Shoppingeyes

The Failure to Measure Innovation - Bill Gates, Lowell Wood and Nathan Myhrvold

2011-04-11T14:37:00.000-07:00

Retail has always been innovative - in fact it has led innovation in some of the most important aspects of technology since the first shingle was hung. Quantifying and measuring the impact of this innovation within the overall economy, or even within our retail organizations, is a hard task. Following are thoughts from Bill Gate, astrophysicist Lowell Wood, and Nathan Myhrvold, former chief technology officer at Microsoft and founder of Intellectual Ventures, talking about how innovation is overlooked in economic statistics.

From: Bill Gates

One thing I want to understand better is to what degree innovation that improves the human condition is reflected in economic figures.Let’s say that someone invents a new bug spray that stops mosquitoes from biting people and is super cheap.

Or let’s say someone comes up with a way to replace hearts for people over 80 that enables them to live longer but that costs a lot of money.

I think that innovation does generally map to economic growth over time. But taking a particular innovation and quantifying its direct economic impact is hard.For example I believe that because the Internet lets people find a lot more information a lot more easily and quickly, it is a much bigger benefit than the economic figures show.

So when people say middle class salaries have not gone up much I think that the “basket of goods” approach to measuring improvement inherently understates how much better life is now than it was in the past.

From: Lowell Wood

I believe that it’s of enormous – I would even say surpassing – importance to be able to quantify the impact of innovation, at least in limited cases.

I suspect that the objective impact of innovation is huge at least occasionally. Being able to prove this would be of great significance in the general debate over how and how much to foster and encourage innovation.

But it seems to be exceptionally difficult in just about any really big circumstances.

Specifically, just about all attempts through the present have been unable to compel the belief of the reasonable skeptic – for good reason.

The National Science Foundation makes occasional attempts to do so, but these seem quite unpersuasive (even to me, eager would-be believer that I am).

I wholeheartedly agree that the economic contribution of the Internet is undervalued. But that’s because Internet-based capabilities have totally changed my professional life, so much so that I can hardly believe how "crippled" and "isolated" I was even two decades ago.

I also strongly agree with your take on the “basket of goods.” The quality of the basket of goods has advanced greatly and this value-increase is essentially totally discounted by standard modes of accounting.

For example, I bought a ticket for a 5,600-mile airplane flight yesterday for $500, an unfathomable bargain by the standards of any previous decade. And I use a laptop computer that cost a few thousand dollars that has nearly 10,000 times the computing power of a system that cost $10 million less than three decades ago.

I would cheerfully trade two years of professional life a quarter-century ago for a year nowadays. Professional/intellectual life currently is vastly more intense, due to the variety and stunning power of the “mental prostheses” now available – so that I’m enabled to do far more per day than I could back in the “Dark Ages”!

From: Nathan Myhrvold

I think the core issue here is quality of life – you can call it various other things, but that is what it amounts to. How do you measure the fact that today we have access to goods and services that we didn’t previously. Simply put, most economists don’t attempt this.

Another way to say this is how could an accountant tell? Economic statistics measure employment, income, and so forth and they don’t grasp this.

The baskets of goods and services that are measured are almost invariably inherited from lists made in the past. There’s a good reason to do so – it allows the numbers to be compared. It is not a bad thing to ask what the price of a Kwh of electricity or gallon of milk or gasoline has been over time.

But nobody tracks computing power, access to information, and so forth.

One could create a “digital basket.” In the graphics category it would record how many polygons per second you can draw per dollar. In information it might track how my access to encyclopedias went from Britannica to Encarta to Wikipedia.

When it comes to software and IT spending, economists would say that they sort of track this by measuring worker productivity. For ages there was a “productivity paradox” because spending on IT did not seem to track to worker productivity. Then it caught up very quickly, so economists would say they do capture it. I am still dubious.

But look at Wikipedia. For about 10,000 to 100,000 people it is an obsession that could properly be called entertainment. They edit the thing for fun – or anyway for zero monetary reward, so no economic stats there.

For the rest of the planet it is an amazing resource – incredible information on just about anything. Where does that fit in any economic analysis?

http://www.thegatesnotes.com/Conversations/The-Failure-to-Measure-Innovation

Posted 03/09/2010

As a founding executive of Hot Topic I say good-bye to Betsy McLaughlin.

2011-04-07T15:31:00.000-07:00

Remember 1993? Clinton sworn in as the 42^nd President. Waco, Texas. Sleepless in Seattle and Jurassic Park were on the big screens, while we listened to Nirvana, Alice in Chains and Rage Against the Machine.

The later was very important for me – because it’s the year that music became not just a big part of my personal life, but an even bigger part of my professional life.

Hot Topic (way before it was HOTT) was setting up shop in a non-descript Ontario CA, office not much larger than a bedroom with Orv Madden and his wife Leann, Jay, Robert, Cindy, Sue, Karen, myself and the newest employee – Betsy McLaughlin – sitting at desks barely 3 feet a part.

Betsy was brash, organized, optimistic, forceful, professional, and insightful – and did I mention organized? It was a time in the company’s history when you literally jumped in a car to deliver goods when you had to. We worked nearly around the clock, trying to create something very, very different.

Betsy wore lots of hats – structuring the organization, creating process, creating a “cycle of life” to keep an amazingly scattered concept not only on track but well ahead of the growth we were experiencing. While Orv was the Master of Ceremonies for the circus, Betsy was the lion tamer. And boy, were people coming to see the circus! Everyday was exciting – leading and following trends as rapidly as they came and went. We had to create an infrastructure to deal with levels of sell- thru that none of us had every seen before – and develop the technology from scratch (thanks Eric).

Its hard not to be nostalgic seeing Betsy leave Hot Topic. For a short while we were peers, comrades in arms, (sometimes not seeing eye to eye but always working it out), and friends. We both used our experience from the early days to lead retail companies. She just did it on a grand, grand scale!

I once told someone who was promoted to President of a national direct marketing retailer (he was not prepared to lead) – “Being President is great club to be a member of, but the dues are really, really high.”

I know Betsy worked hard for all the success she delivered to Hot Topic –and she paid her dues. I know she will leave an indelible stamp of her personality on a great retailer. I know she handled pressure most of us do not even glimpse – and did so day after day.

For me – it is the end of an era. And Betsy, I thank you.

Garr

garr@garrettlarson.com

Challenge: Never, Ever spend a penny on a POS system for your retail startup.

2011-04-06T12:01:00.000-07:00

$20,000. Maybe $15,000 if you were savvy. Today – still $10,000. These are the past and present prices for a complete POS (Point of Sale) system from reputable but antiquated sellers and resellers.

But what about the future?

Virtual Point of Sale (VPOS) is the future. And it’s here. VPOS simply means that just like you log onto Facebook or Twitter to socialize, you log onto a Point of Sale website to run all POS in your store.

Benefits include no updating the software on your machine, 24 x 7 online technical service, no cost to start up and very, very easy to use.

How are they free? Easy – somebody else (in most cases they get a cut of the fee you pay for credit card processing) subsidizes the service.

The only downfall is you need a relatively fast connection and you rely on your VPOS provider to be up 99.99% of the time.

We considered a host (no pun intended) of options and decided on CashierLive.com. It’s a clean, easy to use POS system with tons of videos for training, an easy to understand interface, and free for your store with up to 3 registers.

Here’s some of the others we kicked the tires on: Bluestorelive.com, firstmerchantservices.com, intuitpayments.com, and a host of free shareware programs such as Retail Boss POS, POS 4 Business, and Retail Man POS. For this experiment we decided against shareware only because all the “free” shareware’s have 30-day trials and then cost between $10 and $250.

So now we have one of the most vital parts of our Retail Computer System – the POS. Fully functional, easy to use, lots of great management reporting and still not a penny spent.

On ward and up ward. Next step?

A retailers most important asset is their inventory. Know what is selling, how much to buy, when to mark down items, and keeping an accurate count are the basic ingredients for Inventory Management.

Tune in next time….

Challenge Accepted: Spend $0 and Build a World Class Retail Computer System.

2011-04-05T13:27:00.000-07:00

I had heard a long time client was let go recently, so I wasn’t surprised when he called asking for a favor. After a few minutes of catching up, he told me he was finally crossing the chasm and starting his own shop. As a founding executive of a company that grew from scratch to over 250 stores myself, some of my favorite work is helping other retailers launch new concepts.

His favor, however, surprised me.

“I need to cash in the favor bank and have you recommend a world class computer system to run my entire operation on a limited budget. In fact, the budget is $0. Just a PC I have in my office.”

How quickly I accepted the challenge surprised me almost as much as how great of a computer system we were able to build.

Challenge Accepted: Part 1 – The sum of the parts

We’ll break down creating an ENTIRE retail operations system with no start-up costs by biting off digestible pieces ranked by the most important parts. Lets take inventory of what we have to start with:

1.) A decent, basic windows computer. (In this case Windows XP Pro)

2.) A keyboard, mouse and monitor.

3.) A fast enough (cable in this case) Internet connection.

That’s it!

Now, lets break down the building blocks we will find for our system.

· Operating System

· Point of Sale

· Purchase Order and Open to Buy

· Inventory and Planning Management

· Merchandise Management

· Accounting

· Payroll and Employee Management

· Ecommerce

· Report Building

· Executive Dashboard

Challenge Accepted: Part 2 – Point of Sale

Bottom line – never, ever, spend a dime on old, downloaded point of sale software again. Never. Ever.

More tomorrow….

In the time it took to read this headline, two more retail companies have gone extinct.

2011-04-05T12:44:00.000-07:00

Here’s The Point:

Like human evolution, retail has changed more in the last second of our industry timeline than any other period. Those that adapt and understand the evolutionary pace that exists in today’ retail world will survive – and to those that ignore it might as well offer up their necks to the stronger species today.

Here’s How We See It:

Good riddance. Good-bye. Pack up your old Point of Sale systems and leave town. Don’t let the rollaway security gate hit you on the way out.

This is not the time to rest on outdated, quaint business practices that once reeked of customer service, but now just reek. The evolved retailer is embracing an entirely new and absolutely fundamental shock wave of change: the customer has all the power.

All The Power. They Know It. They are not afraid to use it.

In the past retailers pretended like the customer had the power by espousing legendary customer service, hawking great prices, and hyping great selection. In reality shoppers had to choose from what was in the store, had to accept the price on the tag or wait until a sale, and had to go across the parking lot to show discontent. Look at it this way - your best salespeople feel all warm and all customer cozy if they call another store to find something their store is out of and put it on hold. You may want to recalculate your year-end bonus if you were impressed by their effort.

Today, in the same time it takes to call your next nearest location, a 12 year old can do more damage to your reputation, shop from hundreds of competitors, arrange overnight shipping free, and tell hundreds of other shoppers about her experience, while your best salesperson covers the phone to ask for a last name and when you expect to pick it up.

Here’s What We Want You To Do:

We want you to embrace this new model and the pace of change or suffer the inescapable consequences All of the Born Digital consumers that hold your destiny in their Androided, Appled or Windows Phone hands do not care if your store dies, they know that someone stronger, smarter and more evolved will replace you tomorrow.

Our advice? Take one thing seriously. Which thing? That’s up to you. Take Twitter seriously. Become a powerhouse selling steel cap boots on Twitter. Or take Facebook seriously. Become a great resource for Steam Punk Keyboards on Facebook. Or become “Rank One” on Google for one thing by really understanding just some of the basics of SEO and see how your business changes. If you don’t – well we probably won’t have time to send flowers to your going out of business sale. However, don’t blame anyone else for deciding not to evolve. You decided your own fate even when your customers were telling you they were able and willing to move on to someone else.