  Because businesses are made up of people, and people have a lot vested in the preservation and extension of the status quo:

“It’s both a psychological and economic phenomenon: as people and companies age, they have more to lose. They’re not willing to spend years chasing dreams or to endanger what they’ve worked so hard to build.  Attitudes focused on security, risk aversion, and optimization of the status quo eventually become dominant positions.   […]   Having succeeded, their strongest desire is not to find new ideas to conquer, but to protect the success they’ve already earned.”

Clayton Christensen explored the concept in his bestseller The Innovator’s Dilemma.  As a result of that book there’s a general awareness of the tendency, and many modern enterprises organize themselves against it.  For example, Facebook has posters and stickers on their campus stating “This Journey is 1% Finished”, and they purposefully have concrete floors to preserve that sense of openness to the next big thing for them.

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The better reason why new ideas are often rejected is because it’s hard to know what’s a good idea early on.  The only way to separate the good from the bad is through experience and real validation.  For example, in it’s infancy Google tried to sell itself to Excite for a mere $1M.  That because they thought they had a better way to rank websites, but they hadn’t realized that the best search engine would know the most about what people were looking for (aka intent), and that they could grow a money tree by auctioning off that information (Adwords).  Similarly Steve Jobs and Steve Wozniak tried to sell their early Apple computer designs to HP and Atari.  They knew the designs were good, but they didn’t know how good.

“New ideas demand new perspectives, and it takes time to understand, much less judge, a point of view.”

In the modern era, where new value is being created tackling unrealized needs instead of unmet needs, the only way to know if an idea is good is through real validation.  This is the driving force behind the rise of the Lean Startup movement and it’s emphasis on prototyping, and real customer feedback.

Which leaves us with the final challenge: how to know if a new idea is any good?

My current feeling is to stop talking about ideas.  They’re too vacuous.  I don’t want ideas.  I do want identified problems that real people have.  Bring me stories of customers with real problems.  And bring me prototypes of solutions that have been put in front of these customers.   Then, together, we can start to validate if they’re any good.

 

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Revealed: The 4 Reasons Amazon Web Services Got Approved

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In the summer of 2003 Amazon was a fast-growing online bookstore.  Nine years old, it had pioneered many innovative components of e-commerce that we take for granted today: customer reviews, a personalized shopping experience, relevant product recommendations, and frictionless buying.

Jeff Bezos had founded the company in 1994 and began selling books online.  His advantage, he thought, was that he could sell a bigger selection of books than any traditional book store (or chain).  And right from the start he committed to outstanding customer service. Amazon’s mission is “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.”

Which is why it wasn’t an easy decision in the summer of 2003 to hire a team of 50 or so engineers, and set them upon the task of build “the operating system of the internet,” as Andy Jassy, Sr Vice President of Amazon Web Services, likes to call it.

In this revealing interview at Harvard’s Innovation Lab, Jassy lays out the four reasons Amazon recognized and ultimately decided to pursue this opportunity:

The Leadership team took an assessment of its assets:

“We were doing an assessment ourselves, as a senior leadership team, about what Amazon was really good at.  And initially you can imagine what we were talking about: we were good at retail, we were good at detail pages on our retail site website – all the things that were the primary business at the time.  But as we dug deeper we realized we were really good at running these infrastructure services deep in the stack, and then we were also good at running these reliable, scalable, cost-effective data-centers.  So the first realization we had was that we had a real core competence running infrastructure.”

They had committed to loose-coupling and autonomy beforehand:

“We really got religion in the company about building in a services oriented architectures fashion – very loosely coupled.  It really permeated all the teams such that we had goals for the teams that they had to have well-documented APIs that were hardened so that each of the internal teams inside Amazon could use those respective services to build applications – that was a real cultural shift.”

They recognized that other developers and companies likely shared their challenges:

“When I would talk to our product development leaders they’d say ‘Look I know you guys think these projects should take 2 or 3 months end-to-end, but I’m spending 2-3 months just on the storage solution, or just on the database solution, or just on the compute solution.’  And what they were building didn’t scale beyond their own project, and they knew that multiple people on other projects were building the same thing.  And that was a very interesting realization for us that there was all the reinvention of the wheel inside Amazon – there was this real thirst for infrastructure services.   I think if we had never built AWS and opened it externally, we would have build all these services just for Amazon the retailer to move more quickly.”

They experienced and recognized the power of APIs:

“We have this associates business which allows third-party websites to merchandize Amazon retail products […] and that team was trying to figure out how to be more ubiquitous across the million associate websites.  They tried several tests, and one of the tests they tried was they took all the product data – title, pricing, availability, etc – they put all of that in an API.  They though if they could decouple the data from the presentation that associates would do more with the data than we had time to or could think of.  And that led to much better conversion for those that used it.  But what really surprised us was: with no promotion, thousand and thousand of developers flocked to these APIs.  And they used them for things we didn’t necessarily anticipate them using them for.  And they asked us to open up all kinds of parts of our platform that we hadn’t really contemplated.”

Putting this all together, the Amazon leadership team recognized that “if developers at businesses will build application from scratch on top of these Web Services (which people called the cloud now) then the operating system becomes the Internet – which was a really different model then before.”   Fortunately for Amazon, when they looked to see if any of the key components of this Internet operating system were already built, they didn’t find them.  They felt like they were sitting on a secret:

“We realized we could contribute many of the pieces of the internet operating system.  We decided to pursue this much-broader mission which was to enable developers and businesses to be able to use these web services to build any sophisticated, scalable application they wanted.”

Jassy asked Bezos for a team of 57 people to start building AWS.  They said yes.  The team formed in South Africa and started building the cloud:  EC2 for computing, S3 for storage.  The rest is history.

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Recommended Reading: The Log, what every software engineer should know

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Today I found this absolutely superb article on distributed systems and the central role of the log:  The Log: What every software engineer should know about real-time data’s unifying abstraction

It’s a technical-but-readable exploration of the role of the humble log in databases and distributed systems.  The article lives up to it’s title and I think every software engineer dealing with scale and distributed data should read it.  The author, Jay Kreps, has accurately and insightfully framed what’s currently going in the world of distributed systems:

You can’t fully understand databases, NoSQL stores, key value stores, replication, paxos, hadoop, version control, or almost any software system without understanding logs; and yet, most software engineers are not familiar with them. I’d like to change that. In this post, I’ll walk you through everything you need to know about logs, including what is log and how to use logs for data integration, real time processing, and system building.

This is such an exciting time for applied distributed-systems engineering because more and more companies are reaching global scale (100s of millions of users, billions of daily events, etc).

We were certainly grappling with these issues at Bazaarvoice (see my colleague Victor Trac’s recent post at High Scalability: Evolution Of Bazaarvoice’s Architecture To 500M Unique Users Per Month).  It’s interesting that so many companies seem to have settled on a databus architecture, with a variety of sources and consumers; and that different views (or indexes) are built using domain-appropriate technology (e.g. ElasticSearch for text-search, Cassandra for aggregation, etc) by each watching the bus.  As Jay Kreps writes:

Maybe if you squint a bit, you can see the whole of your organization’s systems and data flows as a single distributed database. You can view all the individual query-oriented systems (Redis, SOLR, Hive tables, and so on) as just particular indexes on your data. You can view the stream processing systems like Storm or Samza as just a very well-developed trigger and view materialization mechanism. Classical database people, I have noticed, like this view very much because it finally explains to them what on earth people are doing with all these different data systems—they are just different index types!

A big, ambitious piece of writing – props to Mr Kreps and the LinkedIn engineering org for sharing.

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