The Integrative Stream

It’s not a bug…

it’s a feature! That may help people rig elections. Debating the Bugs of High-Tech Voting (The Washington Post).

Carnival of the Capitalists is Up (Downunder)

Leah at Working Solo has done a bang-up job with this week’s Carnival of the Capitalists. Head over for your weekly dose of the best in business blogging.

Apostrophaclypse

Seth’s Blog: Do apostrophe’s matter? You bet.

Dell India Ops Head Interview

Roi Malhotra, Dell India’s head of operations, interviewed in The McKinsey Quarterly on Running a customer service center in India. Registration required. Interesting if you’re interested in how outsourcing works, when it works.

Of course, in this case whether it works (or doesn’t work) is determined by the company. Customers are not always going to be happy, but they’re not always going to be happy with on-shore phone support either.

More on Health Insurance Payments

Here’s the AHIP report on electronic claims (pdf). It includes some different numbers on the cost of claims: a clean electronic claim costs 85 cents, a clean paper claim costs $1.58, and a pending claim requiring manual review costs about $2.05 (it isn’t clear whether or not that last average is for paper, electronic, or both). Absolute values are a lot less than the numbers I had, but the proportions are about right and there’s still a lot of cash on the table.

Online Claims Up

The New York Times reports that as of this year, three-quarters of insurance claims are made online (NYT link, registration required). That’s up from 44% in 2002.

And now, data I can’t source properly: an electronic claim costs $8 to process. That sounds like a lot, until you realize that a paper claim costs $16 (this is from an IBM presentation I recently attended). Surprisingly, twenty minutes of web surfing didn’t produce a good number for total health insurance claims on an annual basis. On the other hand, WellPoint alone processes 2.4 billion claim line items a year, according to this article on payer performance. WellPoint is just one insurance company. Assume 10 line items a claim; that’s 240 million claims a year for a player with relatively small market share (Medicare alone covers 50 million seniors).

Even without making the math fuzzier, there’s still a tremendous amount of money left on the table.

A Lost Customer Service Opportunity

I didn’t want to knock the Carnival of the Capitalists off the top of the site so quickly, but needs must when the devil drives. T-Mobile, my mobile phone provider, just lost an excellent opportunity to make a customer very happy. What follows may start to sound like a rant, but it gets back to business at the end.

A few weeks ago, I was down in Washington, DC for some meetings. The meetings went very well, and I flew back to Cambridge a happy man. I remained happy until the following morning, when I determined that my cell phone was still in DC. Best bet is that it ended up in the taxi. Within 15 minutes I was down at the T-Mobile store in Harvard Square, having the phone canceled and a new SIM card inserted into my old Nokia. A few days after that I went back and upgraded to a new service plan and a T-Mobile MDA Smartphone. This was about three weeks back.

About an hour ago I was sitting on the couch paying bills, and took a look at my just-arrived T-Mobile statement. $412. Apparently, at some point before I realized the phone was missing, somebody made a dozen calls to Pakistan, totalling about $350. This was all before I realized the phone was even missing.

I called up T-Mobile support, and was told, basically, to buzz off. They weren’t rude, per se, but the attitude was that I didn’t report it, so it wasn’t their problem, and there was nothing they could do. I spoke to a supervisor who gave me the same line. At the end of the call, nothing, although I did learn that they don’t have any screening programs in place to identify odd calling patterns (something the credit card companies have been doing for years, probably because they’re actually liable).

The truly annoying thing is that I expected this to be an easy thing to resolve. The phone was stolen, I reported it as soon as I noticed (although at the store, not on the phone), and this is the sort of thing they must deal with all the time. Fifteen minutes on the phone and we’re done, right? All of my previous T-Mobile customer support experiences have been excellent; I would have rated them var better than Verizon was. I was not just a good customer, I was an evangelistic customer.

So T-Mobile gets an extra $350 from me. What have they lost? Well, for one thing, I’m very unlikely to renew with them, and if I hadn’t just bought an expensive new phone (now past the 14 day return period, of course) I’d drop them right now, particularly as I’m doing less international travel and don’t need the world phone capabilities as much. Once my contract is up, I’m gone. And I spend about $600 a year on mobile phone and data services.

And they’ve lost me as a satisfied customer. In the past, I’ve encouraged people to use T-Mobile and spoken highly of their data services and hotspots. I know for a fact that at least two people went with T-Mobile on my recommendation. I don’t know what plans they went with, but call that $400 a year in revenues for each. I won’t be doing that anymore. And, of course, I’m currently writing an angry blog post about it; can’t imagine that helps any, although I should be honest and admit that I don’t think it’s going to hurt them much either.

But from a pure cash flow perspective, they’re out $600 a year from me, a cash flow they otherwise might have had in perpetuity. Having a process in place to credit me back for $350 in obviously fraudulent charges would not have been too high a price to pay for that, particularly since the real cost is probably a lot lower: the margins on international calls are reasonably high, particularly for cell phone carriers.

T-Mobile probably doesn’t want to make credits too easy; otherwise support will be deluged and the impact on the bottom line will be substantial. Adverse seletion issues abound. But by not giving their staff any lattitude at all the customers with legitimate grievances (albeit initially with the taxi driver, airplane cleaner or whoever found my phone) don’t get helped, and then they aren’t customers any more.

There are some generalizable lessons here. First, give your customer support people the ability to help customers in situations where the psychic impact is high. It pays off. In this case, I had a phone stolen, which was bad enough, and then got hit with hundreds of dollars in charges. Customers in that kind of situation represent an opportunity, and not just to bill for calls to Pakistan! Help me out, and I’m going to be willing to overlook all sorts of things, including the lousy T-Mobile coverage around MIT.

Second, one bad experience can cancel out any number of good experiences. Loyal customers are sometimes used to being smacked around – look at Apple through much of the 1990s – but that tolerance ends quickly when confronted with a multi-hundred dollar invoice.

The Carnival of the Capitalists

Welcome to the May 22nd Edition of the The Carnival of the Capitalists! For those visitors to the site who aren’t familiar, the the CoTC is a weekly roving roundup of the best business, investing and career management posts in the blogosphere, as nominated by the authors. Anyone blogging on business topics is eligible to participate. See the web site for more information.

For those who know the carnival but don’t know this blog, The Integrative Stream is a collection of short articles, links and general pondering from the perspective someone who’s been an independent consultant, CTO of a small software company and writer on technology issues, and is now in the middle of an MBA at MIT Sloan, on the principle of better late than never.

It’s been a lot of fun editing this week’s submissions. As per usual, most of the submitted posts have made the carnival. However, I did drop some posts which I felt lacked substantial original. A few blogs submitted every post for the week, and those got ignored too. For blogs which submitted too posts, I went with the one I found more interesting. The themes for the week seem to be international business ethics and network neutrality.

An Editor’s Choice doesn’t necessarily mean that I agree with the argument; but it does indicate that I respect the research and thought that went into the post and had some fun thinking about the issues. You might too.

Thanks for visiting, and don’t forget to check out next week’s host, Working Solo.

The Philosophy of Business

• Isaac Schrödinger defends Exploiting the Poor. Of course, it’s not that simple. Having grown up in Pakistan the author adds some first hand observations, and reminds the reader of some fundamental (classical and behavioural) economics.
• Starling David Hunter continues Email Conversation with an MBA Student at The Business of America is Business. Professor Hunter moved on from MIT Sloan right before I arrived at MIT Sloan. I wish he hadn’t.
• Wayne Hurlburt just thinks that good business ethics Change the World.

Managing

• Professor Steve Bainbridge takes an anthropological approach to Meetings and Dominance Rituals: Implications for Corporate Governance at ProfessorBainbridge.com. I was motivated to try to apply his analysis at my next meeting, so this one warrants an Editor’s Choice.
• In Predictably Unpredictable, Carmine Coyote of Slow Leadership takes a crack at the difficult issue of models. Computers make it easier than ever to gather vast quantities of information, but how much data is too much data?
• Michael Wade of ExecuPundit makes a case for why organizations need mavericks. A nice reality check if you get too worried about the occasional prima donna in the cubical farm.
• David Maister brings us Why Should I Help You? at Passion, People and Principles. It’s hard to be a supplicant, but most people can do a better job of it than they currently manage. Editor’s Choice.
• K T Cat at The Scratching Post suggests thinking about Process Improvement As a Current Liability. He (apparently, the author is a black and white tabby cat) is focusing on large-scale, corporate projects. It’s important to differentiate process improvement activities from process overhead, which can also be thought of as a current liability. What looks like overhead today can save your bacon tomorrow.
• A century ago, Frank Woolworth resorted to selling hammers disassembled — the head and handle separate — to maintain his promise that everything in the store was five or ten cents. From 1903 to 1970 Hershey shrank its chocolate bars 12 times to avoid crossing its own nickel price barriers as costs increased. What did they have in common? Constant values. Bob Pritchett suggests avoiding them, whether in software of strategy.

Public Policy

• On the Libertarian front, Brian Gongol has A Public Decision-Maker’s Checklist.
• Leon Gettler of Sox First writes about The SEC and the Jargon Maze. Plain english disclosures? It’s so crazy that it just might work. This is an issue close to my heart–and not just in regulated industries. Editor’s Choice.
• Jack Cluth at The People’s Republic of Seabrook raises important issues involving alligators.
• Tom Rants reviews reasons to mess with markets?.

Career and Employment

• Jacob Cazzell at SuccessMinders.com reminds you to Give value first. Paychecks will follow.
• Jack Yoest has 3 Questions for Your Prospective Boss.
• Mark at SportsBiz looks at the Psychic Income Appeal of playing for the WNBA.
• Brandon Peele at GT reflects on his time with a recent employer in SunTechnics & Me. There are some job search-and-selection lessons to be learned here.
• More ideas for personal growth from Adrian Savage.
• David Lorenzo suggests that you Be the Best.

Business of Technology

• Jon Kay at Centrist Coalition has Everything You Wanted to Know About Network Neutrality. Excellent analysis and an Editor’s Choice.
• cehwiedel at Kicking Over My Traces comments on Net Neutrality, in the context of providing access to telecom services.
• Barry Welford says that [ I’m Feeling Lucky ] Out | [ Search Blogs ] In. He means the buttons on the Google Home Page.
• Scott Milener at The Browster Blog laments the end of the New Economy in Supernova Party – Not Quite Like Its 1999. The other day I was in a meeting and CommerceNet came up. The operative quote from the conversation was “Wow, the last time I read about them it was in The Industry Standard.” The parties were just better back then.

Personal Finance & Personal Business

• Brian at Financial Reference looks at The Role of Financial Advisors. That’s the role they play now, not the role that they should play in the future.
• Need to get motivated? Todd suggests you Learn to make money by emulating people who make money.
• Josh Cohen at Multiple Mentality has Gas Price Tips
• David A. Porter advises that you Beware of Mortgage “Rescue” Firms.
• Dan Melson at Searchlight Crusade presents Real Estate Boycotts and the current state of the SF housing market.
• Steve Mertz writes about how good record keeping helped claim a pension from a previous employer. In this case, $29,871.63 worth. His story does nothing for my own packrat tendencies.
• Free Money Finance has a theory of How the Middle Class Can Get Back on Solid Financial Ground.
• Bob Vineyard reminds us that we have insurance Because Things Happen. A very good health economics point, as well. Insurance doesn’t just
  improve health outcomes after disease strikes – it can engender habits that make disease, or at least acute disease, less likely.
• A Samuel at New Homes Blog has
  5 rules to follow for buying an off-plan property.
• Paul at Paul’s Tips presents Ten good rules-of-thumb for investing.
• Nina Smith at Queercents talks about Team Effort. It’s not a good idea to leave financial leadership to just half the couple.

Impersonal Finance

• RJH Adams at Capital Chronicle presents Equity Markets: Crunched by Deteriorating Liquidity?
• nickel at fivecentnickel.com notes that Bankruptcy Filings are on the Rise
• Dominic Basulto at Business Innovation Insider tells us why My 500 is better than your 500
• Ed at Daily Dose of Optimism saw that Bill Miller is Down on Commodities and decided to take a closer look.
• Inflation may be on the rise, according to Barry Ritholtz of The Big Picture. And apparently folks are catching on..
• Econbrowser notes the dilemma posed for the Federal Reserve by this week’s data suggesting both an increase in inflation and a slowdown of real economic activity. Stagflation wasn’t much fun the last time. Editor’s Choice
• Chris Welch examines Cramer’s “Cyclical Investing and Trading” Chart at InvestorGeeks.
• frugal has some Ramblings on Illegal Immigrants, Globalization, and Inflationary Pictures at My 1st Million At 33.
• Joe Kristan looks at backdating stock options at TaxUpdateBlog.com/a>.
• Japanese Stocks Nose Dive, Japan ADRs & ETFs Next? from Steve Towns at ETF Investor.

Entrepreneurship

• Yaro Starak at Entrepreneur’s Journey provides a Paypal Review from the merchant’s perspective. The same author writes at Small Business Branding about How To Throw Away $500. Australian money, though.
• Dave Navarro has some coaching on 10 sepcific actions for a healthy, growing small business. Keeping normal business hours is something that I can heartily endorse from my own startup and consulting experiences.

Sales and Advertising

• Kevin Hillstrom at MineThatData describes the ‘Multi Channel’ Myth in direct marketing. He starts by positing that the direct marketing industry is in the middle of a strategic collapse, and builds from there. I read this one with great interest, as I’ve recently had the good fortune to hang around with some of the marketing models theorists and practioners here at MIT. Editor’s Choice, and bonus points if you can come up with a new business model for direct sales.
• Steve Mertz at Sales Presentation Training gives a Sales Presentation Tip-Don’t Waffle. Good advice.
• Jim Logan tells us why Your Full Service Real Estate Professional has wasted an opportunity.
• Steven Silvers of Scatterbox presents a PR conundrum: Army chief backs off of war documentary because it has all that pesky war stuff in it.
• Le Centre at Centrerion Canadian Politics explores an Ethical Dilemme[sic] Facing Google Adsense Publishers.
• Abnu presents Naming Restaurants Down There at Wordlab.

Office Life

• The oft-amusing Big Picture Guy at Big Picture, Small Office asks why financial summaries have to boring in The Long and Short of It. I’ve sat through a few of these. It’s also worth noting that BPG got this submission in right at the 3:00 cutoff for Blog posts. Why bother with leftover time before the deadline?

Niches and Riches

BusinessPundit suggests avoiding Chinese Math. “Chinese Math” is the common practice of beginning a business pitch with “the market is huge, and all we need is 10%”. And common it is: even I’ve heard it enough to be tired, and I’m not a VC, Angel, or other reads-business-plans-for-a-living type. Landing those first couple of customers is key, regardless of market size. Savvy investors will want to know how you plan to do that.

All of which is amply summed up in Rob’s post. Here’s my two cents: this kind of thinking doesn’t just stop funding; it stops entrepreneurs cold. I wonder how many good ideas have been left on the table because the potential founders can’t tell themselves a good story about how big the market is going to be? So maybe, after ten years, you end up with a hundred million dollar a year company rather than a five hundred million dollar a year company. That might be just fine. And you might be surprised. Why sit around waiting for the big score that may never come?

As my marketing professor used to say, “in niches there are riches.” Actually, that was just last fall, so I’m sure he’s still saying it. Niches don’t need Chinese Math (or huge populations). They need execution. Ok, maybe that’s just harder.

Health IT Microeconomics

More insurers are reimbursing doctors for online care. Cost issues have kept small physician offices from adopting sophisticated health information technology. And that’s no surprise: clinical systems are complex, and small medical practices are under increasing financial pressure. That means seeing more patients more efficiently and-surprise!-electronic medical records and related tools don’t always mean a quicker visit. Often a better visit, but not a quicker one.

Insurance companies control the final line of incentives for doctors and hospitals to invest in process improvement. If doctors can get paid for an online visit, even if only enough to cover costs, they’ll do a lot more. And since an online visit is less costly for all concerned, everybody wins. Patients win most of all, especially considering the noneconomic costs of going to see your physician. Those costs are substantial – travel time, lost work, gas.

Software Upgrade

I’ve upgraded the blog software to WordPress 2.x, which shouldn’t have any impact on readers. It should have quite an impact on me, however – this blog probably attracts more visits from comment spam-bots than from actual readers. Given the erratic update schedule this isn’t all that surprising, but it’s certainly been a hassle. I moderate everything, so the spam hasn’t been showing up on the site itself, but on an average day I get 20 or 30 notifications that some “reader” of this blog would like to encourage my other readers to purchase various black market medications.

WordPress 2 has some nice features that should fix that. But if you don’t see your comments, let me know.