Randall Howard

Brands, Trust and The Fine Print

In today’s mail I received a tantalizing offer from Bell Canada Long Distance. It promised the ability to “Call the world without limits” by delivering “Unlimited World Long Distance Plan $29.95/mo.” With calls to over 50 countries plus Canada and USA included, on the face of it, that’s a pretty attractive offer.

But, I’ve learned that, when dealing with the telecoms industry whether landline or wireless, it pays to read the fine print. And, sure enough, in very small type at that bottom it says “excludes calls to mobile phones and wireless devices.” Sadly, when I call overseas, where mobile penetration is generally at or even above 100 mobiles for 100 population, over 95% of my calls are to mobile phones. So, far from being unlimited, this plan is really a bit of a “bait and switch” which might well increase my calling costs. In the monthly billing cycle, the arrival of the first bill post sign up would almost certainly make any customer’s blood boil. At a macro level, I’m really curious as to what such deceptive marketing campaigns say about customer relations and basic trust in the 21st century?

Also this week, Canadian Minister of Industry, Jim Prentice, dialled up his earlier suggestion to mobile operators Bell and Telus to reconsider their ill-conceived plan to charge customers for incoming SMS text messages, including SPAM. Minister Prentice, after meeting Bell CEO George Cope, publicly raised the spectre of increased wireless regulation in Canada as a way to increase pressure for the pair to see common sense. Clearly, for companies that act in the public interest, using the police-like powers of regulation to curb those who stray from this idea must strike a delicate balance. Again, is this a trust issue? Are Bell and Telus exhibiting corporate greed or simply strategic incompetence?

Speaking of trust, a week ago a good friend lent me a fascinating book called 24 Days, by Rebecca Smith and John R. Emshwiller, Harper Collins, 2003. The co-authors, two Wall Street Journal Reporters, lay out a factual and totally rivetting chronicle of how the once “great” company called Enron went from being on top of the world into a death spiral in little more than three weeks. To quote the authors, “so much of Enron’s energies were devoted … to exploiting accounting rules to make profits out of thin air. So much brainpower went into temporary gains rather than into building projects with lasting value. By any means, was the Enron way. … Service to its customers and clients, didn’t enter into it.” Having once run a public company where we took our fiduciary and regulatory duties to our shareholders and the public markets seriously, the sheer magnitude of the greedy cleverness of the malfeasance at Enron boggles the mind. Again, why have the fundamental ethical standards of human trust in the corporate world sunk so low? While it is easy to build a house of cards, without long term trust, I firmly believe it is impossible to build any entity (corporate or otherwise) with lasting, long term value.

Trust issues aren’t confined to the US and Canada. In Germany, T-Mobile has been advertising their new iPhone mobile data plans as “open internet access with unlimited data” (”Freier Internetzugang mit unbegrenzter Datenflatrate”) For the details, see a fascinating post from TMCnet. Indeed, customers were finding to their dismay that this open internet access specifically disallowed such basic mobile web services as VoIP, IM, and VPN. Furthermore, the supposedly unlimited data plan was actually capped. This is almost unbelievable, especially in Germany which, being in the European Union, generally benefits from far superior mobile regulation than we enjoy in US and Canada. In a David versus Goliath situation, sipgate, a small VoIP application provider for Apple iPhone, stood up for consumers and has won a preliminary court injunction against mighty T-Mobile. In this instance, there can be no doubt that t-Mobile is just plain wrong. Once again, we wonder how clearly deceptive advertising affects trust between T-Mobile and its cusotmers?

For once, the lessons for companies are simple, yet so often overlooked. In this age of call centres, web self service and mobile nomadism, opportunities for developing personal relationships between companies and customers are on decline. As people feel increasingly distant from the companies that provide them goods and services, the importance of trust in business dealings goes up. I would argue that because trust is built over the long term, it needs to become a vital part of every company’s brand equity. Although economists have yet to devise specific measurements, it is clear that a lack of trust can kill a multi-billion dollar brand very quickly and in such a way as to make recovery extremely difficult and costly, if not impossible.

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Indigestion from “Half Baked” Mobile Web Browsing

Yesterday, Chris Sacca (ex Googler extraordinaire, investor in the likes of Twitter and recent Tech Leadership Conference Keynote speaker) shot a provocative salvo across the bow of the Twittosphere. Many times Twitter is a true belwether, capturing the pulse of market dynamics. And, although saying this might not go down well in Waterloo, it struck a chord with me. Here’s Chris’s shot of wisdom:

“Surfing the web on a Blackberry is like trying to prepare dinner for four with an Easy-Bake” Oven.

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Early Adopters versus Business Models: Shooting Yourself in the Foot?

In an attempt to de-mystify seeming abstract business theory, from time to time, we will discuss “real world” examples of business models in action.

Both theory and practice underscore the importance of keeping early adopters engaged with a new product or service, a key enabler for creating a hit in the mainstream market. Of course, such trend setters love to play and revel in all things new. More importantly, they are also disproportionately connectors and influence makers, who can make or break eventual success in any marketplace. The new science of social networks merely provides proof of our intuitive sense that these people are the number one key to success in new markets.

To provide some historical context, a lack of serious engagement with application developers (a very specialized form of early adopter), penalized early Apple Macintosh market share, a failing which took nearly 20 years to put right! Thus, do people running both startups and major corporations, having learned this lesson, live and breathe attention to early adopter crowd?

Hardly. Below are two glaring examples, sadly (or perhaps tellingly), both involve the same major Canadian wireless carrier. Both involve a very simple lapse in appreciating of long term impact of short term decisions. Can you provide additional examples?

Electronic Bill Presentment and Payment: In the late 1990’s, Electronic Bill Presentment and Payment (EBPP), in which consumer bills that had been printed and mailed via the postal service, are instead processed automatically as a web service, was an exciting emerging market. I can remember the palpable frustration of Ray Simonson when I told him of my early adopter experiences EBPP. Ray, currently CEO of Software Innovation (Coreworx) and my partner at Verdexus , was co-founder and CEO of Bluegill Technologies (now Checkfree Software), which was the run away success and market leader in EBPP.

What was my involvement in this? Around 1998, I jumped at the option of “on-line” billing for my Rogers Wireless service (using a different platform than Bluegill by the way). As a committed early adopter, of course I signed up. Imagine my dismay when, at tax time, I found that the system had stored only the previous 6 months of bills! Because I no longer received paper bills in the mail, and this being early April, I had to scramble to find 9 of the preceding 12 months of billings to complete my return. And, this one year requirement doesn’t even take into account the tax authority’s rule of 7 years of record retention.

Did this early service meet my basic needs? No, it fell short, and spectacularly so. But, even worse, until very recently that negative early experience put a “chill” on my migration away from any form of paper bills, although I did pay online through my bank. Once burned, twice shy.

Wireless Data Pricing: Many people have commented on the issue of high data rates, and even higher charges for data roaming on wireless networks. The problem is endemic in the US and even more spectacularly in Canada, and is arguably a product of a flawed regulatory framework and inadequate competition.

The roots of this problem have been discussed many times, including in this blog and by Alec Saunders. For example, Toronto entrepreneur and futurist, Thomas Purves, in his analytical (if not constructively inflammatory) posting “Canada Worse than 3rd World Countries When it Comes to Mobile Data Access” shows just how egregious data rates really are(see graph). My personal initiation into this problem occurred in 2006 when my normally $300/month Rogers bill came in about $1000 higher than I expected! The cause - the overage was split pretty equally between going over the meagre 25 MB of data (for which I already pay $60/month) and data roaming outside Canada. At the time, both were billed at a charge rate of $0.05/K or an unbelievable $50/MB! And, at least on my Blackberry or Nokia N80 there is absolutely no mechanism to monitor or meter consumption. Therefore, unlike voice with its call timers, there is no effective way to predict and high charges simply show up as unwelcome surprises on the next monthly bill.

Of course, who is going to argue with a company (again Rogers Wireless) exploiting its natural monopoly profits? This problem is more than my personal griping, or that of any individual business. The strategic significance is that if Canada (and to a less extent the US) continues to keep these barriers to adoption of wireless data applications, the innovation and economic benefits will migrate elsewhere. It’s very hard for Canadian mobile startups to compete globally with such a flawed home market. And, for Rogers, my strong belief is that any short term gain will be far outweighed by the loss of signficant data revenues as they become the driver of future wireless business models.

Two very sad stories indeed. I’d love to hear your take on this early adopter issue. Do you have stories of your own? Do you have a different take? Feel free to comment.

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Science Fairs, Social Media & Fads - The New Science for the 21st Century

Last week, my son Devin Howard (a Grade 12 student, pictured above) won a Gold Medal at Waterloo-Wellington Science and Engineering Fair, enabling him to go on to the Canada-Wide Science Fair, run by Youth Science Foundation, in May at the University of Ottawa.

His topic, for which he developed a computer model written in multi-agent, graphical modelling and simulation language called NetLogo, was to study the propagation of ideas such as fads or partisan political persuasion using some of the latest social graph theories. Last summer, at the acclaimed Shad Valley program at University of Calgary, he became interested in the topic of emergence. For those who are not familiar with this fascinating field, emergence can be defined as as “… the way complex systems and patterns arise out of a multiplicity of relatively simple interactions.”

From that springboard, he became interested in the way fads and other changes propagate through society, especially illustrated by recent books like Malcolm Gladwell’s The Tipping Point. (An interesting footnote is that Gladwell, now based in New York City, grew up right around the corner in the small community of Elmira). Gladwell, a journalist by trade with a similar modus operandi to Don Tapscott, has done much to popularize a whole new area of science.

Devin’s project aimed to show how fads, political influence, religions and even diseases spread through society. Au courant terms such as tipping, connectors and mavens all arise from this new science which shows how a few key people can take a simple, and seemingly inconsequential idea or trend and turn it into a mass movement. As story-telling narrative it’s intoxicating, as a science it may well be one of the most exciting subject areas of this new century. And, beyond being a very proud father, I was struck by how much the area Devin chose to study sits right in the epicentre of our investment thesis at Verdexus.

Now, let’s drill a bit deeper to understand why this is so important. Malcolm Gladwell is a (very persuasive) popularizer of complicated and transformational ideas. By contrast, Duncan Watts, associate professor of Sociology at Columbia University and author of the 2003 book Six Degrees, is one of the academic pioneers who managed to fuse existing work in graph theory, psychology, sociology and physics into a new science of connectedness.

This new Science of Networks (covering social, biological and technological networks) is truly a post-millennial creation. In an age when we’ve moved beyond mere specialization, whole new research disciplines are synthesized from a set of discrete subject areas. Such fusion of formerly disparate knowlecdge areas is a key example of the Knowledge Integration referred to in Thomas Friedman’s The World is Flat.

I can’t do justice to this field here, but to give a flavour, some key recent breakthroughs are:

• Duncan Watts shows that the connectedness of most social networks isn’t a Nomal Distribution as might be intuitively supposed, but instead is a Scale-Free Network exhibiting a Power-Law Distribution. The significance of this is that a few key Connectors can make (or break) the ability of the network to take over. Watts points to the Matthew Effect in which “well-connected nodes are more likely to attract new links, while poorly connected nodes are disproportionately likely to remain poor.”
• Furthermore, Watts describes Affiliation Networks, or “networks of overlapping cliques”. They are the new social networking version of clubs, but in scientific terms are Bipartite Networks, which are really fused version of networks of Actors and Groups.
• lastly, the concept of Social Currency has really re-defined the notion of brand in this new science.

As I mentioned, I’m just skimming the surface, but the net takeaway that really excites me, is how new some of this fundamental science is. Although the origins of the field may go back 50 or 100 years, many key findings are still a mere 6 or 8 years old. Furthermore, my sense is that this field is just beginning.

To put this into context, I started working with one of the first peer-to-peer, social networked contact systems with Ottawa-based GoodContacts (now acquired by Reunion) back in 2001 and a full 18 months before Plaxo was launched. When later social networks like LinkedIn came along, I remember asking why we hadn’t taken that approach. But, the truth was, that much of the enabling science hadn’t yet been formalized.

With that in mind, in this day of Facebook, Social Branding, Twitter, and the new social conferencing from iotum, I suspect that we are just in an early generation (Beta test?) of the Social Networking Revolution. Therefore, for human interactions with friends, sales, politics, and entertainment, stay tuned for Social 2.0 and beyond. Remember, social networking is not just a fad of college students and teenagers, but a fundamentally different way to optimizing human and social interactions.

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