billso.com

One strategy that telecommunications companies have adopted is bundling, or selling a combination of services at a reduced price. The goal is customer lock-in, a situation in which the buyer is more or less trapped in their purchase. In many cases, lock-in happens when the customer satisfices or compromises to gain value or convenience. Customers might grow dissatisfied over time, but they are unlikely to leave because alternative services are not available, or their perceived switching costs are too high.

A variety of US cable television and telecommunication companies have offered bundling programs. The usual items include television service and broadband Internet.

Companies that offer cable modems usually offer these services through the same “pipe” or connection – the coaxial cable drop found in many homes.

Local exchange carriers (LECs) offer POTS (traditional or “plain old telephone service”), and the final connection to the home is the familiar RJ-11 modular phone jack found in most US homes. Some LECs also offer mobile phone plans in their bundles.

Landline connections may be offered through VoIP or POTS, depending upon the carrier’s technology.

Agonizing over savings

Alina Tugend of the New York Times provided a great example of this decision-making process in her article last week. Customers sometimes obsess over lock-in when their friends brag about how much they saved by switching. Yes, lock-in also works well for insurance companies, too!

In Honolulu, Oceanic Time Warner, Clearwire and Hawaiian Telcom each offer bundles. Oceanic has a standard cable television package that includes cable modem service, long distance calling and VoIP calling plans. Oceanic staff can connect the customer’s RJ-11 telephone jacks to the company’s network, so customers can continue to use their existing landline handsets and equipment.

Clearwire offers broadband Internet service, long distance calling and VoIP telephone numbers through its WiMax network. Customers can hook their landline phone into Clearwire’s modem. The Clearwire service does not require an installation visit, but the coverage areas are somewhat limited. This article at DailyWireless.org has several interesting diagrams of business telephone systems.

Hawaiian Telcom keeps struggling

The HawTel package includes a POTS landline, long distance calling and DSL. HawTel is still working on its IPTV offering, which has been delayed by implementation problems. IPTV would let HawTel offer television service through the same RJ-11 telephone drop used by its landline and DSL offerings.

As a side note, I hated HawTel’s obnoxious “Savers Unite” advertising campaign, and am glad that it has been replaced. Was the tagline a call to action or an insult? It was hard for me to tell. The radio and television ads reinforced a stereotype of the “thrifty local” who clips coupons, hoards travel-size toiletries and wears old clothes to pay the “price of paradise”. Then again, telecom marketing campaigns usually strive for the “common touch”, in an effort to hold the average customer.

Telecom bundles are subject to a host of Federal, state and local regulations. Pricing is often controlled by government agencies and franchise agreements. On 18 August 2007, I discussed HawTel’s naked DSL option, which let consumers order DSL service without a voice landline. HawTel was late to act, as thousands of subscribers adopted mobile phones and dropped their landlines. These customers switched to Oceanic, Clearwire, or other broadband Internet services.

Customer lock-in is difficult to achieve when companies fail to implement their industries’ key success factors well. On 16 November 2006, I discussed HawTel’s billing problems after the company was purchased from Verizon. Mike Ruley never overcame these earlier issues and lost his post as HawTel’s CEO earlier this month, as I mentioned on 5 February 2008.

LEGO celebrated the 50th anniversary of its first Danish patent on Monday. I grew up playing with a few tubs of LEGO – the basic blocks and some trays, no kits!

BusinessWeek posted a nice slideshow of LEGO’s manufacturing process. The company produces 19 billion LEGO bricks each year with very high quality standards: only 18 of every 1 million bricks is defective.

That’s 36,000 bricks each minute, and  more than 2 million an hour, according to Neatorama.

PopAndCo.com has a cute flash animation of the process. The audio track is loud, however.
LEGO is moving most of its brick manufacturing from Denmark to Mexico and the Czech Republic, according to the New York Times. US manufacturing and distribution is being moved to Mexican outsourcing firm Flextronics, according to this report.

In September 2007, SupplyChainDigest published a good report about how LEGO management came to this decision. Earlier attempts to fix the company’s value chain had helped, but outsourcing was a step the company was reluctant to take. LEGO toys are an important symbol in European lives.

On BoingBoing, an editor created a timelapse video while he built a 5000-piece, US$500 kit of the Millennium Falcon.

As a final note, the Wikipedia entry for LEGO closes with a brief discussion of the trademark.

From CIO Insight: John Parkinson asks an important question - how well can business schools prepare their students to take leadership positions in information technology and innovation?

Graduate education emphasizes meta-learning, or the ability of learning how to learn. A successful master’s degree candidate has demonstrated that they understand and use the course material, and that they can continue to learn and grow as professionals and scholars.

The MBA degree program is fundamentally different from more specific degrees programs. I speak from experience - I earned an MBA as a full-time student at Rollins College in 1988, and I’ve been program chair of an MSIS program for the last 3 years. I also teach dozens of MBA and MSIS students every year. I have a bio page here.

MBA programs provide broad cross-training

An MBA program provides cross-training over several required topics (finance, accounting, marketing, management, law, technology, strategic management) and a handful of specific electives. However, some MBA programs have no electives at all. Other MBA programs have specific areas of interest, such as entrepreneurship, technology, or vertical markets.

A major part the MBA program’s value lies in the integration among the courses. As this is a master’s program, students must do the integrative work themselves, using the frameworks provided by their faculty. This represents the integration of functional areas into business, corporate, and enterprise strategies.

MSIS programs provide managerial and technical preparation

An MSIS program tends to focus on technical skills (telecommunications, software, hardware) and management skills (project management, knowledge management, strategic management). Again, the students follow a framework provided by the faculty as they integrate their knowledge.

If we treat IS as a functional area, and innovation as a process to be managed, the role of the IS professional is to help the organization deliver more value and effectiveness through technology and innovation.

Parkinson’s thesis - that deep scholars are difficult to find - has some merit. Many organizations select CIOs who have demonstrated management ability, but who have limited technological experience. These CIOs are expected to be “quick studies” as they master the technologies and processes that provide value in their organizations.

The MBA degree has often be derided as the “quick study” certificate. Because MBA students get only one or two classes in each of the core functional areas, they learn how to perform rapid analyses that may be sophisticated, but may also lack detail and rigor.

On the other hand, Herbert Simon pointed out that decision-making is usually constrained by the bounds of time, space, and our own cognitive abilities. Managers want to optimize, but they end up satisficing, or making do with less in oder to complete the task at hand. This Wikipedia article has more information and links about Simon’s work, and any good principles of management textbook should discuss Simon as well.

Information systems and technology allow managers to extract more precision and process more data in their everyday work. While IS professionals are essential to this task, they do not necessarily understand the strategic value of the systems they develop, implement and maintain.

In the end, MBAs depend upon IS professionals, and vice versa.

Tech: A timeline and discussion of WordStar, the first real word processor for early PCs. I used it in the early 1980s. How fast can your Pentium 4 run WordStar?

Ha-ha-Hawai;’i: The UH, uh, how can we put it gently? University of Hawai’i officials scrapped their logo development process after 2 years and $150,000. The official details are here, along with various designs from mainland and local firms. UH will continue using its bizaare selection of 150 different logos, while alumni wish for the rainbow’s return.