Category Archives: eCommerce

Zappos New Business Model: Have Insight, Will Respond

A story this morning in Adweek about Zappos reminded me of a recent experience with a client. I’ll get to the Zappos story in a moment, but first our client’s story.

This customer wanted to set up a client summit at Google’s main office in Mountain View. Attending the summit were not only their search team but also some highly placed executives. The reason for the summit was ostensibly to talk about the client’s search campaign, but it soon became apparent that the executives were looking for something more. They had specifically asked for someone to spend some time talking about Google’s culture.

Throughout the day, Google paraded a number of new advertising offerings in front of the team. While the front line teams were intrigued, one particular senior executive seemed to be almost snoozing through the sales pitches for Google’s new advertising gadgets and gizmos. It was only when the conversation turned to Google’s business practices that the executive perked up, suddenly taking volumes of notes. It made me realize that sometimes, it’s not only what we sell that has value for our customers, it’s what we are. I chatted about this recently with someone from Google, saying that their corporate philosophy and way of doing business is of interest to people. I urged him to find a way to package it as a value add for customers. While he agreed the idea was intriguing, I think it got relegated to the “polite jotting down without any intention of acting on it” category.

Now, back to the Zappo’s story. That’s exactly what they’re doing, taking their customer service religion and packaging it so that thousands of businesses can learn by going directly to the source. Zappos Insights is a subscription service ($39.95 per month) that let’s aspiring businesses ask questions about the “Zappos way” and get answers from actual Zappos employees.

The service, said CEO Tony Hsieh, is targeted at the “Fortune 1 million” looking to build their businesses. “There are management consulting firms that charge really high rates,” he said. “We wanted to come up with something that’s accessible to almost any business.”

It’s a pretty smart move. There’s no denying we’re going through a sea change in how business is done. And I’ve always felt that there’s a impractical divide between consultants and businesses that are consistently implementing every day. It seems like you can either do, or teach, but not both. Amazing stories such as Apple, Google, Southwest and Zappos have shown that innovation with culture is as important as innovation in what ends up in the customer’s hands. Zappos is trying to blend the two in an intriguing revenue model.

Edison Also Asked: “When Will People Get It?”

First published November 15, 2007 in Mediapost’s Search Insider

Over the past few weeks, my general theme has been “why don’t more people get it?” Why don’t agencies get search. Why don’t CEOs get search? Why don’t more search portals get that it’s the user that determines your success? Why don’t more people get that the world is changing, quickly? What’s with us, anyway?

Well, this week, I gained a little insight; thanks to a paper by Paul David called “The Dynamo and the Computer.” Maybe we just need some time. It’s not the first time this happened. Let me tell you the story of the light bulb.

Lighting Up the Industrial Age

Edison introduced the first practical incandescent light bulb in 1879. The first generating stations in New York and London started their dynamos spinning in 1881. Profound changes were to follow. Productivity was to grow by leaps and bounds.

Factories in the 1800’s were dark, noisy and not particularly pleasant places to spend a day.  At the center sat the steam engine: a huge, hungry and finicky behemoth, connected by an extended system of belts to the operating machinery of the factory. Even the early electrical engines were smaller, cleaner and much more efficient. Electric lighting made 24 hour shifts more practical. The benefits were obvious. Electricity was the ultimate “no-brainer.”

Still in the Dark

But by 1899, almost two decades after the introduction of the light bulb, only 3% of homes were “wired.” And the much-predicted impact on the North American industrial engine would have to wait until the 1920s to take hold. It took a half century for electricity to make much of a difference in America.

You see, technology tends to move fast, but people move slowly. It’s because transition tends to be dependent on many factors. It’s not like the flicking of (quite literally, in this case) a light switch. It’s more like waiting for a long series of dominos to fall into place, each drop contingent on the previous one.

In the case of electricity, significant money had been invested in steam power. You don’t just rip it all out and start over again, no matter how compelling the advantages might be. So factory owners waited for things to break down, and then retrofitted with new electric engines. But even this retrofitting had to wait for the supply of electrical engineers to catch up. In 1899, not many people knew how to design an electrical delivery system. The skill gap had to be eliminated. And this lack of expertise also showed up in less direct ways. America also had to wait for a new generation of factory architects to appear, who could design factories built to be powered by electricity. For every obvious benefit of electrification, there was a long series of factors that had to fall into place first. That’s why it took five decades to turn on the light.

History Repeating Itself

This technology adoption curve has been repeated over and over. The replacement of horsepower with steam power. And more recently, the information technology revolution. We can get as frustrated as we want with the snail’s pace reluctance of many to grasp the realities of the new world, but the fact is, we’re just being human.

Technology adoption usually follows a predictable path: introduction of technology, commercialization of technology, layering the technology onto what preceded it, and finally, throwing out the old completely and building from the ground up to embrace the technology. Each step depends on the step before it. And in every case, legacy investment slows the speed at which we move from one to the other.

If we look at the adoption of Internet technology and compare it to previous technology adoption curves, we’re just starting up the beginning of the long and steep part of the “S” curve. There’s no doubt we’ll get there, but it will take time.

The Wisdom of Consumer Crowds?

Following up on the theme of the rewiring of our brains, is the internet making us smarter consumers as well? There certainly seems to be evidence pointing in that direction.

A study by ScanAlert  found that the average online shopper in 2005 took 19 hours between first visiting a store and completing a transaction. In 2007, that jumped almost 79% to 34 hours. We’re taking longer to make up our minds. And we’re also doing our homework. Deloitte’s Consumer Products group recently released research saying 62 percent of consumers read consumer written product reviews on the Internet, and of those, more than 8 in 10 are directly influenced by the reviews.

In James Surowiecki’s Wisdom of Crowds, he believes that large groups, thinking independently with access to a diversity of information, will always make a better collective decision than the smartest individual in the group. Isn’t the Internet wiring this wisdom into more and more purchases? When we access these online reviews, we’re in fact coming to collective decisions about a product, built on hundreds or thousands of individual experiences. As the network expands, we benefit from the diversity of all those opinions and probably get a much more accurate picture of the quality of a product than we ever could from vendor supplied information alone. The marketplace votes for their choice, and the best product should theoretically emerge as the winner.

Of course, nothing works perfectly all of the time. As Surowiecki points out, communication can be an inexact and imperfect process, and information cascades based on faulty inputs can spread faster than ever online. But it’s also true that if a cascade leads to rapid adoption of an inferior product, we’ll discover we’ve been “had” faster and this news can also spread quicker. The connections of online make for a much faster dissemination of information based on experience than ever before, ensuring that the self correcting mechanisms of the marketplace kick into gear faster.

There’s a pass along effect happening here as well. For social networking buffs, you’ve probably heard of Granovetter’s “Weak Ties”. Social networks are made up of dense, highly connected clusters, i.e. families, close friends, co-workers. The social ties within these clusters are strong ties. But spanning the clusters are “weak ties” between more distant acquaintances. The ability for word to spread depends on these weak ties. What the internet does is exponentially increase the number of weak ties, wiring thousands of clusters together into much bigger networks than were ever possible before. This allows word of mouth to travel not only in the physical world but also in the virtual. I looked at a fascinating follow up study to Granovetter’s where Jonathan Frenzen and Kent Nakamoto also looked at the value of the information and the self interest of the individual and their “strong ties” within a cluster as a factor in how quickly word of mouth passes through a network.

Deloitte’s study graphically illustrates the weak tie/strong tie effect. 7 out of 10 of the consumers who read reviews share them with friends, family or colleagues, moving the information that comes through the weak ties of the internet into each cluster, where it spreads rapidly thanks to the efficiency of strong ties. This effect pumps up the power of word of mouth by several orders of magnitude.

But are we also becoming more socially aware in our shopping? The research by Deloitte also seems to indicate this. 4 out of 10 consumers said they were swayed by “better for you” ingredients or components, eco-friendly usage and sourcing, and eco-friendly production or packaging. The internet wires us into communities, so it’s not surprising that we become more sensitive to the collective health of those communities in the process.

What all these leads to is a better informed consumer, who’s not reliant on marketing messaging coming from the manufacturer or the retailer. And that should make us all smarter.

Infomediating a Broken Marketplace

First published October 18, 2007 in Mediapost’s Search Insider

Last week, I explored the disconnect between how advertisers define Nirvana; the ability to control consumer and persuade them at will by inundating them with advertising; and what consumers dream about: authentic and reliable information on needed products and services. There are costs associated with both sides, the cost of advertising, and the cost of consumer research. Max Kalehoff, from Nielsen BuzzMetric, pointed out another cost: the nuisance cost to the consumer of wading through an earlobe-deep sea of irrelevant and uninvited advertising: zapped TV commercials, blaring billboards, glaring signage, email spam, ubiquitous interstitials and pop-ups, preloads… .or one of the zillions of other ways advertisers choose to scream at you.

So, with this highly inefficient, annoying and disconnected marketplace, there has to be a better way, right? Well, Marc Singer and John Hagel III think so. They call it the infomediary, a concept introduced in their 1999 book, “Net Worth.” It’s well worth the read. The one thing that struck me is that in the entire book, the word “Google” is not mentioned once. This is not really surprising, given the publication date, but for reasons that will soon become clear, the irony was not lost on me.

How to Spot an Infomediary

Here’s the basic foundation of the infomediary. Acting on behalf of the client when he’s looking to make a purchase, the infomediary takes previously gathered personal information, as well as information volunteered by the client, and searches for the best match with vendors. The client can choose to remain anonymous, saving himself from an onslaught of advertising. Or, if the client agrees, the infomediary will pass his name along to a qualified vendor, and for this privilege, the vendor will pay the prospect. In essence, the infomediary plays the role of marketing matchmaker.

There are a number of offshoots of this basic premise. The infomediary supplies privacy tools to clients, marketing intelligence to vendors, the opportunity to bargain as a group for lower prices on regular consumable products, and it also acts as an aggregator of consumer power. In effect, the infomediary takes over control of the client relationship, inserting itself squarely between the consumer and the vendor, with the ultimate goal of protecting the consumer. This is a decidedly customer-centric model.

But it’s in the basic concept of gathering information about a client, and using that to ensure a good match with a vendor, that one begins to speculate about Google’s ambitions to fill this role. In essence, at a rudimentary level, Google is already fulfilling some of the role of the infomediary. Certainly if you factor personalization into the equation, we move a big step closer to Singer and Hagel’s concept.

Disruptive Influences

There are a number of dramatically disruptive possibilities in the infomediary model:

  • It forces advertisers to surrender all pretense of control over the consumer. Persuasion becomes a non-issue. The touchpoint with the consumer is stripped of hype, ensuring that product information is authentic and factual.
  • It gives the aggregated consumer voice a level of power never seen before. Previously, the marketplace was vendor-centric: here’s what we offer, here’s how we offer it, here’s what we charge. The consumer’s choice was restricted to “take it or leave it.” Now, the balance shifts to the consumer: here’s what we want, here’s how we want it, here’s what we want to pay. Provide it or we’ll find someone else who can.
  • By gaining control of the customer relationship, it forces companies to focus on two other core processes: one, either product innovation and commercialization; or two, infrastructure management, excelling in producing and distributing a product.

Something’s Rotten in the State of Advertising

There are a number of other seismic shifts in the landscape that come out of the infomediary model, but “Net Worth” weighs in at over 300 pages, and I have a bare 700 to 800 words for this column. The sum of it all is that the infomediary model, or some variation of it, dramatically changes the rules of the marketing game. A terribly inefficient marketplace has evolved in the past century, with some very wobbly power structures. The communication disconnect is almost laughable in its dysfunction. Advertisers spend more and more, hoping to penetrate a barricade set up by increasingly militant consumers. It’s literally a war, with strategies to match. The only hint of concession to the increasing power of the consumer has been search, and that has been done reluctantly. Remember Einstein’s definition of insanity? “Doing the same thing over and over again and expecting different results.”

If you look at the characteristics of an infomediary laid out by Singer and Hagel, Google has many of them in place already, and certainly has the resources to assemble the rest. The one piece that’s missing, and this is the critical one, is a purely customer-centric approach. For all Google’s focus on the user experience, their advertising models are still primarily driven by advertisers, not consumers. But for the model to work, consumers have to have complete trust in the infomediary and be willing to share their personal information. As we’ve seen with the initial pushback to personalization, there’s still a healthy degree of suspicion on the part of users that Google will use personal information for its benefit and not the advertiser’s.

4000 Ads a Day and Counting

First published October 11, 2007 in Mediapost’s Search Insider

It’s not easy being a consumer. Current estimates indicate that the average urban dweller is exposed to between 3,000 and 5,000 advertising messages every day. That means, settling on the middle number, that every waking hour (sleep seems to be our only reprieve, and I hear they’re working on that) you’re presented with an ad every 14.4 seconds. That’s every 14.4 seconds, every minute of every day you’re alive. The frequency of this advertising barrage has doubled in the past 30 years.

“Are We There Yet?”

So, let’s imagine that your 5-year-old child interrupted you every 14 and a half seconds with “Moooommmm…” or “Daaaaddd…”. If we use my patience limits as a baseline here, that mean’s you’d last about 1.3 minutes before you went ballistic. The difference, of course, is that we’re genetically hardwired to pay attention to our children, much as we sometimes might try not to. We’ve been conditioned to ignore advertising.

But what happens when we really want to buy something? Suddenly, we’re looking for information, and we spend a lot of time doing so. At least, that’s true for some purchases. Take a computer, for instance. It’s not unusual to spend 10 to 15 hours researching a computer purchase, from the minute you decide you need one to the minute you tear open the box in your home. That’s not including the many hours needed to get your “plug and play” box actually playing after plugging.

The Cost of Consumer Research

Of course, we generally don’t put a cost on our time, but let’s say an hour of your time is worth about $40 (an average rate for someone making $75,000 per year). That means that $1,000 box of electronics cost you an additional $600, just in time spent to pick the right box.

The Internet is not making this any easier. Yes, as consumers, we’re armed with more information sources, but we spend a lot of time sorting out sense from nonsense. The explosion of information sources, both the good and the bad, mean we’re spending more time thinking about what we should buy. A study by ScanAlert found that that across many ecommerce categories, the average time to buy has increased by almost 79% in the past two years. Now, this was just the duration from first visit to purchase in the actual online store. It doesn’t include any consumer research before visiting the store. But I think we’re safe to assume that there would be a corresponding increase in the amount of online consumer “tire kicking.”

It’s No Picnic for Advertisers Either

Before you feel too sorry for yourself, let me tell you, it’s not easy being an advertiser, either. How do we get past the filters? How do we stand out from the other 3,999 messages you’ll hear today?

To recycle some research I did for a previous column (because research is a terrible thing to waste), the Ontario Tourism Board ran newspaper ads in Toronto targeting people looking to vacation in the province. The ad cost (at posted rate card rates) about $54,000. Even with an exceptional response rate, that ad might sneak though the filters of 1,700 or so people and actually catch their attention. This works out to an average cost of about $32 per introduction, or, to put it another way, $32 to tear a hole through that advertising barricade you’ve been building.

Got a Minute? I’ll Make it Worth Your While

So, if advertisers are willing to pay to get your attention, why not cut out the middle man and pay you directly? Why should the Toronto Star get all that money, when you’re the person the advertiser wants to talk to? What if every one of those 4,000 advertisers who are going to try to get your attention today (Consuummmerrr…Consummmerrr!) paid you a dollar to listen to what they have to say? You’d do okay financially, to the tune of about $1.46 million a year. Of course, your brain would explode after the first hour.

The concept is not as far-fetched as it seems. In fact, in 1999 John Hagel III and Marc Singer, both principals with McKinsey and Company, wrote a book called “Net Worth” that explored this very premise (along with a number of others) as a potential online business model. The book provided a detailed business plan for a new concept: the infomediary. Some of the details have been passed over in the last eight years since publication, but the basic premise still addresses a significant disconnect in today’s advertising marketplace. Next week, I’ll lay out the foundation of infomediaries and look at how some of our favorite search players seem to be inching their way towards Hagel and Singer’s proposal.

We now return you to your regular commercial onslaught.

A Caffeine Fueled Vision of the Future

This week, for some reason (largely to do with thinking I could still handle caffeine and being horribly wrong), a number of pieces fell into place for me when it came to looking at how we might interact with computers and the Internet in the future.  I began to sketch that out in my SearchInsider column today (more details about the caffeine episode are in it) , but quickly found that I was at the end of my editorial limit and there were a lot of pieces of the vision that I wasn’t able to draw together.  So I promised to put a post on this blog going into a little more detail.

The ironic thing about this vision was that although I’d never seen it fully described before, as I thought about it I realized a lot of the pieces to make this happen are already in development.  So obviously, somewhere out there, somebody also seen the same vision, or at least pieces of it.  The other thing that struck me was: it all made sense as a logical extension of how I interacted with computers today.  Obviously there’s a lot of technology being developed but if you take each of those vectors and follow it forward into the future, they all seem to converge into a similar picture.

Actually, the most commonly referenced rendering of the future that I’ve seen is the world that Spielberg imagined in his movie Minority Report.  Although anchored in pop culture, the way that Spielberg arrived at his vision is interesting to note. He took the original short story by Philip K. Dick and fleshed it out by assembling a group of futurists, including philosophers, scientists and artists, and putting them together in a think tank.  Together they came up with a vision of the future that was both chilling and intriguing.

I mention Minority Report because there are certain aspects of what I saw the future to be that seem to mirror what Spielberg came up with for his future.  So, let me flesh out the individual components and provides links to technology currently under development that seem to point this way.

The Cloud

First of all, what will the web become?  There’s been a lot of talk about Web 2.0 and Web 3.0, or the Semantic Web envisioned by Tim Berners Lee.  Seth Godin had a particularly interesting post (referenced in my column) that he called the Web4.  All these visions of the Web’s future share common elements. In Godin’s version, “Web4 is about making connections, about serendipity and about the network taking initiative”. This Web knows what we’re doing, knows what we have to do in the future, knows where we are at any given time, knows what we want and works as our personal assistant to tie all those pieces together and make our lives easier.  More than that, it connects us a new ways, creating the ad hoc communities that I talked about in my earlier post, Brain Numbing Ideas on Friday afternoon.

For the sake of this post, I’m calling my version of the new Web “the Cloud”, borrowing some language from Microsoft. For me the Cloud is all about universal access, functionality, connection and information.  The Cloud becomes the repository where we put all our information, both that which we want to make publicly accessible and that which we want to keep private.  Initially this will cause some concern, as we wrestle with the change of thinking required to understand that physical ownership of data does not always equal security of that same data.  We’ll have to gain a sense of comfort that data stored in online repositories can still remain private. 

Another challenge will be understanding where we, ourselves, draw the line between the data we choose to make publicly accessible and the data we want to keep for our own personal use.  There will be inevitable mistakes of an embarrassing nature as we learn where to put up our own firewalls.  But the fascinating part about the Cloud is that it completely frees us physically. We can take all the data we need to keep our lives on track, stored in the Cloud, and have it accessible to us anywhere we are. What’s more, everyone else is doing the same thing.  So within the Cloud, we’ll be able to find anything that anyone chooses to share with us. This could include the music they create, the stories they write, or on a more practical level, what our favorite store currently has in stock, or what our favorite restaurant has on for it’s special tonight.  Flight schedules, user manuals, technical documentation, travel journals…the list is endless.  And it all resides in the Cloud, accessible to us if we choose.

The other really interesting aspect of the Cloud is the functionality it can offer as we begin to build true applications into the web, through Web 2.0 technology. We start to imagine a world where any functionality we could wish for is available when we need it, and where we can buy access as required.  The Cloud becomes a rich source of all the functionality we could ever want.  Some of that functionality we use daily, to create our own schedules, to communicate, to connect with others and to manage our finances.  Some of that functionality we may use once or twice in a lifetime.  It really doesn’t matter because it’s always there for us when we need it.

The functionality of the Cloud is already under development.  The two most notable examples can be found in Microsoft’s new Office Live Suite and in the collection of applications that Google is assembling.  Although both are early in their development cycles, one can already see where they could go in the future.

The final noteworthy aspect of the Cloud is that it will create the basic foundation for all communication in the future.  Our entertainment options will be delivered through the Cloud.  We will communicate with each other through the Cloud, either by talking, writing or seeing each other.  We will access all our information through the Cloud.

For the Cloud to work, it has to be ubiquitous.  This represents possibly the single greatest challenge at the current time.  The Cloud is already being built, but our ability to access the Cloud still depends on the speed of our connection and the fact is right now, our wireless infrastructure doesn’t allow for a robust enough connection to really leverage what the Cloud has to offer.  But universal wireless access is currently being rolled out in more and more locations, so the day is drawing near when access will cease to be a problem.

So, when the Cloud exists, the next question is how do we access it?  Let’s start with the two access points that are most common today: home and at work.

The Home Box

The Home Box becomes the nerve center of our home.  It acts as a control point for all the functionality and communication we need when we’re not at work.  The Home Box consists of a central unit, which doubles as our main entertainment center, and a number of “smart pods” located throughout the home, each connected to a touch screen.

So, what would the Home Box do?  Well first of all, it would inform and entertain us.  The pipeline that funnels our entertainment options to us would be directly connected to the Cloud.  We would choose what we want to see, so the idea of channels becomes obsolete.  All entertainment options exist in the Cloud and we pick and choose what we want, when we want.

Also, the Home Box makes each one of those entertainment options totally interactive.  We can engage with the programming and shape it as we see fit.  We can manipulate the content to match our preferences.  The Home Box can watch four or five sporting events and assemble a customized highlight reel based on what we want to see.  The Home Box can scan the Cloud for new works by artists, whether they be visual artists, music artists or video artists, notifies us when new content is ready for us to enjoy.  If we have an interest that suddenly develops in one particular area, for instance a location that we want to visit on an upcoming vacation, the Home Box assembles all the information that exists, sorted by our preferences, and brings it back to us.  And at any time, while watching a video about a particular destination, we can tag items of interest within the video for further reference.  As soon as they’re tagged, a background application can start compiling information on whatever we indicated we were interested in.  Advertising, in this manifestation, becomes totally interwoven into the experience.  We indicate when we’re interested in something and the connection to the advertiser is initiated by us with a quick click.

But the Home Box is much more than just a smarter TV set or stereo.  It also runs our home.  It monitors energy consumption levels and adjusts them as required.  It monitors what’s currently in our fridge and our pantry (by the way, computers are already being built into fridges) and notifies us when we’re out of something.  Or, if there’s a particular recipe we want to make, it will let us know what we currently have and what we need to go shopping for.

Microsoft already has the vision firmly in mind.  Many of the components are already here.  The limited success of Microsoft’s Windows Media Center has not dissuaded them from this vision of the future.  Windows Media Center is now built into premium versions of the Vista operating system. And the is Smart Pods I refer to?  Each Xbox 360 has the ability to tap right into windows XP Media Center.  The technology is already in place.

The Work Box

Probably the least amount of change that I see in the future is in how we access the Internet at work.  For those who of us who work in an office environment, we’re already fairly well connected to the Internet.  The primary difference in this case would be where the data resides.  Eventually, as we gain comfort with the security protocols that exists within the Cloud, we will feel more comfortable and realize the benefits that come with hosting our corporate data where it’s accessible to all members of the organization, no matter where they are physically located.

But consider what happens for the workers who don’t work in an office environment.  Access to the Cloud now allows them to substantially increase their connectivity and functionality while they’re mobile.  You could instantly access the inventory of any retail location within the chain.  You can see if a parts in stock at the warehouse.  You can access files and documents from anywhere, at any time.  And, you can tap into the core functionality of your office applications as you wish, where ever you happen to be.

Once again, much of the functionality that would enable this is already in place or being developed.  In the last year we at Enquiro have started to realize the capabilities of Microsoft Exchange Server and Sharepoint services.  Just today, Google announced new enterprise level apps would be available on the web. Increasingly, more and more collaborative tools that use the Internet as their common ground are being developed.  The logical next step is to allow these to reside within the Cloud and to free them from the constraints of our own internal hardware and software infrastructure.

The Mobile Device

When we talk about tangible technology that will enable this future; hardware that we can see and touch, the mobile piece of the equation is the most critical.  For us to truly realize the full functionality of the Cloud, we have to have universal access to it.  It has to come with us as we live our lives.  The new mobile device becomes a constant connection to the Cloud.  Small, sleek, GPS enabled, with extended communication capabilities, the new handheld device will become our computing device of choice.  All the data and the functionality that we could require at any time exists in the Cloud.  The handheld device acts as our primary connection to the Cloud  We pull down the information that we need, we rent functionality as required, we do what we have to do and then we move on with our lives.

Our mobile device comes with us and plugs into any environment that we’re in.  When we’re at work, we plug it into a small docking station and all the files that we require are interchanged automatically.  Work we did at home is automatically uploaded to the corporate section of the Cloud, our address books and appointment calendars are instantly updated, new communications are downloaded, and an accurate snapshot of our lives is captured and is available to us.  When we get home again we dock our mobile device and the personal half of our lives is likewise updated.

Consider some practical applications of this:

When we go to the gym, our exercise equipment is now “Cloud” enabled.  Our entire exercise program is recorded on our mobile device.  As we move from station to station we quickly plug it into a docking station, the weights are automatically adjusted, the number of reps is uploaded, and as we do our exercises, appropriate motivating music and messages are heard in our ear. At the same time, our heart rate and other biological signals are being monitored and are being fed back to the exercise equipment, maximizing our workout.

When we’re at home, we quickly plug our mobile device into the Smart Pod in the kitchen, and everything we need to get on our upcoming shopping trip is instantly uploaded.  What’s more, with the functionality built into the Cloud, the best specials on each of the items is instantly determined, the best route to pick up all the items is send to our GPS navigation module, and our shopping trip is efficiently laid out for us. While we’re there, the built in bar code scanner allows us to comparison shop on any item, in the geographic radius we choose.

As I fly back from San Francisco, a flight delay means that I may miss my connecting flight in Seattle.  My mobile device notes this, adjusts my schedule accordingly, automatically notifies my wife and scans airline schedules to see if an alternative flight might still get me home without an unexpected layover near SeaTac Airport. It there’s no way I can make it back, it books me a room at my prefered hotel.

The Missing Pieces

I happen to think this is a pretty compelling vision of the future.  And as it started to come together for me, I was surprised by how many of the components already exist or are being currently developed.  As I said in the beginning, it seems like a puzzle with a lot of the pieces already in place.  There are some things, however, we still need to come together for this vision to become real.  Here are the challenges as I see them.

Computing Horsepower

For the mobile device that I envisioned to become a reality, we have to substantially up the ante of the computing horsepower.  The story that led to my writing of the SearchInsider column was one about the new research chip that is currently under development at Intel.  Right now the super chips are being developed for a new breed of supercomputer, but the trickle-down effects are inevitable.  Just to give you an idea of the quantum leap in performance we’re talking about, the chip is designed to deliver teraflops performance.  Teraflops are trillions of calculations per second.  The first time teraflops performance was achieved was in 1997 on a supercomputer that took up more than 2000 square feet, powered by 10,000 Pentium Pro processors.  With the new development, that same performance is achieved on a single multi-core chip about the size of a fingernail. This opens the door to dramatic new performance capabilities, including a new level of artificial intelligence, instant video communications, photorealistic games, multimedia data mining and real-time speech recognition.

A descendent of this prototype chip could make our mobile device several orders of magnitude more powerful than our most powerful desktop box today.  And when implanted in our Home Box, this new super chip allows us to scan any video file and pick up specific items of interest.  You could scan the top 100 movies of any year to see how many of them reference the city of Cleveland, Ohio (not exactly sure why you’d want to do this), or included a product placement for Apple.

Better Speech Recognition

One of the biggest challenges with mobile computing is the input/output part of the problem.  Small just does not lend itself to being user-friendly when it comes to getting information in and out of the device.  We struggle with tiny keyboards and small screens.  But simply talking has proven to be a remarkably efficient communication tool for us for thousands of years.  The keyboard was a necessary evil because speech recognition wasn’t an option for us in the past.  We can talk much faster than we can talk.

I recently was introduced to Dragon Naturally Speaking for the first time.  I’ve been trying it for about three weeks now.  Although it’s still getting to know me and I’m still getting to know it, when it works it works very well.  I found it a much more efficient way to interact with my computer.  It would certainly make interacting with a mobile device infinitely more satisfying.  The challenge right now with this is that speech recognition requires a fairly quiet environment, you’re constantly speaking to yourself, and mobile devices just don’t have enough computing power to be able to handle it.

We’ve already dealt with the computing horsepower problem above.  So how do we deal with the challenge of being able to get our vocal commands recognized by our mobile device? Let me introduce you to the subvocalization mic.  The mic actually picks up the vibrations from our vocal cords, even if we’re only whispering, and renders recognizable speech without all the background noise.  New prototype sensors can detect sub vocal or silent speech.  We can speak quietly (even silently) to ourselves, no matter how noisy the environment, and our mobile device would be able to understand what we’re saying.

Better Visual Displays

The other challenge with a mobile device is in freeing ourselves from the tiny little 2.5″ x 2 .5″ screen.  It just does not produce a very satisfying user experience.  One of the biggest frustrations I hear about the lack of functionality with many of the mobile apps comes just because we don’t have enough screen real estate.  This is where a heads-up display could make our lives much, much easier.  Right now they’re still pretty cumbersome and make us look like cyborgs but you just know we’re not far from the day where they could easily be built into a pair of non-intrusive eyeglasses.  Then the output from our mobile device can be as large as we wanted to be.

Going this one step further, let’s borrow a scene from Spielberg’s Minority Report.  We have the heads-up display which creates a virtual 3-D representation of the interface.  We could also have sensors on our hands that would turn that display into a virtual 3-D touchscreen experience.  We could “touch” different things within the display and interact with our computing device in this way.  Combined with sub vocalization speech commands, this could create the ultimate user interface.  Does this sound far-fetched?  Microsoft has already developed much of the technology and has licensed it to a company called eon reality.  Like I said no matter what the mind can envision, it’s probably already under development. As I started down this path, it particularly struck me how many of the components under development had the Microsoft brand on them.

If you can fill in other pieces of the puzzle, or you have your own vision of the future, make sure you take a few moments to comment.

Most Shoppers Don’t “Shop Around,” at least Physically

A new study from the Grizzard Performance Group found that US Shoppers don’t have time to “shop around”, with 62% not bothering to compare prices at even two stores. However, they’re very open to saving money, right up to the time of purchase. It’s just that they don’t have the time.

This ties in with my previous post about real time inventory and e-shopping, currently being tested by a a few online services at malls and major chain stores. When we can quickly and conveniently check prices at a number of stores in our area through our handheld devices, trust me, shopping will change forever. And then, a whole new dimension of direct response marketing comes into play. Last minute pushes of discounts at the point of purchase, delivered through your mobile device. As the study by Grizzard indicates, consumers are very open to saving money on a comparable product, even if it wasn’t previously in your consideration set. So consider this. The shopping engine knows what you’re looking for, knows where you are, and knows what comparable products are in stock in the same store. The advertiser can purchase the right to push a message to you right at the point of purchase, offering you 15% off their product, or even offering an automated “match and beat” deal, where it automatically matches the price of whatever you’re buying, and takes a further 10% off. A store around the corner could do the same thing, making it worth your while to check out at least one more store. All these things could easily be handled by algorithms and pre-set pricing thresholds.

And what if we take the Priceline approach? You’re ready to buy, but before you do, you send an offer to stores in your area with what you’re willing to pay for a particular product. The store in question can then decide whether to accept your offer or not. It would be true consumer control. And the really ironic thing? It’s a whole bunch of sophisticated technology, but it brings us right back to old fashioned haggling over the price. Isn’t it fascinating that the more sophisticated the technology, the closer we get to how we used to shop a century ago?

A Sign of Things to Come: eShopping at a Store near You

A small article in the Wall Street Journal (a subscription is needed to read the whole article) is a precursor of a big shake up to come. It’s something I’ve been predicting for sometime now, and while it will take awhile to gain traction, it will turn local retail upside down.

Three malls in California and one in Arizona have agreed to allow shoppers to check prices on actual inventory through text messages from their cell phones with a service called NearbyNow. According to their site, NearbyNow plans to add another 17 malls throughout the US to their network by April. Another service called Slifter is focusing on national chains like Best Buy, CompUSA and Foot Locker.

Here’s why this is revolutionary and why you’ll be hearing more.

  • For shopping, this represents discontinuous innovation. It’s a big win for the user, allowing them to shop smarter than ever before. Consumer demand will drive adoption of this new approach.
  • For retailers, this is scary as hell. By allowing their inventory to be captured realtime, they’re agreeing to be compared side by side with everyone else, including online retailers with no physical overhead to drive up prices. It completely levels the playing field.
  • As a number of technologies improve and converge, this will become substantially more useful and powerful. Mobile computing, GPS and search functionality will make this a must have for consumers.
  • It completely fuses the online and offline worlds, making the transition seamless.

This is one of those ideas you just know will take off, but there’s going to be some significant hurdles to overcome. These services are only as good as their success at signing up merchants. The more stores in the network, the more successful. If only a few are included, consumers will always wonder if there’s a better deal that isn’t part of the service, defeating the purpose. And a number of retailers will resist this trend til the bitter end. Ultimately, it will be consumer insistence that will force the laggards to join.

Another challenge will be the user interface. Right now, both services run on cell phones, meaning you have to deal with an awkward keypad and stripped down display. But this problem will rectify itself with advances in mobile technology.

In the world of shopping, this changes everything.