CIO Agenda 2013

The central topic of the night was IT Consumerization at Churchill Club’s CIO Agenda 2013. Attendees of the talk included Karen Austin (CIO PG&E), Ben Fried (CIO Google), Bask Iyer (CIO Juniper), and Karenann Terrell (CIO Wal-mart). It seemed these CIOs had well embraced the notion that consumer technologies will drive IT strategy moving forward – something that has been well known since employees practiced BYOD when the iPhone penetrated businesses 5 years ago. The mantra now seems to be that CIOs want standards around routine, mundane tasks, as they concede that consumer choice will bring an ever increasing rate of rogue apps into the work environment. Cyber security was cited as the number one issue on the CIO’s mind. Interestingly Google’s CIO seemed to advocate for the strictest policies against rogue employees using whatever Apps and devices they want; this is the one company I expected to offer a near free for all due to its young and reputably innovative employee base.  I appreciated his perspective that IT must make its “employees great” in order to avoid the proliferation of foreign apps in the workplace, but I remain a skeptic that an IT department can keep pace with marketplace innovation. It was a commonly shared view at the talk that IT must delight its customers.

Here are a few of my thoughts on the subject:

1. Private clouds will protect some data if content silos are broken down, but the consumer demand for best of breed will continue to remain a force difficult for slower moving CIOs to contend with.

2. New apps will continue to proliferate when they enable superior productivity.  IT must focus on developing great solutions, where routine and mundane tasks can be modeled. Through the delivery of great services, trust can be established at a level that gets employees on board for the fight against cyber security threats.

3. Innovation requires insight. IT’s strongest play in enabling innovation in the firm is to capture and unlock big data – both explicit and implicit.

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Frictionless checkout a reality?

I’ve had the opportunity to redesign multiple sign-up and checkout experiences over the years. You might think it couldn’t be that hard, but it is never simple from my experience. The sales team may want loads of registration data at sign-up even if it means there is a huge associated bounce rate. Worst case, sales might think, “if they don’t finish the form, then who wants the prospective customer anyway?” On the opposing side, savvy business models such as fermium models may dictate that you capture as many users as possible, even if you don’t know much about them.What is exciting to me is that it looks like we may have a new solution to our registration and checkout woes. Last week, I had the opportunity to attend the X.commerce Innovate conference where they announced PayPal Access. Unlike Facebook Connect’s focus on sharing the social graph with merchants, PayPal Access brings a user’s authentic e-commerce profile to the registration and checkout process. I use the word authentic, because a person using PayPal is a real world individual with a bank account and purchase history. This product allows users to checkout without sharing their private financial information with the company or physically going through registration. On top of that, the retailer doesn’t have to give up valuable social graph data Facebook provides to merchants since they also announced a partnership with X.commerce at the conference. In a nutshell, a person brings both their wallet and their friends to the shopping experience.

I’m not saying that registration will cease to exist. What I am saying is that PayPal Access may reduce friction in the registration and purchase process for the 100m+ and growing PayPal users. For SMBs, this just might level the playing field a bit with larger companies that have much bigger technology budgets. A few lines of code is all you need to create frictionless checkout for many prospective customers.

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Watch anywhere, anytime?

As consumers of digital content, we are all overwhelmed with a myriad of subscription and a la carte procurement options for accessing the movies and TV we want. Unfortunately, no one has the complete solution just yet. Hulu gives us a lot (not all) of the content from Fox, NBC, and ABC but generally lacks support of the cable operators and CBS due to unresolved conflicts with their respective business models. TiVo and other connected TV devices are reaching many agreements with content consolidators such as Hulu and Netflix, but no one has a fully integrated experience where content comes before the content provider’s brand, creating friction in the user experience.

What’s it going to take to get to the Utopia vision of watching whatever you want, wherever you want, without navigating multiple content silos or maintaining an excessive number of subscription services? Here are a few of the primary industry issues outstanding:

Effective revenue model for all parties involved

Content owners need to be fairly paid, which hasn’t happened yet. Netflix’s growth is amazing, as they have captured 60% of the movie streaming market; however, they have windowing rules that keeps desired content out of the hands of consumers too long. Without a dual subscription and ad model, they will likely struggle to establish a model that attracts desirable content and keeps everyone fairly paid.

Hulu’s ad effectiveness with respect to brand and message recall is 55% more effective than traditional advertising. This is translating to higher revenue returns for Hulu per half hour of prime time episode as compared with cable, cable DVR, and broadcast DVR; only broadcast is earning revenue higher per half hour of prime time episode today and the gap is closing quickly. For Hulu, breaking from its JV relationship with its founders is the critical next step to expansion.

It will be interesting to see what packaging and merchandising options develop with the union of Blockbuster and Dish, given the opportunity to marry strong content provider relationships with multi-channel distribution capabilities.

Maintain brand identity, but let go of brand dominance

Making users go to dozens of websites and apps will not work. Content silos must be broken down. TiVo is currently one of the best devices to make this happen as it owns the coveted “input 1” position on our TVs, meaning even our grandparents can easily get to the stuff they want to watch. TiVo’s latest product makes huge strides towards putting the content in front of users before the distributor’s brand and makes great strides at breaking down the windowing issue faced by Netflix by giving users multiple content access points. While TiVo has had many great successes, it is still a heavily considered purchase in comparison to its cable operator owned generic DVR counterparts. Recent partnerships between TiVo and operators indicates that this issue may resolve over time, as its patents and its phenomenally superior user experience are showing signs of winning out.

Emergence of open standards?

From payment systems to ad platforms, the industry may have to adopt open standards to allow everyone to play. The benefit? Ease of use for users and access to content will result in more use. Proprietary business models are great if you can make it work, however, network effects are somewhat questionable, which means being the keeper of all technology components may not be the right strategic move because movie and TV viewing has not proven to be particularly social, at least yet. We don’t care much about how many people are accessing content through the same distribution channel. We simply want the content. The fewer bills, logins, and time spent finding things, the more likely usage will increase for each player.

Blog Sources
Facts stated in this blog were gathered during executive discussions in John Schneider’s Management 162 Business Capstone course at Santa Clara University during the Winter and Spring 2011 school terms. Guests include Margret Schmidt, Vice President of User Experience at TiVo, Tom Fuelling, CFO of Hulu Networks, and Peter Moore, President of Electronic Arts. The point of view expressed in this blog is solely by John Schneider.

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Threading the needle

Photograph: Susana Bates/Reuters

Analysts are questioning Microsoft’s $8.5 billion purchase of Skype this past week for good reason. Skype isn’t turning a net profit and Microsoft wasn’t truly in a competitive bid. This sets up the question as to what synergies can be created between these two firms that drives such a valuation. We’ve all heard about Skype’s role as a key technology across many Microsoft technologies such as Xbox and Outlook, but I think there is one focal area that takes the lead over all others – mobility.

Microsoft announced Windows Phone  7 Series at Mobile World Congress in February 2010 with the goal of re-invigorating their position in the smart phone space, one they pretty much created but have since lost. In a recent opportunity to meet Robbie Bach, Retired President of MS Entertainment & Devices, he emphasized the point that they learned that MS had made a key mistake in the past by allowing handset manufacturers and carriers to manipulate the user experience on the phones with little to no restrictions (which can be likened to the approach Android is taking today). Now Microsoft is tightening controls and limiting what modifications, if any can be made. With this new strategy and reach into both enterprise and consumer markets on a global scale, what was missing until last week?

Microsoft did not have a unique value proposition. Nothing to disrupt the space. Apple has the tightest user experience and ubiquity across devices. Android is in just about everything now. In order to thread the needle between these two heavyweights, Microsoft needs something that changes the current market trajectory which looks to be building towards a duopoly a few years out.

Let’s look at the dynamics on the buy side of the industry, specifically the carriers, as an example of what could happen next. With AT&T’s recent proposed acquisition of T-mobile, Sprint is concerned with extinction due to its relatively low market share. Until now, no carrier has been a big advocate of changing their lucrative business model by allowing highly integrated VoIP calling that negates the use of their airwaves for voice transmission. Why would Sprint or another carrier consider disrupting the industry with a low cost VoiP solution that uses MS Windows 7 and Skype? The simple reason is that that Microsoft can create cross subsidies with search advertising through Bing. Suddenly, the carrier doesn’t lose financially. The consumer wins as well with lower subscription costs. Thus, the industry is disrupted with a network effect between search advertising and VoiP.

Microsoft captures market share, perhaps just enough to be worth $8.5 billion.

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Making aggressive innovation and execution a reality

Robbie Bach, recently retired President of Microsoft Entertainment and Devices Division, visited my Business Capstone class at Santa Clara University on February 11, 2011. Robbie’s experience spans an array of amazing accomplishments including his role as CMO of MS Office and leading the effort to bring Windows Mobile 7 to market this past Fall.

One of the most interesting discussions was related to the introduction of the Xbox. Robbie was tapped to bring Microsoft’s first gaming console to market at a time when Sony and Nintendo dominated that space. This may be hard to remember now that Microsoft is a dominant player with approximately 25% marketshare. Having no formal experience in console gaming, Microsoft recognized the prospective power of this space with respect to fulfilling the vision of “the connected home.” Microsoft knew they needed a seat at the table.

Robbie focused on two key principles for ensuring he had the right organization in place to enable innovation and commercialization of this new product. What struck me the most was his emphasis that “a more disciplined process might have killed the project” and so he really had to strike a balance that ensured they could think like entrepreneurs, while executing manufacturing and distribution on a global scale. The following are the principles he outlined in the discussion:

Separation from the core
Robbie and his leadership team made it clear that they would not join the effort to introduce the Xbox unless they had independence from corporate headquarters. They could not operate effectively under its structure and needed the flexibility to organize the way a game manufacturer operates, rather than the way a computer software company such as Microsoft historicaly operates.

Measuring the market and then setting internal goals
The first order of business for Robbie and his staff was to run game theory simulations to understand how the industry players might react when Microsoft made its debut. By knowing the potential outcomes, he was able tailor his go-to-market strategy. This effort followed with what he called the “3/30/300 documents.” First, he had a 3 page document outline the core principles of the initiative. Second, he had a 30 page document produced that outlined the execution strategy. Finally, the team produced a 300 page document that was the detailed specification for the Xbox console.

The rest is history. Robbie successfully introduced the Xbox in only 18 months from the time he received the assignment.  As a result, he was able to gain 25% market share and build the platform for subsequent console releases.

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Industry disruption needs a disruptive culture

For Q4 2010, ComScore reported that Hulu is watched twice as much as the 5 major TV Networks online combined. Just as this report was released, my class was fortunate to have Tom Fuelling, Hulu’s CFO, visit class to talk about the video rebroadcasting industry and Hulu’s market position.

Tom opened up with Hulu’s mission statement, “To help people find and enjoy the world’s premium content when, where and how they want it.“ A mission statement focused on the end consumer of their product was definitely expected; however, he went on to say: “as we pursue our mission, we aspire to create a service that users, advertisers and content owners unabashedly love.”

What a great statement for my class to hear. At the heart of competitive strategy is an understanding of the industry forces driving profitability and what, if any, resources and capabilities a firm can cultivate to establish a leading position. Born out of industry disruption caused by the ability to distribute video over the Internet, Hulu was somewhat formed as a defensive posture by Fox and NBC to protect themselves against YouTube and other sites illegally

Tom Fuelling, Hulu's CFO

distributing their content. That being said, Hulu understands no one wins if users, advertisers and content owners don’t all obtain value out of the venture.

Hulu, under the working title “NewCo.,” was laughed at when it started out due to the poor history of major media companies working together to deal with such type of attacks.  This was epitomized by its nickname “ClownCo.” From the time Jason Kilar, the CEO, started, the goal was to release a beta product in 10 weeks. To this end, he removed the cubes, modified the refrigerator to house a beer keg, moved out of the corner office and into a room adorned with whiteboards, and wrote a 1,100 word “culture manifesto” aimed at establishing a frugal meritocracy

The rest is history. They now have 30 million users and revenue of $260 million. And that is just 36 months after starting out in Fall of 2007. Ads on Hulu are 55% more effective than the same ads on traditional channels, making a compelling case for advertisers to pay attention to them. To sum it up, TechCrunch ate its words when it released an article, “Happy birthday Hulu. I’m Glad You Guys Didn’t Suck.”

Now Hulu has new challenges. The owners no longer fear YouTube the way they used to in 2007. Consequently, ABC has now created its own iPad App ton control its own distribution, and other networks are more hesitant to concede control of their most popular content to Hulu. And then there is the success of Netflix as a competitor.

Hulu is at a crossroads so to speak. It has already moved to a hybrid advertising and subscription model. Does it now move towards a cable operator model? How will international expansion work? Does it IPO and gain independence from the major networks? Time will tell, but it sure is great having the opportunity to listen to visionaries tell their story such as Tom Fuelling did in my class on February 9, 2011.

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Enterprise collaboration goes way beyond the tools

Photo courtesy of GigaOM

Debra Chrapaty, SVP and GM of the Cisco Collaboration Software Group stated, “You must have the people, process, and technology in place to enable effective collaboration.” She intentionally held technology in third place because you cannot successfully utilize innovative technologies without the right people and processes in place. Her presentation was exceptionally well suited as an overarching theme for the Net:Work 2010 Conference hosted by GigaOM on December 9th. The following are three of the major themes I heard during the event.

Executive decision making and compensation models will change to encourage collaboration. Marc Benioff, CEO of Salesforce.com, is shaking up both his compensation structure and executive planning meetings to improve collaboration within the company. He stated that any employee can earn the same salary as an SVP within his organization moving forward. Compensation will adjust based on performance and he believe some of the best thinking in his company stems from those outside his leadership structure. Most interesting was his recent change to executive offsite planning meetings. He said the executive staff appeared as if they were the “Illuminate” going off to perform some rituals when an executive offsite meeting occurred behind closed doors. Now, he streams his entire offsite meetings live and provides a recorded version of it for all individuals to learn from and collaborate on during the year. His planning sessions are now “live” throughout the year.

Understanding identity and relationships is rudimentary at best with current tools. Jeff Bonforte, CEO of Xobni, discussed the point that explicit data, the type we find on a LinkedIn profile or Facebook page tells us very little useful information about a person. He went on to state, “Implicit data will redefine identity and relationships.” Xobni acquires this information by performing statistical analysis on the messages in a person’s inbox. Most important about the market position his young company is taking is that there will be a revolution in productivity tools when this much greater level of insight is revealed to everyone.

Segmentation matters in the enterprise. Segmenting user behavior based on demographic, ethnographic, and psychographic research isn’t just for establishing strategies to win in the consumer marketplace. A few interesting facts discussed at the conference include the point that Gen Xers are the most likely generation to want to start their own business and that only 33% of North Americans embrace use of video in collaboration tools versus Europe at 66%. These differences in behavior matter and they must be understood. Based on the statements above, I expect very simple and inexpensive collaboration tools to dominate amongst Gen Xers starting their business; whereas, more sophisticated collaboration tools with the use of video to perform better in Europe as a whole.

In wrapping up my summary of the experience, my favorite quote of the conference was that, “we are in the business of connecting people to people, not people to data.”

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Anticipate Change and Exceed Expectations

Analytics and optimization are a crucial part of any product or marketing campaign, but analytics programs are useless unless acted upon. The ability to iterate and improve what exists is what separates the players from the leaders.

Measurement of increased impressions, leads or conversions is just a start. These trailing indicators suggest where your investments might have paid off and what might be going wrong, but they won’t tell you how you can improve. What your team needs is an optimization program that invites innovative and forward thinking.

Most innovative thinking doesn’t occur as a brilliant flash of light from a singular genius. It comes from a combination of a deeper understanding of your customer’s need, the ability to anticipate how those needs will change, a clear business vision and a well thought out analytics and optimization program.

This combination leads to winning ideas that enable you to design ahead of your competition. For the customer, that means a better experience that exceeds their expectation. It shows someone has been thinking about what they need and it allows  you to create distance between you and your competition in the mind of the customer.

I recently shared this concept in the context of the Global Total User Experience at the Smart Seminar on Globalization hosted by Medialocate. Here’s a bit on what I discussed at the event.

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New forms of interaction and learning

I recently wrote a blog about my conundrum as to whether I could trust my new iPad for a big European work and vacation trip. I had to balance the challenge of enabling my wife to do serious dissertation work in the British Library, while keeping my kid entertained. The good news is that the iPad largely passed the test. I’ve had some time now to reflect on how my family interacted with this technology during such a demanding trip across 3 countries.

Entertainment. As anyone with young children will attest, it is amazing to witness the accelerated proficiency in navigation children have with touch screen technology. In a few hours, my son was switching apps and turning the devices on and off. Wow! Well, not really, I’ve seen other kids pick up this technology equally fast. What was a surprising observation to me occurred during the flight home from Rome when he started banging on the tablet. I asked him why he was behaving in such a way and he told me that the movie wasn’t working, even though it was playing just fine. He could not discern between movies, games, and interactive books. He expected everything on his tablet to be interactive, which leaves me with the question:  Are movies as we know them dead?

Work. The iPad was largely a success for my wife. Using Pages and GoodReader for collaboration, content creation, file management and file export she was able to conduct her research; albeit the experience was not as user friendly as we’ve come to expect from other aspects of using the iPad. Where things didn’t work so well was with regards to her need to read existing Word docs that contained comments and edits. She couldn’t view any of the comments; therefore, she was required to drag hard copies around London or do without. The silver lining came with the small form factor and long battery life of the iPad.

Conclusion. There is no question at this point that a new category of device has been created. The connected home just got more crowded, making technology divergence more the predictable path than convergence – darn, I was hoping that soon a single one of my devices could own the living room. What is clear is that new attributes must be factored into customer segmentation and user experience research. Interaction ‘savvyness’ is critical to understand. To draw a comparison, my wife trucked an Apple wireless keyboard into the library each day because there was no way she could type on a touch screen all day long since one error in transcribing from a thirteenth-century manuscript would have been detrimental to her research. My son on the other hand, tried to swipe the top of a glass case when he was looking at a medieval manuscript in Siena’s Duomo.  It was a bummer to see his disappointment when the page didn’t turn!

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Stretching the iPad?

I’ve finally ordered an iPad. It was done in anticipation of my vacation in Europe this August. I’ll be returning to the south of France, where I spent about a year almost 15 years ago. When I moved to France in college, I went with only enough clothes for a week, a dozen books, toiletries, and a Sony Discman – not bad for a 10-month stay!

This time around, my needs are rather different, which really makes me hope that the iPad can deliver promised results.  First, I must keep my 3-year-old son entertained on a 12+ hour flight. Yikes. If it fails, I’ll be a wanted man by the end of the flight; however, it does seem the iPad’s long battery life and library of children’s books and movies should be adequate firepower. Second, my first stop is in London, where my wife will do archival research for her doctoral dissertation at the British Library and the College of Arms.  My question is whether I can stretch the iPad as a true replacement for a laptop, even for serious dissertation work? I sure hope so because I can’t imagine lugging a laptop around with it. I plan to use Dropbox, so that my wife can access her GBs of docs while in the library.  I will buy the Pages app, so that she create new content that will convert to Word docs upon return. Alternatively, I’m considering Google Docs as an option; however, I don’t think she will have Wi-Fi access in the reading room, and I’m not totally sure it can work effectively offline. Lastly, I hesitantly plan to bring the wireless keyboard from my iMac.  I’m hoping my wife finds the touch screen adequate, but there is no room for typos when you are transcribing texts from 700 year old manuscripts!

The reason I write this blog is because I’m going to only have a few days with my iPad before the trip since I’ve joined the backlog of online Apple store orders. Any Apple gurus that can recommend quality productivity tools or caution me in my approach are welcome to chime in. If the iPad meets my needs for this trip, I think it can meet almost any expectation related to netbooks.

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