New Florence. New Renaissance.

Technology Innovation and Modern Day Columbuses

ok, so this is technically not about business use of technology...but what a marvelous story of the Hunters and their 7 year sail around the world 

The Hunters have benefited from a stream of technology improvements from the likes of John Harrison, an English clockmaker in the early 1700s  to more recent technologists like  Dr. Jim Clark, of SGI and Netscape fame. Not to mention all the innovations that help with "massive amounts of navigational, structural, and meteorological data" to compete in  events like America's Cup.

The chances the Mirchandani family will do something similar are pretty slim. My kids went to a sailing camp last month and hated it. May be as they grow up the Little River Band's words "The albatross and the whales they are my brothers..." will inspire them. And I will have won the Lotto.

China/India: Shouldn't we be worried

Dennis Howlett at Bazaarz asks a valid question to my recent posts about doing buisness with China and India:  “What about when China (or India) becomes the powerhouse for innovation - which could happen - in say 5-10 years? Certainly from a European perspective, it's a worrisome scenario”.  And, if you see the comments under Chris Selland's post about offshoring on AlwaysOn, the topic generates other negative emotions - not just worry.

Dennis, we should all be worried – not just you in Europe. I have two young kids who will go to college in a few years and the investment in college is looking far more speculative than an investment in real estate or the stock market. (A potential topic for a future blog – should universities charge based on future earnings?). Heck, my wife and I still have a long., long way to go before retirement. Running a small business is tough enough without these global disruptions.

I worry when I read this Fortune article - Is America the World's 97-lb. Weakling?

I worry about Europe (my wife is Irish) when I read this WSJ article  - Familiar Litany of Woes Across the Pond

 

But then I read this Fast Company interview with Jeff Immelt, CEO of GE - he is a man who worries about his daughter Sarah and his 300,000 employees - I am somewhat less worried.

From my much humbler perch, I believe we have 2 options:

a) We can channel our worry into moving up the value chain or
b) We can worry and put up barriers

Japan evolved from a “utility” provider to an “innovation” provider. Ireland has evolved from an exporter of raw talent to one of sophisticated products and services. Virgin Airways evolved from a cut rate competitor to offering a fabulous “Upper Class”. I would suggest the world adjusted to that - and actually benefited from that. It forced GM and European call centers and BA to improve their product to the benefit of us consumers. Ford went on a quality kick. BA innovated with flat beds, modern fleets and other ideas. Not everyone survived or did well in this Darwinian process, but overall our economies adjusted

But why did Toyota and Virgin become viable in the first place? In general, the consumer in us is pretty loyal. When GM and Renault let the Japanese become world auto players it took 2 decades of neglect – boxy designs, poor quality etc. When a Virgin or an EasyJet or a Southwest grows strong, the incumbent competitors let it happen gradually. Look at the barriers to entry the Alitalias and the Deltas had in place.

Similarly, why did India and China become viable to the Western CIO and VP of Manufacturing? These are blue blooded Americans and Europeans who do not exactly enjoy wading through traffic in Mumbai or Shanghai with all the noise, heat, pollution, poverty. They go there because the incumbents – the EDSs and Accentures – have let it happen through their over pricing, poor service etc. At the same time, the competition has done better than lower prices. The Japanese worshipped Deming and his quality focus. The Indians adore the Carnegie Mellon CMM process improvement model. Half of the Chinese GDP is manufacturing focused – it is their core competence. Their kids actually compete to go to our engineering schools.

They have leveraged our best education and thinking while our incumbents have been coasting. We want our CIOs to feel guilty for offshoring. Honestly, we should blame the IBMs more. We should blame ourselves as workers for continuing to expect a lot of money for flipping SAP switches. 

But let’s look ahead. In our sector, we are used to disruptive technologies and I would like to think we will make the transition well. Like BA, we will hopefully invest in automation, improved processes, get used to lower margins and become much more competitive and innovative. Just look at what this gallery of CIOs is innovating with technology.

Also look at what happened at demand patterns in Japan (and Ireland and Singapore) as they grew affluent. They became voracious consumers of Western products - Disney, Hermes, McKinsey. In 1989, when I was assigned in London for PwC I flew with a mid-level Japanese exec to Paris. I sailed through customs and went to make a call and wait for him. 30 minutes later a custom official beckoned me back in. I was concerned – how often do you get asked to go back into customs? They wanted me to explain in my broken French why my Japanese colleague was trying to smuggle four suitcases full of stuff from Harrods? There must have been $ 25,000 worth of stuff he had bought. I had to assure French customs the items were all meant as gifts back in Japan.

Something similar is happening in India and China. The middle classes are learning to enjoy Pizza Hut, buy Italian cars and come to Disney for holidays. At the recent Paris Air show, they were the biggest buyers for Boeing and Airbus. That’s not to say we do not need to continue to push them to keep opening up their markets or appropriately value their currencies.

I think it will take India and China longer than the 5-10 years you mention to make a similar evolution from “utility” to “innovation” but the west will similarly adjust – and their own economics will catch up. As my article, “The economics of cheap” describes, the total cost of offshoring is rapidly rising. The Indian and Chinese middle class will price themselves out to the Bangladeshis (I was surprised to read recently that 65% of “Indian” restaurants in UK are actually run by Bangladeshis) and the Vietnamese.

Now let’s take the other scenario – if the West actively ignores India and China. Even if we did, Japan and rest of Asia will not, and they can continue to leverage each others domestic markets, and their appetite for oil will continue to grow. We suffer as consumers from lack of competition. As businesspeople, we will be locked out of their markets. I would rather see us engage them, influence them, sell to them – make them part of our economies.

Which brings me back to Jeff Immelt. He may say he is not worried about his daughter’s future. But GE is investing heavily in R&D.  GE is well positioned to earn money in China and India and elsewhere in the developing world. And continue to do well in the West whether we end up as services or manufacturing economies.

But when I see reasoned confidence like his, I am much less worried.  I am encouraging my kids to think about a global career, though. For the rest of us to become like GE we will have to adopt more of an global mentality, travel more, relocate more.

Dennis Howlett at Bazaarz asks a valid question to my recent posts about doing buisness with China and India:  “What about when China (or India) becomes the powerhouse for innovation - which could happen - in say 5-10 years? Certainly from a European perspective, it's a worrisome scenario”.  And, if you see the comments under Chris Selland's post about offshoring on AlwaysOn, the topic generates other negative emotions - not just worry.

Dennis, we should all be worried – not just you in Europe. I have two young kids who will go to college in a few years and the investment in college is looking far more speculative than an investment in real estate or the stock market. (A potential topic for a future blog – should universities charge based on future earnings?). Heck, my wife and I still have a long., long way to go before retirement. Running a small business is tough enough without these global disruptions.

I worry when I read this Fortune article - Is America the World's 97-lb. Weakling?

I worry about Europe (my wife is Irish) when I read this WSJ article  - Familiar Litany of Woes Across the Pond

 

But then I read this Fast Company interview with Jeff Immelt, CEO of GE - he is a man who worries about his daughter Sarah and his 300,000 employees - I am somewhat less worried.

From my much humbler perch, I believe we have 2 options:

a) We can channel our worry into moving up the value chain or
b) We can worry and put up barriers

Japan evolved from a “utility” provider to an “innovation” provider. Ireland has evolved from an exporter of raw talent to one of sophisticated products and services. Virgin Airways evolved from a cut rate competitor to offering a fabulous “Upper Class”. I would suggest the world adjusted to that - and actually benefited from that. It forced GM and European call centers and BA to improve their product to the benefit of us consumers. Ford went on a quality kick. BA innovated with flat beds, modern fleets and other ideas. Not everyone survived or did well in this Darwinian process, but overall our economies adjusted

But why did Toyota and Virgin become viable in the first place? In general, the consumer in us is pretty loyal. When GM and Renault let the Japanese become world auto players it took 2 decades of neglect – boxy designs, poor quality etc. When a Virgin or an EasyJet or a Southwest grows strong, the incumbent competitors let it happen gradually. Look at the barriers to entry the Alitalias and the Deltas had in place.

Similarly, why did India and China become viable to the Western CIO and VP of Manufacturing? These are blue blooded Americans and Europeans who do not exactly enjoy wading through traffic in Mumbai or Shanghai with all the noise, heat, pollution, poverty. They go there because the incumbents – the EDSs and Accentures – have let it happen through their over pricing, poor service etc. At the same time, the competition has done better than lower prices. The Japanese worshipped Deming and his quality focus. The Indians adore the Carnegie Mellon CMM process improvement model. Half of the Chinese GDP is manufacturing focused – it is their core competence. Their kids actually compete to go to our engineering schools.

They have leveraged our best education and thinking while our incumbents have been coasting. We want our CIOs to feel guilty for offshoring. Honestly, we should blame the IBMs more. We should blame ourselves as workers for continuing to expect a lot of money for flipping SAP switches. 

But let’s look ahead. In our sector, we are used to disruptive technologies and I would like to think we will make the transition well. Like BA, we will hopefully invest in automation, improved processes, get used to lower margins and become much more competitive and innovative. Just look at what this gallery of CIOs is innovating with technology.

Also look at what happened at demand patterns in Japan (and Ireland and Singapore) as they grew affluent. They became voracious consumers of Western products - Disney, Hermes, McKinsey. In 1989, when I was assigned in London for PwC I flew with a mid-level Japanese exec to Paris. I sailed through customs and went to make a call and wait for him. 30 minutes later a custom official beckoned me back in. I was concerned – how often do you get asked to go back into customs? They wanted me to explain in my broken French why my Japanese colleague was trying to smuggle four suitcases full of stuff from Harrods? There must have been $ 25,000 worth of stuff he had bought. I had to assure French customs the items were all meant as gifts back in Japan.

Something similar is happening in India and China. The middle classes are learning to enjoy Pizza Hut, buy Italian cars and come to Disney for holidays. At the recent Paris Air show, they were the biggest buyers for Boeing and Airbus. That’s not to say we do not need to continue to push them to keep opening up their markets or appropriately value their currencies.

I think it will take India and China longer than the 5-10 years you mention to make a similar evolution from “utility” to “innovation” but the west will similarly adjust – and their own economics will catch up. As my article, “The economics of cheap” describes, the total cost of offshoring is rapidly rising. The Indian and Chinese middle class will price themselves out to the Bangladeshis (I was surprised to read recently that 65% of “Indian” restaurants in UK are actually run by Bangladeshis) and the Vietnamese.

Now let’s take the other scenario – if the West actively ignores India and China. Even if we did, Japan and rest of Asia will not, and they can continue to leverage each others domestic markets, and their appetite for oil will continue to grow. We suffer as consumers from lack of competition. As businesspeople, we will be locked out of their markets. I would rather see us engage them, influence them, sell to them – make them part of our economies.

Which brings me back to Jeff Immelt. He may say he is not worried about his daughter’s future. But GE is investing heavily in R&D.  GE is well positioned to earn money in China and India and elsewhere in the developing world. And continue to do well in the West whether we end up as services or manufacturing economies.

But when I see reasoned confidence like his, I am much less worried.  I am encouraging my kids to think about a global career, though. For the rest of us to become like GE we will have to adopt more of an global mentality, travel more, relocate more.

BusinessWeek on Innovation

W this week has a whole issue of articles on creativity and innovation.  You HAVE to beg, borrow, steal or buy this issue. Some powerful themes:

- " "What was once central to corporations - price, quality ....is fast being shipped off to lower-paid, highly trained Chinese and Indians..."

"Increasingly the new core-competence is creativity..."

"The Knowledge Economy as we know it is being eclipsed by something new - call it the Creativity Economy"

and a bunch of innovation examples in the issue.

More ammunition for CIOs to crunch "utility" IT spend n their budgets and move more to innovation budgets. Kudos to companies like Hertz, Starbucks and others I have cataloged below which have already been using IT innovations for years to improve customer, partner or employee experiences.  CFOs, VP of HR and others can similarly crunch their own utility spend by effectively using BPO.

Two big gating factors in all this:

1)  the emotional reaction to global competition in the West as I have written in a series of posts on China/India.
2) vendor behavior. As I wrote in The Giant Crunching Sound, incumbent utility vendors  are sucking up way too many dollars and continue to expect innovation pricing. If anything, the stampede to outsource may inflate those costs even more as I wrote in The Economics of cheap.

Keep on crunching...and keep on innovating.

Technology at US/Mexico Border

Naysayers see the US/Mexico border as nothing but trouble, but the reality is the truck and rail traffic both ways represents over $ 200 b in a year in merchandise. BusinsessWeek has a story - A Border Transformed on how the border is using technology to keep the bad guys out, yet not stifle the vibrant trade.  It must be the most high-tech border crossing in the world, far more sophisticated than the US-Canada one.

The article talks about usage of a number of new and established technologies:

a) Use of transponders to allow use of high speed lanes for those who qualify for the INS's   SENTRI program
b) Electronic Pre-notification an hour before crossing - using supply chain concepts behind Advance Ship Notice (ASN) EDI transaction
c) The Free and Secure Trade (FAST) program to pre-certify manufacturers, importers, carriers
d) X-Ray, Gamma Ray detectors to scan trucks and rail cars and portable radiation detectors

What the article  does not describe is the technology investments going into the trucks and the railways - the RFID, GPS Tracking, Route Planning and a whole bunch more.  Not to mention all the INS, customs and other databases and analytical technologies.

As the Taco Bell commercial says - some one is Thinking outside the Bun here.

Naysayers see the US/Mexico border as nothing but trouble, but the reality is the truck and rail traffic both ways represents over $ 200 b in a year in merchandise. BusinsessWeek has a story - A Border Transformed on how the border is using technology to keep the bad guys out, yet not stifle the vibrant trade.  It must be the most high-tech border crossing in the world, far more sophisticated than the US-Canada one.

The article talks about usage of a number of new and established technologies:

a) Use of transponders to allow use of high speed lanes for those who qualify for the INS's   SENTRI program
b) Electronic Pre-notification an hour before crossing - using supply chain concepts behind Advance Ship Notice (ASN) EDI transaction
c) The Free and Secure Trade (FAST) program to pre-certify manufacturers, importers, carriers
d) X-Ray, Gamma Ray detectors to scan trucks and rail cars and portable radiation detectors

What the article  does not describe is the technology investments going into the trucks and the railways - the RFID, GPS Tracking, Route Planning and a whole bunch more.  Not to mention all the INS, customs and other databases and analytical technologies.

As the Taco Bell commercial says - some one is Thinking outside the Bun here.

The Dream is Alive

The space shuttle (STS-114-Discovery) took off a few minutes ago. What a tribute to science and technology!

Living in Florida, I have taken detours off highway 1-95 several times to run in to the Kennedy Space Center and just see the IMAX movie on the shuttle. The views from space, the night time take off, the sonic boom, Cronkite's narration - sends chills down my spine even after it was made 20 years. 

On a side note, here's to program managers who make tough "go/no-go" decisions even on more mundane IT projects. Your relentless testing, your sweat and your prayers all matter - even if you do not get much credit.

God speed, NASA!

The space shuttle (STS-114-Discovery) took off a few minutes ago. What a tribute to science and technology!

Living in Florida, I have taken detours off highway 1-95 several times to run in to the Kennedy Space Center and just see the IMAX movie on the shuttle. The views from space, the night time take off, the sonic boom, Cronkite's narration - sends chills down my spine even after it was made 20 years. 

On a side note, here's to program managers who make tough "go/no-go" decisions even on more mundane IT projects. Your relentless testing, your sweat and your prayers all matter - even if you do not get much credit.

God speed, NASA!

Hertz and Customer Service Innovations

Ask most travelers what the least hassling aspect of a business trip is, and the likely answer is that related to their rental car.  That may seem like a left handed compliment but given the joys of travel these days, it is a compliment. Hertz Rent-a-Car, now part of Ford, but soon to go IPO, is one major reason for driving customer service that the rest of the industry has to emulate. And a lot of that service comes from leveraging one technology innovation after another.

While most Hertz employees are pleasant, I love the fact that on most rentals, I can get away with a total of 4 interactions each averaging a minute or two with them.  I get on their courtesy bus and tell them my name. I show my driver's license when I exit the garage. I tell the attendant the mileage and fuel level when I return the car. I tell the shuttle driver the airline I am flying. Every thing else is automated or uses self-service technology.

Start with the web-site for reservations.  First introduced in 1996,  the site has evolved to support multi-lingual customers in over 7.000 locations around the world.  Given one way drop-offs, weekend rates, corporate discounts and an amazing range of cars and options, the site is pretty easy to navigate. You can print driving directions from the site (uses Microsoft Mappoint) or from a kiosk when you land. The kiosk computerized directions were introduced way back in 1984. Most competitors still only hand out paper maps, so I must admit I have cheated and availed of the Hertz kiosk if I happen to be renting from a competitor.   Of course, with the on-board option on many of their cars called NeverLost you can get GPS navigation, first introduced in 1995.

When you get on their courtesy bus, the driver has an Intermec handheld computer which allows him to relay on an AT&T wireless network to the garage which customers are en-route. That way, you could be coming in at an unplanned time and they still make sure the car is assigned and ready to go.  At the garage canopy, there are electronic boards pointing the customer to the assigned parking space - handy given the bigger locations have hundreds of such parking slots. They have the contract printed out and in the car. The garage attendant at the exit verifies your license, asks if you want to prepay for gas and lets you on your way. Many of the competitors still make even their frequent fliers sign contracts at 5 places in triplicates. Of course, they also try to sell you more insurance and upgrades you do not want.  From entering their bus to out of their garage averages 15 minutes, compared to twice or three times with many competitors. Of course, with WI-FI at Hertz garages, you can choose to stay and work on your laptop as long as you want - but it's your choice.

The cars themselves are loaded with technology (if you choose the options). In addition to the GPS mentioned above, Hertz has Sirius satellite radio (and likely soon satellite TV - Avis already has an arrangement with DirecTV), and DVD players handy for family trips.  (Caveat:  see growing privacy and law-enforcement concerns with tracking devices).

It is the streamlined return process which has always impressed me, and allowed me to catch a few flights I should have missed.  Attendants with their wireless devices and printers can process returns in the parking lot in seconds and allow you to jump on the courtesy bus. While most of the competition now offers something similar, Hertz pioneered this in 1987. The bus in turn is wired to tell you what gate your flight is scheduled for take-off.

Back to the web site.  Each rental receipt is available on-line for 6 months. Frequent flier mile requests can be processed on-line. Try getting retroactive credits with other travel companies  without calls and paperwork!

This is all the technology a customer interacts with. Behind the scenes is a sophisticated reservation and inventory management system, scheduling technology to optimize the pick up routes across various terminals at airports, maintenance record keeping for over 500,000 cars and so on - a pretty complex network.

Post 9/11, a number of airports have moved car rental garages away from terminals and also mandated shared shuttle service. Some of Hertz's innovations have been negated with this supposedly "equitable" treatment of all rental companies.  But given its track record of "firsts" in the industry, Hertz still is a shining example of how technology can dramatically improve customer service - in this case. by dramatically reducing the "face time" your employees need to have with your customer.

IBM's Innovative Electronic Workplace

This continues a  category of posts focused on Innovative Uses of Technology for Business Benefit.  As I wrote in The Giant Crunching Sound, CIOs are crunching incumbent, utility technology spend and freeing up dollars for innovations.

First a caveat. This is a post about a technology vendor. The webcast I link to below has sales slides for IBM Global Services. I am not endorsing their capabilities - more how IBM internally has leveraged technology to create an innovative workplace environment.

I first saw an IBM presentation in 1996 on how they had re-engineered their employee travel expense processing.  They had taken a very manual, paper based process around approvals, receipts, audits, reimbursements and automated it using fax, workflow, digital imaging and archiving and neural networks (for exception analysis). While those technologies seem ancient today and there are many packaged solutions today,  10 years ago, the  innovative use of technology had helped reduce their travel accounting staff 80% from 1993 to 1995. "Innovation" used to squeeze their "utility" spend.

Recently, IBM presented its "On-Demand Workplace" at an Information Week conference I attended.  It is interesting to see to see how IBM has evolved over the decade several similar employee focused applications covering collaboration to training to provisioning. IBM says it has realized over $ 680 m in annual savings. The slide below shows some of their "savings" areas.

What is innovative is the mesh of self-service, portal and other software and hardware which has been leveraged in creating this electronic workplace. In a lot of ways it brings together its global work force of 300,000 + employees, almost half of which are almost constantly mobile - their sales and consulting staff. The payback from that common cultural and communication tool is, of course, much harder to quantify.

Technology Innovation and Jetblue

This continues a  new category of posts focused on Innovative Uses of Technology for Business Benefit.  As I wrote in The Giant Crunching Sound, CIOs are crunching incumbent, utility technology spend and freeing up dollars for innovations.

Innovation is what JetBlue oozes - since its birth just over 4 years ago  People make the point that if you are a start up, you have little legacy, utility spend to worry about - most of your budget can go towards innovation. But the US airline industry around it was not innovating much. If you go on a flight on a wide body plane,  most airlines these days show navigational maps on movie screens. I first saw this US  technology on a Swissair flight in 1989. I did not see one on a US airline till 4 years later. The airline industry in the US has been in a funk and just trying to survive, not innovate. Even Southwest, an airline I admire, was till recently a technology Luddite. They reluctantly gave up their returnable, plastic boarding passes after post- 9/11 security requirements forced them to. So, with this backdrop it is remarkable the technology innovation JetBlue has taken advantage of.

To start with, over 70% of their reservations are on the web.  It built its pricing, customer feedback, electronic ticketing concepts around a clean, simple Web experience. For phone reservations, work-at-home operators in a "virtual" contact center use voice over IP (VoIP) lines. They drove a paperless cockpit.  Pilots  use laptops to get FAA updates on-line and make pre-flight load and balance calculations. This 2002 CIO article catalogs a whole bunch of other small, but high payback, innovations. The company has evolved to try much more sophisticated technology - see this use of free space optics to help relocate corporate headquarters without too much disruption.

Passengers of course are delighted with some of the technology innovations Jetblue has delivered to them. The most popular is the DirectTV channels on each seat. No, they did not wait for Singapore Air to first roll that out.  JetBlue was the first airline in the world to offer live TV and, to maintain this advantage as long as possible, actually bought the company that supplied it with the technology. Then, there is the free WI-FI at their New York JFK terminal.

If you think all this technology innovation is expensive, think again. JetBlue says it spends relative to its revenues less than half the average in the airline industry. Now, that's cool.

Technology Innovation and Distance Order Taking

This continues a  new category of posts focused on Innovative Uses of Technology for Business Benefit.  As I wrote in The Giant Crunching Sound, CIOs are crunching incumbent, utility technology spend and freeing up dollars for innovations.

Look at this innovation about leveraging technology  to streamline order processing in a drive through food chain.  What is particularly interesting it the innovation did not come from the parent McDonald's, but from one of its franchisees, and came from using well established technologies - in this case call center and digital photography related.  Innovative Business use of ITneed not cost millions - it is often about creatively using existing established or beta technology.

Innovation in Silicon and Ohio Valley

Innovation is alive and well in technology.  Kevin Werbach, formerly editor of Esther Dyson's Release 1.0,  recently finished his annual conference, Supernova. Tony Perkins, founder of Red Herring magazine, is hosting his AlwaysOn Innovation Summit next week. MR's SandHill Group Enterprise 2005 comes up in a couple of weeks and always attracts a number of VCs, technology CEOs and a number of fresh ideas. As you scan the agendas, compared to a year or two ago the discussions have evolved to facilitate "social networking" and leverage China efficiencies, but overall the mood is  fairly upbeat about new ideas, even in the face of talk of "industry consolidation".

As I wrote in The Giant Crunching Sound, CIOs are crunching incumbent, utility technology spend and freeing up dollars for innovations. And I have started a series of posts on Innovative Business uses of Technology, as at Starbucks or at the McDonald's franchisee. But the definition of innovation is quite different on Main Street than it is in Silicon Valley.

The technology industry is often not focused on practical applications of their stuff, and minimizing execution risk.  Two professors, W. Chan Kim and Reneé Mauborgne,  at the B-School at Insead in this NY Times interview summarize it pretty well "We should never see innovation as a random process. That's not the way to do it. Silicon Valley has a huge failure ratio. There should be a systematic, repeatable pattern that maximizes opportunities while minimizing the risks. "

The message is clear. Keep bringing out cool stuff. But cool, workable, usable stuff is much better. Listen, then innovate. Which means Kevin's and Tony's and MR's conferences will hopefully, in future, have as many corporate CIOs and CTOs as they do VCs and tech CEOs.