THE FUTURE OF THE INTERNET AND THE FUTURE OF BUSINESS

Script for a speech delivered May 11, 1999, in Lewiston, Maine, at "Cities of the Androscoggin Annual Dinner and Business Forum on Technology and the Future" 

A videotape of this speech (44 minutes) is available for $20. To order, send email to seltzer@samizdat.com or go to Amazon.com 

Copyright (c) 1999 Richard Seltzer All rights reserved. To correspond with the author, send email to Richard Seltzer

I understand that the Farmer's Almanac is published here in Lewiston. Imagine trying to predict today what the weather is going to be in the year 2009. 

And remember that the World Wide Web is just five and a half years old. Many of the businesses and business models that are making headlines today didn't exist in any form 10 years ago.
 
 

On the other hand, technology is far more predictable than the weather. 

We can presume, for instance, that everything that can be invented will be invented. 

We just don't know when it will happen, and the delay between invention and widespread adoption is unpredictable. And there's no guarantee that any particular invention -- no matter how amazing -- will ever become widespread. 

But we can make some educated guesses about adoption of technology, because that depends on human nature. Only what people will actually use will survive. 

Business is about people, about relationships with people. 

And the Internet is about connecting people to people -- it make it easier to build relationships with people at a distance. 

So maybe there are some interesting things we could say about the future of the Internet and its impact on the future of business. 

There are four ways to look at the future of technology: 

* media coverage, 

* giblet soup, 

* trends, and 

* end points.

 The media typically covers technology as infotainment, with technobytes, and scifi-style speculation. This kind of reporting is both tempting and confusing. What's real? What should you invest in? You're dealing here with possibilities that never existed before. To better understand the implications of what's going on, should you read the Wall St. Journal? Or would you be better off reading scifi novels? 

On the other hand, the epitome of scifi -- Star Wars -- isn't about the "future" at all. It takes place "long ago, in a glaxy far away." And the Force isn't technology -- it's in you.
 
 

How many of you have ever been to a major computer show? A Comdex or an Internet World? 

There you see thousands of vendors -- every one of which has THE answer; but all these answers just don't add up. I call it "giblet soup" -- thousands of pieces, each of which might look very good separately, but that give you no sense of where it's all headed. Typically, you come away from events like that more confused than you were to begin with. 

Next comes trends. We all have our favorite trends, which we go out of our way to read about and hear about that, that we love to talk about. Here are a few of my favorites -- 

* digital video (you control it; it's searchable) 

* 

* distance education 

* 

* virtual companies 

* 

* virtual reality 

* 

* electronic books 

* 

* voice recognition 

* 

* Internet agents 

* 

* microcommerce 

* 

* global marketplace.

 * 

Magazines and magazine-style TV programs love trends. PBS will focus on a trend like virtual reality, and convince you in a hour that that's at the heart of where the world is headed. Then they'll do another show about another trend, then another and another. And these trends overlap and compete. If one "wins," that makes a major difference in the fate of the others. So what should you make of it all? 

Wired Magazine is a classic case -- they seem compelled to present a new "revolution" each and every month. 

I prefer to deal with the future in terms of "end points." I look ahead 3-5 years and consider what -- given everything that's happening now -- is extremely like to be real and widespread by then. I'm not betting on any particular technology or product -- the direction is clear and there may be many competitors, and one way or another, whether one wins or all win, this should be the case by then. 

Right now I see three major Internet-related end points 3-5 years from now: 

* bandwidth will be free like water 

* 

* mixed media will prevail (rather than individual knockout winners) 

* 

* the Internet will be so pervasive that it's "invisible" -- taken for granted

 * 

First let's take a look at bandwidth. 

A few years back, major media companies made huge investments in "interactive TV," presuming that they could make back what they spent many times over because they would "own" the houses that they wired, that for years head they would be the exclusive purveyors of movies, entertainment, and online shopping to those homes. That was an enormous mistake. They missed the fact that interaction with other people is far more compelling and addictive than passive entertainment and shopping. They also missed the fact that there would be alternative means of providing those same experiences. Along came the Internet, and those expensive pilots died. 

Today we see Internet over TV cable lines, over fiber optic cable; we see DSL over ordinary phone lines; we see wireless delivery of Internet; we even see Internet over electric power lines. I'm not a prophet. I can't say which of these means of delivering Internet to the home and to businesses will get what percent of the business. But I do see clearly that there will be choice, not monopoly. 3-5 years from now, many of you may in fact have more than one Internet provider and more than one way of receiving and sending Internet traffic. 

Choice means competition, which means low prices and high speed. I expect that the kind of Internet speed that today we consider "premium" -- fast enough for a good video and audio experience -- will by then be quite inexpensive, so inexpensive that most of us take it for granted, like we take water for granted. (Even though in some parts of the world such bandwidth may still be rare and expensive, just as today there are some parts of the world where water is expensive.)
 
 

What's the meaning for business of high bandwidth at low cost? 

That will mean that audio and video over the Internet bcome useful for business. 

These capabilities have been technically possible for years already. I remember being wowed by RealAudio and by Vocal Tech's videophone at Internet World early in 1995. But even today very few people have a fast enough connection to use those capabilities to their fullest. 

In 3-5 years, enough people will have extremely fast connections, so it will become relatively common for you to have videophone interactions with your employees (who may be working at home or on the road) and with partners and with customers. 

These capabilities will also take distance education to a new level -- making the delivery of courses and training over the Internet far more compelling and effective.
 
 

What do I mean by "mixed media"? 

I mean that instead of network computers knocking out PCs or vice versa, instead of there being clear winners in the battle of the devices that help you connect to the Internet -- many gadgets will co-exist. 

Already, you can get your email over your pagers. Soon there will be handheld wireless videogames and gadgets of all kinds that connect to the Internet for specialized purposes. Imagine a pocket gadget that connects you to your online broker and beeps when a stock you are watching reaches a critical point. You may be in the middle of a meeting, but you can discretely take a glance, and with a few keystrokes buy or sell immediately; while the meeting continues uninterrupted. 

Expect to see services that combine telephone, radio, television, and computer networks. 

Expect a multiplicity of really interesting and valuable new services, each with their own special gadget. 

Will this be wonderful? No. Each separately might be wonderful, but all together -- that's another matter.
 
 

Convenience breeds complexity 

Today, you may have 2 or 3 or even 4 remote controls in your livingroom -- the TV, the VCR, cable, maybe a CD player or DVD. 

3-5 years from now you may have the equivalent of a dozen or two dozen or even more -- little gadgets, each of which are very important to you for what they can do, the unique Internet-based service that they can connect you to. But it could be hell keeping track of it all. 

In the computer industry, that's what's known as an "opportunity". Just like to Microsoft a bug is a "feature". 

There will be lots of money to be made integrating all these disparate pieces, all these separate services, making it so you have smooth access to all aspects of your online identity from wherever you may be and from whatever device you may happen to use to connect to the Internet.
 
 

Today there are microprocessors in your car and your microwave and your VCR and your refrigerator, and you simply take them for granted. In the future, chips like those will be networked together, will "talk" to one another, and will be connected to the Internet. In the near future, the Internet will be embedded in everything and easy to use and taken for granted. It will become an extension of us -- like the telephone and the car.
 
 

Since my assignment calls for looking ten years out -- to 2009 -- I'll do so. But with the understanding that while whatever can be invented will be invented, there is no telling if or when it will be widely adapted. 

At MIT's Media Lab, they have already developed computers that you wear and things that think and that talk to one another. 

On the cover of a recent issue of Technology Review, you see a head-mounted computer, where the image is projected directly to the retina of your eye rather than to a screen. In more far-fetched designs, the central processor might be in the heel of your shoe and your skin or your clothing provide connections to other parts of the computer you wear. 

Computer chips could be embedded in anything -- not just appliances, but also your shirt, your bedspread, your furniture -- and they could all "talk" to one another.
 
 

Why would anyone want a shirt or a table that thinks? 

Today, you can buy a full-fledged, well-equipped computer for less than a wooden dining room table. In 10 years, a computer chip will probably cost less than the nails in a table. So the added cost should be insignificant. 

Also the real benefit comes not from having a shirt that thinks, but rather when all these objects communicate with one another and make adjustments for your benefit and without your intervention. 

So should you worry about competition from high-tech bedspread and shirt companies? Probably not. 

If and when that technology becomes widespread, all cloth would come with circuitly built in. It would be cheaper for the suppliers to make it that way -- the cloth communicating with their manufacturing equipment to minimize waste and maximize efficiency. 

And the cloth would then be able to talk to your manufacturing equipment, to help you maximize flexibility, to meet individual needs of customers.
 
 

If you are talking about blue-sky, sci-fi-style future, look for the meeting of biotechnology and computer technology -- bio chips and computer circuitry hooked directly to your skin, eyes, ears, and then direction connection to your brain -- the coming of cyborgs. 

That's technologically possible. But will it happen anywhere but in labs? Will it become widespread? Will it impact your business? 

Maybe. Maybe not. Nobody knows. 

Our vision of the future ages fast. 

Nothing sounds more outlandishly out of date than yesterday's vision of the future.
 
 

I'm reminded of the nostalgia of Tomorrowland. 

I went to Disneyland as a kid in the 1950s, then returned with my own first child in the 1970s. And in the 1970s, they were still using the same Tomorrowland exhibits. I was struck by how out of date the Disney image of the future was. "Progress is our most important product." "Live better electrically." It was a future to be powered by cheap and abundant nuclear-generated electrical power. And in the 1970s, with the oil embargo and concerns over the long-term effects of radiation, the popular vision of the future was quite different -- far more bleak -- a matter of making due with every declining supplies of natural resources. 

Now in the 1990s, that bleak vision of the 70s seems very dated. For reasons I haven't been able to figure out, gas costs less now than it did in the 70s. And we approach the future much more confidently and optimistically, as evidenced by the Dow rocketing past 10,000. 

What matters for business isn't technology in itself (unless you are in the technology business). 

What matters is how people interact with one another and how technology affects that.
 
 

If you want your business to survive, then you should 

* make a better mousetrap (which means not the one that is technically the best, but rather the one that people want most), and 

* 

* serve your customers well, no matter where they may be.

 * 

What should you do today? 

Keep in mind that the Internet is not just a library and not just a shopping mall. 

It is a way to connect people to people.
 
 

Beware of the temptations of technology. 

* Don't throw your customers away based on data about profitability. 

* 

* Don't lose contact with your customers.

 * 

When Digital Equipment realized that 80% of their business came from 20% of their customers, they threw away the 80% to focus on the 20%. Then six months or a year later they discovered that once again 80% came from 20%, so they cut back on the number of customers they would focus on again, and then again. The idea was that if you focused on the 20%, you would get more of their business. But it didn't work that way. Having seen what the company had done with the other customers, many of these customers felt they couldn't count on Digital to be there for them long-term. So Digital not only lost the customers they deliberately dropped, they also soured relations with the remaining ones. 

At a recent conference, I heard a pitch for one-to-one marketing, which was another variant of this same theme. The speaker advocated using sophisticated data-mining techniques to learn more about your customers. That sounded good. But the purpose wasn't to serve those customers better, but rather to identify which customers were the most profitable to you, so you could deliberately dump the rest. For instance, a bank might get rid of a class of high-cost customers by raises fees. 

Tactics like that can bring immediate short-term improvement in profits, but long-term they can be the death of a company, because there's no way for you to know today which of your customers from today are likely to be the best and most profitable ones 3-5 years or even 10 years from now. 

Regarding losing contact with customers, some people misinterpret the power of the Internet. They seek to automate transactions, to keep the cost of transactions very low. But, in fact, the main power of the Internet is in building relationships. The relationship is the asset, and automated processes risk throwing away the relationship. 

Dependence on distributors poses the same kind of risk. Yes, it often makes good sense to sell through distributors; but then use the Internet to provide information, and highly responsive service to the end users -- build that relationship, earn their loyalty, or they'll simply chase after the lowest price and forget you.
 
 

It doesn't take the latest and greatest technology to build an effective Web site. 

Don't start not with the latest whiz-bang effects that your Webmaster or some Web-design company come up with. 

Rather, ask the basic questions: 

* what's your target audience? 

* 

* what content and experiences would draw them to your Web site? 

* 

* what additional services might they want and be willing to pay for?

 * 

Keep in mind that: 

* Most people navigate the Internet by way of search engines. Hence, content -- text -- can draw traffic to a Web site. 

* 

* Pictures which are directly related to products can help sell those products, but graphics used for decoration simply slow the user down -- they don't attract anyone -- a home page is not equivalent to a magazine cover -- you only see the graphics and gimmicky effects after you have chosen to go to that page, and then, quite often, they just get in the way

 * 

If you want targeted traffic at low cost, design your pages for search engines. That means design your pages for the blind, because the webcrawlers that fetch pages for search engine indexes operate just like the blind. Some of the best Internet gurus today are blind -- using text to voice converters and non-graphical Web browsers. Just like the blind, webcrawlers can't "see" graphics and get stopped by fancy effects. 

Keep your pages simple. 

Don't be intimidated by the technology. Don't do things just because technology makes it possible to do them. Do what makes sense for your business, for serving your customers well.
 
 

So what do you need to do to succeed in the future? 

Let me give you some quick practical advice, to help you get experience in doing business online immediately, painlessly, and profitably. 

Go home and do your spring houseclearning. 

Set aside everything that has no intrinsic value that's more than 30 years old.
 
 

Go to EBay and search for items of that kind and see what they sell for thand how they are described. 

Join EBay and start selling. 

Have all you managers do the same -- clearing out their attics and basements and selling junk at EBay.
 
 

If you do this -- and not just for a day -- keep it up for a month or more -- you can learn some important lessons about ecommerce. 

First, you should learn the value of feedback and reputation and relationships. EBay operates without transaction software. It just links buyers and sellers, who then contact one another by email and snail mail to take care of details and make payment and deliver the goods. EBay also has a very effective feedback mechanism. Any member can leave feedback -- positive, neutral or negative -- about any other member. That feedback becomes the basis of your community reputation and has an enormous effect on the number of bids you get for the items you sell and how high the prices go. 

When I started experiment at EBay with old comic books, I was getting an average of $2-3 each. After a month, after I'd built up a few dozen positive feedbacks, I was getting $10, $20, even $30 for comparable comics. 

Successful ecommerce is not about automated transactions. It is about relationships. 

If I had used automated transaction software to sell those same comics, it would have saved me time and hassle, but I would never have built relationships and reputation and I'd have just kept getting $2-3 each. 

"Relationship" isn't just an intangible concept -- it can directly effect the demand and price for your products and services. 

Set up your online business accordingly. 

Make it people intensive rather than automated. 

Also, consider using EBay to test marketing your products and your messages and for testing your pricing. It's an enormous resource -- a global marketplace with millions of people that you can tap into for an insertion fee of about 25 cents.
 
 

So how should you use the Internet to improve your business today? 

* Talk to your customers. 

* 

* Get to know your customers. 

* 

* Serve your customers as well as possible.

 * 

The Internet can help you do all of those.
 
 

Basically, the impact of technology on business is a matter of spin control. 

Not in the sense of Spin City or Wag the Dog. 

Rather, Internet technology can help you spin gold out of straw -- like selling old comic books or bottle caps. 

But that same technology can also help you take something of value and wind up with just straw -- by throwing away customers and throwing away your relationships with customers. 

Your success all depends on how you use the technology. 

Keep your eyes on the customer. 

Use technology to reach new global customers. 

Use it to build closer relationships with customers, to understand them better, and to serve them better. 

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