by Dana Blankenhorn
Volume IV, No. XL
For the Week of October 2, 2000

This Week's Clue: Ho, Ho, Ho

This Week's Clue: Ho, Ho, Ho

SSP (Shameless Self Promotion)

Solving the Education Crisis

How Armstrong Lost His Groove

An October Surprise

Clued-in, Clueless

I know the calendar says October, but now is the time to get your site a very Merry Christmas. Smart companies are already laying their plans and you should too. 

I discussed some creative ideas in last week's issue, but it's now time to talk about some basic blocking-and-tackling. 

Start with some questions. Do you have your inventory lined up? What is your fulfillment capacity? Do you have options and alliances in place if you exceed that capacity? What does your warehouse look like? How are you handling returns now? What happens when that number goes up by a factor of 10? Do you know how much it costs you to deliver your goods, and have you factored that into pricing?

How big are your e-mail lists, and do you know the status of each name - are they customers or prospects? Do you have strategies in place for handling both lists? 

What incentives can you provide customers who order now? What tools can you offer them to help them order now? 

How is your site scaled? Do you know when you'll stop making changes (except maintenance changes) to get ready for the Christmas rush? Do you have your banking and transaction processing arrangements in hand? Do you have alternatives in case they fail to scale? Do you have redundancy all the way around?

If you run stores, have you integrated inventories between the Web warehouse and the store warehouse? Do you have room in those stores to hold merchandise that might be ordered online? Do your store employees have access to the Web site, so they can get stuff for customers online that might not be available in the shop?

Chances are you can't answer most of these questions with a resounding "yes." The Clues as to what's needed to make Internet commerce happen come faster than your ability to make things work. (This has been especially true since the money dried up.)

So right now, set the priorities that will get you to November 1 and the heart of the rush. Look closely at the list of questions I've set out. Calculate the cost of achieving each goal, and estimate the return you'd get for accomplishing each one. Do those things that provide the biggest return on your investment. 

My guess is you'll find that e-mail will give you the most bang-per-buck, unless your program is already well thought-out. If that's the case, look most closely at your warehouse and fulfillment capability, not your Web site. If you can turn prospects from one-time to long-time customers (making them members of your "fan club" list rather than your "prospect" list) you'll have more than a Merry Christmas. You'll have a real business. 

SSP (Shameless Self-Promotion)

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I write daily for ClickZ. I write monthly for  NetMarketing and Boardwatch. I've been in Advertisi000ng Age and the Chicago Tribune . Once every other month I'm in CLEC Magazine. Twice each month I'm at OneChannel.Net  and I've recently joined the staff at ISPWorld. You can always buy my book . Subscription instructions are at the bottom of each issue.

Remember that it's journalism that keeps the Clues coming...

Takes on the News

Solving the Education Crisis

The biggest long-term threat to U.S. economic health (and Internet leadership) is its poor education system. I've been buying education services for my kids since 1995, and I've gotten several Clues along the way.

First, the impact of technology can be over-estimated, especially in the early grades. My daughter reviewed education software as a preschooler. Neither software nor her first school diagnosed her dyslexia. It was people - tutors, teachers, and a great principal - who got her back on track. (She's getting solid marks in 7th grade, thanks for asking.)

Elementary education is actually improving. The key is spending money on people, and putting principals in charge of it. Good schools raise real estate prices (many apartment complexes are filled with "temporary" families trying to "live" near good schools) and reputations sometimes outlast excellence.

Conservatives put a big stake in competition. I agree in principle. I agree that technology can turn a teacher from a sage on the stage to a guide on the side, letting them work on finding a teachable moment rather than simply lecturing and testing. Most old-style teachers, however (including some good ones), can't adapt. We need new teachers who can. Measuring students when they enter a classroom and when they leave, then compensating teachers based on the growth they achieve, makes a lot of sense. But a dilettante ran the first "competitive" school I used. When he lost interest (when he started losing money) all the kids (and families who trusted him) were hosed. He should have paid a heavy penalty for that - any system that creates competition must have such a penalty built into it.

The biggest problems lie in middle school and high school. We've developed a network of "prison schools," where scale forces administrators to destroy individuality in the name of control. All our elementary gains are lost because technology is misapplied, teachers and students are both treated like children, and the wrong kinds of excellence are rewarded. (A good football team doesn't mean squat, and a great SAT score doesn't really mean much, either.)

Colleges have become an extension of high school, and in some ways it's time to acknowledge that. Here's where technology can make a huge impact, because courses are increasingly standardized. It's a mass market and (unlike high schools) it's an open market. A college (like my Alma mater) that only glorifies the undergraduate will fail.

Today's college diplomas are like yesterday's high school degrees. They're just a start on the road to real excellence. Grad school is where you work with real researchers. Research institutions must do a better job teaching graduate students if they're to do the best for the country.

Where does technology fit into this? Mostly schools need office technology. Within classrooms technology is best used for testing and evaluation. Teachers deserve the power to control technology, but should be evaluated based on their return on that investment. The best teachers should teach, and I don't care where they went to school or what their major was.

Crush the bureaucracy, compensate based on results, add competition, and acknowledge the reality of what degrees mean. This can all be done. Failure sentences our children to life in the mid 21st century's Third World.

How Armstrong Lost His Groove

Investors have figured out what we figured out years ago. Under Michael Armstrong AT&T has completely lost its way.

How did this happen? Armstrong made the mistake of assuming that customer control would naturally follow control of a pipeline to consumers. The cost of those pipes was excruciating, the cost of upgrading those pipes to make them worthwhile was huge, and he now faces a host of lower-cost competitors.

I currently have AT&T Cable Service and wonder why I bother. Basic service costs $45/month and I have just 75 channels. That's a lot less service for a lot more money than I could get with a Dish or DirecTv. I only stay out of inertia. Meanwhile I get quite adequate DSL service through Earthlink over my regular phone line. There's no chance in hell that I'm switching to the cable for my phone service.

Just as the dishes got around cable for phone service, there are a host of wireless broadband services coming on-stream. Nokia  and Adaptive Broadband Corp. are just two of the companies offering ISPs and CLECs a low-cost local access solution. Wireless systems can deliver as much digital bandwidth as most folks can handle, and at a much lower cost than the cable people currently have installed.

Liberty Media head John Malone, AT&T's largest shareholder, wants quick action. He wants to "unlock" (get credit for) AT&T's huge long distance cash flow. He wants the kind of quick score a merger with British Telecom (a true mating of dinosaurs) would generate. At this point it doesn't matter whether he wins or loses. Only a real "October surprise" can pull the rug out from other competitors and (perhaps) save the duopoly AT&T thought it was building with the Bells.

But that could be around the corner. See the story below for more.

An October Surprise

A little-known bill from a relatively obscure Congressman could be the October surprise Republicans need to gain total power over the U.S. government .

H.R. 4445 was snuck through a subcommittee and could be through the House as part of an omnibus budget bill within a week. The bill would end "reciprocal compensation agreements." These were originally created so CLECs would pay Bell companies for network access. But clever planning by the CLEC community reversed the charges, and Bells are now on the hook for $1-4 billion per year. Changing the law cancels the bill.

The Bells are pushing the bill (naturally) and you may wonder why anyone should care. The reason is that CLECs and the optical networks they connect to are the big buyers of optical equipment and new telecommunications technologies. Bell purchases, while substantial, have to go through committees of bean counters more worried about paying for 1995's purchases than lowering current costs.

Pass the bill and the dominoes fall. Purchase contracts are cancelled, the prices of optical carriers and equipment makers plummet, the market falls in response, and the economy tanks with it - just in time for the election.

The clever fellow behind this bill wants to be the chairman of the full committee. If Democrat-turned-Republican Billy Tauzin'saudacious plan succeeds, he ought to be named Speaker. Or just call him the new Kingfish.

Clued-in, Clueless

Clued-in is OneName Corp., which is using a version of XML to automatically update e-mail addresses and keep users current as they move among jobs and services.

Clueless are those Silicon Valley cities publicly telling dot-com companies to go away . It's not only a classic case of locking the barn door after the horse has bolted (dot-coms are laying off, not hiring), it will impact other tech industries' views on the area and cause more to leave.

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