One of our best excuses is that we’re responding to business requirements.

It excuses nearly everything. Why do we need more staff? We’re just responding to demand. Why are we building this system? Hey, we don’t define requirements, we just respond to them. Why is our project three years late? Users keep changing the specifications — it’s hard to hit a moving target.

Now that I have your attention I’ll back off a bit. Responding to requirements is important. It’s the tail, though, not the dog. You should wag it, not the other way around.

Businesses decide whether and where to invest in technology based on business considerations. But business users don’t keep track of technology, so they’re in a poor position to understand the opportunities.

That’s an opportunity for you, but only if you keep track of both technology and business trends. Last week we talked about the trends of the recent past: product quality and enhanced service. Product quality matters, of course, because if your product stinks people won’t buy it. Enhanced service matters because exceptional service means your customers will come back.

Quality and service are vital. They just aren’t enough anymore — they’re yesterday’s news. To understand the future you need to understand that people don’t buy products — they buy the anticipated results of owning the products. You don’t buy a car, you buy transportation. It may be luxury transportation, reliable transportation, fun transportation (supply your own adjective), but that’s what you’re buying.

The trends of the future grow out of this reality. Three stand out: entertainment, “molecularization,” and affinity. You’re going to have to support these through technology, so let’s take a look at them.

Entertainment matters to consumers, but business buyers aren’t immune. It isn’t always obvious how to add an entertainment dimension to your company’s business, but opportunities abound. Here in Minnesota we have the Mall of America, complete with an indoor amusement park to attract shoppers. McDonald’s has Happy Meals — not only a product, but a generator of consumer loyalty and repeat business. McDonald’s isn’t selling food. It’s selling a result: smiling children. Your job: figure out how technology (data warehousing and data mining, for example) can make your company’s entertainment program more effective.

Molecularization (a 20 buck word if ever there was one!) lets you break up your products and services into their component “molecules” so you can mix, match, and recombine them to create customized packages for each customer. You run across molecularization every time you buy a new personal computer: You choose how much RAM and hard disk you need, whether to install a tape drive, how big a monitor you want, and what kind of printer to attach. The installation glitches we all face testify to the difficulty of supporting molecularization.

Affinity is my favorite. Affinity drives customer loyalty programs to their logical conclusion. Frequent flier programs generate loyalty, but don’t create a bond between airline and traveler — airport “clubs” do that. User groups — independent of but supported and encouraged by providers — also create this kind of bond. And then there’s DNRC, or Dogbert’s New Ruling Class — a clublike enhancement to the already strong link between Dilbert readers and the characters in the comic strip. Members who visit the Dilbert Zone Web site (http://www.unitedmedia.com/comics/dilbert/) are a click away from a catalog of Dilbert calendars, mouse pads and so on: a perfect example of using affinity to sell product (and a great Web business strategy). The customer result here is a feeling of exclusivity, a sense of being special in a world of 5 billion people.

These three capabilities — entertainment, molecularization, and affinity — will drive the strategies of many businesses in the next decade. Not one of them can succeed without a lot of technology to support it — and that’s good, because it means I’m not going to run out of topics for future columns any time soon.

It also means you’d better start getting ready. You want to lead this parade, not slow it down.

Five or six years ago, I talked about using telecommunications for direct marketing at the Direct Marketing to Business conference.

Since I knew less than my audience about direct marketing to business, I chose the only sensible alternative: I talked about what I did know – in this case, the role of telecommunications in customer service.

The tricky part in a presentation like this is convincing the audience your subject and their interests coincide. “Think of marketing as the top of a funnel,” I told them. “Product quality and customer service are the other end. So long as sales and marketing pour new customers into the top faster than the rest of your company lets them drain out, your business will grow.”

The rest of the speech talked about giving customers direct dial-up access to order-entry and order-status systems, Electronic Data Interchange, fax-on-demand, and enhancing call centers with Computer Telephone Integration. The overall message: providing these exceptional service offerings adds an edge to a company’s customer retention efforts, and since your most likely next sale comes from the customer who just bought from you, marketing needs to get heavily involved in service.

Five or six years ago these ideas were new enough that I wasn’t entirely sure they were anything more than podiumware. Now they’re not just commonplace, they’re yesterday’s news. Everyone knows the importance of service, and the value of retention has been quantified: typically, preserving a current customer has five times the value of acquiring a new one.

Some highly oversimplified history. In about the mid-’70s product was king, American product quality was awful, and Japan, having adopted Total Quality Management (TQM) practices, kicked America’s economic rear-end.

It took a decade, but America eventually improved its product quality to a point where quality no longer won the pot – it was just the ante that let you play. Service became the new differentiator – hence my speech.

You can use a differentiator to gain marketshare or support higher margins. The Japanese used quality at a competitive price to gain marketshare in every industry it attacked. The old WordPerfect used service for the same purpose. Audi now touts both product quality and service as part of its premium image, supporting higher prices.

(The technology industry is something of a paradox in this respect – we pay ever-higher fees for ever-poorer levels of service. Disagree if you like, but first consider that this one subject keeps Ed Foster busy full-time … and his Gripe Line feature elsewhere in these pages doesn’t suffer from repetition.)

To stay ahead of the pack when it comes to providing service, companies have invested heavily in technology. In addition to EDI and fax-on-demand, we’ve pressed imaging, workflow, computer telephone integration into use, along with the World Wide Web which has superseded more primitive means for providing direct access to our systems. Has the investment paid off?

Interesting question. Since our competitors have made the same investments we have, we may all have wasted our money. More likely, our measure of success is keeping our heads above water in the ocean of competition in which we’re all immersed. Such are the hazards of finding suitable performance measures.

As happened to quality, service has reached a point of diminishing returns as a differentiator, becoming just another part of the ante. The ante, of course, is important and the systems you provide that support your company’s TQM and service efforts remain vital to your company’s future.

They’re vital. They just aren’t going to be enough anymore.

As CIO, (or future CIO) you need to stay ahead of the rest of the company in thinking how to apply technology to reshape your company’s strategy. Since it’s the nature of technology to provide or enhance capabilities, you need to anticipate the capabilities your company will need to lead the pack. After you’ve perfected product quality and surrounded your products with high-quality service, what do you do next? Look for another differentiator, of course.

That’s what we’re going to explore next week.