The Business World: Hazarding a guess at technological success

Like fashion retailers, they never know what will sell until it walks out the door

WHAT DO customers want from the new communications technologies - why will some applications succeed in the marketplace and others fail? Soon the technologies will be able to do almost anything: the only safe assumption will be that communications will be infinitely capable and very cheap. What will we want from them?

A brief visit to the US last week has convinced me of two things. The first is that the best guide to commercial success will be common sense. The second that however sensitive we are to human desires and needs - however much common sense we can supply - we will read things wrong. Taken together these point to a straightforward business strategy: that service providers have to operate like fashion retailers, who never know which lines will sell until they put them on the racks and see if they walk out the door.

Anyone who visits the US and talks with business people there will be astounded by the chaotic, clamouring, cacophony that is swirling around the new technologies. Every day there is news of half a dozen new ventures, new products, new services, new names, new ideas. Because the entry cost to this extraordinary industry is so low and because the potential rewards are so high, anyone with the ambition to start a new business heads here first. It is as though the entire entrepreneurial talent of 270 million people is directed at one still-tiny corner of the commercial forest, while a fair portion of the business development talent of the Fortune 500 companies is seeing in what ways it too can change the world.

If the world is changing, people are the same. What does common sense suggest they might want? Here are three needs the new technologies seem to satisfy to a degree.

First, information. Our curious species would seem to have an almost insatiable appetite for information. For some it is the pre-packaged news and entertainment, supplied by large corporations via television, radio, newspapers and magazines. For others, information is a much more personal, serendipitous commodity: everything from gossip about friends and acquaintances to new insights about our particular hobbies and passions.

The existing mass media cater brilliantly to the first need, so well in fact that the new technologies seem likely for the foreseeable future to be little more than additional delivery mechanisms. You want the latest business news at home in the evening? Instead of waiting for the next newscast on cable television, you pull it up on your computer over the Internet. You want the latest score at some obscure game on the far side of the world? Instead of waiting for the papers next day you pull it up on your pager or mobile phone.

If, on the other hand, you want some very personal information, useful only to yourself, then the new technologies offer amazing possibilities. Take a very simple example. Suppose you have a country cottage and want to view the weather there, or the garden. You mount a web camera of the roof and have a look whenever you want. For most people the information would be profoundly boring, but for anyone with a passion for their distant garden, the information would be interesting and rather fun.

Here, the Net is creating not just a new delivery mechanism but actually creating a new service: personalised information that no other technology could provide.

Need number two is time. Of course we all say we want more of it, but often we use technology to waste it. Some technologies are wonderful at absorbing our time, some at providing more of it. Television is perhaps the greatest example of the former, with the average Briton spending about three hours a day watching it. Now computers are catching up, for the average American with web access apparently spends 52 minutes a day on-line. Mobile phones, on the other hand, save time. Or rather, enable us to use time which would otherwise be fallow (on a train, waiting for a bus) in conversation.

The guide as to whether new technologies are likely to be successful, therefore, depends on their ability to fulfil one, or both, of these criteria. If they can occupy time in an interesting and enjoyable way, as television evidently does for many people, then that may be enough. But if they can save time, then they are even more assured of success. Aside from the mobile phone, which of the new technologies are likely to help us save time?

Much of the web-shopping debate centres on whether it really saves time. When buying books, it clearly does. When buying CDs it probably will. When buying groceries, it may do, but however irrational, we may prefer to "hunt/gather" our food from supermarket shelves as did our ancestors from the trees, rather than have it delivered to our door.

The technology for, say, booking flights electronically is still much more primitive than doing so over the phone. It takes roughly five minutes to book a flight over the phone; last time I tried on the Net I gave up after 20 minutes and picked up the phone instead. But this will change, and the point at which it becomes quicker than to book over the phone will signal the take-off for that particular commercial use of the Net.

Finally, value. If a new technology enables us to obtain the same product or service at a cheaper cost we will use it. The advances in communications helps boost value in two ways. They cut costs and they improve the efficiency of the market.

Cost-cutting is essentially a business issue: we are in the very early days of companies learning how to improve the efficiency of their production chains by, to take just one example, linking their systems with those of suppliers and customers via Intranets.

Improving the efficiency of the market probably applies more to consumer/company relations than to inter-company ones, but already the search engines, hunting the best price for a product, are compressing markets, squeezing our pricing anomalies. Expect that use of the new communications technologies to race forward.

When all this is said, though, we will still get things wrong. Virtually every new technology that has been introduced has found different applications from the one to which it was first applied. (Remember, the steam engine was invented for pumping water out of mines, and the computer was a large corporate machine, not a small personal one.) And when they are liable to get things wrong, businesses try everything. Pile 'em high, and see what walks out the door.