Data Sheet—Monday, November 24, 2014

Good morning from rainy New Jersey. Proposed regulations for commercial drones are coming soon, and they’re more restrictive than hoped. Plus, security experts don’t know who unleashed a new strain of spyware that tracks online movements, while retailers think the banks and credit-card issuers should share the bill to make point-of-sale systems safer from future data breaches.

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Can I see your unmanned aerial vehicle license? New rules from the Federal Aviation Administration are forthcoming by the end of the year. Covering technology weighing less than 55 pounds, the policy will require commercial drone operators to have a pilot license plus flights will be limited to daylight hours, reports the Wall Street Journal. That's not likely to sit well with entrepreneurs who want to use the technology more widely for applications in agriculture, filmmaking, and site exploration.

It takes a team to plan a breakup. Hewlett-Packard has shuffled several high-level executives to orchestrate its split, according to a memo obtained by Bloomberg. The reorganization includes moving executive vice president Bill Veghte out of his current role as general manager to lead strategy development for the new HP Enterprise. By the way, HP's fourth-quarter earnings call is scheduled for after market close on Tuesday, Nov. 25.

Change afoot for Samsung Electronics. Speaking of reorgs, it sounds like the struggling smartphone maker is about to replace its top mobile executive, J.K. Shin, with the person heading its smart, connected home technologies, B.K. Yoon. That would leave it with "just" two co-CEOs. WSJ

Under surveillance. Security experts are puzzling over the potential origins of Regin, a strain of spyware collecting data about "individuals of interest" in the hospitality, research and airline industries. The technology can seize remote control of a person's computer and even recover deleted files. The emerging consensus is that the malware was unleashed by a government. Fortune

New page in Apple e-book saga. A federal judge has greenlighted a proposed $450 million payout to settle allegations that Apple conspired with five publishers to fix e-book pricing. There's still an appeal pending on Dec. 15 that could reduce that amount. Gigaom

Agency won't rush net neutrality ruling. Federal Communications Commission Tom Wheeler expects lawsuits regardless of the policy that the agency adopts regulating high-speed Internet access. So the FCC is being extra-methodical about weighing "sustainable rules." A decision is expected next year. New York Times

Banks should share responsibility for data breaches. With retailers under siege by cybercriminals, National Retail Federation CEO Matt Shay thinks credit-card and payment companies should help pay for stronger security measures. He notes: "It's our view that the card companies and the companies that issue cards should have primary responsibility for protecting that piece of the payments system. Those are their cards." Target has been sued by five banks seeking tens of millions of dollars in damages related to its breach last year. Fortune, Bloomberg

POLICY & STRATEGY

Social media and free speech. When does a threat posted on Facebook, Twitter, YouTube, or any other social network become a "real" threat—one worthy of investigation, if not prosecution? Next week, the Supreme Court will hear arguments that could set cleared policies about how law-enforcement agencies can handle threatening posts and comments. WSJ

STARTUPS & DISRUPTORS

Tell-tale IPO in store? Sources suggest that Jasper Technologies—which makes technology that helps cars, manufacturing equipment, and other "things" share data on the Internet—is working with Morgan Stanley, Goldman Sachs Group, and Deutsche Bank AG on a $150 million initial public offering. Customers include Heineken (which uses the software to monitor kegs.) WSJ

An acquisition, in 3D. Printer maker 3D Systems Corp. is paying about $97 million for Cimatron, which makes related computer-aided design software for manufacturing applications.

MY FORTUNE.COM BOOKMARKS

Why tech's gender gap isn't just a pay gap By Telle Whitney

Up all night with bitcoin hackers By Robert Hackett

The silver unicorn lining of Fab's dark cloud By Dan Primack

What's behind Target's new openness By Jennifer Reingold

How online pharmacy spammer organizations really work By Robert Hackett

DESIGN MORE RELIABLE LITMUS TESTS

Pilot tests of new merchandising concepts or new product designs are standard fare for most successful retailers and consumer goods companies. Still, interpreting the rich data surfaced by those initiatives remains a highly subjective affair.

"It matters if Bill or Betty does your analysis. You don't have an analysis, you have an opinion," said Jim Manzi, founder and chairman of Applied Predictive Technologies (APT), a company focused on making the process of business experimentation far regimented. (A mathematician by training, Manzi bears no relation to the former CEO of personal computer software pioneer Lotus Development who shares his name.)

"Every company that we visit is experimenting in terms of trying new things," he said. "What they lack is the capacity to design and read these experiments reliably."

APT's software and testing methodology helps companies set more rigorous parameters around business experiments. It use existing transaction data to pick better control groups, pinpoint the variables that should be examined, and (eventually) interpret the results. It's clients include 100 of the world's biggest consumer brands including Anheuser-Busch InBev, Coca-Cola, McDonald's, Procter & Gamble, Starbucks, Target, and Walmart. APT's access to 20% of all retail transaction in the United States (aggregated anonymously) helps inform decisions.

Manzi's philosophy is detailed in a December article published by the Harvard Business Review ("The Discipline of Business Experimentation"), which he co-authored with Harvard professor Stefan Thomke.

They cite the successful example of Kohl's, which used the ideas behind APT's approach to test the impact of adding furniture to its product mix through a pilot in 70 locations. The reasonable thesis: these big-ticket goods would significantly increase sales. To the retailer's surprise, the results actually showed a net decrease for the stores—mainly because lots of other items were displaced to make room.

"The Kohl's example highlights the fact that experiments are often needed to perform objective assessments of initiatives backed by people with organization cloud," Thomke and Manzi write. "Of course, there might be good reasons for rolling out an initiative even when the anticipated benefits are not supported by the data—for example, a program that experiments have show will not substantially boost sales might still be necessary to build customer loyalty."

Manzi declined to discuss pricing for APT's software and services. APT's lead investor is Accel-KKR, but the 15-year-old company's approach last year also attracted a $100 million minority investment from the merchant banking division of Goldman Sachs.

Noted managing director Joe DiSabato at the time of the investment: "APT is a rare innovator, with multiple patented and commercially proven approaches for truly leveraging big data to generate shareholder value. The collection of talent at APT representing deep data science, advanced math and computer science is delivering that opportunity to customers every day, driving tremendous value."

FOR YOUR INNER TECHNOPHILE

NYC swaps pay-phone booths for Wi-Fi kiosks. Free high-speed wireless access in hundreds of locations isn't expected to boost municipal taxes. Instead, it will be paid for by digital advertisements coordinated by LinkNYC and displayed on tall pylons on city streets. Wired

ONE MORE THING

Barcodes are so passé. Fujitsu Laboratories is experimenting with a new-fangled labeling approach that combines LED lighting and smartphone cameras. You point your camera at the object in question—anything from a consumer product to a museum exhibit—to retrieve more information from a cloud-based service. IDG News Service