What Does This Mean

BP Amoco to Unveil Deal With Tokheim To Supply Pumps With Web Browsers By David Bank

BP Amoco PLC is moving to turn gasoline pumps into Internet-connected kiosks that would provide weather forecasts, traffic updates and, of course, advertising. The oil giant is expected to announce a three-year deal with one of the largest pump suppliers, Tokheim Corp. of Fort Wayne, Ind., to supply new pumps that include Web browsers and Microsoft Corp.'s Windows CE operating system. Tokheim says the new pumps represent the biggest change in gas-station technology since the advent of pay-at-the-pump systems about 15 years ago.

"Think of the dispenser as a Web page," said Gray Taylor, Tokheim 's director of strategic programs. He said that with the average pump serving 70 people each day, an ad on 100,000 pumps could reach seven million consumers. "That starts to rival what happens when you put an ad on TV," he said.

For now, the potential for advertising and electronic commerce is secondary to BP 's savings in managing its equipment. The new pumps can, for example, send e-mail to corporate headquarters when they need servicing. More importantly, new features can be added to the pumps without replacing existing hardware or writing completely new software.

Some warehouse-style discount stores, for example, offer discounts on gasoline to loyal shoppers in the form of register receipts with bar codes that are read by scanners at the pump. Designing the new pumps to operate like personal computers running on a corporate network makes it easier and cheaper to add peripheral devices such as scanners, Mr. Taylor said.

For Microsoft, the deal represents a victory for Windows CE. The compact operating system for non-PC devices trails badly behind 3Com Corp.'s Palm operating system in the market for palm-size and hand-held computers, but it has been making headway in a variety of specialized markets, including point-of-sale terminals at fast-food outlets.

"We have a heated battle with Palm in hand-helds, but we're winning in gas pumps and chicken terminals," boasted Jonathan Roberts, Microsoft's general manager of marketing for Windows CE. The deal also reflects Microsoft's strategy of linking Windows CE to the more powerful Windows NT operating system. Executives at BP said they chose CE primarily because it worked well with the NT software that is already installed in the convenience stores at about half of their 900 company-owned gas stations in the U.S.

Many of those retail systems were supplied by Radiant Systems Inc. of Alpharetta, Ga., which is also working with Tokheim to develop the new gas pumps. Earlier this month, America Online Inc. invested $10 million for a 4% stake in Radiant. AOL isn't involved in the BP deal, but is an example of the kinds of enhanced services that will soon be available, said Jimmy Fortuna, who runs Radiant's hardware-development efforts.

"If you've got a much more engaging user interface, you have a much higher chance to drive that repeat business," Mr. Fortuna said. BP is testing a variety of e-commerce strategies at stations in Los Angeles and other cities. One executive said that in addition to displaying traffic and weather information, "The next stage is to be able to order items from the McDonald's next door."

The new pumps are expected to be installed at new BP stations starting early next year. The pumps will also be installed in existing gas stations, but the schedule for such replacements hasn't yet been set.

What Does This Mean? Group Exercise

Situation

Assume that you work in the strategic planning office of a major global petroleum company (e.g., Shell, Texaco). Your boss walks in one morning and tosses the 17 Aug 1999 Wall Street Journal article, "BP Amoco to Unveil Deal with Tokheim to Supply Pumps with Web Browsers," (p. B6) on your desk and asks, "What does this mean?" "I want you to be prepared to lead a staff meeting tomorrow morning to assess what, if anything, this means to us.”

Thought Questions The following questions are given here to help with your discussion. They are not an outline nor a required list of questions.

1. Are these emerging or enabling technologies? Does that matter? 2. If the boss really did get caught off guard with this story, why did it happen? 3. What should/can this firm do based on this news? 4. Are there new economic opportunities here? 5. Is this a competitive threat? Why or why not? 6. What is the potential for business innovation(s)? 7. Does this change the customer value proposition? How will customers perceive it?

You should avoid any technological determinism1 in your thinking about cause and effect.

1 Technological Determinism is the belief that a new technology causes some effect to happen. For example, “we are deploying notebook computers to the sales force to improve productivity by 10%” or “Consumers will be smarter shoppers with the Internet.”