Tuesday, March 10, 2009

Kehoe - Smug Post-Modernisms and Other Notions We Get Wrong

By John Kehoe - 10 March 2009

I was watching Gremlins 2 with my daughter this weekend (yes, I’m a bad dad, but don’t hold the sequel against me, just the fictional violence). What strikes me about the movie is how cheesy it is. Not the plot but the technology. The video conferencing system, the voice based building controls. I particularly like the talking fire alarm system giving a history of fire, but I digress. It is a great period piece for late 80’s business and technology (Did you know that you could smoke in an office in 1990?). Yes, post modern sophistication relegated to a period piece. Such is father time.

It got me thinking in a broader context. What are we getting wrong today that will be revealed with the passage of time? We can look at the history of scientific progress. Examples abound in astronomy, biology and physics. The same can be said in social sciences, economics and politics. Up until the 1950's, the universe was thought to be quite small. Up until last year, bundled mortgages looked as a good way to diversify risk.

How do we know which horse to back? The first place to look is the ecosystem (yeah, sounds touchy feely, but it isn’t) of the technology. Diamond created the first MP3 player, a 64MB job. They did this years before Apple. Apple won the race, but why? They created a fully contained ecosystem. It consisted of a closed DRM format, content, exclusivity of content, blessing of RIAA and a logo program. It didn’t hurt that they hyped the heck out of it. Microsoft tried the same with Zune, but hasn’t had anywhere near the success. Microsoft was too late to the market and didn’t have the best marketing or industrial design (people like polished plastics and nickel alloy). The same is true with the other media players.

The ecosystem became pivotal. As a consumer, do I go with another ecosystem or do I go with iPod? My best mate abhors all things Apple (except his trusty Newton) and argues against the iPod. iTunes and iPod are closed DRM systems, the music isn’t portable to other systems, Apple locks in content providers. The arguments are similar to the Linux, Apple, Microsoft or [fill in the blank with a comperable technology] proponents or opponents. The fact remains that most people choose the iPod because it has the most mature ecosystem.

So what if there is no ecosystem? How do I pick the winner? I resort to need and simplicity. What do I need to accomplish? For instance, suppose I have a customer facing application that brings in $100 per minute. When the transaction rate slows, I lose money. I can quantify "normal," define a cost of abnormal activity and prove what additional revenue I can create with further capacity. I can determine my cost for that performance delta. It is a simple model and readily understood. It guides what the impact is, what is my need and what can I afford. It’s a good way to avoid the technology weeds.

Time makes fools of us all. We can use that to our advantage. If you don’t need technology XYZ, can’t afford it or can’t absorb it, then don’t buy it. The new classic example is BluRay v. HD-DVD. Both were expensive technologies that consumers would not absorb. The end result of a hard press by Sony lead to the capitulation of HD-DVD within a two week period in 2007. This made winners of the people who bought BluRay and the consumers that waited. Don’t mistake the initial BluRay owners as brilliant strategists: HD-DVD could have won as well. At any rate, the first adopters of BluRay paid $900 for bulky players. Better to wait for Wal*Mart to sell them for $99.95. The real winners are the consumers that sat out the battle.

So we use need and time to our advantage as best we can. We can use a contrarian perspective to the technology cycle. Think of this as the Devil’s Advocate (and yes there is a Devil’s Advocate in the Vatican). This would be considered the "B.S. detector" (a characteristic well honed by Mrs. Kehoe and applied to the auto dealer or to me asking for a 52” big screen). This leads to a skeptical mindset, a healthy maladjustment of the trusting mind.

Consider the evolution of broadband. Fifteen years ago technologists thought it essential, but prohibitive in cost (think ISDN a.k.a. “I Still Don’t Need”). We knew (or at least strongly suspected) what we could do with broadband communications: distribute information, telecommute (the real reason IT guys pushed broadband), new forms of communication, WebEx (which didn’t exist fifteen years ago), shopping, expansion of markets, outsourcing, offshoring, distributive teams, etc. The wheels come off the bus when we start standing up 100 Mbps internet, free municipal Wi-Fi and universal broadband. Why are they needed? Is to keep up with Elbonia? Why should there be a government run Wi-Fi network? If people don’t want broadband why force the build out that capacity? The sixty-four-million-dollar question is: when does a technology become valuable? Fibre to the house was goofy 20 years ago. If you have ask The Creator why he needs a starship.

Despite our best efforts, time will still embarrass us (really, the K car was brilliant idea). What has been the long term impact of Michael Jackson? He went from being King of Pop to Regent of Ridicule in short order. Will Miley Cryus be the Max Headroom of today? (I do have to claim that my daughter is not a Miley fan, I can’t be that bad of a father.) So foolishness can rule the day, but I doubt that Sir Mix-A-Lot’s Baby Got Back’ will be considered "classical music" in two hundred years. We don’t see the Sun Microsystem's ‘We puts the dot in dot com’ commercials (’99-’00) as being seen as the launch pad of corporate success, but an apex of hubris signaling the impending internet bust of ’00.

Looking at the merits of the solution in the context of its ecosystem, need, simplicity, time and our return models, we minimize our risks and bring a skeptical mindset to the hype cycle. Let's not be the next "dot" in "dot bomb."


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