AOL's Leonsis Headlines 7th Annual CIO Forum

Keynote speaker Ted Leonsis, vice chairman of AOL, said he was introduced to computers 30 years ago, when he was a 16-year-old freshman at Georgetown University.

Watch Video of Leonsis' Speech

Executives, academicians and students gathered for an exceptional day of learning and sharing at the Smith School's 7th Annual CIO Forum, held on November 3, 2006. Keynote speaker Ted Leonsis, vice chairman of AOL, talked about strategically managing information technology for the past three decades and how the recent shift in consumer needs is changing business.

Leonsis says he was introduced to computers 30 years ago when he was a 16-year-old freshman English major at Georgetown University. After graduation, he started work at a small computer company in his hometown in Massachusetts. "I literally fell in love with personal computers in 1980," he says, when he bought his first computer - an Apple 2. He started his own company, which was inspired by the TV Guide. The computer is like a TV, he related, and software is like programming - so his vision was to make a TV Guide for the software business. He created LIST - the Leonsis Index to Software Technology - and later sold it for $65 million to a British publishing company. After that, he started his second company, a new media company, called Redgate Communications, which was acquired by AOL in 1992, and the rest, he says, is history.

The New Consumer
The title of Leonsis' talk was "Shift Happens." America is tiny, he says. There are 175 million Internet connections in the U.S. and 300 million people. In five years, there will be one-and-a-half billion people around the world connected to the Internet. There will be also be one-and-a-half billion people without clean water or electricity, he laments. "Forget about the U.S. It's over," says Leonsis. "There is not a lot of growth that can happen here." AOL has reached approximately 114 million unique customers in the U.S. and 200 million around the world.

"We're living in this time when people are dissatisfied and it's the best time of our lives - an interesting duality," says Leonsis. "We have more and more but we are not that happy. People have unbelievable purchasing power, but they don't have much free time. All this stuff we've been making was supposed to make us more productive. Dual incomes, but less savings. Real estate rich, but less cash. Family life is more fractured. We are overscheduled and on the move." Leonsis says, at times he is on his computer at home and his son IMs him from two floors up. "I think that is indicative of the world that we are living in. We're getting older, but we are living longer. We are more sophisticated, but the need for help is very high."

Speaker Martin Menard, director of the Product Capability Group, a part of the Information Services and Technology Group (ISTG) at Intel Corporation, encouraged attendees to "go mobile," saying that the move to wireless Internet access and from PCs to laptops is what's ahead.

For 230 years the U.S. has lived with the same media model, says Leonsis, and it is broken. Newspaper readership has been going down each quarter. Two years ago TV viewing dipped for the first time ever. Tonight in primetime more people will be watching a cable channel than one of the big four networks, says Leonsis. Today, probably 20 percent of the consumers' time is being spent on the Internet.

From 3-8 p.m. each day, a young adult has six things going at the same time: cell phones, Internet (IM), music, video games, TV, and homework, says Leonsis. This is the world that we are going into and it is driving choice and control. They are consuming it in totally different ways. Leonsis encouraged attendees to read the book The Long Tail: Why the Future of Business Is Selling Less of More by Chris Anderson, which focuses on online retailers and niche marketing. The book challenges the 80/20 rule saying that 20 percent of the products do not account for 80 percent of the revenue. The long tail is when low-frequency numbers can cumulatively outweigh the initial portion of a graph and comprise the majority and is an important component in online sales, especially in something like Amazon's recommendations feature, or NetFlix, or iTunes. People are buying from the long tail - the older books, songs, movies, says Leonsis.

"For a gazillion years consumers liked things packaged up," says Leonsis. "But this new consumer wants choice and control. I want the long tail. I want to decide what I'll use when and how; and the model broke." We've never seen this kind of adoption as we've seen in the last couple years, he says. It's no longer good to be packaged up. "All of these new technologies - I don't really view them as being technological breakthroughs - but what the consumer is asking for," says Leonsis. Consumers want to be able to plug and play, to interoperate.

Speaker Rita Zielstorff, RN and manager at PricewaterhouseCoopers (PwC) in the Digital Health Community™ group, gave an overview of a 2,000 acute care hospital study, which had two interesting results: the more a not-for-profit hospital spends on IT, the less the cost per bed, and the lower the incidence of mortality.

Understanding the consumer is important to Leonsis. After a near-death experience in an airplane crash, Leonsis made a list of 101 things that he wanted to do before he died. He got a second chance and he is happy, and happiness is important to him. He worked with AOL and researchers on a 50,000 household study on happiness. The definition of happiness came down to five characteristics, all of which the Internet helps to drive forward. "I tell our employees we are in the happiness business," he says. "If you take away one thing from my speech today," he told attendees, "take away this [these five notes on happiness characteristics]:" You are an (1) active participant in relationships in multiple (2) communities of interest. You have a deep need of (3) self expression (there are 54 million blogs). You want to (4) give back and volunteer and you want to (5) pursue a higher calling.

Leonsis detailed Seven (Web 2.0) Virtues, originally from the 14th century: be generous, share, be polite, be open, listen, respect individual, and diligence wins. He believes these traits still make a great leader/person. Look at G-Mail - unlimited storage. YouTube - share your home videos. NHL - watch all games after they are shown live. Web sites are polite - you can easily remove the Yahoo! toolbar.

The Algorithm
The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nationsby James Surowiecki is about the aggregation of information in groups, resulting in decisions that are often better than could have been made by any single member of the group. Leonsis calls it a breathtaking book, highly recommending it. Leonsis uses an example of the television game show Who Wants to be a Millionaire and its lifeline statistics: 67 percent of the time the expert is right, whereas 91 percent of the time the live studio audience is correct.

Wonder why Google is worth $150 billion? Leonsis explains the Google algorithm: if a lot of people go to your site, it must be good. If a lot of people reference (link to) your site, and it's updated frequently, it must be good, so it gets higher in the results. Leonsis claims that the third page in search results is practically irrelevant. (The first listing gets a 100 percent clickthrough.) It's all about letting the users decide what they want. In a similar fashion, AOL added a spam button to e-mail to allow users to report spam, which once it hit a certain level would block the sender.

We wanted to take AOL back from Time Warner and Wall Street and stabilize, revitalize, and reconceptualize our company, says Leonsis. In August of this year, AOL went from a 20-year subscription business with an ad business attached to it, to an ad business with a subscription attached to it, and grew revenues ($563 million of profit in this quarter). We gave away what we used to charge for, he says. "I believe it happened because AOL bottled up this new consumer and algorithmic business... We give you more and more and charge you less and less," says Leonsis.

Leonsis gives some advice to students: "Study math, study Mandarin." When the light in the car says that you need new tires, you go and get them. He says he's spent a million hours watching TV, thousands watching tire commercials, but when the machine tells him he needs tires, he runs to the shop. "I need to market to the algorithm," says Leonsis.

About the Conference
The Smith CIO Forum is an exclusive gathering of the region's top CIOs. For one day each year, these high-level professionals get away from the pressures and distractions of the office to reflect, learn, mingle, and network at one of the nation's top business schools. Now in its seventh year, the Smith CIO Forum is the place to come for new ideas and a fresh perspective on IT strategy and management.

▓ By Alissa Arford-Leyl, Office of Marketing Communications, Photos by Vipul Bajpai