Category Archives: business

The future of MBAs

I’ve reached M in my ‘the future of’ series. So, MBAs.

We have all had to sit through talks where the speaker thinks that using lots of points that start with the same letter is somehow impressive. During one such talk, I got bored and produced this one letter fully comprehensive MBA. Enjoy:

Corporate Cycle

The future of walled gardens

In the physical world, walled gardens are pretty places we visit, pay an entry fee, then enjoy the attractions therein. It is well understood that people often only value what they have to pay for and walled gardens capitalise on that. While there, we may buy coffees or snacks from the captive facilities at premium prices and we generally accept that premium as normal practice. Charging an entry fee ensures that people are more likely to stay inside for longer, using services (picnic areas, scenery, toilets etc) they have already paid for rather than similar ones outside that may be free and certainly instead of paying another provider as well.

In the content industry, the term applies to bundles of services from a particular supplier or available on a particular platform. There is some financial, psychological, convenience, time or other cost to enter and then to leave. Just as with the real thing, they have a range of attractions within that make people want to enter, and once there, they will often access local service variants rather than pay the penalty to leave and access perhaps better ones elsewhere. Our regulators started taking notice of them in the early days of cable TV, addressed the potential abuses and sometimes took steps to prevent telecoms or cable companies from locking customers in. More recently, operating system and device manufacturers have also fallen under the same inspection.

Commercial enterprises have an interest in keeping customers within their domain so that they can extract the most profit from them. What is less immediately obvious is why customers allow it. If people want to use a particular physical facility, such as an airport, or a particular tourist attraction such as a city, or indeed a walled garden, then they have to put up with the particular selection of shops and restaurants there, and are vulnerable to exploitation such as higher prices because of the lack of local choice. There is a high penalty in time and expense to find an alternative. With device manufacturers, the manufacturer is in an excellent position to force customers to use services from those they have selected, and that enables them to skim charges for transactions, sometimes from both ends. The customer can only avoid that by using multiple devices, which incurs a severe cost penalty. There may be some competition among apps within the same garden, but all are subject to the rules of the garden. Operating systems are also walled gardens, but the OS usually just goes with the choice of device. It may be possible to swap to an alternative, but few users bother; most just accept the one that it comes with.

Walled gardens in the media are common but easier to avoid. With free satellite and terrestrial TV as well as online video and TV services, there is now abundant choice, though each provider still tries to make cute little walled gardens if they can. Customers can’t get access to absolutely all content unless they pay multiple subscriptions, but can minimize outlay by choosing the most appropriate garden for their needs and staying in it.

The web has disappointed though. When it was young, many imagined it would become a perfect market, with suppliers offering services and everyone would see all the offerings, all the prices and make free decisions where to buy and deal direct without having to pay for intermediaries. It has so badly missed the target that Berners Lee and others are now thinking how it can be redesigned to achieve the original goals. Users can theoretically browse freely, but the services they actually want to use often become natural monopolies, and can then expand organically into other territories, becoming walled gardens. The salvation is that new companies can always emerge that provide an alternative. It’s impossible to monopolize cyberspace. Only bits of it can be walled off.

Natural monopolies arise when people have free access to everything but one supplier offers something unique and thus becomes the only significant player. Amazon wasn’t a walled garden when it started so much as a specialist store that grew into a small mall and is now a big cyber-city. Because it is so dominant and facilitates buying from numerous suppliers, it certainly qualifies as a walled garden now, but it is still possible to easily find many other stores. By contrast, Facebook has been a walled garden since its infancy, with a miniature web-like world inside its walls with its own versions of popular services. It can monitor and exploit the residents for as long as it can prevent them leaving. The primary penalties for leaving are momentarily losing contact with friends and losing interface familiarity, but I have never understood why so many people spend so much of their time locked within its walls rather than using the full range of web offerings available to them. The walls seem very low, and the world outside is obviously attractive, so the voluntary confinement is beyond my comprehension.

There will remain be a big incentive for companies to build walled gardens and plenty of scope for making diverse collections of unique content and functions too and plenty of companies wanting to make theirs as attractive as possible and attempt to keep people inside. However, artificial intelligence may well change the way that networked material is found, so the inconvenience wall may vanish, along with the OS and interface familiarity walls. Deliberate barriers and filters may prevent it gaining access to some things, but without deliberate obstruction, many walled gardens may only have one side walled, that of price for unique content. If that is all it has to lock people in, then it may really be no different conceptually from a big store. Supermarkets offer this in the physical world, but many other shops remain.

If companies try to lock in too much content in one place, others will offer competing packages. It would make it easier for competitors and that is a disincentive. If a walled garden becomes too greedy, its suppliers and customers will go elsewhere. The key to managing them is to ensure diversity by ensuring the capability to compete. Diversity keeps them naturally in check.

Network competition may well be key. If users have devices that can make their own nets or access many externally provided ones, the scope for competition is high, and the ease of communicating and dealing directly is also high. It will be easy for producers to sell content direct and avoid middlemen taking a cut. That won’t eliminate walled gardens, because some companies will still do exclusive deals and not want to deal direct. There are many attractive business models available to potential content producers and direct selling is only one. Also, as new streams of content become attractive, they are sometimes bought, and this can be the intended exit strategy for start-ups.

Perhaps that is where we are already at. Lots of content that isn’t in walled gardens exists and much is free. Much is exclusive to walled gardens. It is easy to be influenced by recent acquisitions and market fluctuations, but really, the nature of the market hasn’t really changed, it just adapts to new physical platforms. In the physical world, we are free to roam but walled gardens offer attractive destinations. The same applies to media. Walled gardens won’t go away, but there is also no reason to expect them to take over completely. With new networks, new business models, new entrepreneurs, new content makers, new viewing platforms, the same business diversity will continue. Fluctuating degrees of substitution rather than full elimination will continue to be the norm.

Or maybe I’m having an off-day and just can’t see something important. Who knows?

 

 

More future fashion fun

A nice light hearted shorty again. It started as one on smart makeup, but I deleted that and will do it soon. This one is easier and in line with today’s news.

I am the best dressed and most fashion conscious futurologist in my office. Mind you, the population is 1. I liked an article in the papers this morning about Amazon starting to offer 3D printed bobble-heads that look like you.

See: http://t.co/iFBtEaRfBd.

I am especially pleased since I suggested it over 2 years ago  in a paper I wrote on 3D printing.

http://timeguide.wordpress.com/2012/04/30/more-uses-for-3d-printing/

In the news article, you see the chappy with a bobble-head of him wearing the same shirt. It is obvious that since Amazon sells shirts too, that it won’t be long at all before they send you cute little avatars of you wearing the outfits you buy from them. It starts with bobble-heads but all the doll manufacturers will bring out versions based on their dolls, as well as character merchandise from films, games, TV shows. Kids will populate doll houses with minis of them and their friends.

You could even give one of a friend to them for a birthday present instead of a gift voucher, so that they can see the outfit you are offering them before they decide whether they want that or something different. Over time, you’d have a collection of minis of you and your friends in various outfits.

3D cameras are coming to phones too, so you’ll be able to immortalize embarrassing office party antics in 3D office ornaments. When you can’t afford to buy an outfit or accessory sported by your favorite celeb, you could get a miniature wearing it. Clothing manufacturers may well appreciate the extra revenue from selling miniatures of their best kit.

Sports manufacturers will make replicas of you wearing their kit, doing sporting activities. Car manufacturers will have ones of you driving the car they want you to buy, or you could buy a fleet of miniatures. Holiday companies could put you in a resort hotspot. Or in a bedroom ….with your chosen celeb.

OK, enough.

 

 

The future of ‘authenticity’

I recently watched an interesting documentary on the evolution of the British coffee shop market. I then had an idea for a new chain that is so sharp it would scratch your display if I wrote it here, so I’ll keep that secret. The documentary left me with another thought: what’s so special about authentic?

I’ll blog as I think and see where I get to, if anywhere.

Starbucks and Costa sell coffee (for my American readers, Costa is a British version of Starbucks that sells better coffee but seems to agree they should pay tax just like the rest of us – yes I know Starbucks has since reformed a bit, but Costa didn’t have to). Cafe Nero (or is it just Nero?) sells coffee with the ‘Authentic Italian’ experience. I never knew that until I watched the documentary. Such things fly way over my head. If Nero is closest when I want a coffee, I’ll go in, and I know the coffee is nice, just like Costa is nice, but authentic Italian? Why the hell would I care about my coffee being authentic Italian? I don’t go anywhere to get an authentic Danish pastry or an authentic Australian beer, or an authentic Swiss cheese, or an authentic Coke. What has coffee got to do with Italy anyway? It’s a drink. I don’t care how they treat it in any particular country, even if they used to make it nicer there. The basic recipes and techniques for making a decent coffee were spread worldwide decades ago, and it’s the coffee I want. Anyway, we use a Swiss coffee machine with Swiss coffee at home, not Italian, because the Swiss learned from their Italian sub-population and then added their usual high precision materials and engineering and science, they didn’t just take it as gospel that Mama somehow knew best. And because my wife is Swiss. My razor sharp idea isn’t a Swiss coffee chain by the way.

I therefore wonder how many other people who go into Cafe Nero care tuppence whether they are getting an authentic Italian experience, or whether like me they just want a decent coffee and it seems a nice enough place. I can understand the need to get the best atmosphere, ambiance, feel, whatever you want to call it. I can certainly understand that people might want a cake or snack to go with their coffee. I just don’t understand the desire to associate with another country. Italy is fine for a visit; I have nothing against Italians, but neither do I aspire in any way to be or behave Italian.

Let’s think it through a bit. An overall experience is made up of a large number of components: quality and taste of the coffee and snacks, natural or synthetic, healthy or naughty, the staff and the nature of the service, exterior and interior decor and color scheme, mixture of aromas, range of foods, size of cake portion, ages groups and tribal ranges of other customers, comfort of furnishings, lighting levels, wireless LAN access….. There are hundreds of factors. The potential range of combinations  is massive. People can’t handle all that information when they want a coffee, so they need an easy way to decide quickly. ‘Italian’ is really just a brand, reducing the choice stress and Cafe Nero is just adopting a set of typical brand values evolved by an entire nation over centuries. I guess that makes some sense.

But not all that much sense. The Italian bit is a nice shortcut, but once it’s taken out of Italy, whatever it might be, it isn’t in Italy any more. The customers are not expected to order in Italian apart beyond a few silly words to describe the size of the coffee. The customers mostly aren’t Italian, don’t look Italian, don’t chat in Italian and don’t behave Italian. The weather isn’t Italian. The views outside aren’t Italian. The architecture isn’t Italian. So only a few bits of the overall experience can be Italian, the overall experience just isn’t. If only a few bits are authentic, why bother? Why not just extract some insights of what things about ‘Italian’ customers find desirable and then adapt them to the local market? Perhaps what they have done, so if they just drop the pretense, everything would be fine. They can’t honestly say they offer an authentic Italian experience, just a few components of such. I never noticed their supposed Italianness anyway but I hate pretentiousness so now that I understand their offering, it adds up to a slight negative for me. Now that I know they are pretending to be Italian, I will think twice before using them again, but still will if it’s more than a few metres further to another coffee shop. Really, I just want a coffee and possibly a slice of cake, in a reasonably warm and welcoming coffee shop.

Given that it is impossible to provide an ‘authentic Italian experience’ outside of Italy without also simulating every aspect of being in Italy, how authentic could they be in the future? What is the future of authenticity? Could Cafe Nero offer a genuinely Italian experience if that’s what they really wanted? Bring on VR, AR, direct brain links, sensory recording and replay. Total Recall.  Yes they could, sort of. With a full sensory full immersion system, you could deliver an experience that is real and authentic in every sense except that it isn’t real. In 2050, you could sell a seemingly genuinely authentic Italian coffee and cake in a genuinely Italian atmosphere, anywhere. But when they do that, I’ll download that onto my home coffee machine or my digital jewelry. Come to think about it, I could just drink water and eat bread and do all the rest virtually. Full authenticity, zero cost.

This Total Recall style virtual holiday or virtual coffee is fine as far as it goes, but a key problem is knowing that it isn’t real. If you disable that by hypnosis or drugs or surgery or implants or Zombie tech, then your Matrix style world will have some other issues to worry about that are more important. If you don’t, and I’m pretty sure we won’t, then knowing the difference between real and virtual will be all-important. If you know it isn’t real, it pushes a different set of buttons in your brain.

In parallel, as AI gets more and more powerful, a lot of things will be taken over by machines. That adds to the total work pool of man + machine so the economy expands and we’re all better off, if we do it right. We can even restore and improve the environment at the same time. In that world, some roles will still be occupied by humans. People will focus more on human skills, human interaction, crafts, experiences, care, arts and entertainment, sports, and especially offering love and attention. I call it the Care Economy. If you take two absolutely identical items, one provided by a machine and one by another person, the one offered by the person will be more valued, and therefore more valuable – apart from a tiny geek market that specifically wants machines. Don’t believe me? Think of the high price glassware you keep for special occasions and dinner parties. Cut by hand by an expert with years of training. Each glass is slightly different from every other. In one sense it is shoddy workmanship compared to the mass-produced glass, precision made, all identical, that costs 1% as much. The human involvement is absolutely critical. The key human involvement is that you know you couldn’t possibly do it, that it took a highly skilled craftsman. You aren’t buying just the glass, but the skills and attention and dedication and time of the craftsman. In just the same way, you will happily pay a bigger proportion of your bigger future income for other people’s time. Virtual is fine and cheap, but you’ll happily pay far more for the real thing. That will greatly offset the forces pushing towards a totally virtual experience.

This won’t happen overnight, and that brings us to another force that plays out over the same time. When we use a phrase like ‘authentic Italian’, we don’t normally put a date on it. Do we mean contemporary Italy, 1960 Italy, or what? If 1960, then we’d have to use a lot of virtual tech to simulate it. If we mean contemporary, then that includes all the virtual stuff that goes on in Italy too, which is likely pretty much what happens virtually elsewhere. A large proportion of our everyday will be virtual. How can you have authentic virtual? When half of what everyone sees every day isn’t real, you could no more have an authentic Italian coffee bar than an authentic hobbit hole in Middle Earth.

Authenticity is a term that can already only be applied to a subset of properties of a particular component. A food item or a drink could be authentic in terms of its recipe and taste, origin and means of production of the ingredients, perhaps even served by an Italian, but the authenticity of the surrounding context is doomed to be more and more limited. Does it matter though? I don’t think so.

The more I think about it, the less I care if it is in any way authentic. I want a pleasing product served by pleasant human staff in a pleasant atmosphere. I care about the various properties and attributes in an absolute sense, and I also care whether they are provided by human or machine, but the degree to which they mimic some particular tradition really doesn’t add any value for me. I am very happy to set culture free to explore the infinite potential of imagination and make an experience as enjoyable as possible.  Authenticity is just a labelled cage, and we’re better if it is unlocked. I want real pleasure, not pretend pleasure, but authenticity is increasingly becoming a pretense.

Oh, my razor sharp idea? As I said, it’s secret.

 

 

The internet of things will soon be history

I’ve been a full time futurologist since 1991, and an engineer working on far future R&D stuff since I left uni in 1981. It is great seeing a lot of the 1980s dreams about connecting everything together finally starting to become real, although as I’ve blogged a bit recently, some of the grander claims we’re seeing for future home automation are rather unlikely. Yes you can, but you probably won’t, though some people will certainly adopt some stuff. Now that most people are starting to get the idea that you can connect things and add intelligence to them, we’re seeing a lot of overshoot too on the importance of the internet of things, which is the generalised form of the same thing.

It’s my job as a futurologist not only to understand that trend (and I’ve been yacking about putting chips in everything for decades) but then to look past it to see what is coming next. Or if it is here to stay, then that would also be an important conclusion too, but you know what, it just isn’t. The internet of things will be about as long lived as most other generations of technology, such as the mobile phone. Do you still have one? I don’t, well I do but they are all in a box in the garage somewhere. I have a general purpose mobile computer that happens to do be a phone as well as dozens of other things. So do you probably. The only reason you might still call it a smartphone or an iPhone is because it has to be called something and nobody in the IT marketing industry has any imagination. PDA was a rubbish name and that was the choice.

You can stick chips in everything, and you can connect them all together via the net. But that capability will disappear quickly into the background and the IT zeitgeist will move on. It really won’t be very long before a lot of the things we interact with are virtual, imaginary. To all intents and purposes they will be there, and will do wonderful things, but they won’t physically exist. So they won’t have chips in them. You can’t put a chip into a figment of imagination, even though you can make it appear in front of your eyes and interact with it. A good topical example of this is the smart watch, all set to make an imminent grand entrance. Smart watches are struggling to solve battery problems, they’ll be expensive too. They don’t need batteries if they are just images and a fully interactive image of a hugely sophisticated smart watch could also be made free, as one of a million things done by a free app. The smart watch’s demise is already inevitable. The energy it takes to produce an image on the retina is a great deal less than the energy needed to power a smart watch on your wrist and the cost of a few seconds of your time to explain to an AI how you’d like your wrist to be accessorised is a few seconds of your time, rather fewer seconds than you’d have spent on choosing something that costs a lot. In fact, the energy needed for direct retinal projection and associated comms is far less than can be harvested easily from your body or the environment, so there is no battery problem to solve.

If you can do that with a smart watch, making it just an imaginary item, you can do it to any kind of IT interface. You only need to see the interface, the rest can be put anywhere, on your belt, in your bag or in the IT ether that will evolve from today’s cloud. My pad, smartphone, TV and watch can all be recycled.

I can also do loads of things with imagination that I can’t do for real. I can have an imaginary wand. I can point it at you and turn you into a frog. Then in my eyes, the images of you change to those of a frog. Sure, it’s not real, you aren’t really a frog, but you are to me. I can wave it again and make the building walls vanish, so I can see the stuff on sale inside. A few of those images could be very real and come from cameras all over the place, the chips-in-everything stuff, but actually, I don’t have much interest in most of what the shop actually has, I am not interested in most of the local physical reality of a shop; what I am far more interested in is what I can buy, and I’ll be shown those things, in ways that appeal to me, whether they’re physically there or on Amazon Virtual. So 1% is chips-in-everything, 99% is imaginary, virtual, some sort of visual manifestation of my profile, Amazon Virtual’s AI systems, how my own AI knows I like to see things, and a fair bit of other people’s imagination to design the virtual decor, the nice presentation options, the virtual fauna and flora making it more fun, and countless other intermediaries and extramediaries, or whatever you call all those others that add value and fun to an experience without actually getting in the way. All just images directly projected onto my retinas. Not so much chips-in-everything as no chips at all except a few sensors, comms and an infinitesimal timeshare of a processor and storage somewhere.

A lot of people dismiss augmented reality as irrelevant passing fad. They say video visors and active contact lenses won’t catch on because of privacy concerns (and I’d agree that is a big issue that needs to be discussed and sorted, but it will be discussed and sorted). But when you realise that what we’re going to get isn’t just an internet of things, but a total convergence of physical and virtual, a coming together of real and imaginary, an explosion of human creativity,  a new renaissance, a realisation of yours and everyone else’s wildest dreams as part of your everyday reality; when you realise that, then the internet of things suddenly starts to look more than just a little bit boring, part of the old days when we actually had to make stuff and you had to have the same as everyone else and it all cost a fortune and needed charged up all the time.

The internet of things is only starting to arrive. But it won’t stay for long before it hides in the cupboard and disappears from memory. A far, far more exciting future is coming up close behind. The world of creativity and imagination. Bring it on!

Drone Delivery: Technical feasibility does not guarantee market success

One of my first ever futurology articles explained why Digital Compact Cassette wouldn’t succeed in the marketplace and I was proved right. It should have been obvious from the outset that it wouldn’t fly well, but it was still designed, manufactured and shipped to a few customers.

Decades on, I had a good laugh yesterday reading about the Amazon drone delivery service. Yes, you can buy drones; yes, they can carry packages, and yes, you can make them gently place a package on someone’s doorstep. No, it won’t work in the marketplace. I was asked by the BBC Radio 4 to explain on air, but the BBC is far more worried about audio quality than content quality and I could only do the interview from home, so they decided not to use me after all (not entirely fair – I didn’t check who they actually used and it might have been someone far better).

Anyway, here’s what I would have said:

The benefits are obvious. Many of the dangers are also obvious, and Amazon isn’t a company I normally associate with stupidity, so they can’t really be planning to go all the way. Therefore, this must be a simple PR stunt, and the media shouldn’t be such easy prey for free advertising.

Very many packages are delivered to homes and offices every day. If even a small percentage were drone-delivered, the skies will be full of drones. Amazon would only control some of them. There would be mid-air collisions between drones, between drones and kites and balloons, with new wind turbines, model aeroplanes and helicopters, even with real emergency helicopters. Drones with spinning blades would be dropping out of the sky frequently, injuring people, damaging houses and gardens, onto roads, causing accidents. People would die.

Drones are not silent. A lot of drones would make a lot of extra ambient noise in an environment where noise pollution is already too high. They are also visible, creating another nuisance visual disturbance.

Kids are mischievous. Some adults are mischievous, some criminal, some nosey, some terrorists. I can’t help wonder what the life expectancy of a drone would be if it is delivering to a housing estate full of kids like the one I was. If I was still a kid, I’d be donning a mask (don’t want Amazon giving my photo to the police) and catching them, making nets to bring them down and stringing wires between buildings on their normal routes, throwing stones at them, shooting them with bows and arrows, Nerf guns, water pistols, flying other toy drones into their paths. I’d be tying all sorts of other things onto them for their ongoing journey. I’d be having a lot of fun on the black market with all the intercepted goods too.

If I were a terrorist, and if drones were becoming common delivery tools, I’d buy some and put Amazon labels on them, or if I’m short of cash, I’d hijack a few, pay kids pocket money to capture them, and after suitable mods, start using them to deliver very nasty packages precisely onto doorsteps or spray lethal concoctions into the air above specific locations.

If I were just criminal, I’d make use of the abundance of drones to make my own less conspicuous, so that I could case homes for burglaries, spy on businesses with cameras and intercept their wireless signals, check that an area is free of police, or get interesting videos for my voyeur websites. Maybe I’d add a blinding laser into them to attack any police coming into the scene of my crime, giving valuable extra time without giving my location away.

There are also social implications: jobs in Amazon, delivery and logistics companies would trade against drone manufacturing and management. Neighbours might fall out if a house frequently gets noisy deliveries from a drone while people are entering and leaving an adjacent door or relaxing in the garden, or their kids are playing innocently in the front garden as a drone lands very close by. Drone delivery would be especially problematic when doorways are close together, as they often are in cities.

Drones are good fun as toys and for hobbies, in low numbers. They are also useful for some utility and emergency service tasks, under supervision. They are really not a good solution for home delivery, even if technically it can be done. Amazon knows that as well as I do, and this whole thing can only be a publicity stunt. And if it is, well, I don’t mind, I had a lot of fun with it anyway.

And another new book: You Tomorrow, 2nd Edition

I wrote You Tomorrow two years ago. It was my first ebook, and pulled together a lot of material I’d written on the general future of life, with some gaps then filled in. I was quite happy with it as a book, but I could see I’d allowed quite a few typos to get into the final work, and a few other errors too.

However, two years is a long time, and I’ve thought about a lot of new areas in that time. So I decided a few months ago to do a second edition. I deleted a bit, rearranged it, and then added quite a lot. I also wrote the partner book, Total Sustainability. It includes a lot of my ideas on future business and capitalism, politics and society that don’t really belong in You Tomorrow.

So, now it’s out on sale on Amazon

http://www.amazon.co.uk/You-Tomorrow-humanity-belongings-surroundings/dp/1491278269/ in paper, at £9.00 and

http://www.amazon.co.uk/You-Tomorrow-Ian-Pearson-ebook/dp/B00G8DLB24 in ebook form at £3.81 (guessing the right price to get a round number after VAT is added is beyond me. Did you know that paper books don’t have VAT added but ebooks do?)

And here’s a pretty picture:

You_Tomorrow_Cover_for_Kindle

Death by accountant

Some people are not very good at their jobs. Accountants are one of the critical roles in a successful company. If they are good, the company can flourish. If they are bad, it can die. I have come to the conclusion that the worst employee a company can have is an accountant who thinks they are clever but is actually an idiot. If they work with an equivalent self-regarding idiot from marketing, they can destroy a company. Again, many marketing people are essential and very talented, but some just aren’t.

Permit me one rant as a good example:

My dishwasher just broke, again. It is Hotpoint. I wasted a fortune and six hours of my time to get one of their engineers out to fix it, under guarantee, then another to repair the damage he’d done by doing it wrong. Total repair time was 3.5 weeks because they don’t have enough engineers. They cost money apparently. The 6 hours was because an accountant had decided that they should use fewer staff in the call centre to save costs, and even though their customers probably earn more than a call centre staff member, that would be their money, not Hotpoint’s. It’s OK to waste customer’s money and time, even if they never want to buy from you again as a result. And I won’t!

I would normally have trashed the dishwasher, but the girl in the call centre assured me that this model should last for several years after the repair, and they’d give me a 3 month extended guarantee. So I did. Big mistake. Now, 3.5 months later, it has broken again, £110 for 3.5 months dishwasher, not good value at all. This time I decided to fix it myself, but I’d watched a TV program about people who had dishwashers repaired by independent engineers and they wouldn’t work because they weren’t allowed the codes to reset the machine. An accountant had worked out that that blocking independent fair-priced repairs would guarantee high-priced work for their own engineers. However, this is a broken hinge, so might not be part of the control system. I found the broken part, a far-too-thin for the job bolt, which had sheared due to normal everyday forces on it. The thin bolt is cheaper than a strong one, saving several pounds a year for Hotpoint, and designed to last past the initial parts and labour guarantee. After that, the few pence for the bolt is covered by the 5 years by the parts guarantee, but changing it is a £110 call-out fee. Savings are minimal, the potential extra high value work for already overloaded engineers is actually minimal, but the cost of no more sales of white goods ever again to that customer is large. The outcome is a small short term gain, followed eventually by death as customers blacklist them one by one.

This kind of accountancy decision happens everywhere. Identifying tiny savings here and there presumably wins a little praise from a line manager, perhaps an extra bonus for the staff that thought it up, but who  checks the cost of losing the customer by thoroughly annoying them? That usually isn’t one of the beans that gets counted.

Comet went bust a while back. I remember going there. They had a price guarantee on all their products, so why would anyone need to go anywhere else? Well, an accountant and a marketer decided they could offer a price guarantee to fool all their dumb customers by adding a different letter at the end of each product code, so that they could claim that it wasn’t actually the same product, so the comparison didn’t count. So all their customers stopped buying from them. Death by accountant.

A few of our local restaurants suffered presumed death by accountant too. They were doing very well, filling the place, with lots of happy customers. One day, they look at the books and an accountant explained that if they sold lower quality food, or smaller portions, then profit per meal would be higher. But they presumably didn’t take into account the effect on sales volume of selling lower quality food or reducing portions. Customers stop coming and buying, so they went bust. Death by accountant again.

One or two well-known supermarket chains frequently tried for far too long to fool their customers with fake half price offers and selling large packs at higher price per kilo than small ones. Then it seemed to catch them by surprise that people were going elsewhere. Their accountants and marketers presumably think that customers don’t ever realise the tricks and don’t mind having their intelligence insulted and their time wasted calculating value every time they visit. Their accountants and marketers are actually by far the most valuable employees to their competitors, who see their market share increasing rapidly at their expense.

Telecoms companies, TV companies and many others who sell contract based services take confusion marketing and trick contracts to extremes, with relative novelties such as putting everything possible on their sites except links to let you end a contract, which they make as difficult and time consuming and error ridden as possible. Tricking customers by auto-renewing and making sure that the auto-renew engages a month before a contract expires, and not letting the customer know near that time is tantamount to fraud, but is apparently legal. As long as they mention it in the small print once during the entire life of the contract they can avoid punishment. Obviously their customers don’t check every service they have every week and enter diary reminders to check years ahead on everything they buy, so this is very deliberate trickery. It might make a short-term win, but once a customer is fooled once, they are very likely to avoid doing business with that company again. It may take time, but those customer migrations will eventually be death by accountant too.

Automatically increasing insurance and hoping customers won’t check also trades short term wins against long term survival. The problem seems to affect many industry sectors. This suicide-by-accountant trend seems to be an epidemic at the moment. It must surely end soon, because customers are proving that they are willing eventually to migrate their custom to companies that treat them better. Those accountants that are praising their own cleverness today are actually accumulating a huge volume of angry customers who will happily leave them to die when the market inevitably provides such a sensible competitor.

Customers aren’t stupid. You can treat them as fools for a while, but eventually they will resent it. Then you’ll lose far more than you ever gained.

The bright potential future for BT

I left BT in 2007 after 22 years. (For my US readers, BT is Britain’s version of AT&T). Like most employees of most companies, I had a few gripes over the years, but overall, BT was a good company to work for – humane to its staff, while trying to do a good job for both shareholders and customers in a difficult political climate, with pretty sound ethics. It wasn’t perfect, but what company is?

I currently have BT broadband problems, as you do, again, but I still like BT and still keep all my shares, hoping one day they might get back up to what I paid for them. BT holds a unique place in my investments, being the only one I have ever lost money on (well, if I actually sold my shares now I’d lose). But it is a good company, and entirely fixable. My perhaps unjustifiably high regard for the company in spite of any evidence to the contrary doesn’t extend to the board. BT has a lot of excellent and devoted staff, and they are the reason for its survival, I would say very much in spite of it a long history of rubbish CEOs, including Livingstone. (I would exclude Vallance from my rubbish CEO list, I thought he actually did a pretty good job in the circumstances he faced.) As an engineer who could see the vast potential profits from relatively small investments that were open to a decent sized IT company, they all seemed incompetent to me, determined to ignore those potential markets and investing stupidly in others but focusing mainly on cost cutting as the only tool they could really understand. I don’t think any BT CEO since 1985 has deserved their grade or pay. BT gives its staff appraisals, and if I was his boss, I’d have given Livingstone 3 out of 10. At least now he’s in government, he will just be one incompetent among many so he will blend in just fine.

I won’t bother with the details of mistakes made. They are history. The future could still be bright if the new CEO is any good. Sadly, I don’t know Patterson. He joined the board after I left and I had no contact with him beforehand so I know nothing about him. I wish him the very best of success, for everyone’s sakes and if he does well, I’ll very happily sing his praises.

(I know it’s easy to say I could have done a far better job than most BT CEOs. I am certain that I could, and I certainly wouldn’t have made most of the huge errors that I saw, but anyone could say that and of course it is unprovable , and in any case,  I knew lots of other employees that would still have done much better than me. I guess it is a bit like US presidents. With 300 million people to pick from, you really have to wonder how the hell some of them ever got elected.)

So, what should BT do now? I declare my financial interests. I have a few shares, and one day if I am still alive they’ll give me a pension, and I remain a customer, so I do really want them to flourish, but otherwise I have had no financial exchanges with BT since I left in 2007.

A lot of the potential for BT has existed for a long time, and it is proof of previous CEO incompetence that it remains mostly untapped. Other areas are quite new.

There are a few valuable assets that BT makes too little use of to date. One is trust. BT has always achieved a very high trust rating from customers. Sure, they might whine about occasional lousy customer service or call centre delays, but mostly they still trust BT. Technically, customers assume their kit will work pretty reliably and they will eventually fix it with only modest annoyance when it fails. That’s better than it sounds compared to a lot of companies (Hotpoint, British Gas and O2 to name three at the very top of my most recent customer service hate list). They also trust BT on security, again an advantage not to be sniffed at. More importantly, customers trust it morally. It is quite a nice company. It pays its taxes. It has good old fashioned values and doesn’t do services that are morally questionable except where required to by law. It leans towards the customer’s side on questions of privacy v state surveillance. Again, a whole lot better on several important topical points than many big IT and web companies right now. A decent CEO would make his marketing departments do wonders with those advantages.

BT’s main physical asset is a very widespread network, much of which is fibre. But is has seriously floundered on decent speed broadband roll-out for badly miscalculated economic reasons and has ended up losing large numbers of customers onto mobile and other broadband providers. Firstly, it has to fix that by greatly accelerating its roll-out of fibre to cover the entire population within towns and suburbs. Further than that, it can plead poverty to government to extract subsidies for uneconomic roll-outs in some country areas, and fob others off with custom solutions. How close the fibre actually gets to the end customer is not important and there are many feasible architectural solutions. The data rate the customer gets is important.

The data rates it needs to provide via that fibre must be at least 50Mbit/s, which I calculated a long time ago is the latent demand of an average household today. It must be ready to increase those basic rates quickly through 100Mbit/s in 2015 into Gbits/s soon after.

It should by default provide high speed wireless from all of those homes into the nearby area. This will allow serious competition with mobile companies, especially since many customers carry tablets with only wireless LAN access. Those tablets and many smartphones rely on cloud provision for many services such as photo, video and music storage, as well as download services such as TV on demand. Decent wireless rates in the vicinity of most homes and business properties would make fairly ubiquitous broadband a reality, with none of the tiny date rate limits and poor connections offered by mobile operators. (As an aside, not doing that ages ago instead of crippling the company with the costs of unnecessary 3G licenses was one of the big errors I mentioned).

With high speed ubiquitous access, and still loads of building space to place storage and servers, BT could be a first class cloud provider (as Bonfield should have understood, coming from a computing company in the days when the cloud was still called distributed computing and computing on demand). Its engineers have understood cloud technology principles since the 80s, but it has never really invested in it properly. Now that other companies are threatening to put in their own access to their own clouds, BT is vulnerable to attack if it doesn’t quickly seize the opportunity by the throat. This may well become another missed opportunity for BT.

Another one (that CEO Heiffer should have understood, coming as he did from the finance world) is banking. BT manages to charge profitably on calls that cost just a few pence. Micro-payments is resurfacing once again as a valuable service. So far, no company has succeeded in delivering an acceptable micro-payments service but BT has the geographic coverage and technical skill to pull it off. It could go further and do proper full-service community banking. Again, a huge advantage has fallen into its lap thanks to the demise of trust in conventional banks. If any company could make community based banking work, BT could. The political climate is very favourable to get appropriate regulatory consent, society is ready and even eager, and the technology is available and proven with which to make it. Trust is the magic extra ingredient that BT has more of than other players.

Cloud financing, buying and other community based enterprises are all up-and-coming now, drawing from social and business versions of cloud thinking. Again, the core ideas go back decades. BT has been involved in their debates since over 20 years ago and holds a good hand of cards. It still could help a great deal to stimulate economic redevelopment of the UK by implementing just some of its ideas in this space. It is ironic that Livinsgtone failed to understand this enormous opportunity while he was CEO of BT, yet has now been made Minister of State for Trade and Investment. Why would anyone think he will suddenly understand now?

BT could also develop some of its many inventions made at its research labs. In many cases, small development costs are all that should be needed to generate large incomes. BT’s policy for ages has been to starve any forward looking R&D and only feed proven markets. That is no way to grow. Serious R&D investment could reap many times over in rewards. AI, convergence of IT with biotech, sponge nets, augmented reality, novel interfaces, 3D comms, digital bubbles, biomimetics and many others offer potential. Even the railways are open to attack. Conventional rail is still only equivalent to BT’s old circuit-switched lines that it used until the 1970s. A company that has been in front runners for 40 years of packet switching developments ought to be able to apply equivalent thinking to rail and road to gain rich rewards, converging time-wise as it does now with self driving cars, electrics, self organisation, high speed wireless, super-capacitor development and a host of other technologies BT understands well. Here again, rich pickings are available, and BT has one of the best positions to capitalise.

I could go on, but that is enough examples for now. BT has been offered a fresh start with a fresh CEO. If he is even a bit brave he could easily achieve things very far beyond any of his predecessors. As I said, I don’t know him so have no idea if he will be good or bad. Let’s hope he is up to the job and not just another huge disappointment.

Phoenix-based business strategy will win in a fast-changing world

I am leaving for a conference in a few minutes, so this one will be brief. I hate working in airports and hotels.

Businesses worry how they will survive the next 5, 10, 15 years. They should perhaps stop worrying. The primary purpose of a business is to make money. So here is a better strategy than worrying and spending loads on long term planning:

Spot opportunity

Use cloud based thinking and virtuality to get business up and running explosively quickly.

Employ as few staff as possible as full employees, buy the rest in on short term consultancy contracts and freelancing. That keeps admin overheads minimal. Make them use their own kit and use cloud for IT support and provision. That makes IT staff, risks and costs minimal.

Develop quickly and make your money fast with no regard to longevity.

When competition or other market erosion forces start making an impact, cash in and close down while value is still good

Re-invest in next idea, rising like a phoenix using the cash from the last business

This approach is very light-weight. It needs far less administrative load and can be far more task focused, with higher profit margins.

Live fast, die young, resurrect.

OK, flight to catch.