Internet Changes Everything

November 24, 2006

Pink Floyd - a timeline

Pink Floyd Online | Pink Floyd History - 1964 to 1969

No reason - this is just a simple brilliant summary o f one of the most screwed up, brilliant musical enigma's .... EVER!

Pink Floyd: 1964 to 1969

In 1964, three friends; George Roger Waters (guitar), Richard Wright (keyboards), & Nick Mason (drums) (all students at the Regent Street School Of Polytechnics), formed a band called Sigma 6. Unsuccessful to get famous, The band changed their name to The T-Sets. Later in middle 1965, the band became The Abdads, with new members Clive Metcalf on bass guitar, and Keith Nobles and Juliette Gale on backup vocals. The band changed their name to both The Screaming Abdads, and The Architectural Abdabs. In 1966, Julliette Gale married Rick Wright and The Abdabs broke up. Later that year George legally changed his name to Roger. In Autumn 1966, the band became Sigma 6 again, Roger switched to bass guitar, and they recruited 2 guitar players; Bob Close and Roger Syd Barret. Before long they changed their name to The Pink Floyd Sound.

Later that year, Bob Close left the band. The band finally had a chance to record their first single, Arnold Layne, a song about a crazy transvestite who steals women's clothes. Before long, they dropped the words "The" and "Sound" in the name and made their first album, The Piper At The Gates Of Dawn. The studio rented out to make the album, was right down the hall from where The Beatles were recording Sgt. Peppers, so the band got to know The Beatles very well.

The band had a subsequent tour scheduled for the U.S.A., but Syd got very sick from being blasted on LSD (better know as acid). His LSD addiction helped his imagination to write songs, but around the time of A Saucerful Of Secrets, his drug habits were out of control.

By the end of 1967, Syd was becoming to spaced out for his writings. The band considered getting a replacement for Syd. They recruited David Gilmour, an old friend of Roger and Syd's. Syd got guitar lessons from David in Grammar and High School.

David was recruited to cover for Syd on stage. If Syd were to make a mistake, David would fill the gap, and fix it. That didn't work out. David would cover for Syd on stage while Syd stayed behind stage and wrote songs. That didn't work out.

The band tried as hard as they could to keep Syd in the band, but his acid addiction took control of him and he went crazy. The band finally decided to kick out Syd. Syd wanted to see their show that night but they didn't pick him up. Goodbye Syd Barret. He was institutionalized for drug abuse in 1974.

In 1968, the band continued on without Syd. This was a major tragedy in England, but not in America. Another major tragedy was when David Gilmour's Telecaster was stolen in Chicago. Later that year, the band played a gig in France, and one of the attendees of the show was famous French hippie movie director, Barbet Schroder. He asked Pink Floyd to do the soundtrack to his next picture, More, which would come out in 1969. The band also had an unreleased rock opera the played on-stage, called The Man and The Journey, which they took 3 songs from for the More Soundtrack; Sleep/Nightmare (which would become Cymbaline), Green Is The Colour, and Death (which both parts of the song became both Main Theme and Dramatic Sequence).

The album and movie would be a success in Europe and Britian. The band retired The Man and The Journey before being recorded, but used one song from the album called The Narrow Way. Barbet Schroder would ask the band to do another soundtrack for another movie in 1972 called La Vallee, known in America and Britian as The Valley Obscured By Clouds.

Pink Floyd History - 1970 to 1977

In late 1969, Pink Floyd released a Double Album called Ummagumma. The first disc consisted of live tracks from various live performances in 1969. The second disc consisted of solo studio tracks by each member of the band.

In early 1970, Pink Floyd released their newest album Atom Heart Mother, with an orchestra playing on the 23-minute-plus title track. The band toured extensively with the orchestra supporting the album.

In early 1971, Pink Floyd's executive producer Joe Boyd, made a compilation album of both released and unreleased material from Pink Floyd's past. It was called Relics. While this was going on, Pink Floyd was in the middle of making their new album Meddle with another 23-minute-plus song called Echoes.

In early 1972, Pink Floyd was asked again to do another soundtrack for a movie called La Vallee or The Valley Obscured By Clouds, hence the name Obscured By Clouds came about.

After Obscured by Clouds was finshed, Pink Floyd took a plane to Rome, where they took a bus to Pompeii, one of the 2 cities destroyed by Mount Vesuvius 2000 years ago. There they filmed a private concert, playing some of their best material. The video was called Live At Pompeii, which also included footage behind the making of the album of their new opus.

During the time that Floyd was making Obscured By Clouds, they had written a 45-minute opus of songs that they played live. This opus was called Eclipse. It was mainly focused on society and how it alienates, controls, and destroys daily life. The original name for the opus was supposed to be Dark Side Of The Moon, but the British Blues band Medicine Head released an album the previous year of the same name. So they let the name go, until they heard that the Medicine Head album flopped on Billboard charts, so they revamped the name Dark Side Of The Moon and also wrote an end song for the opus which was called Eclipse. They turned their opus into an album in 1973, called Dark Side Of The Moon. It is the second highest selling rock record in history, compared to Michael Jackson's Thriller.

To follow up their success to Dark Side of the Moon, Pink Floyd made Wish You Were Here. The album was dedicated to original lyricist and guitar player Syd Barret. During late recording of the album, Syd actually showed up to congratulate them on their success with Dark Side Of The Moon, although at first they didn't recognize him because he had gained alot of weight. During that tour they wrote yet another opus, but this one was mostly instrumental. This opus turned out to be Shine On You Crazy Diamond. It was split into 2 halves because it was too long to fit on one side of the record. During this tour Pink Floyd performed Dark Side Of The Moon in it's entirety again.

After the success of Wish You Were Here, Pink Floyd took off for a year and a half to make a new album. This album was based on the aristocratic and communist lifestyles in the world. Each type of person was loosely based on an animal. And this album became Animals. Dogs were the creepy rulers of industry, Pigs were the communist tyrants, Sheep were the common folk, always being brainlessly led by the Dogs and Pigs, and Pigs On The Wing was a love song that Roger wrote to his new wife, Carolyn, the niece of the Duke of York. For the tour the band recruited Dick Parry for saxophone and Snowy White on rhythm guitar. On July 6th, 1977 in Montreal, Quebec, the last show of the Animals tour, a fan was screaming relentlessy and climbing his way up towards the stage. Roger spit on him to show disgustment. After the show, Roger felt bad about this, and escaped back to his hotel room and started writing new music, about how much he and the audience have come apart.

Pink Floyd: 1978 to 1983
In late 1978, Pink Floyd met together to discuss new projects, after David and Rick made solo albums. Roger presented 2 projects in demo form. The first project was rejected, that project turned out to be, Roger Waters' solo album, The Pros and Cons of Hitch-hiking. But the second project was taken, that project was The Wall. Roger had enough songs for 3 discs, but he had to get rid of a bunch of songs. November 30, 1979, The Wall is released in the UK, and the fans love it. December 5, 1979, The Wall is released in the US, and again, the fans love itt. For the tour they recruit Andy Bown on 2nd Bass Guitar, Snowy White on Rhythm Guitar in 1980, Andy Roberts on Rhythm Guitar in 1981, Peter Woods on Keyboards, Richard Wright on Keyboards, and Jon Joyce, Stan Farber, Jim Haas, & Joe Chemay on Backing Vocals.

February 26th, 1980, Pink Floyd premiers The Wall Tour in Nassau Coliseum, on Long Island New York. October 1980, Pink Floyd premiers The Wall Tour in Earl's Court in London. January 1981, Pink Floyd plays The Wall in Los Angeles. April 1981, Pink Floyd Plays The Wall Show 4 times in Westfallenhalle in Dortmund, Germany. August 1981, Pink Floyd plays The Wall at Earl's Court London again, and their tour is over by September.

In 1982, Rick Wright left the band for good. Pink Floyd recuited new Keyboard Players for a new project called, Spare Bricks, A Collection Of Unrealeased Songs intended for The Wall but were scratched. The new Keyboard Players were Michael Kamen on Piano, and Harmonium, and Andy Bown on organ, and synthesizer.

Roger had plans to tour for the new album in November 1983, but because of tensions between each member, Roger cancelled those plans, and changed the name of the album to The Final Cut, which it probably would be if David and Nick left, but they didn't.

Pink Floyd: 1984 to 2001

In 1984, the band went their own seperate ways, Rick Wright made a solo project with Dave Harris called Zee-Identity, David Gilmour made a new solo album called About Face, and Roger Waters made The Pros and Cons Of Hitch-hiking. In 1986, David Gilmour talked to Nick Mason about getting the band back together. This caused a major law suit. Roger Waters, sued David and Nick for the rights to the music, and the band name itself. Roger lost the case because Pink Floyd was never anything put into writing, but Roger was given the rights to perform Pink Floyd music at his concerts and was given ownership of The Wall and The Final Cut.

In later 1986, Dave and Nick set out to make the new album, A Momentary Lapse Of Reason. They recruited an array of Musicians for the album like King Crimson's Bass Player Tony Levin, Roxy Music's Guitar Player Phil Manzenara, Vanilla Fudge's drummer Carmine Appice, Richard Wright on Keyboards and about 20 others. They took off for the road, in later 1987 under the name Pink Floyd. They recruited Gary Wallis for Drums and Percussion, Guy Pratt on bass guitar, Jon Carin on keyboards, Tim Renwick on Guitar, and the "cre`me de la cre`me" of the show, the return of Richard Wright. The 3-Year Tour concluded in August 1990, when Pink Floyd played at The Knebworth Festival.

The Band took a 3 year Hiatus from Touring and Recording in 1990.

Pink Floyd started recording in 1993 for their new album, The Division Bell. Richard Wright was finally back fully with the band. The band toured for 6 months. The Tour Ended after a series of 12 shows at Earl's Court London, and during their tour of Europe, David Gilmour married his girlfriend Polly Samson. For this tour they did something they hadn't done in about 20 years, they played Dark Side Of The Moon in it's entirety.

Pink Floyd released a live album and video on their Division Bell tour, both featured with live Dark Side Of The Moon. The band was successful once more.

In 1996, Pink Floyd was inducted into the Rock and Roll Hall Of Fame. Gilmour, Wright, and Mason performed Wish You Were Here with Billy Corgan of Smashing Pumpkins. Floyd has done no concerts since then, but made a new live album in 2000. The band made this live album from many different recordings from The Wall Shows of 1980 and 1981 in London's Earls Court and Los Angeles, with Roger Waters. Roger Waters toured in 1999 & 2000, he made a new live album called In The Flesh.

In Late 2001, Pink Floyd including Roger Waters and Syd Barrett, with producer James Guthrie, made a new compilation album called Echoes. Although Floyd never did well with Compilations or greatest hits albums, this album was remastered as one continuous song like Dark Side Of The Moon, and did well in the charts.

November 24, 2006 at 08:27 PM in My Blog | Permalink | Top of page | Blog Home

November 13, 2006

Entrepreneurs See a Web Guided by Common Sense

Entrepreneurs See a Web Guided by Common Sense - New York Times

By JOHN MARKOFF
Published: November 12, 2006

SAN FRANCISCO, Nov. 11 — From the billions of documents that form the World Wide Web and the links that weave them together, computer scientists and a growing collection of start-up companies are finding new ways to mine human intelligence.

Their goal is to add a layer of meaning on top of the existing Web that would make it less of a catalog and more of a guide — and even provide the foundation for systems that can reason in a human fashion. That level of artificial intelligence, with machines doing the thinking instead of simply following commands, has eluded researchers for more than half a century.

Referred to as Web 3.0, the effort is in its infancy, and the very idea has given rise to skeptics who have called it an unobtainable vision. But the underlying technologies are rapidly gaining adherents, at big companies like I.B.M. and Google as well as small ones. Their projects often center on simple, practical uses, from producing vacation recommendations to predicting the next hit song.

But in the future, more powerful systems could act as personal advisers in areas as diverse as financial planning, with an intelligent system mapping out a retirement plan for a couple, for instance, or educational consulting, with the Web helping a high school student identify the right college.

The projects aimed at creating Web 3.0 all take advantage of increasingly powerful computers that can quickly and completely scour the Web.

“I call it the World Wide Database,” said Nova Spivack, the founder of a start-up firm whose technology detects relationships between nuggets of information by mining the World Wide Web. “We are going from a Web of connected documents to a Web of connected data.”

Web 2.0, which describes the ability to seamlessly connect applications (like geographic mapping) and services (like photo-sharing) over the Internet, has in recent months become the focus of dot-com-style hype in Silicon Valley. But commercial interest in Web 3.0 — or the “semantic Web,” for the idea of adding meaning — is only now emerging.

The classic example of the Web 2.0 era is the “mash-up” — for example, connecting a rental-housing Web site with Google Maps to create a new, more useful service that automatically shows the location of each rental listing.

In contrast, the Holy Grail for developers of the semantic Web is to build a system that can give a reasonable and complete response to a simple question like: “I’m looking for a warm place to vacation and I have a budget of $3,000. Oh, and I have an 11-year-old child.”

Under today’s system, such a query can lead to hours of sifting — through lists of flights, hotel, car rentals — and the options are often at odds with one another. Under Web 3.0, the same search would ideally call up a complete vacation package that was planned as meticulously as if it had been assembled by a human travel agent.

How such systems will be built, and how soon they will begin providing meaningful answers, is now a matter of vigorous debate both among academic researchers and commercial technologists. Some are focused on creating a vast new structure to supplant the existing Web; others are developing pragmatic tools that extract meaning from the existing Web.

But all agree that if such systems emerge, they will instantly become more commercially valuable than today’s search engines, which return thousands or even millions of documents but as a rule do not answer questions directly.

Underscoring the potential of mining human knowledge is an extraordinarily profitable example: the basic technology that made Google possible, known as “Page Rank,” systematically exploits human knowledge and decisions about what is significant to order search results. (It interprets a link from one page to another as a “vote,” but votes cast by pages considered popular are weighted more heavily.)

Today researchers are pushing further. Mr. Spivack’s company, Radar Networks, for example, is one of several working to exploit the content of social computing sites, which allow users to collaborate in gathering and adding their thoughts to a wide array of content, from travel to movies.

Radar’s technology is based on a next-generation database system that stores associations, such as one person’s relationship to another (colleague, friend, brother), rather than specific items like text or numbers.

One example that hints at the potential of such systems is KnowItAll, a project by a group of University of Washington faculty members and students that has been financed by Google. One sample system created using the technology is Opine, which is designed to extract and aggregate user-posted information from product and review sites.

One demonstration project focusing on hotels “understands” concepts like room temperature, bed comfort and hotel price, and can distinguish between concepts like “great,” “almost great” and “mostly O.K.” to provide useful direct answers. Whereas today’s travel recommendation sites force people to weed through long lists of comments and observations left by others, the Web. 3.0 system would weigh and rank all of the comments and find, by cognitive deduction, just the right hotel for a particular user.

“The system will know that spotless is better than clean,” said Oren Etzioni, an artificial-intelligence researcher at the University of Washington who is a leader of the project. “There is the growing realization that text on the Web is a tremendous resource.”

In its current state, the Web is often described as being in the Lego phase, with all of its different parts capable of connecting to one another. Those who envision the next phase, Web 3.0, see it as an era when machines will start to do seemingly intelligent things.

Researchers and entrepreneurs say that while it is unlikely that there will be complete artificial-intelligence systems any time soon, if ever, the content of the Web is already growing more intelligent. Smart Webcams watch for intruders, while Web-based e-mail programs recognize dates and locations. Such programs, the researchers say, may signal the impending birth of Web 3.0.

“It’s a hot topic, and people haven’t realized this spooky thing about how much they are depending on A.I.,” said W. Daniel Hillis, a veteran artificial-intelligence researcher who founded Metaweb Technologies here last year.

Like Radar Networks, Metaweb is still not publicly describing what its service or product will be, though the company’s Web site states that Metaweb intends to “build a better infrastructure for the Web.”

“It is pretty clear that human knowledge is out there and more exposed to machines than it ever was before,” Mr. Hillis said.

Both Radar Networks and Metaweb have their roots in part in technology development done originally for the military and intelligence agencies. Early research financed by the National Security Agency, the Central Intelligence Agency and the Defense Advanced Research Projects Agency predated a pioneering call for a semantic Web made in 1999 by Tim Berners-Lee, the creator of the World Wide Web a decade earlier.

Intelligence agencies also helped underwrite the work of Doug Lenat, a computer scientist whose company, Cycorp of Austin, Tex., sells systems and services to the government and large corporations. For the last quarter-century Mr. Lenat has labored on an artificial-intelligence system named Cyc that he claimed would some day be able to answer questions posed in spoken or written language — and to reason.

Cyc was originally built by entering millions of common-sense facts that the computer system would “learn.” But in a lecture given at Google earlier this year, Mr. Lenat said, Cyc is now learning by mining the World Wide Web — a process that is part of how Web 3.0 is being built.

During his talk, he implied that Cyc is now capable of answering a sophisticated natural-language query like: “Which American city would be most vulnerable to an anthrax attack during summer?”

Separately, I.B.M. researchers say they are now routinely using a digital snapshot of the six billion documents that make up the non-pornographic World Wide Web to do survey research and answer questions for corporate customers on diverse topics, such as market research and corporate branding.

Daniel Gruhl, a staff scientist at I.B.M.’s Almaden Research Center in San Jose, Calif., said the data mining system, known as Web Fountain, has been used to determine the attitudes of young people on death for a insurance company and was able to choose between the terms “utility computing” and “grid computing,” for an I.B.M. branding effort.

“It turned out that only geeks liked the term ‘grid computing,’ ” he said.

I.B.M. has used the system to do market research for television networks on the popularity of shows by mining a popular online community site, he said. Additionally, by mining the “buzz” on college music Web sites, the researchers were able to predict songs that would hit the top of the pop charts in the next two weeks — a capability more impressive than today’s market research predictions.

There is debate over whether systems like Cyc will be the driving force behind Web 3.0 or whether intelligence will emerge in a more organic fashion, from technologies that systematically extract meaning from the existing Web. Those in the latter camp say they see early examples in services like del.icio.us and Flickr, the bookmarking and photo-sharing systems acquired by Yahoo, and Digg, a news service that relies on aggregating the opinions of readers to find stories of interest.

In Flickr, for example, users “tag” photos, making it simple to identify images in ways that have eluded scientists in the past.

“With Flickr you can find images that a computer could never find,” said Prabhakar Raghavan, head of research at Yahoo. “Something that defied us for 50 years suddenly became trivial. It wouldn’t have become trivial without the Web.”

November 13, 2006 at 11:53 PM in Internet evolution | Permalink | Top of page | Blog Home

November 05, 2006

A bigger bang

A bigger bang | Weekend | Guardian Unlimited

The second internet goldrush is in full swing, and this time it's all about real people, creating, editing and showcasing their own lives and opinions. John Lanchester gets to grips with the virtual universe and Guardian writers interview the smartest and the luckiest entrepreneurs who demolished the old internet and built a brand new one

Saturday November 4, 2006
The Guardian

In July 2005, Rupert Murdoch had what was widely seen as a brain-fart. He spent $580m on an internet company that was only two years old. The company was called MySpace and it was the fastest-growing new example of what are called "social networking" sites: a place where young people could post pictures of themselves, solicit friends to get in touch, let people listen to their music, answer pointless questionnaires, and in general go on at great length about the favourite subject of every young person on the planet: themselves. The company was seen as a fad by the few grown-ups who knew about it, and was notorious among geeks for its horribly irregular site design. It had no revenue stream to speak of. The "business model" for the company - the way it was eventually going to make money - was ... er ... next question. There was widespread tittering. Murdoch, who lost a lot of money on the first cycle of internet hype, had bought another pup.

In August, MySpace, which on various measures is now the busiest internet site in the world, signed a deal with Google guaranteeing it $900m in search-related advertising revenue over the next four years. Murdoch has made some big mistakes with his big bets, but MySpace isn't one of them. Instead, it is the exemplar of a new wave of innovation on the internet, an innovation focused not so much on new technology as on the way people are beginning to use existing technology. It is, I think, significant that the co-founder of MySpace, Tom Anderson, is what used to be a rarity in the net world, an arts graduate, with, instead of the computer science PhD that would once have been de rigueur, an MA in, of all things, film criticism.

"Technology," a sage once observed, "is stuff that doesn't work yet." That sounds like a joke, and it is, but it is also a crucial truth about what technology is and does: we perceive something to be technology only when it is still new and, like most new things, not quite working the way it's supposed to. Nobody thinks that the wheel is technology, though it's as important a piece of technology as humanity has ever invented; the book is an unimprovable masterpiece of technology, and relies on another, arguably the most consequential piece of technology there has ever been, the alphabet. But because you don't often find yourself waiting 45 minutes on a helpline trying to connect to Alphabet Technical Support in Bangalore, you probably don't think of the alphabet as a piece of technology.

It is when people stop thinking of something as a piece of technology that the thing starts to have its biggest impact. Wheels, wells, books, spectacles were all once wonders of the world; now they are everywhere, and we can't live without them. The internet hasn't quite got to that point, but it is getting there. People around my age - I was born in 1962 - can remember with great clarity the first time they saw a colour television. (In my case it was in 1968, in, of all places, Harrods. Another period detail is that my parents had taken me there to buy a dog.) That means we had grown up with enough black-and-white TV for it to seem the norm, so that the new thing was an extraordinary marvel. People about 10 years younger than me don't know what I'm talking about. For them, TV was never black-and-white and colour pictures were never a miracle. Similarly, younger internet users who have never heard the whistling, chattering, hopeful-anxious sound of a dial-up modem connecting to the internet. For them, increasingly, the net is something that is always available, has always been there, and can be accessed anywhere and at any time. Wireless modems, and the omnipresent internet they permit - the internet that is everywhere, like the air - still seem miraculous to me, but to 10-year-olds they seem utterly prosaic.

People are growing up with the internet, and the internet is growing up with them. It is evolving. Email was once a marvel of practicality and utility; people under the age of 25, though, never knew a time before it was broken by spam, and prefer to use instant messaging or texting. In the corporate world, as a publisher once told me, "email's main function is as an instrument of torture". In civilian life, I increasingly notice that people don't actually read their email; they sort of skim it, and get the gist, and any fine distinctions or crucial information are usually best communicated in some other way. So the heroic period of email is already in the past. No one could have predicted that, just as no one could have predicted the extraordinary, dizzying multiplying of the number of blogs being written. (I don't say read.) That number has been doubling every six months for the past three years: there are now, as of July 31, more than 50m blogs on the internet; 175,000 new blogs are created every day - that's two every second. The dominant languages (they jockey from month to month) are Chinese, Japanese and English. There are 1.6m blog posts a day.

What does that mean? What should we think about it? It's hard to know where to start, other than to say that those figures are from Technorati, a blog-tracking and searching website that is one of the indispensable sites for anyone with an interest in the net. What is a typical blog? Who knows? Somebody wittering about what they had for breakfast, or complaining about their boyfriend, or posting terrible photographs of their dog, or how they played Pong last night and it was more fun than some of their new games, or how lousy it is being a policeman, or the sex life of an American expatriate in China. (That blog, Chinabounder, has caused a national scandal in China, and spawned a hunt for the blogger that is itself the subject of a blog, Who Is Chinabounder?) It's almost impossible to think of a subject that isn't being blogged about.

The shorthand term for what is happening now is "Web 2.0", a designation coined at a conference in 2004 by the web-business booster Tim O'Reilly, as describing "an attitude rather than a technology". The phrase is a shorthand for the second internet goldrush, to follow the one that ended in 2000 with arguably the biggest destruction of investors' capital in history. From the business point of view, the defining feature of this new goldrush is that established companies are throwing huge amounts of money at upstarts who have three things in common: they have grown from nowhere with astonishing speed; they have no revenue stream to speak of; and most of their content is provided by their users. Thus we have Murdoch's buy of MySpace in July 2005, Yahoo's of Flickr in March 2005 and its rumoured to be imminent buy of Facebook for around $1bn, and - in money terms the biggest of them all - Google's $1.6bn acquisition of YouTube on October 9. That's a great deal of money raining down on some happy, happy nerds. Chad Hurley and Steve Chen only founded YouTube in February 2005. Their creation has grown in value at a rate of more than $100m a month - which must surely be a world record. That's a hell of a lot of money to be earned by the founders of a company with no earnings.

What all these new kind of sites share is an approach to creating things: "user-created content", in the jargon. The internet is no longer about corporations telling you what to do, think or buy; it's about things people create. The stuff they create falls into two very broad types. (The types aren't distinct; they blur and overlap and mash-up, as is the new way of it.)

The first type is the collective or collaborative gathering of information. One of the most important examples of this came in the wake of Hurricane Katrina, when survivors were dispersed all over the place, information was chaotic and contradictory, and the government, temporarily, seemed to collapse. A group of net-heads, led by a hacker called David Geilhufe, realised that scattered information was being posted to blogs and news sites, and put together a team of thousands of volunteers to "screenscrape" this information off the net and amalgamate it in one place: Katrinalist.net, which within a single day had collated information about 50,000 survivors of the disaster. No other medium could have done that, and no government agency came close to having the nous.

The collaborative aspects of the net have tremendous power to gather and collate information. Wikipedia is one example of this: the biggest and fastest-growing encyclopedia on the net, and the subject of many horror stories on the part of what bloggers like to call the MSM (that's mainstream media, like this). Wikipedia-bashing is all the rage in the press, and there's no denying the encyclopedia's flaws; but it's also a reference resource of extraordinary range and ease of access and, when the subject involved is sufficiently uncontroversial, remarkable usefulness. The rule of thumb with Wikipedia is that the more nerds argue about an entry, the less useful it is. (Incidentally, in the American university system, any use of Wikipedia immediately guarantees the student an F.)

Another collective site - one I look at every day - is Digg, in which users click on a thumbs-up to vote for interesting stories. Digg, Wikipedia and comparable sites have just been the subject of a blistering essay by Jaron Lanier, a scientist-thinker-mountebank who invented the term "virtual reality" and whose essay in Edge, an online magazine, complains about "Digital Maoism" and the tendency of these sites to form a "hive mind", a collective, consensus reality. And there's something in that: in any arena of human activity, you don't get a spiky, idiosyncratic take on things from sites where people vote for the most popular anything. But you do get a sense of what people find interesting, what they're reading about and talking about; a lot of what is on there is interesting and funny, and anything boring and/or stupid can be quickly scanned and rejected. The ease and speed of not-reading is one of the good things about reading on the net.

If collective sites are one of the big categories of New Thing, the other is to do with personal sites - what have been called "Me Media". But the distinctions are not clear-cut, and some interesting things happen in the overlap. Del.icio.us is a bookmark site where people list favourite places on the web - sites, blogs or whatever - which makes it a personal thing, but the entries can be tagged (ie, they can have subject labels attached) by anyone who looks at them. This gives Del.icio.us a flavour that is both personal and collective: it's about individual likes, as viewed in a group perspective, or something. I find I use it most when something else on the net sends me there, and I become curious about what someone who's interested in the same things as me finds interesting. Flickr is another site in this personal/collective overlap. It's a place where people post and tag photographs, often with multiple categories: so, say, a photo of a woman in a bikini on a beach in Brazil might be tagged as "beach", "bikini", "Brazil", and "whoa baby". I don't fully understand why people are so keen to post private photographs to Flickr, or why people are so keen to look at other people's photographs, but that's just me. Millions do.

YouTube is a hugely popular site that is more firmly in the personal category. It is basically a huge clearing house where people can post videos of, well, of anything. Want to film yourself standing on one leg, and let strangers see the result? YouTube! Then everyone who views it can vote on its popularity - that's the collective touch. Quite a lot of YouTube is pilfered off the TV: the point at which the site became a household name in the US was when it rebroadcast a sketch called Lazy Sunday from Saturday Night Live. NBC forced them to take the footage down, but the resulting publicity turned YouTube from a geek favourite to a general favourite. Because anybody can put anything (except porn) on to YouTube, I'd say roughly 98% of it is so boring that it rivals prescription sleeping aids, but the other 2% still adds up to a lot of stuff. At the time of writing, the most popular thing on YouTube is Peter, a 79-year-old man from Norfolk, complaining about modern life. His unique selling point is that he is the oldest person on YouTube. Peter is like a nicer, duller, less funny, less incisive version of Victor Meldrew. People love him.

We are now firmly in the category of the personal site. One way of putting it is to say that collective sites are useful (except when they're not) and personal sites are interesting (except when they're not). The big daddy of these, the 900lb gorilla, the Godzilla, the current Biggest of Big Things, is MySpace. Readers of the business pages first heard of MySpace when Murdoch bought it in 2005, and the site forced itself into the consciousness of the wider public over the past year, mainly through the MySpace-powered breakthroughs of three musical acts: Gnarls Barkley, the Arctic Monkeys and Lily Allen.

That was no accident. Music made MySpace what it is today. At the time the company launched, in 2003, the then biggest social networking site, Friendster, didn't allow bands to promote themselves. The men behind MySpace saw that as a crucial mistake, not least because of music's centrality to young people's self-definition. Bands gave them a reason for visiting MySpace, and something to talk about when they went there. "Music is a major cornerstone of our success," Tom Anderson says today. "We've got over two million bands on the site already and the number just keeps growing. As other artists - comedians, film-makers, designers, etc - have come on the site, the success we've seen with music has repeated itself. If you're connected to culture and offer compelling content, you can reach broad segments of our community pretty fast. That's true if you're Snoop Dogg or an unsigned garage band in Liverpool."

Cool - everything to do with cool - is a big, big business. MySpace is in that business. It has more than 110m registered users; if it were a country it would be the 10th biggest in the world, just behind Mexico. Its audience, heavily skewed towards the affluent youth of the west, is a marketer's and advertiser's fantasy. In time, this might be a problem for MySpace, as companies become more astute about how to manipulate the apparent chaos and spontaneity of the site to plant manufactured hype. (There has just been a kerfuffle of this sort on YouTube, about a fake video blog called Lonelygirl15.) Chris DeWolfe, the CEO of MySpace, was bullish about this when I asked him. "'I'm not sure how anyone could falsely construct hype on MySpace," he said, "since the community rejects pretty much anything that isn't authentic." Well, quite - and they might decide that MySpace itself is not wholly authentic. But although there are murmurings about hype, for now, the site is riding high. "If you're not on MySpace," an American teenager told a researcher, "you don't exist."

The hardest thing to get your head around is the sheer size of this audience. When you first browse MySpace pages, the site asks what country you're interested in, which gender, what age range, and whether you want only to see people who've posted photographs of themselves. If you leave all of those settings on the default options, you are taken to see the MySpace pages of women in Afghanistan between 18 and 35 who have posted pictures of themselves. Guess how many there are? Three thousand. I thought that was a mistake - what, 3,000 women peering out from beneath their burkhas in Kabul to post complaints about their mothers-in-law? - but when I started clicking, I landed first on the page of a 18-year-old woman who is a private in the US army and based at Bagram. That's when I realised that most of these pages belong to young women soldiers, and also what MySpace is: a place where you can go to communicate with, if not quite anyone in the world, then with an 18-year-old US army private who likes Sixpence None The Richer, Eagle Eye Cherry and the Ramones, has a weakness for deli pickles, a fear of snakes and whose ambition for this year is to achieve abs of steel. And there are 100m more pages where that one came from.

There is something freaking-out about this. It's hard to know what to think of a phenomenon where quite so many people are so on display, so contactable, so ready to be got in touch with, so connected. Speaking for myself, I feel a strong sense of intrusiveness when I look at people's MySpace pages - a reaction that makes no sense at all, since the whole point of these pages is that they've been designed to be looked at. While I've been working on this piece, I've been showing MySpace to people who don't know it and asking what they think of it, what it reminds them of. One of the best answers was given by my wife, who said it reminded her of scrapbooks, the kind that teenagers used to keep - postcards, photos, lists of likes and dislikes, doodles, best friends, boyfriends, crushed flowers, crushes. But while all that is true, the truest thing is to say that you can't really come up with a metaphor for MySpace. It really is a new thing.

This has, of course, caused a moral panic. Like most moral panics these days, it is about paedophilia. In the US, there are court cases from people who've been bullied online, and there's a bill targeting MySpace before Congress, under the lumpen name of the "Deleting Online Predators Act". And I suppose there's something in this; certainly there's no way of knowing if people are who they say they are. But it should also be borne in mind that teenagers, in particular, need a place where they can try out identities and experiment with different versions of themselves. MySpace has more then 4m registered users in the UK, and logged more than 1.6bn page visits in June. A great deal of that traffic, perhaps most of it, comes from teenagers - a fact that surely reflects the diminishing opportunities for teenagers to meet and interact in real life. A lot of what goes on on MySpace is that, to non-teenagers, extraordinarily hard-to-understand activity of hanging out. What's going on? Nothing's going on. That's the point.

The usefulness of this for young people is not small. A friend firmly interrupted me when I was talking about the MySpace moral panic. Her children are devotees of Bebo, a site similar to MySpace but based around schools and colleges. "Leila had some friends over from her school. She's 13 and Tom is 11, and that's a difficult gap when the girls are older than the boys, so I was worried. But when they came over they hit it off immediately, because they already knew all about Tom from Bebo, what bands he liked and so on, and he already knew who they were, and they immediately began talking and they never stopped, and there was no awkwardness at all. It was fantastic. Especially compared with what it used to be like to be a teenager. I feel as if I spent the second half of the 70s trying to make conversation with boys who felt even more awkward than I did - thanks to the net, you just don't have to do that any more."

Perhaps the more genuinely worrying thing is the opposite of the one the moral panic is about. I said MySpace is all about connectedness; but equally, and perhaps more truthfully, it could be said that it's all about separation. In 2000 a man called Mitch Maddox changed his name by deed poll to Dotcomguy and lived for a year without going out of his house: all his shopping, all his everything, was done exclusively over the internet. That was a stunt, obviously - a rather depressing stunt - but it made the point that this is what the world is now like. (In case you're worried, he changed his name back to Mitch Maddox at the end of the year.) You can make your living, do your shopping, pay your taxes, enjoy your entertainments, have friends and relationships, all without going out of your house, or indeed without moving away from your computer screen except to go to the fridge and toilet. Now that, it seems to me, is a profoundly grim thought.

Tom Anderson doesn't agree. "For most of our users," he told me, "the vast majority of their MySpace friends are also offline friends. They're just connecting through a different medium when they're on MySpace. The connection between someone in Leeds and a comedian in Los Angeles would probably never happen if it weren't for MySpace, so it enables friendship and connection far more than it limits it." Pressing the point, I asked if the MySpace idea of a friend represented a devaluation of the idea of friendship. Again, he didn't agree. "It's pretty cool when you can connect directly with your neighbour and the Black Eyed Peas at the same time. MySpace gives our members the ability to reach such an incredible range of people and have direct contact with them. I'm not sure how that devalues friendship so much as it expands the range of potential friends you can have."

Well, maybe. About five years ago I was checking my email in a cybercafe in Sydney. Being nosey, I began sneaking discreet peeks at my neighbours' computer screens. On my left, an American backpacker was writing to a man she'd met in India, debating whether they should arrange to meet again and take their relationship further or whether they should leave it as it was, as a Bogart-and-Bergman we'll-always-have-Dharamsala memory. On my right, a man in a turban was writing to a woman not his wife about how his wife did not understand him. It struck me that everybody on the net is sitting alone at a computer screen, and many of them are wishing they weren't alone, while also, often, in some deep way, preferring that they are alone and being nervous of the alternative. Sit someone at a computer screen and let it sink in that they are fully, definitively alone; then watch what happens. They will reach out for other people; but only part of the way. They will have "friends", which are not the same thing as friends, and a lively online life, which is not the same thing as a social life; they will feel more connected, but they will be just as alone. Everybody sitting at a computer screen is alone. Everybody sitting at a computer screen is at the centre of the world. Everybody sitting at a computer screen, increasingly, wants everything to be all about them. This is our first glimpse of what people who grow up with the net will want from the net. One of the cleverest things about MySpace is the name.

November 5, 2006 at 07:20 PM in Internet evolution | Permalink | Top of page | Blog Home

Mastering the Three Worlds of Information Technology

Mastering the Three Worlds of Information Technology

There are three categories of IT, each of which provides different organizational capabilities—and demands very different kinds of management interventions.

by Andrew McAfee
In the information era, the best of times are the worst of times. Computer hardware keeps getting faster, cheaper, and more portable; new technologies such as mashups, blogs, wikis, and business analytic systems have captured the imagination; and corporate IT spending has bounced back from the plunge it took in 2001. In 1987, U.S. corporations’ investment in IT per employee averaged $1,500. By 2004, the latest year for which government data are available, that amount had more than tripled to $5,100 per employee. In fact, American companies spend as much on IT each year as they do on offices, warehouses, and factories put together.

However, as IT’s drumbeats become louder, they threaten to overwhelm general managers. One of the biggest problems companies face is coping with the abundance of technologies in the marketplace. It’s hard for executives to figure out what all those systems, applications, and acronyms do, let alone decide which ones they should purchase and how to successfully adopt them. Most managers feel ill equipped to navigate the constantly changing technology landscape and thus involve themselves less and less with IT.

Adding to executives’ diffidence, corporate IT projects have often delivered underwhelming results or been outright failures. Catastrophes—such as the one at American pharmaceutical distributor FoxMeyer Drug, which went into Chapter 11 and was sold in 1997 when a $100 million IT project failed—may be less frequent today than in the past, but frustration, delay, and disappointment are all too common. In 2005, when IT consultancy CSC and the Financial Executives Research Foundation conducted a survey of 782 American executives responsible for IT, 50% of the respondents admitted that “aligning business and IT strategy” was a major problem. The researchers found that 51% of large-scale IT efforts finished later than expected and ran over budget. Only 10% of companies believed they were getting high returns from IT investments; 47% felt that returns were low, negative, or unknown.

Not surprisingly, any fresh IT proposal sparks fiery debates in boardrooms. Some boards say “Why should we bother? IT isn’t strategic, so it doesn’t matter in a competitive sense. We should be minimizing our technology expenditures.” Others argue “Whether IT matters or not, we shouldn’t be doing it ourselves. Companies are becoming virtual, and software is becoming rentable, so why do IT the old-fashioned way?” Thus, executives try to delegate, outsource, rent, rationalize, minimize, and generally remove IT from their already long list of concerns.

Executives need to stop looking at IT projects as technology installations and start looking at them as periods of organizational change that they have a responsibility to manage.

But managers who distance themselves from IT abdicate a critical responsibility. Having studied IT for the past 12 years, I believe that executives have three roles to play in managing IT: They must help select technologies, nurture their adoption, and ensure their exploitation. However, managers needn’t do all those things each time they buy a new technology. Different types of IT result in different kinds of organizational change when they are implemented, so executives must tailor their roles to the technologies they’re using. What’s critical, though, is that executives stop looking at IT projects as technology installations and start looking at them as periods of organizational change that they have a responsibility to manage.

Building an Effective IT Model

Everyone who has studied companies’ frustrations with IT argues that technology projects are increasingly becoming managerial challenges rather than technical ones. What’s more, a well-run IT department isn’t enough; line managers have important responsibilities in implementing these projects. An insightful CIO once told me, “I can make a project fail, but I can’t make it succeed. For that, I need my [non-IT] business colleagues.” Managers I’ve worked with admit privately that success with IT requires their commitment, but they’re not clear where, when, and how they should get involved.

That’s partly because executives usually operate without a comprehensive model of what IT does for companies, how it can affect organizations, and what managers must do to ensure that IT initiatives succeed. As HBS professor Clayton M. Christensen and Boston University professor Paul R. Carlile point out in their working paper “The Cycles of Theory Building in Management Research” (Harvard Business School, February 2005), a good model or theory does two things: It groups important phenomena into categories, and, within categories, it makes statements of cause and effect. Yet even state-of-the-art models of IT’s impact consist only of statements about individual technologies, such as “CRM lets you get closer to customers” and “SCM enables you to reduce inventory.” Such declarations don’t help executives; they’re more akin to sales pitches than statements of fact. These assertions are also silent about why technologies will deliver to companies the benefits they have promised. Why will customers start confessing their deepest desires to your customer relationship management system? Why will suppliers start delivering just in time when you set up a supply chain management system? Existing models don’t help executives choose among technologies, either. Every business wants both to be closer to customers and to keep inventory levels low—but is it better to first invest in CRM or SCM improvements?

One way to build a comprehensive model is to place IT in a historical context. Economists and business historians agree that IT is the latest in a series of general-purpose technologies (GPTs), innovations so important that they cause jumps in an economy’s normal march of progress. Electric power, the transistor, and the laser are examples of GPTs that came about in the nineteenth and twentieth centuries. Companies can incorporate some general purpose technologies, like transistors, into products, and others, like electricity, into processes, but all of them share specific characteristics. The performance of such technologies improves dramatically over time. As people become more familiar with GPTs and let go of their old ways of thinking, they find a great many uses for these innovations. Crucially, general purpose technologies deliver greater benefits as people invent or develop complements that multiply the power, impact, and uses of GPTs. For instance, in 1970, fiber-optic cables enabled companies to employ lasers, which had already been in use for a decade, for data transmission.

The complements of process GPTs are organizational innovations, or changes in the way companies get work done. Research suggests that four organizational complements—better-skilled workers, higher levels of teamwork, redesigned processes, and new decision rights—allow process GPTs to deliver improved performance. For instance, in the early twentieth century, factories in America replaced central motors driven by waterwheels or steam engines with newly invented electric motors. These large motors were connected to a driveshaft, which was connected by belts to the factory’s machines. At first, electric motors were bolted onto the old driveshafts. As time went on, businesses built smaller electric motors and connected one to each machine. The new motors gave companies the freedom to redesign work flows. They were able to build long, low factories instead of high, narrow ones, for example, and to arrange machines in rows that later became assembly lines. However, businesses had to hire workers who were both more skilled and better able to independently make decisions at each station. Once all the organizational complements to electric motors were in place, they maximized the technology’s impact and boosted productivity in the U.S. manufacturing sector.

These insights are also true of IT, but with one distinction: Information technologies, my research shows, don’t enjoy the same relationships with the four organizational complements that other process GPTs have. Some information technologies can deliver results without the complements being in place; others allow the complements to emerge over time; and still others impose the complements they need as soon as companies deploy the technologies.

Classifying IT into three types can help leaders understand which technologies they must invest in as well as what they should do to maximize returns.

Based on those variations, we can classify IT into three categories. (See the exhibit “The Three Varieties of Work-Changing IT.”) Each offers companies distinctive capabilities, delivers unique benefits, and triggers organizational changes of different types and magnitudes. This classification can help leaders understand which technologies they must invest in as well as what they should do to maximize returns. It can also indicate which IT initiatives are going to be relatively easy to implement and on which projects executives should focus. In that light, IT management starts to look less like a black art and more like the work of the executive.

The Three Categories of IT

Executives often talk about the revolution that computers have brought about in companies, but, as the IT model I’ve described illustrates, that’s an oversimplification. IT sets off several kinds of revolutions in organizations because technologies fall into three distinct categories.

Function IT. (FIT) includes technologies that make the execution of stand-alone tasks more efficient. Word processors and spreadsheets are the most common examples of this IT category. Design engineers, accountants, doctors, graphic artists, and a host of other specialists and knowledge workers use FIT all the time. People can get the most value from these technologies when their complements are in place but can also use FIT without all of the complements. For instance, an R&D engineer can use a computer-aided design (CAD) program to improve the way he does his work without making any changes in how the rest of the department functions. Furthermore, FITs don’t bring their complements with them. CAD software, for example, doesn’t specify the processes that make the most of its power. Companies must identify the complements FIT needs and either develop them or allow users to create them.

FIT is powerful. Five years ago, Ducati announced that it would enter the MotoGP racing circuit in 2003. Its designers kicked off a project to build a suitable motorcycle in November 2001. They started by using simulation software to build and test virtual engines. The simulations made the team realize that a two-cylinder engine wouldn’t be powerful enough to win races, so it decided to build Ducati’s first four-cylinder engine. The team finished designing the engine in August 2002; a motorcycle powered by the engine was zooming around test tracks two months later; and the project was largely complete by January 2003. The Italian company participated in the MotoGP circuit in 2003 and outperformed most of its rivals: Ducati placed second in the manufacturers’ standings, a ranking of companies that race motorcycles on the circuit, and its riders finished fourth and sixth in the individual standings.

Ducati’s experience with FIT vividly demonstrates the capabilities of this IT category:

• Enhancing experimentation capacity. Ducati’s engineers built thousands of engines and motorcycles and compared their performance without touching a sheet of steel.

• Increasing precision. The company’s designers came to trust the software so much that if test results disagreed with a simulation, they told me, the first reaction was to mistrust the test results.

Network IT. (NIT) provides a means by which people can communicate with one another. Network technologies include e-mail, instant messaging, blogs, and groupware like Lotus Notes. NIT allows people to interact, but it doesn’t define how they should interact. It gives people freedom to experiment instead of telling them what they must do. Unlike FIT, network IT brings complements with it but allows users to implement and modify them over time.

In 2005, investment bank Dresdner Kleinwort Wasserstein introduced three network technologies: messaging software, employee blogs, and a company wiki, a Web site that employees could contribute to or edit without needing permission or HTML skills. DKW’s people generate data, get opinions, and find answers by using the messaging software to contact the firm’s traders and analysts across the world. Many managers write blogs or post comments on others’ blogs. Some DKW directors see the wiki as a way to deal with e-mail overload and encourage their teams to post agendas, to-do lists, and work in progress on the wiki rather than circulating them via e-mail.

As the DKW example illustrates, NIT’s principal capabilities include the following:

• Facilitating collaboration. Network technologies allow employees to work together but don’t define who should work with whom or what projects employees should work on. At DKW, ad hoc teams have formed because employees read one another’s blogs. These teams have used the wiki to accomplish tasks, and they have disbanded without orders from senior executives.

• Allowing expressions of judgment. NITs are egalitarian technologies that let people express opinions. DKW employees use blogs to voice their views about everything from open-source software to interest rate movements.

• Fostering emergence. “Emergence” is the appearance of high-level patterns or information because of low-level interactions. These patterns are useful because they allow managers to compare how work is done with how it’s supposed to be done. Emergence is also valuable for users. For instance, employees can easily search and navigate DKW’s blogs and wiki for trends and data even though nobody is in charge of making them easy to use.

Enterprise IT. (EIT) is the type of IT application that companies adopt to restructure interactions among groups of employees or with business partners. Applications that define entire business processes, such as CRM and SCM—as well as technologies, such as electronic data interchange, that automate communications between companies—fall into this category. Unlike network technologies, which percolate from the bottom, enterprise technologies are very much top-down; they are purchased and imposed on organizations by senior management. Companies can’t adopt EIT without introducing new interdependencies, processes, and decision rights. Moreover, companies can’t slowly create the complements to EIT; changes become necessary as soon as the new systems go live.

In 2002, American retail drugstore chain CVS became concerned about the long wait times at its pharmacies and reexamined two steps in its prescription fulfillment process that it had automated. Initially, its pharmacies had performed the first step, a safety check for drug interactions, one hour before the customer’s desired pickup time. After that, it checked whether the insurer would pay for the medicine. Despite automating the process, CVS often was unable to resolve all of the outstanding safety and insurance issues by the promised pickup times, which irritated customers. CVS then decided to reverse the order in which the steps were executed. The change met with resistance from many CVS pharmacists, who felt that since the drug safety check was the more important of the two, it should be the first step in the process. The team that was rolling out the project reasoned with the skeptics but eventually realized that it would not win them all over. So it instructed the pharmacies to perform the insurance review first, when customers dropped off prescriptions, rather than immediately before pickup time. That allowed technicians to work with customers to correct small glitches, such as date of birth errors in health insurance records, that would prevent drug reimbursements and to warn people if they were likely to run into bigger issues, such as the nonpayment of insurance premiums. The new sequence also let CVS’s pharmacists incorporate the safety check into their quality control procedures instead of treating it as a separate step. Redesigning the fulfillment process cut wait times at CVS by as much as 80%, which improved customer satisfaction.

As CVS’s experience shows, EIT’s primary capabilities include the following:

• Redesigning business processes. Because CVS employees couldn’t fill prescriptions until they had completed the two checks in the new sequence, the revamped fulfillment process wasn’t just a good idea in theory—CVS employees had to execute the process in that particular sequence. EIT gives managers confidence that employees will execute processes correctly.

• Standardizing work flows. Once companies identify a complementary business process, they can implement it widely and reliably along with the EIT. CVS rolled out its new process in 4,000 outlets across the United States in less than a year.

• Monitoring activities and events efficiently. EITs can allow managers to get an accurate and up-to-date picture of what’s happening throughout the enterprise, often in something close to real time. CVS’s software lets executives know how many prescriptions are filled every day in each location, how long it takes to fill each prescription, and what kinds of fulfillment problems employees had to tackle.

Managing the Three Types of IT

Across the three IT categories, executives have three tasks. First, they must help select IT applications that will deliver the organizational capabilities they desire. Second, they must lead adoption efforts that result in the creation of complements for those technologies. And third, they must shape the exploitation of IT by ensuring that technologies, capabilities, and complements stay aligned.

IT selection. Companies often select IT applications after one of their executives hears about a new technology and wonders why his or her organization hasn’t invested in it yet. This approach is pervasive. How often do you hear, “Shouldn’t we take a look at Technology X?” or “Why can’t Technology Y do that for us?” Companies will even invest in a technology because everyone else in the industry has purchased it or because it comes with glowing recommendations from consultants, analysts, and journalists.

Trouble is, there’s an endless supply of new applications, partly because of innovation and partly because of clever rebranding. Companies can’t possibly evaluate all the new applications that cross their paths. Another, more fundamental, problem is that this method of choosing applications reflects an outside-in approach: Executives describe a technology that’s available in the outside world and propose that it should be brought into the company. No one stops to think about whether the organization actually needs the capabilities that the technology offers. Between 1999 and 2001, American companies spent $130 billion on IT they never used, according to one estimate. An outside-in mentality was surely behind much of that waste.

A more sensible question for executives to ask is “What do we need IT to do for us?” For instance, they might consider, Do our company’s engineers need to increase their experimentation capacity? Do our sales and marketing departments need to collaborate more often? Do we need to standardize fulfillment processes throughout the world? Managers should also set IT priorities. They must decide, Is it more important to have a single source of employee data or to get weekly reports from the sales force about client contacts? Would the R&D department be better off if it could conduct more simulations or if it had an online space for brainstorming? Would it be more valuable to enhance the enterprise system by adding a layer of analysis software or by extending it to suppliers through a private data exchange? These are tough choices, but they are appropriate ones for top management teams to talk through. (See the sidebar “The IT Dialogue.”)

The IT Dialogue

An inside-out approach puts the spotlight squarely on the business before evaluating the technology landscape; it focuses on the capabilities that IT can provide rather than on the technologies themselves. A discussion among executives about capabilities will highlight what the business most wants to be good at—and it will show whether there’s agreement about what the business needs to be good at. Once the company’s business needs are clear, the technologies it requires will come into focus. Typically, FIT delivers productivity and optimization, NIT increases collaboration, and EIT helps standardize and monitor work. Thus, when executives decide what capabilities they need, they will know what kind of IT to buy and the nature of the initiatives they must manage.

Once the company’s business needs are clear, the technologies it requires will come into focus.

In our 2004 case study “Enterprise IT at Cisco,” two HBS colleagues, F. Warren McFarlan and Alison Berkley Wagonfeld, and I described how Cisco used the inside-out approach to refocus the IT selection process. Cisco realized that there were drawbacks in its IT decision-making process as it was trying to recover in late 2001 from a fall in revenues. CIO Brad Boston found that Cisco had nine order status tools. Each of them used data from different sources, which used different definitions for key terms. As a result, the systems couldn’t give the company a clear picture of its orders. There were similar problems in the sales organization. Boston and his colleagues realized that Cisco needed to improve its standardization and monitoring capabilities, so they selected an upgraded ERP system and a customer database. They also decided to implement the new technologies across the company even though it was costly and time-consuming to do so. The ERP project required three years to implement and cost the company approximately $200 million. Since Cisco couldn’t gain the capabilities it wanted without those technologies, however, it chose to invest in them.

IT adoption. After IT selection, executives’ attention turns to adoption: the hard work of putting the technologies they’ve invested in to productive use. At this stage, managers’ main responsibility is to help create the complements that will maximize IT’s value. FIT doesn’t bring its complements with it, so managers must find ways of identifying them. That’s what BMW’s chief designer, Chris Bangle, did in the late 1990s when he wanted designers to use computer-aided styling (CAS) software in addition to paper, clay, and wood. As Bangle explained to HBS professor Stefan Thomke during an interview, the designers were reluctant to use the software, even though Bangle had hired CAS specialists to work alongside them. One day, Bangle declared that within three months, the CAS team would have to pay for itself—or he would sell the team’s computers. He didn’t twist the designers’ arms; he pressured the CAS specialists and modelers. They helped the designers adopt the software and create new design processes. Bangle knew he couldn’t force the technology’s adoption or merely hope that complements would emerge. He had to allow his team to discover new ways of working—although he could prod it a little.

There’s an interesting dichotomy in executives’ roles when it comes to NIT adoption. Because the use of such technologies is voluntary rather than mandatory, they make users feel more, rather than less, in control of their work. As a result, their adoption isn’t difficult. However, managers still have to intervene with new technologies, such as groupware, wikis, and blogs, by demonstrating how they can be used and by setting norms for participation. Once network technologies are properly established, their use takes off, and the challenge for managers is to refrain from intervening too often or with too heavy a hand.

In stark contrast to FIT and NIT, enterprise IT is hard for companies to adopt. The benefits look great to people at the top, but employees usually dislike EIT technologies. Unlike network technologies, they don’t just enable new ways of working; they dictate them. Enterprise systems define new cross-function business processes, impose the processes on employees without allowing employees to modify them, and bring higher levels of oversight. Most employees don’t like having new processes dictated to them by a piece of software and will use a variety of techniques to prevent the adoption of enterprise technologies. Executives must intervene forcefully throughout EIT adoption efforts because new processes, changed decision rights, and greater interdependence come hand in hand with these technologies.

In fact, the biggest mistake business leaders make is to underestimate resistance when they impose changes in the ways people work. In 2002, a Boston-based hospital set up an IT system that replaced handwritten prescriptions with online orders. The system instantly checked doctors’ prescriptions for harmful doses or drug interactions and transmitted the orders to the hospital pharmacy. Even though studies had demonstrated that the system would reduce medication errors, physicians bitterly resisted. They complained that the computer-based process was slower and less convenient than paper-based ordering and that the built-in error checking didn’t work. They protested so strongly that the hospital was able to roll out the system in only a few departments. Today, most of the doctors continue to write prescriptions on paper and fax them to the hospital’s pharmacy. The system’s champions were caught completely off guard by the doctors’ reaction to the monitoring and standardization capabilities that the hospital sought.

The biggest mistake business leaders make is to underestimate resistance when they impose changes in the ways people work.

EIT adoptions can give rise to several kinds of problems. For example, EIT projects often become delayed as employees and managers negotiate the use of complements, such as new processes, that the technology has imposed. Companies often settle for solutions that are more modest than originally planned and gain only some of the capabilities they had initially sought. Firms may even abandon EIT adoptions altogether. Even worse, some businesses don’t abandon an EIT project when they should, which wreaks havoc on performance. For instance, in the late 1990s, both Hershey and Nike implemented technologies that were a poor fit with their business needs and processes. As a result, the finances and share prices of both companies suffered.

All the successful EIT adoptions I’ve studied have used the same process for avoiding failure, and all the unsuccessful EIT adoptions I’ve studied have not used it: They have decided at the outset how key issues about configuration and other aspects of the adoption will be raised and how they will be settled. The most important participants in this task are not IT specialists or consultants but business leaders from the areas affected by the new technology. The more areas there are, and the more their work is being changed, the more the adoption effort needs a seasoned leader. A midlevel project manager doesn’t have the formal or informal authority required to make and implement these tough decisions. At CVS, for example, the leader of the EIT project was responsible for both IT and store operations, so he had the authority to deploy the new process despite opposition from the chain’s pharmacists. Similarly, despite Cisco’s decentralized culture, the company set up a business process operating committee (BPOC) that consisted of six senior executives and the CIO. The BPOC met throughout the EIT adoption effort to make policy and process decisions and to signal that Cisco wouldn’t back away from establishing the complements that the technology needed even though there was resistance within the organization.

Leaders who successfully implement EIT try to build consensus in the organization, but they’re also willing to push ahead without having everyone on board every step of the way. Their decisive style runs counter to the usual advice about how executives should get users to accept and own new technologies. For example, in 1999, when a mutual fund company set up a CRM system, it asked its salespeople to enter the information about their meetings with brokerages and institutional investors into the system. The sales reps saw this, correctly, as an attempt to capture knowledge that existed only in their heads. They refused to use the system, which delivered little value to anyone for years. The situation changed with the arrival in 2001 of a new sales president, who demanded that reps enter information into the CRM system, threatened to withhold commission payments from those who didn’t, and instructed her direct reports to cross-check the sales reps’ entries against expense reports. The president’s policy was met with stiff opposition, but the reps quickly realized that they had to accede to the demands of the new boss if they wanted to continue working for the company.

IT exploitation. A business leader’s third IT-related responsibility is to extract the maximum benefit from technologies once they are in place.

Companies can best exploit FIT by fine-tuning organizational complements. When HBS professors Marco Iansiti and Alan MacCormack studied the 1995 America’s Cup sailing competition, they found that all of the teams used simulation software to help them design their boat keels. Most teams worked with universities and aerospace companies to build sophisticated simulations and used either mainframes or supercomputers to do the work. They were all beaten by Team New Zealand, which used less powerful workstations but brought the computers down to the docks where its boats were built. The New Zealand team also encouraged experimentation and teamwork and pushed keel modification decisions down the organization. Because the other teams didn’t do all of those things, they couldn’t harness the full power of the FIT.

Employees exploit older NITs such as e-mail and instant messaging on their own, but business leaders have a role to play in exploiting newer technologies like blogs and wikis. They can help sustain and increase the use of complements to make the technology continually more effective, primarily by guiding users. Darren Leonard, a managing director in the global equity derivatives business at Dresdner Kleinwort, recalls how he got his colleagues to use the company’s wiki: “First, if a wiki has no structure, it’s perceived not as an opportunity but as anarchy, and our people have no time for anarchy. I went back to my initial pages and rewrote them to be a lot more directive. For example, I made a page with the agenda for an upcoming meeting and asked people to add to it. Second, wikis have to be clearly better than other ways of collaborating. There have to be uses [for them] that demonstrate their power. One of these uses came prior to a special senior management meeting where we could bring questions from our groups and get them answered. I put up a page…asking my [team members] what questions they wanted me to ask on their behalf. People used the page to post questions, edit them, and discuss which ones were the most important and why. That really accelerated wiki use. Finally, old habits are hard to break. The tendency is for people to keep using e-mail because that’s what they know....I have to [tell them], ‘I’m not reading e-mails on this topic. Use the wiki’ or ‘Everyone’s assignments are on this page—use the same page to report on progress.’”

Interestingly, EIT’s exploitation is often easier than its adoption. Since the work of imposing new processes is done by this stage, the manager’s task is to leverage already standardized data and work flows. Few employees and managers have problems with that; they’re eager to get the most out of a system that was so much trouble to set up. Exploiting EIT sometimes requires adding a new FIT on top of it. In the mid-1990s, food services giant Sysco implemented an ERP system and data warehouse across its 80 regional businesses. Sysco’s executives realized that because all of the companies were now recording orders in the same way, it was possible to analyze the standardized data to answer two questions: Which customers were most likely to defect? and What other products could it be selling to existing customers? Sysco invested in business intelligence software, which sits on top of the ERP system, extracts data from it, and facilitates its analysis. As a result, salespeople and managers gained something akin to a crystal ball that could provide two critical answers they needed.

Other companies have exploited enterprise systems by extending them to customers, suppliers, and joint-venture partners. That expands businesses’ monitoring capabilities and provides levels of control that they could otherwise have achieved only by employing more people. For instance, the $107 million Argentine grain producer Los Grobo uses an EIT system to track all the work done on its farms. Los Grobo rents most of the fields, and contractors plant, spray, harvest, and oversee them. The contractors enter their activities into Los Grobo’s system through a Web interface, which allows managers and specialists at the company’s Buenos Aires headquarters to make informed decisions about land management and yield improvement. This platform has helped Los Grobo grow its sales at a rate of 40% per year since 2000—without buying more land or hiring as many employees as it used to.

• • •

For a resource to have an impact on a company’s competitive position, it must be valuable, rare, inimitable, and nonsubstitutable. Oil wells and diamond mines meet the test; pencils and paper don’t. What about IT? At first glance, it would seem that all three IT categories fail to meet these criteria. Vendors offer a wide range of FIT, NIT, and EIT, so these technologies are not rare and seem to be highly imitable. However, people often forget that while the software itself might not be any of those things, a successfully implemented system isn’t easy to replicate. Because of the managerial challenges inherent in its implementation, IT meets all four criteria when a company succeeds in applying a technology and, consequently, gains valuable capabilities.

November 5, 2006 at 03:56 PM in Web/Tech | Permalink | Top of page | Blog Home

November 01, 2006

Strategic Security: Developing a Secure E-Mail Strategy

Strategic Security: Developing a Secure E-Mail Strategy - Security - Network Computing

Message encryption, along with other measures, should be a critical part of your overall security strategy. But poor planning could leave your organization compliant and yet still unprotected. Here's how to choose the right combination of encryption and protection technologies to suit your needs.


Introduction
Encryption Options
Stop Viruses, Can Spam
Securing Mobile Devices

Oct 26, 2006 - By Christopher Beers

As an IT manager, your professional life is a balancing act in which you weigh the needs of your department against the reality of your budget. The range of potential purchases that makes up your budget proposal includes “critical” products, as well as not-so-urgent pet projects. Before you finalize next year’s capital budget, better be sure you’ve included funds for e-mail encryption in addition to virus scanning and content filtering.

E-mail security encompasses a wide variety of initiatives that attempt to reduce risk to employees, IT networks, intellectual property and customers. Recent legislation has forced businesses to implement various e-mail security initiatives that might not have been deployed voluntarily. Although virus scan-ning is old hat to most IT shops and content filtering is becoming just as common, encryption–a broad topic that is often overlooked by small businesses–is becoming increasingly important, especially given the rise of Wi-Fi hot spots and the use of handheld devices, such as Treos and BlackBerrys. The three types of e-mail encryption–boundary, staging server and end-to-end–offer varying levels of security. The type of encryption that makes sense for your company will depend on the kind of business you’re in and the type of content you need to lock down.

Bolt Down Your Email

Nearly half of 149 IT decision-makers for North American small companies surveyed by Forrester Research said they plan to spend capital in 2006 to secure e-mail. They’ll focus their capital on securing e-mail at the gateway, concentrating on spam, viruses and regulatory compliance. This trend is likely to continue and will probably increase in the coming years as companies realize the importance of e-mail security to their overall security strategy.

So which combination of encryption and protection is right for you? There’s no single answer. It’s safe to say, however, that a blind drive to meet bare-minimum compliance standards is a poor method for choosing an encryption-security solution–such a strategy could leave your organization compliant but still insecure.

Encryption Options

A variety of technologies have emerged in the encryption field. Boundary, or gateway, products attempt to encrypt e-mail before it leaves the corporate network. This method seems to have the most traction given its ease of implementation compared with that of other technologies. Staging-server encryption captures and stores secure e-mail locally on the network for remote users to retrieve over secure Web portals. Finally, end-to-end encryption offers the most secure scenario, encrypting the message immediately after the user clicks the Send button (see “Encryption Models,” right).

Large-scale deployments of completely secure e-mail are seen mostly in military, financial, health-care and government organizations. And growing businesses are more likely to deploy secure e-mail solutions for specific departments, such as finance, accounting and HR, according to Gartner. These highly secure e-mail systems are expensive, costing $20,000 to $200,000 for a 2,500-user installation, on top of the cost of an existing e-mail platform, Gartner estimates.

» Boundary Encryption

Boundary solutions work well for communications within the corporate network, but may not work for external e-mail, particularly to general consumers. In the boundary model of e-mail encryption, secure relationships are established with the boundary servers of both partner entities. This is typically a manual process, though it’s possible to configure some devices to automatically attempt to deliver the e-mail securely, and then fall back to normal mode if secure channels are unavailable. When a secure connection can be established, all e-mail sent between the two gateway servers is encrypted, which means when the data is most vulnerable, it has already been encrypted as it passes over the Internet. In this model, e-mail transiting within your corporate e-mail infrastructure is not encrypted.

Companies with encryption products in this arena include IronPort, Tumbleweed and Voltage Security. These vendors provide devices that serve as a barrier, residing on the edge of the network, filtering all incoming and outgoing messages for spam, malware and phishing.

More important, to address compliance issues, these devices also can provide encryption using a variety of technologies, including PGP, S/MIME and TLS (Transport Layer Security). TLS adoption continues to rise, and it’s likely to remain the preferred method through 2009. This is due to its popularity, acceptance and maturity as a secure transport. PGP (Pretty Good Privacy) is a free technology developed by the company of the same name and is effective and easy to use. It’s a public-key technology; servers share their public key and encrypt the message with a private key. Using the public key found and managed by Internet keyservers, receiving e-mail servers can decrypt messages. S/MIME (Secure/Multipurpose Internet Mail Extension) is similar to PGP. Encryption products operating at the boundary are best-suited for small companies that send sensitive data from one corporate entity to another. This solution gives them the most bang for the buck and secures e-mail where it’s most vulnerable.

» Staging-Server Encryption

Staging servers are used to store sensitive e-mail that can be retrieved later by the recipient on your secure network. If a user sends an e-mail to a domain that’s listed as secure by your outbound security filters, it’s routed to a server on your network. E-mail is then sent to the recipient notifying him that he has received a secure message. To read the message, the recipient must log into the secure server, usually using a secure Web portal, to view and respond to the message. This solution can be implemented using gateway devices or can be configured in certain software applications: PostX and Tumbleweed offer good products in this arena. For companies, such as banks, HR firms or credit-card companies, that want to notify customers their attention is needed–for instance, to ascertain that a transaction took place–this method works well.

There are some disadvantages to staging-server encryption, however. If end users correspond often with external recipients, each of those recipients will be forced to maintain yet another in-box and sent-mail box. And forgotten-password resolution for occasional users and automated password recovery must be well-thought-out to prevent additional work and unauthorized access.

» End-to-End Encryption

End-to-end encryption does what its name suggests: Data is encrypted by the sender and remains so until decrypted by the recipient. Typically, software agents are deployed that let users send encrypted mail by pressing a “Secure Send” button. There are products from PGP, Voltage Security and others that work with all major desktop clients. End-to-end encryption is suitable for environments–such as finance, accounting and HR– in which sensitive information must be kept secret and transmitted securely.

End-to-end encryption can be configured per user, per department or enterprisewide. It typically works using public-key encryption, with end users storing their public keys on servers that anyone can access–most frequently on servers maintained by the Massachusetts Institute of Technology or PGP. When a user sends an e-mail message, it’s immediately encrypted using the recipient’s public key found on key servers located on the Internet. Once the message is received, the recipient uses a private key to decrypt and view the message. This technology is getting easier to install and implement, but to encrypt a message, the recipient’s public key is required, so if a recipient doesn’t have one (and most don’t) e-mail messages sent to that recipient will not be encrypted. There is, of course, a mechanism by which users are notified whether their e-mail was sent securely.

Stop Viruses, Can Spam

Eliminating virus threats from e-mail is a two-fold process. First, you must prevent viruses from entering your e-mail infrastructure by using software or hardware. Then, you must ensure your solution is updating its virus-definition files–year-old definition files are useless. And it’s not sufficient to simply deploy protection that scans incoming e-mail for viruses; you must prevent users from spreading the infection among internal e-mail servers as well as to computers outside your IT networks. Second, each desktop computer must have virus-scanning software that searches e-mail attachments to remove the threat of infection.

McAfee, Symantec, Trend Micro and other security vendors all offer add-on software that downloads regular updates to ensure you have the latest signatures for current viruses. You also can replace your inbound gateway e-mail servers with an appliance capable of removing virus content from e-mail. IronPort, Sonicwall and Symantec offer e-mail security in hardware devices that do more than virus scanning; these appliances also find potential malicious content.

As we mentioned last November, legislation such as the CAN-SPAM Act of 2003 has not led to a decrease in the amount of spam a typical end user receives (see “Spam Filters: Still Sick of Spam”). Content-filtering software, however, can reduce the number of spam and phishing messages that make their way to e-mail in-boxes. Our Network Computing Barracuda spam filter tagged 86.7 percent of all our mail as spam earlier this year–that’s 7,348,391 messages. That ratio was relatively unchanged from testing we did in October 2005 and May 2004. (Barracuda won Network Computing’s 2005 Well-Connected Award in the Antispam Tool category.)

Most spam is now blocked at the boundary, before it reaches the messaging server, by devices such as Tumbleweed’s MailGate Email Firewall, which uses the company’s DAS (Dynamic Anti-Spam) technology, and IronPort’s C600 appliance with Symantec Brightmail Anti-Spam. You can also buy software that runs on a corporate mail platform to protect gateway server devices.

Today, the greater threat comes from spyware and phishing attacks rather than conventional spam. In extreme cases, instances of spyware, especially key loggers, can compromise a company’s intellectual property. Besides the increased risk of losing data when spyware is installed, it can be difficult and time-consuming to remove. And, productivity can suffer when employees spend company time fixing credit reports harmed during a phishing attack. So filtering only for spam is clearly not a wise choice.

One area of content filtering that doesn’t get enough attention is that of intellectual property in outbound e-mail. Nearly 50 percent of network security attacks come from within the so-called secure boundary of the corporate network, according to Deloitte’s 2006 Global Security Survey (see “Data Drain”). People have different incentives for accumulating corporate information illegally. They might be paid handsomely for stealing data, or they might simply take data because they can. We’ve all come across the end user who, knowing he’ll be leaving the company soon, decides to forward all e-mail in his in-box to his personal e-mail account. We’re also familiar with the more damaging scenario of the employee who takes all of her contacts–including valuable sales leads–with her to her next job. Creating an effective e-mail security policy that includes scanning outbound e-mail for sensitive content can help protect your corporate secrets and keep information from getting to where it shouldn’t. But content scanning is still not as accurate as virus scanning. False positives, mistuned policies and e-mail mistakenly held up as “potential” threats on outbound servers will cause business delays.

Policing Your Setup

Combating viruses, spyware and phishing attacks does not stop with the selection and implementation of one of these technologies. Your security policy must be clearly defined to match the sensitivity of your data, and it must be enforced; it must convey who owns e-mail and how it is used. Undesirable e-mail security scenarios can be avoided through awareness campaigns and personnel training. Make sure your end users log out of their Windows sessions when leaving their workstation to prevent unwanted browsing of their in-boxes. Work with HR to ensure that employees are aware that all corporate e-mail is the express property of the company, not the employee. Take measures to make sure passwords aren’t written down and placed on monitors or under keyboards. These sound like common-sense measures, but we all know how often these guidelines are ignored. Finally, be wary of visitors to your offices, and make sure they are chaperoned when appropriate. Based on these concepts, create e-mail education seminars for your users. Training your end users will allow them to police themselves.

One of the more deadly delusions in the IT world is that the systems administrator or security officer can somehow maintain control over the network and all the information in it. The fact is, though IT professionals create and enforce policy, end users’ actions ultimately dictate how technology is used in the enterprise.

Securing Mobile Devices

Many executives, managers and even IT personnel carry handheld devices so they’re never out of communication. These devices have consumer versions of software that handle e-mail synchronization using POP and even Microsoft Exchange. For better security, all enterprises must consider acquiring the enterprise software versions of these devices.

BlackBerry’s BES (BlackBerry Enterprise Server), for example, gives systems administrators the flexibility and control they desire while providing the encryption necessary to achieve compliance with federal and state mandates. BES offers the option of using AES (Advanced Encryption Standard) or Triple-DES (Data Encryption Standard) to encrypt data sent from the messaging server to the handset. Additionally, BES lets systems administrators make changes to end users’ handheld devices remotely. Devices can be entirely disabled, passwords can be changed and, in cases where the device is lost or stolen, data can be wiped from the device–all by remote administration.

If your corporation uses Treo devices, there are solutions for synchronizing e-mail over secure POP or Exchange synchronization, including third-party programs to send specially crafted text messages that will wipe the data from the device. Good Technologies offers a similar secure Exchange synchronization product for Palm OS and Windows Mobile users.
From Dark Reading (http://www.darkreading.com/document.asp?doc_id=109262&print=true)

Christopher T. Beers is an NWC contributing editor and manager of systems operations for a large broadband ISP, where he oversees daily operations of high-speed data and VOIP for the Northeast United States, including Solaris and Linux administration. Write to him at cbeers@nwc.com.

OCTOBER 30, 2006

November 1, 2006 at 09:24 PM in email | Permalink | Top of page | Blog Home

Living a Second Life

Virtual online worlds | Living a Second Life | Economist.com

Sep 28th 2006 | SAN FRANCISCO
From The Economist print edition
A Californian firm has built a virtual online world like no other. Its population is growing and its economy is thriving. Now politicians and advertisers are visiting

PETER YELLOWLEES, a professor of psychiatry at the University of California, Davis, has been teaching about schizophrenia for 20 years, but says that he was never really able to explain to his students just how their patients suffer. So he went online, downloaded some free software and entered Second Life. This is a “metaverse” (ie, metaphysical universe), a three-dimensional world whose users, or “residents”, can create and be anything they want. Mr Yellowlees created hallucinations. A resident might walk through a virtual hospital ward, and a picture on the wall would suddenly flash the word “shitface”. The floor might fall away, leaving the person to walk on stepping stones above the clouds. An in-world television set would change from showing an actual speech by Bob Hawke, Australia's former prime minister, into Mr Hawke shouting, “Go and kill yourself, you wretch!” A reflection in a mirror might have bleeding eyes and die.

When Mr Yellowlees invited, as part of a trial, Second Life's public into the ward, 73% of the visitors said afterwards that it “improved [their] understanding of schizophrenia.” Mr Yellowlees then went further. For about $300 a month, he leases an island in Second Life, where he has built a clinic that looks exactly like the real one in Sacramento where many of his students practise. He gives his students “avatars”, or online personas, so they can attend his lectures inside Second Life and then experience hallucinations. “It's so powerful that some get quite upset,” says Mr Yellowlees.

Second Life, as Mr Yellowlees illustrates, is not a game. Admittedly, some residents—there were 747,263 as of late September, and the number is growing by about 20% every month—are there just for fun. They fly over islands, meander through castles and gawk at dragons. But increasing numbers use Second Life for things that are quite serious. They form support groups for cancer survivors. They rehearse responses to earthquakes and terrorist attacks. They build Buddhist retreats and meditate.

Many use it as an enhanced communications medium. Mark Warner, a former governor of Virginia who is considered a possible Democratic candidate for president in 2008, recently became the first politician to give an interview in Second Life. His avatar (also named Mark Warner) flew into a virtual town hall and sat down with Hamlet Au, a full-time reporter in Second Life. “This is my first virtual appearance,” Mr Warner joked, “I'm feeling a little disembodied.” They then proceeded to discuss Iraq and other issues as they would in real life, with 62 other avatars attending (some of them levitating), until Mr Warner disappeared in a cloud of pixels.

By emphasising creativity and communication, Second Life is different from other synthetic online worlds. Most “massively multi-player online role-playing games”, or MMORPGs (pronounced “morpegs”), offer players pre-fabricated or themed fantasy worlds. The biggest by far is “World of Warcraft”, by Blizzard Entertainment, a firm in California, which has more than 7m subscribers. These worlds are the modern, interactive, equivalents of Nordic myths and Tolkien fantasies, says Edward Castronova, a professor at Indiana University and the author of “Synthetic Worlds: The Business and Culture of Online Games”. They allow players to escape into their imaginations, and to take part by, say, joining with others to slay a monster.
Making, not slaying

Second Life, by contrast, was designed from inception for a much deeper level of participation. “Since I was a kid, I was into using computers to simulate reality,” says Philip Rosedale, the founder of Linden Lab, the San Francisco firm that launched Second Life commercially three years ago. So he set out to construct something that would allow people to “extend reality” by building a virtual version of it, a “second life” not unlike that envisioned by Neal Stephenson in “Snow Crash”, a science-fiction novel published in 1992.

Unlike other virtual worlds, which may allow players to combine artefacts found within them, Second Life provides its residents with the equivalent of atoms—small elements of virtual matter called “primitives”—so that they can build things from scratch. Cory Ondrejka, Linden Lab's product-development boss, gives the example of a piano. Using atomistic construction, a resident of Second Life might build one out of primitives, with all the colours and textures that he would like. He might add sound to the primitives representing the keys, so the piano could actually be played in Second Life. “Of course, since these are primitives, the piano could also fly or follow the resident around like a pet,” says Mr Ondrejka.

Because everything about Second Life is intended to make it an engine of creativity, Linden Lab early on decided that residents should own the intellectual property inherent in their creations. Second Life now allows creators to determine whether the stuff they conceive may be copied, modified or transferred. Thanks to these property rights, residents actively trade their creations. Of about 10m objects created, about 230,000 are bought and sold every month in the in-world currency, Linden dollars, which is exchangeable for hard currency. Linden Lab estimates that the total value (in “real” dollars) this year will be about $60m. Second Life already has about 7,000 profitable “businesses”, where avatars supplement or make their living from their in-world creativity. The top ten in-world entrepreneurs are making average profits of just over $200,000 a year.
By emphasising creativity and communication, Second Life is different from other synthetic online worlds

Second Life's total devotion to what is fashionably called “user-generated content” now places it, unlike other MMORPGs, at the centre of a trend called Web 2.0. This term usually refers to free online services delivered through a web browser—for example, social networks in which users blog and share photos. Second Life is not delivered through a web browser but through its own software, which users need to install on their computers. In other respects, however, it is now often held up as the best example of Web 2.0. “It celebrates individuality,” says Jaron Lanier, who pioneered the concept of “virtual reality” in the 1980s and is now “science adviser” at Linden Lab. And it connects people, he says, because “the act of creation is the act of being social.”

The Web 2.0 crowd also extols Second Life for its highly original business model. Most Web 2.0 firms try to build audiences around user-generated content in order to sell advertising to them. This assumes the availability of unlimited advertising dollars, a notion that is increasingly ridiculed.

Linden Lab does not sell advertising; instead it is a virtual property company. It makes money when residents lease property—an island, say—by charging an average of $20 per virtual “acre” per month. Only about 25,000 residents, or about 3% or the population, lease property, but that already amounts to 53,800 acres, which, in real life, would be bigger than Boston. This works out to monthly revenues of $1m, not counting the commissions that it takes on currency exchanges between Linden dollars and hard cash. As a private company, Linden Lab does not disclose its exact revenues, although Mr Rosedale says the firm is “close to profitability”.

A common reaction to such numbers is astonishment that anybody should pay anything at all for something that exists only in a metaphysical sense. But “there's actually no economic puzzle in this; all kinds of things derive their economic value only from the realm of the virtual,” says Indiana University's Mr Castronova. The American dollar, for instance, is virtual (aside from the value of the paper used for the bills) in that it requires consumers to have faith in its worth. In the context of online games, virtual economies much bigger than Second Life's have existed for years. Many people in poor countries, called “gold farmers”, play games such as “World of Warcraft” professionally to score weapons, points or lives to sell to lazier players in rich countries. But Second Life is unique in that residents conceive what they sell. As such, says Mr Lanier, it is “probably the only example of a self-sustained economy” on the internet.

For all these reasons—its ability to change the real lives of its residents, its innovations in technology and in its business model—Second Life has become a darling of Silicon Valley. It promises to be “disruptive”, says Mitch Kapor, the inventor of the Lotus spreadsheet that played a big role in the personal-computer revolution of the 1980s and 1990s. He is now chairman of Linden Lab. To him, Second Life is comparable to both the PC and the internet itself, which started as something “quirky” for geeks, and then entered and transformed mainstream society. “Spending part of your day in a virtual world will become commonplace” and “profoundly normal,” says Mr Kapor. Ultimately, he thinks, Second Life will “displace both desktop computing” and other two-dimensional “user interfaces”. As “a hothouse of innovation and experiment,” he says, Second Life may even “accelerate the social evolution of humanity.”
Back to this reality

It is bold and early to make such predictions. After all, Second Life is still a relatively small virtual world—only about 9,000 residents are usually logged in at any one time, for example. About two-thirds create content from scratch, but mostly they customise things that they find or browse passively. And a lot of the wares on offer are banal. Whereas a few residents choose very innovative bodies for their avatars, most have shapes, male and female, that hew to the default templates and look, predictably, like cosmetically enhanced porn stars. Among the artefacts, there is some genuine art but quite a bit of junk.
Endless possibilities: Donna Meyer, a grandmother from New York, and her avatar

Is Second Life a nirvana where unknown talent can prove its creative mettle and make it in the real world? “You can create your own island and people come to it,” said Bill Joy, a co-founder of Sun Microsystems and now a prominent venture capitalist. But “I don't see any correlation between that and what it's going to take to be a designer and have a skill set to succeed in the world.”

Mr Castronova also cautions against overestimating the depth and breadth of Second Life's economy. Yes, people do create clothes and games and spacecraft in Second Life and then sell them. But most of the big money comes from the virtual equivalent of land speculation, as people lease islands, erect pretty buildings and then rent them to others at a premium. Tongue in cheek, Mr Castronova compares Second Life's in-world boom to America's house-price bubble. In artistic terms, there is not always much difference between building an in-world house and designing a personal web page.

There are also stirrings of discontent among some of the “older” (if one can use that term in a three-year-old metaverse) and more purist residents of Second Life about what they see as a menacing trend toward commercialism. One avatar, for example, has created “MetaAdverse”, a network of advertising billboards inside Second Life to which property developers can feed images of their creations. More controversially, Second Life is also attracting the attention of corporations and advertisers from the real world hoping to attract the metaverse's residents. Publishers now organise book launches and readings in Second Life. The BBC has rented an island, where it holds music festivals and parties. Sun Microsystems is preparing to hold in-world press conferences, featuring avatars of its top executives. Wells Fargo, an American bank, has built a branded “Stagecoach” island, where avatars can pull Linden dollars out of a virtual cash machine and learn about personal finance. Starwood, a hotel and resort chain, is unveiling one of its new hotels in the virtual world.

Toyota is the first carmaker to enter Second Life. It has been giving away free virtual vehicles of its Scion brand and, in October, will start selling all three Scion models. The price will be modest, says Adrian Si, the marketing manager at Toyota behind the project. Toyota really hopes that an “aftermarket” develops as avatars customise their cars and sell them on, thus spreading the brand “virally”. Toyota will be able to observe how avatars use the cars and might, conceivably, even get ideas for engineering modifications in the real world, he says.

Those Scion cars have “great driving performance for in-world physics,” says Reuben Steiger, the boss of Millions of Us, a company he founded this year to bring companies like Toyota into Second Life for marketing and brand-building. “How it corners and makes sounds when it changes gears is great.” So Toyota, which is a client of his, along with Sun Microsystems and even Mr Warner, shows that Second Life is “perfect for creating experiences around a brand,” says Mr Steiger. “We don't think that conventional advertising will be very prevalent,” he says, because it would “be badly received culturally”. Advertising in Second Life is not about “trapping people” but about captivating and stimulating them. A good campaign in Second Life costs about $200,000 dollars, he reckons, of which only a tiny part is property leases and most goes to paying the talented designers to create great virtual stuff.
Virtual strip mall?

Inevitably, this sort of thing turns some residents off. Will Second Life, that realm of individualism and pure creativity and spontaneity, get plastered over by the same mega-brands and mass culture that have, arguably, made the physical world such a homogenous place? In real life, many avatars argue, big business tends to push out small artisans. If the same happens in Second Life, the metaverse will lose its raison d'être.

Mr Rosedale, Linden Lab's founder, empathises with the concern, but thinks it is misplaced. “That is a fear which comes from the real world that is not likely to be borne out in Second Life,” he says. His arguments are all economic. In the physical world land is scarce, so big brands can buy up much of it; in Second Life, Linden Lab simply allocates more computer-processing power and makes even more islands available. The world is infinitely expandable, in other words. If one patch did become homogenous and drab, avatars would simply fly off to the next.

Another economic difference, says Mr Rosedale, is the lack of economies of scale in Second Life. In real life, a shoemaker, say, can reduce the average cost of making a pair by producing huge amounts, and the average cost of marketing by buying advertising in bulk. In Second Life, however, scale means nothing. There is no manufacturing cost to minimise. Gimmicks, such as giving away free shoes, are useless because nobody actually needs shoes at all. Nike, say, has no inherent competitive advantage over a hobbyist who likes to design shoes (or feet, paws, wings or claws) for fun. Thus, says Mr Rosedale, whereas the physical world has relatively few things that are sold in huge numbers, Second Life has huge numbers of things that are sold in relatively small quantities. In the statistical jargon, Second Life's economy trades in “the long tail” of things.

This is why, for the time being, Mr Rosedale prefers to rule Second Life with Adam Smith's “invisible hand” only. To him that means treating every resident the same, whether it happens to be Toyota or “an 80-year-old woman from India.” Both will pay the same price for their acres; what they do with it is up to them. If it ever became necessary, he adds, Linden Lab could “become a regulator and break up monopolies”, but this does not seem likely to come about.

How, then, is one to make sense of Second Life? For those new to it, it appears to be too mind-boggling to have much relevance to real life. For those who spend time inside, however, Second Life ironically tends to resemble the real world even as its obvious differences become clear. Mr Kapor, Linden Lab's chairman, is the first to agree. “People bring all their karma” into the world, he says. Alongside benevolence, there is harassment. If Second Life were ever to become truly mainstream, there is no guarantee that residents would not pollute it with racism and hatred. Perhaps crime too: residents had to reset their passwords after a recent hacking attempt.

These things may be a criticism of human nature, but it cannot be blamed on Second Life. Henry Jenkins, a professor of media studies at the Massachusetts Institute of Technology, thinks that Second Life deserves credit as “a world of hypotheticals and thought experiments.” From new approaches to corporate branding to education, Second Life is a petri dish for innovations that may help people in real life. Already, therapists are using Second Life to help autistic children, because it is a safe environment to practice giving signals to others and interpreting the ones coming back. Other organisations are using Second Life for long-distance learning. Overall, says Jaron Lanier, the veteran of virtual-reality experiments, Second Life “unquestionably has the potential to improve life outside.”

November 1, 2006 at 09:11 PM in Business Models | Permalink | Top of page | Blog Home

Integrating the Channels

http://www.banktech.com/printableArticle.jhtml;jsessionid=XWF44MCHDKT04QSNDLRCKH0CJUNN2JVN?articleID=193402868

Nov 01, 2006
URL: http://www.banktech.com/showArticle.jhtml?articleID=193402868

Channel Management

The development of banks' overall channel strategies has been anything but deliberate. Delivery channels have grown from need and technological advances, and banks' channel strategies have evolved in response. But now that financial institutions are juggling numerous channels and the multitude of ways in which they touch customers, many banks are actively looking to integrate those delivery channels more strategically.

According to an August survey from the American Bankers Association (Washington, D.C.), usage of the major delivery channels is decidedly split. When 1,000 consumers were asked what banking method they used most often, 32 percent said the branch, 26 percent said online, 26 percent said ATMs, 5 percent said the telephone and 5 percent said traditional mail (6 percent said other/none). But statistics on channel usage -- by age, gender and wealth, for instance -- abound.

Generally, current research indicates that the branch and the Internet are the key buying channels for banking products. A recent survey from Framingham, Mass.-based Financial Insights reports that the branch remains the most utilized channel, with almost 75 percent of consumers visiting a branch at least once a month. However, according to the survey, customers who use the online channel tend to have more interactions per month with their financial institutions: 25 percent log on more than 10 times per month.

According to research from Cambridge, Mass.-based Forrester Research, 82 percent of consumers still prefer the branch for opening a new account. Yet there is a strong difference in channel preference by age. Younger generations overwhelmingly prefer the online channel and are more likely to adopt online banking activities, Forrester reports.

The bottom line is that no channel is an island unto itself, says Karen Massey, a senior research analyst with Financial Insights' consumer banking and credit practice. "All channels are important to consumers for the specific purpose each serves," she writes in a new report from the research firm. As a result, Massey urges banks to invest in a consistent customer experience across all channels, including integration of real-time cross-channel data.

Seamless Customer Experience

The current focus in banking is on customer-centric, rather than product-based, strategies. And customers have strong demands. Consumers want to bank on their own terms -- they want access to their money anywhere, and they want it now, said Bart Narter, senior analyst, banking, Celent (Boston), during a recent BS&T webcast, "SOA for Multichannel Integration." "That has been a challenge for the banks," he noted.

Customers are spoiled by general retailers, says Jerry Silva, TowerGroup (Needham, Mass.) research director for retail banking and delivery channels. Some large retailers allow customers to order products online and then pick them up at the nearest store location, for example. But because of the way bank channels have been set up, with different products maintained in different silos and with no real interface to unite the systems, many banks haven't been able to deliver this level of service to their customers, Silva says.

"It's important for customers to feel like a bank really knows them," says Alex Hart, president and CEO of online banking solutions provider Corillian (Hillsboro, Ore.). The customer should get the same information at the ATM, the branch and online, Hart stresses -- there has to be consistency across those channels. At too many banks, he contends, that is not the case. "[Channel integration] is really designed to create a better user experience; it creates preference and differentiation," Hart says.

SOA for Multichannel Architecture

"Firms need to build integrated channels that facilitate customer information and process flows," said Peter Tebbenhoff, product marketing director for Palo Alto, Calif.-based business integration and process-management software provider TIBCO Software, during the BS&T webcast. "Only then will banks be able to achieve the operational efficiencies they had hoped for," he added.

But most banks must overcome legacy architectures that have been built piecemeal as the result of the emergence of new channels and products, as well as M&A activity, Tebbenhoff said. Maintaining legacy systems is time-consuming, prone to error, expensive and inflexible, he noted.

The best approach to achieve multichannel integration, according to Tebbenhoff, is a service-oriented architecture (SOA). "Enabling channels to interact with core applications allows banks to pull out the detailed data embedded deep in core systems spread across the enterprise, translate it into comprehensive, meaningful information, and enable its consistent availability across all of the delivery channels to internal and external constituents," according to a TIBCO report, "Using SOA to Cash in on Multichannel Integration."

A trailblazer in this area is The Huntington National Bank in Columbus, Ohio ($36 billion in assets). According to TowerGroup's Silva, "Huntington is the poster child of multichannel integration."

Dan Vermeire, SVP and chief technology officer for the bank, says a determination to improve the customer experience motivated Huntington to integrate its sales and service channels. "Huntington is incredibly focused on customer service -- on making sure that the things we do end up in positive experiences for our customers," Vermeire says. "We want to see things done consistently and accurately [across channels]," he adds.

"Banks have an intense number of ways in which we touch our customers. ... As those technologies evolved, it was not easy to integrate [them]," Vermeire continues. "Delivery channels exploded and customer experiences were starting to become disjointed. They weren't always receiving the same information or the same approach in service and delivery from one channel to the other." To clear up any customer confusion and create a more seamless experience, Vermeire says, he wanted an integration architecture that was designed specifically to deliver consistent information and experiences across the bank's channels.

Forrester senior analyst Mary Pilecki echoes Vermeire's sentiments. "The consistent customer experience is more targeted toward getting the same answer to the same questions," she says. Customers all have a preference for a particular channel, but no customer base will be homogeneous in its preferences, Pilecki observes. Therefore, banks should aim to provide a common experience across channels. The common experience can be delivered through a business process management (BPM) suite, Pilecki says, and SOA can enhance the BPM.

Huntington partnered with Columbus, Ohio-based software provider Synoran for its SOA platform. The Synoran solution enables Huntington to see a real-time picture of all of its customers across all of its channels, leading to a total view of the customer, according to the bank's Vermeire.

After Huntington's initial investment in SOA, the bank first integrated its self-service channels and then began to focus on the platforms used by its associates for sales and service capabilities, Vermeire explains. "We look at it as an overall business strategy and journey," he says. "[It's] a road map that's focused on customer needs and business changes."

A multichannel integration platform provides three major benefits: customer responsiveness, operational efficiency and a huge degree of savings by reducing errors, according to John Knightly, VP, industry and partner marketing, for San Jose, Calif.-based enterprise infrastructure software provider BEA. The banks that want a "walk-before-you-run approach," he says, start with a specific channel and specific goals. They build modular components and then realize that they can use those in other channels. "A more visionary bank" wants to do it all at one time, Knightly says.

Preparing for Growth

Waterbury, Conn.-based Webster Bank is an example of such a visionary bank. In early 2004, Webster ($18 billion in assets) decided to replace all of its core banking systems to support future growth. "We wanted an IT infrastructure that would support a bank double or triple our size," explains John Kershner, the bank's CTO.

In conjunction with the decision to upgrade its core infrastructure, Webster decided to implement SOA, Kershner says. When the bank selected Jacksonville, Fla.-based Fidelity National Information Services for most of its core banking applications, it was with the agreement that the vendor expose its mainframe systems to Webster through SOA, he says. "We require all of our stra