Chief Marketing Officer Conference 2000 – New York City

Transcript from John Patrick speech – CMO Conference – New York 2000.
Opening remarks by Mr. William Etherington Senior Vice President and
Group Executive of Sales and Distribution at IBM Corporation.

John Patrick

ETHERINGTON: Thank you, Ginni. Did you hear that? She gave something away. You know, I’ve dealt with these guys in Global Services, and they are so profit oriented, because I’ve seen their profit plan.She just gave away a half day of consulting. That’s wonderful. So we’re…by the way, that’s for serious. Yes, she wasn’t kidding. And we have a system to track your request and we’ll make sure we put our team in front of your team for a half a day and help you scope some of this stuff out. We’re going to go to our final presentation, which is John Patrick, which — John told me I’ve set him up. Everybody…I’ve made him this big guru. He has a beard, you know, so that makes him a guru. And before I do that, let me — because Abby will close the session off — thank you all for coming, and also thank you for being IBM customers. We are only what we are because of you and all of our other customers around the world, and we too often don’t take the time to thank you for doing business with the IBM corporation. We hope we can do more business with you and we hope that we have inspired some thinking in this conference that would cause you to expand a relationship. So with that, let me now take you to the future of the Internet, John Patrick. John?
[APPLAUSE]
Okay. Well, we have sound. I could listen to that for an hour, but since I stand between you and lunch, I won’t. By the way, if you don’t know what that was, that digital play list I just showed and how to set it up and how to enjoy digital music throughout your house, how to capture it and organize it. Talk to your kids, and they will tell you how to do it.
[LAUGHTER]
Well, I would like to talk to you about the future of the Internet, and I’m going to start with the big picture. And I would say, to begin, we’re at the very beginning of this. You know, at times it seems like everybody is connected. Everywhere you go, we’re all talking about it. Everybody is connected. But the reality is, the number of people right this very second who are using the Internet as a percentage of the world’s population rounds off to zero. There’s nobody connected. Well, maybe two or three percent. We are two or three percent into what the Internet is going to mean to each of us in our business and personal lives. We haven’t seen anything yet. From an economy to an e-conomy. It’s happening every day you read about it. The CEOs that I talk to say, John, I have had e-nough hearing about this. But the reality is, we’re at the very beginning of this as well. We haven’t seen anything yet compared to what we’re going to see.
Open systems, things like Linux that you read about in the papers every day are changing the game in a major sort of way. And number four as part of the big picture is what I believe as a technologist is the most important element of all of this, and that is the power of a click. You know, in so many ways the Internet is all about a massive transfer of power from institutions to people, to you and to me. The power of a click, whether it’s a mouse button or whether it’s the click on a mobile phone is so powerful. Institutions around the world in many cases are in denial about this. You can see it in stories that you read. I saw something just recently about the stock exchanges. It was a stock exchange here in New York, and this little story in the paper said that the board of directors of this exchange was going to have a meeting and at this meeting they were going to take a vote on whether or not to extend the hours of trading. So here we are 175 or 200 million people connected, every computer connected to the Internet and six guys in New York think they have a vote about whether or not and when we get to use it to trade stocks. So I’ll have more to say about that in a moment. And, lastly, the Next Generation of the Internet is underway, under construction. It’s an exciting thing, and I’m going to be focusing my remarks about it.
It’s about, of course, speed, but it’s also about some other characteristics which are, perhaps, even more important than the other six things that you see listed here. And if you want to go into this in great detail, please visit the IBM portal at ibm.com/NGI. It is our Next Generation Internet portal where you can see many, many examples of this. So I’m going to just touch on some of them. First, of course, is speed. The Internet is going to be very, very fast. In fact, we will be awash in bandwidth.
Now, if you were staying here in the hotel and had your laptop, your ThinkPad, and you connected at some fairly slow speed, it may seem a little presumptuous to hear me saying that we will be awash in bandwidth, but the reality is we have [Adam Smith’s] invisible hand for bandwidth working for us. Telephone companies are rolling out this new technology called DSL around the world — Digital Subscriber Line. It means if you are within 12,000 feet of the central office of phone company, you know that little red brick building with no windows in it that most communities have…..and most people are within two miles of one of them, you can have this new technology. And it’s extraordinarily fast. It allows the delivery of video into your home or business. This threatens cable companies. Meanwhile, cable companies have the ability using the cable to not only deliver Internet capacity at very high speeds but also to be able to deliver telephony, thereby threatening the telephone companies.
And then along come wireless companies like [Taligent], [Terabean] and quite a few others who are delivering extraordinarily high speed bandwidth through the air, threatening both the telephone companies and the cable companies. So this competition, this race of technology will bring speed to us very quickly. Video on the Internet today looks like this.
[VIDEO VIGNETTE]
A little bitty not particularly easy or interesting to look at. Now, here’s that same video in the Next Generation of the Internet background which we have up and running now.
[VIDEO VIGNETTE]
Look like television? Yes, you can’t tell the difference. High-quality, jitter-free, full-screen video over the Internet. Now, what does that mean? Well, first it introduces geoindependence. It means that experts, you know, the people who live on airplanes, will no longer have to be on airplanes. They’ll be on video walls. And so a doctor may be on that video wall while you’re at a local hospital, and you get inside of a functional MRI machine and the doctor’s talking to you and the doctor says, please bend your knee, and you bend your knee and that doctor sees what’s happening in your brain from 5,000 miles away. Geoindependence. Now, everybody, of course, is not going to have this high bandwidth; it’s going to roll out at different rates and paces in different parts of the world. However, there’s going to be enough of it that from a marketing point of view, you need to expect, and people will expect of you, to create very creative content to take advantage of this.
Now, what do I mean by creative content? Let me give you an example of something I just saw I thought you might find interesting. This is something that I think is pretty creative.
[VIDEO VIGNETTE]
How’s that for a Web page?
[LAUGHTER]
Very creative. People will expect to see very creative things on this bandwidth. Now, also we’re going to see a shift in the bottlenecks. The bottleneck is going to move away from that last mile, away from the modem, back into the server. People are going to need really big servers. At IBM, we like this part of the problem.
[LAUGHTER]
And third, the content is going to be closer than you think. The content will be distributed widely, broadcasted from satellites, pushed down into Internet service providers, moved out to those little green boxes on telephone poles that will contain smart disk drives. And so we’re going to have a very high performing medium. The evolution of not a new medium but the new medium. And this presents a tremendous marketing opportunity like nothing we’ve seen in many decades, maybe ever. Now, the second characteristic of the Next Generation of the Internet is that it will be always on. Today the Internet is not always on. In fact, the way we use the Internet is we have this wonderful technology that we call the dialer. And so what we do is we go to our dialer and we dial.
[DIALER SOUND, MODEM CONNECT]
Some people actually enjoy the sound of that. Oh, the connection broke. Now, is anybody going to miss this experience?
[LAUGHTER]
Well, I don’t think so. Now, another consequence of being always on is people’s propensities will change greatly. Now, if you were preparing to come to this meeting and you were on your way out the door… I think I’ll check the weather. Would you go to your PC, dial your Internet service provider, wait for that noise and hissing and buzzing and then…? No, you wouldn’t. But if you were always on with a cable modem or a DSL modem and all you had to do is go over and touch the mouse and your screen pops up and you click on the weather icon and there, maybe you would. So the proclivity to do things, to shop, to entertain, to learn, if you were always on, I believe will change quite dramatically. And also the kinds of things that are delivered over the Internet will change. Today we look at Web pages. Tomorrow we may look at the weather.
This little weather box is showing realtime weather data delivered from the roof of a house of a colleague of mine living on a small island, the Isle of White off of the coast of England. About $200 worth of Radio Shack equipment on the roof broadcasting through some prototype technology that we’ve created realtime weather data showing what’s going on. Now, another example will be the connection of the Internet, since it’s always on, to deliver other kinds of things. For example, you may be on the train on the way to work and you say, gee, did I put the blinds down? I can’t remember if I put the…I was supposed to put the blinds down so I don’t bleach out the furniture. Let me go check. Oh, the blinds are up. Let me click on my phone. Down go the blinds — because the Internet’s always on. It’s connected to a server in your home tied to your appliances, and through a wireless interface, you were able to get connected. Now, the next dimension of the Next Generation of the Internet is that it will be everywhere. Today the Internet is not everywhere. Today the Internet is where your PC is. That’s where the Internet is — 98 percent of Web pages are delivered through a desktop PC looking through a browser. That 98 percent is going to drop well below half and fairly soon — over the next couple of years. Not because of a decline in PCs; PCs will continue to grow. I can’t imagine, personally, giving up my personal computer. But, on the other hand, lots of new ways are going to come along to supplement looking at this weather page through a browser. For example, some people will choose to see it on their television: 95 percent of the time this TV is a TV but 5 percent of the time it’s actually a browser. Other people prefer to have it on their pager. Now, perhaps it will not be done like I did it here, taking that big weather page and just scrunching it down and squeezing it onto a very small space but, rather, using a technology called transcoding….that you may have seen in the gallery upstairs whereby the important content from a page is extracted, like, is it going to rain and what’s the temperature and deliver that through the pager. Other people will choose to use their Personal Digital Assistant. This little computer for many millions of people will be the only computer they need. Not for everybody, but for very large numbers of people that will be their browser. And others will choose to use the phone. Now, you heard Ginni mention [NTT Dokomo]. What’s going on in Japan is quite amazing to me. I was just there seeing teenage girls and boys using their [I-Mode Dokomo] phone to ship pictures to each other…..little black and white pictures of themselves delivered over the Internet through an I-moede phone. They’ve gone from zero to 5 million users in less than a year and are projecting 10 million users by the end of this year.
The telephone is going to enable Europe to soon leapfrog, probably, passed the Americas in terms of the usage of transactions on the Internet. Why? Because people will be paying their bills, doing their financial transactions on trains using telephones, using the wireless access protocol that you’ve heard about a few moments ago. And then, of course, there’s the kiosk. How do we achieve universal access? Through kiosks. Kiosks will be in churches and schools and government buildings, on the street corner, in the jungle, on the plant floor. People taking a Web break instead of a smoke break. They’re going to be everywhere, and they will be Internet standards based kiosks that allow people access for transactions. And then there’s a whole new family of devices, things that we don’t have today, things that you might think of as information appliances.
Does anyone yet own a [Kerbango] Internet radio? Well, the [Kerbango] Internet radio, it looks like a radio. You plug the Internet into the back of it. On the left it has a volume control and on the right it has a tuning knob. The only difference is that instead of just getting those radio stations within 30 or 40 miles of where you are, it gets all of the radio stations that are on the Internet. Last I looked there were about 2,000. So if I’m in Sydney or in Europe or in Japan, I listen to WQXR classical music from here in New York using the Internet. And, of course, some people will use all of these devices depending who they are, where they are, and when they are. And you really need to plan from a marketing point of view to deliver your content in multiple ways. Does that make it harder? Yes. Does that make the reach possibilities much larger? Does it give you the ability to take advantage of propensities? Of course.
Let me show you an example of something we’re doing in this arena with wireless. Here you see what we call the IBM Blue Phone, and on this little phone we have the ability to enter a name. I just typed in my name, Patrick, and the wireless phone went to a central database at IBM of over 300,000 IBMers, looked up my telephone number and displayed it there. Of course, I could click on the button and call this person, or I could send an instant message. So I click on the instant message menu and it says I could send a message to someone saying, call me now, call me in five minutes, help I’ve fallen and I can’t get up, or whatever message you want to send. So, I’ll just send, please call me. The message has been sent. Here comes the message. So on the desktop of a person appears this instant message saying please call me. The person could answer and that message would go back to the telephone. This concept of instant messaging is a very powerful ingredient in the Next Generation of the Internet and, in fact, it relates directly to this next characteristic which I call natural. The Internet is not so natural today. You have to want to do it. You have to work at it a bit. Each day it’s getting better, of course, and as we look a bit into the future, we’re going to see some quite powerful things. For example, in this buddy list of instant messaging — by
the way, how many of you use instant messaging at work? Oh, quite a few of you do. And those who don’t, your kids do at home. They get off of the school bus, they make a bee line for the PC, they don’t start up a browser, they start up their instant messaging program to chitchat with their buddies that they just got off of the school bus with. And at work I hope you’re finding, as we do, that instant messaging creates this wonderful new backchannel, this additional way to supplement conference calls and meetings to allow people to slip that little proverbial yellow piece of paper under the desk to another person or to reach over and whisper to somebody but they’re 5,000 miles away during the meeting. Now, where I think this is going is actually even more important. Let me click here on [Frank Shlicktenberg], a colleague of mine. Send Frank a message. Frank, how is the weather in Heidelberg? Now, I am not connected right now. I captured this the other day to show to you. Frank, how’s the weather in Heidelberg? Let me send that to Frank.
[GERMAN DIGITAL TRANSLATION]
So, I typed this message in English, the only language I know, unfortunately, and it was translated on the fly to German and then it was played to Frank so that Frank could hear it using text-to-speech technology. Frank replied to me in German…
[ENGLISH DIGITAL TRANSLATION]
John, it is cold and rainy, and I heard it in English. So what do we have here? Think about the combination of instant messaging with voice recognition with text-to-speech with the Internet and what do you get? You get a realtime multi-lingual intercom. Think about a customer asking a question of customer service in Spanish and have that question be routed to the most knowledgeable person on that particular subject matter who answers the question in Chinese and the questioner hears the answer in Spanish. This is a game changer for being able to do business on a global basis or to be able to respond to your constituents who may speak a different language or at least be more comfortable in a different language. Now, instant messaging, by the way, doesn’t have to be just talking to people. It is possible to send an instant message to something we call buddy bots. And these buddy bots are basically software agents.
So, for example, I could send a message to this person here or this sort of person, Blue Pages, and say, who is Michael Nelson? And I send that message, and that little robot, so to speak, that buddy bot, went to that database for me on my behalf and got the information and told me, here’s who he is, here’s where he works, here’s his phone number. I might also want to get a stock quote. I could just say, stock quote, [e-wow] — [e-wow] last trade at $8,542, up $1,231. So the idea here is to be able to leverage this technology and be able to adapt it to simple routines. If you think about customer service, how many questions that you receive are really very routine, predictable questions? How about a dictionary that you might provide. We have one at IBM. We have over 200,000…hard for me to imagine this, but we have 200,000 different terms in it, so I could say, for example, what is NGI? And it tells me it’s the Next Generation of the Internet. And click here if you want to go learn more about it. So I think this is at this stage a technical idea. It’s a prototype that we’ve been experimenting with but certainly something with a lot of marketing customer service oriented potential.
Of course, we also have here the most important analytical tool, the eight ball. Do you recall the 8-ball? Let’s see. Was this a valuable conference for CMOs? Let’s see what the 8-ball says. It is decidedly so.
[LAUGHTER]
So it must be true. Okay. Now, this concept extends a great deal. The buddy bots, the instant messaging leads to what we call e-meetings.
[DEMO]
So here’s an electronic meeting going on. We run about a hundred of these per day at IBM. It not only saves travel expense, which, of course, is important, but to me, more importantly, it provides for continuity of thought. These meetings that are electronic start on time, they end on time. Have you seen the ad that we run on TV where the people all come in this big conference room, they sit around a conference table and they’re looking at each other and somebody says, who called this meeting? And nobody knew, so they all walked out. That doesn’t happen with e-meetings. e-meetings have a manager, a person that calls the meeting. And everybody knows who’s in charge. Each presenter in a meeting can show their materials, a spreadsheet, a presentation, whatever it might be, and everybody else sees it in their browser.
Is it like PictureTel? Yes, sort of, except you don’t need PictureTel. You can be in a hotel room. You can be at the Admiral’s Club. You can be at home at a client’s office. This is a very powerful tool. By the way, this is all shipping technology from IBM called Sametime, branded by our Lotus division. We’ve even extended this into something we call the Video Water Cooler where we have multiple locations of our Technology Group and at lunchtime people instead of going by the water cooler in one location they can stand around together in multiple locations with realtime video sharing their experiences and developing a sense of teamwork. Now, the Next Generation of the Internet also needs to be more intelligent. Today, the Internet is not so intelligent. In fact, it’s quite dumb, but lots of intelligence can be integrated with the Internet through portals. Now, today Web pages essentially are organized around formatting. So if you look under the covers of a Web page, you would see something called tags. And these tags describe what the page looks like. In other words, it’s Baldini or Helvetica, Courier, 10-point, centered, bold, colored blue, whatever — formatting information. There’s a new standard — and this was the only technical term I will use, but it’s so important to marketing called XML. XML is a new standard for putting organization around Web pages so that instead of having these tags that talk about what a page looks like, there are tags that say customer number. Shipping date. Postal code. Quantity on order. Quantity back ordered. Things that are meaningful from a business point of view that now gives structure to the Web. This is the next major evolution that we’re seeing right now with the Web is this introduction of structure. And from a marketing point of view, you’ll want to define the various terms and ways of doing business and things of this nature so that your Web begins to transition from something that looks pretty to something that looks pretty and means something and can be integrated with real business applications. Portals of all kinds are emerging. We, of course, have these general purpose portals, and Lou talked about these a little bit yesterday.
I think they will continue to be important but more important will be portals of a specialized nature, things like e-chemicals. You know, some people actually wake up in the morning and they rub their eyes and they go, ah, chemistry. You know, they can’t wait to get to e-chemicals. They don’t care about The Wall Street Journal or The New York Times. When they’re in New York they care about e-chemicals. They want to talk chemistry. And they chat, they discuss, they learn, and they make deals. And so the emergence of these portals is changing quite a bit. They’re becoming trading hubs, e-marketplaces, a way to identify inefficiencies that exist in the industrial infrastructure and replace it with a portal that allows people to come together.
This is not a phenomenon you want to watch. This is a phenomenon you want to be part of so that you don’t end up paying fees to others who got there first. Now, there also are, of course, community portals. I think of these as lifestyle destinations. These are quite important, actually. Six to 10 year olds tend to hang out at places like Blackberry Creek. Eighteen to 30 year olds perhaps, at Tripod; 30 to 45 year olds at I-Village or Parent Soup; 45 to 102 year old people at Third Age: this is where 70 year olds go to find a date. This is where you can configure a fragrance to project the way you want to project. Now, what’s in common here at all of these lifestyle destinations is that people are hanging out. Are you aware that hanging out is an important new technology term? I learned this recently in dealing with teenagers. Where are you going? Out. What are you going to do? Nothing. Then they come back later, sometimes much later, sometimes the next day. Where have you been? Nowhere. What did you do? Nothing.
[LAUGHTER]
Well, you must have been doing something. No, I was just hanging out. Oh, now I get it. Hanging out. This hanging out is an important new phenomenon, not only with teenagers, but on the Internet people hang out at the Harley-Davidson motorcycle site or at Third Age or at a golf center or wherever. So, you need to know where your constituencies are hanging out. Look at Third Age media in the lower right there. When people hanging out there get interested in computers, up comes IBM. And they get interested in investing and up comes e-trade. Now, why is it IBM and E-TRADE? Why isn’t it Gateway and Fidelity? Well, it’s because IBM and E-TRADE made a deal with [Mary Furlong], the chairman and CEO of Third Age Media, a nonexclusive yet preferential arrangement, a relationship, where if you go to read about e-business, you might find an article there written by someone from IBM. You certainly will see IBM advertising. We are participating now I think close to a thousand sites around the world where we have relationships, half of them in this country and half of them outside of this country. So find out where your people hang out, your constituencies, and build those relationships. A lot of people that I see have this strategy of we’re going to build this great portal and everybody’s going to come to our portal. Well, do you know there’s a billion Web pages out there right now, soon to be 10 billion? Why are they going to come to your one page? And the answer is they probably won’t unless they are led there through someplace that they hang out. Knowing what you know is emerging as a key part of the intelligence of the Internet and intranet. There’s a deficit, a knowledge deficit, of five to 6,000 people per person in your company and my company, because the five percent least knowledgeable people don’t know what the five percent most knowledgeable people know. And we’re very hard at work on this subject, introducing soon a new product called Raven which will allow the creation of a knowledge portal inside of your company that allows tying together of all the databases, not only from the Internet but everything in your company so that people who are working on a project can find out who else in the same company is working on that project? And then, of course, Deep Computing, to mine those relationships and activity and to follow the seven habits that Ginni talked about.
Now, the Next Generation also needs to be easy. It’s not easy today from a technical point of view to do a lot of the creative ideas that many of you have. It’s not easy to do. And, in fact, the more creative you are from a marketing point of view, the harder it is technically to make these things work. I can’t imagine how many hours must have gone into Water Babies, for example. We’re hard at work at IBM in finding ways to make this easier through our Websphere technology that you heard about earlier and equally important we’re working on technology and we have a prototype out now to allow people who are Web page creators…..not programmers, but Web page creators to be able to use what we call scripting, which is something much simpler than programming, to allow those Web designers to be able to do very pizazzy marketing kinds of things. I can’t resist but to show you one quick example of what I’m referring to here. e-deal is a company that’s very similar to eBay. I’m going for bring up here on my screen an auction bar. Now, you see at the top? Can you see that at the very top of the screen? That’s an auction bar, and if I were connected, it would be bringing in realtime data showing items that I chose to follow that I’m watching, and I can move them around and when one of them turns red, that means that the price just changed on that particular auction. Now, what’s significant about this is that this was done by a Web page developer. It was not done by a programmer which traditionally would be the way that would be required to do something this sophisticated. This is a marketing idea outside of the browser to create little applications on the desktop that project your brand, not projecting Microsoft Internet Explorer or Netscape Navigator but projecting your brand on the desktop. So there’s a lot of opportunity here to leverage this. And if you’re interested, I urge you to visit our alphaWorks site, alphaWorks.ibm.com to see this new technology. We’ll soon see the emergence of the TeleWeb.
[DEMO]
This is a regular television. I’m watching this TV, sitting in the family room, and I pick up my channel selector and I click on the TV, and up comes the Web page. And I get interested in this Web page and the next thing you know, I bought one of these things — which of course is exactly the idea. So things are getting easier. These Linux and other OpenSource technologies are making a big, big impact to make the infrastructure — the things behind the scenes — simpler. Not a desktop idea, but rather the infrastructure. You may have read that IBM is embracing this very significantly; we think it’s going to over the next several years have a major impact in the ease of being able to deploy significant infrastructure on the back end. I won’t go into the details of that at this time.
I can only tell you that in my short 34 years at IBM I have seen three major shifts that have occurred: in 1981, the PC; 1991, TCP/IP, the language of the Internet; and in 1999, Linux and OpenSource software. And in all three cases established existing companies said we don’t need that new thing; we already have something better. And in all three cases venture capital money and creative people moved into those areas. And in all three cases they became grassroots initiated but ultimately profound to the evolution of the Internet. And I believe that’s what we’re seeing right now with Linux. Now, the last of the characteristics of the next generation of the Internet is trust. Now, this relates to privacy and I promise that I will not give you a privacy lecture; you’re all now appointed and have your assignment from Ginni to take over this function. But it’s related to a broader subject, which is trust. Trust is related to having identity.
Now, on the Internet today we have no authentication. You may not have thought about this; most people don’t. When you go to a Web page at the bottom of the page you see this little solid lock or key. And that solid lock or key tells you implicitly that your credit card number, for example, is being encrypted. It’s being scrambled using the key of Mastercard or L.L. Bean, in such a way that only the server on the other end is able to unscramble that credit card number. And so you are relieved that no one can steal your credit card number. And you’re correctly relieved. However, who is that server really? How do you know it really is L.L. Bean or Mastercard? How do they know you are who you say you are? And the answer is, you don’t and they don’t, because there is no authentication. You have a log-in and password, well, lots of people freely give their log-ins and passwords to other people. In fact, people now have so many log-ins and passwords they don’t know what to do with them. They write them down on a piece of paper, and then they put it on the table. It falls on the floor and the dog eats the piece of paper. Now what do you do? Then you say, oh, jeez, I’d better build a database of all my log-ins and passwords. Now you become a database manager. That’s not what you want to be. So this is a really important subject, and the answer to this, what could be a very long discussion, is digital IDs. They are not…they have nothing to do with governments spying on us; they have to do with empowering us as individuals.
They have to do with enabling marketing to really take off because there’s trust. And once you have a digital ID which has been issued to you by someone that you trust, then you’re empowered to have authentication and to have authorization to do important things…..and to have complete confidentiality and to know that any exchange of information has integrity — meaning, it didn’t get altered as it traveled across the Internet, trapped by someone else that [didn’t happen]. And since you get non-repudiation which means that the transactions will hold up in court. So this is an area that’s vitally important. Parts of the world have good very thin veneers of government approval to say that digital signatures are okay. We don’t have it in America yet, but I hope we very, very soon will have it. This will mean that we will not be so dependent on cookies. Cookies are a technical matter. Cookies were invented to enable what we call state. That means that when you go to a Web server and you click on something, you exchange information, then you come back to a follow on, they know who you were, they remember you. And they remember you because they put this little cookie on your PC. So when you came back, they read that cookie and they know who you are. Well, that has its good side and its bad side. The good side, of course, is it enables the Internet to work very well, it allows personalization, it allows servers to remember you when you come back. But it also makes possible the invasion of your privacy and for potentially getting offers that you don’t want to have. Once we had digital IDs we’ll be able to…
[SOUND OF MOTORCYCLE]
…move on without those cookies. And lastly I should mention now that you are in charge of privacy in your companies, the P3P — Platform for Privacy Preferences, which is a new data privacy model — has now been approved as a global standard by the World Wide Web consortium. P3P will allow people to establish whether they want to be anonymous or whether they want to give away some of their personal information in return either for a promise of privacy or for perhaps a discount or a special deal.
Now, open standards are what are required to enable this evolution of the next generation of the Internet. The Internet is built on standards. It’s the only thing I know of that works the same everywhere. Everywhere in the world it is exactly the same. I don’t know anything else that’s that way. Somebody said Starbucks was, but I don’t know if that’s true or not. But it certainly isn’t true of most electrical or technical specifications. The Internet, however, has grown because of this tremendous adherence to global standards. A whole new set of standards are now emerging built around that concept of XML that I mentioned a few minutes ago, including things like the trading partner agreement markup language that allows Web pages to specify terms like lessee, lessor, date of grant…..things of this nature so that contracts can be negotiated over the Web. This will evolve into higher levels of abstraction, things like Oasis, which is a vocabulary, in effect, for the semiconductor industry. And this will occur in all industries based on this concept that I’m describing. Right now in the wireless area, we have no standards. We have some very interesting things going on in Europe with the wireless access protocol.
We have some things going on here in this country around some other models in Japan that [Dokomo], they’re using a unique implementation of their own. I believe we will see these all come together over the next 12 months into a higher level order, something called XHTML, a standard which is device independent, not just for phones but for any kind of device. The role of public policy is so critical to this evolution, and I certainly cannot add to what Chris and the excellent panel have already talked about. When do we get this next generation of the Internet? When does it arrive? Well, it has no arrival date. Each day we get a little step closer. Think back about what the Web was like in 1993, if you can remember, or if you’ve tried it back then. It was nothing like it is today. Well, when did it change? Well, I don’t — it’s hard to say. I can’t put a date on it. It’s just there were certain things that happened along the way, the introduction of various technologies and standards and it just evolved. That’s what’s happening with the next generation of the Internet, only it’s happening a lot faster with a lot more collaboration, with a lot more government academia and companies working very, very closely together. It, of course, is going to lead to millions of e-businesses, not just big ones, but tiny ones. I’ve often talked about the fountain pen maker in Verona, Italy, who some day would sell his pens on the Internet, and I did a search recently and I found there are a lot of Italian jewelers on the Web selling their fountain pens. And I think it’s significant not only because they can reach across their borders, but it’s significant because being e-businesses themselves, they will have very high expectations on you and us or us as partners with them as small businesses.
And then, of course, we have the mainstream businesses. Well, what is a mainstream business anymore? And who will be the dot-coms? I think it would be very trite to say that you need to be an e-business. Everyone will be an e-business. Not being an e-business would be like not having a fax machine. And I think the winners and losers will not be separated based on technology. They will not be separated based on venture capital. They will not be separated based on having dot-com in your name. They will be based in large part, I believe, on marketing. It will be done based on who does the best job of segmenting their market, understanding their customers, setting the right prices and having world-class customer service. That will be what makes the difference.
Now, I think we will begin to see failures. This year we will see headlines around the world of companies who are beginning to fail. And there will be two kinds. One kind will be dot-coms who have a crazy idea. Unfortunately, you can’t tell, necessarily, which ones they are because some of the craziest ideas may turn out to be the best. And the fact that we can innovate very easily on the Internet is a wonderful thing. It allows for new ideas. And so we should expect to see failures. The other kind of failure I think we will see is companies who exist already but companies who studied this too long, who waited, who waited to see everybody else move, who couldn’t face the issues of this intermediation….who couldn’t devise a new channel strategy that was acceptable to their own company. And so it’s time to move, of course, very, very quickly, as you’ve been hearing throughout. And business-to-business, lastly on this subject, will be the largest portion, probably ten times bigger, maybe only five, maybe 15, but very much larger than business-to-consumer. And what we will see here is servers talking to each other. Today, most of e-business is a person with a browser communicating with a server. What we’re going to see is servers talking to servers. Now, let me make that very practical for you as I talk about the last topic, which is the power of a click. This has to do with expectations. Expectations are rising every single day. And the best example I think I can think of to help you see what I’m referring to here is in the hotel business. Recently I went to a Web site to see how many points I had, frequent stayer points with a particular hotel, and to see if there was an award available, a coupon available that would allow me to have a one-night stay in New York city. And sure enough, I found that coupon there on the Web site. That’s exactly what I want, this coupon XYZ will give me one free night in New York City. So I called the hotel, and a very courteous person answered the phone. How can I help you? I said, do you have a room next Friday night in New York City? Yes, sir, we do. I said, great, I’ll take it. Is there anything else we can do for you, Mr. Patrick? Yes, there is. I would like to use a word code XYZ to pay for my hotel room. And the person said, I don’t know what you’re talking about. I said, well you know about a word code XYZ and how many miles and points I have. No, no, I can’t see that. I said, well, is this the company or is this the answering service? No, no, this is the company but this is the reservations department. Oh, I see. Okay. Well, what do I do? I mean, I want to use this coupon to stay in your hotel. Mr. Patrick, it’s no problem at all. This was a Friday night. No problem at all. Just call us back Monday morning 9 to 5 during our normal business hours. Give us your credit card number and for just $35 we will overnight to you a copy of that coupon you’re looking at. Now, I don’t know if this is translatable around the world, but I would call that like a stick in the eye.
[LAUGHTER]
Now, is this company stupid? No. They’re not stupid. I’ve talked to the CEO of this company about this. He very well understands this problem. And we all have it. And what is the problem? Application integration. This is the holy grail for e-business. It’s enabling the reservation system to send an e-mail over to the frequent stayer system saying, hey, I got this guy who wants this room, take 40,000 points out of his balance and confirm to me that you did that. And the frequent stayer system sends an e-mail back to the reservations system saying everything’s okay. And I see on the Web page, you’re confirmed, and we used your coupon.
We have technology to do that, and there are thousands of examples of needing to connect together these various applications, and it has nothing to do with the client or with the customer visiting a server with their browser. It has to do with these servers being able to talk to each other. And there isn’t time to revamp those applications which were probably developed in different decades. There isn’t time to rework them and reengineer them, put them together. Don’t bother. Do that later. In the meantime, just enable this message going to back and forth in between. It’s called Message Queueing. It’s great technology from IBM. This subject of expectations is so powerful, I feel this momentum by the day. Does anybody enjoy call centers? Don’t you just love it when you call a call center and they say, listen carefully because your menus have changed.
Who cares if their menus have changed? You listen to nine things and then four things and then two things. And you know exactly what you want. You want to just click on it but you can’t because the power resides there. But the powers are being transferred to you, and others will find out how to do that because it’s doable. And there are so many examples, and we all need to change our vocabulary to listen to what people are saying and what they expect. Do you think kids have a high expectation of what should be possible? Look at this e-mail. This is from a financial services institution. This is a real e-mail. I somewhat camouflaged it to protect the guilty. Dear Mr. Patrick. Thank you for your recent e-mail inquiry. Unfortunately, I would not be able to handle a request like this through e-mail. You have to call us 9 to 5 and talk to one of our customer service representatives. Call our 800 number. We don’t care if you’re in Europe where you can’t call an 800 number. Call us on our terms. Right? If you have any other problems, send us an e-mail.
[LAUGHTER]
Look at this last example here. This is a software company. This is a software company. I was ready to buy this piece of software. I would have paid anything for it. I clicked here to buy and it came back and said, no problem. Step one. Print this form. Step two, fill it out and fax it to us.
[LAUGHTER]
Now, this is comical, but I confess that we would probably find something like this somewhere on IBM dot-com, and I suspect all of you have it too. I recommend to you hire a college student whose job it is to spend a half a day a week…..or a couple half days a week suffering around your site to find all the things that they can’t do and make a list of them and prioritize them, and I guarantee you, you will find lots of things that you can’t do.
The bottom line here is accommodation, and I believe from my travels around the world talking with a lot of people, a lot of CEOs, that many companies have not yet made this fundamental decision. And the decision very simply is are you going to accommodate the Internet while you keep doing business the way you’ve been doing business or are you going to embrace the Internet as your most important single strategic relationship with all of your constituencies while you accommodate the way you’ve been doing business? Bring them together. It will not be the only medium, but it will be the most important medium, and people will expect it. So in summary, how do you survive with all of this that’s going on? I have four very simple ideas just as one fellow traveler, and I think these, perhaps, set a context for Ginni’s seven habits. And the first is to think outside, outside is where all the people are. They have the power. Walk in their shoes. Secondly, think big, but start simple and grow fast. The old model is plan, build, deliver. Plan, build, deliver. 18-month cycle. The Internet model is sense and respond. Sense and respond. 18-hour cycle. Now, I’m not suggesting that you throw something against the wall. Instead, build on a framework. And you heard from Ginni about the many ways that we can help you devise a framework, not committed only to IBM technology but a framework that embraces all Internet technology on a standards basis. And lastly, get a taste of Internet culture. I recommend that any new Web page first be approved by a 16 year old to make sure that it passes the sanity check. If you can’t find a 16 year old, go talk to these people at the Melrose Mirror. The Melrose Mirror is a great newspaper. It exists only on the Internet. There is no paper version. You’re looking here at the Web master and the Web [doyanne] and the publishers and the Web designers and the HTML jockeys that build this great newspaper. As you can see, they’re not 16. They totally get it. Their motto is keeping pace in cyberspace.
So when you run out of skills, you can’t find any more of those hot 23-year-old programmers, talk to these people. They’re mobile from the Internet and they can do amazing things. Well, I invite you to visit IBM.com/Patrick, P-A-T-R-I-C-K, and there you’ll find everything that I’ve talked with you about. You’ll also find a collection of very short little papers. They’re one page or less that I call reflections, and there are some there about security, privacy, about expectations, about packaging and things that are maybe emerging issues coming along with the Internet. You’ll also find important business content like Mozart, motorcycles, GPS and running and brew pubs and brewery guides and other topics of that nature. And please do visit the next generation Internet portal at IBM. It’s just simply IBM.com/NGI. Well, I thank you very much for your attention. We’re right on time but maybe we can take one or two quick questions? I would love to do that, if we can. And then I think we go back to Abby and on to lunch. Is there a question? No questions. Thank you very much for your time, back to you, Abby.
[END OF SEGMENT]