August 2007 Archives

In this 14 minute segment (download iPod compatible, 70MB), Carrie Hensel and I discuss how her web design and development firm, Inner Circle Media, competes effectively against large competitors. Carrie starts by arraying the range of jobs Inner Circle takes on, from externally facing sites to internally facing sites for tracking billable hours and medical procedures. When I pressed Carrie for how she manages to beat large firms, she laid out the following interesting scenario that echoes recent criticisms of enterprise solutions:

• Similarly to what Victor Naidu described for ERP, large firms are frequently offering prebuilt solutions that still require extensive customization.
• These solutions are also foreign to the client's established way of doing things, requiring them to learn new work procedures.
• The solutions may only tangentially address the client's original problem requiring the client to buy more than they really need.

Much like Menlo Innovations, Inner Circle Media's solution is to suggest a phased approach in which they focus on exactly what the client needs. In future segments with Carrie, she will discuss product ideas that have arisen from this approach.

In this 14 minute segment (download iPod compatible, 73MB), Victor Naidu and I discuss the genesis and evolution of RAMSoft's security products starting in the late 1990s. Similarly to what Dennis Blanchette described for Ensure, Victor was motivated by the observation that 80% of security breaches are from internal sources. As the scope of the Internet age was becoming apparent, Victor perceived this as an opportunity to fill another gap in the market place. However, it took security products a while to catch on. Victor notes the following:

• Although the conceptual need for security was clear, many potential customers were not initially perceiving security as a pain point.
• Victor has found niches in health care, motivated by HIPA privacy regulations, and finance.
• One of Victor's main customers produces loyalty cards, a topic we covered with PowerPass.
• The need for technology to monitor use of technology arises from the ubiquitous use of technology making it impossible to monitor by traditional means. It's a self feed cycle.

In our next segment with Victor, we will be discussing his global initiatives.

This is our final podcast in our series on Ideation's new PowerPass loyalty card. In this podcast (download iPod compatible, 47MB), Tom Ungrodt and I begin by discussing the economics of print advertising and loyalty cards for the small gift shop operators who are Ideation's customers. Then Jay Upell and I discuss where he would like to see Ideation's PowerPass loyalty card in a year and how he views the competition.

Tom's discussion of small gift retailer economics and advertising is quite informative. Here are the highlights:

• For gift shops, there are two major holidays per year large enough to support mailing Ideation's catalog, Christmas and Mother's day.
• The minimum catalog printing is $6300 for 10,000 catalogs plus approximately another $2000 for mailing them.
• Ideation's average customer does under $1M per year in revenues, suggesting an advertising budget of $35–$50K. Two catalog mailings eat up half this budget.
• Retailers wanting to get year round impact for their advertising budget might see loyalty cards as an option that keeps customers returning.

In this 10 minute podcast (download iPod compatible, 51MB), Bruce McCully and I discuss how he has positioned Dynamic Edge for strong growth serving small and medium businesses. Bruce describes Dynamic Edge as a "technology concierge". It provides an IT support services resource that companies could generally not afford to staff themselves.

The bulk of our discussion focuses on how he markets to companies that may not have a deep understanding of the capabilities or the role of information technology. Bruce outlines a number of factors:

• First, the pitch has to be oriented towards issues as the customer sees them. For instance, the need for financial reports so the customer knows where they are financially.
• Second, sales depend strongly on the consultant's skill in perceiving customer needs and matching them with services Dynamic Edge can provide.
• As a result, Dynamic Edge really has to focus on the type of people it hires. Bruce looks for people who can listen well and are focused on others' success.

Dynamic Edge is clearly a knowledge management organization with a strong interface to customers so they can make the value of that knowledge apparent. In future segments, Bruce and I will discuss how Dynamic Edge manages knowledge and the types of substitutions they usually make in organizations.

In this six and a half minute podcast (download iPod compatible, 35MB), Dennis Blanchette and I discuss what he terms "walk away security" in the context of securing end-user behavior. Dennis is the CEO of Ensure Technologies. Ensure produces and markets the Xyloc RFID (Radio Frequency Identification) security system, and has been in existence ten years.

Since security requires restricting access to only those who require certain resources, there is always a trade-off between security and convenience. End-users focused on efficiently performing their roles often find these restrictions onerous, particularly if the restriction requires them to go through a lengthy re-authentication protocol after, say, only a short time away from a resource.

Dennis discusses and demonstrates how Xyloc provides one answer to this trade-off:

• Xyloc functions based on a radio handshake between a card you wear around your neck and receiver located near the resource.
• When the card moves more than a certain distance from the reader, the user is logged out.
• When the user moves back within the prescribed distance, he or she is automatically logged back in.
• Xyloc integrates well with other security measures such as biometric scanning and password authentication.

In future segments, we will discuss how Dennis plans to grow Xyloc's user base and potentially move into new product offerings. We will also outline the importance of the enterprise market for accelerating a small company's growth.

In this fourteen and a half minute podcast (download iPod compatible, 76MB), Peter Morville and I discuss the veritable explosion in user contributions that has taken place in the past few years. Noted examples include flickr, a photo sharing site, and youtube, the video sharing site. A recurring issue with media files in particular is how to organize the material so that people can find it. Peter has long been an advocate of using professionals in this role. However, the mass of data is so great that professionals can only classify a small portion of it, leading to various attempts to harness non-professionals. Thomas Vander Wal termed this effort to harness amateur classification "folksonomy", for taxonomy created by folk.

We run through several issues:

• Users don't seem to want to help classify all data. Amazon's attempt to harness user classification for its inventory failed.
• However, Library Thing, which uses Amazon's book data has succeeded, perhaps because users feel they are primarily performing a service for themselves.
• Luis Van Ahn has explored ways to get users to consistently classify image data in ways that they find fun and will do for free.

In this slightly over 12 minute podcast (download iPod compatible, 65MB), Bob Holland and I discuss his early career and the five companies he has built. After graduating from his Ph.D. program at Virginia Tech in the 1970s, Bob was interested in creating a degree program where students would learn about system dynamics. His idea was to promote the field by training students who would arrive at their employers and ask for the tools required, namely computer equipment. He was able to sell Eastern Michigan University on this idea, and so he came to Michigan, founded the CIS Department at Eastern Michigan University, and stayed.

Once Bob got the program at Eastern Michigan underway, he decided he would prefer to get back to business and proceeded to found five new companies. What struck me in this part of the conversation was Bob's drive to move toward the cutting edge, found a company, and then sell, an attitude he confirmed at the end of the conversation.

As Bob notes toward the end of the discussion, he prefers a type of innovation where he is creating new markets, finding things that people will want but do not know it yet. This style is different from some other innovators we have spoken with, like Victor Naidu, who are attempting to figure out how to fill already existent, perceived gaps in the market place, or like Bill Michels who are attempting to figure out how to replace existing products in the market place.

In this thirteen minute podcast (download iPod compatible, 68MB), Bill Michels and I continue our conversation regarding how ADR North America fills gaps in the supply chain training market. An important theme of the conversation is that the training market place is starting to look for Return on Investment (ROI). ADR North America addresses the need for ROI in several ways:

• They perform an initial assessment over the Internet to determine where skill gaps are according to their pace model of purchasing management.
• They then target individuals with the highest skills gaps.
• Training is delivered both face-to-face and through elearning modules. Companies like the initial training to be face-to-face with elearning as a refresher and for new hires.
• ADR focuses its courses on projects that the company actually faces.
• ADR then provides counseling to individual trainees.

The total intended effect of this package is to increase the skill levels of employees so that they can meet the challenges that the company actually faces.

In this podcast (download iPod compatible, 49MB), Victor Naidu and I continue our conversation about innovating ahead of the curve. A surprising twist Ramsoft took in the late 1990's was to get into the Enterprise Resource Planning (ERP) business. ERP is essentially a form of packaged software for the enterprise, and one might not think much innovation is involved. Remarkably, we then relate ERP to tying together components over the Internet. Highlights of the conversation include:

• ERP filled a gap in the market place, one of Victor's innovation themes, for companies wanting to avoid the Y2K problem and also get out from under the increasing maintenance costs for their legacy system.
• Quite a bit of customization is involved in installing ERP systems. Companies might pay $1 Million to purchase the software but $10 to 15 million to customize it.
• The high cost of customization frequently comes about from companies' attempts to alter the software to match their specific business practices. Little wonder that Nick Carr suggests that a major way to trim IT expenses is to minimize customization.
• Victor views ERP as just another means of rapid application development to create services that meet company needs.
• Now, these sorts of services are starting to be created over the Internet.
• Victor's observation is that the Internet enables true global sourcing of business services. See our conversation with Jimmy Hsiao for a discussion of technical and cultural limitations on that observation in the case of China.

In this 8 minute podcast (download iPod compatible, 43MB), Jimmy Hsiao talks about how he developed offices in three different cities in China and the importance of a fourth. Recall from our last conversation that Logic Solutions has been in China for the past 8 years. Highlights of this conversation include:

Nanjing

Logic Solutions started in Nanjing. They were looking for a location to source their development work that was not too expensive. Nanjing is a former capital of China with a well-educated population that is also off the beaten path.

Beijing

Jimmy knew of a good web development firm in Beijing that wanted to sell its business. Beijing is also the capital of China and a good location for learning of new developments.

Shanghai

One of Jimmy's major customers in the U.S. is General Motors. He was mentioning his China supply chain management activities, and GM suggested he set up in Shanghai to help them. Jimmy assessed that Shanghai was a growing, important city from another of perspectives and did so.

Hong Kong

Jimmy does not have an office in Hong Kong, but it is an important gateway from the country where he was born, Taiwan, and the main land as there are currently somewhat strained relations between the two. Jimmy also notes that many foreign businesses choose Hong Kong because of its English-speaking heritage.

In this 3 minute podcast (download iPod compatible, 15MB), Bob Holland gives a quick synopsis of Web 2.0's penetration in the traditional business setting. Bob starts off by talking about the general notion of positive network externalities in any information systems product. Basically, in most information systems products, you gain by having others use it also. At the very least, you gain by having a larger pool of people providing feedback about the product and who you can share information with.

Web 2.0 essentially transfers this social network effect to the Internet. Traditional businesses are really just catching on how to use this feature with services like Linked In.

In this 8 minute podcast (download iPod compatible, 42MB), Jay Upell of PowerPass and I discuss how retailers use PowerPass. There are two components. First, retailers can target their promotions better toward people who use the card. Blind promotions tend to get response rates on the order of one to two percent. Targeted promotions, such as the Powerpass birthday program get on the order of fifteen to twenty percent, a factor of 10 improvement.

An interesting piece of information that falls out of this interview is the primacy of regular mail over email in promotions. Powerpass's retail customers typically have ten times more mailable addresses than email addresses. A further limiting factor on email is the prevalence of SPAM.

Finally, we get to how sophisticated the retailer has to be to participate in the program. Training is required, and there are prebuilt reports for things like sales after promotions. Powerpass will also work with retailers to build custom reports.

Additional Links

• There's a fine line between legitimate email and spam such that many commercial messages are quickly caught in spam filters.

In this nine and a half minute podcast (downlaod ipod compatible, 47MB), Bill Michels, CEO of ADR North America, explains ADR's pace model of supply chain management. This conversation sets the stage for a series of segments on how ADR helps foster innovation in the supply chain.

The pace model might be thought of as a framework that helps identify the different phases a company might experience in managing its supply chain:

• Price drift: The supplier is increasing its price to the purchaser but experiencing relatively stable costs. The supplier is capturing all of the value in the difference between what it charges and what it pays.
• Price down: The purchaser starts to demand back some of the surplus from the supplier.
• Cost down: The purchaser and the supplier start to cooperate in getting the supplier's cost down so that they can continue to make margin.
• Cost out: The purchaser and the supplier move to radically rethink the supplier's offering to continue to get cost out of the product for the purchaser.

As might be apparent from this description, different skill sets are required at the different phases. In our next segment, Bill describes how ADR developed an assessment tool for diagnosing whether companies have the right skills for the stage they are in. In a later segment, we'll talk about how offshoring can complicate the picture, particularly in the later, strategic stages of the relationship.

In this 8 minute podcast (download iPod compatible, 42MB), Victor Naidu and I begin a fascinating conversation regarding how his company, Ramsoft, has innovated in IT consulting. Victor and his wife began Ramsoft in 1992, initially focusing on a cutting edge software methodology, rapid application development. Later in the 1990s, Victor moved on to the Internet and Enterprise Resource Planning software.

After outlining the company's history through the 1990s, Victor reflects on when it is best to enter a market:

• Being a market leader is good because customers perceive you as an expert and are willing to hire you as such.
• However, it is not good to create the market because you will have to wait too long to actually get a return on your investment.
• Entering the market near the stage of mass adoption guarantees low returns as the service is commoditized.

In our next conversation, we will discuss how Victor applied this philosophy to entering the ERP market.

Additional Links

• Wikipedia provides a description of Rapid Application Development.
• This Wikipedia article provides a good account of ERP software, used to integrate enterprise systems.