Thursday, April 24, 2008

The Technology of Debt Collection

I read a story in the New York Times business section today which I found somehow profoundly troubling. The story (free registration required) entitled
"Debt Collection Done From India Appeals to U.S. Agencies" which describes the growing use of technology-enabled collection firms based in India. The gist of the story is that U.S. bill collectors are now beginning to outsource debt collection because they can get the service in India for about a quarter of what it would cost in the states. Technology, sophisticated database query systems, web technology, and global communications systems, are making all of this possible.

So, we have an economy which uses sophisticated technology to market products to U.S. consumers, encouraging people to overspend, and then the same technology enables low-cost overseas operations to collect when the payments are late. Many U.S. companies use this type of technology to both outsource production of their products and for the collection of the payments and debts from customers, many of whom are over their heads. All of this is driven by the lower cost of labor outside the country that is enabled to work from such a distance by our highly innovative technology. I am not sure where the companies think Americans are getting their income to make all of these purchases but clearly many of the jobs people use to do (like production and bill collection) are now moving off-shore. Technology makes it all possible.

Don't get me wrong, I am a great supporter of technology and innovation and in the long run I think it does far more good than harm. The Times story seems to me, however, to be one of those that goes under the heading of "Unintended Consequences". At least to me, this reinforces the need for the U.S. to stay at the forefront of innovation in order to be able to pay the higher wages that are required to keep people afloat in this global economy. Otherwise technology enables companies to look for the lowest cost labor pool they can find, no matter where it exists.

Of course, Americans could better watch what they spend and not have to get a call from a debt collector (even an Indian debt collector). But somehow, I think that this would raise the concerns of the very companies who depend on these same consumers to buy products they might not be able to afford.

The Times story ends on this (ironic) note:

Encore pays its collectors in India an average base salary of 17,000 rupees ($425) a month, and they earn bonuses — sometimes more than $1,000 a month — for getting customers to pay. In contrast, collectors in the United States, make about $6,500 a month. Thanks to the income, a windfall in India, where the average monthly income is $63, collectors are amassing some of the status symbols that probably got their clients into trouble in the first place — new scooters, iPods, Swatch watches and exotic vacations.

Tuesday, April 15, 2008

The Art of Riveting

I was interested to read a recent article by William Broad in the Science section of the New York Times entitled "In Weak Rivets, A Possible Key to Titanic's Doom". The article summarized investigations by historians of science who have looked into the question of whether Harland and Wolff, builders of the Titantic and her two sister ships Olympic and Britannic, used sub-standard rivets on the Titanic (see my previous post about these ships). Deep submersibles investigating the Titanic's wreck site have seen that the plates in the forward part of the ship's plates sprung open from the impact with the iceberg. The bow and stern of the ship were put together with iron rivets while the center, higher-stressed, portion of the hull was riveted using stronger steel rivets. The evidence seems to suggest that poor quality material and poor riveting techniques lead to brittle rivets which fractured more easily when the ship hit the iceberg.

What caught my eye in the article was a description of the riveter's art:

In their research, the scientists, who are metallurgists, found that good riveting took great skill. The iron had to be heated to a precise cherry red color and beaten by the right combination of hammer blows. Mediocre work could hide problems.

This really speaks to my blog of a couple of days ago about defining what is technology? The Greeks would have easily called the art of riveting "techne". It was something that took a highly skilled and experienced worker to do correctly. Done right using good material, iron rivets were perfectly acceptable fasteners. But done poorly (the builder couldn't find enough qualified riveters for the massive project) and with inferior materials (the iron ordered was often of a lower grade), then the integrity of the rivets were very much in question.

The article went on to describe how iron gave way to steel in later riveted construction and hand riveters were upgraded with automatic riveting equipment to insure more consistent results. Certainly, these were steps in the right direction to insure the safety of structures. But somewhere along the way, another art died, the art of the hand riveter. We probably don't need many of them anymore but it is a great example of how so many other artisans have disappeared to progress. Stone masons, wood carvers, glass makers, steel workers, these occupations and more have become part of the "lost arts", part of the "lost techne". TItanic was lost for the lack of techne.

Monday, April 14, 2008

Why I Don't Read Innovation Business Books

Hardly a week goes by without the publication of a new business book on innovation. Most of these books purport to teach the art of innovation within your company. If only you follow the author's recipe, you can kick-start your company's innovation processes, accelerate growth, and reach some new level of creativity and productivity. Don't get me wrong, I think most of the authors of these books are quite sincere in their beliefs about their methods. But I take a contrarian point of view.

In fact, most companies of any size are not organized for innovation, they are organized for efficiency and profit growth. Innovation is a messy, expensive process with a low probability of being either efficient or profitable in the short run. Most of what the business books describe as innovation in companies is really about incremental improvement in existing products and processes. It is not hard to understand why existing companies resist innovation: it is not a good bet for their quarterly returns and in our economy, the quarterly earnings statement has become virtually the sole measure of the worth of a publicly traded company.

No, innovation processes are hard to teach to companies because they so rarely happen within an existing company. It is for good reason that most real innovations happen in academic research labs and start-up companies. The people who want to be in these places are the antithesis of the types of people you find in big companies. They hate bureaucracy. They want to do it their own way, even if it means they risk their very livelihood in moving an idea towards the market. These people would never describe themselves as reckless risk-takers but they have a much higher tolerance for ambiguity than their corporate counterparts. Moreover, they usually have a downright ornery streak of independence coupled to a high sense of self-confidence. Having to have every idea reviewed by multiple levels of management using conservative corporate processes is anathema to them. They know what they want to do and they just do it.

So is it possible to bring innovation to a large company? Yes, but it almost always has to be built into the DNA of the company from the start. I worked for 3M for 30 years. 3M is known for its innovation. That innovation came from a very organic business model. The core of the idea was to divide every business when it reached a certain size and let the parent division protect and nurture its offspring. This model had lots going for it. People who had an entrepreneurial streak could champion a new business and grow with it. The model was self-replicating: every division general manager was measured on the growth of the parent divisions AND the number of offspring created. The really innovative part of the equation was summed up in the corporate axiom that "technology belonged to the corporation and products belonged to the divisions". That meant that technology could be mixed and matched and recombined across all of the businesses to create new synergies that were not possible within any one division. Conversely, it meant that the divisions could jealously protect their products and markets as any small independent company would do.

This business model served 3M very well for its first 80 years. Finally, however, growth began to slow, the customers became confused by the multiple divisional sales forces that called upon them, global markets demanded more coordination, and competition in what use to be 3M's core markets made the going tougher. These forces began to be felt in the 1980's. Like most companies, 3M focused more on central planning and more on efficiency. The organic growth model gave way to a planned efficiency model. Not surprisingly, the makeup of the people in the company began to change. The entrepreneurs and risk-takers were harder to find. Some left the company, others went underground. Innovations still happen at 3M but the organic business model that was the core of the company has changed. Perhaps it had to given the scale and multi-national nature of the company.

So what would I put on a manager's reading list is they wanted to learn about innovation? I would suggest histories and biographies that portray how some of the great innovators of the past have done it. Check the reading list in the sidebar of this blog for some starting points. The most basic lesson may ultimately be that if you really believe you have a paradigm-changing idea, you will need to leave the safe haven of your current company. That is a scary proposition, especially in a recessionary economy. But going back to some of those earlier entrepreneurs, they won and lost fortunes, often several times over. Money was not their primary goal. Seeing their idea come to life was all that was important. Ask yourself, "What would Edison (insert your favorite innovator) do?" You might come away with some new ideas.

[Image of The Librarian, Giuseppe Arcimboldo (1566). From Wikipedia]

Saturday, April 12, 2008

Technology: I Know It When I See It

Technology. We live with it every day. It creates our life experiences as much as we create technology. We can't pick up a publication without reading about what is hot in "tech" (the shortened version of hi-tech which is itself the shortened version of high technology). Our current list of what wears the "tech" accolade consists of biotech, nanotech, infotech, and other esoteric topics. Carl Sagan once remarked,

We live in a society exquisitely dependent on science and technology,in which hardly anyone knows anything about science and technology.

I am trying to do my little bit to remedy that. I have started planning a short course on the history of technology. It seems that a practical place to start such a history is to define the word "technology". The word is used so frequently and so casually that surely a good definition would be easy to find. Not so. The word has its roots in the Greek words "techne" and "logos". For the Greeks, techne related to the arts and crafts and contrasted with "episteme" which usually referred to the sciences. More specifically, techne referred to the skills that were needed to make or build something. The term "logos" meant "word" and has been broadened to mean "knowledge". So, techne+logos has been interpreted to mean the knowledge of skill and crafts.

It's not clear who first used the word "technology" in its modern form. One candidate whom has been suggested is Jacob Bigelow, a professor at Harvard who wrote a book in 1829 entitled The Elements of Technology. This book was intended to be a catalog of technologies from ancient to modern. Bigelow was the first to hold the Rumford Chair at Harvard, a chair endowed by Count Rumford (Sir Benjamin Thompson) who had been born in Massachusetts in 1753 and who died in Paris in 1814. Thompson, a loyalist, fled the colonies for England during the American Revolution. He was named Count Rumford in 1792 while working for the Bavarian Government (the name he took, Rumford, was the early name of Concord, New Hampshire where he taught school). But Rumford would have been very much in tune with Bigelow's book.

Bigelow wrote extensively in the introduction of his book about the "arts and sciences" (the same as the Greek techne and epsiteme). This is an older pairing than our more current "science and technology". In Bigelow's world, the arts included all of the practical arts embodied in the Greek word "techne". Technology was part of the arts and separate from the sciences, which focused more on discovery than on crafts. As technology has become evermore based on science, we have coined the phrase "applied sciences" to represent the intersection between pure science and the more pragmatic technologies. The boundaries between these domains get ever blurrier and we probably will never have something that is pure technology.

But I still am looking for a good definition of technology. Perhaps a good working definition is:

The systematic knowledge and the methods and procedures which can be used in a specific area in order to resolve practical problems.(ref)

What makes up what we call technology changes with every generation and often much more often than that. A century ago it was airplanes, automobiles, electric power distribution, motion pictures, and a host of other things that have since receded into the background fabric of our lives.

The late Douglas Adams who wrote The Hitchhiker's Guide to the Galaxy gave a great tongue-in-cheek description of the evolving stages of technology in a 1999 essay on the internet:

1) Everything that’s already in the world when you’re born is just normal;
2) Anything that gets invented between then and before you turn thirty is incredibly exciting and creative and with any luck you can make a career out of it;
3) Anything that gets invented after you’re thirty is against the natural order of things and the beginning of the end of civilisation as we know it until it’s been around for about ten years when it gradually turns out to be alright really.

Apply this list to movies, rock music, word processors and mobile phones to work out how old you are.

I love this description because it not only helps to define the "newness" angle on technology but also our ambivalence about the new dimensions of tech that threaten our status quo. The New New Thing is still trying to solve some practical problem in our lives. It seems to often happen that the original target for the technology proves to be unworkable but technology is amazingly resilient and seeks an application as surely as water seeking its own level. The reservoir of technology, of knowledge of the practical arts, keeps rising.