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With senior executives under federal indictment, with prominent companies paying hundreds of millions of dollars in fines, and with trillions of dollars of stock-market valuation evaporating into thin air, it has been hard to find much good news for business in 2002. So here is some: Innovation progressed at a furious pace, generating products and ideas that will fuel economic growth and improve productivity. Figuring that we could all use something to celebrate just now, we toast those innovations here with our fourth annual Killer App Awards. Despite the gloom and doom in the press, we had plenty of interesting developments to consider—everywhere from the physical world (e.g., Dean Kamen’s Segway “human transporter”) to outer space (e.g., the Global Positioning System) to cyberspace (e.g., multiplayer fantasy games). To pick our winners, we asked readers and other friends for suggestions about innovations that reached escape velocity in the past year—in other words, not necessarily developments that began just recently, given that many new ideas have a slow burn. We then tested the suggestions against the principles in Unleashing the Killer App: Digital Strategies for Market Dominance, the business best-selling book co-written by Chunka Mui, Context’s executive editor. As in years past, we divided the awards between start-up businesses and established companies. We acknowledge that not everybody wins in the blood sport called capitalism, so, as usual, we handed out a Road Kill Award, too. The difference for 2002 was that we were more open to picking an entire category of development as the winner (or loser, in the case of Road Kill), rather than just one company. Once the finalists were picked, we solicited votes from visitors to our Web site and then turned the results over to our editorial board to make the final decision. And the 2002 Killer App Awards go to.... START-UP BUSINESSES The development of the satellite-based location system actually began in 1972, when the U.S. military decided it wanted to be able to “drop five bombs in the same hole,” in the colorful words of Brad Parkinson, the former Air Force colonel who headed the effort. The resulting $4 billion Global Positioning System—which has receivers that triangulate their location by timing how long it takes for radio signals to arrive from the 24 satellites that orbit 12,500 miles above the Earth—was opened to the public by order of President Clinton in May 2000. Today, location-finding receivers can cost $100 or less and can tell you where something is to within about a yard. The possibilities for the technology seem boundless. GPS not only assists smart bombs looking for Osama bin Laden but also helps duffers in golf carts figure out just how far they are from the hole and lets hikers easily map routes to their favorite vistas. In one study, trucks with GPS devices drove 10% fewer miles and generated 15% more revenue. If those results hold as GPS is rolled out, the trucking industry would save an estimated $20 billion a year. The GPS has been a boon to surveyors—though, like many killer apps, it has had unintended secondary effects. The GPS has led many to revisit property lines and has produced disputes, such as a widely reported spat between Connecticut and Rhode Island over a boundary established in 1840. GPS gear also was used in 2002 to pinpoint where to drill an airshaft for nine Pennsylvania miners trapped more than 200 feet underground. The mine covers more than a square mile, but the six-inch-wide shaft reached precisely the pocket where the miners were huddled up to their necks in water. Rescuers pumped warm air into the mine, keeping the miners from dying of hypothermia for the more than three days it took to drill a larger hole and stage a dramatic rescue that gripped television viewers around the world. “The number and variety of applications seem to just keep increasing,” says Professor Richard Langley, an expert on GPS at the University of New Brunswick in Canada. In addition to the personal and commercial appeal, GPS’s spread is being driven by a 1996 Federal Communications Commission mandate that telecommunications companies be able to pinpoint the origin of 911 calls by 2005. The terrorist attacks of Sept. 11, 2001, also stimulated rapid growth in GPS to track suspects and seal borders. Meanwhile, the European Union’s space agency has approved a GPS competitor called Galileo to launch in 2008. Some nine million GPS units were sold in 2001, according to Discover magazine, and growth is expected to continue to explode. “No doubt about it, my killer app vote is for GPS,” says editorial board member Marvin Zonis. “If you have ever driven from one place to another in a strange city, following the magic directions of the GPS device in your rented car, you get it.” RUNNER-UP As editorial board member David Reed puts it: “Anything that can get the chairman and CEO of Turner Broadcasting so excited that he claims that going to the bathroom in the middle of a commercial might be illegal has got to be a killer app.” The “anything” that Reed refers to is the personal video recorder, or PVR, which records programs on hard disks as they are broadcast and lets viewers manipulate them. Suddenly, “live” television programs can be paused or rewound. In addition, viewers can easily skip ads. As Reed notes, some incensed TV executives have responded with the dubious argument that TV watchers have an implied contract requiring them to view comercials. EMarketer Inc., a research firm (www.emarketer.com), estimates that one million PVRs have been sold, 90% of them in North America. Sales growth is more than doubling each year—and Informa Media, another research organization (www.informamedia.com), expects that rate to accelerate. It predicts 54 million PVRs will be installed by the end of 2005. Two companies dominate the PVR market: EchoStar Communications Corp. (www.dishnetwork.com), with 23%, and TiVo Inc. (www.tivo.com), with 31%, according to the Carmel Group, a media research and consulting company (www.carmelgroup.com). If PVR growth is even close to what Informa and others expect, these companies will prosper for years, while NBC’s three-bong station break soon may symbolize an industry “for whom the bell tolls.”
ESTABLISHED COMPANIES Among existing businesses, our winner is what may turn out to be another form of GPS—what you might call a Global Patient System. Medtronic Inc. (www.medtronic.com) is leading the way with its CareLink Network, which is the first service that monitors heart patients during their day-to-day lives and transmits patients’ data to their doctors over phone lines. Formerly, patients had to visit their cardiologist’s office to have their hearts monitored. CareLink is being used by nearly 75,000 patients, who hold an antenna over their pacemaker or implanted defibrillator, then transmit the data to the CareLink network. UBS Warburg LLC (www.ubswarburg.com) securities analyst David Lothson estimates that the Medtronic remote-monitoring network will be used by 150,000 patients by 2006. With more than five million Americans suffering heart failure every year, the technology is arriving just in time for the aging baby boom generation. Currently, CareLink can be used only to monitor pacemakers. Pending further Food and Drug Administration approvals, its use may be extended to all the two million patients who have implanted Medtronic devices. “Within five years, we expect that this market [for monitors and implantable pumps and stimulators] can generate for Medtronic in excess of a billion dollars,” says Art Collins, chief executive of Medtronic. In addition to Medtronic, Biotronik Inc. (www.biotronik.com) has won FDA approval for a real-time pacemaker-monitoring system. A transmitter in the pacemaker sends data to a device that makes a cellphone call to a Biotronik central computer. The computer downloads the data and faxes them to a doctor’s office. CardioNet Inc. (www.cardionet.com), which recently received an investment from Guidant Corp. (www.guidant.com), does remote electrocardiograms to check for any irregularity in the heartbeat. The system relays data from heart patients to doctors using a combination of wireless and Internet links. With so much progress in the area of remote monitoring, it is easy to imagine all sorts of possibilities. People will be able to manage their health better by seeing how diet, exercise, and stress affect their vital signs. Patients could be equipped with alarms so that paramedics are called in the case of a heart attack. Doctors will understand their patients much more thoroughly, because they will receive a steady stream of information about their health, rather than collecting a few bits of data at each annual checkup. As a result, doctors could be able to spot such illnesses as cancer earlier and more reliably. Those are just the effects on doctors and patients. The medical industry also will be transformed, as the roles of hospitals, insurance companies, and makers of drugs and devices are redefined. Thorny issues about privacy and medical ethics will surely reappear. Still, no matter how remote monitoring plays out, we should all be the healthier for it. RUNNER-UP With its imaginary worlds and endless plots, Sony Online Entertainment Inc.’s EverQuest game (www.sonyonline.com) becomes an obsession to its users. The game allows thousands of players to enter magic worlds, where they adopt roles, take on quests, make friends, and live and die. The experience is so compelling that nearly 400,000 subscribers pay $13 a month to participate. EverQuest may be just the beginning, too. The game has been such a hit that other so-called massively multiplayer games are appearing. Research firm Gartner Inc. (www.gartner.com) estimates that online games will climb from a $239 million market today to $2.3 billion in three years. More importantly, some analysts believe that online games will accelerate the adoption of high-speed, “broadband” connections to the home—fanaticism about games already has prompted South Korea to become perhaps the most wired country in the world. Linking people through online games also could create a network through which all kinds of entertainment could be distributed. Microsoft Corp. (www.microsoft.com) seems to believe that will happen: It announced in 2002 that it would spend $1 billion to enter the business of massively multiplayer games.
ROAD KILL After a players’ strike was narrowly averted over the summer, Major League Commissioner Bud Selig told reporters that he was “a Yogi Berra theorist.” He quoted Berra’s famous line, “It ain’t over ’til it’s over,” then boasted: “It’s over.’’ By “it,” he meant the possibility of a strike, but he could just as easily have been talking about baseball’s future. Critics say big-spending clubs, such as the New York Yankees, essentially buy their appearances in the World Series by paying the huge salaries of the best players in the free-agent system. Attendance was down 6% this past year. A New York Times poll found that only 14% of adults consider themselves “very” interested in baseball. The league shows few signs of knowing how to reverse its problems. “Major League Baseball rivals the U.S. airline industry as the worst-run business in America,” editorial board member Jim Gilmore says. “Selig, his crony club owners, and the belligerent union leaders are systematically working to destroy our national pastime.” Gilmore predicts that teams in Montreal, Tampa Bay, Florida, Minnesota, Pittsburgh, Chicago, Oakland, Texas, Colorado, and Anaheim will disappear over the next decade. [For his and Joe Pine’s thoughts on how to fix the game, see “R.I.P. MLB.”] RUNNER-UP (or, Also Run Over) The Wireless Application Protocol has an apt abbreviation: WAP. Pronouncing it is an exercise in what your English teacher called onomatopoeia—you create a sound effect that describes what happened to the protocol. WAP got whapped. WAP was supposed to allow users of wireless devices, such as cellphones, to access and interact with information and services easily and instantly over the Internet. Manufacturers claimed that WAP phones would become desktops in the hand. However, painfully slow response times, high costs, and tiny screens created a completely different meaning for WAP in users’ minds: “What A Pain.” A.T. Kearney Inc. (www.atkearney.com) and the University of Cambridge’s Judge Institute of Management (www.jims.cam.ac.uk) in the United Kingdom surveyed 5,600 mobile phone users worldwide in January 2002 and found that only 2% to 3% used WAP on a daily basis. Not to say that we told you so, but Context predicted as much in The Great Lie, [“Web Phon(i)es,” February/March 2000]. In other words, we told you so. R.I.P. MLB The current management philosophy of Major League Baseball can be summarized in two words: Damn Yankees. And the fixation on mitigating the Yankees’ recent dominance is propelling the league to do some truly strange things. What other business treats labor negotiations as an occasion to weaken its leading brand? What other business lets internal strife generate such negative publicity? MLB is practicing road-kill marketing—providing a lesson for us all in how not to run an enterprise. Here is how MLB should resurrect its business: FACE REALITY. If MLB truly wanted competitive balance, it would not have moved in 1994 from two postseason teams per league to four (by going from two divisions to three and letting a wild-card winner into the playoffs). Under the pre-1994 format, the New York Yankees would not have even qualified for the postseason in its championship seasons of 1996 and 2000 (they would have finished second each year to Cleveland in the old American League East). MLB should minimize the likelihood that a weak team from a weak division makes the playoffs, perhaps by keeping the number of playoff teams the same but returning to two divisions and letting two wild cards into the postseason from each league. Regardless, MLB should stop focusing on redistributing existing revenue from big-market teams to small-market teams (perpetuating a zero-sum approach) and instead allow teams to retain new revenue generated from nontraditional sources (fostering innovation). Pooling revenue from such new ventures as MLB.com does nothing to address the disparity that exists between teams in television revenue. Letting teams retain revenue from individually owned and uniquely differentiated Web sites—as just one potential set of innovations—could, however, help close the revenue gap. SELL EXPERIENCES. Stop managing minutia, like trying in vain to speed up the game (after all, baseball’s uniqueness is centered on the absence of a time-keeping clock). Instead, strive to get customers to spend more time (and money) at the ballpark—before, during, and after each game. Baseball is in the experience business, so it should stop acting like a goods manufacturer (talk of the “product” on the field perpetuates this erroneous positioning). Promotions based on giving away goods are no longer enough. Today, people desire unique experiences that engage them in a distinctively personal way. If Dennis Tito will pay $20 million to labor as a space tourist, what experiences might command fees orders of magnitude above today’s ticket prices from fanatically enthusiastic and wealthy fans, while simultaneously driving increased ticket sales? Here are some possibilities:
Such experience-based offerings as these will not only generate direct revenue, but they’ll also drive demand for more tickets and enable the currently less-fortunate franchises to better compete with those damn Yankees. Gilmore, an Indians fan, and Pine, a Yankees fan, are co-authors of The Experience Economy and the recent Amazon.com eDoc The Experience IS the Marketing. They collaborate just 11 months a year, avoiding unnecessary interaction in October as they separately root against and for the Yankees.
WHERE ARE THEY NOW? As a lark, some friends once put together a Procrastinators Club. Each Dec. 31, the club issued annual predictions—for the year ending that day. The group said that, while the predictions weren’t exactly timely, they sure were accurate. Those of us who don’t have the luxury of waiting to make “predictions” until after the fact don’t do quite so well on accuracy. A lot of people have learned that over the past few years, as predictions about dot-coms, the stock market, and lots of other things have proved to be way off. Still, at the risk of making ourselves wince, we decided we should do a reality check on the three years of Killer App Awards we have handed out. So far, if we do say so ourselves, we have done pretty well. One of our first winners, Amazon.com Inc. (www.amazon.com), took a while to show a profit but is hailed as the company that convinced mainstream consumers it was O.K. to buy goods online. Online auctioneer eBay Inc. (www.ebay.com), also a winner the first year we handed out awards, is humming along. EBay conceded a minor defeat when it gave up on its Billpoint payment service and bought the dominant online payment service—but the company it bought happened to be PayPal (www.paypal.com), another Killer App Award winner. Yahoo Inc. (www.yahoo.com) is doing less well but is, at least, hanging in there. Among the established companies that won, General Electric Co.’s Global exchange (www.ge.com), the business-to-business e-commerce unit, was so successful that the conglomerate sold the unit for a profit of $500 million. Online discount brokerage house Charles Schwab & Co. (www.schwab.com), while clearly hurting now, is well-positioned to take advantage of all the changes going on in the financial-services industry. The three past recipients of our Road Kill Award—AOL Time Warner (www.aoltw.com), Encyclopedia Britannica Inc. (www.brittanica.com), and the long-distance telephone business—still look like dead meat to us. We aren’t saying we haven’t occasionally been idiots. Why, we once gave a Killer App Award to Enron Corp. (www.enron.com). We called it a “dancing dinosaur” because the old-time energy company had been able to capitalize on the chaos unleashed by deregulation and technology. Can we claim partial credit? After all, Enron turned out to be a dinosaur, even if it isn’t exactly dancing these days. Editorial Board of Judges JOHN PERRY BARLOW is a retired cattle rancher and former lyricist for the Grateful Dead who has written extensively on how business and society are becoming more virtual. GORDON BELL, is a senior researcher at Microsoft Corp. Previously, he led the development of the first minicomputer at Digital Equipment Corp. MEL BERGSTEIN is chief executive of DiamondCluster International Inc. DAN BRICKLIN is currently founder and chief technology officer of Trellix Corp. He is best known for co-developing VisiCalc, the first electronic spreadsheet. GEORGE DAY is a professor of marketing and co-director of the Mack Center for Technological Innovation at the University of Pennsylvania. JIM DUDERSTADT is president emeritus of the University of Michigan. He has returned to teaching and research. TIM GALLWEY is author of the best-selling Inner Game books on learning. His latest: The Inner Game of Work. JAMES H. GILMORE is co-founder of Strategic Horizons, a management-consulting firm. STEPHEN HINDMAN is founder and principal of consulting firm SPHindman LLC. ALAN KAY is widely regarded as a principal inventor of the personal computer. He was a founding principal of Xerox PARC. ANDY LIPPMAN is a co-founder of MIT’s Media Lab. HEIDI MASON is a managing director of the Bell-Mason Group, with Gordon Bell. She is co-author of The Venture Imperative: A New Model for Corporate Innovation. ANTHONY PAONI is a vice chairman of DiamondCluster and a former professor of technology at Northwestern University’s Kellogg Graduate School of Management. B. JOSEPH PINE II, an authority on mass customization, most recently co-wrote The Experience Economy: Work Is Theatre and Every Business a Stage. DAVID P. REED is a consultant on information architecture. Previously, he was chief scientist at software concern Lotus Development Corp. MOHANBIR SAWHNEY is the Tribune Professor of e-commerce at Kellogg. He is co-author of The Seven Steps to Nirvana: Strategic Insights into eBusiness Transformation. JIM SPIRA is president and chief operating officer of American Greetings Corp. JOHN SVIOKLA is a vice chairman of DiamondCluster and a former professor at Harvard Business School. MARVIN ZONIS is a professor at University of Chicago’s Graduate School of Business, where he teaches about leadership and the politics and economics of development.
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Charge to work jobs traditionally performed by paid labor or unpaid volunteers: scoreboard operator, grounds crew, mascot, organist, spring-training helpers, even honorary managers—say, at the All-Star Game. (After this year’s fiasco, don’t tell us the risk of mismanaging the game is too great!) Package such paying labor within fantasy camps or educational classes and recast existing workers as hosts for such experiences.
