{"id":801,"date":"2015-07-09T14:59:15","date_gmt":"2015-07-09T12:59:15","guid":{"rendered":"http:\/\/borkedcode.com\/wp\/?p=801"},"modified":"2015-07-09T14:59:15","modified_gmt":"2015-07-09T12:59:15","slug":"multipliers-dont-create","status":"publish","type":"post","link":"https:\/\/www.borkedcode.com\/wp2\/2015\/07\/09\/multipliers-dont-create\/","title":{"rendered":"Multipliers Don\u2019t Create"},"content":{"rendered":"<p>Well, that\u2019s a rather general topic, isn\u2019t it?\u00a0 Okay, let\u2019s get specific:\u00a0 in the last twenty years, computers and software, roughly labeled \u201ctechnology,\u201d have become absolutely ubiquitous and necessary in first-world business.\u00a0 And yet, <span style=\"text-decoration: underline;\">human expectations of them have been rather wildly unrealistic<\/span>, generally being let down in spite of the successes they bring.<\/p>\n<p>These themes have played themselves out in the startup community for two straight decades now, and I\u2019ve been neck-deep in it the entire time. \u00a0Companies fail time and time again when it seems like a no-brainer for success. \u00a0I\u2019m always a little surprised that people still seem to miss out on what really is going on there.\u00a0 In the context of this article, let\u2019s pretend it\u2019s a Tom Clancy novel and the tech always works as intended, no failures, okay?<\/p>\n<p>Let\u2019s first answer the implied question:\u00a0 Why is Tech so commonplace now?<\/p>\n<p>Obviously the first answer from many people in the working-day world is \u201cI can\u2019t do my job without the computer.\u201d \u00a0But why is that?\u00a0 Outside of the people whose jobs <em>are<\/em> the computer (IT staff, etc.), most people have jobs that either used to be done, or could have been done, in the \u201creal world\u201d with paper and pen, filing, mechanicals, etc.<\/p>\n<p>So what happened here?<\/p>\n<p><em>The competitive landscape changed<\/em>.\u00a0 Tech as a tool is a <em>Force Multiplier<\/em>.\u00a0 That\u2019s a military term that generally refers to any mechanism, terrain, or other condition that can make a fighting unit more effective.\u00a0 Park a squad of infantry in the middle of an open field and call it a \u201cforce value\u201d of 1.\u00a0 Put them in a light forest and you might have a value now of 2 or 3.\u00a0 Put them in a reinforced bunker with fixed guns and you can really amplify their ability.<\/p>\n<p>Tech in business works as a force multiplier for most jobs it applies to.\u00a0 The accountant who used to have to slave away at the books with a pencil and a calculator (an early force multiplier, pun intended) now has a PC running Excel (I was tempted to say Lotus there, giving away my Internet age), which can do much of the job far, far faster and enabling that person to do multiple times the amount of work in the same time.\u00a0 <em>It multiplied that person\u2019s ability to work<\/em>.<\/p>\n<p>The digital photographer can now snap thousands of shots and find the keepers <em>much <\/em>faster.\u00a0 Tech has made film photography largely obsolete.<\/p>\n<p>The astronomer can now sift through enormous mounds of data in a week that in the past would have taken decades to work through.<\/p>\n<p>The marketing and sales execs of companies can determine worthy paths of action based on decision support systems built over the last couple of decades which produce accurate and timely information much faster and more accurately than human calculations and instinct could.<\/p>\n<p>The end result, and the short answer to the question is:\u00a0 businesses that don\u2019t use Tech as a force multiplier are subject to a hefty disadvantage in the marketplace.\u00a0 In a capitalist society, where money wins over all, such a disadvantage either amounts to corporate suicide or is suffered as a result of some benefit provided that disallows the use of the multiplier (think: handcrafted woodworks sold in a niche market \u2013 obviously can\u2019t use a computer-driven lathe to do the job).<\/p>\n<p>So\u2026tying back to the original theme &#8211; how does this relate to human expectations?<\/p>\n<p>Humans, as a rule, don\u2019t \u201cget\u201d computers.\u00a0 People don\u2019t understand them, they just understand how to use them.\u00a0 A very low percentage of the population really understand how to convince a computer to do something (and even fewer among them understand what they <em>need<\/em> to convince the computer to do).<\/p>\n<p>When computing arrived on the scene, it was first a precious commodity.\u00a0 The investment in computing was serious business, and only the richest could afford it \u2013 which is slightly ironic, given its nature in reducing human costs.<\/p>\n<p>In short order, however, computing and the spread of computing devices put computing into commodity status, even children had them &#8211; and computing\u00a0<em>made certain things possible that simply were not possible before<\/em>, generating the illusion that Tech was a creative force unto itself.\u00a0 For example:<\/p>\n<ul>\n<li>The special effects of the film \u201cReturn of the Jedi\u201d would not have been possible without a supercomputer. Later films have moved almost entirely into CGI.\u00a0 \u201cAvatar\u201d is a prime example of a film with enormous percentages of its shots being entirely computer-enabled. \u00a0Tech looks like the creative force here, but isn&#8217;t.<\/li>\n<li>You, personally, can now carry a device that contains high-fidelity recordings of <em>every piece of music you have ever heard in your life, and has room to contain every piece of music you ever will hear for the rest of your life<\/em>. \u00a0Tech is an enabler here, people begin taking it for granted.<\/li>\n<li>You can use a device (probably the same one as from the previous bullet) to connect to and have a conversation with anyone similarly equipped on the planet in seconds. And send them spreadsheets or other files at the same time. \u00a0Another tech enabler.<\/li>\n<li>Video conferencing, Dick Tracey style (yeah, I remember the comics, get back on topic please) could not be done without Tech. \u00a0Very enabling.<\/li>\n<li>Distribution of movies was restricted to specially equipped public places and homes of the very wealthy \u2013 until Tech came along and offered to deliver practically any film ever direct to your screen, before you&#8217;re done making the popcorn.<\/li>\n<li>Cars, planes, and nuclear reactors that can run under their own supervision will shortly be the norm.<\/li>\n<\/ul>\n<p>These things made tech seem like the magical creator that could whisk us into a Jetson\u2019s future.\u00a0 And so we got the 90s Tech Bubble, the Silli Valley .com boom which is (arguably) still going on.\u00a0 What we don\u2019t notice among the now-ubiquitous presence of technology and the headline stories of great successes\u00a0are the millions of other ideas that <em>did not<\/em> survive.\u00a0 For every successful business like Amazon.com, thousands died on the vine, even some that catered to extremely large markets.<\/p>\n<p>Many folks don\u2019t remember Pets.com, WebVan.com, Garden.com, Kozmo.com, or Flooz.com \u2013 but these were companies valued near or above a billion 1990s USD each, not insignificant chunks of change.\u00a0 Each of them had a pretty decent idea, even if one or two were a few decades too soon.<\/p>\n<p>Take WebVan.com, for example.\u00a0 Solid idea, on paper \u2013 order your groceries online and schedule their delivery to your home.\u00a0 Using tech as a force enabler for orders and allocation of distribution resources, great.\u00a0 What happened here?\u00a0 The businesspeople involved <em>did not recognize that tech is a multiplier \u2013 not a creator.\u00a0 <\/em>They assumed that the use of technology would make business problems irrelevant, just a thing of the past.\u00a0 Because once you\u2019ve got the system humming, it\u2019s just going to keep working, right?<\/p>\n<p>Not so fast.\u00a0 Webvan never sorted out the basic business premise in the first place, and as a result the quality of their offering suffered.\u00a0 Their distribution centers cost double what their competitors\u2019 did, with capacities that were double what their own traffic could generate \u2013 wasted money.\u00a0 Their products suffered \u2013 people often complained about receiving rotten produce, and who wants to spend an hour on the phone with Customer Support over a rotten lettuce?\u00a0 They alienated their customers and eventually people stopped buying.<\/p>\n<p>Their management was also roundly criticized for being massively incompetent in the grocery business by the experienced grocers who left the company after acquisitions.\u00a0 So here you had businesspeople with the expectation that just by \u201cinternetting\u201d a business, it could be made successful \u2013 no knowledge of that industry needed.<\/p>\n<p><em>It wasn\u2019t the tech that wrecked them, it was their business execution.<\/em>\u00a0 The tech, as a force multiplier, <em><u>multiplied the impact of their business decisions<\/u><\/em> \u2013 in some of these cases, taking a bad situation and making it worse.<\/p>\n<p>There\u2019s also a factor here that isn\u2019t often mentioned \u2013 arrogance.\u00a0 The arrogance of ignorance, of \u201chow hard can it be to sell food?\u201d\u00a0 This usually happens because the founders are so focused on making a gigantic IPO (because hey, the tech is here and the business has to be easy, right?) that they forget to build &#8211; or never really figure out how to build &#8211; a really solid business.\u00a0 If it looks good, it\u2019ll IPO well, or it\u2019ll be acquired by someone else, and then making the company\u00a0actually work is their problem. \u00a0This is a theme which, regrettably, has not departed the tech startup scene.<\/p>\n<p>And this is the same problem suffered in most startups.\u00a0 The assumption that by just throwing tech into a business one will \u201cdisrupt\u201d or \u201crevolutionize\u201d an industry and make the company worth a billion dollars is hugely prevalent. \u00a0It&#8217;s also hugely wrong. \u00a0Oh, there might be a billion valuation somewhere, but the company won&#8217;t be worth that price tag &#8211; and it\u00a0<em>will\u00a0<\/em>fail despite the big numbers. \u00a0So you get a bubble buildup, perceived values exceed actual by a long stretch right up until a collective coming-to-their-senses occurs and everyone&#8217;s stock values crash.<\/p>\n<p>When you add tech to a bad business, it doesn\u2019t make the business better, at best it\u2019ll simply add more to the cost of operations, and at worst it accentuates what is worst about the company and result in an accelerated demise.<\/p>\n<p>Pets.com was another good example of this \u2013 their premise was to sell pet products and food at big discounts over buying them in the store.\u00a0 The assumption, that tech as a method of ordering would reach enormous amounts of customers, and the business would be amplified dramatically by this.\u00a0 They spent monstrous sums on advertising to bring up their brand awareness \u2013 this, largely, was successful.<\/p>\n<p>Except what they didn\u2019t drum up\u00a0was desire to buy.\u00a0 People, in general, were buying their pet food in grocery stores and the local pet store as they walked past.\u00a0 Those sales which did get made were at a much lower margin than their competitors had (due to the steep discounts) and operational costs were higher (because the product had to be shipped to the consumer), and suddenly those lines of sales revenue and cost crossed one another \u2013 and Pets.com wasn\u2019t earning money.\u00a0 It was a case where tech was imagined to be the solution, but a solid business simply didn\u2019t exist behind it.<\/p>\n<p>A more modern example, perhaps \u2013 which shall remain nameless.\u00a0 Taking payday loans (the predatory interest short-term loans designed to get people hooked and keep pumping them for interest and penalties) and stick them on the internet.\u00a0 Again, top management with zero prior experience in the field, hyping up about how they\u2019ll be a \u201cbillion-dollar\u201d valuation \u2013 looking at their exit.\u00a0 Throw tech at it and it\u2019ll all work out, right?<\/p>\n<p>Except it won\u2019t.\u00a0 The business showed minor successes at first and received a lot of press, developing the illusion of quality, but with a less-than-optimal development team, a deeply unethical product line in an age where social awareness of disadvantage is becoming mainstream, competitors already present in the marketplace offering more ethical and more affordable products, and a management team desperate to make their exit, the business is on a collision course with its iceberg.<\/p>\n<p>The overwhelming theme in these cases are <em>the assumptions that tech will create the magical conditions where a business will succeed.\u00a0 <\/em><\/p>\n<p>The raw fact is:\u00a0 <u>tech won\u2019t do that<\/u>.<\/p>\n<p>The <em>business model must be correct<\/em>, and tech can\u2019t really help that (at some point in the future, courtesy of AI and learning algorithms, that might change).\u00a0 That means management must be capable of building a good, solid business \u2013 and that MUST be their focus.\u00a0 Not their \u201cexit.\u201d\u00a0 Notice I\u2019m not saying the business has to exist first \u2013 it doesn\u2019t.\u00a0 What I am saying is that tech doesn\u2019t create the business \u2013 the people behind it do.\u00a0 Tech <em>enables the business to accelerate<\/em>, enables it to operate faster, become successful faster, reach more people faster.<\/p>\n<p>The holy grail of all this?\u00a0 <span style=\"text-decoration: underline;\">The Business.<\/span>\u00a0 Building a lot of hype and a lot of awareness are great, but if the Business behind it all simply doesn\u2019t work, it\u2019ll just be a very costly and public embarrassment when the whole thing crashes.\u00a0 \u00a0\u00a0The Business is the product inside the wrapper, the hype and awareness are the wrapper \u2013 if the product is bad, most people won\u2019t buy.\u00a0 You might find the occasional sucker among investors to sink a big chunk of change blindly into further funding a bad business, and you might trick the public with a hyped IPO (images of <em>The Wolf of Wall Street<\/em> come to mind), but in the end, if the business is bad, it won\u2019t survive.\u00a0 Tech cannot stop that any more than throwing more money into the hole.\u00a0 It can only act upon what already exists. \u00a0And if the processes in place generate more cost than revenue, tech will only make that loss happen faster. \u00a0Investors and fund managers would be well advised to keep in mind that they might be better off ignoring the tech flash when doing their due diligence (unless of course, the tech is core to the business).<\/p>\n<p>On the other hand, if you have a good business model, of course tech can amplify that successful business and carry it around the globe in a matter of seconds (hours if you\u2019re running on CDN resources).<\/p>\n<p>And then, only then, will that tech be the force multiplier that creates a front-page story that will give people something to really smile about. \u00a0What might have been a local success story can be taken to extremes never before imagined, case in point \u2013 Amazon.com.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Well, that\u2019s a rather general topic, isn\u2019t it?\u00a0 Okay, let\u2019s get specific:\u00a0 in the last twenty years, computers and software, roughly labeled \u201ctechnology,\u201d have become absolutely ubiquitous and necessary in first-world business.\u00a0 And yet, human expectations of them have been &hellip; <a 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