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The Knowledge Lab

Launched by NCR–famed for cash registers and ATMs–this showy lab in London hopes to define e-commerce. But some say it’s more PR than R&D.
September 1, 1999

The British aren’t famous for creativity in the kitchen. But last September a London-based team of researchers struck a blow against this cultural clich. They didn’t introduce a new cuisine, however; they came up with a new kind of cooker. Dubbed the “Microwave Bank” by its creators, the prototype looked much like a standard countertop microwave, with one big difference: a computer screen where the door window ought to be. Voice recognition software and touch-screen technology allowed users to send e-mail, pay bills, access their bank accounts or watch TV. A built-in barcode scanner automatically added items to an electronic grocery list. Resident intelligent agents kept track of a user’s domestic habits and then suggested dishes or looked up recipes online. And it even cooked food.

The launch of the Microwave Bank drew an impressive amount of attention from the UK press, and marked the very public debut of the prototype’s developer, the Knowledge Lab. Set up in September 1996 by the Financial Solutions Group of Dayton, Ohio-based NCR-the world’s leading supplier of ATMs-the Knowledge Lab boasts an eclectic mix of twenty- and thirtysomething staffers. Computer scientist works alongside technical engineer, artist, jewelry designer, graphics/industrial designer, biophysicist, mathematician, economist, psychologist and philosopher. The 25-member team’s mission is broad: focus on tomorrow’s consumer. Or, as the Knowledge Lab’s glossy launch brochure declared: “To create foresight-to get a grasp of the future before it happens. To start to lead the way in challenging established assumptions.” Housed in a stylish open-plan studio space in central London, the lab is separated from Financial Solutions’ reception by a wall of frosted glass, perforated with portholes to give visitors a glimpse of this future.

The Knowledge Lab’s director, neuroscientist Stephen Emmott, sums up the lab’s fundamental focus within the rather loose bounds set by its parent company with two words: relationship technology. “The context for everything we do is the networked economy,” Emmott says, “and the central purpose of networks is to establish and maintain relationships.”

The relationships that interest Emmott and his lab are those between consumer and consumer and between consumer and supplier-the demands and preferences of the consumer and how the supplier serves and stimulates these demands. By exploring and exploiting these relationships, NCR hopes to find ways to reposition itself after a troubled time in the 115-year-old company’s history. And in setting up the lab, NCR has forged unusual relationships of its own, recruiting its own customers (banks) to help fund and advise the new center and even contribute their research to its projects-much as MIT’s Media Lab is funded through its relationship with technology firms. The verdict is still out on how successful this project will be. While observers express praise for the lab’s boldness, they also voice skepticism about the originality of some of its ideas. And some question whether the ultimate aim of the lab is more PR than R&D.

Only Connect!

The telephone and e-mail are today’s quintessential relationship technologies, says Emmott, who left a position as a senior scientist at Bell Laboratories to head the new London lab. “Both are used to maintain and develop relationships, although they were designed as information technology.” In dreaming up the network-based relationship technologies of the future, Emmott says he and his staff want to “reach the non-computer-using consumer through invisible computing,’” and come up with devices and services as user-friendly and useful as the ubiquitous telephone.

That’s the philosophy at the heart of the Microwave Bank, says Sarah Woods, the Knowledge Lab research fellow who led the project. “More than 90 percent of the UK population have a microwave, but unlike the VCR, the biggest technophobes can use it,” says Woods. Employing a familiar, everyday appliance means users don’t have to be an Internet Einstein to access a full range of services available on the World Wide Web, says Woods, and it “demonstrates how things can be networked around the home.” She and her colleagues are also working on the “Thinking Bin,” a high-tech trashcan that would communicate with the Microwave Bank, adding discarded items to the shopping list or automatically sorting garbage for recycling.

With four (soon to be five) Knowledge Lab groups currently tackling some 30 projects (see “Structuring Knowledge” on last page), Emmott’s idea of invisible computing extends well beyond the kitchen. There’s a prototype secure system enabling micro-payments and communication via either the Internet or phone using everyday objects-rings or cufflinks might serve as tokens, increasing or decreasing in monetary value when waved at a point-of-sale device or ATM.

Researchers in the lab are also focusing on ways to put a friendlier face on desktop e-commerce. “Rei,” for example, is an interactive Internet soap opera that enables users to buy featured products with a click. For those looking for a collector’s item or a bargain, Knowledge Lab staff are developing a system that sends a squad of intelligent agents onto the Internet to hold and participate in online auctions, roaming through sites to meet the user’s criteria for buying and selling and developing strategies to optimize prices. In Emmott’s words: “eBay on testosterone.”

So far, 15 patents have been registered, making commercial exploitation of the Knowledge Lab’s activities a rising priority for NCR. Projects such as Microwave Bank have already gone as far as they can within the lab’s confines, Woods says. NCR executives plan to open a sister division whose mission will be taking Knowledge Lab concepts into production and out to market. Though the new division was scheduled for launch by the summer of 2000, its name, location, staff and structure were yet to be confirmed when TR went to press.

Bonding With Bankers

If the Knowledge Lab succeeds in defining and designing the next wave of commerce-enabling technology, it will in many ways be a move to NCR’s roots. After all, the corporation was founded in 1884 as one of the earliest cash-register manufacturers. Originally called the National Cash Register Company, NCR was for decades a leader in banking and consumer-transaction technology. But in the 1980s, NCR got big for its boots, spreading itself into a number of loosely associated businesses (there was even an NCR PC).

By the end of the 1980s, NCR had been overshadowed by younger organizations driving the personal computer revolution. Without the economies of scale that allowed upstarts such as Compaq and Dell to manufacture competitively, the company began suffering heavy losses-despite the growing importance of two core strengths: ATM and point-of-sale technology. By the mid-1990s, it was clear NCR needed to change. Moreover, the change needed to be highly visible, re-establishing NCR’s reputation for innovation in the fast-paced, increasingly aggressive banking and retail marketplace.

NCR’s strategy was to outsource the manufacturing of hardware such as ATMs, cash registers and barcode scanners and concentrate on the company’s ability to gather data about customer transactions. At the same time, corporate restructuring moved NCR’s Financial Solutions Group’s headquarters to London-it was then that the Knowledge Lab was born. “We needed a point of difference,” says Kicki Wallje-Lund, Financial Solutions Group vice president of business development and the NCR executive responsible for launching the Knowledge Lab. “Our competitors had state-of-the-art banking centers to show customers visiting their HQs. We wanted something different-to be recognized as a thought leader.’”

The proposed structure of the lab was intriguing: Although launched and housed by NCR, it would be co-funded by the Financial Solutions division’s customers-the banks. This would not only offset some investment costs (NCR spent 3.5 million, or about $5.5 million, in the first year), Wallje-Lund explains, but also help the company forge stronger relationships with its customers. Rather than simply paying money up front for an entitlement to research results or regular reports, banks were invited to become partners (in NCR-speak, “members”). Member banks could join an advisory board and have a say in the conception and utilization of Knowledge Lab concepts. Members were invited to contribute to the lab’s research by, for example, coordinating consumer trials.

Initially, there was skepticism within NCR as to whether customers would pay, Wallje-Lund says. But the lab secured a high-profile portfolio of commercial partners, including Barclays Bank, HSBC, Sun Trust and Wells Fargo. “The level of interest exceeded our initial targets,” she adds. The first year, 10 banks each contributed $25,000. This year, two dozen are contributing up to $50,000 apiece while NCR has upped its annual investment to 4 million to 5 million ($6.3 million to $7.9 million).

Indeed, the biggest challenge wasn’t finding sponsors but getting the right people to work in the lab, Wallje-Lund says. “We found ourselves in a catch-22 situation: We needed to change people’s perceptions about NCR if we were to convince them to come to us rather than, say, Microsoft. The trouble was, we couldn’t do this until we had the right people in situ.”

Luring Stephen Emmott away from Bell Labs was a key accomplishment, one that’s drawing kudos from Knowledge Lab members. “He’s a marvelous leader, and a visionary,” gushes Roger Alexander, managing director of the emerging markets group at Barclays Bank. Alexander is confident that NCR is giving Emmott and his lab enough latitude to operate productively.

It was exactly this promise of the “freedom to innovate” that drew Emmott to the Knowledge Lab. “All they said to me was You can do whatever you want,’” he explains. “Of course, there was a tacit assumption that this would be relevant to technology, but the key was they did not tie me specifically to e-commerce, or even banking technology.”

An Image of Innovation?

Room to grow is certainly important to the success of any young research operation, but Emmott’s words taken in combination with the generally fuzzy corporate rhetoric surrounding the Knowledge Lab’s mission beg the question: Is the lab more a showpiece than a hothouse for new technologies?

Michael Bove, head of the MIT Media Lab’s Object-Based Media Group, is one observer who has his doubts. “There have only been a handful [of technology projects] announced so far,” he notes, “and a number of these sound as if they were created to make NCR a good press release.” This is not an entirely critical statement, however. Explains Bove: “Given NCR’s recent history as a corporate entity, it had to do something. It’s a good start.”

Still, Bove questions the originality of Knowledge Lab concepts, and with good reason-his own work includes “Hyper Soap,” an interactive Internet soap opera which, like “Rei,” allows users to click on and buy featured products. And many manufacturers are using their research divisions to get in on the invisible-computing game: In October 1998, for example, Italy’s Merloni Elettrodomestici, Europe’s fourth-largest home appliances producer, unveiled a new line including washing machines, dishwashers and refrigerators that can communicate with online assistance centers and with one another. Meanwhile, UK-based Electrolux has developed “Screenfridge,” complete with LCD touch screen, barcode scanner and Internet connection.

In the view of Alexander Linden, senior analyst for advanced technology applications at GartnerGroup, an international research and consulting firm, the Knowledge Lab has plenty of company. “Many companies now have similar operations in place,” says Linden. “Labs have become a highly competitive area of investment for all concerned.”

Bove believes that whether the Knowledge Lab turns out to be a good investment for NCR will depend partly on the parent company’s expectations-“to explore new opportunities or remake the organization. If it’s the former, anything they do will probably be a good thing. If, however, it’s the latter-this may prove problematic.”

The Knowledge Lab may get a grace period to prove its mettle, because NCR’s other shifts in focus are paying off. Last year, the company reported profit of $122 million on revenues of $6.5 billion. In the fourth quarter of that year it posted revenue growth for the first time in 13 quarters and improved gross margins by 2 percent. As the bottom line fattens, Knowledge Lab lingo is creeping into its parent’s way of thinking: A new mission statement, or “NCR Manifesto,” outlines the company’s future direction and shaped an international advertising campaign that premiered in May. “We are not a business-to-business company; we are a business-to-customer-to-consumer company,” the manifesto declares. “For over a century we have been managing the point of transaction.’ For the next 100 years, we are going beyond that point of transaction to the value and trust of relationships.” The next few years will show whether the Knowledge Lab can help its parent make good on these brave words by moving beyond corporate image-making to technological innovation.

Structuring Knowledge: Groups at the Knowledge Lab

Group Focus Researchers’ Disciplines Consumer Research Understanding the changing relationships between banks and other commercial providers and their customers by focusing on consumers, behavior, attitudes and use of technology Marketing
Human Factors Computational Modeling Developing new mathematical approaches to modeling, allowing providers to predict and manage customer relationships Biophysics
Language Acquisition
Statistics User Experience Future products at the intersection of computing, networks and everyday objects-particularly fashion and household goods-and their application to e-commerce Design
Interactive Design
Furniture Design
Industrial Design
Fine Art
Telecommunications Emerging Technologies & Lifestyle Engineering The convergence of computing and communications technology Philosophy
Electronic Communications
Computer Graphics
Machine Vision

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