TELECOM Digest OnLine - Sorted: Re: Home Phones Face Uncertain Future

Re: Home Phones Face Uncertain Future

w_tom (
Tue, 02 Nov 2004 00:57:56 -0500

Lisa unfortunately describes short term solutions as if they were long
term. Long before any business school spread sheet can measure
innovation, the innovation is no longer innovative. List of companies
destroyed by short term thinking -- ie management concentrating on
marketing -- is long.

Old style business schools taught that innovation was something that
fell from the clouds or was a result of capital investment. Reality.
Innovation requires capital. Too much capital can even destroy
innovation. Capital never created innovation. Again innovation
requires capital BUT capital does not create innovation.

How long does it take to develop an innovative product? Four to ten
years. Any b-school graduate should have been able to answer that
without hesitation. The profits that Ford Motor finally created in
1990s had almost nothing to do with the work (or marketing) in 1990.
Those 1990 profits were directly traceable to work done in 1981, 1982,
1983, 1984, 1985, and 1986. Four to ten years to produce an
innovative product -- even longer for the resulting profits to appear
on bean counter spread sheets.

Business school graduates in marketing and accounting are
necessary. They are peripheral (support) functions - about 20 or 30%
of the work. Unfortunately, such people are trained to think only
they are source of success. The work they do today can appear on a
spread sheet this year or next. That is misleading. Same thinking
that nearly destroyed IBM, HP, Apple Computer, and is destroying AT&T,
GM, and Kodak, and Xerox.

Business school people make good employees in peripheral company
operations -- accounting and marketing. But the profit comes from
long term thinking -- things done 4 and many more years previous. Real
profits come from innovation that business school graduates have a
long history of undermining. If the CFO becomes CEO, then
historically, innovation is stifled. Demonstrated repeatedly and

In the meantime, cell phone technology did not happen instantly as
implied. Its been ongoing since the 1960s. Each generation has been
slowly picking at the land line business. Finally, a cell phone
technology has emerged that does obsolete POTS landlines -- 3G cell
phones. This latest cell phone finally does everything POTS phones do
-- and more. No place did I say technology is instant. Furthermore
your facts are too much based on yesterday's (static) prices rather
than on the true cost of the service now and in the future. Again a
classic business school mistake to see things in terms of spread
sheets -- that report things 4 to 10 years previous rather than on
current costs that will appear as prices in the years future.

You cannot use costs as demonstrated to see the future. Because cell
phones costs $40 per month means they will costs as much in four
years? Furthermore, the typically land line now costs about $50 per
month with minimal long distance usage, taxes, long distance access
charges, etc. POTS line costs will not decrease. Cell phone costs
will. Your business school analysis should have made that obvious.
3G phones have finally made POTS phones obsolete.

Your first point -- if people only replace things when they wear out,
then we all would still be using 486s. Classic error taught by some
B-schools in the 1970s. Indeed, this machine is a 486-66 and it works
just fine. So why did so many replace their 486s with Pentium 233s,
then with Pentium II and Pentium III 500s, then with Gigahertz
Pentiums? The 486s did not wear out. In industries that are more
innovative, then products are replaced because they become too
obsolete. In technologies with no innovation, then people do not
dispose of equipment until it wears out. This is why bean counters
loved to make cars that failed after 3 years -- most every 1970 MBA
designed American car.

In companies dominated by business school graduates -- IBM corporate
that stifled their PC division -- then the company is doomed to be a
loser. IBM PC business was founded by hiding the operation from IBM
MBA types (Don Estridge). Once the PC business became so profitable,
then those MBA types (Cannavino) conspired to control that business.
Therefore drove IBM Boca Raton into the ground using business school
concepts that stifled innovation. This example is repeated constantly
in dying businesses. AT&T being another classic death. But to see
the death, one must use product oriented thinking -- decades -- rather
than business school thinking -- four year and less perspectives.

Again, to respond to your 'second': somehow you think cell phones are
instant technology. The cell phone has been in development since the
1960s. Those with 'dirt under fingernails' knew this.

To your 'fourth': marketing is a necessary part of the business -- a
peripheral part that must not dominate innovation. When marketing
types became the top manager -- Young of HP, Akers and Cannavino at
IBM, Spindler and Sculley at Apple, Roger Smith at GM, Henry Ford at
Ford Motor, etc -- then innovation dies and the company sees the
effect a decades+ later in spread sheets. Cancer created when
marketing becomes more than a peripheral business function.

In another example, you don't understand what Gerstner did to save
IBM. IBM was foundering when he brought with him his business
experts. For years, IBM did nothing. But in Jan (forgot the year) in
the Wall Street Journal were the backgrounds of five people who were
promoted from the ranks to be 'above' those earlier friends. Look at
those five backgrounds. At least four were slam dunk examples of
people who come from where the work gets done. Therefore IBM stopped
calling the mainframe a dinosaur. Instead they rebuilt the entire
business around the mainframe -- including support operations you have
cited. Innovation was finally permitted. Therefore the mainframe
began taking business from super computers.

With redundant processing, the mainframe also cut into the
mini-computer server business. Product oriented managers refocused on
the main frame and its so many peripheral businesses. Gerstner's
original MBA subordinates were replaced by those with product oriented
backgrounds. That was the turn around at IBM after floundering in the
first years that Gerstner arrived.

I am trying to keep this short. But to understand what I have posted,
one cannot take the simplistic analysis from b-school graduates. Even
the Wall Street Journal summary that touches on this IBM story was
multiple full pages inside. To see how product oriented thinking
turned about IBM, one must be able to, for example, describe in
technical detail fundamental differences between the pre-Gerstner IBM
390 and its innovative (rather than cost controlled) replacement. The
devil is in that detail which is why those with technical degrees make
far better managers than those with b-school education. B-school
graduates routinely stifle innovation with spread sheet analysis.

Two types of managers exist. Product oriented and finance oriented.
Finance oriented actually think they can create innovation by throwing
capital at it. If your b-school education is still teaching this,
then your school still promotes an American version of communism. The
B-school graduate is the key decision maker. Under communism, your
roof does not leak until the top manager says so. In product oriented
systems, the manager says a roof leaks when the occupant says it is
leaking. In communism, everyone works for the boss. In product
oriented companies, the boss works for employees. Fundamental
difference between well managed verses communist companies.

In the movie Apollo 13, who is the hero? Bean counters will often say
the astronauts or flight director Gene Krantz. Reality: every hero
has no name. This is how America works when it is productive. The
management simply provides attitude and knowledge -- the strategic
objective -- and the little people effectively solve problem after
problem. The little people are empowered to be decision makers -- not
top management. Worse, when b-school training says the manager is the
problem solver, then we have communism -- centralized bureaucracy -
only the trained manager can solve problems. This causes stifled

Classic example of bean counter management. Every engineer said don't
launch the Challenger. They could not find a single engineer to say
launch. And so bean counters made a 'management decision' by not
listening to engineers. Bean counter types explicitly demanded that
"a management decision" be made -- because they could not think
product oriented. That should have been 3rd degree murder. But too
many are now brainwashed in business school concepts as to say it was
an accident. It is an accident if the decision maker first had
sufficient background to understand the concepts. But those who
killed Challenger astronauts did so because using business school
concepts (which also meet the definition of junk science reasoning)
rather than good technical facts to make a decision. Those not
qualified to make decisions rejected the advise of everyone who was
qualified. That should be called manslaughter. They only did as they
were taught in the business schools. Therefore seven died and we
forgive them?

Being MBA trained is power to know how the enemy thinks. Japanese
call it "Made Being in America". Yes, some business school graduates
do work as product oriented thinkers -- and therefore promote
innovation. They use their MBA background to help drive off the
anti-innovators. They fully appreciate Clayton Christensen's
"Innovators Dilemma". One need only look at steel manufacturing
companies (saved by an anti-innovation US president) to see the only
reason for steel's continued demise. Too many business school
graduates and therefore nobody could innovate.

The anti-American steel companies USX (US Steel) and Bethlehem Steel
still did not use electric arc furnaces some 40 years after the
innovation was used by innovative (foreign) steel companies.
Companies who used 'men of steel' rather than bean counters for
managers. Please show me where the bean counters could justify
electric arc furnaces? Instead, bean counters used MBA cost control
mentality -- economy of scale. They made more obsolete blast furnaces
-- just bigger. Patriotic foreign manufacturers provided US with
steel because innovators innovate rather than cost control.

You think AT&T was not static? They attempted how many different
solutions justified by MBA concepts? They had no idea of how to put
VoIP on cable. They bought cable companies based upon spread sheet
analysis only to discover, after the fact, that entire cable company
infrastructure was built with the wrong cable -- using cost controls
to install wrong cable. For a third time, the entire cable network
had to be replaced again. Any product oriented thinker could see
that. But AT&T management is anti-innovative -- which means
anti-American. AT&T managers did not even sufficient technical
knowledge to even read the label on cable entering their own homes.
AT&T did not have the capital to replace the entire network. So AT&T
sold off those cable companies at a major loss. Was it a $500 million
loss? You call that trying a new business? I call it classic MBA
school management techniques where "a good manager can manage ANY
business" ... into the ground.

It gets more damning as we think more product oriented. AT&T did not
comprehend packet switching concepts. Too complex. AT&T understood
circuit switch technology. So they were going to provide phone
service on cable using circuit switched technology! If your jaw did
not drop, then your technical background is woefully insufficient.
Obviously a more expensive technology with no future. But on MBA
b-school educated spread sheets, circuit switched was a less 'risk
adverse' technology. Classic b-school mentality which is why every new
AT&T venture was flawed from the beginning. AT&T MBA trained managers
never entered a new business venture with product facts. Therefore
everyone failed.

One need only read David Isenberger (, chief scientist in
AT&T Bell Labs, to see how anti-innovative AT&T was even 10 and 20
years ago. Why? Robert Allen (AT&T president) was a fast tracker and
Harvard Business School trained. Innovation at AT&T could not happen.
Change cannot be measured on spread sheets until long after change has
happened. AT&T has long been the classic example of static -- selling
off businesses to remain solvent rather than innovate. AT&T is a dead
company that survives only on finance games.

AT&T is classic of what bean counters do to companies. The Economist
said it best. No company in the history of free market economics has
ever destroyed more shareholder value faster than what AT&T did to
NCR. AT&T is dying because MBAs stifled innovation at AT&T for at
least 25 years. The examples would be longer than this post. Only
bean counter mentalities could not see this because many stifled
innovations are instead blamed on straw men such as unions, unfair
laws, unfair competition, under funded pension funds, etc. Why did
AT&T long distance network crash across the country for one whole day?
Why did they shut down NYC long distance and NYC airports on two
different occasions? (Concorde had to make an emergency landing on a
runway 500 feet too short because of but another AT&T network failure
directly traceable to bean counter costs controls). Why did Robert
Allen go before the press at 4 PM -- before failure reasons were even
known - to blame unions? He was using classic business school
reasoning. Blame everyone but top management.

An enemy of business schools is management education that comes from
product. W. E. Deming is an enemy of business schools. How did Ford
Motor show profits in 1990? They eliminated the anti-innovation
(therefore anti-American) bean counter Henry Ford. (Actually we the
public did that by not buying American; instead buying on free market
concepts such as Toyota and BMW.) Therefore Ford began scrapping
their every anti America cars. First car designed by 'car-guys' in
Ford since the 1965 Mustang? 1987 Ford Taurus. First car since 1965
designed by people who come from where the work gets done. Bean
counters were demoted to jobs they do best - support the innovators.
Cost controls were replaced with innovation - which is why new Fords
on and after Taurus cost less to build.

By replacing cost controls with innovation (Quality is Job One), Ford
went from new bankruptcy to record profits in something under 20

Quality is Job One -- means W. E. Deming management principles
replaced business school myths. People with 'dirt under their
fingernails' replaced cost controlling bean counters. Cost controls
make short term cost reductions and long term major cost
increases. (Same principle proven by Iacocca in Chrysler.) Business
school graduates only see those cost reductions many years after the
fact -- long after innovation has reduced those costs.

I come from where the work gets done. Have seen business school
graduates stifle innovation routinely - and deny they were doing so.
Why? They had short term perspectives (spread sheets) and could not
see innovation, because innovation takes upwards of a decade. And
then more years for such innovations to appear on spread sheets.

Where companies are in trouble, then use a Deming concept to see why.
85% of all problems are directly traceable to top management. When
management says there is plenty of blame to go around, then management
is 100% responsible for the failures. In AT&T and other
anti-innovative companies, top management routinely blamed anyone but
management. Look at the background of that management. They are
trained as MBAs or lawyers -- have no experience in the core business.
No wonder innovation could not happen (Same reason why First Energy
almost made a Three Mile Island event in Toledo, electric shocked
people in swimming pools in Ocean County NJ, failed to provide
electricity to Jersey shore boardwalk concessions on multiple,
consecutive weekends including 4 July, and created the entire NE
blackout.) They believed a b-school mantra -- a good manager can
manage any business -- which means innovation is then stifled.

It is not a 'longshot' when the man has 'dirt under his fingernails'.
He has the experience and technical knowledge to know. B-school
graduates who could not see same instead call that a 'longshot'.
'Longshot' without much hope in success is virtually everything AT&T
tried -- because AT&T management is b-school trained. Their cable
purchases at excessive price, reasons for nation wide and multiple NYC
long distance blackouts, destroying the management concepts that once
made the Bell Labs so successful, or what they did to Unix are but
classic examples of anti-innovation thinking. But then AT&T
management -- business school trainees -- will deny this. They
instead blamed others. Classic bean counter thinking.

Myopic thinking not to see fiber as the future for landline companies.
In fact, if land line companies do not hurry (because they are 10
years late), their future will be radically diminished by the lesser
technologies such as cable companies. If you don't think so, then
please put up facts that demonstrate otherwise. Show us how business
school thinking can see the future of technology - see the future by
using spread sheet analysis. The future of landline companies is
clear if one has 'dirt under the fingernails'. Please show us --
using specific product examples and b-school concepts -- where another
technology would save the baby Bells.

An outright challenge to bean counters. Show us another technology
that could save the baby Bells from going down like AT&T.

Lisa Hancock wrote:

> w_tom <> wrote:

>> Common mistake when predictions are based upon business school
>> concepts rather than first learning the details.

> While some of what you say is true, I must disagree with other
> parts. Business school concepts definitely have their place.

>> Third generation cell phone technology has finally made standard
>> (POTS) phones obsolete.

> "Technology" is not _instant_. Just because a new technology is
> perfected does not mean other technologies are "obsolete". A lot of
> technocrats are so enamoured with new stuff they fail to understand
> the big picture.

> First, it takes time to implement new technology. For example, a
> great many people out there do not have cell phones nor wish to have
> one. Others have them but use them only for emergencies and have
> $15/month plans. Many people get something new only when their
> existing machine wears out; not everyone is enamored with the "latest
> and greatest".

> Secondly, new technologies must mature. Things are improving, but
> many cell phone users get cutoff in mid conversation. When compact
> discs were first introduced, their sound and operation needed tweaking
> to get widespread acceptance so serious listeners would replace their
> vinyl.

> Third, new technologies have a new cost that not all consumers are
> willing -- nor should -- have to pay. A consumer perfectly happy with
> POTS service should not have to pay the $40/month for cell phone
> service. An occassional $15/month emergency-only cell phone user
> likewise shouldn't be forced to upgrade. The computer manufacturers
> finally learned that people weren't so ready to upgrade their PCs so
> often.

> Fourth, the implementation and marketing of technology is critical.
> Dilbert might make fun of the marketing types, but they are necessary.
> The genius of Edison was not in the light bulb, but rather a whole
> power generation and distribution network to make the light bulbs work
> and earn money from them.

>> The baby Bells are not dominated by myopic MBA managers whose
>> education literally destroys both innovation and what little remains
>> of AT&T. AT&T management has a static perspective because they view
>> from anti-innovative B-school concepts. If AT&T still ran the baby
>> Bells, then Nokia's predictions would have merit. But baby Bells
>> (about 10 years too late) suddenly realized that they too will go
>> the way of the anti-innovation AT&T. Baby Bells are finally, after
>> more than 50 years, rewiring their entire network.

> Being an "MBA manager" is neither good nor bad in itself. Sure, one
> could point to plenty of very successful businessmen who had an 8th
> grade education, just as one could point to 3-pack-a-day smokers who
> lived to be 105. But most business people make good use of skills
> taught in business school.

> I don't agree on AT&T being "static" at all. Their management tried
> quite a few different avenues, they just didn't work out, it was not
> for lack of trying. Guessing wrong does not make a company "myopic",
> hindsight is always 20/20, foresight is not. Over history, many
> 'wrong' business predictions were perfectly reasonable and logical at
> the time they were made.

> When a businessman takes a longshot and wins, people call him
> "shrewd". If his longshot loses, people call him other less
> complimentary things. We read about the success stories with great
> fanfare, but not about the many more losers.

> Baby Bells most certainly did NOT wait "50 years" to rewire their
> networks. A lot of people believe -- wrongly -- that the phone
> network at the time of divesture was all ancient. True, some of it
> was, but a very great deal of it was state of the art for its day.
> Bell Atlantic was 100% ESS after divesture, and shortly later was 100%
> digital, just to give an example. Trunks between offices were
> advanced high capacity.

>> But don't expect mobiles to replace land line just as IBM found new
>> purpose in their core businesses (once IBM replaced their MBAs with
>> computer guys, then IBM rediscovered innovation meaning that a main
>> frame is no longer a dinosaur).

> While agree mobiles won't replace totally land lines, there are a
> couple of errors here. What I expect is that mobile were supplement
> land lines. A suburban family with teenagers that might have had two
> or even three voice lines in the house may get by with a single line,
> and use cell phones for the rest.

> As to IBM, IBM did not go back to its "core business", nor did it
> replace its MBAs with computer guys. Actually, IBM has reduced its
> core business -- manufacturing and selling computers -- and wisely
> supplemented it with consulting and service bureau work which was once
> a small subsidiary. The "computer guys" didn't make this transition,
> but rather an outsider, the former head of Nabisco (Gerstner sp?). I
> don't know if he had an MBA or not, but I think he did.

>> Devil is always in the details which means the manager must have 'dirt
>> under his fingernails'.

> That is true.

>> Without a long detailed list of advantages and disadvantages for
>> each technology combined with a list of future markets and
>> innovations, then one can only make predictions like business school
>> graduates and that BBC article.

> Not true. Predicting the future, whether it be the tomorrow's weather
> or markets for new technologies, is always a gamble. There are always
> variables that are a guess, plus variables no one expects.

>> These latter people routinely stifle innovation because they don't
>> have education from where innovation happens. Spread sheets and
>> marketing mentalities are important peripheral parts of business;
>> but only with a short term perspective.

> Without a "marketing mentality", innovation is worthless. Without
> a good cost/pricing strategy, products cannot be manufacturered nor
> services provided. Having technology without a way to get it in the
> hands of customers is worthless. The Watson father/son didn't know
> squat about any technology, but they knew marketing. The ENIAC-Univac
> people were experts in technology, but didn't know squat about
> marketing. It didn't take long for IBM, using its marketing skills,
> to quickly surpass ENIAC-UNIVAC's way superior tech skills.

>> To see the future of land lines with a long term perspective, one
>> must apply knowledge and experience of the technology.

> Yes and no. In the late 1970s, the "knowledge and experience" of
> computers was using punch cards as an input medium. Note that when
> more modern gear (ie key-to-disk, on-line terminals, PC-DOS) replaced
> the punch card, they kept the principles -- 80 column screen, auto
> numeric shift, 'drum card' field setup, etc. That's what the technies
> were used to.

> But the techies were wrong! It turned out that the future belonged to
> something entirely new -- the GUI screens and Windows that had no
> connection to the punch card style whatsoever.

>> Any land line company that intends to be alive in 10 years will have
>> replaced or duplicated their entire network in fiber -- and learned
>> new products based upon the new demands of that technology.

> Who knows if fibre will be dominant in ten years?

> Keep in mind there's an excess today of fibre capacity; that means
> some companies that built fibre networks are losing money from lack of
> use.

> Don't ask me why, but Picturephone service never caught on, while cell
> phones cameras and text messaging are very popular with kids.
> (Punching in text on a tiny phone keypad seems ludicrous, but they
> love it.)

>> Standard technologies potentially on the chopping block: faxes,
>> portable phones, conventional dial up phones, international shortwave
>> broadcasting, and maybe even conventional letters.

> It takes an awful lot for a technology to become truly discontinued.
> What usually happens is that an older technology remains in use, but
> yields market share to newer technologies. They still make
> typewriters for example, but most such work is done on computers now.
> Further, older technologies may offer a backup. (Yes, there are some
> exceptions).

>> Any Baby Bell that uses the bean counter concepts of cost controls
>> is doomed just like Western Union and AT&T.

> "Beans" are basic to a business. If you don't count your beans, you
> will go out of business.

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