The Chasm

Some IT organizations think they have the wherewithal to do everything in-house. They manage their projects, hire some consultants and run their own datacenters. Around 80% of the IT budget is allocated to keeping existing systems running, which has little or no impact on company growth. Managing legacy applications is labor intensive, as it typically involves a Babylon of languages, applications and systems. The fact that this hodgepodge functions at all can be called a miracle. If a business process changes or a new product is introduced to the market, the IT department takes months, sometimes years, to bring about the necessary changes. There are too many dependencies and complexity is too high to have the application-base adapt rapidly. The transition to ERP packages such as SAP and Oracle did not the resolve the flexibility issue. Implementing SAP is seen by many as “pouring super expensive concrete in the foundation of the corporation”. Rich in functionality, high in cost, but agility is not a characteristic. Most organizations are better served by simplification and modernization of their existing systems, rather than the addition of new features (this also applies to Microsoft Office).

Large software projects remain unpredictable. The root causes of projects that are running way over budget and over time can be typically found on the fault-line of business and technology. If CIOs continue to behave like true cost center managers and keep holding on to a technology view of the world, IT will remain neutral at best and a value drain at worst. The technology providers that can provide relief are few and far between, as they tend to suffer from the “hammer syndrome”, i.e. they see every problem as a technology problem that can be killed by throwing more abbreviations at it. SOA, BI and BPM are all helpful tools, but only if they are used in the proper business context. “The business hasn’t given us clear requirements; they keep changing their minds all the time”. This type of statements indicates a chasm between business and IT. In 2008 the Hackett Group published a report which showed that companies where the IT discipline is weaved into the fabric of the organization have 40% higher margins than their peers who don’t. According to Faisal Hoque, of the BTM Corporation, the convergence of business and IT is a key driver for growth and profitability. This implies that every IT person understands the business value of the application she is working on and every executive has a grasp of the importance of technology for the company direction. Key technology decisions are business decisions. IT is managed using financial models that continuously measure value added to the organization. Applications are grouped in portfolios and directed on value, cost and risk.

In the last couple of years we have seen some dramatic changes in the IT world. A new generation of applications built for the Web and utilizing open source and collaborative development models, are allowing companies to implement flexible applications much faster and cheaper. Applications like Salesorce.com are shared among multiple companies (so called multi-tenant systems) and offer a web-based platform to integrate with existing systems. Applications that “live in the Cloud”, as this is euphemistically referred to, negate the need to manage infrastructure. In general it doesn’t make sense for most companies to own and manage their own technology infrastructure. They lack the expertise and scale to do this effectively. This is better left to specialists like HP and IBM or new players like Amazon.

Web technologies allow organizations to interact and exchange knowledge effectively. Business analysts, architects and project managers will remain close to the business, but there is no need to have developers, testers and configuration managers within the walls of your organization. Using collaborative development tools and methodologies it is possible to get the right talent at the right moment, independent of location and time-zone. When the project is well managed and scope and specifications are under control it doesn’t matter if the code is being cut in Bangor, Maine or Bangalore, India.

To sum it up, there is a plethora of wonderful new models and tools to make IT more efficient. In the end it’s only going to be effective if the barrier between business and IT disappears and IT becomes a true enabler of business value.

Facebook knows more about you than you do

So you have added hundreds of people to your Facebook account, from your closest friends to vague acquaintances or even people you have never met. You interact with them on topics that interest you, you post, tweet and twitter to make sure everyone knows you exist or just for the fun of it. You play some games or do quizzes; the ones that compare you to animals or famous people. Innocent stuff, right? Maybe.

Facebook knows your employer, education, sexual orientation, friends and your interests. You use FB on your iPhone as well and thanks to the GPS in your phone everyone is aware of your whereabouts. And these quizzes you take? They are neatly packaged psychological tests that try to glean information about you, thereby taking profiling to the next level. Using behavioral analytics, all this data is being compared with three hundred million people (a user-base the size of the entire population of the US) to find patterns. Knowing who is like you, they now can fairly accurately predict what is next. In essence they create a model of you and use this to target advertising. Moreover, they can aggregate information over all these users and apply “social sensors” to see if tastes or moods are changing among certain groups. This is powerful knowledge…People who are more cynical than me can probably come up with some horror scenarios.

According to ACLU, California’s Civil Liberties organization, most people don’t know that Facebook's default privacy settings allow full access to a user's information. It is actually worse.. every time one of a user's friends takes a quiz, the quiz has access to that user's profile information. Of course that has not gone unnoticed and some users sued FB, alleging that the social networking site violates several state laws aimed at protecting consumers' privacy. According to the WSJ, the complaint accuses FB of failing to compensate its users for harvesting their personal data and for violating laws that protect consumers from having information they upload to the site shared with third parties, such as advertisers. Hopefully Facebook will strengthen the privacy of personal data, but it seems that the floodgates have opened.

Interestingly, when I talk to my kids they are not that concerned. They have grown up with Facebook and actually use it as a tool to position themselves, to basically promote the “brand me”. They have become incredibly clever in manipulating the way they are being perceived from their Facebook presence. It of course begs the question what is the reality content of what they post? As Daniel Hollinger writes in an excellent article in today’s WSJ: “it's getting harder to know what's real and unreal in a world that always seems to be slipping slightly out of focus.” Probably, the word “reality” itself has lost its meaning a while back when the Dutch Endemol group launched the first reality show, aptly named “Big Brother”.

Netflix found a cheap fix for innovation

Netflix started its business as a DVD rental company a couple of years back. They cleverly combine a net-based ordering system with a well thought-out physical distribution approach for the flicks on DVD. You select your movies from their website and put them in a queue. Every time you send a DVD back, by dropping it in a pre-addressed, pre-paid envelop in your mailbox, you get a new one. No late fees. Great for people like me who want to bring DVDs on a trip or just forget about them. Last year they introduced movies online to watch either on your PC or TV, via a small WiFi connected box. Guess what? They actually have old Dutch favorites like Soldier of Orange and countless other non-mainstream movies.

When you log on the first screen that comes up is “Movies you’ll love”. I have rated around 400 movies so far (nowhere near the guy who rated 5,000 movies in one day). The ratings vary from 1 to 5 and I generously bestowed Ben Hur, Citizen Kane and The Godfather with the maximum number of stars. My ratings are continually compared with people who have similar tastes and by applying some complex algorithm they predict which movies I might be interested in. They show both the overall rating and the one they believe I will give the movies I am considering for watching. Interestingly these two are rarely the same and my ratings are consistently close to their predictions.

A while back Netflix invited anyone with a beautiful mind to participate in a contest with $ 1 million prize money to come up with an algorithm that would improve the accuracy of their current system by more than 10%. In order to do so they made millions of data records available and tested the algorithms submitted against the actual ratings submitted by customers. According to Business Week, the winning team, which includes scientists from AT&T (T) Research, Yahoo's (YHOO) Israel lab, and computer scientists from Austria and Canada, blended more than 700 different statistical models into their formula. The next contest will be for algorithms that predict the popularity of new movies, based on your rental history, demographics and other profile attributes.

Netflix has stared into the future and seen what is happening in the media world. As content proliferates and the lines between user and producer blur, it will get harder and harder to separate the wheat from the chaff. While the studios will continue to generate blockbusters with big stars and maybe even come up with an original plot, instead of a comic book rewrite, we can expect more and more interesting low budget movies for smaller audiences. Movie business is even worse than the fashion industry and the few hits have to make up for multiple misses. But Netflix has something the studios don’t: a thorough understanding of their customers’ tastes and interests down to the individual level. Shortly, they will have a way to predict whether a movie will make it or flop. And they pay only $500K to get there, while the big studios keep shooting in the dark.

Netflix has understood that they don’t need to hire armies of PhD’s in statistical analysis to get what they need. They just “crowd source” their innovation. According to the New York Times, thousands of teams from 186 countries made submissions. The winning group is a merger of different smaller teams, who initially competed against each other. A Survivor-like situation emerged with different individuals and groups trying to form alliances to beat the others.

Google, Amazon and Netflix run highly profitable, multi-billion businesses based on a simple principle: attract as many users as possible and have them interact on your site, gain a detailed understanding of their needs and interests and analyze this against huge quantities of data on their peers to create the best value propositions. There are some lessons here.

Nothing endures but change

It is a cliché to state that globalization has been a tremendous force of change in the last decades. Never before have economies, markets and supply chains in different parts of the world been so entwined. This has led to unprecedented growth of the world economy. It allowed China to lift around 500M people out of poverty since the country opened up in the late seventies. It turned India from a socialist, autarkic backwater into an economic power and helped another 122(!) countries to grow more than 4% in 2007.

But there is a flip side: the resulting interdependence has brought complexity and instability. The butterfly effect applies: “small variations of the initial condition of a dynamical system may produce large variations in the long term behavior of the system”.

When the financial markets collapsed the repercussions were felt around the globe and as a consequence most western countries will experience a shrinking economy in 2009. The causes are manifold. There were the financial managers, whose short term oriented decisions were guided by multi-million bonuses. Then the compulsive consumers on a spending spree, high on cheap credit, supported by the huge trade deficits with China. Lax regulation, opacity and complexity of markets also played a role. All was well until the bubble burst and the walls came crumbling down. For a brief period Europe was basking in schadenfreude and then quickly governments had to step in to rescue their local banks. Iceland’s financial products -too good to be true- turned out to be that way. Within a couple of weeks this pristine country’s stock exchange lost 90% of its value.

I guess by now everyone realizes that financial markets operate 24 hours a day, around the globe. They have become more dynamic and complex and evolve faster than most people can grasp. Nassim Taleb, who writes about what to do with a world we don’t understand in the Black Swan (published before the crash): “Globalization creates interlocking fragility, while reducing volatility and giving the appearance of stability. In other words it creates devastating Black Swans. We have never lived before under the threat of a global collapse.” Some of the world’s leading financial gurus, including Alan Greenspan and Warren Buffett, have openly admitted that they failed to see what was happening. Buffett states in his letter to shareholders: “I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action.” On the theoretical front, Nobel Prize winner Paul Krugman puts it as follows: “much of the past 30 years of macroeconomics was spectacularly useless at best, and positively harmful at worst.”

Other industries may not show the same dynamics as the Financial Services, but acceleration of change is happening in IT, healthcare, automotive and media.

The IT industry has always been prone to change. What happened to Wordstar, Visicalc, Wang and DEC, just to name a few of the hundreds of brands that disappeared? Given the steady onslaught of open source and cloud services, where will the companies go that sell expensive software with outrageous maintenance contracts and the need for armies of specialists to install and keep it running? Successful product companies like Apple have focused on design and online services. They don’t own any factories. Google has built their business model around getting huge numbers of users and mining their data on the largest imaginable scale. Those providing software services can no longer depend on their proprietary knowledge, as there is currently more and better technology information in the public domain than in any of these companies. Those without a substantial workforce in emerging economies like India, China, Philippines or Argentina will soon find themselves out of work.

Oil prices have been fluctuating wildly. Last summer in a matter of weeks the price at the pump doubled. At the same time the discussion on global warming moved to the foreground. Gas guzzlers like the Hummer suddenly lost their coolness. Although years in the making, the decline of the Detroit Big Three became clear to all. Ford managed to fight its way back to profitability but Chrysler and GM had to be bailed out by the government. They didn’t act quickly and resolutely enough. Western car markets have shrunk by almost 20%. Meanwhile the car markets in India and China were alive and well. Tata launched a revolutionary $2,500 car that competes not only with low end cars but also motor bikes. Meanwhile countries like Australia and Israel are working on an electric car infrastructure. This is an industry in transformation.

The media industry is struggling. The sales of CDs is in terminal decline. Though paid-for downloads are increasing steadily, more and more kids are listening to personalized Internet radio and are no longer interested in owning songs. In the last year hundreds of newspapers went bankrupt, losing the battle with their online competition. Open source models are appearing to compete with traditional publishing and Google is putting millions of books online. Youtube is replacing television as the most important entertainment medium. Time to rethink business models in this industry.

Most companies react to change by reorganizations or mergers and acquisitions. It is harder to have the companies’ business models and processes adapt to new customer needs, competition or regulation. One of the reasons is that the key processes are supported by software applications and a technology infrastructure, suffering from change resistance. Business models also have the tendency to assume a linear world, rather than one in which sudden events and disruptions become more rule than exception.

The fashion industry always had to deal with fickle consumer tastes that could change on a dime. For most apparel companies it is hit or miss. In contrast, the Spanish company Zara has built their business model around customer insight and agility. According to the Harvard Business Review: “Zara has developed a superresponsive supply chain. The company can design, produce, and deliver a new garment and put it on display in its stores worldwide in a mere 15 days. Such a pace is unheard-of in the fashion business, where designers typically spend months planning for the next season.” Zara operates 1,500 stores in 71 countries. They aim to be as close as possible to the customer. Every day they collect sales data from all of their stores. These data are analyzed and related to inventories and other operational data. Slow moving inventory in one store can be moved to a fast moving store. They use a team-based approach in which designers and product managers work closely together to continually evolve their clothing lines, based on the information they receive about sales as well as input from store managers. Most products have very short life cycles. This gives their clothes a level of exclusivity and forces the consumer to buy today, because it may be gone tomorrow. Accurate forecasting is not required: they adjust as they go along. The company has a vertically integrated supply chain, keeping half of the work in-house, and a network of partners and subcontractors. Its supply chain is built around speed of operation. The CEO of Zara: “you need to have five fingers touching the factory and five touching the customer.”

Like Zara, who captures customer information in every store every day, companies that have a strong engagement with their customers tend to do better. They react faster and have more influence on customer needs. Many consumer goods and apparel companies who sell their products through distributors have to make assumptions about their client needs, as they lack a direct channel and timely data. But current technology allows these companies to get in touch with their clients directly, without the need to invest in a large retail network. They should set up highly interactive portals to promote information exchange between their stakeholders. Clients in different markets are prompted to share experiences. Forums on product customization or service improvement allow insight in customer needs. Events, both online and offline, can be organized to rally the fan base. All this interaction may be analyzed to glean information on current and future customer needs. While this will not generate the next breakthrough product, it gives input on product improvement and generally strengthens the ties between supplier and consumer. It will give the company an early warning system for changing behavior.

Successful companies constantly monitor the environment and assess the potential impact of changes on the company’s business. One of the largest Investment Banks has created online dependency maps of the companies they invested in, similar to the ones you can find at News Dots. It visualizes the most recent topics in the news as a giant network, highlighting “hot areas”, that may require action. So when GM got in the news about their issues it immediately showed which companies had substantial subcontracting relationships. New technologies that search large quantities of data and find patterns and associations, can highlight early warning for impending change. Obviously dealing the right way with that change is a matter of leadership and organizational agility. More on that topic in my next blog.

Open Source Ingrained in Ingres

Roger Burkhardt, an Oxford educated, technically savvy Brit, is leading the US software company Ingres. I learned about Ingres when I was attending university. They had developed one of the first relational databases. At that time its use was confined to labs and not yet ready for prime time. Subsequently Ingres became widely adopted and thousands of customers used the database products for their applications. Computer Associates acquired Ingres in 1995. The company was subsequently relaunched as an open source company in 2006. Roger took over as CEO, after a 6 year stint as Chief Technology Office of the New York Stock Exchange.

He comments: “Most concepts that are fine in theory don’t work in practice. With open source it is the other way around. It goes against all organizational principles, but turns out to be highly effective”. He and his team have developed a network of thousands of users, developers and contributors. They created a lively community committed to keep the Ingres products at the forefront of technology. The business model has evolved from a traditional licensing model, which aims to lock in clients and have them charge for annual maintenance fees, to one of implementation, optimization and support. Ingres technology is freely available as a download and the company makes money selling a support subscription to users who are running mission critical workloads.

Roger is particularly excited about “Open Innovation”. They started working with the Amsterdam-based on Centrum Wiskunde & Informatica (Centre for Mathematics and Computer Science) on the next generation of database servers. Their starting point was that the architecture of database software was based on the 20 year old technology and that the explosion of stored data with its 50-100% annual growth required fresh thinking. CWI and Ingres invited a community of scientists to work on a project dubbed “Vectorwise Computing”. In essence they redesigned the software to take advantage of the very large number of transistors packed on today’s Intel chips and to resolve the fact that memory has become a major bottleneck. The global team, of which many members have never met face-to-face, is led by two of Ingres top engineers and two of CWI scientists as well as leading researchers from around the world. Ingres ensures that the end result is a commercially viable product, available to the development community as open source.

For their internal technology needs, Roger decided to move away from in-house developed, managed and operated systems. He felt that the company needed a flexible application base that would allow them to rapidly integrate the acquisitions they had planned and be able to scale with the volume of business. His direction was to use “Software as a Service”, where viable. The obvious advantages of this approach are short implementation cycles, flexible cost with low upfront investment and minimal operational management. The potential downside is lock-in and dependency on the provider. He is increasingly looking for open source software that runs in the Cloud, to get the benefits of the service and avoid the risks of vendor dependency. Currently his core business applications are obtained as a service from Salesforce.com and Intact for ERP.

Since Roger has actively lived the tremendous innovation and opportunities spawned by the open standards and open source movement in the Internet space, he is a staunch believer in applying the same concepts to one of the biggest issues facing us: global warming. He is working with a number of organizations to accelerate the speed of innovation in green technology.

Open Source is becoming a phenomenon that extends well beyond software. Its collaboration model with large groups of people around the globe contributing on the Internet to common solutions, is making inroads in education, healthcare and now green technology. The organizations that know how to tap into these opportunities by leveraging web tools and engaging key stakeholders will set themselves apart.

A visit to the doctor

A couple of days ago I paid a visit to the dermatologist. The receptionist gave me a faded yellow form and I duly filled in my personal data and a largely incomplete and inaccurate health history. And what was the name again of these pills I am taking daily? The form disappeared into a solid looking metal cabinet spilling over with similar records containing similar half truths. A little later the doctor handed me an unreadable handwritten note that could be exchanged for a tube with pills at the pharmacy a couple of miles down the road.

What is going on? The US spends a whopping 17% of its GDP on health care and, according to McKinsey, around $650Bn more than necessary and more than any other developed country in the world. However, the life expectancy is higher and infant mortality lower in most of these countries. You may find the most sophisticated health care available to those who can pay, but on aggregate the US doesn't compare well. Nearly a 100,000 people die in the US each year of medical mistakes.

There are many reasons for the exorbitant costs, starting with the strange system of care providers passing the cost to insurance companies who pass it on to companies and finally to the consumers, who believe that their company is paying. The relative administrative cost is twice as high as the next country at the bottom of the list (bureaucratic France). Medicare spending and results vary widely among areas with little difference in outcomes, which points to huge inefficiencies. There are no incentives to work more efficiently and that shows. Americans also pay on average 50% more on drugs than other developed countries. Apparently the pharma industry has great a lobby on K-Street. Then of course there is the issue of 46 million uninsured. And the strangely litigious legal system.

Economists rarely agree, but there is consensus that fixing health care is critical to fixing the economy. To highlight this point: according to The Economist, GM spends more on health care than on the steel for its cars. This is a complex beast and more politicians have failed than succeeded in tackling the myriad of issues. But the population is graying and medical costs show worrisome inflation rates. Since 1999 the average cost of a policy for a family of four has doubled. It now equals a full quarter of the median household income. According to a report of Obama's Council of Economic Advisors, any reform that slowed the annual growth rate of health costs by 1.5% would boost America’s economic output by over 2% and increase the average household’s income by $2,600 in 2020. The Obama Administration is tackling health care with top priority and a focus to extend benefits to all, while reigning in the costs.

Here's a place to start: less than 20% of care delivery organizations have electronic patient records. While there are notable exceptions, like Kaiser Permanente and the Mayo clinic in Minnesota (check out their website!), efficiency in this industry has been lagging way behind. I can do all my banking at home or on the road using my iPhone and get cash at any ATM around the world (with the notable exception of Cuba as I experienced last month), without any intrusion of my privacy. Banks around the world are interconnected and information exchange has been standardized for ages. An electronic patient administration, information sharing and data analysis are essential for efficiency improvement. When information is exchanged between organizations instantly and without errors the quality of the treatment will improve. This is especially relevant in emergency situations.

Rolling out large scale projects, like a standardized patient administration, is a daunting task. It is not so much the technology that makes it hard, but the required changes in the business processes, organization structure and, last but not least, the company culture. Add the political sensitivity on top of it and you will see the combustibility of it all. But the urgency should override inertia.

While medical research has made tremendous strides in the last years, there are still many unknowns on the results that drugs in different combinations may have on treatment. Large scale data analysis can provide valuable insights. Using Web 2.0 technology, doctors can tap into the collective wisdom of their peers when dealing with a difficult prognosis. Patients can be automatically reminded of their check-ups and appointments. The same technologies are now bringing about a change in the traditionally paternalistic relationship between doctor and patient. Most people go online to find information about their health. New websites have sprung up that are focused on sharing information and experience about diseases, symptoms, treatments and side effects. Patienslikeme.com and inspire.com already have hundreds of thousands of members actively communicating amongst each other and with the doctors that are participating. Even the pharmaceutical industry is weighing in. Novartis is learning from the effects of their drugs and more importantly trying to understand more before they launch a new drug. They are actively recruiting for clinical trials on these sites. Why wait for your doctor to get your records integrated, organized and analyzed? Both Google and Microsoft are getting into the game and offer DIY tools to manage your health. Microsoft even calls it Health Vault to highlight security and privacy of data.

Besides looking for obvious technology solutions you would expect a focus on creative sourcing solutions. However less than 3% of all work supported in India comes from this industry (compared to 41% financial services). The US spends $91Bn more than necessary on administration. There is no reason why large parts of the administrative work can not be performed more cost effectively by creating shared services centers in low cost locations. There are already several successful engagements with hospitals in India, that analyze X-rays and lab reports. Google “teleradiology” and dozens of companies offering the service pop up. The next step may be an Indian doctor performing remote surgery. Or if that is too far fetched, the patient can travel to Asia to have the treatment delivered in one of the world class hospitals over there. My son was born at Bumrungrad hospital in Bangkok. He was the only blond baby in a room of 40 dark skinned babies. The doctor who delivered him was educated in Germany. My wife had a huge private room with a seating area and a kitchenette, as well as 24 hour private nurse. This was in 1991 and we were about the first westerners there. Last year this hospital treated 400,000 patients from 150 countries, many covered by their insurance! Cuba has been training world class doctors for the last 40 years and once this country opens, it may become a major destination for “medical tourism”.

Expect major surgery to be performed on health care policies, structures and processes. This has to become a global industry, supported by state-of-the- art technology and operational processes that are being measured and continually improved. And maybe the per person cost one day comes down to Canada's level, which is 50% of the US per capita spending.

Taking the paper out of the newspaper

In the hit show The Soprano's we frequently saw Tony dressed in a robe walking out of his suburban mansion to pick up his newspaper from the driveway. Many people, thugs and undersigned included, are used to this daily ritual of reading the paper at the breakfast table. But I have decided to cancel my paper newspaper. After years of struggling with keeping it together while reading and unable to ever fold it back the way it was, I have thrown in the towel. From now on I will only read the news online. No need to cut down trees, fuel the printing presses and transport hundreds of pages to our home. I will have my news served sustainably. I now read the New York Times on my PC and iPhone, but I have ordered the Kindle so I can swallow the opinion page together with my bowl of cereal. No more rain swept tracks to the driveway to look for a soaked blue plastic bag that contains a wet bundle with news already slightly staled during its journey down to Connecticut.

Some people like the smell of the ink and the rustle of paper. I don't. This is a relic of the past. Who is reading the 25 pages of financial data? Who is interested what the weather in the Mid West was yesterday? Who looks at classifieds when you have Craigslist? What I have done instead is create a MyYahoo page which combines the news of about ten dailies and weeklies with RSS feeds for columns of my favorite commentators, organized by major topics. This is physically impossible with paper. It used to be that you read one or maybe two newspapers a day. Now you can access a wide array of sources and zoom in on what you're interested in. I regularly watch related videos, link through for background information and participate in discussions. I mark articles for later reading on my iPhone and check the most emailed or discussed articles to find something that may surprise me.

Like any other industry that is uprooted by new technologies and innovations, newspapers are struggling to deal with this change. Some close shop, others pursue online models more aggressively. The bottomline is that this industry is in dire need to radically reinvent itself. Maureen Dowd wrote a column in the NY Times with the heading “Slouching to oblivion”. She mentions that Sam “The Sham” Zell called his purchase of The L.A. Times and The Chicago Tribune “a mistake,”. He said, “It’s very obvious that the newspaper model in its current form does not work and the sooner we all acknowledge that, the better.” In an article named “The rebirth of news” The Economist reports that in Britain around 70 local papers have shut down since the beginning of 2008.

The music industry has gone through a period of angst when people started downloading music. Like the paper, the CD as medium was becoming rapidly cumbersome and the pricing model completely out of wack. You rarely like all the songs on an album. The ipod and iTunes changed this. Most grown ups now buy only the songs they are interested in for 99 cents each. But in the meantime the music industry also has to deal with artists directly communicating with their audiences, without the need for big business. Another example of disintermediation. Layers of management only work when they truly add value. So it goes with the papers. Reprinting a Reuters or AP article may make sense in the physical world, yet it doesn't in the online world when you get breaking news directly streamed from these news agencies into your browser. But many people are willing to pay for news analysis, sound journalism and commentary. The Wall Street Journal has over a million paying online users. Three newspapers — The New York Times, The Washington Post and The Boston Globe — will offer a reduced price on the Kindle in exchange for a long-term subscription. But they still need to pay for their physical delivery and haven't fully figured out a sound model for online only.

The online newspaper model will follow the same principles as any other online business. First the value offered should be obvious to the users with a high level of convenience and ease of access (tailored to different types of devices). In addition, there has to be true engagement. This means that publishing is becoming more interactive. Leading columnists now analyze the feedback they get on their posts, engage in discussions and exchange notes and ideas with their readers. Those readers themselves are becoming micro publishers. They write comments and challenge factual content of news items. During the presidential race much of the fact checking was a collaborative effort between experienced journalists and smart amateurs. Today's major issues are global and complex. The written word does not always suffice to explain all aspects succinctly. An online “paper” should provide a true multimedia experience, leveraging the web's rich tools for visualization of complex concepts. Lastly, through establishing direct feedback loops with their subscribers (or rather community members?) the news services can fine tune their content and packaging and get true insight in the readers interests. This should be translated in new advertising models. Rather than offering bland ads based on some aggregate view of its readers it can advertise in Google or Facebook manner: highly personalized messages reflecting the way you click and the content you read.

All this points to a new experience. It means more focus on multimedia presentation, investigative journalism, analysis and commentary. One of the key objectives of a news paper is to obtain, organize, analyze and package the news. A new objective is to engage its readers to become community members. Newsworthy items can be solicited from its members and stories collaboratively developed. Most people are willing to financially support the communities they belong to. It seems that Web 2.0 Times has arrived.