The Challenge Dividend

Why Gov't Shouldn't Wi-Fi

Paul Saffo is credited with the definition of wisdom as "strong opinions, weakly held."  In other words, you should have strong beliefs, but always be ready to change them when new information or better arguments come along.  My favorite, similar quote goes back to Socrates - as told by Plato - "He who is wise admits he knows nothing."  Whatever you call it, both quotes set up this post - in which I admit that I was wrong.

For a long time I have been in favor of free, government-provided Wi-Fi service.  I believed this was a great "purpose" of government in that it uses public funds to create a clear public good.  Internet access helps power free markets, educate citizens, help people find employment, and countless other benefits.  In many ways, this service is not too dissimilar from building roads and bridges.  Instead of relying on a shrinking number of private companies, each charging up to $100/month, I believed that the government was in a better position to oversee construction of this information super-highway.  And while I have never blogged about this exact topic, I did weigh in a few months back with the opinion that such services should be outsourced by governments via competitive bids.

But I now have changed my attitude, because I was reminded this week that government cannot simply create the information highways.  It is continually compelled to exercise control and power over the bits and bytes that travel over it.  Absolute power corrupts absolutely. 

My reminder comes via Boing Boing, which publishes daily, random "wonderful things" from around the Net and receives about 10 million visits per month.  It's pretty tame stuff.  However one of the not-so-wonderful things Boing Boing found was that the site itself was banned by Boston.  A reader trying to access the site via Boston's free, public Wi-Fi service found the warning (above) instead.  Boston has "censorware" installed to protect its people from the naughty side of the net, and a harmless phrase was mis-interpreted by the software.

So the citizens of Boston are not only kept from their freedom to view adult materials (from the dirty to the medical), but they are also subject to the obvious failings of censorware.  They don't mean harm, but it is a function of how government works.  One can imagine the city meetings where debates over free Wi-Fi came to the question of "what about when people look at porn over our city's service?"  Even those politicians who could care less personally are subject to the angry calls of voters who cannot accept certain things in others' private lives.  In other words, "I don't want my tax dollars going to support that lifestyle."  As a result, power is used, freedom is restricted, and a government-provided service suddenly has a less value than a private provider.

I am not saying that government-provided Wi-Fi is a total mistake.  Limited access is good enough for many people and better than nothing.  But this story points out the inherent problem with government-provided services.  Whether in China or Boston, Communism or Democracy, the capability to control people is almost always used by those in power to do so. 

Guitar Hero 2: Incredible Fun Challenge - UPDATE

Back in January I made public my newfound guilty pleasure in video games.  Not only do they make a great break from a long day, but they serve as great fodder for The Challenge Dividend.

My current obsession is with the game Guitar Hero 2 for Xbox 360.  If you can get over the geek factor of paying $89.99 for a toy guitar (complete with strap and cool stickers), Guitar Hero 2 offers an incredibly fun and challenging experience.  The best way to describe the game is "guitar karaoke".  You have a fake guitar with a strumming bar and five "note" buttons.  You assume a character playing a live show and watch as the notes come down the screen, strumming and hitting the right notes in time with the rest of the band.  And there are all real songs by bands from Jane's Addiction to Iron Maiden.  Like karaoke, you get a small rush from actually feeling like you are a musician.

But the deeper beauty of this game is that you continually build up skills by improving your performance on each song.  Thanks to a bevy of goal and reward-based challenges, you can see your skills improve in real time.  These include:

• Over 70 songs to play and more you can buy from Xbox Live.  Each one with unique characteristics.
• A live leader-board of everyone else in the world who is playing (I'm at about 59,000 our of 260,000 players - and climbing).
• Songs, characters, equipment and venues that you unlock by mastering groups of songs.
• A surprise encore song after you successfully play five others in each venue.
• Multiple levels - Easy, Medium, Hard and Expert - so that once you make it through the game on Easy, you effectively start over with more complicated series of notes for the same song.
• Several Xbox Live Achievement Points (which all games have) for about 50 varied skill accomplishments.

I know it is geeky at the end of the day, and I'm no musician, but I love the fun of the challenge and literally seeing my skills increase with each song played.  And my kids love to watch and cheer along.  In the future, I can see this kind of excellent training and technology combined to actually teach you how to play the guitar for real.

For a look at the game as played by a real Guitar Hero champ in action, check this out:

UPDATE: I got a chance to play Guitar Hero Encore: Rocks the 80s at a friend's house.  It's a $50 add-on that basically adds several songs and comes without some of the bells and whistles of the original game (e.g. no ability to change scenery).  Reviewers have panned it as a game that is taking advantage of GH fans eager for more songs to play.  In a nutshell, the game maker's lack of challenge led to a less valuable product.  GH better get it's act together, though, as MTV's Rock Band game is getting huge buzz.

 

The Whiners Take on Google

If you can't beat 'em, whine about 'em.  That seems to be the tactic of competitors in the online advertising game today, as companies that cannot seem to touch Google's superior products and services now are resorting to complaints. 

First, Ask.com has launched an ad campaign that is asking Internet surfers to "Join the Revolution" against Google's leading search engine.  At its online site and in advertisements, the campaign features and underground look and feel, and TV commercials in Britain are made to look like pirated signals.  Questions in the ads ask things like "Should one company really control the web's information?"  Of course, for all of its slick advertising, the world has pretty much seen through this campaign as a blatant attempt by marketers to drum up support for a search engine that has 4.5% share versus Google's 75%.

I suppose the folks at Ask.com are actually throwing in the towel and hoping that a gimmick wins them support.  Although the hope to spark a revolution, the reality is that the market has chosen Google simply because it is a better search experience.  We are already free to choose the best, and we have chosen.  Sorry, Ask.com.

The second example concerns the recent announcement of Google's purchase of Doubleclick.  Doubleclick is positioned as a middle man in the online advertising market, helping connect advertisers and web properties.  The buy helps Google continue to build a complete advertising network, and big improvements are expected to come from their combination.

But complaints are coming already.  Some say this will give Google too much power.  In a case of extreme irony, Microsoft is at the forefront of the debate, calling on regulators to closely review the potential deal.  Yeah, the same Microsoft that defended against several types of monopoly behavior is protesting that Google might improperly use its power.  The same Microsoft that spent decades defending itself with claims that its great products and services led to domination, not monopoly power.  To add to the irony, (the new) AT&T has joined the chorus of the concerned.  Yep, the same AT&T that was broken up by regulators decades go.

Alas, Microsoft, too, might be figuring that it has no room to beat Google on better products and services.   The company's share of search continues to fall, and it still has not gained a significant foothold in the business of online advertising.

Several weeks ago I told the story of Levi's jeans and its central strategy of suing any competitor that appears to violate its trademarks.  To me, resorting to legal challenges is a poor way to win, as it does nothing to actually improve the product or customer experience.  Tellingly, Levi's sales continue to fall.

In all three of these cases, challenge is not driving improvement for the whiners.  These companies have effectively surrendered, and I would sell or short the stocks of all three.  But the failure of these three does not mean that "challenge leads to improvement" has failed as well.  Rather, there are thousands of large and small companies alike devoting time to unseating the Googles of the world.  Improvement is always possible and will continue both outside of and within Google headquarters.  And we will see the benefit in years ahead - even if it doesn't come from Ask.com, Microsoft, and Levi's.

Guest Column: The Old Days Weren't So Good

A propensity to analyze the world and write publicly about it is in my blood.  My Dad, Robert Gilbreath (Sr.) is a great writer who has written several books, including his latest, Compel.  Today I'm giving him the floor for a piece that was also published in the Atlanta Journal-Constitution today.  He challenges the notion that the "good old days" really were so good....

The good old days weren't so good

Lately I've been besieged with email from fellow boomers lamenting today's world and urging us of the same age to fondly remember our childhood years--back in the 'Fifties. Maybe this is a generational thing, where the old folks always talk about how "the good old days" were better. But some of the memories these e-mailings invoke aren't so good. Some of them are terrible. These reminiscences usually begin with the question "Remember When"? Oh yes, I surely do.

Most remind us of the nights we spent catching fireflies, and putting them into a jar. Or playing kick the can until our aproned moms called us to supper. Then there's that standard remembrance of riding our friends on the handlebars of our bikes, or, more seriously, of times when drugs were unknown, and the worst thing that could happen is the teacher told your parents that you were "bad".

Back then, we knew what was right and what was wrong. We knew black from white. Things were simpler (and, from this vantage, worse). Blacks were "N's. Chinese or Japanese, or anyone from Asia, were "gooks". Homosexuals were just fun to beat up when drunk. Ahhh, the good times. And who can forget the siren call of the ambulance entering their subdivision every other weekend to take out a father who, due to smoking, drinking, or just a steady diet of beefsteak, had the inevitable heart attack. Dying at age 45 is one of the remembrances I have. Not too good.

Remember when, after dad died, mom couldn't get a credit card because all their family credit was in dad's name? Remember when the prettiest girl in school suddenly disappeared? Seems the home for unwed mothers served as a convenient forget-me-not abode. Then again, there was always that back-alley coat-hanger guy to take care of unneeded pregnancies. Or how about when we cringed under our seats at school, fearful of the inevitable nuclear holocaust, only to learn, as we grew older, that the attackers couldn't even manufacture enough toilet paper for their citizens. And these monsters were going to "take us over"?

Oh yes, I fondly remember the days when men could beat their wives with impunity, when our brothers and ourselves were drafted, called up, under penalty of law, to die in some God-forsaken place for some God-forsaken political reason long forgotten. Ahhh, the good old days. And the good old days when kids not up to par were "retarded", those in wheelchairs were "cripples". We laughed at drunks, seeing Foster Brooks on TV burping and slurring his words as a talented comedian.

Or when cars needed periodic "valve grinding", the streets were littered with spent mufflers, people thought nothing of throwing beer cans out their car windows, and dogs ran loose. One of my "fondest" memories is riding in a car, everyone holding their noses, guessing which one of us five children stepped in something a dog left. Ahhh, the good old days.

When my cohorts ask me to remember "back then", I have to control an urge to say "Yes, I remember it quite well, in fact, I stepped in it." No matter what we tell you, it was really quite worse than this.

 

A Voice of Challenge in Islam

Although my initial focus for the Challenge Dividend is clearly the Business community, I believe any organization can reap improvement by embracing challenge.  This past Fall, I even delved into religion a bit, thankfully without a deluge of angry comments.  Today I dip into the religious discussion again, by sharing the perspective of a Muslim who is struggling to bring introspection and debate into his faith.

Two weeks ago, the Wall St. Journal (subsc. req'd) published an opinion piece by Tawfik Hamid.  Dr. Hamid was once a member of a terrorist organization, the Jemaah Islamiya, and is now a medical doctor "living in the West."  The piece, titled "The Trouble with Islam", attempts to unearth realities of the Islamic faith which have been ignored by most critics and moderate Muslims.  Hamid believes that:

• "Traditional and even mainstream Islamic teaching accepts and promotes violence. Shariah, for example, allows apostates to be killed, permits beating women to discipline them, seeks to subjugate non-Muslims to Islam as dhimmis and justifies declaring war to do so."
• "The grave predicament we face in the Islamic world is the virtual lack of approved, theologically rigorous interpretations of Islam that clearly challenge the abusive aspects of Shariah."
• "Political correctness among Westerners obstructs unambiguous criticism of Shariah's inhumanity. They find socioeconomic or political excuses for Islamist terrorism such as poverty, colonialism, discrimination or the existence of Israel."
• "The tendency of many Westerners to restrict themselves to self-criticism further obstructs reformation in Islam. Americans demonstrate against the war in Iraq, yet decline to demonstrate against the terrorists who kidnap innocent people and behead them."
• "Western appeasement of their Muslim communities has exacerbated the problem. During the four-month period after the publication of the Muhammad cartoons in a Danish magazine, there were comparatively few violent demonstrations by Muslims. Within a few days of the Danish magazine's formal apology, riots erupted throughout the world. The apology had been perceived by Islamists as weakness and concession."
• "All of this makes the efforts of Muslim reformers more difficult. When Westerners make politically-correct excuses for Islamism, it actually endangers the lives of reformers and in many cases has the effect of suppressing their voices."

In a nutshell, Hamid believes that "the trouble with Islam" is a lack of rigorous introspection and challenge of violent beliefs.  Westerners enable this by only challenging their own activities (e.g. American presence in Iraq), rather than judging the Muslim religion.  Failure to challenge the beliefs of a few - both from within and outside the faith - has exacerbated destruction and terror.  Throw in the fact that women in Muslim countries lack equal power, and you have yet another imbalance that threatens improvement.

I find refreshing thinking in Tawfik Hamid's words, and in his belief that challenge is the only force that will improve his people.  If only others had the courage to follow his lead.

Extra AP Test Incentive

Around the country today there are thousands of high school students preparing to take Advanced Placement (AP) tests.  Most of them are hoping for a passing grade that helps them earn college credits in topics from American History to Calculus.  But for a growing number of AP students there is an extra incentive: cold hard cash.

The Wall St. Journal (subsc. req'd) reports that several states, non-profits and public companies are lining up to line the pockets of students who pass AP tests.  In Texas, for example, kids can earn $100 for each test they pass. 

Most of the organizations behind these grants are hoping to encourage students to study in a particular field.  For example, the National Math and Science Initiative received a grant of $125 million from Exxon in hopes of increasing the quantity and quality of math and science graduates.  Because of the challenge of needingbetter employees, companies like Exxon are helping drive innovation in education.

Students, meanwhile, benefit from the added challenge in the form of a financial incentive to take and pass the tests.  While $100 might not even cover a single monthly car payment, it does pay for the cost of taking the test itself.  And this can be an important amount to encourage a student to go through with the exam, especially for families with lower incomes.

Finally, even teachers are seeing benefits from these programs.  The Texas program offers teachers a bonus of $500 to $1,000 if they become certified AP instructors, and a $100 bonus for each student who passes.  One calculus teacher is averaging an extra $4,000 per year in AP-related bonuses.  This positive challenge offers a nice motivation and reward for teachers who put in the extra effort and help their students succeed.  It is also a way to build merit pay for the best teachers, without going through the government and anti-competitive teachers' unions.

So far, the results an initiative in Texas is very promising.  As seen in the chart above, the number of exams taken at 10 schools in the Dallas Independent School District has increased dramatically since the program has been in place. 

The initial reaction of many to this program is probably skepticism and a concern that the next generation is too focused on financial incentives.  But let's be realistic instead of idealistic.  Incentives are forms of positive challenge that can lead to improvement.  And in the sad state of high school education today, any experiment that rewards hard work is worth a try.

Will the Imus Challenge Beget Improvement? - UPDATED

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I cannot stand Don Imus.  I believe he is rude, a bully, and has made racist comments on more than one occasion.  As a result, I have chosen not to pay attention to his programs.  Part of me was glad to see him pay the price for his actions with a termination from CBS and MSNBC last week, another part wondered: Will the Imus challenge beget improvement?  I believe the answer is yes.

I believe  the public outcry against Imus and the pull of advertiser support suggests that our society is continuing to clear out the last remaining elements of racism and bigotry.  Unlike Howard Stern or many comedians who poke fun at racial and sexual stereotypes (including their own) equally, Imus's style is bullying and judgmental.  His depiction of the Rutgers women's basketball team as "nappy-headed hos" is clearly mean-spirited and condescending.  The court of public opinion came down hard on this comment.  Advertisers pulled away from the program en masse, reflecting the overall public sentiment.  I believe this will serve as a sign to other entertainers and society as a whole that such comments are unacceptable in today's more enlightened society.

Further, this case further proves the power of the free market to advance society.  In spite of calls for the FTC to take action against Imus's comments that "went over the public airwaves," there was no need for government involvement.  Instead, CBS and MSNBC, as well as their advertisers, decided that the market would not tolerate Imus's conduct.  So they quickly took action.

As a culture, we are much more accepting and respectful than we have ever been.  And public challenges like this will serve as continual signposts for our improvement as a culture.

UPDATE: At least one major global brand agrees.  Nike put out a front page ad in major newspapers as well as sent its email database the "open letter thanking ignorance" for making us remember what goodness is and what progress we've made.  Pretty cool advertising.

Highs and Lows for Walmart - Part 2

Building on my post from two days ago, another area where Wal-mart is seeing highs and lows of a large successful company is whenever it moves into a new market.  Each new market entry becomes a focal point for a growing, concentrated and passionate legion of opponents.  Unfortunately, recent examples suggest that this may be a place where Challenge does not lead to Improvement...

Protests against Wal-mart's move into new markets mainly has come along with plans to add physical locations in the few remaining zip codes where the company has no presence.  I will never forget a long battle over a new store location when I was in college at Duke University.  Today, the protests are largest in urban areas like Chicago, Los Angeles and New York City, where tight regulations and union power continue to push the promise of everyday low prices out of reach for those who actually need them the most.  CEO Lee Scott seems to be close to giving up.

But now Wal-mart is even challenged in its effort to expand its products and services.  A firestorm has surrounded the company's attempt to enter the Retail Banking business through establishment of an industrial loan corporation.  Every step in Wal-mart's journey to build a modest retail bank has been tracked and criticized by special interest groups including existing banks, unions, lawmakers and community organizations.  But a new Democratic Congress and the uphill battle against these groups seems to be too much for Wal-mart to fight through.  In March the company withdrew its application.

While protesters celebrated, to me this is a loss for the banking industry and millions of consumers.  At the end of the day, Wal-mart has a proven history of driving incredible efficiency in the markets it has entered.  Its relentless focus on driving costs out and passing the savings to consumers has improved our lives significantly.  Wal-mart's success and its innovative approaches have, in turn, been copied by countless competitors, who drive further efficiency.  A McKinsey study estimates that one-quarter of the breath-taking rise in U.S. productivity in the 1990s resulted from Wal-mart's rise and those that followed its methods.

Retail banking is certainly an industry ripe for productivity improvements through challenging new competitors like Wal-mart.  With a fresh perspective and existing customer relationships, we could have seen a broader renaissance in financial services.  But for now, this dream is dead.

If given a vote and a few of the facts, I would bet that most Americans would support Wal-mart's entry into this market.  Our country values low prices and free competition.  But our current democracy values the special interests of a few over free markets and the greater good of the whole.  Minority rules the majority thanks to focused dollars and voices of special interests.  The majority just doesn't care enough to go to pro-Wal-mart rally. 

And so it seems that the challenge from special interests has led to a failure, not improvement, for the whole of society.

But hope lives on.  The excellent Net Banker blog points out that another retailer, Kroger, is offering a range of financial services in its stores, including mortgages, credit cards and pet insurance, thanks to a partnership with Royal Bank of Scotland. 

Highs and Lows for Walmart - Part 1

It isn't easy being the largest retailer in the world.  With great power and integration into millions of people's lives come and microscope of the press, competitors, and every special interest group on the planet.  But Wal-mart's success and intense public spotlight make it a fascinating, living case study for The Challenge Dividend.  Over the past month, there have been two interesting chapters in the company's evolution that are worthy of coverage here.

First, there has been the ongoing saga of Wal-mart's public feud with former VP of Marketing, Julie Roehm.  You can dig deep into the details of this soap opera at various news outlets, but to keep the story short: Roehm was fired after Wal-mart claimed it took unauthorized gifts from vendors and had an affair with a subordinate.  Roehm claimed this was false and sued the company, then Wal-mart took the somewhat unprecedented step of making illicit emails public.

A public feud of this magnitude seems unusual, which usually signals that this is about something bigger.  It appears to be a strategic move by Wal-mart to not only defend its reputation, but signal to current and prospective employees that any such activity will be dealt with severely.  A recent NYTimes article details some of the extreme measures the company has taken to punish transgressions; for example:

• Hired a team of former CIA and FBI investigators who manage a 400-person security group.
• Tracked another manager to Guatemala to prove he was having an affair with a subordinate.
• Dug up receipts showing that a former executive charged fiber supplements and hunting gear to the company.

While certainly the ethics of some of its investigations can be questioned, the company's aggressive stance against misconduct is a choice that fits its "Everyday Low Prices" ethos.  Originated by founder Sam Walton, the simple focus on driving costs out of the system in order to drop prices below those of competitors has earned Wal-mart a loyal following, while generating billions of shareholder value.  And now that Sam Walton has passed away and the company employs hundreds of thousands of people around the world, it must find new ways to instill its values. 

Rigorous, public prosecution - even at the cost of employing a 400-person enforcement team - helps to deter employees from giving in to the temptations of vendors and co-workers alike.  This kind of challenge both improves the performance of current employees and attract the right new hires.  Meanwhile, the challenge helps ensure that we shoppers can still get great deals - like camo shorts for less than $16.

(Next up: Failure in Banking)

Embracing Constraints

In the Western world we seem to be obsessive about choice and options.  Our freedoms were won hundreds of years ago and we now take for granted that we can basically do whatever we want.  But we often forget the fact that the challenge of limitations and restrictions can themselves be liberating.  Garr Reynolds' Presentation Zen blog reminds us of this additional example of how Challenge Drives Improvement.

Reynolds makes the point that much of the work of designers is in fact aided by constraints:

• "Whether constraints are good or bad, enabling or crippling, is in a sense irrelevant; constraints are simply the way of the world."
• "In the field of design there is the belief that with more constraints, better solutions are revealed." (John Maeda)
• "What we can learn from professional designers, then, is that (1) constrains and limitations are a powerful ally not an enemy, and (2) creating our own self-imposed constraints, limitations, and parameters is often fundamental to good, creative work."

Reynolds refers to Marissa Ann Mayer, Google's VP of Search Products and User Experience.  Mayer claims that constraints on file size, fit with existing technology, and short development times help her team succeed or fail faster and come up with better ideas.  She says:

"Constraints shape and focus problems and provide clear challenges to overcome. Creativity thrives best when constrained."

I see the benefits of creative constraints everyday in my day job at an advertising agency.  My role at the agency often involves helping to build a strategic approach for a particular project, or weighing in on the fine points of a creative brief.  A solid strategy, measurable objectives, and creative brief help "frame" (i.e. constrain) the creative work that comes next. 

One of the quotes I often use in guiding teams is: "We've got to build the box to think outside of."  In other words, by giving some constraints - say, the product benefit or specific consumer insight - our creative teams are challenged in a specific way.  They apply their mind power in a focused direction and develop unique approaches that delight consumers while meeting business needs.  Alternatively, if we just said "come up with some big ideas", our teams would not know where to start.   And our clients would not know how to judge our work.

Taking a step back, maybe part of what we love about art is that it is the result of a man or woman innovating and expressing herself within firm constraints.  We are left to appreciate unique message within an understood setting.  A marble sculpture, watercolor on canvas or 17-syllable haiku are highly constraining media that still beget innovation and moving messages.

For my part, I know that focusing on a specific insight in this blog has helped me tighten my writing and hopefully attract more readers.  And the more I constrain myself with the Challenge Dividend message,
the more creative ways I see to apply it.