Technology

The Art of Evolution

A short aside today, before we return next time to the Art of Change.

Dave Rolfe at Crispin Porter + Bogusky blogged yesterday about a powerful initiative that the agency is undertaking. As some people know, we are working with CP+B to help them design, navigate and implement this evolution. 

And while we make it a point not to discuss the specifics of our work with clients, Dave’s post speaks volumes for how successful companies become and remain so.

“We’re eyeing a model that will explore how post-production can best function in the overall creative process.” 

There are two truths on which to build a more valuable creative business. The status quo is where the funerals of once great companies are planned. And the future has no rules. Great companies live in the space between the two. They are pragmatically fearless. 

“We’ve been working like this since the beginning.”

Evolution is a state of conversion. The from being as important as the to. A business that sells subjectivity is built upon core values. Defining them clearly helps you make big leaps feel like small ones. 

“The best in talent will be sought to lead, and the best will be developed within the system.”

The art of growing a talent-dependent company is based on investing in those that can teach. From experience. And achievement. And in those that can learn. From others. And themselves.

“Made to take advantage of and connect the agency's geographic and cultural diversity.”

Geography can be an obstacle. Or a benefit. And culture is the DNA on which sustainable growth depends. First you need to recognize their importance. Then you need systems and processes to unlock the power of both.

CP+B’s evolution presents both threat and opportunity to many other companies. As Jerry Solomon commented at the bottom of Dave’s post, “We should view it as a challenge. If someone can do it better, faster and cheaper they deserve the business. And, if they can't our value becomes greater.”

Precisely.

The Art of In-House

For fifty years the advertising food chain was linear and static. Agency. Advertiser. Production. You could fight within your peer group. But not above or below. A state of competition that comforted and restricted in equal measure. 


Today that food chain has been blown up. Advertisers produce. Producers develop. And agencies try and figure out at which table they want a seat, while trying to make sure they're not the ones standing when the music stops. 


Seismic evolution or revolution? Your choice. The future being restricted only by your vision of what it holds and your capacity for change.  


For many companies, the vision includes adding new services. A strategy which is flawed only if you believe that the ease with which your suppliers provide them is an indicator of the simplicity of adding them yourself. Which is the same as deciding to extract your own tooth because you have a great dentist. You save the money. But the results are messy.


Service businesses - the definition of every creative company - need to successfully add new capabilities if they are to grow. Indeed, it is a strategy so tried and tested it has a chapter of its own in every MBA textbook: ‘Vertical integration.'


For creative companies, successful vertical integration is the result of making a clear strategic choice about how best to do so based on the structure of your organization and its capacity for change. There are two models:



  • Immersion: in which the new capabilities are fully integrated into the core business. This structure is often seen in new companies that incorporate multiple capabilities into a holistic organizational structure from startup.

  • Independent: in which the new capabilities are built and developed in their own right, using intimate understanding of the needs of both the company and its clients to maximize the value of the new In-House offering.


Of these, by far the most common is the Independent approach. The successful deployment of which requires avoiding five mistakes. 


Succumb to them - as many companies do - and you throw away brand empowerment, operational scalability, marketing gravity, profitability, creativity and ROI.


Here, in the order in which they are most likely to occur, are the mistakes to avoid when adding In-House:


1. In-House as Add On


Creative companies often act tentatively when moving outside their base capability. This often manifests itself as a failure to commit fully to the operational foundations necessary to ensure the investment in new services will produce a return.


When In-House is built as an add-on, you:



  • Cede the advantage to the competition - your former suppliers - for whom your 'add-on' business is their only business; a full-time commitment your competitors invest both heart and soul into every day.

  • Expect your staff to behave as clients, while you treat them like staff. The fastest way to have them end up being neither.


2. In-House As Department


For companies that make it past their fear of commitment, the next most common mistake is to treat the newly formed business as a department. Here, the parent commits serious resources - usually time, money and space - but then imposes its own traditional management structures and operating practices. 


This works as well as having your mother select your spouse. She has a lot of knowledge about important issues. But not necessarily those that determine the success of your marriage.  


3. In-House as Subsidiary Brand


This is a stumbling block for so many creative companies who have successfully navigated hurdles 1 and 2.


Fearful that the success of the new business will undermine the brand value of its parent owner, the parent inevitably inserts their name into that of its new offspring. 


This is the equivalent of thinking a take-off powered by a Rolls Royce engine somehow diminishes American Airlines.


That Rolls Royce is a premium brand in its own right requires Rolls Royce to keep making better engines. 


That American Airlines picks you up and safely sets you down using Rolls Royce technology is a win-win-win.


4. In-House as Requirement


Avoiding mistakes 1-3 eliminates the biggest obstacles to turning new in-house capabilities into a successful business. 


What happens next is the pivot point.


Parent companies have awesome influence. Influence that can be misdirected into requiring that its staff will use the In-House services.


This removes the greatest advantage that the new business has - proximity to its potential clients - by exchanging choice for edict; the surest way to motivate creative people to do exactly the opposite of what you want.


Deliver extraordinarily and market gravitationally. The rest will take care of itself. 


5. In-House as Holding Company Aggregator  


Holding companies offer many benefits. A subject for another day.


But not one has yet successfully built powerful, aggregated In-House production services. 


Typically this is because holding companies design from the top down, a view that brings virtually no understanding of the needs of the creative team. 


Or from the middle sideways. Which ensures the business is built to service only the needs of one company. As opposed to those of many.


Adding In-House should take place from the bottom up, and from the future back. Two perspectives from which to ensure you have one eye on the road beneath you, and one eye on the horizon.

iHave

I'm impatient for change. A good quality on which to build businesses. The status quo and self-satisfaction being the two greatest enemies of value creation. However you define value.


I write this post on technology that didn't exist to me this morning, on an app I didn't know about last Wednesday.


I do so, not because I am certain it will improve the quality of the process or the results.


But because I am not.


And because the cost and risk of exploration are acceptable.


Learning what we don't know is more important than learning what we do. A simple truth I am reminded of in every conversation in which I listen more than I speak.


Cost and risk, however, are subjective. And should always be measured against a fixed point of reference. Which is that the cost and risk of maintaining the status quo are always higher than we think.


And deny us the thrill of waiting, four-year old like, for the delivery of this wondrous window into the future that I now hold in my hand.

The iNevitability of iNnovation

I’m counting the days until my iPad is delivered. Three.


Which is one fewer than the number of ways it already needs improving.

1. eBooks should have audio tracks. Music embedded into the digital pages. Background noise that fill out the scene. Spoken recipes as you cook. A whole new medium waiting to be unlocked.

2. The back of the iPad should display the cover of whatever you’re reading. For a hundred reasons. Maybe more.

3. We need a magazine tear-sheet app, which allows people like Chris and Jamie to throw away their boxes of clippings, and organize them digitally instead in a virtual index of ideas and inspirations.

4. Its wireless feature should extend to my thoughts. Because typing is analog technology in its most primitive form.

Evidence that innovation has no limitations.

And requires but one thing.

A refusal to accept the status quo.

Even when it hasn’t yet arrived.

Why The Kindle Is A Pocket Calculator

The first electronic calculator was built in 1961. It used vacuum tubes. And a lot of your desktop.


Twenty years later, credit card calculators were promotional giveaways on a par with wall calendars. And most people would have taken the calendar, so ubiquitous had portable maths become.

The Kindle hasn’t had a twenty year run. More like twenty months. And just as it began to move from the ‘Early Adopter’ to the ‘Early Majority’ phase, people are beginning to write its epitaph.

Too small. Too grey. Too late.

Courtesy of better technology created by a company with a plan.

I blush not at all at being an Apple evangelist. They are an extraordinary company in their ability to conceive, design and deliver.

Amazon, on the other hand, has struggled since its inception to differentiate strategically between ‘can’ and ‘should’. A shortcoming that required hundreds of millions of dollars in losses to discover that selling clicks to other vendors at 5 cents each is more profitable than building infrastructure and inventory.

The Kindle is a good product whose time has come and almost gone before it arrived.


A reactive creation by a reactive company.

As evidence I offer you this.

Apple’s iPad uses touch screen technology evolved from three years and 42.48 million units of experience with the iPhone. The iPad screen contains 1000 sensors over its 80 square inches. Anywhere you touch you’re in contact with six or seven.

Amazon’s response? Yesterday, they acquired a company called Touchco. A New York start-up that specializes in touchscreen technology.

Touchco has ‘roughly six employees’ and has yet to turn its technology into a commercial product.

I believe in technology, innovation and possibility. I believe David can beat Goliath on a regular basis these days. And I believe in dreams.

I also believe that if you own a Kindle, you should use it a lot between now and late April.

After that, it’s a doorstop.

I Have A Dream

I received an email early this morning.


You know the kind. A hyperbolic headline. Followed by a first line of text that says something like, “Can you believe this?”  And then endless scrolling down through forwarded addresses of others who have received, commented and passed the message on.

Eventually you get to the subject. Usually a block of text describing the imminent danger we are all facing, or a conspiracy of some sort. They exhort you to be afraid. And to act. And to pass this on to as many people as you know.

What the web giveth the web taketh away. And the advent of Snopes had made it a simple matter to validate or deny the content in a couple of moments.

Over the last four years, none that I received were ever found to be true. Not one.

Which hasn’t stopped people disseminating and propagating. A waste of time and emotional energy of staggering proportions.

And the creation of negative energy on a massive scale.

An action that has consequences. If you believe in Noetic Science.  Which can be over-simplified as the power of positive thinking. As support for which some people offer The Global Consciousness Project. 


The GCP uses random number generators around the world to track whether collective human emotion makes these random patterns more cohesive. Whether thoughts can affect the physical world.

On two occasions, the Project believes they did.

Lady Diana’s funeral.

And 9/11.

There are many scientists and theologians who dispute the science. I’m neither.

What I know is that those two days represent the days in my life in which I have felt most connected to humanity. A fact. Not a claim.

One which supports a belief that we are more connected than we want to know.

And that what we feel has the power to cause change in the physical world.

Which brings me back to this morning’s email.

It contained a picture. Of Barack Obama. In 2005. Taken with eight other people. Including the White House gatecrashers. Tareq and Michaele Salah.

Supporting the picture is a lengthy dissertation that connects Obama to Hamas and accuses the White House of co-ordinating cover-up efforts with a pro Palestinian organization.

As proof of these claims, the email provides a large, bold link to Snopes.  Which in turn confirms the authenticity of the photograph.

What the email doesn’t show is a picture of John McCain with the Salahs. Apparently from the same event.


Truthfully, it didn't take a lot of research to find this second picture.


It was in the same Snopes link the email author offered as proof. The same Snopes link.

Politics creates emotion. As do differences of all kinds. A fact Dr King so powerfully made in 1963.

The election of 2008 was a remarkable event. The power of positive thinking at work.


But as Doctor King's dream comes true, so must new dreams be forged.

My dream is for a world which looks at the whole story.

My dream is for a world in which we use only the power of positive thought.

My dream is for a world in which the future is better than the past.


For everyone.

Never Again

In our travels we come across two kinds of people. The optimist. And the pessimist.

The pessimists are more certain about their perspective. An ironic display of confidence.

I used to believe there was merit to either view.

I used to believe some things can be done. And some things can’t.

I used to believe.

I was wrong.

Evidence comes in small ways. And proof takes time. But it is all around us.

In 1961, JFK challenged us to go the moon. A challenge of epic proportions. We went six times. The last was 38 years ago. If you watch the clip, you’ll hear Kennedy reference another achievement that took place 35 years earlier.  Listen. You won't believe it.

In 2002, Minority Report showed us a new way to manipulate images. A way that every one of us talked about afterwards. Today, a 2 year old throws any toy to the floor that doesn’t work that way.

In 2007, Apple invented the iPhone. Today, it unlocks my car, remotely controls my computer, finds my dog. It does 100,000 things beside. And we’re hoping the Droid finally gets it right.

Last year those that defended the publishing industry said it would survive because some people wanted to be able to hold what they read, not look at it on a screen.


This weekend, Chris showed me this on the web. 


The drawback? They’re a couple of months away.

And finally, last week a client sent me a link to a video. This morning, my friend Dennis Ryan blogged about it. Which made me finally watch it.

Watch the video. Any part of it. As Dennis says, do so in HD. And then tell me there is anything that is not possible.

Anything.

It’s not possible?

Never again.

Dance and Yodel. Why Books Aren’t In Trouble. But The People Who Sell Them Are.

I went to Barnes and Noble this morning. I was one of 35 people standing outside waiting for them to open.

Where else in Manhattan, I wonder, did a retailer draw a crowd today without a free giveaway involved?

No one went to the cafe. No one went to music and video. Two people headed to the magazine sections. And the rest of us went looking for books.

45 minutes later, I walked out with four. Thanks to no-one and nothing. Except my perseverance and determination.

In the business section, an employee stood at his counter drumming his fingers on the counter-top. Loudly. I think it was loudly. It was hard to hear above the noise of the phone ringing beside him.

I turned to the computer help centers. Helpful. Provided you know the precise spelling of author. Or book. Luckily my iPhone Google search interpreted my attempt, and corrected me. No inter-device cut and paste, however. Dutifully I tried again. The book was in stock, one aisle over.

Except it wasn’t. I tried to decode the cataloguing system. An explanation somewhere would have been helpful. Even if I can’t re-sort by clicking a column header, understanding how you’re trying to do it would save me the trouble of figuring it out for myself. Alphabetical by title? Ah, by author. Except here and here and here. And in any event, my title and author exist in neither.

Another staff member walked by. I looked up plaintively. Without breaking stride she asked me if I needed any help. “I’m looking for the Art of Seduction,” I said, more loudly than I cared to. Based on her response, I’m fairly sure she hasn’t read it. Though I sensed she knew where it was. Her gesture had a number of interpretations, one of which was to duck. But as she disappeared round the corner I gave one last hopeful glance in the general vicinity of her final indication. There, a single copy, lay forlornly and ironically by itself. Clearly, sympathetic presentation of the merchandise hadn’t been on that morning’s staff meeting agenda either.

If you’re going to sell something, sell it. Use technology intelligently, find people who care, train them properly and worry about the details.

Demand is out there for all kinds of things. But if it matters more to your customer than it does to you, their standards will eventually decide if you’re in business.


Google just announced the launch of their online book store.


How much is a Kindle?

5 Things The Airline Industry Has Taught Us About Better Business

The airline business is pointless.

If there was any kind of alternative to traveling further than 250 miles, we’d all take it. And celebrate.

Instead, we game the system to get the lowest fare possible, hope our upgrade clears, and try to make sure there’s internet access on board to help us forget that as an indicator of man’s achievements, air travel is our only major innovation that’s going backwards. Having experienced Concorde, that’s a realization that hits me every time I fly.

Fifty years after the Boeing 707 was heralded as the first jet airliner, we still fly at exactly the same speed that modern miracle achieved on its maiden voyage. 591 MPH. Imagine where things would be if technological achievement had remained frozen in 1959. Today, New York to London is still 6 hours, give or take, depending on the jet stream.

Maybe that’s the real strategy behind global warming. Heat the planet, create violent weather conditions, jump on board the jet stream. It would make more sense than anything else those that run the airline industry have offered as business rationale.

Let’s look at just this decade. Since 9/11 the industry has:



  • Gone through five Chapter 11 reorganizations

  • Supported two mergers

  • Eliminated about 250,000 jobs

  • Been responsible for a mountain of debt and pension defaults.


If over that same period you ignore the tens of billions of dollars written off to goodwill write-downs, and the hundreds of millions of dollars of reorganization costs, then the airline industry only lost around $40 billion.

$40 billion. In an industry trying to make money.

With no competition.

That every one of us will have to use multiple times this year.

And yet. The most recently published quarterly reports have been met by airline executives with rejoicing over the increases they have generated in ancillary revenues. Things like baggage fees and on-board meals. United earns about $14 a passenger in those fees. They also lost $137 million in the 3rd quarter.

What they don’t know is the cause and effect of either number on the other.

In other words, they don’t know if charging for bags increases revenue or drives people to other airlines.

Seems like a fairly rudimentary piece of analysis. If we do this, will be better or worse off?

United don’t know. (No news there for the airline that came up with the profound brand positioning, Rising.  As opposed to the alternative, one presumes.)

Neither do any of its competitors. One of the many reasons why the airline industry has lost more money than it has ever made.

But the airline industry does have value. As a business model. Of what not to do.



  1. Don’t sell your services for less than it costs you to provide them. Unless you know you can raise them tomorrow. Not think. Know.

  2. Don’t build a business that is entirely dependent on any single resource, especially when controlled by a limited number of suppliers who are ambivalent whether you succeed or fail.

  3. Don’t build a business around a small group of people with highly specific, and hard to replace skills. And if you must, align their interests with yours. So that the success of the business is their business - as well as yours.

  4. Don't restrict innovation. If your business can't offer a significantly more valuable experience every three years, your customers will find someone who can. Unless you can corner the entire industry. In which case, you don't need anyone's help.

  5. Don’t focus on narrow metrics that support what a great job you’re doing while the business is falling down around you.


The truth is out there.


Just don’t expect to find it by looking up.

5 Steps To An Information System

You can’t build a better business without better information.

With rare exception, the information management systems of most companies do little to contribute to their success.

At best they are not getting in the way. Most of the time, they are considerably more destructive than that.

A better business is one that knows where it’s going. And is built to get there.


In that outlook it is not surprised by its success. A trait that becomes self fulfilling.

Here are five foundations to creating durable information systems that will outlive their founders:



  1. Strategy. Well designed systems are built to fulfill their company’s purpose. Only when you have defined that can you establish the architecture that will support the journey.

  2. Scalability. Start with a numbering protocol that supports enough digits. Re-engineering platforms in response to success is expensive, distracting and sometimes impossible. Companies as sophisticated as American Express have made this mistake.

  3. Sensitivity. Particularly to the daily needs of the staff that use it. Systems that demand consistent data input but provide no immediate return to the people responsible for its entry, fail prior to installation. Any system must benefit every user.

  4. Flexibility. We absorb information individually. Systems that treat us as two dimensional limit the long-term growth of a business by minimizing the involvement of those who see the business on three planes.

  5. Clarity. Users have little time for and less interest in training. A system built on consistent interface protocols shortens adoption timelines and increases exploration and ultimately use.


Information is the compass that guides a company. Without it your final destination is a guess.

Which makes the journey more exciting.

But more prone to icebergs.
 

Pass It On

Last year’s university freshman are a historic group. They are the first generation for whom the internet has existed since birth.

If you are reading this blog you have developed a facility for technology that would have astounded you twenty years ago had someone described the communication capability to which we now have access.

Free content on any subject, instantly searchable and accessible from anywhere in the civilized world. Oh, and wirelessly.

For most of us, no matter how comfortable we become, there is a degree of awe that comes with the opportunity to converse like this.

For a twenty year old, they can imagine no other way. They look forward. And ask for more. The difference, as Sir Ken Robinson points out, of being digital natives versus digital immigrants.

A better business embraces the future.

Today, doing so requires a leap of faith to test even the most devoted agents of change. And glasses. Two hurdles most twenty year olds don’t have to contend with.

But for all their hope and exuberance, they’re looking to us to lead. For at least a while longer.

I think it’s time we did. By looking forward. With purpose.

Yesterday was great.

Tomorrow will be better.

Pass it on.

Nantucket - Part 2

Owning your own business is a journey. One that requires two pieces of navigation.

Knowing where you’re going. And knowing where you are.

In that order.

In between, the trick is keeping one eye on the road ahead and one eye on the horizon. Avoiding potholes while seeing all the possibilities makes for powerful businesses that make people’s dreams come true.

Standing at the bow of the Nantucket ferry on Sunday night, Chris was absorbed by the lights that emerged from the mist at regular intervals. Depth perception at sea is difficult at the best of times. On a fog shrouded evening, with only a narrow moon-lit path to guide you, it’s impossible.

Several times we were convinced that a particularly bright light was Sankaty Head Lighthouse on the island’s eastern tip, only to discover as we passed it ten minutes later that it was in fact a buoy, set to mark the shipping lanes on this busy stretch of water.

Finally I pulled out my iPhone and Google mapped our location. The power of hand-held, battery powered, GPS technology. Three hundred years ago, men drowned because there was no way to tell the time at sea. Time being a key determinant of position. Today, the risk is falling overboard while texting.

The answer, in case you’re wondering, is 6.7 miles. The distance at which Nantucket’s lights emerged from the fog on this particular evening.

At 6.8 miles, there was nothing. Thirty seconds later the entire island lay before us. We knew it was there. We could see it on the map on my phone. We were looking for it. And yet, it still caught us by surprise.

Which is how the future works. Here before we know it. A problem for most business owners, who spend today acting as though they control tomorrow. Too late, they find they don’t. The best we can do for what comes next is prepare. There are no guarantees. Only the inevitability of change.


For today’s success to mean something tomorrow, we need to build platforms and develop strategies that maximize the possibilities that we will reach where we’re headed.

On a fog-filled evening in the Atlantic, the Nantucket ferry provides a reassuring platform. And the lady captain had clearly done this before. As an alternative strategy to rowing ourselves across, it had one obvious downside. Expense. $446 round trip with a car. We thought three benefits more than compensated for the cost. Speed, quality of life and probability of outcome.

As we got closer to the harbour, the captain turned on a massively powerful spotlight and swept the water immediately in front of us. As the outer wall came into view she kept the light fixed to a point at its base. The opening was narrower than I expected. Nantucket’s dimensions have changed little since its days as the home of the world’s whaling industry, and both its nautical and land based infrastructure struggle to accommodate the modern trend of bigger modes of transport. At some point one or the other will have to change.


Building infrastructure that can support unforeseeable growth is a long-term view that requires short-term investment. And commitment. It's easier to just keep going. It's also, inevitably wrong.


Safely into the harbour, there was one last manoeuver to undertake, and she turned the ferry on its considerable axis before lining up the bow of the ship exactly in line with the disembarking ramp.

With the gentlest of thuds we came to rest. 27.8 miles from where we had started. Precisely where we had intended. And fifteen minutes early. A snip at $223.

As we left the ferry and headed into town to find some dinner, we were greeted by streets filled with people busy with their own lives. Which for many meant getting ice cream at the juice bar - the crowd outside the door spilling into the road as we drove by.

Building a busines well, is a microcosm of a life well lived. A clear sense of where you’re going, fueled by a personal journey of self-discovery to which we remain ever open.

We ate leisurely, and wandered the shops for a while, eating our own ice cream. Chris radiated contentment - a sense that has come more easily in the past few years as we exchange years for perspective.

Life lessons are hard earned. As I turned the car into the quiet country road that led to The Wauwinet, I had no way of knowing that tomorrow was going to provide me with one of the most meaningful of my own. 

Technology is a Means - Once You Know The End

in 1994, you could buy one gigabyte of data storage for about $3,500. It occupied a hard drive that was appropriately nicknamed a ’brick’. Actually a real brick was smaller and considerably lighter.

Today, that amount of data will fit on a device smaller and less expensive than a lipstick.

The capacity of technology to make our lives different is staggering. But for business owners, using it effectively and wisely is one of today’s biggest challenges. I see many, many example of companies who dramatically under or over invest in technological solutions.

The over-investors are typically given bad advice by an under qualified ‘expert’ they have acquired along the way. The under-investors put cost before any other consideration.

In both cases, the business is damaged. Sometimes irreparably.

When you over invest, rarely can you afford to then immediately replace that piece of technology with another. The result is that you then design the business to the technology in order to justify the investment. Businesses designed to accommodate bad systems usually fail. Customers don’t care about your systems. They care about what you’re doing for them.

When a business owner under invests in technology, a number of things happen. The company is restricted in the ways it can service its customers, or analyze its performance, or communicate, or operate or expand. Or in some cases, all of the above.

Technology should be guided by a philosophy and must support a clear strategy.

Otherwise, whether you want the latest, the greatest or the cheapest, you’ll always be wrong.

Do you have a technology strategy?

Planning The Last Day First / STEP 4: INTEGRATION

On 9/11, Chris and I were in a hotel room in Scotland. She was on the phone with our accountant in Chicago about the upcoming deal with the Whitehouse. Suddenly, he told her to turn on CNN. A plane had crashed into the World Trade Center.As soon as the picture resolved I knew it was terrorism. A clear blue sky. The tallest building within several thousand miles. And growing up in London in the Seventies where bombs were part of our daily life. I knew it was possible. It took four days to get back to the States. We were the first plane allowed in to US airspace from Europe. We landed to applause and sobbing. And a new way of life.

Planning The Last Day First / STEP 2: EXPANSION

The first year went by in a blur. A few signs of optimism. A lot of anxiety. But through it all we really did act locally and think globally.We had hired David Brixton, a very talented editor from London and convinced him and his wife Jemma of our dream. They moved to Chicago and brought European flair, creative credibility, a work ethic that matched ours and extraordinary social sensibility.

7,6#5$4@3*2f1 Reasons Why Your Systems Are Critical

Fred Wilson blogged yesterday about his recent problems with American Express.

Last I checked there were 133 comments on his post. Fred is apparently not alone in his experiences with AmEx’s declining customer service standards. Things have fallen a long way since the days of Karl Malden.

The issues at American Express can be attributed to many well discussed macro-economic factors, none of which, as entrepreneurs, we can do much about.

But one particular comment on Fred’s post stood out to me as indicative of a deeper issue at AmEx. It’s an issue that I see most business owners fail to address until the problems are so deep rooted that there’s no viable solution.

Their information management systems.

Most entrepreneurs are in a hurry to put some foundations in place and get into business. If they hire great lawyers and accountants they get great operating agreements and financial reporting. If they don’t, they don’t. The rest they learn as they go.

But when it comes to managing the information around which their company operates, they often focus only on their current business needs. And almost not at all on what they might need five years later. As though thinking about it will jinx it. This happens all the time. Even among people paid to think ahead.

Remember the Millennium bug when the world's computers were supposed to come to a halt because most of their operating code had been written with two digit calendar years? After all, who could envision the world reaching the year 2000 all the way back in the uh, 1950s.

A version of this has affected American Express. In their case the issue is the account number structure they used in the 1970s. I’ve reprinted the comment added to Fred’s post this morning:

“I'd had an AmEx Platinum card for nearly 30 years, never missed a payment. Last year I wanted to arrange for the card account to be paid automatically from a bank account. AmEx said sorry, the auto-payment feature wasn't available for my card, even though the feature was offered on their website. I escalated through SEVEN layers of managers, being stone-walled at every level, until the highest VP finally told me that AmEx cards with older numbers were handled on a different computer system which couldn't be upgraded. My only option was to cancel my Platinum AmEx and open a new account, which would have a new number and be hosted on a newer computer system where auto-payment was available. This was so incredibly incompetent that he convinced me that it must be true.”

The issue, of course, is not that American Express physically can’t transfer the data. It’s that they feel that the cost of translating and transferring it to the new systems is cost prohibitive to them.

Even if we forgive them the limitations of their early account numbering system as a result of unforeseeable technological evolution, they’ve compounded the mistake at least twice more - each time exponentially.

The first, by deciding not to perform a comprehensive system upgrade of all their customers when the new system was implemented. The second, by deciding to then highlight the inadequacy of their original planning by offering their new customers better service than the original card members.


Offering your oldest customers less service than your newest is a quick way to making sure your newest become your oldest really fast.

Ultimately, the random, volatile behavior of their customer service department is more indicative of the lack of trust they have in their own philosophy, their systems and ultimately themselves.

If you want your business to last you have to build it to last. If you design a spectacular house and then run the plumbing through cardboard tubes, eventually the Fed Ex guy is going to find water coming through the front door.

Companies work the same way. The outward face of a company is always a reflection of its inner workings. And no amount of customer service training can hide a badly built business.

So take a look at your information systems and think hard about whether they’re built to support your company’s best case scenario ten years from now.

If they’re not, you’re just planning for failure.

Head in the Cloud. Feet on the Ground.

Whether you’re a single-owner, home-based business or a multi-office, multi-national, you don’t need me to tell you that you need technology.

An email address and a website for sure. And if you have a web 2.0 perspective, you’re on Facebook, Twitter, Digg, StumbleUpon, LinkedIn, Disqus and possibly Valium.

Today, technology is evolving in real time. We’re literally watching it happen. Last November, the UK press included 40 articles that referenced Twitter. In the month ending today, there will be more than 700. And to coin Winston Churchill, we’re not even at the end of the beginning.

But while all this has been going on right under our very noses, an even more important technological revolution has been taking place in the back-rooms of some of our largest technology corporations.

It’s called the cloud. And in this exact moment, you’re in it.

The desktop revolution that Apple launched in 1984 has powered the PC revolution for a quarter of a century, putting a computer into the hands of virtually everyone we know. Indeed, the growth of the internet has been made possible by the advent of the desktop which gave us all web access - on our terms.

But in the last two years a subtle, and now increasingly significant shift towards a ‘cloud’ of massive, web-based, centralized servers is creating an entirely new set of possibilities.

This blog, like virtually every other blog, was created on a piece of software that exists only in this ‘cloud’ of central servers. The only point of access to it is through the internet.

No longer do I need a state-of-the-art laptop. Or three or four separate applications to create and manage the site. All I now need is a device with internet access. And nothing else. (This particular post was written and added to the site on my iPhone.) Software updates are a thing of the past, because they’re done automatically at the other end of the connection. And no more downloading, rebooting, reinstalling either. Just sign in, and you’re working on the latest version - though as Facebook users recently discovered, this-all-for-one, one-for-all approach can have its drawbacks. (Isn’t it time Facebook provided customized interfaces. Haven’t they heard we’ve individuated?)

The intensity with which some of the major technology companies are expanding the computing cloud, http://bit.ly/QoSGg means we’re going to see a lot more examples of services like Google Docs, SalesForce.com and WordPress. We’re also going to see stuff we haven’t yet imagined. How about multi-player, real-time video games that don’t need a $400 console or a $24.95 disc.

Of course, the cloud has enormous implications for every business owner. Big and small. A one-person company on a distant mountain top will now be able to have the same technological support as a Fortune 500 behemoth. Not close. Not like. The same.


When size no longer creates automatic marketplace domination that’s good for everyone because then innovative solutions to problems can come from anywhere, not just the giants. For anyone grounded in their business, that’s an incredible asset because now you can leverage the thing that sets you apart from your competition like never before.

Imagine if this concept could be applied to manufacturing. If the cloud could build and distribute cars - meaning anyone’s ideas about fuel, safety and aesthetic could be realized - does anyone believe we’d be sixty days away from the Big Three becoming the Big One?

That’s because the things that allow economies of scale to take hold - standardization, homogeneity, conformity - kill innovation. By definition. Instead, the cloud takes economies of scale and gives them to the individual, releasing the capacity for originality in all of us.

Now, overnight, we can all became Microsoft or Warner Brothers or Penguin. That’s a lot of responsibility. Let’s make sure we use it.