Archive for March, 2009

Commercialization Is The Key To National Prosperity

Saturday, March 14th, 2009

It doesn’t matter where scientific discoveries and breakthrough technologies originate – for national prosperity, the important thing is who commercializes them. This summarizes the first and last chapters of Amar Bhide’s latest book “The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World”. In his essay in The McKinsey Quarterly, this Lawrence D. Glaubinger Professor of Business at Columbia University argues that the United States is miles ahead of every other country in the world when it comes to commercialization and go to market. Citing the examples of Japan, South Korea and Taiwan, who lag behind the US on commercialization after 150 years despite massive progress they’ve made in industry, educational system and military in the past few decades, Bhide attributes America’s lead to a “great and diverse team, which takes a very long time to build.” He concludes with the following assertion: “China and India aren’t close to catching up with the United States in the ability to develop and use technological innovations.”

In my opinion, which has been recently published in The McKinsey Quarterly, the present lead enjoyed by the US has little to do with time or team. An updated version of my letter to the editor is given below.

I’ve always believed that go-to-market is what separates a great idea from blockbuster revenues, so I agree with Amar Bhide’s views that commercialization is key to national prosperity. When I used to live in Germany, I used to get exasperated by those picturesque shops he refers to shutting down every Sunday, which was the only day in the week when I had time for shopping. As a result, I’m not surprised to hear Bhide’s contention that American retailers absorbed German inventory-reduction technologies more eagerly than local German ones did. 

But my views deviate from Bhide’s when it comes to the reasons. In my opinion, it’s attitude and mindset, not team or time.

An average German citizen believes that it’s unfair to make store employees work on Sundays or beyond 6PM on Saturdays (yes, they actually keep saying this in numerous opinion polls held periodically by retailers seeking to build a case for keeping stores open on Sundays, not to mention for extended hours on weekdays and Saturdays). That’s why German shops stay shut longer than American ones, and that’s why they’re inefficient. In India, even today, many Indians use the words “crass” and “commercialization” in the same sentence. It takes an economic downturn like the present one for many Indians to understand the importance of concepts like commercialization / go-to-market. In many parts of the world including India, invention for the sake of invention is considered noble, whereas profiting from it is perceived as greed.

It’s this attitude and mindset among many countries that has given the US a default lead in its commercialization and go to market capabilities. This lead can vanish if other countries undergo a change of attitude. While that could admittedly take longer than 150 years, it could also happen much faster.

How Micropayments Enable Digital Content Shopping

Wednesday, March 4th, 2009

Following on from my earlier blog post Micropayments – Saviors or Enablers?, I decided to check out how well they fare as enablers of digital content shopping.

Going back to Walter Isaacson’s essay in the TIME magazine, I agree that newspaper and magazine publishers should introduce the “pay-per-drink” model whereby they let customers buy and pay only for the specific article or video or whatever content they wish to buy. From my personal experience, I can easily relate to how badly a lack of this model has affected publishers’ ability to generate revenues.

I recall a number of occasions when I’ve come across an article or research report that I was so keen on reading that I wanted to buy it. But, the only way to do so was to sign up for an annual subscription costing a couple of hundred dollars. Even if I could afford that kind of money, there was no way I was going to spend it because (a) I was interested in only one item at that time (b) I’d no way of knowing if I’d ever visit that website in future, or (c) even if I did, if I’d find anything interesting enough, or (d) even if I did, whether the publisher be charging money for it or giving it away free. In a couple of cases, the website would quote a price for that item that was one-fourth of the annual subscription fee, which was a rude way of telling me that the publisher did not encourage pay-per-drink.

In all these occasions, I’ve been forced to give up my intention to purchase and the publisher has lost revenue opportunity.

The thrust of Isaacson’s argument was that, a modern crop of micropayment providers allow pay-per-drink, so they can save the newspaper and magazine industry.

In a larger context, let alone save, even to enable digital content shopping, it’s crucial for micropayment providers to support the pay-per-drink model. Since subscriptions cost 2-4 figures, they’re served well enough by conventional payment methods like credit or debit cards, so micropayment and pay-per-drink are inextricably linked to each other.

To see how this link played itself out, I decided to test-drive modern micropayment providers like SpareChange, BeeTokens and TipJoy mentioned in Isaacson’s essay and a few more like Onebip, SurfPin, PayMate and ZipCash that I came across subsequently.

On the face of it, all these micropayment methods support pay-per-drink. But, if you scratch the surface, you notice that all of them introduce a ‘subscription effect’ by which I mean that far more of the customer’s money (than the cost of the digital content) is stuck somewhere in the chain. 

Let’s take the example of SpareChange to understand the subscription effect.

You first need to open an account with SpareChange. Then, you need to fund the account by linking it to your credit card or bank account. Since the premise of Isaacson’s essay is that credit and debit cards charge high processing fees that make them unsuitable for purchases worth a few cents or dollars, it’s natural to expect SpareChange to specify a minimum pre-funding limit, just the way Skype and a few music download websites specify $10-20 as their minimum. Even if SpareChange doesn’t specify any minimum, you’re going to find it too time-consuming to enter your credit or debit card details (estimated at around 80-100 keystrokes) every time you want to pre-fund your SpareChange account just for your current purchase. So, either way, you’ll end up pre-funding your SpareChange account with $$ (say, $20) and spend this for multiple ¢ (say 10¢) purchases from multiple websites over a period of time. 

Effectively, you’ve avoided paying $$ to the publisher (aka web merchant) for a subscription, but you’re forced to pay $$ to SpareChange when all you wanted to do was buy something for 10 cents. This subscription effect vitiates the basic principle of pay-per-drink model according to which the customer should have a safe and convenient method for paying out just the exact amount of their present purchase, and not more.

This subscription effect is not unique to SpareChange, so it appears that none of the modern micropayment methods support genuine pay-per-drink.

Of course, SpareChange and others would argue that you can always spend the remaining credit on other websites that accept SpareChange. But, that’s not very different from the subscription-seeking publisher’s argument that you pay once for an annual subscription and keep downloading as many articles as you want for the whole year.

Genuine pay-per-drink will happen only when micropayment providers (and merchants themselves) understand and cater to one basic reality about digital content shopping, which is, when customers come to the checkout, it’s to pay for something costing a few cents. At that time, they’re not interested in buying anything else nor willing to commit to buy anything else in the future, so they shouldn’t be asked to shell out anything more than those few cents.

Given its strong need to support pay-per-drink, the adoption and success of micropayment methods will depend upon how well their operating model addresses this fundamental reality.

P2FM Services Walk The Tightrope Between Convenience and Security

Monday, March 2nd, 2009

The latest breed of American personal finance services like Mint and Wesabe provide great value by helping their users get a handle on their personal finances. Mint bills itself as an online personal finance service that securely downloads users’ financial transactions, categorizes their transactions, provides a unified view of all account activity and associated  account alerts, and offers personalized suggestions for significant savings opportunities.

Like traditional PFMs, Mint and others  provide generic news and advice related to personal finance  areas like income tax, interest rates, and so on.  But, by analyzing their users’ individual financial transactions, Mint and others are able to bolster their value proposition by making suggestions that are personalized for each individual. For example, Mint would be able to tell one user, “Hey Jack, you can earn $100 more by moving your $6,000 from your Bank of America account *6666 to ICICI Premium Savers Account”, and prod another one,  “Hi Jane, did you know that you can save $75 by moving your automobile insurance from XXX to YYY  insurer?” As a result, they are customized or individualized personal finance managers, somewhat like the financial advisors that high networth individuals employ. For  this reason, I’ll  use the term  ‘Personalized Personal Finance Manager’ or  ‘P2FM’ while referring to Mint, Wesable and other modern personal finance services.   

Welcome companions even in the best of times, P2FMs deliver more value now — what’s not to want about the chance to get every tip to earn more and spend less during these challenging economic times? No wonder P2FMs are seeing explosive growth in recent times with Mint alone claiming that it’s adding over 3,000 users every day, tracking $50 billion in transactions and $15 billion in assets and has identified more than $100 million in potential savings for its users.

Eager to experience P2FMs firsthand, I recently registered myself on Mint. At the outset, I was impressed by the anonymity Mint affords you by not asking you for your name or address. All it needs is your email address. Along the way, I learned that Mint would be able to deliver personalized suggestions relevant to me by analyzing transaction statements of my financial accounts without any efforts from my side. Wow, won’t that be very convenient, I said to myself.

To do all this, Mint required me to ‘link’ my financial accounts with its website. This meant sharing with Mint all the confidential information (like password, date of birth, and answers to secret questions) that I’d use to access any of my Internet Banking accounts. In other words, I’d be allowing Mint to get into my Internet Banking account on my behalf. 

This stopped me right in my tracks and I realized right there that P2FMs are walking a severe tightrope between convenience and security.

Even assuming I trusted Mint’s integrity and believed that it would / could never make improper use of my financial account credentials, I wasn’t so sure that a startup company would be able to protect my confidential information when large banks and credit card processors seem to be losing millions of customer records to hackers at regular intervals despite all their investments in security technologies. I also remembered the constant entreaties from banks never to reveal passwords to to anyone. So, I refused to link any of my financial accounts with Mint.

In the next two weeks, I received a couple of reminder emails from Mint asking me to link my accounts. I replied back to them sharing my security concerns. I haven’t heard back from them and assumed that they must be experiencing the same behavior from most of their registered users.

Lo and behold, that’s not the case.

According to data Mint presented recently in its response to Intuit’s challenge of its claimed user numbers, Mint mentioned that 30% of its 934,000 registered users (all in the US) haven’t linked any of their financial accounts to Mint (like me!). That meant that 70%, or 655K users, have linked at least one financial account to Mint (unlike me!). In fact, Mint claims that most of its users link between 5-6 of their financial accounts.

It seems that the value of personalized suggestions and the convenience with which it delivers them have allowed Mint to overshadow users’ security concerns.

Now, if P2FM services have seen explosive growth in the US, much of which has happened during the last six months of challenging economic times, we should be finding a similar trend in Europe, which is going through equally challenging times and has comparable Internet penetration as the US?

No! You’d be hard pressed to find any well-known personalized personal finance services in Europe. Why?

By automatically accessing their users’ financial accounts regularly (once every night, in the case of Mint), P2FMs may deliver great convenience to their users instead of asking their users to go through the inconvenience of downloading and submitting transaction statements frequently. But, in return for this convenience, users have to keep their security concerns aside and give away confidential information to P2FMs. Going by conventional wisdom about Europe’s security-consciousness, it’s no wonder that there are no well-known P2FMs in Europe.

To succeed in Europe and in many other countries in the world, P2FMs will have to tweak their model to recognize that not everyone will compromise on security for the sake of convenience. They’ll have to think of innovative ways to allay users’ security concerns, yet maintain middle-ground on convenience. The only P2FM I came across in Europe shows some progress in that direction.

Kublax, a barely known P2FM in the United Kingdom, does not force users to enter financial account credentials if they choose not to, so it’s secure. It analyzes transaction statements that are published on its website by users who visit their financial accounts themselves to download transaction statements. Although its website contains step-by-step instructions on how to download transaction statements from the Internet Banking websites of leading banks in the UK, I found this to be a somewhat cumbersome procedure. Then, when I realized that I have to repeat this procedure periodically (Mint does this once a day) so that that Kublax’s alerts and suggestions are current and relevant, I decided it was not worth taking so much trouble just to save some 100-200 bucks — which is the maximum savings that I reckon P2FMs can deliver per user on an average going by Mint’s claim of $100M in savings suggestions (for its 655K users). 

So, P2FMs have a long way to go to achieve the middle-ground on convenience.  

One concluding thought: If 655K users in the US didn’t mind sharing their financial account passwords with a startup like Mint, I’m sure a much greater number won’t mind doing so with their trusted banks. This should be the tipping point for banks to start offering personal finance solutions on their Internet Banking portals especially when seen in the context of the large user count amassed by early banking-sector PFM providers like Bank of America (2.5 million) and Wells Fargo (1 million).

Securing Airtel WiFi Broadband Connection

Sunday, March 1st, 2009

I recently upgraded my home Airtel broadband connection to WiFi so that the three PCs and one Palm PDA in my home can access the Internet simultaneously. Airtel’s engineer had set up a secured network and left the WiFi router (beetel 450BXI) to its default SSID of ‘Broadcom’. 

A few days later when I visited my father’s house, I noticed that Airtel had setup the WiFi router there also as ‘Broadcom’. Since this led to access conflicts on my PC, I decided to change my router’s SSID to something unique (‘fl’). With some good telephone support from the Airtel engineer, I was able to accomplish this by myself.

Two days later, I noticed that the router had slipped into ‘Broadcom’. Given that the router was originally setup in secure mode, I was quite puzzled to notice that it was now slipping into unsecured mode. I accessed the router’s admin page and repeated the procedure for setting up ‘fl’. All was well for a day. However, the next day, the router again went into ‘Broadcom’ and unsecured mode. I kept trying to fix the problem by myself but, surprisingly, hours of Google search yielded no useful information. Eventually, I had to repeat the setup of ‘fl’ everytime the router went into ‘Broadcom’.

Tired of doing the same thing repeatedly, and frustrated with the lack of success with self-service, I called Airtel. They promptly sent an engineer who upgraded the firmware on the WiFi router. Seven days later, my router has not slipped into ‘Broadcom’, so I think this solution has worked.

The nature of the solution and the speed at which it was implemented tells me that Airtel must have received this complaint several times. As a result, I’m now questioning my earlier conclusion that my problem was unique on account of the lack of any useful information on the Internet. By posting the problem and solution here, I thought that someone else facing a similar problem can immediately figure out what the solution is. 

PS: Airtel’s support is good, so I don’t think anyone should have problems with the basics of setting up a secure WiFi network in the case of Airtel. But, if you need any assistance there, please leave a comment, I’ll do another blog post with those details.