InformationWeek: The Business Value of Technology

Building A Business In The New Economy
January 28, 1999

continued...page 7 of 7

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Q: To get back to the Amazon.com example. When the product is information and not good or a service, I thought the object to Amazon would be that you have a computerized online bookstore selling paper, physical books. Today, while we see newspapers and magazines online, why don't we see books in digital form? Is it an intellectual property issue?

A: First of all, let me say some very good things about Amazon. They are a great company and they are just not in the business you think they are in. You happen to think that they are in the book business. They are actually in the customer creation business and they would tell you so if you asked them. They happen to sell books sort of like Priceline sells airline tickets to start. But Amazon's long-term strategy is much more about satisfying customers at a low variable cost then it is about selling books. It is a world class leader in not only understanding that but any of you who have shopped with them and sort of seeing the way they handle it maybe versus an over-the-counter transaction at Barnes & Noble where you never hear from them again. I don't want any of my remarks taken as a negative to Amazon. That is not the case.

Now let me answer your question. The answer to your question is that as technologists, and I will assume everybody in the room has a strong tie to technology, we all wish the world would be the way we want it to be. Of course, consumers don't give a care at all about what you want it to be. It is sort of like picture phones. What a great idea. We will all look at each other on the telephone. Yes, that means I have to get dressed every time I take a phone call. A book is a wonderful thing. A book is a tangible thing. It has got color pictures. It has a binding. I can take it. It is relatively inexpensive. It is portable. It is durable. Not only that, it is a pretty high quality thing. Stuff that comes off my computer printer generally looks like garbage. As a consumer, and I wouldn't want it for anything other than it's information content. To sort of say, well gee, isn't the information content what the book is all about and can't we just print the books on our own computers and maybe we will have a little binding machine. This is irrational. This is fantasy-based behavior. As a marketer, I often sit in my office, we have technologists all over the place and they say, boy could we do this. We could download the whole experience. I say, what are you nuts? Will it change. Sure. You know, obviously there will come a time where perhaps books will be "manufactured" in your home. Perhaps there will be no book at all. Perhaps we will all be reading off PDA backlit screens. Who knows? Perhaps there will be chips that make us see the words on our retina. People behave the way they behave for really good reasons and if your idea is to change how people behave, as a general rule, you've got a very bad idea.

Q: In the Grishman book example you gave earlier, you made it very clear that intermediate supply chain are going to have to figure out the DNA pretty quickly. What is your idea of the window, the intermediaries in trying to figure out the new DNA? Is it a year, five years, twenty years?

A: It is a long time. As opposed to everybody else telling you it is a short time. It is a long time because the world changes a whole lot slower than everybody in New York pretends it does. Look at the highway system and look at the phone system. Those things changed the world over a period -- probably with the highway system about thirty years and the phone system, maybe 15 years. I mean, really changed everything. I would argue that there is probably five to eight years at least in radical change in the DNA for major business elements. Not to say that you can't come up with exceptions. Of course, you can. Music would be an exception. Music is a pure information flow to begin with. College kids today aren't going to buy CD's much longer. It is almost over for the music business so if you are a music retailer, uh oh. You better refigure that out. If you are selling mortgages, uh oh. If your product is real information and that is all it is, uh oh. But if there is physical movement, if there is logistics, if there is elements to the system that require real inventory, real controls, real customer handling, you know, the things that we generally associate with large business commerce methods, you've got some time. That doesn't mean you better not get your ass in gear, you better get your ass in gear, especially if your competitor figures out the DNA first and patents it. Because you could suddenly could find yourself unable to practice your own business as it evolves into it. That is a big deal. However, I think the race is more to change your mind than it is to change your practices. Business people change their minds pretty slowly. Most large organizations barely hear the customer let along serve the customer. There is more time than it looks but then again, when the cliff comes, it is going to be a pretty big precipice.

JIM: You mentioned patenting the idea. As you conclude here, I should share with the group Jay's Walker Digital has been around for about six years and holds over 200 U.S. patents. When I first read about Jay it was a fairly demeaning article that attacked him that talked about this person going off and filing lots of patents. You have filed lots of patents. Could you share with us your sense of why that is important activity for you?

A: As opposed to a consultant who wants to sell you my ideas and I am not. When I talk about the re-architecting of the information layer, I really believe it. For the past six years a group of about 25 of us, which I have funded, have spent all of our time rethinking how the information layer is actually going to work in the future of commerce worldwide. We have not only thought about it but we have designed business methods and systems that are demonstrably unique and therefore entitled to a U.S. patent as business methods. Those of you that are familiar, recently the U.S. Court of Appeals for the Second Circuit, reaffirmed the notion and the Supreme Court agreed, that business methods are as patentable as plant patents or anything else. If indeed that is true, you can devote enormous time and energy to reinventing the world of business. Priceline itself is protected by an issued business patent and 17 others pending. You not only can rethink about it but you can own the information layer that we believe is going to be so critical, much as Microsoft owns the operating system for 95% of the world's PC's today.

JIM: Thank you so much.

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