Walter Wriston did pioneering work in the use of IT in the corporation, and he foresaw that it would flatten hierarchies politically as well as in the corporate world. Yet Citibank remains one of the most hierarchical organizations around, and 25 years after Wriston's pioneering work they were still doing management workshops to get people to stop hogging information to build their powerbases in the company.
That story I got from a friend whose wife worked for Citibank a few years ago. But I've had plenty of comparable experiences of my own. These cases are interesting and important, for they are absolutely material clues to the frequent failures of IT projects. Interestingly also Microsoft, arguably one of the more successful software companies around really succeeded by focusing on the easy stuff, some programming languages at first but then personal applications. That is to say they solved the problems of secretaries and other administrative staff before they ever got into hairy stuff like networking infrastructure and server software, not to mention business applications which they are now entering, and which are truly an intractable area of only a few hard fought successes. Or, to put it differently they built their fortune based on solutions which left the hard part - business analysis - to the user. And now they're getting to the hard part.
I once did an interview with Prof. Edsger Dijkstra, in which we explored in depth his insights around the frequent IT failures in business, and he was very clear that many business problems can be mathematically quite intractable, and Database logic is about the hardest thing there is.
But it is the control issue that really kills a lot of IT projects. My own most interesting experience revolved around a Decision Support technology in the shipping company where I worked in the early 80's. In conjunction with an MIT based OR consulting group we prototyped a Decision Support workstation for the company's fleet of chemical tankers, including evaluation of all combinations and permutations of a given trading pattern, and the ability to do load maximization and optimal pricing. We had good economic models indicating that the project had the potential for upto 20-30 million dollars of incremental intramarginal profits compared to the then somewhat computer supported, but really manual/personal decision making about major changes in trading patterns. One of the interesting examples was a change in voyage pattern we discovered at a certain point, yielding an extra $1 million per trip, but by the time we discovered the pattern, we had already missed the opportunity three times, in essence because it involved the need of three people talking about different parts of the world. That was the clearest ever indication of why such technology could change things for the better.
The project got shot down, essentially because the then sixty-five year old founder of the company had an emotional aversion to giving up decisions he ultimately regarded as his prerogative, and the head of operations, who perfectly well understood that I was actually right, saw the project as a threat to his job.
Then in 2001 I was in the company as a vendor, and the new CIO, who had a background at AMR Corp, and therefore understood yield maximization, told me he was then implementing the project which had been abandoned in 1987. I never found out what became of it, but I wondered how much was the compound return on an extra $25 million per year for 14 years? I never did the calculation.
In short "management" in many cases feels as much threatened by information technology as factory workers do by machines. It is this friction more than anything which is an actual manifestation of the "digital divide," in a practical way, which means that many people who do have access to the technology, misuse it for trivial tasks because they are afraid of it.
The above scenarios are just another way of looking at how we often fail to make use of the availability of IT solutions even when they are plentifully available. In this sense the digital divide is here, not there. And as long as we don't understand it here, we can't solve it there. To think that solving the digital divide means providing access to personal computers and the internet is silly nonsense. Bridging the digital divide requires extending useful applications and solutions to people in a way that's easy to use and access. It may be through an internet café, a cell-phone, a fat client or a thin client as the case may be, but success means usability, not how it's delivered.
Copyright © 2005 Rogier F. van Vlissingen. All rights reserved.
Wednesday, November 30, 2005
Tuesday, November 29, 2005
From Prepaid Phonecards to Financial Services
Did anybody write a decent history of the phone card business yet? It would be fascinating. I know, I was there.
In the early nineties I was trying to market some of the early prepaid phonecards, with my American friends wondering what was the point. Being from Europe I was convinced they would succeed, though it took me a while to find out why.
At one point a friend organized a luncheon at a phonecard convention. At that particular time a few small companies were marketing phonecards, and trying to cook up a business case. Many were trying to do promotional cards on the European and Asian model without success, because consumers didn't know what phonecards were for, and threw them out. For some time the collectible market was buoyant, mostly because of foreign buyers, who did not appreciate the meaninglessness of every Tom, Dick and Harry printing phonecards, and going out of business the next year, not to mention the fact that "unused" was frequently not a useful distinction for pin-based cards, unless the pins were covered by a scratch-off strip, which was often not the case in the early days. All the majors at that time had retail product at 60 cents per minute for domestic US traffic, and multiples for international traffic, and the biggest successes were vending machines in Hotel lobbies, supplying cards to visitors from Japan and Europe who already knew what a phonecard was, and did not realize the price gauging. The majors were spending themselves silly on trying to market these cards, without any meaningful success.
I had a chance to speak at that luncheon. My comment boiled down to a question to the majors: "Why are you marketing to the wrong people?" I proceeded to point out that a prepaid card was a financial instrument not a phone product, because it removed credit as an impediment for using the phone system. Therefore its natural market was 30 million under-served consumers in the US who did not have home phones because of credit problems. These folks were looking for a discount product, not for 60 cents a minute. Not a hint of any appreciation from the collected MBAs working for the big phone companies, but two months later someone else who was at that meeting called me to tell me they were testing a card which addressed the market I described. Would I be interested in checking it out? I said yes. It was the TLC phonecard, the first serious (somewhat serious at least...) discount phonecard. My phonecard business went from $3,000 in sales the first year, to $30,000 the second to $300,000 the third (the year TLC was launched), to $3 million in its fourth year (1996), after which the market collapsed and many companies, including TLC went out of business. But by that time however, the case was made that the market was discount cards, and even the majors didn't take more than another 10 years to figure it out, though they never really succeeded at it either.
In the practice of marketing these cards, we did not need any advertising, except some posters with rates. What I did do was to go into a convenience store and give away one or two $2 cards to the last people on the line, and tell them how to use the cards. The next week when I came in the owner of the store would want to buy phonecards. In other words, the real marketing was word of mouth. This was an experience that was reinforced again and again, such as in early 1997, when I had a card with specials to W. Africa, and within two weeks I knew every Senegalese store owner in Connecticut. Suddenly Senegalese people came chasing me down the street to be able to sell the cards in their stores.
In short if you're selling a product that meets a real need, you don't need much advertising. This is very different from selling to wealthy consumers and competing for disposable income with a million other products. For that type of business you need heavy marketing budgets, and the normal marketing logic is start at the high end, and lower prices with volume.
But along the lines of realizing that phonecards were a financial product, not a phone product, I began to think a lot about the fact that there is a huge pent-up demand for effective financial solutions and that check-cashers, bill-payers, money-remitters, pawnshops, and payday loan operators were making a lot of money delivering inferior service, and were ripe to be taken out by effective solutions enabled by superior IT and the internet. It is now 2005 as I write this, and it still has not really started to happen, but inevitably it will.
Copyright, (c) 2005, Rogier F. van Vlissingen. All rights reserved.
In the early nineties I was trying to market some of the early prepaid phonecards, with my American friends wondering what was the point. Being from Europe I was convinced they would succeed, though it took me a while to find out why.
At one point a friend organized a luncheon at a phonecard convention. At that particular time a few small companies were marketing phonecards, and trying to cook up a business case. Many were trying to do promotional cards on the European and Asian model without success, because consumers didn't know what phonecards were for, and threw them out. For some time the collectible market was buoyant, mostly because of foreign buyers, who did not appreciate the meaninglessness of every Tom, Dick and Harry printing phonecards, and going out of business the next year, not to mention the fact that "unused" was frequently not a useful distinction for pin-based cards, unless the pins were covered by a scratch-off strip, which was often not the case in the early days. All the majors at that time had retail product at 60 cents per minute for domestic US traffic, and multiples for international traffic, and the biggest successes were vending machines in Hotel lobbies, supplying cards to visitors from Japan and Europe who already knew what a phonecard was, and did not realize the price gauging. The majors were spending themselves silly on trying to market these cards, without any meaningful success.
I had a chance to speak at that luncheon. My comment boiled down to a question to the majors: "Why are you marketing to the wrong people?" I proceeded to point out that a prepaid card was a financial instrument not a phone product, because it removed credit as an impediment for using the phone system. Therefore its natural market was 30 million under-served consumers in the US who did not have home phones because of credit problems. These folks were looking for a discount product, not for 60 cents a minute. Not a hint of any appreciation from the collected MBAs working for the big phone companies, but two months later someone else who was at that meeting called me to tell me they were testing a card which addressed the market I described. Would I be interested in checking it out? I said yes. It was the TLC phonecard, the first serious (somewhat serious at least...) discount phonecard. My phonecard business went from $3,000 in sales the first year, to $30,000 the second to $300,000 the third (the year TLC was launched), to $3 million in its fourth year (1996), after which the market collapsed and many companies, including TLC went out of business. But by that time however, the case was made that the market was discount cards, and even the majors didn't take more than another 10 years to figure it out, though they never really succeeded at it either.
In the practice of marketing these cards, we did not need any advertising, except some posters with rates. What I did do was to go into a convenience store and give away one or two $2 cards to the last people on the line, and tell them how to use the cards. The next week when I came in the owner of the store would want to buy phonecards. In other words, the real marketing was word of mouth. This was an experience that was reinforced again and again, such as in early 1997, when I had a card with specials to W. Africa, and within two weeks I knew every Senegalese store owner in Connecticut. Suddenly Senegalese people came chasing me down the street to be able to sell the cards in their stores.
In short if you're selling a product that meets a real need, you don't need much advertising. This is very different from selling to wealthy consumers and competing for disposable income with a million other products. For that type of business you need heavy marketing budgets, and the normal marketing logic is start at the high end, and lower prices with volume.
But along the lines of realizing that phonecards were a financial product, not a phone product, I began to think a lot about the fact that there is a huge pent-up demand for effective financial solutions and that check-cashers, bill-payers, money-remitters, pawnshops, and payday loan operators were making a lot of money delivering inferior service, and were ripe to be taken out by effective solutions enabled by superior IT and the internet. It is now 2005 as I write this, and it still has not really started to happen, but inevitably it will.
Copyright, (c) 2005, Rogier F. van Vlissingen. All rights reserved.
Personal Computing versus Personal Computers
Virtual Computing and Personal Computers are about the same age, but they haven't truly met yet, at least not in the consumer experience.
The reality however is that the meeting is inevitable, so that we can finally make the transition from Digital Divide to Digital Un-divide, making affordable personal computing a reality. For the personal computer model (and therefore the Microsfoft business model of old), are really a still-born baby, a fluke of history. Except for professional uses, most personal computers (think of the family computer) are shared resources to one degree or another. And besides the security disaster that they are by definition, which cannot be solved, i.e. is logically incapable of solution, except for bandaid solutions, work-arounds and kludges, they are also not practical, not manageable, not to mention needless energy hogs.
For one thing, think of what it would do for our electrical bills and for the country's energy dependence, if we replaced all PCs drawing 3-500 watts, with thin clients or smart terminals drawing 25 watts.
For another think of how much happier most of us would be if we didn't have the endless worries of PC maitenance (they break down far more than cars), and instead had a managed back end, run by professionals, particularly if it provided better security and privacy than the home-based "personal computer" we now use, but which is likely to be shared to one degree or another, voluntarily or otherwise (Johnny, did you mess with my computer again???)
That sounds like it may be the right direction. I for one, being far more computer literate than about 99% of the population, would relish the thought of never having to hunt down another virus, or to replace a hard disk for that matter. Even more so, I would relish the thought of accessing my work from wherever I need to be.
The Personal Computer model probably reaches saturation at no more than 15% of the world's population, and is not truly functional or reliable for better than 95% of users, because of its inherent management problems. The Personal Computing model has a lot further to go, because it is both more functional and far cheaper. If the 50/15 initiative is the answer or even part of the answer remains to be seen.
Copyright, (c) 2005, Rogier F. van Vlissingen. All rights reserved.
The reality however is that the meeting is inevitable, so that we can finally make the transition from Digital Divide to Digital Un-divide, making affordable personal computing a reality. For the personal computer model (and therefore the Microsfoft business model of old), are really a still-born baby, a fluke of history. Except for professional uses, most personal computers (think of the family computer) are shared resources to one degree or another. And besides the security disaster that they are by definition, which cannot be solved, i.e. is logically incapable of solution, except for bandaid solutions, work-arounds and kludges, they are also not practical, not manageable, not to mention needless energy hogs.
For one thing, think of what it would do for our electrical bills and for the country's energy dependence, if we replaced all PCs drawing 3-500 watts, with thin clients or smart terminals drawing 25 watts.
For another think of how much happier most of us would be if we didn't have the endless worries of PC maitenance (they break down far more than cars), and instead had a managed back end, run by professionals, particularly if it provided better security and privacy than the home-based "personal computer" we now use, but which is likely to be shared to one degree or another, voluntarily or otherwise (Johnny, did you mess with my computer again???)
That sounds like it may be the right direction. I for one, being far more computer literate than about 99% of the population, would relish the thought of never having to hunt down another virus, or to replace a hard disk for that matter. Even more so, I would relish the thought of accessing my work from wherever I need to be.
The Personal Computer model probably reaches saturation at no more than 15% of the world's population, and is not truly functional or reliable for better than 95% of users, because of its inherent management problems. The Personal Computing model has a lot further to go, because it is both more functional and far cheaper. If the 50/15 initiative is the answer or even part of the answer remains to be seen.
Copyright, (c) 2005, Rogier F. van Vlissingen. All rights reserved.
Subscribe to:
Posts (Atom)