The battle of eReaders will be all about software

There is a lot of activity on the eBook front: Sony earlier announced that they would be moving towards supporting the open ePub eBook format on their eReaders, and they are expected to announce a new eReader that incorporates cellular data connectivity. Barnes and Noble announced this week that they are partnering with Irex Technologies and will come out with a new device later this year.

But with all the hoopla and promise, one thing missing from a lot of coverage is the software side of things. That is where the eBook eBattles will be fought and won.

eBooks are beginning to take hold for a lot of different reasons: finally there are enough titles available (although in a confusing array of formats and readers). Prices on the devices have come down and quality has gone up. Prices on the eBook titles themselves are at parity with the mass market paperbacks. The size and quality of the screens is approaching that of printed paper. Battery life is reasonable.

All of this may be well and good, but the real reason that eBooks are doing well is that the software is finally catching up with the hardware. Why so? Because you need a great combination of eReader software along with Web storefronts that offer the books for sale and allow people to shop and discover books that they want to download to their readers. Some of the people that design the Web stores that offer up the eBooks are getting some clue here. The best example is Amazon's Kindle storefront. Why? Because first and foremost, they know how to sell books online. Inside of about 35 seconds, I can find and purchase an eBook, and in another 35 seconds, have it in my hot little hands and start reading. It is hard to beat that kind of delivery time.

Sony's Web store, ebookstore.sony.com, comes in second, such as trying to find bargains. On both you can sort eBooks by price, but because Amazon offers so many free eBooks, it is hard to find current titles. Sony does a better job. Sadly, in order to buy an eBook from Sony, you need their desktop client software. B&N.com is just plain miserable.

My choice of eReader is to use the Kindle app that runs on the iPhone/iPod touch. I don't have to carry another device around, and while the Kindle reader does drain my iPhone battery, I can deal with it. I also don't read much beyond text: if I had a need for more graphics-rich documents, I would consider another reading device.

I have read about a dozen books from start to finish on my iPhone and found the experience to be more than satisfactory. Most of these are the sort of books that I would buy in airports and dispose of or donate almost immediately after reading. The iPhone Kindle app has a few things going for it: since I carry my phone everywhere, I am not without reading material to fill in those small time gaps during the day while I am waiting in an office for an appointment or so forth. At night, I can continue reading in bed without annoying my wife, since the screen is backlit. The page turning process is something you get used to, and the ease at which you can find a book and start reading within about a minute is great for those of us that require near-instant gratification. You can be well into the new best seller of your choice before anyone else had even time to get to the bookstore, let alone wait for the overnight Amazon shipment.

If you are in the market for an eReader and have an iPhone, it is a simple matter to download the free app, start browsing Amazon's Kindle store, and stuff it full of eBooks. If you don't have an iPhone, it almost makes economic sense to buy an iPod Touch and dedicate it to reading books: the cost is nearly the same as the Kindle hardware device. The downside is that you will need to be in WiFi range to download your books. On the iPhone, like the Kindle hardware, you can download over the cellular network.

If you have a Blackberry, Palm and some other PDA, then you have two choices: either the Barnes and Noble eReader or the Mobipocket eReader. Both are more cumbersome to use than the Kindle app, and require you to download books to your desktop first. I couldn't really get the B&N app going, it seemed like it had too many moving parts.

Sony's eReader currently lacks the communications but supports a lot of different book formats, including their own which they are phasing out by the end of the year in favor of ePub. And they have a growing culture of modders who have exposed the underlying Linux OS to do various things:
http://www.reghardware.co.uk/2009/08/11/how_to_hack_sony_reader/

ePub-formatted books can be read on the iPhone with Stanza, but the process is also cumbersome and clunky, certainly nowhere near the experience of the Kindle. Google and others have digitized many public domain books in this format, but few of the current best sellers are in it. Amazon, by virtue of their market position, is in a better place here. They also understand how to develop Web software, something Sony -- and B&N for that matter -- still haven't caught on to. The better the Web stores are, the more eBooks will be sold.

For eBooks to be truly eUniversal, Kindle needs to be able to read ePub formats, and be available on Blackberries and Palms and other larger-screen phones and PDAs. And all the various players – including Sony – need to eliminate the digital rights management that comes with your eBook, as has been reported with last month's debacle over "1984."

While nothing will ever replace the physical bookstore browsing experience, at least for me, I am glad to see this market continue to mature.

Listening to the voice of the customer

Two companies are showing that in today's touchy economy, making the sale is all about the way you respond to a customer via the telephone. And not only are they are listening very carefully but also they are using sophisticated software systems to help implement their solutions. One of them, called Aisle411.com, is brand new, launching this week. The other one is very well established, called Varolii, and we'll get to them in a moment.

Aisle411 is used to help consumers find a specific item in a store. Say it is a hardware store that you don't often frequent, so you don't have the store layout encoded in your brain. You spend the first few minutes wandering the aisles, or asking an employee where your item is located. Wouldn't it be nice if a service could tell you where you can find it – by aisle number and shelf position?

I have a confession to make: I am not a shopper. I don't like to buy stuff, of any kind. But what Aisle411 is doing is noteworthy just for people like me, who measure the amount of time inside a store in microseconds. According to their research, more than 13% of shoppers leave a store without finding what they came for in the first place.

Aisle411 uses speech recognition software and some elegant programming to direct shoppers to the right place in the particular store they are trying to navigate. You just call them up and say what you are looking for.

Behind this phone call there is a huge database of products, store layouts, and other information. And while Aisle411 is just getting started with a few Ace Hardware stores in the St. Louis suburbs, they have big plans to work with a number of national retailers, who see this as a way to differentiate themselves and offer up better customer service, as well as to increase sales by helping their customers actually buy more stuff when they are roaming the aisles. And Aisle411 is turning its systems into a way to provide better leads management, inventory management, and real-time tracking for store owners. They can deliver coupons for related products to the consumers’ cell phone via a text message, too. And the service is free for consumers.

Now let's contrast what an older company is doing to help provide better customer service with automated call center software. What do you do when you get a incoming robotic phone call from one of these services? I know what I do, I hang up. I don't want to talk to a machine. But to try to keep more people on the line, as well as actually provide better customer service, you have to combine the best bits of psychology with technology, as the folks from Varolii – one of the leading vendors in this software -- have found out.

The company's automated attendant completes over a billion calls a year for many large banks, airlines, and others that need to make customer service calls. They have begun learning from all these calls and now apply a little bit of psychology and population dynamics in helping their customers prepare the right series of voice prompts for their automated systems. Their goal is to help keep more people on the line and provide better customer service.

Varolii has learned that different age groups respond differently to how they are contacted by their systems. With Gen Yers, you want to send a text message and then follow up with a voice call, which is exactly the reverse of how to deal with a GenXer: call first and then follow up with a confirming text message, while for baby boomers call first and then follow up with email. And the strategy for seniors is to use voice prompts that speak slower and can be repeated. They have also found that the time of day and the sex of the recorded voice matters in terms of getting the best response too. How many of us have heard "press one for English, two in Spanish?" – well, that isn’t the best prompt design, because someone could hit the wrong key on the phone dialer pad by mistake and then start receiving prompts in the wrong language. A better method would be to move the response key further away, such as pressing 9 for Spanish.

They found that calls that avoided the use of Social Security numbers but could authenticate the account holder with some other specific information, such as an airline frequent flier ID or bank account number, increase the probability of action by 30%. And using the word "now" in a prompt, such as "press one now to activate your card," add a sense of urgency and that will translate into better results.

Finally, unlike the movie Jerry Maguire, you don't have me at hello. In fact, you want to avoid starting any calls with "hello" – when you remove hello from the initial greetings, you get a 50% increase in live answers. The company suggests starting off with identifying the company name and purpose of the call, and start talking immediately upon when the call is answered.

Both Varolii and Aisle411 are showing that it pays to listen and track what customers are doing over the phone. Both also marry some sophisticated voice response software with lo-tech phone calls to help improve customer service. It just shows you that when it comes to doing innovative things over the telephone, we still have a lot to learn.

Netflix should buy the US Postal Service

Congress last week began hearings about whether to discontinue Saturday mail delivery, close local branches and other measures to try to balance the postal service's budget. On the national news last night was a story about how a small town in Maine fought to retain its lone street mailbox. I say desperate times call for much bigger measures, and my suggestion is to sell the entire USPS outfit to Netflix, lock, stock, and … Well, you don't want to say certain words around postal employees – at least until they become Netflix staffers. More on that in a moment.

It isn't so far-fetched when you start to think about the possibilities. After all, Netflix is keeping the USPS afloat with more mailings of DVDs than McDonalds sells burgers. They have more than 50 distribution centers around the country, all of them in locations that are more secret than Dick Cheney's bunker. They certainly understand how to run a distribution network, they have the machinery and the personnel. Plus, something that would warm the cockles of my Republican wife's heart, I can't believe that I am saying this but having a truly private mail carrier might actually bring some economic sense to our mail system.

How would this look? Here are my suggestions: First all, all mail would be one size and have to be sent in those familiar red mailers. That would mean that anything larger would have to use some other carrier, such as Fedex or UPS. International mail? Same thing. Magazines? Well, this is hard for an old magazine editor like myself, but they will have to change to the Netflix form factor if they still want to be mailed. Junk mail? Same deal. Standardization is key. No more post cards. If it doesn't fit in a mailer, you can't mail it.

Next, we eliminate potage stamps. Since we all will be using the standard mailers, we have standard postage. You buy the mailer and pay for the postage right then and there. Forget about metering based on weight: whatever you can cram into one of those envelopes is what you get to send. This obviates the need to run local post offices: if you need to mail something bigger, you can go on down to Kinkos or the local UPS store. They give better customer service there anyway. No more postage meters, but Pitney Bowes has been on the decline for years anyway.

And while we are at, we should eliminate business delivery of postal mail. Don't need it. You want to send something, use one of the other private carriers and get it there overnight. I recall a funny story a few years ago, when I was doing some work for a publishing firm and mailed in my signed contract. My editor kept saying that he never received the contract, because he never thought to ask where his actual postal mailbox was – there was little point because he never got anything via USPS that he cared about. The only thing that I get these days are checks, and we might as well move towards electronic payments anyway. Some of my clients now do direct deposit to my bank account, and I wish more did.

Netflix is a good choice to run the USPS for one other reason: it has an amazing employee base. You couldn't pick something that was more the polar opposite of the feather-bedded, anti-customer oriented, highly motivated, hyper regulated postal system if you tried. How so? There is no vacation or hourly time card tracking policy at Netflix. There is also no specified uniforms or other dress code policy there but no one has come to work naked lately. Their entire T&E policy is "Act in Netflix's Best Interests" and not much more than that. I think that says a lot about how much a company can trust its employees, unlike many firms that make you take odd flights to save a few dollars that consume hours of your time, or jigger your expense report so you can get almost reimbursed for your actual out-of-pocket expenses. The lesson is that you don't need detailed policies for everything. (You can see the details of this for yourself if you are interested here:
http://www.slideshare.net/reed2001/culture-1798664

I know having Netflix run the postal system is probably a fantasy. But it is fun to dream, and have hopes, right?

Eyes on the prize

The news last month that two groups of computational researchers have qualified for the $1 million Netflix Prize got me thinking about how other prizes have had a very influential role in technology development. For those of you that missed this nugget, several dozen different computer scientists and mathematicians have tried over the past year to improve upon the algorithms that Netflix uses to recommend new videos to its subscribers. The teams that could get better than a 10% improvement (defined very precisely by Netflix) would qualify to win the prize purse.
http://www.netflixprize.com/

This is only the latest in a series of prize-motivated developments. For the past three years, a group of southern California investors have been working on a venture called Prize Capital. The effort grew out of the work of the Ansari X PRIZE Foundation that awarded a $10 million prize in 2004 for the first private spaceflight.

Prize Capital combines old-fashioned greed with socially conscious investing on a grand scale. Their concept is thrilling, with a simple idea at its core. An investment firm creates a fund that will be used to invest in the total field of competitors in a single niche market. The complexity comes about in its execution, which may be why no one has ever tried to do it on the scale that they envision before now. The first prize effort is underway to develop better biofuels:
http://prizecapital.net/Prize_Capital/Algae_Fuel_Prize.html

Unlike traditional venture funds that invest in multiple companies or sector funds that serve particular markets, the prize capital model starts with this "matrix fund". The genius behind the idea is that this fund drives an entire ecosystem for directing high-return innovations. The largest and most noticeable element is a very public science contest that all of the funded companies take part in, going after a ten million dollar prize purse and racing to be the first to establish a particular invention, task, or medical cure.

The Prize Capital notion is revolutionary and differs from existing venture or sector funds on several different dimensions. First, the combination of the matrix funding model with the prize competition is a brilliant deal-discovery mechanism. The allure of the challenge and the chance to be in the spotlight, not to mention the actual cash prize itself, can help to locate and identify potential technology solutions in a particular market niche. Because the prize is a public one, the bright light of worldwide publicity associated with the contest can help bring about all sorts of benefits to the competing companies, including attracting additional investors and management talent.

Second, "the matrix model permits investors to bet on every horse in the race," says Lee Stein, one of the founders of Prize Capital and an early leader in the Internet payments industry in the mid-1990s. "A lot of times VCs don't make investments because they have a short list of companies in a particular niche but can only invest in one. The matrix model enables them to play the full field and spread their risk."

Traditional venture capital funding is not structured to take positions in direct competitors, while the matrix concept relishes this situation. Prize Capital leverages its relationship with the prize management industry to take positions with everyone in a given field. As long as the competition is attractive enough to cause everyone in a given field to enter a particular competition, the result is a new opportunity for investors to become involved with cutting edge technology. Spreading the investments across the matrix can create additional leverage and reduce the risk of the investors.

A third difference is that Prize Capital will own a royalty stream on the intellectual property generated by the teams in the competition. Even if a given company fails to win the prize, the fund has the ability to succeed.

Fourth, the prize mechanics are important part of the deal, and here is where the groundbreaking work on the Ansari X PRIZE has paid off. These mechanics have to be carefully scripted and innovation targets clearly defined. The competition also requires that the ultimate science must be repeatable and independently verifiable. This was done on the Ansari X PRIZE and is an essential element of any planned future competitions.

The prize is only awarded when a positive report comes back saying everything works. This process is more stringent than that is typically required by peer-reviewed academic journals, the current prestige venue for scientific results. Prize Capital thus could be in an interesting position of being able to set a very high bar here for how basic research is conducted in the future.

While the traditional VC trades capital for equity positions in their portfolio companies, Prize Capital can use other kinds of benefits, including the additional influence from the publicity and activities of the competitors as they work hard to meet the particular goals to win the prize, to secure stakes in the innovation on favorable terms.

Most science competitions have been funded through philanthropic means. Prize Capitalism leverages the large jumps in technology innovation and uses it to fuel an entire ecosystem of investments to take advantage of these innovations.

Look at what happened with the original X PRIZE. That initial $10 million prize purse was leveraged into over $100 million into work being done to develop two spaceports in the New Mexico and Arabian deserts. This isn't just a lot of dot-com sock puppets or social networking startups depending on ad click-throughs. This is hard-core real estate development, new job creation and engineers building real assets on the ground.

The Prize Capital model has something for everybody. It could bring a ray of hope for many people that are looking at ways to dramatically increase basic research and kick start medical cures. It can co-opt the heavy publicity surrounding the whole prize itself and the take advantage of the spirit of invention and innovation that so often goes hand-in-hand with the best American capitalists. It has universal appeal across nations and cultures too, and can play as well with the new generation of Asian proto-capitalists and with the old crew along Sand Hill Road too. And it has some Hollywood glitz on the order of "American Idol" and yet still appeals to button-down Wall Street bottom-line sensibilities. It is an intriguing mix of investors, capitalists, non-profit charities and philanthropists working hand-in-hand, all in the name of advancing science and fostering innovation. I wish them well and hope to see the fruits of their labors soon. In the meantime, keep your eyes on other prizes.

Houston, give us a reading on the 1202 program alarm

Like many of you that grew up in the 1960s, I have been spending a lot of time online looking at the various commemorative links to the Apollo 11 moon landing that happened 40 years ago this week. I found it fascinating, not just because the event was such a key moment in my teenaged nerd life, but also because it shows how we managed to triumph over technology that wouldn't even be found inside your average watch today, let alone a cell phone or computer. Rather than pepper this email with a lot of links and run the risk of the sp*m gods, please go to strominator.com and you can click on what you want to follow up with more conveniently.

The Apollo spacecraft had three different display units onboard, running two computers: one in the main command module and one in the lunar module. Both weighed 70 pounds, ran at 1 MHz and had about 152 kb of memory.

To get an idea of how primitive the guidance computer was, you didn't have a typewriter interface or a display screen, but a box with mostly numeric input that you had to key in "nouns" and "verbs". You can go here and try the simulator:

The first moon landing was beset with problems. Armstrong had 17 seconds of fuel remaining, after having to take manual control over the lunar module and fly past some obstacles. The site was four miles off course because the module wasn't completely depressurized when it separated from the command module – a small amount of gas pushed it off course. And during the descent, several people documented how many times the guidance computer would get overwhelmed with data inputs and had to be rebooted, because Aldrin had not set one of the radar switches properly and it was filling up the computer with too much data. A young engineer, Stephen Bales, made the critical decision to ignore these warnings. There is a great video segment about it from CBS News that they ran this week.

There are probably hundreds of Web sites with various tributes to the space program, I will just mention two places that I enjoyed reading. First is a special report compiled by EE Times, which has eyewitness accounts from a few of the engineers who worked at NASA, along with a teardown of the space suits used and other technical info about the program.

The other is a list of numerous technological achievements from the space program that have found their way into our lives. And while Tang isn't on the list (and it is dubious whether it should be), there are lots of other things showing just how much innovation NASA had to do to put two men on the moon and bring them back home safely.

When did the browser become the next OS?

"We view the Internet as the fourth desktop operating system we have to support after Windows, MacOS, and DOS." That quote was from an executive at McAfee, and DOS gives it away that it was spoken back in 1996.

With the announcement that Google will develop a quick-start operating system by next year for instant-on netbooks, I thought it might be interesting to take a trip down memory lane and remind us how we have gotten to the point where the browser has become the next OS, and probably now moving into first place rather than fourth.

Of course, the smarmy retort to Google's announcement is that we already have a quick-start, ultra-reliable Web OS, it is called OS X and my MacBook takes about five seconds from when I open the lid to when I can be surfing the Web. Unlike many Windows PCs, I don't have to have a degree in advanced power management techniques with a minor in spam and virus prevention to get this to work.

But let's go into the WayBack Machine to the early 1990s and see the context of that McAfee quote.

The first collection of Web browsers literally weren't much to look at, because they only displayed characters and basically just a page of hyperlinked text. This was the then-popular Lynx that was initially designed back in 1992 for Unix and VMS terminal users (that was back when we called them that). Think about this for a moment: this was pre-iporn, pre-IPO Netscape, pre-real Windows -- when the number of Web servers was less than a few hundred. Not very exciting by today's standards.

Then Microsoft got into the game, and things started changing. With the introduction of Windows 95 we had the beginnings of a graphical Internet Explorer, which ironically was licensed from the same code that Netscape would use to create their browser (and eventually Firefox). Windows 95 came with both IE and Windows Explorer, and the two were similarly named for a reason: browsing pages of the Web was the beginnings of something similar to browsing files on your desktop. Things didn't really get integrated until IE v4, which came out about the same time as Windows 98, and they were so integrated that they begat a lawsuit by the Justice Department. At the end of 2002, Microsoft was legally declared a monopolist and had to offer ways to extract IE from Windows going forward for users who wanted to install a different browser.

During the middle 1990s, we began to see better support for TCP/IP protocols inside the Windows OS, although it really wasn't until the second edition of Windows 98 that we saw Microsoft improve upon the browser enough that they could include it as part of their Office 2000 product. Before then, we had separate drivers and add-on utilities that required all sorts of care and feeding to get online, in addition to using AOL and Compuserve dial-up programs.

As an example of how carefully integrated IE was with Windows, when Microsoft released IE v7 along with Vista, initially you needed to verify your license of Windows was legit before you could install the latest version of IE on earlier operating systems. That restriction was later removed.

And lately Microsoft has announced its next version of Office 2010 will have even further Web integration and the ability to create online documents similar to the way Google Docs works. Google Docs is an interesting development of itself, because now documents are stored outside of the desktop and managed through a Web browser. As long as I have an Internet connection, I don't need any software on my local machine to edit a document or calculate a spreadsheet.

So what is the real purpose of an operating system? Originally, it was to manage the various pieces of your PC so that your applications could talk to your printer or your hard drive or display characters on your screen without having to write low-level programs to do these tasks. Three things have happened since the early PC era:

First, as the Web and cloud computing became more powerful, we stopped caring where our information is located. In some sense, having documents in the cloud makes it easier to share them across the planet, and not have to worry about VPNs, local area network file shares, and other things that will get in the way. And we even have cellphones like the Palm Pre that have a Web OS built in, so that applications don't have to be downloaded to the phone but can run in the cloud. At least, when developers will finally get their kits to build these Pre apps later this summer.

Second, as the desktop OS matures, we don't have to worry about the underlying hardware as much because that hardware has gotten more generic and the OS has taken on a bigger role (to match their bigger footprints too). Although printer drivers are still scarce for Vista, and 64-bit apps aren't as plentiful, for the most part we don't need a "thick" desktop OS. Yes, there are enterprise apps that need the OS, and some that need a specific version of Windows too, but most of our computing can be done without really touching much of the OS.

Finally, the browser is the de facto Windows user interface. Perhaps I should say the browser plus Ajax or the browser plus Flash. But most applications that were formerly client/server now just use browser clients, or run inside a browser with minimal desktop downloads. This has been long in coming, but now Rich Internet Applications can be considered on par with local Windows and Mac ones.

So here we are, at the dawn of the new Google OS. We have come full circle: from the green-screen character mode terminals of the mainframe and Unix era to the browser-based Webtops of the modern era. This doesn't mean that Windows 7 or 8 or whatever will become obsolete. Just less important. And given the multiple billions of dollars that Microsoft has made over the years from Windows (and let's not forget dear old DOS), you can imagine that there are some nervous folks up in Redmond these days.

How proudly we fail: how 25 innovative tech companies die

I recently wrote a story for Datamation.com that looked at 25 companies that are no longer with us but were ahead of their times with innovative products. Before you write in and say that I missed your favorite, I wanted to take a few moments here and talk about some of the interesting trends that I saw from this list. The reasons for failure could be broken down into five general categories:

Corporate hubris and hijinks. Tech companies don't have the best record when it comes to staying on task, and this is especially true when they merge or start to bleed their best people. Look at Ashton-Tate's dBase. When they were at their height of their powers in the 1980s, thousands of people around the world studied their programming language and built databases on PCs (I was one of them). Then they lost their way and were sold to Borland in 1991, and that was the beginning of the end for both the company and its flagship product. Borland had a competing database product and couldn't sustain dBase. Or Banyan's VINES networking operating system, which also had a loyal customer base and had innovative directory services applications long before they were implemented by Novell and Microsoft. How about Digital Communications Associates, maker of the 3270 Irma boards? They quickly disappeared after 1994 when Attachmate acquired them.

The market evolved past them. Columbia Data Products made the first clone PCs back in 1982, not long after IBM came out with their model. They lasted five years, and the market moved on to more efficient suppliers like Dell and HP. Ironically, we got some other innovation from Columbia that they were less known for, the SCSI storage interface that was used for many years to connect hard drives to PCs. AST Research was another one who had a dominant share of the peripheral expansion market in the 1980s, only to see many of these peripherals integrated into PC motherboards.

Bright people working in the wrong company. Just because you have a collective brain trust doesn't mean that you are going to live long and prosper. Sometimes the chemistry is wrong, or the circumstances not quite right. Take First Virtual Holdings, one of the pioneers of Internet payment systems. Their founders went on to develop key products for Paypal. General Magic founding fathers went on to develop key parts of several phones including iPhone for Apple, Android for Google, and to help start eBay.

The Osborne effect. One company even is notable for its failed strategy of pre-announcing products that killed any demand. Osborne Computers was the early leader of portable PCs that weren't all that portable – at close to 30 pounds and a few inches too big to fit under an airline seat, they were a bear to fly with. Nevertheless, when Osborne announced a new version in 1983, everyone stopped buying the current models.

Engage lawyers. Sue everyone. Repeat as needed. Research in Motion uses this tactic to the present day, even though it has lost its share of suits in the creation of the Blackberry smart phone and millions of dollars. SCO/Caldera Systems has done something similar for early Unix inventors. Sometimes winning a lawsuit can be the death of a company too: Witness Stac Electronics that won $120 million from Microsoft on their disk compression technology, something that is now part and parcel to just about every operating system.

Take a look at my trip down memory lane here: http://tr.im/rcro