Bruce Schneier, one of the world’s foremost experts on computer security, has a great essay about how we need to get less panicky about possible terrorist threats – in order to twart terrorists.
Common sense, in other words. May the newspapers and politicians of the world hear him, but I suspect that the economics of attention and influence is against him.
My colleague Frank Capek at the Concours Group is running a project collecting outstanding customer experiences, with a view to analyzing them. He asked for examples – so here is my favorite:
Back in the early nineties I lived outside Boston, as a doctoral student. The children were small and required a lot of small items whenever we were out and about, so I used to wear one of those photographer’s vests, with lots of pockets and good ventilation. Now they are hallmarks of the elderly suburban dork, but back then they were moderately fashionable.
One day I needed a some new shirts, so I called Eddie Bauer‘s order phone. I ordered the shirts, and then (since I am a certified nerd, known to do that kind of thing) struck up a conversation with the Eddie Bauer lady at the other end:
Espen: By the way, I bought one of those photographer’s vests about a year ago – that thing has been great, very practical, use it all the time.
Eddie Bauer Lady: Great – is it still OK?
E: Sure! Well, come to think of it, there was a small tear under one arm, but my wife mended it, so it’s fine.
EBL: I’ll send you a new one.
E: But .. I am not complaining, it is fine!
EBL: They aren’t supposed to tear like that.
E: Well, but I have been using it a lot…
EBL: Still, that’s not supposed to happen. Hang on a second [sound of furious typing in the background] .. hm… here it is, yeah, you bought it last summer, at $49. [more typing] Seems we don’t have that kind any more, we have a new one, costs $54, I’ll send you that.
E: Er..well, thanks!
EBL: No problem. Anything else, Sir?
A few days later the new vest arrived. Later, I was told that the customer service representatives at Eddie Bauer have a certain dollar amount, per customer, that they can use at their discretion. In this case, it cost Eddie Bauer a garment.
On the other hand, I have mentioned this incident in many presentations around the world, and now also in my blog, so I think Eddie Bauer got their money’s worth in customer satisfaction and free advertising. And I still shop there.
Anyone else with similar stories, or other outstanding customer experiences you want to share?
Regdeveloper tries to debunk the wonderful story about the co-buying of diapers and beer. And it turns out the story is based on an actual finding, but the reasons for the covariation is left to the imagination of the marketeer.
My take on the situation was always that diapers is a stress purchase. When you run out of diapers, you don’t wait until the next time you go shopping – someone has to get in the car right away, or pick up something on the way home from work. The man of the house gets the job, enters the store and goes straight to the diapers section, then rewards himself with a sixpack since he is out shopping anyway.
The fact that Osco never moved beer close to diapers to increase sales is neither here nor there – they could have. And perhaps they should, at least between 5pm and 7pm on Thursdays.
So I will continue to tell this story, with careful insertion of “it might be a good idea to” rather than the affermative.
Note to self: Chris Anderson’s discussion of the underlying distribution of long tails looks interesting. Time to investigate, at some point.
Robert Scoble has an interesting "exit interview" with his readers as he is leaving Microsoft. Very interesting. One key phrase on blogging in general and how information moves: "All you need to do is tell 15 bloggers something and if it rings true it’ll get repeated around the world. That’s what gets executives fired."
I am just waiting for blogs from, say, inside General Motors or some of the large airline or media companies talking about their struggles to stay afloat. Not to mention the blogging-induced Enron, whoever that will be.
There has been much speculation following the NYTimes report about Google’s amazing new data center, located near a large river primarily because it needs a lot of power. Why do they want all that storage and processing power?
One interesting idea from Ian Betteridge: To learn to model context. Sounds plausible to me, though I think a reasonable model of how we think has much wider applicability than merely getting the right ads in front of you at the right time.
Scobleizer quotes some interesting statistics: Microsoft is gaining server market share because of blogs (and wikis). Though some insightful comments modify the numbers a bit, the increase is still large, and shows that Microsoft can make a dent in that market by doing what they did on the desktop: Offer functionality that is "good enough" and relatively easy for the end user to set up. At the very least, it is in indication of blogs becoming a "must have" on any web site.
To respond, the open source community would have to go from pluribus to unum in terms of user experience, configurations and setup. I doubt that is going to happen. Wonder which segments of the market Microsoft is gaining in?
It turns out, as I speculated, that the report about the English farmer selling gallows to African dictatorships seems to be an elaborate hoax. Well, score one for good ol’ economics – it just doesn’t make financial sense to make something simple out of wood and metal in the UK and sell it expensively to Africa.
Great video of how Wal-Mart has spread – showing the economics of geography and logistics. Via Tyler Cowen, who also links to explanations for the growth pattern.
The Economist thinks Microsoft is a little like IBM, facing a form of competition where it cannot compete because of legacy software and a vulnerable business model.
I agree.
That being said, the new version of Excel has some interesting features for data visualization.
Dell is buying Alienware, which Nicholas Carr interprets as a deviation from Dell’s traditional business model.
I am not so sure. I see it as the disovery (by Dell) that the gaming machine market is not only large, but ready for folks that want the speed and the graphics and perhaps also the cool design, and want that in a package that does not require them to build the machine themselves or deal with smaller vendors with less global reach. Imagine a WoW environment with ads for Dell Computers inside, in many languages and delivered all over the world. Dell delivers in Norway, for instance, but I don’t think Alienware does.
So in my book, this is Dell taking their business model to the gaming market, which still wants to maximize performance for a given budget (which Dell is masterful at) and still demands customizability (as opposed to more and more of the business or private PC market, where any machine off the shelf is pretty near good enough.)
Move to where the money still is, in other words.
Jeff Jarvis whips out his keyboard and gives a commenter a piece of his mind about what to do when you are working in a sinking industry…. I love it.
I recently did some speaking at a conference of writers and publishing people, and the sentiments are the same – "we are too valuable to have to deal with the vagaries of the market or think about what value we provide to our customers" – so it is nice (and inspiring) to see someone nicely keeping the gloves on, carefully picking the opposition’s arguments apart, before delivering the knock-out.
Via Nick Carr refers to an article by Lee Gomes in the WSJ about search engine ginning as a response to news events. I suppose we had it coming, but shouldn’t Google and others be able to counter this with pointer weighting?
The conclusion, of course, is that the Hawthorne effect is alive and well, even if the original never was . Or is this Heisenberg applied to the Internet?
I am currently reading two books on what can only be described as Web 2.0: John Batelle’s The Search and Peter Morville’s Ambient Findability. I don’t know why (maybe just my own overdosing on reading after starting my sabbatical), but I am finding both hard to get into.
The Search is better written – it is a mix of a corporate biography and a discussion of how search capability changes society. The language is tight – though sometimes cute, as in the phrase "the database of intentions" about Google clickstreams and archived query terms – and there is a thread (roughly chronological) through the book that allows most people who have been online for a while to nod and agree on almost any page. John Batelle has an excellent blog and plenty of scars from the dot-com boom and bust (I always liked Industry Standard and wrote a column for the Norwegian version, Business Standard, for a few years, so I am very favorably disposed), and his competence as a writer shows. The book reads like a long Wired report, but better structured, marginally below average in use of buzzwords and John has the right industry connections to pull it off.
Ambient Findability looks at search from the other side of the coin – how do you make yourself findable in a world where search, rather than categorization, is the preferred user interface? For one thing, you have to make your whole web site findable, make it accessible and meaningful from all entry points. Morville fills the book up with drawings and pictures on almost every page, comes off as a widely read person, but I am still looking for a thorough expansion of the central message – or at least some decent and deep speculation on personal and organizational consequences. It is more a book popularizing information science than a book that wants to tell a story, and it shows.
While both books are well worth the read if you are relatively new to the Internet, I was a little disappointed in the lack of new ideas – they are clever, but once you accept that the marginal cost of processing, storage and communciations bandwidth approaches zero, the conclusions kind of give themselves. Perhaps I am tired – actually, I am – perhaps I am unfairly critical after having treated myself to The Blank Slate, The World is Flat and Collapse, but these books, while both worthwhile, have failed to "wow" me.
Apologies. I will make a more determined re-entry once I wake up.
There is an interesting little thread over at Slashdot about computer rebates and how good or bad they are. Everybody likes the discount but hates the paperwork, and some pretty sinister conspiracy theories are bandied about, which, of course, is the way we have come to like it at Slashdot.
What gets me, though, is the marketing consultant quoted in the point article, who says that there are rebates because "unlike regular sales, people perceive them as a one-time opportunity to get a product at a lower price than it would normally be sold at."
What utter rubbish. The simple reason rebates and coupons exist is that they allow price discrimination. They are a way of offering a price reduction only to those customers who want it. If they didn’t exist, the seller would have to discount the price for everyone, losing revenue from the customer who would be willing to pay more.
I live in a pricy country on a pricy continent, and tend to buy electronics and other things when in the US. I get the rebate coupons but often don’t bother sending them in – both because of the hassle (the rebates often can be redeemed to US addresses only, adding extra complexity), but also because the price already is significantly lower than in Europe and I just want the product. I can easily imagine many rich and/or busy Americans buying things and not bothering about the rebate – which means that the seller gets more total revenue.
Price discrimination works to the benefit of both the spendthrift and the miser: The former gets the product he wants at a price he is willing to pay. This allows the seller to increase the amount on the rebate, making it cheaper for the miser, who is willing to spend the time and do the paperwork.
Rebates and coupons are outlawed in Norway and in many other European countries, less, I suspect, because they are seen as tricking the consumer than because the wage differentials are smaller in Europe, making price discrimination less effective.
Anyway: To all those carping about how much work the coupons are and the 60% fulfillment rate: If all rebate coupons were redeemed, the rebates wouldn’t be so good. So keep quiet and keep filling in those forms. They are good for you precisely because they are a mechanism allowing you even lower prices than you would get without them.
Friedman, T. L. (2005). The World Is Flat: A Brief History of the Twenty-first Century
I have long used chapters from Tom Friedman’s The Lexus and the Olive Tree
That being said, my feelings are mixed on this one. Don’t misunderstand me – everyone, from politicians to business leaders to students – should read this book, but perhaps less for the first 10 chapters, where Friedman describes how the world is going “flat” (that is, small and interconnected) than for the latter part of the book, starting with chapter 11, “The Unflat World”, where he dives into the difficulties of globalization and the dangers of holding it up. While the first 10 chapters are interesting because Friedman writes extremely lively and documents relevant, if well known cases with clarity and wit, it is in the latter part of the book, where Friedman shows why he is the New York Times leading foreign affairs journalist and not their technology or business writer. In that part, the book starts to shine and really deserve the accolades heaped on it.
His key message is very similar to the closing passages of Landes’ The Wealth and Poverty of Nations
That being said, the weakest chapter of the book is the one about business – aside from the brilliant example of Aramex, a Jordanian rapid delivery company, most of the advice there is trite to business researchers and, I suspect, not exactly news to the common reader. Friedman’s saving grace is that he can and does travel, has an incredibly knack not only for picking the relevant examples (most of the companies mentioned, such as UPS, eBay, Wal-Mart, are overused in many other contexts but appear fresh here) but for writing them up in a style that makes them interesting. The best example by far is Dell Computer, where he simply traces (or, rather, gets Dell to trace for him) in minute but fascinating detail how the computer he wrote most of the book on came to be – showing that if China and Taiwan cannot agree politically, they are pretty good at supplying parts and know-how to each other and to the world.
Friedman has a great gift for the poignant expression (On the need to not shut the world out for fear of terrorism: “Leave the cave-dwelling to Osama.”) but sometimes veers over towards the saccarine (On the India-Pakistan sabre rattling in 2002 and how big companies lobbied to get India to stand down: “The [India-Pakistani 2000] cease-fire was brought to us not by General Powell but by General Electric. We bring good things to life.”)
His suggestion that the United States embark on a “man on the moon” project aimed at making the country energy-independent in ten years is nothing short of brilliant – it addresses a serious problem, is doable, would further research towards a great goal, and help the American and the world economy no end. And it would lessen the world’s dependence on oil and thereby reduce the danger of future fallouts over access to energy. Go for it. It’s a no-brainer.
Friedman also answers his critics, cheerfully admitting that he is a technological determinist – “guilty as charged” – but not a historical one. And his analysis of how the anti-globalization movement – which he thinks is extremely important – has been shanghaied by anti-Americanism and geriatric leftist ideology is both cooly rational but also heartfelt: Friedman is honest and world-wise enough to know that globalization, to be a beneficial evolution, needs a fact-based and rational opposition – focused on how we globalize rather than whether we are. Too many critics of globalization see it in terms of conspiracy theories – it is an evolution enabled by freedom of information, capital and to a certain extent people, and attempts to put the djinnie back in the bottle are not likely to be successful, to put it mildly. (Incidentally, Jared Diamond’s Collapse, which I am halfway through at the moment, provides a much better foundation for this opposition than Naomi Klein’s populistic but theoretically incoherent No Logo.) As Friedman says it: “What the world doesn’t need is the anti-globalization movement to go away. We just need it to grow up. […] You don’t help the world’s poor by dressing up in a turtle outfit and throwing a stone through a McDonald’s window. You help them by getting them the tools and instutions to help themselves. […] Just ask any Indian villager.”
His best writing – and underlying anger – comes out when writing about the people for whom globalization is not as much a negative influence as a distant mirage. They constitute half the world’s population, they will get restless unless as soon as they see what they can get, and if that isn’t good enough reason to start thinking about how to use globalization beneficially rather than try to stop it from happening, I don’t know what is.
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Possible error: On page 268, Friedman refers to a study of “leading universities” creating 4000 companies with 1.1m jobs and $232b in revenues, refers to the “Task Force on the future of American Innovation” On page 244, however, the same figures are repeated, but instead of “leading universities” it is MIT, and the reference is to a study by BankBoston.
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Notes after the jump, taken as I read through the book, offered here, caveat emptor, typos and all:
Telephone call: "I’m a secret agent, we are conducting a terrorist money-laundering operation, please hand me all the bank’s cash in a bar, so I can mark them. You will get them back, I promise!"
I don’t know what this says about bankers in Paris, but I hope at least some of them, at this point, are former bankers….
Interesting little discussion of why Europeans have long holidays and Americans not. High tax rates and/or collective bargaining caused it – though that leaves the question of why Europe got into collective bargaining agreements in the first place. And we are back to the fact that America was built by the people who upped sticks and left – largely on their own – whereas industrial Europe was shaped by the people who chose to remain and stick together. And bargain collectively.
Going for longer holidays rather than more pay made people stick together – give people more money and they tend to become individualistic about it, save it or lose it, thus increasing heterogeneity. Mandatory holidays kept the workers together and reduced internal competition, thus preserving the collective mindset.
Anyway, I am rambling. Think I need a vacation. Again.
Bob Cringely has been looking into the likely sale of Skype. Good analysis, as usual.
Skype is “Revenue killer number one” according to a telecom executive friend of mine, and I could easily see Vodaphone pick them up. Actually, Microsoft or Intel could be candidates, too – imagine going IP and wireless with 20m customers.
Memo to my MBA students: Read and learn from Tom Evslin.
I am sure, though, that my colleagues teaching negotiations would have a comment or two….
Applied Abstractions 