Business Week (special report – July ’05) [LINK]

That’s due to “near-monopolists” in many areas, says futurist Mark Anderson, whose newsletter is read by the likes of Gates and Dell

Mark Anderson just might be one of the most influential technology futurists around. His weekly newsletter, Strategic News Service (SNS), is widely read by a who’s who of investors and tech visionaries.

“Overall, your newsletter is good, which is why I ordered it,” reads one reader comment on Anderson’s Web site. Scant praise? Not when it’s coming from Microsoft (MSFT ) Chairman Bill Gates, an avid reader. Another fan is Dell (DELL ) founder Michael Dell. At least once a week Anderson says he gets an e-mail from Dell seeking his counsel. “He always wants to know what’s wrong with what he is doing,” says Anderson.
Who is Mark Anderson, and why are some of the biggest names in tech reading his newsletter? Anderson, 53, founded two software companies before becoming a consultant for computing and telecom clients, such as Dell and Microsoft. Most of his efforts nowadays focus on his “Future in Review” conferences, designed to showcase the hottest new technology ideas. Past conferences have attracted the heads of Hewlett-Packard Labs (HPQ ) and Microsoft Research.
When Anderson began publishing SNS in 1989, his newsletter was a tech pioneer. It was one of the first subscription-based newsletters on the Internet. An issue of the newsletter, which has a standard subscription price of $595 annually and can run between 15 and 50 pages, touches on everything from an analysis of a particular company’s earnings to Anderson’s thoughts on worldwide broadband penetration.
So what does Anderson see in his crystal ball currently? He says the tech industry is battling “a dearth of innovation,” due partly to near-monopolies that have formed within various tech sectors, from chips to PC software. But don’t fret. He says this status quo could be short-lived thanks to the rise of Linux.

His other major prediction: If companies would only use their computers more efficiently, say linking them in networks called grids, they might solve a myriad of problems — even helping to find a cure for cancer. Anderson talked with BusinessWeek Online reporter Olga Kharif on July 20. Edited excerpts of the interview follow:

Q: Are companies making good use of technologies they already have?
A: They’re not. Case in point: grids. A grid is where you manage all your PCs together as one computing resource. What you get is a supercomputer made up of individual computers. Companies today have nearly all the assets to make grids work. And CEOs are always concerned with return on assets. But if you’re not using grids, then you’re wasting computer cycles that are worth a lot of money.
Most businesses have not yet asked deep questions about their business, they still view computers as bean-counting machines. But [when that changes], once you have the power of a supercomputer, you could ask questions such as: Are there patterns in my customers’ relationship to me of which I’m unaware? Are there pricing patterns of which I’m unaware?
I think that my friend Jeff Immelt, [CEO of General Electric (GE )], who is making a point of driving technology into every one of his products, is not making use of the most obvious technology. What would be the change to GE if, instead of turning the lights off at night on their PCs, that company turned them into a giant, worldwide supercomputer? It could solve many of their problems.

Q: Do you think that, perhaps, companies aren’t implementing grids and other new technologies because they’ve become disappointed with the return on their technology investments?
A: There was a lot of hype about Y2K, and it’s true that many people felt betrayed. It’s also true that people reduced spending as the economy fell apart. But they got over that back in 2002. Now, they’re more interested in technologies that can perform specific tasks, reduce expenses, and have ties into revenue growth.

Q: Isn’t it difficult to find a direct correlation between IT and a company’s revenue growth, though?
A: This is brand-new stuff. There are very few companies that are good at this right now. But let’s, again, look at the grid example. Today, your customers might be in one place. Tomorrow, they might be somewhere else. And you need to be able to watch for patterns to know this is happening.
Just think about this: If people in retail as well as in other industries could effectively match day-by-day weather with product-sales results, they’d find lots of correlations. And that might be very useful. Or you might be able to find that people who buy toilet paper also buy toothpaste, and you’d put them on the same aisle. There are lots of patterns that grids can unearth for you.

Q: What are some other emerging technologies that companies need to be aware of to stay competitive?
A: If you look at communications, the reason that BlackBerry [mobile e-mail] devices are so successful is: It turned out we needed to improve communications when people travel. Next, what’s going to happen is improved communications not just between people, but also between people and machines.
Radio Frequency Identification [RFID, which are electronic tags used to track goods within the supply chain], and RFID-related technologies have opened a huge new area. All the people who run warehouses are going to have real-time information about what’s inside, which they don’t actually have today.
The definition of what a warehouse is is already changing. Volkswagen and Dell might store their products in the same warehouse, but where one warehouse ends and the other begins is determined by a dividing line on the floor. So getting to know where a product is becomes very important. Wal-Mart (WMT ) has gotten it, but most others have not. In the next five years, we’ll see an absolutely massive change in our ability to communicate with devices.

Q: We’ve gone through massive technology changes over the past decade, what with the spread of PCs and the Internet. Where does innovation happen now?
A: We tend to see it at the intersection between different markets. Places that are very interesting to me right now are where one industry overlaps with another, such as PCs, RFID, and grids. PCs, on their own, aren’t very interesting. RFID tags, on their own, aren’t, either. But how these technologies work together — [for instance, how grids can derive patterns from information gathered by RFID tags] — that’s really interesting.

Q: Which other industries are at this intersection?
A: The most exciting answer is computing and biology. As these two worlds start talking to each other, as we use computers to understand more about biology — like how the cell works — we can solve many problems, such as [find a] cure for cancer.

Q: Stem cells could, potentially, cure a wide array of disorders. Yet, there’s been a slowdown in stem-cell research in the U.S. because of ethics concerns. Is the U.S. falling behind other countries in research in this and other areas?
A: I think this is a deep mistake to allow religion to enter conversation about science. I do believe we need to look at ethics. But we certainly need to be careful not to hobble ourselves through our own biases and prejudices as we’ve done with stem cells. Stem cells offer so much promise, we will look like jerks [for not supporting research in this area].

Q: So many companies are moving their R&D overseas.
A: You bet. You know who’s gotten our stem-cell program? China. We’re just saying: “Here’s the most promising research in the world, and we’re not going to do it. Go ahead.” And [countries like] China are going as fast as they can, as they should.

Q: In the future, will companies do all their R&D and manufacturing in China? If so, what kind of an impact will that have on the U.S.?
A: There’s a big story in the question of how much outsourcing is there? A new study recently came up with a number that was five times the Dept. of Labor’s [number of jobs outsourced]. They’ve done the study by reading the newspapers every day about how so and so just announced a new outsourcing project affecting 30,000 people. They just added up the numbers.
The problem is one of pay. You can get a $30,000-a-year PhD in India, instead of a $140,000-a-year PhD here. We’ve got to solve this problem. Some people talk about free trade. But what if it turns out that one country — say, China — became the low-cost producer of all goods, or all goods and services? What would the implications be in terms of the human capital in the U.S.? Would it destroy human capital? At what point do you stop being an economy?

Q: Some futurists say the U.S. will become an economy of ideas, which will be turned into products elsewhere. Do you buy that?
A: I’m not buying any of it, I think that’s [bullsh–]. The people who’ll be the greatest innovators will live in an office above the shop floor. We’re not going to have all these storytellers.

Q: Do you see any new technologies that have been overhyped?
A: Right now, I see a dearth of innovation. The various innovations that I’ve mentioned are happening at the fringes.
One reason is, [as is the case with Wal-Mart suppliers,] companies’ margins are getting sucked up. Another reason is there are lots of dominant players — near-monopolists. There, the lack of innovation is natural. Areas that are more competitive are the areas of innovation.

Q: Do you expect this situation to change any time soon?
A: A lot of competition will arise. We haven’t yet seen an offering from the Linux crowd in terms of device drivers, [which help a particular device interact with an operating system,] or ease of installation. But if those two problems are fixed, I think you’ll see real competition to Windows.