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Eight Predictions

I've had some very thoughtful responses to the Macro Issues
newsletter, and I'll bring those into an upcoming edition. Because
January has already rolled around, however, it's time for some
polishing of the crystal ball. I'll repeat the fact, true since the
newsletter started in 1997, that I hold no direct financial positions
in any of the companies mentioned.

1) The second half of the year will be stronger than the first half in
the PC sector

Dell has been running uncharacteristically behind projections and
targets, as has Intel. My guess (and it's nothing more than a guess)
is that enterprise IT shops are holding off buying PCs until Microsoft
ships Vista: why would you want to deploy thousands of boxes in
February only to have to upgrade them less than a year later?
Microsoft, meanwhile, is ramping up the machine for its most highly
publicized and marketed product launch ever.

2) "Services" will become the corporate IT buzzword outside IT

Services-oriented architectures, or SOAs, have soared in recognition
in the past 18 months, and vendors are responding: you can see the
term on Oracle's and BEA's front web pages, and extensive marketing
support is showing up at HP, IBM, and SAP. Two questions should be
kept in mind: 1) As one senior architect at a Fortune 50 company told
me, "If SOA is the answer, what was the question?"

2) I defy anyone who's touting SOA to name the architecture it's replacing.

3) Google will launch a breakthrough business outside web advertising

The stock price contains lots of speculation that the company will
reinvent another market, and downward pressure on that price along
with increasing competition will perhaps accelerate the entry into the
data center, Internet telephony, network computer, or other adjoining
space. To hedge my prediction, the breakthrough new application may
still be in public beta as of December 31.

4) HDTV will have collateral effects

After at least two decades of being a commodity item eclipsed in
allure and economic power by the PC, the television is returning to
primacy as a driving economic force. (To be fair, HDTV is in some
ways a hybrid of computing and video display if you consider how much
processing power is required for smoothing algorithms, for example, or
how important computer memory is for the base technology.) Cable TV
coax, for example, can't support as many HD streams into a residence
as fiber can. Demand for those streams will somehow benefit
fiber-focused companies, like Verizon and SBC/AT&T. Similarly, demand
for HD-caliber content will force the Blu-Ray and HD DVD camps to
reconcile. Finally, demand for flat-panel HD displays is driving a
rapid increase in price-performance relationships, favoring efficient
companies like Samsung over rivals with less disciplined supply chains
and slower new product development.

5) The relentless reinvention of business markets by the Internet and
digitization will continue

Here's a top-of-mind list of businesses that have had their economics
radically altered thus far:
-travel agents, hotels, and airlines
-record labels and music distribution
-newspapers
-computer programming
-dating and matchmaking
-telephony
-photography
-computer and network hardware
-video rentals
-advertising
-retail
-government services such as motor vehicle registration, unemployment compensation, or the mails
-electoral politics
-secondary markets like garage sales, auctions, antique dealers, classified ads, and flea markets

That's a lot of change in a decade.

Who might be next? Television is my best guess, given the presence of
Apple (iPod video purchases), Microsoft, Google, Yahoo, Cisco (with
its newly-purchased set-top box business), and AOL/Time Warner along
with the RBOCs: that's a lot of intellectual and financial capital
being focused on a mature industry that is becoming more digital every
day. Automobile manufacturers and dealerships, health care, and
education are further down the list of potential breakthroughs.

6) The quiet march of robot progress will continue

iRobot now has two consumer offerings, a vacuum cleaner and
floor-mopper, to go with their four publicly announced military and
commercial products; the company sold almost $100 million worth of
products last year. Stanford and Carnegie Mellon both enjoyed
spectacular success at the 2005 DARPA Grand Challenge: a year after
every vehicle in the field failed, some literally crashing and
burning, five driverless entries completed a 132-mile off-road path.
Countless industrial tasks are accomplished robotically with products
from companies including ABB, Epson, Fanuc, and Panasonic. The fact
that much of this innovation happens away from public relations firms
and tradeshows like CES means that it's hard to get an intuitive feel
for what's happening below the radar.

7) Sensors and other location-awareness technologies will make the
news for an unexpected consequence

In 12 years, the EZ Pass electronic toll collection system expanded
beyond New York, New Jersey, and Pennsylvania to reach from Maine to
Virginia and as far west as Illinois. Such systems can facilitate
other objectives as well as increasing traffic flow: variable road
pricing (as is the case in London and elsewhere), crime-solving, and
payment tokens. RFID tags are used by horse breeders (and have been
for roughly the past 25 years), wildlife biologists, and supply chain
managers. Cell phones can be both bar code readers (in Japan and
probably elsewhere) as well as beacons. Sensor communications are
becoming standardized, as with the ZigBee protocol for building
automation and other tasks. The bottom line is that a system designed
to do one thing will be manipulated to do something markedly
different, and the side effect will be newsworthy.

Cell phone providers, for example, know how fast traffic is moving
because of how fast their subscribers change cells. Will they sell
that information to news radio stations whose helicopters can only
cover one road at a time? RFID tags in passports can be read from a
far enough distance that the design criteria were recently changed by
the US immigration authorities to include a metallic shield. If
sensors are embedded in humans for authentication and payment, as has
been suggested, will muggers kidnap people rather than demand their
wallets? Who has the authority to download OBD II sensor data from
automobiles, which can record how fast a vehicle was moving along with
other parameters? Can such data be subpoenaed in civil litigation?
If drivers don't want governments tracking their movement, it's often
harder to pay tolls with coins than use transponders - and even then,
the toll booths frequently record license plate numbers to catch
evaders. What are the actual costs and benefits of anonymity versus
facilitating tracking?

8) The developing world will once again make headlines for innovation
and not just cheaper production costs

Brazil is leading the world in some facets of cloning and alternative
energy development. China is developing a state-backed Linux
distribution. Korea leads the world in broadband deployment. The
Microsoft Developers Network has 6.5 million people in India, which is
second only to the U.S. What has been called the BRICK cluster -
Brazil, Russia, India, China, and Korea - is evolving extremely
rapidly, although the political instability of Russia is impeding its
progress as investors back away. Look for a major announcement from
one of the four remaining countries, potentially in biotech, optics
and displays, or networking.

--Dr. John Jordan
Founder, Still River Research and executive director of the eBusiness Research Center at Penn State University

Posted by John Jordan at 07:45 AM | TrackBack

January 2006: A Macro View

Before we get into the business of predicting what might happen in technology-related areas in 2006, I wanted to step back and note six macro-level factors that, if they break in a certain way, will make discussions about Google vs. Microsoft, cable vs. DSL, Intel vs. AMD, or Blu-Ray vs. HD DVD utterly irrelevant. The other factor here is timing: it's impossible to know when a hurricane, epidemic, or political uprising might hit, so these kinds of long-wave changes don't fit neatly into a chronological prediction. Nevertheless, all of them have the potential to rearrange the landscape of hundreds of millions of individuals.

Of the six macro trend areas, three are political, two are natural, and one straddles the line between the two.

-Two natural areas of potential disruption-

1) Climate change

Regardless of one's interpretations of various claims as to causation and severity, evidence for the existence of what's called "global warming" mounts yearly. Foreseeing the consequences is another matter. How much will coastlines be altered by rising water levels caused by melting polar ice? What will be the political and economic consequences of newly exposed mineral resources in the Arctic? Normally peaceful nations, including Canada and Denmark, are contesting several previously ice-bound islands and surrounding areas that could include such attractive resources as diamonds and oil; the former country recently staged military exercises in the region to bolster its presence.

Much was learned in the twentieth century about the interconnectedness of ecosystems, but the scale of those connections seems to be increasing as knowledge expands. Researchers at the Woods Hole Oceanographic Institute have hypothesized dramatic shifts in what they call the Atlantic Conveyor: a loop that begins with warm water flowing north along the eastern U.S. coastline, powered by equatorial warmth and related energy. After warming the Canadian Maritimes, the water flows toward Europe, then south toward the equator. During this stage, the cold, fresher water falls because it's heavier, further helping fuel currents.

Shifting the balance of fresh versus salt water at different places in the loop generates climate change, which changes what foods will grow where and how much heat is needed for the resident populations. (Migration patterns of butterflies, for example, are being found to be much more dynamic than previously thought as they discover newly hospitable habitats.) In the extreme case, currents could actually flip directions, as they have in the distant past. The climatic consequences of the Gulf stream's moving only slightly, or cooling by a few degrees -- as a result of melting ice caps -- involve not only hotter summers or fewer hard frosts in the winter (and a probable rise in mosquito-borne disease) but also, paradoxically, colder temperatures in parts of North America and/or Europe. And nobody knows yet if there's a connection between global warming and all those hurricanes.

2) Avian flu

Nature is at base a system of checks and balances: growth and decay, life and death, order and disorder all exist in dynamic tension. As some forms of disease like bacterial infection or smallpox come under attack from improved hygiene, medications, or new social practices, new ones emerge. (It was fascinating to hear President Bush supporting Intelligent Design in the same week he authorized a relatively aggressive government response to a disease that doesn't exist yet but will if a virus mutates in a certain way.)

No current adults in leadership positions have ever seen a pandemic. The last one was in 1918, and had the nasty trait of attacking people with the strongest immune systems in what is called a cytokine storm: People's faces turned purple and they coughed blood as their lungs were destroyed in 24 to 36 hours. Losing thousands or tens of thousands of prime-of-life adults would have unforeseeable psychological and economic effects this time around.

Here's a back-of-the-envelope estimate of how bad an H5N1 pandemic could be, courtesy of public-health expert Dr. Larry Brilliant via the Strategic News Service:
******
First, assume that over the three-year period that pandemics usually run their course, one-third of humanity contracted the disease (about the same proportion as the 1918 flu and the same order of magnitude as other flu pandemics). Then, assume that the death rate from H5N1 drops from the currently reported 50% human fatality rate (it is almost 100% fatal in chickens) reported today.

Assume that as a result of both better surveillance (so that we find more mild cases, reducing the denominator of the case fatality rate, which is number of deaths divided by number of cases) and the virus becoming less virulent over time - as do most viruses as they pass through the human population - the case fatality rate drops by nine-tenths. That would reduce the case fatality from H5N1 to 5%. Even then, we face a disaster of unimaginable proportions: if 33% of the 6.5 billion people in the world get infected, and 5% of them die, we are looking at over 100 million deaths from the disease.
******
The economic consequences would be a massive extrapolation from what we saw with SARS, which caused 44 deaths in Canada but paralyzed the economy: imagine the world's airlines being grounded, for example. Slowdowns in just-in-time logistics will quickly shut down manufacturing lines that lack inventory buffers. Public places like office buildings, arenas, and train stations will empty out. People are already hoarding vaccines, but even anti-viral hand wipes could become coveted items. The picture gets worse from there, if (and it's a huge if) H5N1 mutates to spread by human-to-human contact.

-One area of natural and political overlap-

3) Unstable energy prices

The reasons for oil's being dramatically more expensive are of course many and varied; they're also sometimes secret. Even visible records are suspect: Shell downgraded its published statement of proven oil and gas reserves five times in a twelve-month period. The lack of transparency into the operations of key producers (OPEC nations), key decision-makers (Vice President Cheney), and major markets (China) means that tracing cause to effect will be effectively impossible, particularly when catastrophic events (earthquakes, tsunamis, hurricanes) disrupt matters further.

The Iraq war is of course a major factor in this instability; so is Israel's current political situation. China's surge in urbanization and manufacturing capacity is spurring demand, while, in the near term, supply is unlikely to grow from either new discoveries of current fuels or commercialization of new fuels. One exception may be biofuels: Brazil's calorie-rich sugar cane converts to ethanol costing about a third of what American grain-based ethanol does. Biodiesel, made from used fryer grease and similar byproducts, can also be made from soybeans, another major crop in Brazil.

But the rise of alternative fuels will not reduce oil's primacy any time soon, and the imbalance between growth in consumption, speed of depletion, and available reserves looks like it will widen before it can stabilize. Add a climate shift (what if London used as much heating fuel per capita as Stockholm?), a political disruption in supply or distribution (whether from terrorists, taxing authorities, or regime change), or a natural disaster, and oil prices could shock the global economy since virtually every product and service folds energy into the final price.

-Three long-wave political shifts-

4) The end of the bi-polar world

From the 18th century through most of the twentieth, prosperous nations organized competing networks of far-away, less developed territories. France had possessions everywhere from Louisiana to Algeria to Vietnam, England's empire truly spanned the globe, and more recently the U.S. used economic, military, and cultural incentives to maintain if not an empire at least a sphere of influence from Korea, Japan, and Taiwan to Canada to NATO.

Now, World War II fades into the past and less frequently dominates policy debates. Differentials in birth rates create population imbalance between religions and regions. Communications simultaneously reinforces local cultures and connects disparate peoples into a global cultural fabric. For these and other reasons, the model of the big countries shaping smaller and poorer countries' destinies is falling from favor. Arms deals can be had from the U.S., France - and China, with the wild card of the former Soviet states selling off armaments for hard currency, no questions asked. Intellectual capital comes less exclusively from the Harvard-Sorbonne-Oxbridge axis given that China, India, and the former Soviet states are both home-growing and temporarily exporting hundreds of thousands of motivated and talented students.

For many years, conventional wisdom held that the U.S.-USSR two-camp world, albeit with fatefully high stakes for live conflict, kept smaller "rogue" states in line. The two superpowers held many interests in common, and countries like Libya and North Korea, as well as non-state actors, were held in check. Now, what some call the "unipolar" world, with the U.S. as the sole superpower, works differently. Europe is attempting to organize itself as a countervailing force via the EU, Japan is moving out of its post-WW II stance, and the "nuclear club" includes many relatively minor countries who now carry potentially big sticks. China, meanwhile, is modernizing in its distinctively Chinese way, becoming the world's factory, extending some freedoms while curtailing others, and reinventing itself at an unprecedented scale as millions of people relocate every year.

There's no consensus understanding of the current world. Tom Barnett's "core and gap" view probably has few fans in Europe and fewer in Riyadh. The Bush administration's stance of unipolarity, which both permits and necessitates unilaterality, has been fought both within American politics and in Europe, never mind in the eastern hemisphere. The simultaneous attack on and retreat from modernity, meanwhile, joins religious fundamentalists from many faiths in focusing on common or similar enemies, even as they differ in their chosen path forward. Indeed, the single most important geopolitical result of the fall of the Berlin wall may be the resurgence in the number and power of non-state actors (such as clerics, media personalities from Berlusconi to Murdoch to Ailes, and non-governmental organizations like the Gates Foundation and Greenpeace). Whatever their power, however, none of the emerging entities can either countervail U.S. dominance or hold a cadre of nation-states in loose alignment. The result is the instability that we see today and a war fought not against a geopolitical entity but a mode of political conflict.

5) Decreased faith in government and authority

The lack of faith in political institutions extends far beyond a simple dislike or disapproval of a given politician's performance. Across the globe, politics as an exercise is being viewed with less trust and confidence than at any time in recent memory. George Bush's approval rating, ever since New Orleans, has been less than 50%, a stunning reversal for the apparently decisive winner of the 2004 election who at the time claimed a mandate. Even the process by which that election was conducted, relying as it did on electronic voting machines that lacked audit trails and hard copy but featured visibly insecure code, is now widely distrusted.

Italy's Silvio Berlusconi has used his media holdings and government powers to reinforce his position (in part by clamping down on publications that satirize and criticize his alleged law-breaking), but even with a hand-tailored legal code, a facellift, and a hair transplant, Berlusconi trails his opponent in the upcoming April election.

Germany's Angela Merkel was hardly swept into office on a wave of confidence and good feeling. After confusing gross and net income twice in a single debate and later allegedly plagiarizing a Ronald Reagan speech, her party limped into a first-place finish in the election for Chancellor. After two months, her party (the Christian Democratic Union/Christian Social Union, at 35.2% of the vote) and its strongest challenger (the Social Democrats, with 34.2%) agreed to a coalition government.

Even England's Tony Blair, seemingly invulnerable to Tory opposition, lost his first House of Commons vote in November. Much like George Bush in the U.S., Blair faces public disapproval but has no credible political opponent to contend with. History's grade on his handling of the Iraq war is still incomplete, to say the least, but right now voters seem ambivalent: when asked when he should act on his promise to voluntarily leave government in the next several years, only 25% of respondents hoped he would change his mind and stay on past the next General Election.

In all four of the above-mentioned countries, public dissatisfaction derives in part from a lack of confidence as old slogans and solutions fail to address current reality. Economic uncertainty builds as jobs and wages are being reoriented away from high-paying, often unionized, positions toward part-time or otherwise lower-paying work. An increasing number of jobs (and types of jobs) are being moved to lower-wage nations, whether Mexico, Poland, India, or China.

6) Increasing signs of class conflict

Under the Bush presidency, the gap between rich and poor has dramatically widened. The notion of a broad-based middle class, serving as a buffer between the extremes and as a target for the striving poor, can no longer be assumed. Even mainstream economists like Mark Zandi at Economy.com contend that the middle class is splitting, unevenly, into those who are doing well and those who, largely because of globalization, are struggling.

According to venture capitalist Steven Rattner writing in Business Week (8 August 2005),

"Every serious study shows that the U.S. income gap has become a chasm. Over the past 30 years, the share of income going to the highest-earning Americans has risen steadily to levels not seen since shortly before the Great Depression.

JUST HOW DRAMATIC A SHIFT over the past three decades? Economists Thomas Piketty and Emmanuel Saez calculated (using data from the Internal Revenue Service, hardly a hotbed of partisanship) that the share of income going to the top 1% of households nearly doubled, to 14.7% in 2002, up from a low of 7.7% in the early 1970s. By comparison, the income share for the top 1% peaked at 19.6% in 1928 before beginning its long slide. What is particularly alarming is that at every step up the ladder, the disparity has progressively widened. Over the past 30 years, the share of income garnered by the top 10% of Americans has grown by about a third; the share of the top 0.01% -- the 13,000 or so households with an average income of $10.8 million in 2002 -- has multiplied nearly four times."

Turning her focus away from the rich, Harvard Law School professor Elizabeth Warren analyzes the rise in middle-class wages from a different perspective: risk. Given that both spouses in a two-parent family are often working full-time to meet recurring, fixed expenses like day care, insurance premiums, mortgage, and taxes, (and not discretionary items like food, travel, and clothing that can be adjusted), there's no slack in the budget for time taken off to care for sick kids or recuperating elders. Nor can the spouse working in the home serve as a backup wage-earner in the case of layoff or disability involving the main wage-earner. The notion of safety nets has fallen from the center of public attention of late, but the fact remains that there are complex moral, political, and economic questions about caring for our fellow citizens that are not going away.

The Katrina disaster linked several of these themes into a complex tragedy. Decisions to evacuate and/or shut down oil wells and pipelines were made in close conjunction with energy companies. Racial tension has been a facet of New Orleans life for well over a century as French treatment of blacks (and intermarriage) starkly differed from Confederate and then Reconstruction attitudes and policies. Class tension, meanwhile, followed the pattern of many tourist-driven economies: to cite but one example, the status, and stature, of the poorly-paid police department remains fragile even now. When natural disaster hit and was compounded by the consequences of bad human decisions made over decades, the decay of civil order was frightening and remains poorly understood.

Nor is class redefinition and its resulting tensions solely a North American issue. The riots in France last year sprang from complex sources, but religious affiliation, economics, and government's mild response to astounding unemployment figures were part of the mix. Similar tensions are less volatile but equally present across Europe, where immigration policies are being hotly debated and often redrafted. The class component of much of the violence in the Arab world is also impossible to ignore as differences in education, social mobility, and personal prospects (as in arranged marriages, for example) mix with religious intolerance across much of Africa and through Asia.

If a rising tide was formerly said (reportedly by everyone from Herbert Hoover to John F. Kennedy) to lift all boats, what happens when there are areas of the bay where the less fortunate stay stuck in the mud while they can see better-off brethren differentially profit from war, globalization, oil shortages, and other burdens widely shared? As we contemplate what 2006 will bring, seeing the magnitude and complexity of these kinds of long-term developments that could become either urgent or inexorable forces in our lives can be a useful, if perhaps overly sobering, exercise.

For further information:

http://www.whoi.edu/oceanus/viewArticle.do?id=7115

http://companionship.typepad.com/critt/2006/01/brilliant_pande.html

http://www.bmonesbittburns.com/economics/reports/20050812/avian_flu.pdf

http://www.bmonesbittburns.com/economics/reports/20051011/dont_fear_fear.pdf

http://www.thomaspmbarnett.com/pnm/index.htm

http://www.businessweek.com/print/magazine/content/05_32/b3946130.htm?chan=gl

http://privatizationofrisk.ssrc.org/Warren/pf/

--Dr. John Jordan
Founder, Still River Research and executive director of the eBusiness Research Center at Penn State University

Posted by John Jordan at 05:48 PM | TrackBack

2005 Predictions Revisited

A year ago I tried to highlight some areas of instability, opportunity, and uncertainty that might be resolved in calendar 2005. Reviewing this list, it's striking how little some things change (the DVD standards battle) and how much other industries (search in particular) simply exploded.

I won't march through the entire list but will instead highlight a few entries with comments in italics.

A is for Apple, which has to address some big questions. Having reinvented the mass-storage market by equipping the iPod with a great interface and compelling legal content, the leadership must anticipate the eventual margin erosion in the hand-held segment and decide how long to ride the premium-price position in computational jewelry (i.e., what used to be called PCs). Steve Jobs had a great '05 by any measure, cannibalizing his own markets with new, far superior products (the Nano) and getting new services (video) into the market before most analysts predicted. Even the one misstep, the iTunes cell phone, will be tied more to Motorola than to Apple. Regarding the prediction, it may be that Apple doesn't need to worry about the desktop or laptop markets.

B is for business intelligence, the fancy name for data warehousing. For information to enhance business outcomes, it has to fit more closely into real processes. The MBA analyzing data cubes has far less leverage than the people at the point of customer activity making better decisions in the moment. That objective means that data analysis tools will have to become more industry- and process-specific rather than generic, and they can no longer be so detached from operational systems. Looking back, B should have been for blogging, which evolved faster and delivered more mainstream impact than Cognos/SAS/Hyperion et al did.

D is for distributed development. The issue isn't really India per se, because there will be new low-cost environments for certain kinds of work as India develops inflation, a middle class, and/or heightened political tensions with Pakistan. Managing distributed development is a more general issue than merely signing up resources in India or Spain or Estonia, and the tools for doing so are still generally immature. The other story here was weather: tsunamis, hurricanes, earthquakes, and blizzards reinforced again how hard it is to manage infrastructure and business processes on a global scale.

E is for energy, which remains a constraint for everything from mobility, in the form of battery life, to data centers, in the form of heat. Intel recently had to switch over to dual-core processors to maintain its stream of new microprocessor introductions because of heat, and the marketing strategy for Centrino (slower clock speed, better battery life) doesn't immediately translate into a parallel pitch for desktop and server chips that will no longer be positioned solely on speed. The other energy factor that came into play this year was of course price volatility: running a cooler data center can repay in serious dollars not spent on utility bills.

F is for fiber optics, which remain a wild card in the the quest for widespread residential broadband access. Relatively speaking, Verizon is taking an aggressive position with fiber to the premise (rather than the node) in the Keller, Texas trial. Longer term, both capital and regulatory uncertainty loom. Meanwhile, wireless broadband deploys far faster and at lower cost, and it's completely possible that anyone who spends billions of dollars digging up yards in 2005 could be aced out by a wireless carrier within five years. Verizon and SBC/ATT continue to be caught in the regulatory conundrum of being neither conventional voice services nor cable operators as they try to enter the broadband sweepstakes. At the same time, one of the potentially huge stories of the year, if proved true, is the rumor that Google is preparing to deploy thousands of data centers (connected to fiber they have quietly been buying) to deliver applications over the network with low latency.

J is for jail. Sarbanes-Oxley section 409 is still being interpreted, but some provisions for timely disclosure took effect in August. The legislation uses the terms "real time" and "urgent" for these disclosures, which will add to the CIO's already substantial compliance burden -- and provide tough penalties for failure. "Real time" for some purposes is four days, but retrieving a given email or category of instant messages, for example, within that time is impossible for most organizations. Possibly in the manner of Y2K, this fear may have been overstated.

K is for killer application, or more properly the lack thereof. Intel has suffered as both consumers and business users find it difficult to justify new hardware purchases for tasks such as email, web browsing, and spreadsheets. On mobile platforms, meanwhile, cultural differences drive divergent adoption patterns of everything from mobile messaging to cameraphones to geolocation. Personal digital media management, in the form of iPods and TiVos, has sold well, but not all that well. In a global market, it's worth reflecting on total TiVo sales: 4.6 million for 2003, and probably less than 10 million total worldwide as of mid-2004. Much to the concern of many in the PC and related industries, this prediction came true, to the point where Dell had troubling results despite having some of the best managerial execution in the world.

M is for management software. Given that headcount remains a large and, thanks to health care costs, growing component of IT budgets, and given that the complexity of the IT shop is still growing despite efforts to rein it in, better tools for running the IT business are essential. Some are in early deployment. Consider that front office, back office, sales force, shopfloor, and field service all have been automated, but the IT organization typically runs on spreadsheets rather than audit-able, robust enterprise systems. Unfortunately, it's hard to sense how this is playing: Mercury Interactive, a leading company in IT governance software, is battling against being delisted from the NASDAQ after its CEO, CFO, and general counsel resigned amidst an investigation into financial criminality.

R is for RFID. Retailers already have the business case and many of the business practices in place to exploit the consumer-products and pharmaceutical tags; what will change dramatically are the behaviors and expectations in such places as hospitals, unionized warehouses, and courts. What are the rules for using tags (or automobile "black boxes") as evidence? What are the privacy rights of an employee suspected of theft or even of slacking? How will the black market adapt to the presence of tagged Oxycontin in both legitimate and shadow supply chains? While the big questions are no closer to articulation, much less resolution, the operational results appear to confirm the assertion that retailers, if not manufacturers, can benefit: a study done out of the University of Arkansas compared stores with RFID systems to stores without them and found that the former had 16% fewer out-of-stock events. Generally speaking, the industry average for stockouts is 8%, so a 16% reduction takes the number down into the high 6s. Dollar savings were not projected. (The other big R in 2005 was robotics, as four teams succeeded in mastering DARPA's Grand Challenge a year after the whole field failed in both mundane and spectular fashion.)

S is for search. Google's ambition and capability are both formidable: their agreement with leading university libraries to digitize some of their holdings parallels a less-visible effort at the Internet Archive and will be a landmark in information access. Yahoo, Amazon, and Microsoft, meanwhile, are devoting major investment and brainpower to various categories of search challenges. Given the magnitude of information volumes both at rest and in motion, traditional methods for storing, finding, and manipulating data will have to be reinvented - and more layers (in the form of geospatial, audio, and other aspects) are still in the queue. The arms race in search is astonishing, as are stock valuations. The big players are hiring talent across the world, and dispersing to do so: Google is opening a lab in Pittsburgh to get access to more Carnegie Mellon folks, while both Yahoo and Google are launching initiatives in New York. Microsoft, meanwhile, finds itself in an uncharacteristically defensive posture and has handed much of the responsibility for a reinvention to an outsider, Ray Ozzie from Groove, who came on board with the acquisition of the company he founded after leaving Lotus.

W is for Windows, still the world's most profitable software franchise. Security remains a major question mark, as does the issue of platform extension: how can Microsoft most successfully maintain look, feel, and branding across PCs, cell phones, game consoles, TV set-top boxes, MP3 players, handhelds, and home entertainment centers? Where does extension inhibit rather than enhance entry into new markets? Microsoft has confronted the security and reliability challenges head-on as it prepares for Longhorn, now named Vista, to launch in late '06. How well it has done so will shape the company's future prospects.

Z is for zero latency, otherwise known as real time enterprise. Driven by compliance requirements, customer requirements, and competitors, often from unfamiliar sectors, businesses often confront "impossible" performance requirements that can't be met simply by tweaking existing processes and procedures. As with so many other technologies, the really tough part of real time is behavioral and cultural rather than engineering. While IBM maintained its "On Demand" branding, the industry excitement for real time as a performance ideal feels like it's waning. Despite what is or isn't being said or written, however, the demands -- on people, on management technique, on systems -- will continue to mount as margins for error decrease.

--Dr. John Jordan
Founder, Still River Research and executive director of the eBusiness Research Center at Penn State University

Posted by John Jordan at 04:16 PM | TrackBack

The Disintermediation That Wasn't

It's hard to believe that it's been over a decade since the notion of Internet disintermediation first received widespread attention in Bill Gates' book, The Road Ahead. If you look at travel agents who collected a lot of money for printing airline tickets, the prophecy has come true.

Residential real estate was another field predicted to be toast. John Baen and Randall S. Guttery predicted in 1997 that jobs would be lost to automation, commissions would drop, and more sellers could sell direct. The logic of the argument is strong, even in hindsight, but it doesn't hold up. Instead of being pushed aside by the Internet, real estate agents, individually and in powerful trade associations, have been aggressive in their adoption of emerging technologies. Rather than being disintermediated, the National Association of Realtors has become the subject of Federal Trade Commission and Department of Justice inquiries into price maintenance: U.S. house sellers generally pay a 6% commission, while in the U.K., the figure is only 2%.

What happened that the prediction could be so far off?

The picture is not unambiguously successful. Real estate agents in the U.S. enjoyed a year of extremely high market activity in 2004, but average commission income went down, in part because average selling prices were accompanied by a drop in the average commission to 5.1%, and in part because the barrier to entry for the field is low enough that lots of new aspiring agents got their licenses. Still, this largely means that the field is a victim of its own success.

1) Real estate is a relationship business
Whether he or she is hunting for scarce properties in a hot market or scarce buyers in a cool one, good real estate agents embed themselves in deep social networks. The trust required for a buyer to make what is typically the biggest purchase of his life does not translate to a browser-based form. As recent house sellers, we found our buyer through a real estate agent who had been working with him as a buyer's broker for nearly a year. Could a website, however thorough, have broken that trust if we had tried to sell the property ourselves?

2) Houses aren't plane tickets
To the extent that house purchases are deeply personal and given that every buyer is different, the matching of buyer to property requires both architectural and psychological understanding, patience, and some luck. Real estate agents spend a lot of time behind the scenes learning the market, tracking trends, and generally becoming informed as to what combinations of features will match up best with a given buyer.

3) Control over information confers power
A real estate transaction involves multiple layers of information: comparable sales, future uses for nearby vacant land, whether the neighborhood kids are nice and the schools good, what kind of builder put up the structure, etc. Little of this exists in standardized databases, and it's both hard and expensive to generate in a channel outside traditional real estate firms. Where data does exist in structured form, access both to add and to view important kinds of information is tightly controlled.

4) Organization is power
The National Association of Realtors is large, well-funded, and effective in influencing legislation. Many attempts to create alternative business models, involving less than full service but more than For Sale By Owner behavior, have been literally or effectively outlawed in certain states. No comparable organization exists for travel agents, for example.

5) Real estate has embraced emerging technologies
I can recall seeing the iPix 3-D photographic demo at a trade show in the late 1990s; now flythroughs, often sophisticated, are a staple of real estate websites. In the November 28 Boston Globe, a local agent discussed how a new tool integrates access to listings, personal contact management, and other tools in a PDA. Some brokers have taken to using blogs as another tool to build relationships, confer authority, and generally keep their names in play. Even so, the most powerful tool for most agents remains the mobile phone, a device and set of capabilities that the Web has a hard time replacing.

6) Home-buying is a complex transaction
As my Penn State colleague Steve Sawyer and his co-authors have found, it's naive to speak of disintermediation, singular, in the process of purchasing a house or condominium. The Web has clearly changed the process, but there are too many moving parts in the transaction for it to be conducted completely online. Some business-to-business aspects are moving toward standards like XML to smooth workflows between, say, mortgage lenders and title insurers, but conceiving of the process as analogous to even car-buying ignores the coordination and other roles played by a trusted party in a complicated, emotional, and large purchase. As Sawyer et al state,

"The analytic simplicity of categorizing complex transactions as either intermediated or not belies the web of connections and actions that make selling and buying real estate a multi-state and multi-step process."

It's good counsel to observe as we analyze other predictions in the future.

References:

John Baen and Randall Guttery, "The Coming Downsizing of Real Estate," Journal of Real Estate Portfolio Management

Kimberly Blanton, "Realtors get their hands on technology," Boston Globe, November 28, 2005

Waleed Muhanna, "The impact of e-commerce on the real estate industry: Baen and Guttery revisted," Journal of Real Estate Portfolio Management 8

Steve Sawyer, Rolf Wigand, and Kevin Crowston, "Redefining Access: Uses and Roles of Information and Communication Technology in the U.S. Residential Real Estate Industry from 1995-2005" Journal of Information Technology

--Dr. John Jordan
Founder, Still River Research and executive director of the eBusiness Research Center at Penn State University

Early Indications has been published by John Jordan twice monthly since 1997, focusing on the broader implications of emerging technologies. It is distributed free of charge by the eBusiness Research Center at Penn State University. Back issues are available online at earlyindications.blogspot.com. Quotation is permitted with full attribution. The author holds no direct financial stake in any of the companies mentioned. Comments and questions, which will not be included in future letters without express permission, should be directed tojmj13@psu.edu; to subscribe simply send a request to hmw2@psu.edu.

Posted by John Jordan at 04:09 PM | TrackBack

A Blog of Her Own

The rise of blogs authored by women, covering women’s issues and presenting a female perspective on events confirms that the Internet gives women a voice. We are beyond the era when email was the killer application and women praised the Internet for helping them save time and stay in touch with family. The blogosphere equips women with the tools to generate intense debate and increase awareness—among both male and female readers/writers—about unresolved issues women face daily (e.g., inequality, work-life balance, parenthood, etc.).

According to the blogosphere statistics from comScore, women blogs garner 8 percent of the standalone blogs' traffic. While this may sound like a small sliver of the pie, it is worth noticing that women’s issues emerge as their own category in a highly fragmented public space next to:

politics/news (43 percent)
technology (15 percent)
media (8 percent)
personal (6 percent)
business (3 percent)

In fact, the actual percentage of blogs written by women is even higher as there are many women writers and commentators in gender-neutral categories such as politics and healthcare.

Is the number of women publishing blogs enough to push for change at a large scale? Unfortunately, not yet. Although blogging gives women the opportunity to amplify their voice, top blogs authored by men still surpass those authored by women. A quick glance at Technorati’s top 100 blogs shows that only 18 percent have women writers--nine percent are written by women and another nine percent are written by a group of authors including women. The top women bloggers discuss a variety of topics besides women’s issues; such as technology, politics, design and personal stories.

The absence of women authorship in the blogosphere is similar to trends we see in the traditional news media:

• Although women have been the majority of college journalism majors since 1977 (Association for Education in Journalism and Mass Communication), they only account for one-third of journalists in the U.S. (Poynter Institute’s American Journalists Survey, 2003).

• Similarly, 38 percent of newsroom supervisors at U.S. newspapers are women (American Society of Newspaper Editors, 2005). The incidence is even lower in U.S. TV stations, where 21% of news directors are women (Radio-Television News Directors Association, 2005).

• Women correspondents reported only one-quarter of network TV news stories for the past four years (Center for Media and Public Affairs, 2005).

• Byline authorship is also heavily skewed towards men. Columbia Journalism Review (July-August 2005) reports that in an analysis of 11 of the nation’s top intellectual and political magazines published between October 2003 and May 2005, male-to-female byline ratios ranged from 13-1 at the National Review to 7-1 at Harper’s and The Weekly Standard to 2-1 at the Columbia Journalism Review.

While there seems to be a gender imbalance in (US) news rooms, women have a relatively stronger presence in lines of work that shape public policies. Indeed, women make up seven in 10 paid employees in non-profits (Hodgkinson & Weitzman, 2000) and they hold about one-third of policy making staff positions (Saidel, 2004)--according to a study of top-ranking gubernatorial appointees and staff advisors with policy-influencing responsibility in governors' offices.

Why not expand the reach of this intellectual power to wider audiences who may be tapping at their keyboards to connect with like-minded people and to gather information on issues of interest? Citizen journalism has the potential to significantly increase women’s presence in the public eye. While striving to get on the traditional media’s agenda and gain increasing editorial power over news content, women can sidestep biased institutions, set their own agenda in the blogosphere and reach thousands of people through their own writing. The emergence of women’s blogs as a category indicates that social change can brew in the blogosphere.

Posted by Idil Cakim at 12:51 PM | TrackBack

How can we escape the word salad around "services"?

If one ventures into the enterprise software world, the sheer volume of verbiage devoted to variations on the words "service" and "services" is bewildering, especially because a server, which confusingly can be either hardware or software, is unrelated to services. Web services are related to but not synonymous with service oriented architectures (SOAs), some of which can be implemented using an enterprise services bus (ESB). Public examples of SOA-like behavior can be found in the much-better named category called mashups, examples of which can be found below.

At the macroeconomic level, meanwhile, the services sector (which is really several sectors, as UCLA's Uday Karmarkar has noted) is crowding out products companies as the dominant force in gross domestic product. In the middle between code and Alan Greenspan, marketers worry about satisfaction ratings for customer service (including self-service) in the transaction process, while aftermarket repair and maintenance is yet another kind of service. Finally, there are transactions in which activities are performed in conjunction with a product purchase: software implementation is one such service.

According to the Oxford English Dictionary, "service" has at least five different meanings that could apply to the current confusion:

-the action or process of performing duties for
-an act of assistance
-the process of attending to a customer in a shop
-a system supplying a public need such as transport, or utilities such as electricity and water
-a periodic routine inspection and maintenance of a vehicle or other machine

(The root word, servus, means "slave.")

IBM has launched a research initiative into what is now being called Services Science, Management, and Engineering (SSME). According to the initiative's website, "A service is a provider/client interaction that creates and captures value." Elsewhere, an IBM Software page answers the question "What is an SOA?" this way:

"SOA is the blueprint for IT infrastructure of the future. SOA extends the Web services value proposition by providing guidance on how enterprise IT infrastructure should be architected using services."

But it's clear that the software folks do not intend that such architectures should use "provider/client interactions that create and capture value." Given this wide semantic variation, it will not come as a surprise that measuring services is problematic. At the economic level, what is the productivity of a teacher or programmer? The input-output metric used for mechanical efficiency breaks down, but no model readily presents itself as an alternative. There is substantial promise in the area of supply chain research however, insofar as networks of people in various roles perform tasks to accomplish a process. At a sufficient level of abstraction, treating some kinds of medical patients, building software, and delivering fresh strawberries do share metrics, constructs, and success factors.

Measurement of services is important for many areas, particularly where money is concerned. Thus a network provider might have a service level agreement (SLA) with a customer, that throughput will never fall below a given threshold and downtime is expected to be 30 minutes a month, never falling between 8 am and 6 pm, etc. Confusingly, because a services-oriented architecture runs across a network or set of networks, it requires a service level agreement from the provider of the network. The "S" in SOA has nothing to do with the one in SLA.

One further thought. Does customer satisfaction measure what was delivered by the provider, or what was experienced by the customer? For this discussion, "service" can be understood as retail or hospitality, professional services like law or consulting, and possibly more. Major corporate effort is expended in the area of increasing customer satisfaction, usually in operational improvements. It may not be the best place to apply effort, however. If satisfaction is understood as the congruence between expectation and experience, some of that spending on operations could be redirected into negotiation, getting customers to reset expectations rather than trying to meet unrealistic ones.

A cab ride is a service. Going from midtown Manhattan to LaGuardia at 1 pm on a weekday can take 25-45 minutes, while doing so at 5:15 is a very different proposition. Weather makes matters worse. If, however, a driver takes an hour in the middle of a sunny day because of inexperience or other driver-related factors, the rider is right to be irritated. The point here is that much effort is expended in trying to define service levels for a wide range of contingencies. Alternatively, it may make more sense to educate customers into the factors, both in and out of the provider's control, that influence service performance.

The broader issue of confusion over service, service levels, and service economics will get worse before things improve. That the language is insufficient probably relates to the relative newness of the swings from products to services, and from applications that run on processors to services that run over networks. I can only hope that just as "horseless carriage," a lame extension of a soon-to-be outdated name, gave rise to a rich vocabulary of automobile language, so too can we get more words like "mashup" and fewer bureaucratic three-letter acronyms that usually define reality neither vividly nor accurately.

Mashup examples:
http://www.mashmap.com/
http://www.internetbargaincenter.com/

--Dr. John Jordan
Founder, Still River Research and executive director of the eBusiness Research Center at Penn State University

Posted by John Jordan at 01:17 PM | TrackBack

Early Indications: Resources and Destiny

"In the Web 1.0 era, when a company raised $10 million, they spent $2
million on servers from Sun, another $2 million on software from BEA,
another $2 million on Oracle software, and then they'd have only $4
million left to actually build the thing."

-David Hornik, venture capitalist at August Capital, speaking
at the Web 2.0 meeting, quoted in the Boston Globe, October 10

"Here's what we're going to do. We're going to go out, and we're
either going to buy Oracle financials or SAP. That's a $5 million
plus or minus purchase. Plus consulting [fees]. . . . I said, 'Look -
I have been through so many general ledger conversions in my life . .
. I'm not going through another conversion [off of Great Plains] when
we get to be a $100 million company.'"

- Jim Barksdale, speaking in 1997 of his early days at Netscape,
in Michael Cusumano and David Yoffie, Competing on Internet Time

As Jared Diamond posited in his seminal Guns, Germs, and Steel,
there's often a tight connection between resources and destiny. Less
important than the quantity of a resource, however, is its fit with
human or market need. Much like the Maginot line, corporate barriers
to entry (assemblages of resources) can turn out to be competitive
liabilities as speed, focus, and agility frequently trump mass.
For example, Ford and GM are jettisoning as much excess baggage as possible--
perhaps noting that neither Honda nor Toyota run car
rental companies, own satellite factories, or build military armored
vehicles. By contrast, Netscape built in anticipation of rapid
growth, correctly as it turned out.

Businesses can be built of many resources: material, human, financial.
More recently, economists including Paul Romer have contended that
innovativeness itself is a resource: the world might run out of oil,
in this line of argument, but it can't run out of creative people
motivated to solve energy problems. There's also the matter of
intangible assets like patent portfolios, branding, and capabilities
in employee selection and training. The factors of production have
expanded beyond the original land, labor, and capital.

Technology is of course a core business resource. In the developer
and IT management communities, the acronyms are running particularly
hot and heavy right now. Between Asynchronous Javascript and XML (AJAX), Linux, Apache, MySQL, Perl/Python/PHP (LAMP), two flavors of
OSS, RSS, and CSS, people who write code have a wide range of
lightweight, network-centric tools at their disposal. Many of these
standards are supported by free and/or open-source software, and many
expand the repertoire of the web browser to behave more like a thin
client of a "real" computer. (For examples, see Google Maps or Gmail,
Web Boggle, backpackit.com,
Microsoft Outlook web access, Flickr, or even enterprise-grade
applications like NetSuite.)

These new kinds of software tools and materials are in the process of
changing not only the technology world, but the business and social
environment. Think about the history of building: when structural
steel and fast elevators became available, Louis Sullivan and his
successors built buildings that would have been inconceivable only
years earlier. What would major modern cities look and feel like if
buildings were only 10 to 15 stories tall? When powerful air
conditioning became sufficiently cheap and reliable, the American
South and Southwest underwent a development boom that persists to the
present. Resources shape destiny, again and again.

The relationship between the nature of technology and business
potentialities reminded me of my colleague Dave Robertson's very pithy
explanation of the delicate business of getting information technology
and business decisions to reinforce each other. I'm paraphrasing:

"Let's compare a business to a vehicle. You could choose to be a dump
truck, or a hybrid, or a sports car. None of these are inherently
better than the others until we know whether the context is family
driving with $4 gas, or building highways, or racing. Once a business
decides what kind of business it needs to become, a gravel hauler or a
dragster, you look under the hood: IT is the vehicle's engine. A
cogenerating electric motor probably won't power the dump truck, while
dropping a Hemi into a hybrid would just be wrong. Each engine is
right for a certain kind of vehicle, but again, it all depends on
context."

Dave, who's a professor at IMD, goes on to say that this metaphor
provides a way into his
research, soon to be published, into the intricate but essential
matter of getting business architectures and technology architectures
to reinforce each other. (His co-authors are Jeanne Ross and Peter
Weill of MIT's Center for Information Systems Research.) If a
retailer is positioned to deliver high-quality men's wear at a premium
price, for example, late shipments, sloppy customer records, and slow
network connections will undermine that strategy. On the other hand,
plenty of successful service businesses, including banks and
universities, still run green-screen mainframe or minicomputer
applications, complete with batch processing and poor access to
analytical data streams.

Both business architectures and technology architectures are creations
of the organizations they inhabit: formal methodologies and
prescriptions, while they have a place, will not in and of themselves
build either a sturdy chassis or an engine that will fit both that
chassis and its real-world requirements. It's one thing to decree
data quality standards and quite another to understand how and where
conflicting or erroneous entries are introduced. If a business
intends to expand internationally, is it hiring employees who are
multilingual and can operate across cultures? Are computer systems
ready for multiple currencies, multiples time zones, and multiple
process maps? Similarly, it's one thing to say "our customer always
comes first" and something quite different to give employees the
training, managerial cover, and career incentive to act on the
rhetoric.

By noting the wider acceptance of Linux, Python, or
software-as-service applications, do I suggest that every IT shop
throw out its Rational methodologies, Microsoft developer suite,
or Oracle databases? By no means. Being aware of available resources
informs choices, including the decision to stand pat. A building
architect needs to be informed of the state of available materials so
he or she can choose to incorporate glass-and-steel curtain walls (as
at the United Nations building), curvilinear reinforced concrete (the
Guggenheim), or self-weathering Cor-Ten steel (the Chicago Civic
Center). But just as not every building is a landmark, most
technology environments will not rival Wal-Mart’s or Google's. Even
so, good IT architecture is no less important, whether the
environment's job is to run unobtrusively but reliably, or whether IT
is the business, as at Amazon or Morgan Stanley.

Who's responsible for constraining and enabling the architects'
technology choices, of being the client, as it were? In a recent
article in Harvard Business Review, longtime IT authorities Richard
Nolan and Warren McFarlan contend that IT governance begins with the
board. Following that logic, it's both appropriate and necessary that
business and technology executives learn what extreme programming
looks and feels like, or where PHP can work better than Java, or what
Linux actually costs and delivers relative to proprietary Microsoft
and Unix.

Just as hybrids aren't inherently better than diesels and dump trucks
aren't superior to Priuses, so too for information technology: it's
not a matter of choosing the "best" technology, but the one that fits
(and perhaps reshapes) its context. In the quest for better, and
better-fitting, business and technology architectures, a working
knowledge of the rapidly evolving set of alternatives is too valuable
to be left to technologists alone.

--Dr. John Jordan
Founder, Still River Research and executive director of the eBusiness Research Center at Penn State University

Posted by John Jordan at 06:00 PM | TrackBack

Early Indications II: Vendor Tectonics

The following headlines were selected from the News.com website on
Monday September 26:

-Cingular to launch music download service in 2006
-Verizon switches on TV service
-Intel launches WiMax trials in Asia
-T-Mobile to invest in 3G in U.S.
-Google confirms it's testing wireless service
-Verizon Wireless teams with notebook makers

Couple these tidbits with eBay's purchase of Skype, Sony's massive layoffs and attempted reorganization, and Apple's continuing dominance of the handheld entertainment market, and a raft of questions emerges.

1) Will any company be able to duplicate Microsoft's powerful position in desktop computing as new platforms emerge?

2) Which current industry leaders will be acquirers and which will be required in the coming wave of consolidation?

3) What will be the new leverage points that allow hardware, software,
or connection vendors to develop tighter customer relationships and presumably higher profitability?

4) What external forces will help shape this contest?

The list of headlines is at once tantalizing and frustrating: familiar vendors are assuming slippery identities. Cingular is a wireless carrier, but now it sells Motorola phones with Apple iTunes software. Will its music service be a competitor or complement to Apple's? Verizon used to be a phone company, then it became a phone plus half of a mobile phone company, and now it's delivering television. But wait: Google is streaming UPN video and Yahoo is delivering both network shows and original video news reports from ex-CNN reporter Kevin Sites.

On the hardware side, meanwhile, Intel used to live in the computing market, but the company remains determined to make an impact in the Lucent-Ericsson neighborhood as well. Verizon is trying to increase adoption of its wide-area wireless midband service by signing deals with hardware manufacturers. Finally, China's emergence as a hardware factory will have major repercussions.

Let's look at the various players in this new "digital home" environment grouped into three buckets: decliners, question marks, and ascenders.

Decliners:
Despite my respect for Howard Stringer, Sony looks to be in a bad way. The Playstation franchise could remain a bright spot, but the company's high prices and slow time to market may be endemic to the culture and thus not fixable, particularly by an outsider. Sony-Ericsson has not shaken up the mobile handset market and the company's proprietary standards (for memory, among other things) swim against the prevailing tide of open standards.

Slow-moving telecoms, as The Economist suggests, will be undone by VoIP. Surprisingly, the magazine's second most vulnerable company, in its heavy reliance on voice revenues, was Vodaphone; other nominees include British Telecom, SBC, and Telecom Italia.

Other decliners, such as AT&T and IBM's PC unit, have already been sold. In the future, players like Paul Allen's Charter Communications, Ericsson, Time Warner, Philips' consumer electronics business, and others could be similarly vulnerable to takeover.

Question marks:
Motorola seems to have been defibrillated by new CEO Ed Zander. The Razr phone has become a must-have, and the Rokr iPod phone will bear watching. In the carrier market, Moto's Canopy system is much farther along than Intel's WiMax. Whether the company can compete within a footprint that remains broad (even after the semiconductor unit was spun out) is the big question: can the same company profitably sell home networking, military radios, carrier gear, and smart phones?

Microsoft certainly counts as front-page news these days, with lead stories in both the Wall Street Journal and Business Week. The culture is clearly in transition as Vista has required new ways of writing code and the executive turnover continues to mount. Microsoft also has prime real estate in the current platform, and substantial cash with which to buy a competitor as instant access to new markets. The centrism of the PC to the firm's worldview may be a limiting factor, given how quickly Google has innovated and how prominently smartphones figure in the global market.

Apple has soared on the success of the iPod's excellent combination of
hardware, software, and content. But what happens to the computer
piece of the franchise? And can the successor to the iPod do the same
thing for video? Getting permissions will be harder (and indeed some
music rightsholders may successfully renegotiate rates), the network
connections will need to be faster, and video viewing -- unlike music
listening -- is not a background activity. Getting the interface to
be as intuitive and smooth may also be harder.

Nokia has ridden a roller coaster over the past few years as its
various phones have touched or failed to touch the nerve of a
fashion-conscious public. Revenues have been declining while profit has been highly variable. The company's future depends in large measure on carriers over which it has limited control, and on usage habits which are similarly fickle. Finally, content providers like Yahoo, Disney, and Newscorp may have a large say in the company's fate as phones become TV substitutes.

Aggressive telecom and cable providers have connections to the home or
customer that are fast and getting faster. They also have limited
control over programming costs, and face competition both from each
other (Comcast offers voice even as Verizon offers TV) and from
satellite. The list of broadband pioneers also includes Orange,
Korea's KT, and Yahoo BB in Japan. Balancing the value brought by a
fast connection with content-driven revenues will remain the challenge
for these companies.

Ascenders:
Google is clearly frightening the industry. The firm's deep pockets,
inventiveness, and sheer technical prowess mean that new product and
service announcements can come from any sector of the technology map.
(Speaking of talent, Vint Cerf, Rob Pike, Adam Bosworth, and more than 100 former Microsoft developers all work there.) The company has a strong and growing presence on the PC desktop, unsurpassed Linux experience and expertise, deep knowledge of mapping and image searches, testbeds in wireless and cell phone markets, and the attention of smart people all over the world who want to work there. Google could expand its voice chat into full-fledged voice over IP (and become a phone company), or sell a super-cheap network-centric PC running a non-Microsoft OS, or make any of a dozen other bold plays that would truly disrupt existing industries.

Like Google, Yahoo has lots of cash and has been hiring superstar
talent. It has more media savvy and focus among its leadership team,
and may well morph into more of a Viacom/Newscorp competitor than a
technology company. As navigating the home page makes clear, however,
managing the extreme breadth of services (from driving directions to
dating, finance to fantasy football to photos) might become unwieldy.

Samsung is on a roll. The company now has the most powerful Asian
brand in the world, surpassing Sony this year, according to
Interbrand. The company's displays, memory, and cell phones all hold
leadership positions in their markets, and the patent portfolio is
strong. Unlike Microsoft or Nokia, Samsung is probably equally
comfortable in a wired or unwired universe. Also unlike most American
companies, Samsung is well positioned for growth in the developing
world including India and China given its geographic presence and
price points.

After completely reinventing the economics of the PC industry, Dell
has begun moving into adjoining markets: its flat-panel TV prices
undercut most name brands by hundreds of dollars, for example. Its
MP3 players will never challenge the iPod for design quality, but like
the Axim handhelds they continue to improve while maintaining a low
price point. To a certain extent Dell stands to gain as a result of
Microsoft's heavy marketing in support of Vista next year, but the
company is now sufficiently diversified, both product-wise and
geographically, that its fates are no longer tied to Microsoft's.

Who's missing:
It's hard to know where to put the companies that will make the
digital home possible. EMS providers like Jabil Circuit, logistics
companies like FedEx, and component manufacturers including Intel and
Synaptics (which makes scroll wheels) all could profit regardless of
which of the branded companies win in the consumer market.
Infrastructure and business services providers including Cisco, IBM,
HP, Oracle, and SAP could similarly benefit, depending on their
presence in a given vertical.

Finally, retailers including Best Buy, Wal-Mart, and Dixons stand to
benefit if they can master the merchandising and logistics required by
rapidly changing, complex bundles of products and services: it will no
longer suffice merely to move boxes. The retailers' challenge will
soon include such elements as liability for recycling toxic waste like
that found in PCs and cell phones, reverse logistics for returns, and
serving as a systems integrator for connected systems that to date
require considerable expertise to install and manage.

Wild cards:
Government regulation will play an important role is sorting out
winners from losers. Rules for broadband competition, copyright
duration and extent, and protection of national "champions" (such as
telecoms like Telstra or France Telecom with government ownership
interest) only begin the list of extra-market forces.

Finally, and most crucially, revenue models are in the midst of a
dramatic reinvention. In telecom alone, Skype threatens minute- and
distance-based pricing with obsolescence, competing broadband
technologies break any natural monopoly that might have existed, and
new forms of seemingly peripheral content like games and ringtones
play a disproportionate role in determining profitability. Elsewhere,
expensive investments in global news organizations (think of CNN) or
movie studios (think Viacom) could become boat anchors as their
relevance declines in the face of bottom-up alternatives like news
blogs or digital moviemaking and distribution.

The ultimate signal of the market's volatility is the reluctance of
both consumers and manufacturers to commit to new standards:
high-definition audio, high-capacity DVD, and high-bandwidth wireless
are only three examples of multi-billion dollar hesitation and
disagreement. Until obsolescence is no longer at the top of buyers'
concerns, demand will remain inhibited. Paradoxicallly, the current
state of messy competitiveness could be Microsoft's legacy: in the
absence of a dominant vendor as all the players seek to prevent a
leader from emerging, customers lack assurance of interoperability and
backwards compatibility, and remain -- intelligently -- tentative.

--Dr. John Jordan
Founder, Still River Research

Posted by John Jordan at 10:54 AM | TrackBack

New Zealand Diary: The Future Is for the Young Entrepreneur

Twenty-two hours after leaving my driveway, I landed in Spring.

New Zealand, in late September – and perhaps anytime -- is a beautiful country, but especially beautiful in the “Garden City,” Christchurch where I am attending and speaking at Electronics South Connectivity 05.

The conference is a showcase of electronics and software companies that call Canterbury home. A quick walk through the exhibition area reveals a tremendous degree of engineering talent, if not also entrepreneurial prowess. I visited with a number of companies that have developed world-class applications – but they are hard pressed to explain them.

A case in point: Visual Footprints. The company had developed intelligent video surveillance system that combines sensor technology to detect security events with license plate detection. Designed to detect and prevent “drive offs” at the gasoline pumps, the software most certainly has applications in traffic management, homeland security, border control, among others. The market for this application ranges far from the shores of New Zealand, and with luck the engineers who have developed this technology will get the good help they need to find these opportunities.

This engineering, rather than entrepreneuring, mentality isn’t unique to New Zealand by any measure, but it creates a particularly difficult situation in a country where startup technology ventures have little choice but to address global markets.

The good news seems to be that both private and public initiatives are in place and most surely will pay off in the long run.

One such initiative is “Bright Sparks,” a program that teaches school children best practices in engineering and entrepreneurship. Bright Sparks celebrated their annual awards on Friday, September 30, with a showcase of some phenomenal young talent.

Among these was an energetic and intelligent young woman, Allison Blanchard, who had invented an interactive learning toy to encourage hand-eye coordination in developmentally disabled children. The project brief, Allison told me, was to create a developmental toy, and it was she who determined, after initial market research, that the unaddressed market was physically disadvantaged children. The 16-year old visited a local hospital to observe her target market. She developed and tested prototypes with a young boy with Cerebral Palsy. This direct customer interaction drove changes to both the physical design and the feedback functions in the electronics.

The result is an elegant toy that most certainly has commercial implications.

When I asked Allison whether she intended to market the product, she smiled and shrugged. This was a school project, she said. She really loves accounting and hopes to pursue that career. Let’s hope that at the very least, she applies her bookkeeping skills to an early stage venture; she’s as sophisticated a market-driven project developer as I’ve seen in some people twice her age.

Posted by Chris Shipley at 06:47 PM | Comments (0) | TrackBack

Katrina/Rita Mobile Phone Project

As Huricane Katrina made tens of thousands homeless, I had the opportunity to receive first-hand reports from Pam Peterson, a social worker and long-time friend who had gone to Houston to support the evacuees there.

Very quickly, she recognized that among the biggest challenge at the Astrodome and surrounding shelters was being able to communicate quickly and effectively with various support networks and evacuees. Out of this challenge the Katrina (and now Rita) Mobile Phone Project was born.

In the last three weeks, many in the Guidewire Group and DEMO communities have come to the support of this project and today, the first shipment of phones is on its way to Houston, to be delivered to Care for Elders/Sheltering Arms and program director Jan Edwards.

Nearly a month after the first hurricane hit the Gulf Coast, the elderly and disabled remain the most at risk, separated from families and struggling to find adequate care and accommodation. Care for Elders continues to work with these special victims of the storms in the weeks and months ahead.

So how will the phones be used? As Jan Edwards told me:

Now, we are challenged to provide service for those elders who remain in temporary shelter or permanent housing, scattered throughout the county. We plan to do case management on site for them in a variety of settings, but we will have, I believe, similar needs for communication among the workers and volunteers, and to connect to community services and other informational resources. As generous as this donation is, it may be that we can provide them directly to the seniors for their own ongoing use. They have been placed in different housing situations in a strange city and have many unmet needs to deal with in the long term, as well as safety concerns. There are situations and needs that are emerging as I type this and try to answer my phone, for which I am sure the donated phones will make helping possible.

While several individuals have come forward to help in this project, one company has demonstrated outstanding generosity and compassion: AIRMEDIA. AIRMEDIA launched its application development and deployment platform for mobile entertainment at DEMOfall last week, and had acquired cases of mobile phones to demonstrate its technology to market influencers. Then, CEO and founder Don Harris decided that the phones would be put to better use in Houston, with the victims and volunteers of Huricane Katrina.

I'm tremendously grateful to Don and AIRMEDIA for this donation.

You can still contribute to the project in one of two ways:

1. You can donate a mobile phone(s), with or without pre-paid service. We are collecting phones at the Guidewire Group office and plan to send a second shipment late next week.

2. You can donate money to purchase phones and/or pre-paid service plans. Checks can be made to "Big Bark Publishing," noting "Katrina Phone Project" in the memo field. Donations can be sent to the Guidewire Group office.

The address at Guidewire Group is:

Chris Shipley
Katrina Phone Project
Guidewire Group LLC
600 Townsend Street, Suite 120e
San Francisco, CA 94103

Posted by Chris Shipley at 02:35 PM | Comments (0) | TrackBack

Early Indications I: Open Source Beyond Software

In the September 5 issue of The New Yorker, Malcolm Gladwell explores the efforts by Mattson, a food R&D firm, to design a new cookie. The problem had tight constraints on such factors as fat, shelf stability, and calories. Three different teams competed with alternative proposals. One was a classic top-down, managed group led by a Mattson EVP. Another team was comprised of two strong hands-on associates. Finally, a so-called dream team was drawn from across the industry: Mars, Kraft, Keebler, Nestle, and Kellogg's were represented, among others. You'll have to read the article to find out who wins, but the project raises several important issues.

Mattson's head man, Steve Gundrum, works in Silicon Valley and carefully tracks the tech industry. For the bakeoff, he wanted to test his hypothesis that software engineering can provide lessons to other industries. The two-man team of peers was based on Kent Beck's notion of extreme programming, or XP, in which programmers attack projects in small increments with pairs of programmers taking turns at the keyboard. The dream team was an attempt to use the open-source model to generate great ideas based on the wealth of expertise represented by the participants.

As Gladwell points out, re-designing Unix is a fundamentally different exercise from inventing a tasty, nutritious treat: fixing ("many eyes make bugs shallow") is not imagining. The fifteen expert bakers all held strong opinions about their own contributions and couldn't unite behind a consensus idea, but the project manager was told to let the group find its own "natural rhythm" and so let the chaos play out. In the end the team's friction prevented its potential expertise from being plumbed; in contrast, one Mattson person was able to draw on previous experiences, including an insight that topical (surface-applied rather than baked-in) seasoning makes tortilla chips more compelling, and devise a marginally more popular entry. Gladwell argues that if the dream team had been smaller it would have functioned better, but that speculation evades the question of whether Linux was the right model in the first place.

Many other unanswered questions arise. Open source has many parallels to classic scientific research: open publication, peer review, and incremental progress. In both cases the primary incentives relate to reputation rather than commerce. Because the two communities and code bases share many similarities, it may follow that applying open source techniques to biology will amplify traditional pathways to progress. But biology can be methodically incremental in ways that new product design cannot.

Even in software, it's hard to point to examples in which an open-source community model generated something new and ready for a broad user base; Linux, Apache, MySQL, and the scripting languages (Python et al) cannot remotely be called mass-market software. Linux is also built for use: I'll update a storage-attachment routine because I have to do that task in my job. Compare the cookie bakers, who were designing for a market. Without the commercial distributions like Red Hat and SuSE, Linux would have very few user interface refinements, include much different documentation, and lack things like liability protection and warrantees that a market demands.

A new generation of for-profit companies is attempting to use open-source methods to build applications rather than infrastructure. So far it's too soon to tell whether SugarCRM can dent SAP, Siebel, or Salesforce, or whether Mitch Kapor's Open Source Applications Foundation can bring Chandler up to the level of Kapor's last Personal Information Manager, Lotus Agenda. Even though the teams can once again follow established patterns of an existing package, it still remains to be seen how well the open source model applies to more "productized" offerings. There's also money to be made in the integration of free and/or open source software with both commercial software and in-house applications, and VCs are backing several startups in this sector.

The question of money points to a connected nuance: open source relies on more than attracting mobs of people to attack a problem. The cookie dream team, for example, didn't share a goal or a reward mechanism. Through a variety of means, by contrast, the Linux community knows who's contributed what. Just because open source is not for profit, some observers fall into the altruism trap. Experience suggests there is a third way here: in no way can the model be described as a charity, which means that managing in or near an open source environment raises unique challenges.*

A major and often overlooked cornerstone of the open source model is transparency: beta code is released early and often precisely because it will be imperfect. The wide variety of public responses to the Hurricane Katrina disaster illustrates how these habits are becoming ingrained: many people have offered to help individual families or groups by opening their home or trying to direct financial assistance. Not only are FEMA and the Red Cross incapable of organizing relief in this way, but also the implications of such widespread personalized benevolence take us into new political, ethical, and even public-safety territory. Such an impulse challenges the traditional Jewish notion, which has many echoes in policy and practice, that both the donor and recipient of charity should be anonymous.

By one participant's own admission, the open source cookie model couldn't beat existing offerings from Pepperidge Farm. Metamarket's Open Fund mutual fund transparently published its holdings in real time and relied on a similar dream team of business and technology gurus, but shut down after 24 months of operation in August 2001. For all of open source's impact, which is difficult to overstate in its home terrain, we may have to wait some time until we see new drugs, fashions, or buildings built on parallel communities.

Perhaps the most potent discovery of the open source model's power occurred when people weren't expressly looking for it. In Howard Dean's 2003-4 campaign, word of mouth led to unprecedented numbers of small donations. The campaign's workings were visible to the community in ways most political organizations are not. Semi-tangible reward and recognition systems sprang up to motivate more and more volunteers to contribute energy, ideas, and time. The fact that the grass-roots movement in some ways overwhelmed the formal infrastructure was both a blessing and a curse to the campaign, which in fairness cannot be faulted for not being able to find a fulcrum for the unanticipated groundswell. (To be clear, Dean and his handlers can and should be faulted for plenty of other things.)

The overarching lesson, whether from code, campaigns, or cookies, is clear: new communications tools are facilitating new kinds of political, social, and economic interactions, the implications of which we're only beginning to comprehend.
_____
*This analysis from an economics paper on a non-software topic seems to fit perfectly: "We suggest that . . . the individual motivations supporting community governance are not captured by either the conventional self-interested preferences of 'Homo economicus' or by unconditional altruism towards one's fellow community members"

Samuel Bowles and Herbert Gintis, "Social Capital and Community Governance," Santa Fe Institute working paper 01-01-003

--Dr. John Jordan
Founder, Still River Research

Posted by John Jordan at 04:47 PM | TrackBack

The Week in Tech - 08/22/05

--Starting your week off with some politics: the Bush administration is objecting to the creation of a .xxx domain, saying it would create a virtual red-light district. Am I missing something here? Wouldn't that be a good thing? Would you rather have an adult bookstore next door to your home or 30 miles away in a designated area?

--Following on the recent story that blogs are not as prevalent as we think, RSS has even smaller numbers. A new Nielsen study finds that only 11% of blog readers use RSS and 66% of them don't even know what it is. Are you an RSS user? If not, why? Is this technology integral to the growth of the blogosphere?

--Have you heard of BugMeNot? It's a site that creates bogus log-ins for all those pesky registrations that so many media outlets require these days. Problem is, most of those sites are now wise to it and make a practice of disabling the log-ins on a daily basis. So BugMeNot is organizing a protest of sorts. It's called International Database Poisoning Day and the plan is to inundate media with fake registrations. Think it will work? Which side of the fence are you on - are registrations evil or necessary?

Posted by Carla Thompson at 08:21 AM | TrackBack

What's a Blog Really Worth?

It’s been a good long while since I posted (breaking all the rules I set for my clients), but in the last three months things have changed. Instead of my PR clients wanting to talk about writing blogs, now everyone wants to talk about monitoring and searching blogs. This tectonic plate shift seems to have occurred some time in late May or early June. That’s got to be a good thing – it seems like the entire blogosphere wants corporations to LISTEN to them, and now corporations are trying to figure out how to do just that.

The thing is, if a company wants to penetrate a market or build relationships in the blogosphere the single most important thing is listening. But how? While all of the blog search companies are now fast at work creating tools that do spiffy charts and graphs, (as ever, the wonderful engineers at the blog search companies are doing what engineers do – thinking about numbers, algorithms, ways to automatically generate data) my clients want qualitative analysis. What are the verbatim quotes? What do they mean in a larger sense? What are the big themes? What should we do with this data? No matter what anyone says, semantic analysis and sentiment analysis are a long way away from being truly accurate or truly useful.

For now, manual labor is the only way to REALLY understand what’s being said. We just had five interns spend about eight business days (yes, that’s 40 total business days) doing a blogosphere search and analysis on behalf of a consumer products client. But the results we got were dramatically different than what’s available via any of the blog search technology companies now. On the other hand, search technologies are evolving weekly. Mary Hodder did the best overview of what’s possible that I’ve seen. I expect a lot of change here in the next three months – a little less manual labor is always good!

When I’m not having conversations about blog monitoring, I’m having conversations about RSS. We have a long way to go before RSS penetration delivers on the promises that RSS technology makes, as this recent Nielsen study of blog readers makes clear. Where we are with RSS today reminds me of where we were with the Web in 1995 – I remember a national network news crew that came out to interview Sun executives about “the Internet.” Someone mentioned that Bank of America had a URL on a billboard on Highway 101 in Silicon Valley. This was such a major development that the news crew (who flew out from New York) asked us where the billboard was so they could shoot it. So if RSS is now where the Web was in 1995, there’s no way we can accurately or completely predict how RSS will change business, change media, change communication, and indeed change our day-to-day lives. All we know is that it will. That’s going to be even more interesting to watch!

--Lisa Poulson
Managing Director, Technology Practice
Burson-Marsteller San Francisco

Posted by Lisa Poulson at 08:15 AM | TrackBack

The Week in Tech - 08/15/05

--Google's boycott of CNET was the reigning topic last week and still seems to have life left in it. It raises all sorts of interesting questions about corporate PR; as a former PR person myself, I'm astonished at how badly Google has handled the situation. Where do you fall in this? With Google or CNET? Or somewhere in between?

--Great article from Inc. on the future of advertising. We can all agree that traditional methods and outlets are disappearing quickly for advertisers; the question is where they should go next. How personalized do we want ads to become? Do consumers have any say in the matter?

--I couldn't decide where to focus for this last item so I'll just settle for the theme of "Numbers!" Yahoo and Google are arguing about the size of their indices, an ultra-comprehensive study looks at the growth and dynamics of the blogosphere and how to use it toward political ends, and Feedster announces its Feedster 500 list, ranking the top 500 blogs with the most inbound links. Where will all these numbers lead us? Anywhere useful? Or is this medium too new to quantify?

Posted by Carla Thompson at 07:19 AM | TrackBack

Remembering Windows 95

It's a slow time in the technology industry. Breakthrough innovations are few and far between: the iPod is almost four years old, and it's hard to point to anything very interesting since then. Because revenue growth has slowed, mergers and acquisitions have become the main order of business at such companies as Oracle and, for a time, HP. Venture capital is increasingly migrating to biotech, physical security, and other sectors only tangentially related to computing. The industry could use an injection of energy, activity, and not least important, revenue.

Given this state of things, everyone is watching Microsoft, which is preparing to launch a new operating system next year. Last month, merely changing the name from code (Longhorn) to product (Vista) devoured a lot of attention, and more recently a stripped-down version of the product shipped to beta testers. The product has been a long time in coming, and the scope has been managed downward in several respects. Nevertheless, both Microsoft and the industry more generally see Vista as a potential jump-start very much in the same category as Windows 95 ten years ago. Because Vista represents the first opportunity in over ten years to begin with a "clean sheet of paper," unlike Windows 3.1, 98, ME, and 2000/XP, Bill Gates has repeatedly linked the two products in public.

Before looking at whether that association is warranted, it's worth remembering just what Windows 95 brought to market. In 1994, loading a browser onto Windows could be complicated by the operating system's lack of Internet Protocol support. DOS prompts were very much a day-to-day reality. File names were limited to eight letters, and CD-ROM support was spotty. E-mail was used only by fringe populations rather than being nearly universal. Adding hardware was more difficult than it needed to be, multitasking was nearly impossible for both processing and user interface reasons, and multimedia computing was, again, the province of only a small subset of users.

Windows 95 changed all of that. Even before Gates' famous "Pearl Harbor" speech helped turn Microsoft into an Internet-aware company, Windows 95 made Internet connection, through both browser and e-mail, a mass phenomenon. Multimedia, too, became an everyday event with better hardware support (including CD-ROM drivers). Overall usability, despite the initial confusion at using a "Start" button to shut down a machine, was enhanced by deeper camouflaging of the command-line layer, longer file names, and plug-and-play peripheral support. Finally, the operating system kept pace with Intel's chip performance and supported more realistic instances of multitasking.

The public responded. In the quarters immediately following the launch, retail sales of Windows 95 software soared, augmenting a strong increase in OEM sales of pre-loaded operating systems. Responding positively to improved networking support and promises of enhanced manageability, corporate IT organizations spent at record levels: Microsoft's operating systems revenues jumped from $1.5 billion in fiscal 1994 to $4.1 billion only two years later.

What might we deduce about the prospects for Vista based on the Windows 95 experience? First, it's hard to see a parallel burst of initial interest, with or without a Rolling Stones commercial. According to Microsoft, the benefits of Vista fall under five general headings:

-Reliability
-Security
-Deployment (for organizations managing large rollouts)
-Performance (including better power management and faster boot up)
-Management

These categories of improvements are clearly aimed at corporate buyers rather than individuals. Most of the things a consumer-grade user will see - including better desktop graphics, and RSS support within Internet Explorer - already come standard in Mac OS X. Backward compatibility will be substantial, to the point that many Vista improvements (including the IE browser) will be available as retrofits to Windows XP. These upgrades will also slow Vista adoption.

Here's another way of thinking about the comparison. In 1995, Microsoft turned the telephone network into an extension of the computer, or vice versa: between them AOL and Windows 95 made the Internet a household utility. In 2006, no parallel leap into an adjoining domain - think of home entertainment, specifically the television - will be supported. Bill Gates’ longstanding prediction about widespread adoption of a voice and speech interface to the PC will be addressed with Vista support, but even given a powerful standard processor configuration at its disposal, Vista still won't make masses of people retire their keyboards.

In short, Windows Vista looks like a solid product for corporate purchasers, but the lack of "gee-whiz" and "I've always wanted to be able to do that" desirability will prevent end-user excitement from reappearing the way it did ten years ago. An industry in search of the next big thing will have to keep looking.

--Dr. John Jordan
Founder, Still River Research

Posted by John Jordan at 12:53 PM | TrackBack

The Week in Tech - 08/08/05

--Ever wonder how honest those user reviews are on Amazon and other shopping sites? Here's a peek inside the process that should raise some questions.

--An interesting study came out of Forrester last week, finding that consumers' adoption of technology depends on their attitude toward tech. Tech optimists, for example, own an average of 6.3 devices, while pessimists own 4.4. Sounds common sense but the specifics spark further thinking.

--Even more from Forrester: looks like the blogosphere isn't as poised to take over the world as we thought. Fewer than 2 percent of online users read blogs. Does this surprise you? What will propel blogs into the force they already think they are?

--Fun article from CNET on ten technologies they miss. How about you? Any products/technologies you think should've been kept alive?

Posted by Carla Thompson at 07:27 AM | TrackBack

The Week in Tech - 08/01/05

--Fire up your laptops, granny - apparently e-mail is only for old people. A recent Pew research study found that U.S. teenagers prefer IM when talking to each other and only use e-mail when communicating with "parents or institutions." Should the tech industry pay attention and shift focus to IM and text messaging? Is e-mail destined to become the new snail mail?

--Sen. Tom Carper of Delaware is calling for a tax on Internet porn, proposing that the resulting funds go toward prosecuting child pornographers. The linked article is brief but the issues surrounding this are endless. Is this a first step toward a new form of online taxation? How much of this is a political ploy (Democrats needing a strong moral issue to rally behind)? Or is this simply a good idea whose time has come?

--Another acronym bites the dust. Accenture finds that CRM (customer relationship management) tools do not result in better customer service. Despite heavy corporate investment in CRM over the past few years - mostly on the advice of consulting firms like Accenture - over two-thirds of survey respondents cite no marked improvement. What went wrong? How can a company recover from bad internal investments?

Posted by Carla Thompson at 09:11 AM | TrackBack

Mainstream RSS: Coming Soon To A Screen Near You

By the end of the 1990s, when the Internet population in the U.S. was reaching critical numbers, AOL represented the average user - the inexperienced, not-so-savvy consumer who was interested in going online and who appreciated the ease of using AOL features. Now, the company’s access to millions of subscribers has turned it into the big “equalizer” on the Net. While many companies are trying to figure out RSS (Really Simple Syndication), looking to build business models around it or weave it into their work, AOL is bringing RSS to the average users’ home.

In his July 28th MediaPost article, Gavin O’Malley notes that AOL is partnering with the RSS search engine Feedster to provide its customers with a more customized and visually rich online experience. Surely, there will be an adoption curve among the AOL users. But at last the consumer will gain more control over content choice and the power of online syndication will be unleashed. AOL users who want more from their Web experience and want to select who reaches them will follow the early adopters and soon enough, RSS will become a mainstream application.

You may ask, “What’s the big deal with RSS? Why is a simple syndication tool so intriguing all of a sudden?” In reality, the demand for RSS was brewing at an increasingly higher temperature as marketers were pushing – and almost force feeding – content to their online audiences. The flood of pop-up offerings, e-newsletters and new-feature announcements eroded the end user’s control over a customized online experience. RSS changes all that and could even be considered the TiVo of online media. The difference between the impact of selective viewing on TV and the Internet is that smart online marketers are open to letting their audiences mix their own media. When visitors participate in creating their own content, they are more satisfied with their online experience and stay loyal to the sources that provide them with the flexibility. Imagine your favorite news sources bundled together and delivered to your desktop at a frequency of your choice, solely because you selected them and clicked “yes” to receive them. If you have a Web site or a blog, think of inching up on Google listings as the network of visitors who link to your area and receive updates grows.

Finally, freedom and democracy! The Internet experience is turning from what’s out there to what we make of it. For end users, whose inboxes are saturated with irrelevant messages, RSS helps manage the information overload. For marketers and content providers, RSS means more work to earn the respect of their audiences and hook them in. But there is also the promise of deeper and more solid, steady relationships once they get in front of their key targets. The rewards will not be limited to higher returns on marketing dollars. Analyses of RSS feeds/links and search-engine listings will provide marketers with tangible insights about audience preferences. Content providers will have more direction in producing “hit” pieces that will generate buzz through conversations, email messages and blogs. The transformation of RSS from a high-tech into a mainstream function will benefit consumers and marketers alike.

--Idil Cakim
Director, Knowledge Development
Burson-Marsteller

Posted by Idil Cakim at 07:58 AM | TrackBack

Virtual Trust

Business notice: I have officially formed a company, Still River Research, to deliver consulting and analysis services. The website (www.stillriverresearch.com) is now out of beta after generous suggestions from several newsletter readers. I am now booking projects for the fall; please notify me if I can be of service.

Security stories currently dominate much of the news. Between London, the Patriot Act, data thefts and losses, and renewed efforts to mandate identity cards for immigrants, it's difficult to help but feel that the world is a scary, dangerous place. My focus here, however, is on a near neighbor to security: trust, and how it can be both reinforced and undermined in new ways via digital networks.

It doesn't take long to see how various online efforts attempt to prove their trustworthiness:

- eBay relies on collated word-of-mouth to label bad apples and reassure good citizens. The company's institutionalized reputational currency ("view my 100% positive feedback!") is not patentable yet constitutes an enormous barrier to competitive entry.

- Some social network and dating sites use acquaintances as proxies: "you don't know me, but you know Mike, and Mike knows me, so I'm probably OK." As the Spokes and Friendsters of the world have discovered, trying to scale friend-of-a-friend trust is neither obvious nor cheap. When was the last time you used one of these services and could honestly say it was overwhelmingly positive?

- Other dating sites rely on the objective authority of social science. At eHarmony, potential daters are greeted by "relationship expert" Dr. Neil Clark Warren, who has built a "detailed questionnaire measur[ing] the intricate facets of a person, including the 29 dimensions that are most important in relationship success." Not only that, an American Psychological Association conference included a paper that suggests that eHarmony marriages are happier than marriages built on other matchmaking techniques.

- Some entities have had a difficult time recreating the trust they built offline in new media. According to Lawrence Baxter, chief e-commerce officer at Wachovia quoted in the July 21 Boston Globe, the bank can no longer use e-mail to communicate with customers because phishing attacks so skillfully recreate the look and feel of official correspondence that customers routinely delete real messages. Cost structures used in the online bank's business case, meanwhile, almost certainly are rendered obsolete by the need to revert to physical mail.

- Amidst all of the 10-year celebrations of e-commerce sites eBay, Amazon, c|net), some longtime readers may recall our discussion of Encyclopedia Britannica, which was nearly wiped off the map after over 225 years of operation. The company still exists, still publishes multi-volume hard-copy products, and recently announced it had re-formed and upgraded its panel of experts. That body, once home primarily to white males, now includes four Nobel laureates, two Pulitzer Prize winners, and a much more representative cultural makeup. Significantly, the last meeting of the board was ten years ago.

Several conclusions emerge:

1) Trust pays: eHarmony says they get 10,000-15,000 new members a day, each of whom has spent between $50 and $250.

2) Trust is expensive to build. As I searched for a new cell phone, Staples referred me to an outside vendor, but the vendor's site retains a Staples logo at the top, with the reminder that Staples will stand behind any transactions. The vendor's own site, with no such guarantee, sells the exact same service plan and phone for $50 less. Given the failure rate and overall dissatisfaction with U.S. wireless carriers, that $50 insurance looks very appealing.

3) There's a fallacy that identification can routinize trust: TSA screenings assume that someone with a driver's license that matches her face won't try to do anything bad to the aircraft. Conversely, someone who doesn't provide ID is kept off the plane: former Sun Microsystems employee John Gilmore is in federal court challenging the unwritten and/or secret law (nobody has yet produced it) that states that an "internal passport," as he calls it, is a condition for public transportation. (Here's the Gilmore site: http://www.papersplease.org/gilmore/index.html)

4) The Britannica case, in its contrast with Wikipedia, highlights a particular dynamic on the Net, that of open vs. closed credibility, or trust if you will. Much as "many eyes make bugs shallow," as Eric Raymond argued in The Cathedral and the Bazaar in reference to open-source software, Wikipedia establishes trust in the volume of researcher-reader-editors who will spot and fix errors. Unlike the Staples model, money is less effective than reputational currency - the same stock of "funds" that makes eBay work.

Britannica, on the other hand, seeks the credibility of the few: the Encyclopedia's editor stated that, "At a time when vast quantities of questionable information are available on the Internet and elsewhere, rigorous and reliable reference works are more important than ever." They are, but Britannica has a lot to answer for: the BBC reported that a 12-year old boy in London found five errors in two entries. Add to the errors the cost to fix paper editions, and the lag between error detection and correction - how many readers will propagate errors in the interval?

5) In the physical world, institutions can convey cues that reassure patrons of their solidity and presumably good intentions: marble pillars on a bank, brightly lit colorful plastic in a strip mall, even flight attendants' and pilots' uniforms. Online, Wells Fargo, Target, or Delta can't convey the same kind of authority in pixels, so the task becomes twofold: connecting to the existing credibility through branding, and capturing various kinds of word of mouth.

In the coming months, several trust stories will bear watching:

- Pharmaceutical companies, particularly in the COX-2 (Vioxx) neighborhood, have suffered major reputational damage, much of it related to online behavior, and the legal proceedings will be only one element of a fight to regain public trust.

- The 2008 presidential race will begin heating up, particularly the early-stage fundraising. Watch for the lessons various candidates learned from the Howard Dean experience.

- After the golden age of the CEO as hero, the past few years have reversed the public perception of business leaders. Huge severance packages following poor shareholder results, lawsuits, guilty verdicts, and general tarnish on the aura make for a tough time to be a leader. Will Mark Hurd fare better at HP than did Carly Fiorina? Can Ford and GM rise to the challenge of viability and profitability? Will Boeing build a lead on Airbus? In each case, much will hinge on how much trust the leader can generate in his or her own company, the market, and the financial community. So far, by the way, it appears that Hurd understands the power of e-mail better than Harry Stonecipher at Boeing, who apparently let it become his undoing.

--John Jordan
Founder, Still River Research

Posted by John Jordan at 07:24 AM | TrackBack

The Week in Tech - 07/18/05

--Online video has been the topic of choice in the past week. A persistent rumor about an upcoming Apple video iPod appears to be true. CBS News will offer a 24-hour news network over broadband. And AOL followed its phenomenal Live 8 success with the announcement of Network Live, a joint entertainment venture. Television and film have ever-so-slowly migrated to the Web over the years; what's the final destination? Will the TV set in the family room eventually become obsolete?

--This little gem received big attention in the blogosphere last week, if only for one day, and got me thinking about the bigger issue at hand. Vodafone published a survey in the UK focused on women and mobile phones, with the conclusion that (gasp) women are informed users who know what they want. Oh, and they don't go for "pretty pink phones with sparkly bits on." What got me thinking - does a gender divide exist in technology or did that line disappear years ago? Apple doesn't create two separate campaigns for male and female iPod users - should they?

--Record labels are growing ruthless in the download fight. An Australian man was found guilty of copyright infringement, as was his ISP. The kicker? He merely hyperlinked to recordings on other sites and had nothing to do with hosting the files. This could easily get out of hand: the blogging community would suffer immensely if hyperlinking becomes a crime.

Posted by Carla Thompson at 06:43 AM | TrackBack

Signals and Noise on Broadband

I think there are some patterns emerging from some seemingly unrelated recent developments:

Item: After the mass transit bombings in London, what used to be called "man on the street" perspectives provided some of the most vivid news sources. The BBC has long solicited cameraphone images and personal accounts, and this week's events proved the value of this approach as one element in comprehensive news gathering.

Item: Wasting no time integrating the Keyhole technology, Google launched a free beta of Google Earth, an even more addictive variation on the satellite imagery embedded in Google Maps. In the Wall Street Journal, Walt Mossberg questioned the utility, but not the fun and wonderment fueled by the technology. For example, Google Siteseeing, a weblog unaffiliated with the company, gathers readers' harvests of interesting (for whatever reason) images from the air: shadows of airplanes about to land, smoke plumes, college campuses with giant initials on nearby hillsides, Bill Gates' house. The site has proved so popular it's had to rehost onto commercial-grade infrastructure. (For lots more on this theme, see the coverage of O'Reilly's Where 2.0 conference: http://www.oreillynet.com/where2005/.)

Item: Earlier this month, a carrier in a major European nation announced 3G cellular service over which it will broadcast 42 channels of television to mobile devices. People would be accustomed to this kind of activity in South Korea, but in France? France Telecom is involved along with Orange, giving rise to speculation that national policymakers have decided to emphasize broadband as an economic growth engine.

Item: Apple's new OS, nicknamed Tiger, includes an RSS feed reader within the Safari browser. It wasn't that long ago that people who wanted aggregated feeds needed to install and understand scripting languages. Bloglines changed that, but Tiger appears to be the cleanest implementation to date: I've heard of people upgrading only for this one feature.

Item: After MTV's North American feed of the Live 8 performances was interrupted by ads - midsong - music fans were delighted to see AOL open up a nearly complete video archive of six venues' performances. Apple's Quicktime format is supported, but not Firefox; in Internet Explorer, the viewer is treated to annoying Microsoft ads.

Conclusion 1: Diversity is good. Even without worries of terrorist attacks, viruses, and tightly coupled grids that may or may not have adequate bulkheads to prevent cascading failure (as in the US-Canada power failure of two years ago), convenience and basic prudence suggest that heterogeneous communications channels make a lot of sense. Anyone who switches to sole reliance on voice over IP, the cable company, cellular, instant messaging, or anything else risks total lights-out, as London residents discovered this week. (According to the Wall Street Journal, officials decided against shutting down the cellular networks; the lack of service was apparently caused by heavy traffic.) The success of AOL undoubtedly spurred MTV's decision to re-broadcast Live 8 without interruption.

Conclusion 2: Innovation is happening from both top down (as in Google Labs) and bottom up. Historically the Web has made it easy to find big news sources, but with RSS, it's similarly simple to find small ones. I'm finding it educational to watch media outlets attempt to include and/or co-opt blogs: the Wall Street Journal regularly includes Glenn (Instapundit) Reynolds in the print paper, while publications all over the map are including various blog voices. It's unclear as to what editorial oversight news-organ bloggers enjoy, how they're paid, and what precedence the "day job" medium has with regard to liability, scoops, retractions, and the like. There's still much to be sorted out here.

Conclusion 3: Broadband makes things happen. Whether it's telemedicine, gaming, or secure transmission of private data, its low broadband penetration means that untapped opportunities abound in the United States. As of March, the OECD rated the U.S. 17th out of 30 nations in terms of broadband service cost, but this is deceiving as the U.S. ranks only 6th in average broadband speed: Japan's standard service is merely 12 times as fast (26 MB/sec to 2, with a theoretical limit of 51; fiber to the home is expanding rapidly and delivers 100 MB/sec). In short, U.S. customers pay a lot for service that's only charitably defined as mid-band.

The implications can be found in multiple domains. For example, the recent data thefts are increasingly being reported not from hackers but from boxes of backup tapes falling off the back of trucks. It's an open question whether an employee or customer would rather have her sensitive information carried on MCI fiber or a FedEx van.

Remote work is an even more pressing example: between 1970 and 2002, vehicle miles traveled in U.S. urban areas have tripled. Road mileage has in no way kept pace, and the next thirty years will be worse for congestion: few states can afford to maintain the roads and bridges they already have, much less build more. Broadband promises to help create alternative ways of organizing resources, with Jet Blue's virtual call center (consisting of work-at-home customer service reps) serving as one real-life progenitor.

Other promising signs keep cropping up: on the connection front, services like Sprint's EVDO and Verizon's FiOS support reasonably symmetric speeds up and down in part because the business case for customer uploading (digital photos and the like) is getting harder to ignore. Furthermore, increasingly multi-modal communications media like the Weather Channel on cell phones and Google's purchase of Dodgeball support heterogeneous redundancy. Finally, at the FCC and elsewhere people who can make a difference seem to be raising communication policy to a slightly higher level of import.

One great thing about the current cornucopia of technologies is that some can be deployed very rapidly, to the point where Japan, for example, was able to leapfrog much of the world in a matter of a few years. Who will be the next Korea, the next Japan, the next Sweden? It's no exaggeration to say that the whole world is indeed watching - and, increasingly, contributing to content creation and distribution.

--Dr. John M. Jordan

John Jordan is a member of the Guidewire Group Sounding Board.

Posted by John Jordan at 02:33 PM | TrackBack

The Week in Tech - 07/11/05

--Where did you turn for coverage of the London attacks last week? I found myself clicking between CNN and blogs; guess which delivered more? Citizens around the world quickly covered this story in their own individual ways, from phone cam shots that made it onto the evening news to conspiracy theorists on the Daily Kos. Boing Boing's consistently updated entry beat the heck out of anything the big guys put together.

--Is Apple about to become a phone company? Forbes thinks so.

--PC World reviews Longhorn (the next version of Windows) in its August issue, with a couple of interesting screenshots included. In a nutshell, they deem it long on graphics and search but short on productivity or security breakthroughs.

--Need a hotspot but don't want to go to jail? Build your own! Popular Science has instructions on how to turn your backpack into a portable WiFi hotspot. And it's solar-powered to boot. This is either innovation at its best or geekery run amok. You decide.

Posted by Carla Thompson at 12:32 PM | TrackBack

The Week in Tech - 07/05/05

--Sun announced its first-ever laptop last week, along with several other initiatives not-so-subtly aimed at boosting revenue. At the risk of echoing recent magazine covers, what will it take to save Sun? How did they get in this mess in the first place? All the major tech players took financial hits when the bottom fell out, but one could argue that none did so much as Sun. Why?

--It was only a matter of time... A new UK publishing house called The Friday Project emerged last week, with the sole purpose of turning Internet content into "the world's finest books." On the one hand, this makes complete sense; the amount of talented creative writing in the blogosphere is enormous. But for every Daily Kos, there are 1,000 treatises on Why I Love My Cat and What I Ate for Breakfast. Will this democratize the publishing world or poison it?

--New Scientist has a fascinating piece on the future of technological innovation. One prominent physicist argues that we're about to enter the "dark ages" of innovation, with all major branches of the technological tree having been discovered. As you can imagine, this theory meets with some dissent. Where do you sit in this debate? Have we run out of ideas? Or are we venturing into entirely different territory, starting a new tree from the ground up?

Posted by Carla Thompson at 08:46 AM | TrackBack

Leading Questions for Week of 6/27/05

--Who's tired of hearing about identity theft? Unfortunately, it's an inescapable topic these days, with new lapses occurring on an almost weekly basis. NBC Nightly News is covering it daily this week and it's the cover of Newsweek.
**Questions: What's the solution, if there even is one? Do we need to step back and take an entirely new approach to information disclosure? Could this be the next boom in technology - securing one's identity?

--A customizable keyboard was the talk of tech blogs recently. Users customize the key layout and functionality according to personal preferences and work style.
**Questions: How will data entry evolve in the next few years? Is voice-enabled entry dead in the water? The keyboard seems a bit 20th century; where can we go from here?

--Microsoft announced that it will tie RSS functionality directly into the next version of Windows. Some hail it as a big step toward mainstreaming RSS, while others worry that the company is trying to dictate the technology's direction.
**Questions: How prevalent is RSS in your world? Do you encounter limitations you'd like to see changed? Does the entry of Microsoft into a market signal a death knell for that technology or a broadening of innovation?

Posted by Carla Thompson at 08:19 AM | TrackBack

Let’s go orienteering!

Last week I spent three fascinating days in Zaragoza, Spain at Guidewire’s Innovate!Europe 2005, where I learned a ton about what works and what doesn’t for tech start-ups across the European markets. Mårten Mickos’ talk was a terrific distillation of the cultural drivers that help and hurt innovation in embryo. The event was a fiesta of opportunities to observe cultural drivers - a big part of orienteering.

To crib from thesaurus.com, to “orient” means to:
· Familiarize, adapt, locate
· Inform, advise, edify, enlighten, initiate, instruct, prepare
· Affect, apply, connect, refer, unite
· Or, if one is of a sinister mind: distort, angle, bias, influence, point, twist, warp

In my first Guidewire post I talked about how important it is for companies to understand their blogosphere (in my opinion everybody’s blogosphere is a bit different). While I was in Europe, I stopped by Burson’s offices in Paris and Madrid to share what I’ve distilled about corporations and blogging over the last year or so.

My standard advice these days is for companies to take the blogosphere in three steps – evaluate, participate, and create. Some companies should never do more than simply evaluate and monitor their blogosphere. Some may choose to participate via existing blogs, and still fewer may choose to create their own blogs. Many corporations have it backwards though - they want to jump in to creating first. This can backfire; some prominent companies have jumped into the deep end headfirst and suffered for it.

Evaluation – the essential step every corporation must take - is all about orienteering. Companies need to familiarize themselves with their blogosphere. They need to adapt themselves to using an RSS reader and checking it as often as they check their other news sources. They need to locate the key bloggers. They need to map their blogosphere or hire a company, like us or one of several others, to do it for them!

Once they establish the basic lay of the land, companies can be informed, edified, enlightened and instructed by what they find, and in turn they can instruct their peers inside the organization about what they find and where they find it. A great example of this is Andrew Carton, creator of treonauts.com, who I met at Innovate! last week. His site is an invaluable resource not just for Palm, but for anyone who makes or wants to make handhelds.

If the company is shrewd, they will then apply what they learn and see. What they learn from their blogosphere can affect every aspect of their interactions with the public – customer service, sales, public relations, etc. If they’re really shrewd, they’ll establish valuable connections with bloggers as well.

Corporations who have been foolish enough to try to bias, influence or twist have – at least so far - failed, thank heavens.

While there aren’t well-defined maps that companies can easily pick up and apply to the blogosphere, the time and effort to truly orienteer within it is vital. Those who make the effort will find resources for their own businesses that will be truly enlightening.

Posted by Lisa Poulson at 08:41 AM | Comments (0) | TrackBack

Leading Questions for Week of 6/20/05

--First Intel, now Dell. Michael Dell expressed interest last week in licensing Apple's Mac OS X. Steve Jobs has no plans to license it for PC usage - yet. Will this change his mind?
**Questions: Is a Mac-PC hybrid viable? Do recent developments signal the end of a long-festering war? How would technology as a whole be affected by such a shift in thinking?

--A piece by Declan McCullagh generated ripples in the blogosphere and among privacy advocates. The government appears to be toying with the idea of requiring ISPs to retain records of their customers' online activities. This is a tricky issue, as the original target is child pornographers. But once implemented, it could easily be used for all manner of investigations
**Questions: Internet privacy could not be a hotter button right now; what must happen to move us to the next level? Will users need to make concessions in certain areas? Or should the Internet remain the sole un-policed, un-monitored bastion of society?

--One day in the near future, we'll look back fondly on a time when Google didn't have its finger in every area of our lives. Or will we? The company plans to launch an electronic payment service this year that will directly rival PayPal.
**Questions: After all the security mishaps of late, should we be handing over all our personal data to one company? Or is a unified approach the answer to breaches? Is Google overreaching? How much diversification can one company handle?

Posted by Carla Thompson at 07:47 AM | TrackBack

News by Me-Media

“…Consumers will turn to a more personalized array of media, drawing on information from a variety of sources.”
- Paul Holmes, Holmes Report

I read this quote in Holmes Report’s May 30th issue while preparing for Burson-Marsteller Chicago’s blogging seminar “Midwestern Views on Social Impact and Moneymaking.” It made me think back to the idealist teachings of journalism professor Ben Bagdikian, who spoke about corporate influence in traditional media organizations in his widely popular book, the Media Monopoly. Thanks to the rise of blogs and public discussion forums, media power dynamics are shifting away from what Bagdikian described. Instead, consumers are finding alternatives to institutionalized media voiceswhile clients and agencies fine-tune their tools to analyze the alternative media. No one has yet come up with the perfect model though.

My thoughts were echoed by Dr. Clarke Caywood, from Northwestern University, a fellow panelist at the Burson event. Dr. Caywood suggested that we might be approaching this sphere of irregularity with the wrong tools. He pointed out that studying Internet influencers and their impact on online word-of-mouth was a traditional approach following well-tested academic models. The irregular nature of the blogosphere, Caywood said, may require newer communication models as distinct as the channel itself.

So far, studies about the Internet have focused on the size of the blogger nation. How many people are blogging? How many are reading? What percentages of them are influential? In light of Dr. Caywood’s comments, perhaps we should reverse these questions and find out what e-fluence is from a blogger’s perspective.

Hearing other panelists such as Martha Irvine (a national writer for the AP), Charlie Madigan (senior correspondent and Sunday Perspective editor of the Chicago Tribune) and Chuck Salter (senior writer and Chicago bureau chief of Fast Company) discuss the changing face of journalism and the social impact of blogging, I came up with my own short list of how bloggers garner clout. Bloggers establish themselves as authorities and strengthen their reputation by:

- Being authentic: Unedited writing with a genuine tone is closely linked with credibility in the eyes of blog readers.

- Having an individual voice (i.e., Me-Media): I raised an eyebrow when I heard that Madigan’s blog for the Chicago paper has directed him to write op-ed pieces where he can assert his personal point-of-view as a journalist. This was an interesting hybrid, where an established paper was absorbing an alternative reporting approach while drawing clear boundaries between fact-based reporting and personal remarks. As Madigan noted, the blogosphere possesses a “personal culture,” not to be confused with an institution based in a commercial setting.

- Revealing facts and information otherwise unavailable to the public: The open-diary format of blogs allow a larger community to preview lifestyles and experiences they may not have known otherwise. While some of this information may seem too personal, don’t these accounts resemble the “people stories” on acclaimed TV news programs?

This is the supply side of the equation. What about the demand? Why are increasing numbers of Internet users relying on blog reports as part of their daily media regimen? We are finally becoming comfortable in the virtual village!

As more people turn to the Web to verify the news, seek their online buddies’ opinions and put their two-cents out there, we will have to change our understanding of how information flows in society and what type of knowledge impacts our everyday decisions. Marketers are quick to count industries where word-of-mouth endorsements weigh as much, if not more, than traditional media messages. This list - which includes healthcare, fashion, travel and entertainment - is sure to expand, as boundaries between alternative and traditional media fade and consumers become just as likely to get credible information from blogs as they have from traditional sources. Expertise is shifting to me-media.

--Idil Cakim
Director, Knowledge Development
Burson-Marsteller

Posted by Idil Cakim at 07:38 AM | Comments (0) | TrackBack

Can IT Fix Health Care?

“The solution seems obvious: to get all the information about patients out of paper files and into electronic databases that -- and this is the crucial point -- can connect to one another so that any doctor can access all the information that he needs to help any given patient at any time in any place. In other words, the solution is not merely to use computers, but to link the systems of doctors, hospitals, laboratories, pharmacies and insurers, thus making them, in the jargon, ‘interoperable’.”
-"Special report: IT in the health-care industry," The Economist, April 30, 2005, p. 65 (online at http://www.economist.com/displaystory.cfm?story_id=3909439)

There's no question that North American medicine is approaching a crisis. According to the Washington Post, 45 million Americans carry no health insurance. Between 44,000 and 98,000 people are estimated to die every year from preventable medical errors such as drug interactions; the fact that the statistics are so vague testifies to the problem. The U.S. leads the world in health care spending per capita by a large margin ($4500 vs. $2500 for the runners-up: Germany, Luxembourg, and Switzerland), but the life expectancy ranks 27th, near that of Cuba, which is reported to spend about 1/25th as much per capita. Information technology has made industries such as package delivery, retail, and mutual funds more efficient: can health care benefit from similar gains?

The farther one looks into this issue, the more tangled the questions get. Let me assert at the outset that I believe electronic medical records are a good idea. But for reasons outlined below, IT by itself falls far short of meeting the challenge of rethinking health and health care. Any industry with the emotional freight, economic impact, and cultural significance of medicine can't be analyzed closely in a few paragraphs, but perhaps these ideas might begin discussion in other venues.

1) Definitions
What does the health care system purport to deliver? If longevity is the answer, clearly much less money could be spent to bring U.S. life expectancy closer to Australia, where people live an average of three years longer. But health means more than years: the phrase "quality of life" hints at the notion that we seek something non-quantifiable from doctors, therapists, nutritionists, and others. At a macro level, no one can assess how well a health care system works because the metrics lack explanatory power: we know, roughly, how much money goes in to a hospital, HMO, or even economic sector, but we don't know much about the outputs.

For example, should health care make us even "better than well"? As the bioethicist Carl Elliott compellingly argues in his book of that name, a substantial part of our investment in medicine, nutrition, and surgery is enhancement beyond what's naturally possible. Erectile dysfunction pills, steroids, implants, and blood doping are no longer the province of celebrities and world-class athletes. Not only can we not define health on its lower baseline, it's getting more and more difficult to know where it stops on the top bound as well.

Finally, Americans at large don't seem to view death as natural, even though it's one of the very few things that happens to absolutely everyone. Within many outposts of the health care system, death is regarded as a failure of technology, to the point where central lines, respirators, and other interventions are applied to people who are naturally coming to the end of life. This approach of course incurs astronomical costs, but it is a predictable outcome of a heavily technology-driven approach to care.

2) Health care as car repair for people?
Speaking in gross generalizations, U.S. hospitals are not run to deliver health; they're better described as sickness-remediation facilities. The ambiguous position of women who deliver babies demonstrates the primary orientation. Many of the institutional interventions and signals (calling the woman a "patient," for example) are shared with the sickness-remediation side of the house even though birth is not morbid under most circumstances. Some hospitals are turning this contradiction into a marketing opportunity: plushly appointed "birthing centers" have the stated aim of making the new mom a satisfied customer. "I had such a good experience having Max and Ashley at XYZ Medical Center," the intended logic goes, "that I want them taking care of Dad's heart problems."

Understanding health care as sickness-remediation has several corollaries. Doctors are deeply protective of their hard-won cultural authority, which they guard with language, apparel, and other mechanisms, but the parallels between a hospital and a car-repair garage run deep. After Descartes split the mind from the body, medicine followed the ontology of science to divide fields of inquiry -- and presumably repair -- into discrete units.

At teaching hospitals especially, patients frequently report feeling less like a person and more like a sum of sub-systems. Rashes are for dermatology, heart blockages set off a tug-of-war between surgeons and cardiologists, joint pain is orthopedics or maybe endocrinology. Root-cause analysis frequently falls to secondary priority as the patient is reduced to his or her compartmentalized complaints and metrics. Pain is no service's specialty but many patients' primary concern. Systems integration between the sub-specialties often falls to floor nurses and the patient's advocate if he or she can find one. The situation might be different if one is fortunate enough to have access to a hospitalist: a new specialty that addresses the state of being hospitalized, which the numbers show to be more deadly than car crashes. (To restate: something on the order of 100,000 people die in the U.S. every year from preventable medical accidents.)

The division of the patient into sub-systems that map to professional fields has many consequences. Attention focuses on the disease state, rather than the path that led to that juncture: preventive care lags far behind crisis management in glamour, funding, and attention. Diabetes provides a current example. Drug companies have focused large sums of money on insulin therapies, a treatment program that can change millions of peoples' lives. But when public-health authorities try to warn against obesity as a preventive attack on diabetes, soft drink and other lobbies immediately spring into action.

Finally, Western medicine's claim to be evidence-based contradicts the lack of definitive evidence for ultimate consequences. The practice of performing autopsies in cases of death where the cause is unclear has dropped steadily and steeply, to the point where doctors and families typically do not know what killed a sizable population of patients. A study at the University of Michigan estimated that almost 50% of hospital patients died of a condition for which they were not receiving treatment. It's potentially the same situation as storeowner John Wanamaker bemoaning that half of his advertising budget was being wasted, but not knowing which half.

3) Following the money
Health care costs money, involves scarcities and surplus, and employs millions of people. As such, it constitutes a market - but one that fails to run under conventional market mechanisms. (For example, excess inventory, in the form of unbooked surgical times, let's say, is neither auctioned to the highest bidder nor put on sale to clear the market.) The parties that pay are rarely the parties whose health is being treated; the parties that deliver care lack detailed cost data and therefore price services only in the loosest sense; and the alignment of patient preference with greater good through the lens of for-profit insurers has many repercussions.

Consider a few market-driven sub-optimizations:
-Chief executives at HMOs are rewarded for cost cutting, which often translates to cuts in hospital reimbursement. Hospitals, meanwhile, are frequently not-for-profit institutions, many of which have been forced to close their doors in the past decade.
-Arrangements to pay for certain kinds of care for the uninsured introduce further costs, and further kinds of costs, into an already complex set of financial flows.
-As Richard Titmuss showed over 30 years ago in The Gift Relationship, markets don't make sense for certain kinds of social goods. In his study, paying for blood donation lowered the amount and quality of blood available for transfusion; more recently, similar paradoxes and ethical issues have arisen regarding tissue and organ donation.
-Insurers prefer to pay for tangible rather than intangible services. Hospitals respond by building labs and imaging centers as opposed to mental health facilities, where services like psychiatric nursing are rarely covered.
-Once they build labs, hospitals want them utilized, so there's further pressure (in addition to litigation-induced defensiveness) for technological evidence-gathering rather than time-consuming medical art such as history-taking and palpation, for which doctors are not reimbursed.
-As a result, conditions with clear diagnoses (like fractures) are treated more favorably in economic terms, and therefore in interventional terms, than conditions such as allergies or neck pain that lack "hard" diagnostics. Once again, the vast number of people with mental health issues are grossly underserved.
-Medical schools can no longer afford for their professors to do non-reimbursable things like teach or serve on national standards bodies. The doctors need to bring in grant money to fund research and insurance money for their clinical time. Teaching can be highly uneconomical for all concerned. One reason for a shortage of nurses, meanwhile, is a shortage of nursing professors.

4) Where can IT help?

Information technology has made significant improvements possible in business settings with well-defined, repeatable processes like originating a loan or filling an order. Medicine involves some processes that fit this description, but it also involves a lot of impossible-to-predict scheduling, healing as art rather than science, and institutionalized barriers to communication.

IT is currently used in four broad medical areas: billing and finance, supply chain and logistics, imaging and instrumentation, and patient care. Patient registration is an obvious example of the first; lines and foodservice the second; MRIs, blood tests, and bedside monitoring the third; and physician order entry, patient care notes, and prescription writing the fourth. Each type of automation introduces changes in work habits, incentives, and costs to various parties in the equation.

Information regarding health and information regarding money often follow parallel paths: if I get stitched up after falling on my chin, the insurance company is billed for an emergency department visit and a suture kit at the same time that the hospital logs my visit -- and hopefully flags any known antibiotic allergies. Meanwhile the interests and incentives are frequently anything but parallel: I might want a plastic surgeon to suture my face; the insurer prefers a physician's assistant. From the patient's perspective, having systems that more seamlessly interoperate with the HMO may not be positive if that results in fewer choices or a perceived reduction in the quality of care. On the provider side, the hospital and the plastic surgeon will send separate bills, each hoping for payment but neither coordinating with the other. Bills frequently appear in a matter of days, with the issuer hoping to get paid first, before the patient realizes any potential errors in calculating co-pay or deductible. The amount of time and money spent on administering the current dysfunctional multi-payer system is impossible to conceive.

Privacy issues are non-trivial. Given that large-scale breaches of personal information are almost daily news, what assurance will patients have that a complex medical system will do a better job shielding privacy than Citigroup or LexisNexis? With genomic predictors of health -- and potential cost for insurance coverage -- around the corner, how will patients' and insurers' claims on that information be reconciled?

A number of services currently let individuals combine personal control and portability of their records. It's easy to see how such an approach may not scale: something as trivial as password-resets in corporate computing environments already involves sizeable costs; now think about managing the sum of past and present patients and employees as a user base with access to the most sensitive information imaginable. With portable devices proliferating, potential paths of entry multiply both the security perimeter and the cost of securing it: think of teenage hackers trying to find their way to Paris Hilton's medical records rather than her Sidekick.

Hospitals already tend to treat privacy as an inconvenience -- witness the universal use of the ridiculous johnnies, which do more to demean the patient than to improve quality of care. The medical record doesn't even belong to the person whose condition it documents. American data privacy standards, even after HIPAA, lag behind those in the European Union. From such a primitive baseline, getting to a new state of shared accountability, access, and privacy will take far more diplomacy than systems development.

Spending on diagnostic technology currently outpaces patient care IT. Hospitals routinely advertise less confining MRI machines, digital mammography, and 3D echocardiography; it's less easy to impress constituencies with effective metadata for patient care notes, for example. (Some computerized record systems merely capture images of handwritten notes with only minimal indexing.) After these usually expensive machines produce their intended results, the process by which diagnosticians and ultimately caregivers use those results is often haphazard: many tests are never consulted, or compared to previous results -- particularly if they were generated somewhere else. NIH doesn't just stand for National Institutes of Health; Not Invented Here is also alive and well in hospitals.

Back in the early days of reengineering, when technology and process change were envisioned as a potent one-two punch in the gut of inefficiency, the phrase "don't pave the cowpaths" was frequently used as shorthand. Given that medicine can only be routinized to a certain degree, and given that many structural elements contribute to the current state of affairs, it's useful to recall the old mantra. Without new ways of organizing the vastness of a longitudinal medical record, for example, physicians could easily find themselves buried in a haystack of records, searching for a needle without a magnet. Merely automating a bad process rarely solves any problems, and usually creates big new ones.

Change comes slowly to medicine, and the application of technology depends, here as always, on the incentives for different parties to adopt new ways of doing things. Computerized approaches to caregiving include expert knowledge bases, automated lockouts much like those in commercial aviation, and medical simulators for training students and experienced practitioners alike. Each of these has proven benefits, but only limited deployment. Further benefits could come from well care and preventive medicine, but these areas have proven less amenable to the current style of IT intensification. Until the reform efforts such as Leapfrog can address the culture, process, and incentive issues in patient care, the increase in clinical IT investment will do little to drive breakthrough change in the length and quality of Americans' lives.

Posted by John Jordan at 11:30 AM | TrackBack

Leading Questions for Week of 6/13/05

--I leave town for one week and miss an historic event in the computing world. Apple announced early last week that it was terminating its partnership with IBM and switching its computers to Intel chips. Opinions are all over the map on this. What's yours?

--We've discussed often on Guidewire the role of blogging in corporate communications. Now "blogger" has become the latest job opening at a growing number of companies. Businesses are hiring workers to write blogs, looking for candidates who effectively achieve the casual, conversational tone of a blog.
**Questions: Does this go against the original intent and aims of the blogging community? Or is it a natural next step for blogs? Can it enable a new level of open communication between companies and their customers?

--Hot Button topic of the week - Microsoft is helping the Chinese government censor its Web sites. Affecting all blogs created through the MSN space, the policy forbids certain words such as "democracy" and "human rights" and Microsoft, along with its Chinese business partner, is working with authorities to block such words.
**Questions: Where should Microsoft draw the line? Is its duty as a vendor to provide whatever the client requests? How far should a business go for its customers?

Posted by Carla Thompson at 06:02 AM | TrackBack

Leading Questions for Week of 5/31/05

--Very timely subject with Guidewire's Innovate!Europe coming up - French voters' rejection of the EU constitution.
*Questions: What does this mean for the Euro? How deeply will this affect Europe's technological landscape? Does a lack of uniformity translate into lack of innovation?

--Tech columnist David Sheets contends there is no safe Web browser. Internet Explorer has become synonymous with security breaches but recent gaffes by Netscape and Firefox strengthen his point.
*Questions: What is the alternative? Where do you see the Web browser in 10 years? Could this be the next frontier of tech innovation - finding a better, more secure way to access the Internet?

--The White House has asked a federal appeals court to grant it access to ISP provider information. A judge last year blocked the government from searching communication records such as this, but the Bush administration argues it needs the information to fight terrorism.
*Questions: Where does one draw the line when it comes to technological privacy? Is this a freedom we should concede in the new age of terrorism? Or is the potential for abuse too great?

Posted by Carla Thompson at 07:28 AM | TrackBack

Word-of-MouthTrickles Offline and Online

A recent NOP World release, “Word of Mouth Ain’t Just Blogging,” stated that in-person conversations are much more likely to be the source of word-of-mouth than electronic communications such as e-mail and blogging. The trend observed in the general population is even stronger among influentialsSM who shape the masses’ purchasing decisions by advising them on what, how, where and when to buy. The sound research follows a legacy of decades of ongoing surveys among public opinion leaders. And NOP World is correct in recommending companies not to “put all their eggs into one marketing basket [and] develop integrated plans that mediate all media.”

As a researcher interested in investigating the Internet’s role in the communication flow, I see a clear path to advance the body of work about word-of-mouth and marketing: Consider online influentials as a distinct breed of consumer, not simply a segment overlapping with the traditional group of influencers.

My view is based on Burson-Marsteller’s online influencer (or e-fluentials®) studies, ongoing since 1999. We modeled the e-fluentials after NOP World’s definition of influentials and learned that electronic communications are just as viable for e-fluentials as traditional word-of-mouth channels. In other words, these Web-savvy public opinion leaders are equally comfortable telling a story over e-mail or sharing it in-person.

This year’s study, focusing on e-fluentials who use high-end technologies (i.e., tech-fluentials) showed the same trend. For instance, tech-fluentials who actively blog are almost as likely to pass along a story about a company by talking in-person/over the phone (77%) as they are by forwarding an e-mail (82%). Their ease in spreading the word about companies by posting to discussion boards (55%), writing to company Web sites (50%) and sending instant messages (50%) suggests that these tech-fluential bloggers are multi-channel consumers.

Content also affects tech-fluential bloggers’ choice of communication channels when they would like to spread information to their networks. They pick communication channels depending on the tone of their message:

--Tech-fluential bloggers are just as likely to spread a negative story (76%) about a company in-person, as they are to share a positive story (77%).

--However, they are more likely to relay negative stories than positive ones on company Web sites (63% vs. 46%), discussion boards (58% vs. 51%) and opinion Web sites (53% vs. 37%).

--They are more likely to send e-mails (84% vs. 79%) and instant messages (54% vs. 46%) when talking about their positive experiences with companies, than when mentioning their negative interactions.

Thinking of the communications process in separate silos (e.g., online vs. offline) may work well for measuring the returns on a media plan. However, everyday conversations about companies, brands and products flow over a much more complex and intertwined set of channels. Public opinion leaders may start telling a story in-person and continue informing their networks online, and vice-versa.

Before weighing one communication channel over another,
marketers need to:

-understand their audiences’ affinity with technology
-determine the tone of their discussions
-prioritize between the online/offline channels to reach consumers

As seen in the example of tech-fluential bloggers, online forums such as blogs, company Web sites and discussion boards may be the places to tune into their conversations and take notes about how public opinion is shaped online and offline. Indeed, checking online postings and comments sent to company Web sites can help companies develop relations with key stakeholders, catch issues before they turn into crises and implement cost-effective marketing tactics. Word-of-mouth is not limited to blogging and other forms of online chat. Yet, we must not ignore that Web-based conversations can provide just as valuable--and more traceable--feedback about products and services than do offline conversations.

----Idil Cakim
Director, Knowledge Development
Burson-Marsteller

Posted by Idil Cakim at 06:54 AM | TrackBack

Power laws for fun and profit

Five years ago, the Internet sector was in the middle of a momentous slide in market capitalization. Priceline went from nearly $500 a share to single digits in three quarters. CDnow fell from $23 to $3.40 in about 9 months ending in March 2000. Corvis, Music Maker, Dr. Koop - 2000 was a meltdown the likes of which few recreational investors had ever seen or imagined. Science was invoked to explain this new world of Internet business.

Bernardo Huberman, then at Xerox PARC, and others found that the proportion of Web sites that got the bulk of the traffic fell far from the 80/20 rule of thumb: as of December 1, 1997, the top 1% of the Web site population accounted for over 55% of all traffic. This kind of distribution was not new, as it turned out. A Harvard linguist with the splendid name of George Zipf counted words, and found that a tiny percentage of English words account for a disproportionate share of usage. A Zipf distribution, plotted on a log-log scale, is a straight line from upper left to lower right. In linear scale, it plunges from the top left and then goes flat for the characteristic long tail of the distribution: twosies and then onesies occupy most of the x-axis.

Given such "scientific" logic, investors began to argue that the Internet was a new kind of market, with high barriers to entry that made incumbents' positions extremely secure. Michael Mauboussin, then at CS First Boston and now at Legg Mason, wrote a paper in late 1999 called "Absolute Power." In it he asserted that "power laws . . . strongly support the view that on-line markets are winner-take-all." Since that time, Google has challenged Yahoo, Weblogs have markedly deteriorated online news sites' traffic, and the distinction between online markets and plain old markets is getting harder to maintain. Is the Zipf distribution somehow changing? Were power laws wrongly applied or somehow misunderstood?

Chris Anderson, editor of Wired, has a different reading of the graph and focuses instead on the long tail. In an article last fall that's being turned into a book, Anderson explains how a variety of Web businesses have prospered by successfully addressing the very large number of niches in any given market. Jeff Bezos, for instance, estimates that 30% of the books Amazon sells aren't in physical retailers. Unlike Excite, which couldn't make money on the mostly unique queries that came into the site, Google uses adwords to sell almost anything to the very few people who search for something related to it. As of March, every iTunes song in inventory (that's over 1 million) had been purchased at least once. Netflix carries far more inventory than a neighborhood retailer, and can thus satisfy any film nut's most esoteric request.

At the same time, producers of distinctive small-market goods (like Weblogs, garage demo CDs, and self-published books) can through a variety of mechanisms reach a paying public. These mechanisms include word of mouth, search-driven technologies, and public performance tie-ins; digital distribution can also change a market's economics. Thus the news is good for both makers and users, buyers and sellers; in fact, libertarian commentator Virginia Postrel has written for the last several years on the virtues of the choice and variety we currently enjoy.

There's currently a "long tail" fixation in Silicon Valley. Venture capitalists report seeing a requisite power law slide in nearly any pitch deck. CEO Eric Schmidt showed a long tail slide at the Google shareholder meeting. Joe Krause, formerly of Excite and now at Jotspot, tries to argue for a long tail in software development upon which his product of course capitalizes. The term has made USA Today and The Economist. In some ways this feels like the bubble again, for better and for worse.

At one level, the Internet industry seems to need intense bursts of buzzword mania: you no longer hear anyone talking about push, incubators, portals, exchanges, or online communities even though each of these was a projected multi-billion dollar market. The visual appeal of a Zipf distribution may also confer Anderson's long tail with a quasi-scientism that simple terms like "blog," "handheld," or "broadband" lack. Netflix, Amazon, and Google lacked power law graphs, I'm pretty certain, in their startup documents and have managed to thrive regardless. Anderson's own evidence illustrates what a long way it is from explanation to prediction: showing how some firms can profitably address niches doesn't prove that a startup will similarly prosper in an adjacent market. To his credit, he focuses primarily on entertainment, where digitization is most prevalent.

The recourse to supposed mathematical precision to buttress something as unscientific as a business plan is not new. Sociologists investigating networks of people have been overshadowed by physicists who bring higher math horsepower to the same sets of problems, yet it's still difficult to understand Friendster's revenue model. Complex adaptive systems research was very hot in the 90s, following in the course of the now barely visible "artificial intelligence." The problem extends beyond calculus to spreadsheets: much of what passes for quantitative market research is barely legitimate data. To be reduced to a single semi-reliable number, a simple 5-point questionnaire response should have the answers vary in regular intervals, yet words rarely behave this way. Is "most of the time" 8 times out of ten or 95 times out of 100? Who remembers to count before someone asks? Purchase intent rarely translates to purchase. Yet executives make decisions every day based on customer satisfaction scores, opinion surveys, and focus groups, all of which reduce noisy variation to apparently clinical precision.

Make no mistake: Chris Anderson has identified something important and widespread when he groups superficially dissimilar businesses to spot their shared reliance on the medium's powerful capability for matching big, sparse populations to things they want and will pay for. Returning to our opening question with regard to what's changed since 2000, the necessary preconditions of successful long tail models include large populations and strong search, a relatively new capability. What will disrupt today's incumbents by 2010? New kinds of batteries? Flexible displays? Enforced shutdown of the peer-to-peer networks, possibly by a massive worm/virus of unknown origin?

It's also important to see the both/and: just because quirky tastes can constitute a profitable audience in new ways does not preclude hits like the Da Vinci Code, let's say, from being major news. And power laws still apply to traffic (and presumably revenue): Google and Amazon profitably handle massive volumes of site visits whereas Real's download service, about which Anderson rhapsodizes, still loses money. At the end of the day, no algorithm in the world can negate the most powerful "law" of business, that of cash flow.

--Dr. John M. Jordan

John Jordan is a member of the Guidewire Group Sounding Board.

Posted by John Jordan at 07:26 AM | TrackBack

Leading Questions for the Week of 5/23/05

In which we take a look at hot topics in the tech world and pose questions for your consideration.

--The future of television is hot this week. eBay struck a deal with Time Warner that will allow viewers to make bids via their TV sets. Steven Levy takes a look at the future of television in this week's Newsweek and UK mobile provider Orange will offer top shows and channels on your handset.
*Questions: How integral is television to the future of consumer tech? Should the PC be phased out entirely, moving all apps to your TV and mobile device? Would consumers react favorably to such a shift or do we prefer our TV-watching remain non-interactive?

--The supply of future IT workers is a familiar theme that shifts focus every few months. Last cycle, there were worries that India and China will outpace us soon; this week, it's lack of interest in IT degrees from American colleges. IBM held a conference last week to discuss ways to attract top students to Information Technology. "The slope shows an unbelievable decline in computer science majors. There are smart people no longer even signing up to take our introductory courses. We need to fix it, or there's not going to be a U.S. work force in computer sciences."
*Questions: How dire is this problem, really? As both participants in and observers of the tech scene, do you see a marked decline in workers and/or innovations?

--Gary Rivlin penned an interesting piece in the Times last week. The general theme is the reduced field of VC players in Silicon Valley. But Rivlin makes some friends by citing the exodus of "tourist VCs" as a reason. Stewart Alsop and Mitch Kapor receive this designation as VCs from "nonfinancial backgrounds" who left the field due to failure or other interests, depending on who you talk to.
*Questions: Did venture capital become overrun with tourists during the boom? Or is the reduction in VCs part of the natural ebb and flow? What qualifies someone as a VC?

Posted by Carla Thompson at 09:09 AM | TrackBack

What do corporations want?

When last I contributed to Guidewire, I talked about how corporate PR people are trying to make sense of and figure out how to jump into the blogosphere. I’ve just come back from a week in New York where I attended Personal Democracy Forum and Syndicate, two conferences that were all about the blogosphere. As ever, the technology is moving at lightning speed and I met so many entrepreneurs who are building exciting and useful tools and services to power RSS, etc.

Interestingly, there was little discussion about corporations and the blogosphere at these events. Based on conversations I had over the course of the three days, it’s clear that there is very little mutual understanding between the entrepreneurs, geeks and enthusiasts on one side and the mainstream corporate marketing and communications professionals on the other. Which makes me feel like a U.N. interpreter.

I opened my remarks at a panel presentation at Syndicate by saying:

--Most corporate communications and marketing people – even at technology companies - don’t even know what RSS is.
--Those who have heard of blogs and RSS don’t think they need to worry about them yet – and until a Wall Street Journal reporter calls the corporate communications director and says “Hey, I read [fill in the blank] about your company in this blog, what’s your response?” they’ll think they’re right.
--At the same time, they all know something is going on out there on the Web and that they better keep an eye on it.

During the panel, we talked a bit about why corporations are reticent to move into the blogosphere. In the interest of fostering mutual understanding, here are three things companies worry about:

--Liability – in our litigious business environment, any public utterance by any corporate representative is fair game for a combative lawyer. This is no small concern. Open-minded in-house lawyers and persistent corporate PR people are working it out one conference call at a time, but this struggle will take place at every corporation.
--Love – companies are filled with people, and no person likes to see the product they make, the policy they create or the opinions they share lambasted in public by a sharp-tongued blogger. If it’s the blogosphere vs. THE MAN, people at corporations know they’re battling a stereotype, and that’s daunting.
--Scaling – the blogosphere is about conversations. No corporation has the staff to conduct quality 1:1 conversations with everyone in the blogosphere who may want to communicate with them. They don’t know how much energy and commitment quality participation in the blogosphere will take; jumping in half-way may be worse than not jumping in at all . . .

Having said all of this, the corporate PR people I’ve spoken with understand there is much to gain from participating. The hurdles are significant however and corporations need help crossing them. They need clear, thorough analysis of what’s going on in the blogopshere that impacts them. They need sound guidance on policies. They need to study examples of corporations that successfully blog. They need to study examples of corporations who have made big fat mistakes. And they need to have this information presented to them by people who understand what life is like inside their organizations. Then they’ll get there.

--Lisa Poulson
Managing Director, Technology Practice
Burson-Marsteller San Francisco

Posted by Lisa Poulson at 08:49 AM | TrackBack

O Brother, Where Art Thou?

Issues of electronic identity and mobility have recently been playing out in quiet but important ways. Each of three instances from last week's news is a classic case of social or economic problems being tangled up with a technology challenge. To see only one side of the question is to create the possibility of unintended consequences, allow hidden agendas into play, and generally confuse the allocation of sometimes-scarce resources. The emergence of location-sensitive services has occurred in sometimes unpredictable ways: rather than driving by the mall and getting an ad on my cell phone or satellite radio telling me about the sale at Penny's (to quote Airplane!), I and many others have much more pressing concerns about being identified and found - on our terms rather than someone else's.

-Google Buys Dodgeball
Dodgeball is a social networking service built - literally - by two guys, possibly in a garage. It combines mapping and location-awareness with connections to friends and friends-of-friends. Right now it has achieved its greatest traction in New York City, where people can find each other and meet up with help from the software that runs on cell phones. Last week Google announced that it had purchased the company for an undisclosed sum.

The connections to Google's expanding portfolio are fascinating to contemplate. The more I use Google Maps, toggling between a map location and a satellite photo or seamlessly dragging a map into a viewable window, the more impressed I am. It's a useful exercise to compare Mapquest and Google Maps, given that the underlying map data comes from the same source (NAVTEQ): the implementations have significant differences. Dodgeball also could connect with the Orkut social networking work, the Hello and Picasa photo sharing tools, and of course Google Local.

Viewed in isolation, the Dodgeball service raises the revenue questions familiar to watchers of Friendster et al: who will pay for what, and who collects by what mechanism? But in the context of the Google suite, Dodgeball becomes a feature rather than a product, and those revenue concerns vaporize, particularly in light of the massive runup in online ad spending that's enriching both Yahoo and Google.

-Real ID Becomes Law
Buried in a Senate appropriations bill devoted to funding the war in Afghanistan, the Real ID provision mandates that states adhere to a federal standard for issuing drivers' licenses, effectively creating a national ID card. According to F. James Sensenbrenner, the Republican Chair of the House Judiciary Committee and the bill's author, "American citizens have the right to know who is in their country, that people are who they say they are, and that the name on the driver's license is the real holder's name, not some alias." Opponents of the bill - which numbered 600 - included states, pro-immigration groups, and privacy watchdogs. Encapsulating the Real ID language deep in the appropriations bill prevented consideration of the proposal on its own merits, a fact that both Republican and Democratic Senators bemoaned.

The Smart Card Alliance announced its support for the measure, which will cost an estimated $100 million to $750 million to implement. Expect other technology lobbies to follow; Oracle, for one, has been active in the debate for some time. That cost will be paid by the states, which are now in the position of having to make their licenses "machine readable" without any further guidance. The Departments of Homeland Security and Transportation will set standards for deployment; states that opt out will have their citizens kept off airplanes and out of Federal buildings.

More chillingly, as Bruce Schneier points out, nobody can use post office boxes on their license - even judges and undercover police officers. Illegal aliens, or "undocumented workers," will be forbidden from holding driver's licenses, which in purely statistical terms will result in more uninsured motorists and higher insurance premiums. States will be required to retain the documentation (such as a birth certificate) on the basis of which they issue a given license, in sharable digital form, for years afterward, increasing the risk of identity theft still further. As Schneier points out, a national ID requires a national database, and the abuses of the database, not the card, are the main cause for concern. Substantial breaches have already occurred at current leaders in identity management: credit card companies, state DMVs, health authorities. With more agencies connected into a de facto national identity database, the scale of risk magnifies. But Congressional leadership decided that a debate over the costs and benefits of such a system was not as important as preventing Latinos from driving to work. Expect those 600 groups of opponents to fight this battle further.

-The Breakdown of 911
After a series of implementations beginning in 1968, Americans on wireline voice connections could reliably dial the same three-digit emergency number anywhere in the country. As the Bell System of the twentieth century fades farther and farther from view, the presumption of 911 reliability declines proportionately with the old business model even as demand increases: New York handles about 30,000 calls a day to 911. The problem comes in two variants.

First, a number of Voice-over-IP customers with life-threatening - and as it turned out, life-ending - emergencies could only reach a recording at Vonage saying to call 911 from another phone. The Texas Attorney General is raising the question after a 911 call failed during a home invasion in Houston. A baby's death in Florida is being blamed on a Vonage 911 failure. According to the Wall Street Journal, "In a letter to Florida's Attorney General, [the mother] said the Vonage customer-service representative laughed when she told her that Julia had died. 'She laughed and stated that they were unable to revive a baby'. . . ."

For their part, Vonage includes bold-print instructions for manual 911 mapping during the sign-up process, but it's been estimated that up to a quarter of the U.S. population is functionally illiterate. One feature of VoIP is its portability: plug the phone into an RJ45 jack anywhere and receive calls at a virtual area code of the customer's choice. Navigating firewalls, dynamic IP addresses, wireless connections, and frequent network outages taxes anyone but the most technically adept Internet user. Children are also a key 911 constituency. Taken collectively, these overlapping populations raise dozens of tricky questions. At the infrastructure level, the FCC and other agencies face the substantial challenge of determining the fairest, safest set of technical interconnection requirements incumbent on the Regional Bells and VoIP carriers.

From the Bell perspective, 911 obviously costs money to implement and maintain, and declining wireline revenues translate to declining 911 funds. Connecting 911 to the Internet in a reliable, secure manner is nontrivial - network attacks have used modems to target the service in the past - and until contractual arrangements are finalized there is reluctance to subsidize the same firms that present themselves as full wireline replacements.

911 isn't just a VoIP problem either: cellular users represent about a third of emergency callers, but math and economics conspire to make finding them difficult or impossible. In rural areas, cell towers often follow roads, so attempting to triangulate from three points in a straight line can limit precision. States have raided 911 tax revenues for budget relief. According to the National Emergency Number Association, quoted in the Wall Street Journal, "sixteen states, including New Jersey, Arizona and Ohio, have upgraded less than 10% of their counties. Six of those states haven't finished a single county."

It's turning out that the phone is a major platform in the identity debate. Number portability was an unexpectedly popular mandate a few years ago, and the fastest technology adoption in history was a phone feature: 55 million people signed up in a matter of months for a service - the Federal Do Not Call registry - that didn't exist when it was announced. That's even faster than the previous champ, Netscape Navigator's zooming to 38 million users in 18 months. Given the global nature of some of these questions, not to mention numerous issues with ICANN and DNS, the discussions and solutions will only get more complicated. As the examples illustrate, getting social arrangements to keep pace with technology innovation is if anything more difficult than the innovation itself.

--Dr. John M. Jordan

John Jordan is a member of the Guidewire Group Sounding Board.

Posted by John Jordan at 07:05 AM | TrackBack

Can a corporation be credible?

Right now almost every PR person I know is trying to figure out how to jump into the blogosphere, how to create a blog for their CEO, etc. My advice to anyone who wants to ghostwrite a blog is STOP RIGHT NOW. STEP AWAY FROM THE KEYBOARD.

Why? First, we’re on the verge of a blogosphere bubble. There are lots of voices out there – now that Rosie O’Donnell and Arianna Huffington call themselves bloggers, it’s clear to me we’ve crossed the chasm. Bland ghostwritten corporate speak doesn’t stand a chance. Instead, the clearest and most authentic voices will be heard.

Second, people who work at corporations should blog to develop and deepen relationships – with customers, employees, partners, shareholders – all of their key audiences. To create productive and valuable dialogues online, you’ve got to have a credible voice (Match.com notwithstanding). And, to state the obvious, credibility is won and maintained by individuals. Blogs are powerful because real people write them and real people read them.

A corporation’s credibility is the sum of the credibility of each of the people who work at and represent the corporation - some more than others. According to research conducted by my employer, Burson-Marsteller, CEOs are held responsible for 50% of a company’s reputation. The CEO’s importance to a company’s reputation has increased 25% since 1997. (www.ceogo.com)

After spending nearly 20 years in the PR business, I’m a little bit obsessed with credibility. Thesaurus.com equates credibility to: believability, integrity, plausibility, possibility, probability, reliability, solidness, soundness, tenability, trustworthiness, validity. After a lot of thought over a lot of years, I think credibility distills down to one basic thing – reasonable-ness. What do I mean by reasonable-ness? Here are a few examples:

· When you make statements - in a blog, a press interview, a speech - be certain that your facts are clear and defensible. “When you hit that little publish button and something goes up, you know that literally millions of eyeballs around the world are going to parse it,” says Michelle Malkin, a conservative blogger. The Wall Street Journal, January 21, 2005
· Connect. Link to source material and authoritative third-party commentary to add weight to your positions and show that you’re reasonable.
· Shout out your mistakes. Be the first to acknowledge and correct your own mistakes and misstatements. A reasonable communicator does NOT hold on blindly to a position and refuse to acknowledge errors.
· Be clear about what you can’t discuss and why. A reasonable communicator assumes that his or her readers are smart and reasonable people. Reasonable readers don’t expect material disclosures in a blog entry – they know the SEC has rules. They’ve heard of Sarbanes Oxley. As a PR person who has handled litigation more than once in my career, I found that if I said to reporters something like “I know you want access to all the evidence in the case, but we can’t show you evidence until after it is presented in court,” I pretty much always got an, “Oh, OK, I’d just like to see it when you can show it to me” response from reporters. Thus we avoided all sorts of conflicts. Reasonable explanation, reasonable response.
· Be respectful in acknowledging dissenting opinions. This is the single most important factor in building credibility. Two intelligent, motivated and reasonable people with the same fact set can come to opposite conclusions. And that’s just fine. Not everyone has to agree with and love your corporation. They just need to know that you’re not afraid of their dissenting opinion and that you respect it. When you respond to them in this reasonable way, your critics lose their fangs.

While this is intuitive in personal relationships, it can be much harder to achieve in the business world. But it is very much worth the effort. Building credibility is a serious process that happens incrementally over what can be an excruciatingly long time. Credibility is hard won and easily lost. Warren Buffett famously said, “If you lose dollars for the firm by bad decisions, I will be understanding. If you lose reputation for the firm, I will be ruthless.”

For every communications professional, maintaining and expanding the company’s credibility should be the paramount goal of corporate blogging. If you don’t think your corporation is ready to do what it takes, stay on the sidelines for now. Watch and learn as others succeed and fail. Then you can show your executives how to do it right.

--Lisa Poulson
Managing Director, Technology Practice
Burson-Marsteller San Francisco

Posted by Lisa Poulson at 08:31 AM | TrackBack

Tipping the Iceberg

Communication scholars have long studied how influential opinion leaders spread the word across networks. Yet today’s lean-forward, take-charge audiences, who create and distribute their own content, challenge classic diffusion theories. Tech-savvy opinion leaders have new reporting tools, such as blogs, to spread word-of-mouth faster and wider than before. Mapping the blogosphere and finding key blogs may seem as arduous as tracing shooting stars with bare eyes. But looking into the online communication habits of people who speak up and draw an audience around their stories may help us better understand this new communications realm.

A recent Burson-Marsteller survey of online public opinion leaders, unveiled an elite group of influencers who use high-end technologies (e.g., WiFi, smart phones) to gather and spread information about companies, brands and products. Compared with the average U.S. Internet user, these “tech-fluentials” are significantly more likely to write their own blogs: 33% of them have their own blogs (Burson-Marsteller), in contrast to only 9% of online adults (Pew Internet and American Life Project survey, Q1 2005)

Blogs are not the only place where tech-fluentials rush to make their point. Blogging is merely a sign of their considerable contribution to the online chatter. Influential bloggers use multiple online channels when talking about corporate initiatives. In fact, tech-fluential bloggers are more likely than their counterparts to:
--Post messages to bulletin boards on a weekly basis (52% vs. 26%)
--Use instant messaging to relay positive (54% vs. 37%) and negative (46% vs. 35%) stories about companies
--Contribute to an opinion Web site to relay negative stories about companies (53% vs. 39%)

As marketers charged to find the optimal ways to reach audiences, we have become accustomed to asking one-dimensional questions. How many bloggers are there? How many people read blogs? Who reads blogs? The diversity of tech-fluential bloggers’ online habits, however, underscores how communication grows organically, across many platforms, in various modes.

Bloggers’ power is not confined to arguably amateur-looking and self-promoting Web pages. Each entry about a company may represent numerous discussion-board comments, IM conversations and e-mails to opinion sites. Online influencers’ blogs may be the tip of the iceberg when considering the total amount of chatter these opinion leaders generate on the Internet.

We need to find ways to relate to influential bloggers and develop an understanding of how they view brands, products and services. Here are a few suggestions:

**Be resourceful: Bloggers build substantial portions of their content by linking to official sources. Keep them in the loop by providing easy-to-find, current information on your company Web site. Include transcripts of important offline news coverage about your business. Refer bloggers to third-party sites where they can download additional information.

**Give them a pad and solicit feedback: Consider establishing an online network of autonomous bloggers who can review new products and serve as guardians of public interest.

**Reply promptly and regularly: Use your company Web site as an interactive forum to answer questions frequently asked by your online stakeholders. Respond to queries in a timely fashion. If possible, provide personally written, customized responses.

**Set guidelines for company blogs: Employees represent a company’s values and promote its offerings through their work and through word-of-mouth. Human resources and legal departments can create guidelines to protect employees who blog and facilitate their conversations with other bloggers.

To have a comprehensive perspective on how blogs affect communications and business, we need to be aware of audience members who take the initiative to collect and distill information about companies, brands and products. These individuals not only speak about companies, but directly to them. Almost all tech-fluential bloggers (97%) e-mail companies and 80% visit company Web sites to read of the latest technologies. Active and influential bloggers present us with an opportunity to establish rapport with dynamic stakeholders and earn their approval through candid and transparent communications.

--Idil Cakim
Director, Knowledge Development
Burson-Marsteller

Posted by Idil Cakim at 09:08 AM | TrackBack

My Way

One of the great but difficult thinkers of the twentieth century, the economist and satirist Thorstein Veblen, wrestled with people's interconnected relationships both to what Marx named the means of production and to the consumption of mass produced goods. Veblen attributed a nobility to work that he called the "instinct of workmanship": man the maker "has a sense of the merit of serviceability or efficiency and of the demerit of futility, waste, or incapacity." By contrast, what he memorably named "conspicuous consumption" was "ceremonial" in that it sorted people by reputation, the basis of an ultimately unwinnable competition.

By mentioning Veblen, I raise an unanswerable question. The people who buy mass-produced stuff, often called "consumers," want in some deep-rooted way to shape their environment beyond just piling up purchased goods. How much people want to stand out as unique, and how much they want to create something tangible, is of course impossible to differentiate or quantify, and of course sometimes an artifact embodies both consumption (or conspicuousness) and workmanship. But the current business landscape provides too many examples for this to be a fad: there's something very potent afoot in the rise of personalization and customization.

-Nike's ID (www.nikeid.com) mass-customization site has been up for a long time now. Back in 2000, an MIT grad student wanted his custom label to read "sweatshop," and Nike's refusal turned into a PR bonanza for both the grad student and the site itself. I don't know when it was most recently upgraded, but the current range of product and color options is truly dazzling: the Flash visualization tool is a lot of fun, to the point where designing your own stuff can get addictive. The price points have come down too: you can get a customized bike messenger bag for $50 or a watch for $85, while eligible shoes seem to sell for $10 over retail.

There's a lot of cleverness embedded in the site. The color palettes, for example, are constructed such that it's truly hard to get two adjoining colors to clash. In some shoes, you can order two different sizes - 8 right and 8 1/2 left, for example - at no extra cost. The number of potential configurations is huge, but the volume is sufficiently small to justify the cost with customer "delight" - it's clearly an opportunity to surpass expectations.

Nike in turn plays directly to Veblen: university sports teams and elite athletes frequently get shoes in custom color schemes. It used to be a mark of distinction, or perhaps what Thorstein would call "invidious [unfair] comparison," to have shoes that aren't available in stores. Now, anyone can just do it - and not only with youth-oriented brands either: for the same $10 premium, you can design your own L.L. Bean canvas tote.

-One of the many reasons for Japanese automakers' success in the U.S. relates to their conscious courtship not of the NASCAR audience (which with few exceptions has been offered unmemorable racing-related products to buy by the American Big Three) but of the street-racing subculture central to "The Fast and the Furious." Honda, Mitsubishi, and Subaru have sold inexpensive cars that have serious upgrade and customization potential, and while some offerings such as the Dodge Neon SRT have come from U.S. badges, they're clearly late to the game. The difference between car as finished artifact and car as a platform for creativity was grasped first by some astute observers of Asian-American teenagers.

-Rupert Murdoch recently told the U.S. newspaper industry convention that paper news is in danger of missing the key young adult demographic: circulation numbers are off, so badly that many big papers have been caught padding them to maintain ad revenue. TV news is also in decline: viewership is off by a third since 1993. In contrast, the most comparable online sites are either highly opinionated and interactive, or else highly selectable: Yahoo and Google News are growing far faster than any mainstream online news operation.

-Keeping with the TV theme, TiVo may have made it out of the woods with the Comcast deal. The future of TV ad revenues is being reshaped not by the remote control, which was frequently used to skip advertising, but by an automated device that does the same thing. Broadcasters are accustomed to control over the viewing experience: even mighty Microsoft has its logo disappear at bootup, as do cellular carriers and handset makers, so people can display any pictures or colors they choose on their computer and mobile phone screens. The networks, meanwhile, are fighting time shifting and time compression even as they find new ways to insert logos, promotional announcements, and other reminders of whose interface we're watching. Viewer annoyance with Jim Nance during the NCAA basketball tournament reached new highs, for example. By contrast, the cellular industry has supported customization and is profiting: U.S. ringtone sales were $850 million last year, double the 2003 total.

-One of the most powerful trends in electronic gaming is the creation and maintenance of virtual worlds. SimCity originally went nowhere among distributors because there was no winning and losing. Now, there is a cottage industry of Sims furnishers, not to mention players: in a hot industry, the Sims 2 was 2004's top-selling PC title. In racing games, players often configure their own cars. The examples go on from there.

-Burger King has had over 30 ad slogans, and the chain recently adopted the second, most memorable one: "Have it your way." Returning to that message was part of a turnaround that took average annual franchise sales from $970,000 to $1.3 million.

-At the top of the digital camera mass markets are "prosumer" models that mimic the functionality of the top 35mm film cameras. Canon's Digital Rebel was the first to market at the $1,000 price point, and it has sold 1.2 million units; Nikon's D70, released slightly later, sold over a million units between March 2003 and February 2005. These
single-lens reflex cameras allow the photographer to compose the picture based on what the lens "sees," and, significantly for our discussion, to interchange lenses. These cameras also support file formats that better facilitate complex manipulation software like
Adobe Photoshop. The range of possibilities is a long way from taking film to the neighborhood drugstore for processing.

-The music industry has yet to adjust to a model in which listeners choose what they play and in what order, as opposed to embracing the album or CD as the unit of consumption. Playlists are a textbook example of user customization, and unlike the old Uplister business, which only published playlists, Apple has integrated playlist publishing into the iTunes operation.

-Under the radar, Creative Memories has become a substantial business. Never heard of it? The Minnesota-based company began in 1987 as a spinoff of a photo album-manufacturing company and now uses 90,000 "consultants" to help people build personalized scrapbooks. 2004 sales were roughly $425 million; for comparison in the direct-sales industry, the Longaberger basket company made $1 billion in 2000, at which time it employed 8,000 people - a figure cut in half since then as demand fell with the economic slowdown.

-Not-so-random facts: Do-it-yourself (DIY) has helped drive Home Depot and Lowe’s to strong, sustained growth. As we discussed in February, O'Reilly Media has tapped a nerve with MAKE magazine, aimed at people "who don't mind voiding the warranty." Home entertainment digitization is being led by hobbyists building PCs to serve as music
and video servers. One of the most popular campus and young adult activities is reported to be knitting; celebrity knitters include Julia Roberts and Cameron Diaz.

What does this batch of wide-ranging examples suggest? Companies that fail to understand and market to the customization mentality will face an uphill climb: General Motors and Ford, the paragons of mass production, are in deep financial trouble. Toyota and Honda serve more niches more profitably and are thriving. Subway, where each sandwich is made to order, has severely dented McDonalds' industrial model. Dell's dominance of the PC market begins with customization. Financial services companies that rely on brokers and brokers' commission structures like Merrill Lynch have had to respond to the Schwabs of the world - but now that firm is fighting a two-front battle against lower-cost low-service brokerages and established firms like Fidelity that provide a range of interaction options.

As I noted at the outset, it's difficult but important to separate and identify a number of forces. Daniel Bell identified "The Coming of Post-Industrial Society" thirty years ago, but it took the Internet for us to feel what it's like to transcend factories the way factories had trumped farming roughly a century before Bell. As information about stuff becomes more valuable than stuff, the activities of creation and individualization take on a new shape in both tangible and intangible realms. First, in an economy largely devoted to non-essentials there exists some [essential?] desire to make meaningful stuff, not just ideas and decisions. Secondly, we can see a broad-based quest to differentiate oneself by differentiating one's stuff. Finally, there's a sense of entitlement, related to the "affordable luxury" trend embodied by Starbucks, itself a primo customizer: I want the best (of something) made for me because I'm worth it.

The digital world both contributes to the desire for and enables the fulfillment of customization, but, returning to the theme of last month's "Being Analog," we still have a lot to learn about the boundaries, permeable and otherwise, between the worlds of ether andof earth and its offspring.

--Dr. John M. Jordan

John Jordan is a member of the Guidewire Group Sounding Board.

Posted by John Jordan at 07:30 AM | TrackBack

Dancing with Elephants: Steps in Big-/Small-Company Partnering

Last week, I joined a half-dozen executives and academics from around the world in a panel addressing the topic of constructive business collaborations. Never mind that First Tuesday hosted the panel on the Last Wednesday, the topic drew several hundred to the Ecole d’Ingénieurs et Architectes de Fribourg in Switzerland, where we debated the risks and advantages of collaboration.

Given a taste of my own medicine, I was allotted just eight minutes to share ideas on how small startup companies can effectively collaborate with large established companies. While not an exact transcript, what follows are some of the notes I used in the presentation.

There comes a point in almost every startup’s life when they realize that in order to get their technology to market, they are going to need to partner with a larger – often much larger – company. The mouse asks the elephant to dance.

Curiously enough, these large companies – the elephants -- have to dance. They are big animals, yet they must continue to grow. They have technology platforms and, based upon them, business franchises that they are trying to expand. But organic growth can be difficult for large organizations, and so they partner to extend their franchise, entrench their platforms, and drive new revenue into the business.

Elephants also have to innovate, another challenge for large companies that have as their priority serving current customers and keeping established products current and competitive. Small startups – the mice – can act as R&D agents for the elephants, filling gaps in the product portfolio and opening new product opportunities.

But dancing with elephants is tricky business, and it’s best to take a few lessons before sashaying onto the dance floor.

Lesson #1: Elephants don’t have to dance with you

Elephants aren’t in business to help you be in business. No matter how large or how rich, these large businesses are not benefactors for startups. They are in business to achieve their own market goals and they make decisions in their own self-interest. Elephants dance with startups not because they can but because they want to. It’s the job of the mouse to make certain the elephant chooses to dance with him.

So ask yourself:

– Does my business align with the elephant’s goals?
– Does my technology improve the elephant’s business?
– Does my technology fill a hole in the elephant’s product plan?

And then, approach the elephant with analytics to support your proposal. I recently met one smart startup, just three engineers, with some very impressive media technology. Independent of the elephant, this mouse ran real life trials to demonstrate that the elephant would see a statistically significant increase in average sales using the mouse’s technology. Needless to say, that got the elephant’s attention.

Lesson #2: Elephants are BIG

It may be evident, but it’s worth saying aloud: Elephants work on a completely different scale from startup ventures. To get the elephant to dance, you’re going to have to demonstrate that you can make a significant positive impact on the elephant’s business. That means big numbers, lots of zeros. Can dancing with you bring the elephant new customers or add significant new revenue?

If not financial returns, how will a dance with you enhance the elephant’s image, reach new markets, or otherwise advance a priority initiative? When Intel decided to get into the WiFi game, the company set aside millions of investment and marketing dollars to put into smaller companies that were moving innovative wireless applications into the market. Intel didn’t make this investment to help little companies, they did it to establish a market requirement and create demand for the chips they make for the then-nascent market.

Lesson #3: Dance a Familiar Dance

All of technology’s elephants have developer and business development programs specifically aimed at helping them find dance partners. These are well-established programs, usually with clear mandates and processes designed to scale across a range of potential partners. Elephants rarely create unique deals with small partners unless doing so will have a huge impact on the elephant’s business. It’s incumbent for the mouse to fit into the elephant’s program.

Lesson #4: Be Careful Where You – And They – Step

Even with no ill intensions, it is easy for a massive elephant to misstep. It’s important then to approach the elephant with caution. Large companies evaluate new products and markets with a build-or-buy analysis. If you approach an elephant with just an idea, you put your business at risk. The elephant, liking the idea but seeing nothing to buy, might just build it himself or find another partner whose idea has become real.

Some mice think they can solve this problem by asking the elephant to sign an NDA. You can ask, but you’re only demonstrating your naivete by doing so. Large companies don’t sign NDAs, and not because they are keen to steal good ideas. Rather, these companies are so large and host so many initiatives, that it would be impossible to know that projects similar to yours are not underway somewhere in the bowels of the organization.

If you are paranoid about losing your idea, protect it with execution (thereby making it easier for the Elephant to buy rather than build) and/or with patents.

Lesson #5: Know When To Stop Dancing

Elephants can dance on and on. They have deep pockets and market advantage. And elephants can be slow. Simply put: your urgency is rarely the elephant’s urgency. Many a startup has become exhausted and even failed waiting for a deal to move through an elephantine organization.

Before beginning the dance, know the signs and timelines that will guide your decision to get off the dance floor, preserving your time, capital, and energy for other more agile partners.

Posted by Chris Shipley at 03:11 PM | TrackBack

Who Are the Masses? What Do They Want To Hear?

Every day the impact of blogs on corporate communications and corporate reputation becomes clearer. Fortune’s cover in January and BusinessWeek’s cover this week aren’t about the fact that blogs exist; they’re about the impact of blogs on corporate reputation about a paradigm shift that we’re only beginning to understand.

Why are blogs so powerful? Because real people write them and real people read them. As BusinessWeek says in their tips, “PR Truly Means Public Relations.” It means talking to the public, not in a Norma Desmond, “I’m ready for my close up” way, to be sure, but in a way that each corporation must define.

Talking to regular people means saying things that regular people want to hear. This, unfortunately, is a challenge for those of us in the technology business. (If you disagree just think about leveraging paradigmatic shifts to achieve platform independence blah blah blah. . . )

“Disciplined” may not be the first word that comes to mind when you think about a politician, but people in this business know that, in order to succeed in communicating with voters, the message must be very simple, and must be said over and over and over again. This is pure torture for technologists. No matter how in love our CEO, CTO, product manager or even head of sales is with an idea, some other idea comes along and it’s “Hey look, there’s something shiny over there.” And the message is lost.

We have to learn how to tell a story that regular people will understand. And to tell it enough times that it makes sense. Why? Because everyone (consumers, voters, your parents) now knows who we are and where we live –we’re the ones who lost so much of their money back in 2001 and they use all of the stuff we make much more than they did ten years ago. So they’re watching us – and having feelings and opinions about what we do. And many of them are connecting to each other online and sharing those feelings and opinions. (See above.)

In the new world of true “public” relations, only the multilingual will survive. We have to talk to all of our audiences – business partners, regulators, shareholders, end users, CIOs, with the same message and the same story – but translated in a way that they’ll understand.

When I worked at Sun we were lucky enough to have a former USA Today reporter on our staff (here’s a shout out to Mary Smaragdis!). Mary edited every single press release about the Java technology according to USA Today’s rules. No acronyms, no industry buzz words, no technology described in a way that someone’s grandmother wouldn’t understand. This worked. The truth is, just because we understand our own messages doesn’t mean they’re good.

And while we’re at it, let’s cut out the inside baseball. Well, not all of it because it’s fun, but let’s change the ratio. I love a good architecture war as much as the next person, but let’s realize what the rhetoric is, understand its function in our business, and put it in its proper place.

Let’s not try our audiences’ patience so much anymore. If we don’t, we’ll pay for it eventually. Much of what we say and do is incomprehensible to our newly empowered constituents, and we often don’t pay attention to or understand how they perceive our way of doing business. It seems that most Valley leaders didn’t think for a moment that Enron’s egregious abuse of stock options would ever come home to roost here. That was an avoidable mess if there ever was one.

Finally, as I say to every person I media train, “Your audiences do not find you, your company, your products nearly as interesting as you find yourself, your company, your products.” If we can keep this essential truth in mind as we figure out how to describe what matters to us to the people who matter to us, we’ll make a lot of progress!

--Lisa Poulson
Managing Director, Technology Practice
Burson-Marsteller San Francisco

Lisa Poulson is a member of the Guidewire Group Sounding Board.

Posted by Lisa Poulson at 10:40 AM | TrackBack

Catalyzing Europe's Technology Innovation Ecosystem

Over the past three weeks, I’ve been visiting with technology entrepreneurs in London, Paris, Madrid, and Geneva. These conversations have confirmed my belief that the technology development on the right side of the Atlantic is absolutely world class.

In fact, despite the constant refrain that Europe is “behind the U.S.,” I find that European-developed technology is quite contemporary with – and often exceeds – U.S. innovation. In certain markets – such as mobile content and services – the U.S. lags considerably behind much of the world.

Still, there is this perception among American investors and customers – and even among Europeans -- that Europe is lagging.

The perception is fueled in large measure by the lack of strong, recognizable global technology players to come out of Europe in the last 20 years. Today, when you list the great European technology brands, you can count them on the fingers of one hand: ARM from the UK. Business Objects and Gemplus in France. Nokia and Ericsson in Scandinavia. SAP in Germany. And this despite some €73 billion being spent on technology R&D throughout the European Union

So why -- with innovative engineering, significant public investment, world-class universities, a growing venture capital industry – has Europe not produce more great global companies?

The answers are not easy – and they do vary among Europe’s geographical and technical markets. But one thread is consistent: European countries, individually and collectively, do not have a cohesive ecosystem to support entrepreneurship and to move great, innovative ideas from conception to product reality. The parts are in place, but they are not working together effectively.

European entrepreneurs, for example, are a growing but still rare breed. Culturally, Europeans are risk adverse in their careers. Why take a chance on a startup venture when a public service job will pay you, if not exceptionally well, at least for the rest of your life? Besides, new ventures tend to spin out of large, established companies controlled by wealthy families or state interests. How can a small startup compete with that?

Contrast this cultural mindset with the United States, a country built on risk taking by the earliest settlers, explorers and prospectors. And whereas a failed venture in the U.S. is an opportunity to learn from mistakes, failure in a European venture is an indelible blemish on the record of the entrepreneur. So while hundreds of initiatives from the European Commission through local government outreach outline marked increases in technology growth, the initiatives themselves are thwarted by a cultural proclivity toward safer research positions inside large companies and public and private universities.

The entrepreneurial mindset is changing, albeit slowly, fueled in part by an emerging venture capital industry. Yet it is a mistake to closely associate European venture capital with U.S. venture capital. As an asset class, technology venture capital is some 10 to 20 years the junior to its counterpart in the United States. And because European venture investments have relatively fewer and smaller exit strategies to exercise, European venture is considerably more conservative and more selective than U.S. venture funds.

In the United States, early-stage companies are also supported by a network of service organizations. Lawyers, accountants, market strategists, communications specialists, strategic consultants, and a raft of others have deep experience in the specific needs of
early-stage companies. Many of these firms work with startups in exchange for ownership share, dealing in the one currency most startups have in abundance – equity. In Europe, these service businesses have neither the depth of experience nor the flexibility to work with startups on an equity basis.

The fourth leg of the ecosystem is the early adopters of technology itself. In Europe, large customers tend to be conservative in their adoption of technology. They are hesitant to do business with all but the most established of companies. As the CEO of a French software company told me last week, “My customers are more likely to examine my P&L before they will look at my technology solution.”

U.S. companies, on the other hand, have adopted the practice of embracing technology as a competitive lever. And while they can be cautious about working with young companies, they will weigh the competitive reward against the risk an early-stage company may pose.

Without a robust ecosystem to support technology innovation, European innovation is a lot of great ideas – but not a lot of great products or great companies. Worse, Europe risks becoming a second world technology market after North America and China, as early stage ventures pass over Europe to do business with the larger markets to the East and West.

The good news, however, is that things are changing in Europe, and changing quickly! Where just a few years ago, I was told that an event such as Innovate!Europe could not happen because the market is too fractured, today, I am told that it has to happen because the market is so fractured.

Indeed, that is Guidewire Group’s goal with Innovate!Europe – to bring together the pieces of the European technology innovation ecosystem and to act as a catalyst to encourage a unified and productive European marketplace. Innovate!Europe is a dialog among the actors who together can build a pan-European infrastructure to accelerate European innovation and product commercialization, and to build the next great European – even global – technology companies.

The ambitious goal of Innovate!Europe is – in a few years’ time – to require more than one hand to count Europe’s great global technology companies. In ten years or less, we ought to be able to name a dozen or more global technology brands grown from European soil.

This is not a simple task, and it cannot be achieved by simple conversations. Europe must address challenging questions and build an agenda to move forward together to create a great European Technology Innovation Ecosystem.

Posted by Guidewire Group at 11:08 PM | TrackBack

Searching for Blog Relevance

One computer, coupled with the speed and immediacy of free speech on the Internet, can significantly impact public perceptions. We are no longer discussing if blogs matter but rather, which ones. As bloggers amplify their voices through ever-expanding audience networks, companies are in a hurry to get straight answers on how these new stakeholders affect their reputation and financial assets. The most commonly asked question in communication strategy meetings is, “Who are the most influential bloggers?”

Considering the numerous factors that affect audience interests – such as content, topic, industry and social context – the right answer is, “It depends!”

There is not a standard formula for measuring the influence of blogs on reputation. Traditional Web metrics may not be the best tools to gauge a blog’s power in reaching online audiences. With the exception of a few, most blogs do not garner traffic comparable to mainstream online news sources, growing their audiences through links and referrals instead.

The primary factor to consider when estimating a blog’s influence is relevance. What percentage of employees, investors and customers are regularly reading the given blog? Those blogs that have both a high number of links (a proxy for Web readership) and are identified as relevant by key stakeholders should be put on a communications watch list for postings about the company’s business and industry.

In short, your company needs to effectively track blogs, adjust media plans and integrate alternative communications among existing tactics. Here’s how:

Step One: Check the house inventory and start a list. You may already have some information about your online followers. Are bloggers emailing Webmasters, customer service representatives or PR contacts? Browse through the company Web site log reports. Are Web site visitors being referred to the company site from a blog? Start your watch list with bloggers who are contacting the company and driving traffic to your Web properties.

Step Two: Take online audiences’ pulse. Partner with online buzz-monitoring companies (Intelliseek, BuzzMetrics, v-Fluence) for an in-depth understanding of what online audiences are saying about your brands, products and services. Which blogs are hosting the most extended conversations about your company and its offerings? Note the proportion of conversations stemming from blogs vs. other online public forums. Earmark those blogs that contribute most to the online chatter about your company.

Step Three: Add some weights to the equation. After creating a short list of blogs based on your company Web site referrals and online monitoring research, use specialized search engines (Technorati, BlogPulse) to gauge these blogs’ clout. How many other bloggers link to them? Do they consistently write about a topic relevant to your company’s position? Those blogs with more links and a consistent voice should go to the top of your list.

Learn about the bloggers’ educational and professional backgrounds. According to an Arizona State University study (Economist, April 21st, 2005), “the top bloggers are more likely than top newspaper columnists to have gone to a top university, and far more likely to have an advanced degree, such as a doctorate.” Are the bloggers in your list experts on the topics they write about? If so, their readers will be even more likely to follow their recommendations.

Step Four: Browse online and offline media. Supplement blog search-engine information with news database (Factiva, Lexis-Nexis, Dialog) searches. Are the bloggers on your list cited by any offline or online media sources? Any coverage in mainstream media outlets validates the blogger’s influence.

Step Five: Confirm relevance with your audience. Conduct a survey among your key stakeholders and run your list of relevant blogs by them. Have they heard of these blogs? Do they read these blogs?

Step Six: Measure impact on reputation. When surveying your stakeholders, ask them about their perceptions of the company and what sources they use to form their opinions. Are the blogs you’ve identified treated as credible sources helping to shape your audience’s opinions? Would they be willing to pass along such information to their friends, families and colleagues?

Blogs are vehicles for influential stakeholders who speak up to make a difference in their communities. They carry opinion leaders’ views from computers and wireless devices to in-person conversations. Thanks to blogs, hard-to-find information comes within stakeholders’ reach and turns into sales, votes and investments. Companies can strengthen their foothold online by identifying and tracking those sources that significantly contribute to the buzz on their brands, products and services. Businesses can get a direct view of how public opinion about their initiatives evolves by following blogs relevant to their audiences.

--Idil Cakim
Director, Knowledge Development
Burson-Marsteller

Posted by Idil Cakim at 02:44 PM | TrackBack

The State of the European Innovation Ecosystem

Conventional wisdom says that Europe’s technology markets are far too fractured to support a one-Europe competitive ecosystem of technology innovation and product development. Yet this is exactly the challenge that Europe’s technology investors, entrepreneurs, public sector officials, ITC executives, and early adopter customers must demand from one another.

Indeed, while the conventionally wise may have held firm to this belief in the past, the wisdom is in dire need of rethinking if European technology innovators are to compete on a global stage and European businesses are to remain competitive in global markets.

I tested this theory as I met with investors, startups, service providers, and journalists around Paris and London last week. No one doubted the premise.

“There is no point in one market, if it isn’t really one market,” said Fiona Vickers, an executive recruiter for Highland Partners and a founder of the exclusive business networking organization “The Chemistry” in London. “If Europe is going to be any kind of power [in the global technology market], we must come together. And if we do, Europe has the opportunity to be the leading power.”

Certainly, there are business barriers to creating a unified European technology ecosystem. Yet it seems that nations that have come together under a common currency should be able to find their way to mutually beneficial laws, regulation, and business practices to create an environment in which innovation flourishes.

The challenges could be overcome easily if they were “simply” business issues. Instead, centuries of history, culture and custom divide European countries as much as the Euro and the European Commission attempt to unite it. Europeans -- who travel along routes established by the Romans and live among medieval castles and cathedrals -- have very long memories, indeed. They are rightfully proud and fiercely protective of their heritages, their cultures, and their languages.

And those cultural differences set up very high barriers to business. Take, for example, the conversation I had with a French entrepreneur who has been building his startup entirely in the U.S. He told me, when I asked why he didn’t build the company in his homeland, that “it is too hard to sell in Europe.” Then he told me about a German customer who insisted that native-German speakers be assigned to provide customer services – and that customer service representatives be physically located near the customer’s site. “To roll out in Europe, we would have to place people in every country where we want to do business. That is too expensive. In the U.S., I have an office in Silicon Valley and another in Boston, maybe also in Chicago, and I am covered. It is much more efficient.”

And pity that poor German customer. By placing demand for local, native-German speaking sales and customer support, the customer effectively limits its technology choices only to those companies who are willing to comply with that demand. Surely some startups will do so, but many of the most innovative companies will not. They will seek out larger markets that can be effectively targeted with a few well-placed resources – markets such as the U.S. and China. And the German customer? He’s left without a technology lever to use for business advantage.

That said, after some eight years of Europe watching, it is clear to me that Europeans are eager to see things change. To a person, the people I talk to agree that the time is now to bring together a dialog that promotes a cross-border technology ecosystem in Europe.

In fact, in the most shocking admission, one French venture capitalist acknowledged that English would be the language of business in Europe. Coming from a Frenchman, that is some sign of change, indeed!

Posted by Guidewire Group at 06:03 PM | TrackBack

New Rules for Communicators? Um, yeah . . .

Everyone communicates. We type. We talk. We always have.

Blogs are a way to communicate. Whether bloggers are journalists or not doesn’t matter. What does matter is that the walls of our organizations are glass and the lights are on. Highly empowered people comment on and seek to influence what we do - and they have keyboards. In some cases, they have an amazing ability to get internal company information. (Or an incomprehensible amount of spare time. Or both.) Whether sycophantic, benign or malicious, these communicators are being heard and sought out by reporters, customers, competitors – the very stakeholders PR people are paid to reach and influence.

Blogs are chipping away at the control of things corporate communicators hold dear - our right to define the message, to provide or withhold access, our conceit that we can shape the news flow that surrounds us. In short, our little fantasy that we set the agenda. Oh dear!

All of these changes are part of the natural maturation of the world’s most interesting industry (ours). It means some adjusting, but an industry full of companies that shift product strategy every three months ought to be able to shift communications strategy, right? Of course! How can we be effective communicators in this new world? A few suggested rules:

Rule One: There are no rules. Why are we so eager to determine whether bloggers are journalists? If we can categorize them, maybe then we’ll know how to treat them. There are as many types of bloggers as there are mammals. The only absolute is that bloggers want to communicate. Everything else we learn on a case-by-case basis.

Rule Two: Use your orienteering skills. Figure out which blogs matter to you, your company, your clients. Get yourself a good RSS reader and start tracking these blogs every day. If you need help, try Intelliseek, Technorati, or Feedster.

Rule Three: Learn the meaning of “conversation.” “Traditional media send messages, blogs start discussions,” says Loic Le Meur at Six Apart. A conversation requires respect, trust and ongoing participation. A conversation is about individuals. According to Chris Shipley, “It’s easy to hate a big monolithic company; it’s hard to hate individuals, especially when they tell the truth.”

A word on mutual respect: Despite what start-up CEOs tend to think, journalists are not a marcom tool. Neither are bloggers. They examine skeptically and then perhaps disapprove of a company’s actions or executives. Sometimes we’ll agree, sometimes we won’t, sometimes we’ll just bore each other.

Rule Four: Embrace transparency. It’s not a bug, it’s a feature! If you’re afraid of the truth getting out, your company has bigger problems than PR. Let’s assume you have a good story to tell. Tell it! At the same time, public companies live with particular responsibilities about what they communicate and when. Stay close to your legal team as you enter the blogosphere. The issues are complex and evolving. Get someone in your legal department assigned to work with you to create a blogging policy for your company immediately.

Rule Five: It’s a meritocracy - so say something interesting! Real people write readable, credible blogs; corporations don’t. In this industry we’re philosophers, artists, hucksters, and evangelists. Bring out your personalities and create meaningful dialogues.

And while you’re at it, make sure that what you say is accurate and truthful. When you err, be the first to acknowledge and correct your mistakes. Building credibility is a serious, incremental process. If you lose your credibility in the blogosphere, you’re losing it very publicly indeed.

Rule Six: Feed the blogosphere. Invite your watchers and commentators in, and give them interesting things to think about and do. Whatever you may think of their message and motivations, the PR people behind the Swift Boat Veterans For Truth cleverly invited bloggers to attend the taping of their ads during campaign season and got tremendous play on blogs as a result.

In addition, as my colleague Idil Cakim points out, bloggers build a substantial portion of their content by linking to official sources. Keep them in the loop by providing easy-to-find, current information on your company Web site. Include transcripts of important offline news coverage about your business.

Change is good. Embrace it! Guide your organization to embrace it, too. After all, you’re already in the blogosphere – your customers, employees, partners and competitors are bloggers. Join the party!

By Lisa Poulson
Managing Director, Technology Practice
Burson-Marsteller San Francisco

Posted by Lisa Poulson at 06:58 AM | TrackBack

Finding Media in the Mirror

Trailing only slightly the efficacy of the Bush Presidency, the future of journalism is among the most hotly debated issues in the digital media world. Traditional newspapers are taking a pummeling from blogs. Virtually every news source in existence is under scrutiny. Does traditional news still matter? Have career journalists grown lazy? What has happened to objectivity? Since my childhood listening to the god-like voice of Walter Cronkite to today’s 40-point-font hysteria of Matt Drudge, the transfiguration of the news industry is staggering.

Amid so much change, where does one go for reliable, objective news?

Essentially, nowhere . . . and everywhere.

If it’s a reliable, objective single source you seek, I wish you the best of luck and hope that your journey to madness is short and relatively painless. Reliability depends on whom you’re talking to – or reading. Some swear by Jon Stewart; others take Rush Limbaugh as gospel. And objectivity? Hunter S. Thompson once said that the only true objective journalism is sports scores and stock market quotes, calling the phrase, “a pompous contradiction in terms.”

Modern journalism is fractured, confusing, blatantly biased and begging to be defined. So where does that leave us, the readers? It leaves us to our own devices and that may not be so dire after all.

As a self-professed media junkie, my habits may be more egregious than others. Until CNN turned into non-stop talking heads (and when exactly did that occur?), I kept the all-news station on throughout the day. I watch local news nearly nightly, read the daily newspaper over breakfast and still turn to the “big guys” when disaster strikes. I subscribe to multiple magazines, from Vanity Fair to National Geographic. And I spend an obscene amount of my day checking my Bloglines feeds at an embarrassing rate, lest I miss the latest Linux rant on Slashdot. In short, I have become my own news network. Driven away from traditional media by bias, ineptitude, and unoriginal thought, I invent my own solution. I read the latest Iraq updates on Al Jazeera, bounce to the nightly news for their take, check in on Drudge for a giggle, then visit a favorite blog or two for any conspiracy theories I might have missed.

By the end of the day, I’m exhausted, wanting to return to the time when these events were spoon-fed to me. Walter, where are you when I need you most?

But should we hearken back to the day when Mr. Cronkite pulled off his glasses, choking back tears to inform us that our president had died? No pundits brayed beside him, no ticker ran below to relay how the stock market was reacting. Then again, no one told us how incomplete the Warren Commission report was or provided a platform for all the witnesses who swore something else was afoot. We had to wait 20 years to hear dissenting voices. Sure, some of us think those voices are all loony. But some of us don’t.

And that’s where we find ourselves in the 21st century – with the luxury of one thousand different voices from which to choose. Rather than demand that the old guard change or the new kids be more responsible, let’s see if we can shift to make room for all of us.

Perhaps the new face of media has turned out to be… our own.

--Carla Thompson, Editor, Guidewire Group Editorial

Posted by Carla Thompson at 08:08 AM | TrackBack

Where is Europe's Garage?

On a quiet tree-lined street in Palo Alto, California, you can stroll by the modest address where William Hewlett and David Packard worked together to start the company that is now known worldwide as HP. Indeed, the tiny garage at 367 Addison Avenue, designated by an historical marker as the ''birthplace of Silicon Valley,” is for many the symbol of innovation, invention, and entrepreneurship in the United States.

While Hewlett and Packard were not the first Silicon Valley entrepreneurs, they are no doubt the best known, in the U.S. and around the world. They have been followed by Andy Grove, Bill Gates, Steve Jobs, Scott McNealy, Larry Ellison, and countless other, lesser-known entrepreneurs. Today, it is not uncommon to refer to the early days of any technology company as “just two guys in a garage.”

As much as the garage on Addison Avenue represents entrepreneurship, however, it also represents an ecosystem that came alive to help these two men and those that followed build world-class companies. Along with Hewlett and Packard, names like Kleiner, Perkins, Wilson, Sonsini, Silicon Valley Bank, Regis McKenna, and hundreds of other investors, bankers, lawyers, and professionals that work with struggling startups to accelerate their march to success. This “Innovation Ecosystem” works together in the world’s richest IT marketplace to build the products and companies that drive the U.S. and, increasingly, the global economy forward.

This ecosystem is vital to any technology market, and as we look to Europe, we must ask: “Where is the garage?” “Where is the ecosystem?” Indeed, Europe’s research parks, universities, and institutions are ripe with innovation. Yet the ecosystem which surrounds the development, launch and commercialization of innovative technology products is highly fragmented across Europe.

This is the innovation challenge for Europe in the first decade of the twenty-first century, and why Guidewire Group is hosting Innovate!Europe. Innovate!Europe is the first executive-level conference focused exclusively on highlighting, supporting, and celebrating European-originated technology innovation, and uniting an ecosystem to transform technology innovation and entrepreneurship in Europe. We invite you to join us in Zaragoza, Spain, June 13 – 15, 2005 to take your place in this ecosystem of innovation. To learn more, visit http://www.innovate-events.com.

While many suggest that a pan-European technology market cannot be created from the fractured collection of country markets, we believe that a pan-European tech market must be created in order to build a strong innovation center -- in distinct European countries and across European country borders. Failure to bridge markets into a European technology powerhouse will stifle European economies in an increasingly global technology market. Without a large, attractive market base in Europe, technology companies in North American and Asia will bypass European sectors and look to one another as global technology trade partners, focusing on the large, and by comparison homogeneous, markets that each region offers the other.

Posted by Guidewire Group at 01:19 PM | TrackBack

Connected Living at DEMO@15!

After the first session at this year’s DEMO@15! there is a great deal in the Connected Living space to write home about, and this is just the beginning of the two-day conference that provides a peak at the best technology products coming to market. Despite the fact that DEMO includes a large number of enterprise-only products and solutions, there are plenty of technologies and products that can be applied to the home if not explicitly designed for it.

For example, iControl Networks provides a great solution for home control and monitoring using IP, RF and Powerline. With three components: the networked box, the wireless sensors to be applied to doors and windows throughout the home, and the web-based interface for remote monitoring, iControl provides a fully functioning, always on glimpse into what’s happening on the home front. The product will be available this summer
with an introductory package for $399 including a camera, the gateway, 4 sensors, a lamp dimmer module, and a key chain remote. There is also a $9.95/mon charge to connect the service. These guys are onto something.

I have to say, Motorola has really surprised me this time. They showed a very cool capability to access and play all your digital music (in MP3 format) and commercial-free radio (through their iRadio channels) with their iRadio product. You can control music via any factory standard, plain vanilla car radio or BlueTooth-enabled cell phone. Music is controlled and shifted using the pre-set stereo buttons or your cell phone, which automatically pauses the music when you get a call. You can also play your MP3s to your home stereo, which they showed streaming from a ROKU box.
So, in a follow up conversation, I learned that your music collection can be stored on a PC, laptop, or any other storage device, and for the iRadio application the music is actually downloaded onto your mobile phone, via Blue Tooth or USB 2.0.
Although Motorola estimates that this capability will be included in most automobiles within the next 5 years, for now the user needs to buy several component parts. First of all there’s the stereo converter in the car, which will probably be offered for $50-$75. This must be installed in the car which will probably cost another $25-$50, unless you happen to be a home installer type. Finally, there’s the monthly radio charge, which according to Motorola could be as low as $5/month. Unfortunately, iRadio is not currently available, yet. The iRadio product/service offering will have customer trials in Q2 2005 with a mainstream launch in Q4.

Finally, Mediabolic is back with a new offering that enables products that connect your digital media to your TV set. The company expects this new player to reach consumers in multiple form factors including PCs, consumer electronics devices and even built-in to TVs, allowing wireless distribution of music, video, and photos. The reference design for Mediabolic’s Network Media Player will be available in 2 months time, with actual product available in September for the holiday buying season.

Posted by Katherine Noesen at 01:38 PM | Comments (0) | TrackBack

Backstage at DEMO

Backstage, DEMO's product demonstrators are a jumble of nerves. These companies are betting their product launch on the six minutes they have in front of the audience of 700 business development executives, investors, media, and other opinion makers. What's it like to launch a product at DEMO?

Forbes' Arik Hesseldahl has followed one of this year's companies, Jambo Networks, and chronicled its journey to DEMO in a multi-part series, Diary of a Demo.

Posted by Chris Shipley at 01:30 PM | Comments (0) | TrackBack

The DEMO@15! Opening Remarks

Welcome to DEMO@15! Fifteen years! It’s almost hard to believe. . .

In that time, we’ve produced twenty DEMO and DEMOmobile Conferences. In fact, this is the21st DEMO event in 15 years. Over the years, nearly fifteen hundred products have been introduced on the DEMO Stage.

DEMO has tremendous reach, and tremendous staying power –through good economic times and terrible ones – because of the great community that has grown up around this event. DEMO really is about the people, and, of course, it is about the products -- products that become the lens through which we get a better glimpse into the trends and ideas that will shape the technology market in the coming months.

Long before these 73 companies came together in the DEMO Class of 2005, the DEMO marketing team was talking about “technology in Bloom.” That idea became the central theme of the marketing. And I have to confess that while I liked the artwork, the colors, and the design, I really didn’t pay close attention to the campaign. I was busy narrowing a field of some 450 companies to 160 finalist, and then down to the 73 that are at DEMO@15!

I’ve often said that in planning DEMO, I don’t begin with an concept of the market and find products to fit it. Rather, I find the best companies and suss out the market trends those products reveal and amplify.

So there is some serendipity in the fact that the 73 products and companies -- in the longer context of the past 15 years – speak to this idea of “technology in bloom.” You see, if there is a unifying idea among these extremely diverse products, it is that of fruition and growth. Whether in the consumer segment or the enterprise market, these products speak to fulfillment of long-held promises.

Think back to the very first DEMO in 1991. Howard Elias, one of our innovator award winners – introduced the very first integrated multimedia PC. Two vendors were showing the PC as a platform for television. These were the harbingers of the digital media revolution. Fifteen years later, a half-dozen companies are here demonstrating that digital media is a powerful, everyday reality.

DEMO 94 was host to a shootout between Novell and Lotus over the desktop application that was then called Groupware. Today, collaboration is simple and accessible, and a part of dozens of applications, from collaborative blogs and wikis to business instant messaging.

Throughout the mid 90s, DEMO attendees saw the first digital cameras and photo editing software. Among our most memorable onstage demos was Kai Kraus’s demo of the photo morphing software called Soap. Now, digital cameras are everywhere, including our mobile phones, and we have companies here who are continue to push the bounds of digital photography.

In 1996, DEMO showed early work in Voice over IP. At DEMO, you’ll see companies that have embraced VoIP. They have tackled the hard problems of messaging and are bringing new sanity to business and consumer telephony.

At DEMO 97, a little company called Hot Office introduced what was arguably the first ASP software. A few attendees that year thought accessing server based software through a browser was a ridiculous idea. A few years later, we struggled to define .NET and Web services and to show meaningful examples of these then-new ideas at work. This week, service-based software is almost a given and Web services are opening new opportunities for businesses of all sizes, but especially smaller enterprises. Delivering enterprise-class functionality at small business prices is leveling the playing field of business in a manner that could profoundly affect how work is organized in the years ahead.

At DEMOmobile 99, Atheros unveiled its WiFi chipset. Two companies at DEMO are advancing the state of the art in WiFi connectivity. As importantly, the ubiquity of WiFi is having a profound affect on the consumer technology experience. Supported by this wireless networking technology and others, long-envisioned ideas around the complex problem of home monitoring and control are a simple reality, ready to implement now.

These are just a few of many examples where the seeds of technologies, planted across the years, that are coming to fruition in the products and services being launched here this week.

But make no mistake: these are not merely iterative products built on old ideas. Certainly, they are evidence that the personal technology market has reached a level of maturity and stability. Yet each of these products is innovative in its own right: innovative in creation of new technology, in the combining of components, in their approach to problems, and in the business models that take them to customers. The 73 products at DEMO this week are here because they move the market forward.

In fact, growth is clearly a theme in these products: The growth and maturity of the consumer market; a return to growth in the business market. Now to be clear: I’m not talking about hot-house growth spurred by artificial light and potent fertilizer – the conditions that allows for a spurt of energy without deep roots.

We are moving into a period of sustained growth because the tough soil and harsh conditions of the past four years have made today’s technology companies stronger. It is interesting to note that nearly half of the companies at DEMO this year – 32 to be precise -- are self- or angel-funded. These are companies that have accomplished the hard task of bringing products to market on the grit, passion and determination that they can create real change.

But no matter the size or funding, all of these companies know the challenges of innovating in a tough market and each has pushed through, developing great ideas, fueling new concepts, and creating real and sustainable value for their customers and themselves. These companies and these products are well-rooted for future success.

And these companies will play a role in the market growth that cuts across technology sectors – business and consumer. You’ve heard me talk before about the blending of work and personal lives. That line continues to blur, at least when it comes to technology. Today, business and consumer technology markets are tightly integrated.

Thre are so many entry points in the market that lead to the purchase of even more productivity enhancing, life-style enhancing products. And you know how quickly one purchase can lead to another, how products justified as a work expense are used as well for your personal enjoyment.

There are, simply put, great things to buy and they are offered in programs and packages and at prices that make them attractive to business and individual consumers. And they are coming to market at a time when consumers and IT Buyers are coming back to the table.

Indeed, I have said about this particular demonstrating class that it may well be the most expensive DEMO I have produced – expensive because there are a lot of products in this class that I simply have to have.

I invite you to visit the DEMO@15! Web site to learn more about these products.

Posted by Chris Shipley at 09:10 AM | Comments (0) | TrackBack

The Calm Before . . .

It's five a.m., and the Westin Kierland is eerily quiet. I slipped out of bed 15 minutes ago, splashed some water on my face, dressed and made my way to hotel lobby and across to the ballroom where, in just a few hours, DEMO@15! will get underway. This is one of my favorite moments at DEMO, the moment of greatest anticipation.

Products, under development and under wraps sometimes for years, will come to light this morning. Often, the companies that have created them will make their debut as well. Seventy-three products in all, ranging from a famework for grid-like computing on a Windows platform to a scanner than guarantees the perfect fit of jeans. This broadly diverse class of products speaks volumes about the state of the industry, the health of innovation, the breadth of imagination. (A little later today, after I’ve given it, I’ll post my opening remarks which speak to those issues.)

Over the next two days, these products will roll out to fanfare, speculation, analysis and critique. Seven hundred technology execs, investors, and media will have lots to say about DEMO@15! and the companies that are launching here.

Jason Calacanis is here blogging DEMO. So is Robert Scoble, and a dozen other bloggers. DEMO is aggregating a lot of these blogs on its site, and I'll be blogging from back stage as the event unfolds.

But right now, all's quiet at DEMO.

Posted by Chris Shipley at 04:15 AM | Comments (0) | TrackBack

Welcome to Guidewire Group

Guidewire Group is a media company helping smart technology companies launch innovative products into emerging markets. Through a range of products and services, Guidewire Group leverages its network and media products to champion great technologies in today's most exciting new markets.

Posted by Chris Shipley at 01:22 PM | Comments (0) | TrackBack