By Tom Steinert-Threlkeld  |  Posted 2005-07-08 Print this article Print

Decades before the idea took hold in the dot-com era, Reader's Digest kept a "360-degree view" of each of its customers—tracking every contact it ever had with a subscriber to its magazine or a purchaser of any of its condensed books or o

Genetic Enemies

It was time to replace another cranky system. The year was 1964, and the system was a Univac II computer, the company's workhorse since 1958.

Reader's Digest had purchased one of the first Univacs in the world. In fact, Reader's Digest was buying the computers when there were fewer than 100 extant, at about $1 million a crack—almost $7 million each, in today's dollars.

Even at that price, the Univac could store only 10,000 words in its memory, and divide a few hundred numbers in a second. Sandy Koufax' fastball crossed home plate faster.

As long as it had to be replaced, systems director John Moore and programming manager Robert P. Otten had this idea: Combine all information that the company held on its magazine, condensed book and special product customers into one file. Then combine that with a history of every piece of mail or promotion sent to each customer.

"The real genius was to put data on what was mailed to anyone, into the system,'' says Robert Burns, not the Scottish poet but one of the lead developers of what would come to be called UFS.

The task in front of the developers was not as simple as the idea. Keeping track of Reader's Digest customers was akin to keeping track of the American population for the Census Bureau. By 1965, the magazine had 10 million subscribers. That put a copy of the publication in more than 1 of every 6 homes in America.

But its marketing reach was even more extensive. The number of households in its files at that time totaled 50 million. According to the Census Bureau, there were only 57.4 million households in the country.

Putting data into a new electronic filing cabinet would not be easy. Many customer records were kept on metal stencils with tiny holes punched in them. To "pull" the records on a given set of customers to whom you wanted to send a mailing, you would stick a long "chopstick" through a hole and, literally, pull the right stencils out of the stack.

For turning those records into digits, punch cards were the order of the day; and the process of getting customer information on the cards was something of a full-employment act for the women of Pleasantville. Women willing to work full-time, as well as housewives with some spare time before kids and husbands came home for the evening, became data entry clerks. About 150 would spend their days heads-down, operating key-punch machines, entering new orders, making changes in addresses and the like.

If they didn't have cars or didn't drive, no matter. Reader's Digest would pick them up in buses that ran routes around the town of 7,110 and elsewhere in Westchester County to bring them to work.

Their job was to put as many holes into as many cards as they could. The cards made it possible to turn customer records into bits of digital data. Which meant the information could be used to do more than just create mailing labels, even if labels were the end output.

Back then, it was genius enough to think of putting what marketing piece was mailed to whom, and when, into a database. If all the data about a customer could be kept in a single file, you could know who bought what, who responded to promotions, who paid promptly and who didn't. And who would make a good prospect for more of what you sold.

Moore and Otten's idea was to merge the records of the magazine business with those of the condensed book business and the single-sales group, which sold one-shot music and book products like Music of the World's Great Composers or the Reader's Digest Great World Atlas.

Moore was in charge of developing the software "systems" that could improve operations at Reader's Digest. But first he had to convince Bob Frankel, his opposite number on the hardware side, that a single file of customer information was worth the effort.

He wouldn't really have to convince Frankel to phase out the Univac. That was overdue. But Frankel made hardware decisions, and competition was keen in the computer business. Sperry, which made the Univac, was still a big name. So were RCA and Honeywell.

Moore wanted a new machine from IBM, the 360, the first standards-based computer designed for commercial information processing. But Moore and Frankel were "genetic enemies,'' according to Burns.

Frankel was in charge of the part of Reader's Digest that fulfilled orders for magazines, books and other products. Since he owned the computers, he figured he should run the systems department, Burns recalls.

But Moore did that and had to serve the marketing department, not just the fulfillment operation, along the way. Making matters worse: They were polar opposites in character. Moore had an advanced degree from a major East Coast technical institute, was Irish and known to enjoy a drink or two, Burns says. Frankel, by contrast, was viewed as a buttoned-up "CPA-type of a guy.''

"It was an oil-and-water sort of deal,'' Burns says.

Moore and Otten would need to get the backing of operations vice president Kent Rhodes and marketing chief Walter Hitesman, two men who would later become president of the company. But first, Frankel would have to go along.

So Burns and Moore waltzed down to the fulfillment conference room, on the ground floor, next to the garden—the same room once spied by a visiting set of old ladies who wisecracked, one to the other, in "Laughter Is the Best Medicine" style, "Oh, Helen, let's go in there and get fulfilled!''

Moore made his pitch. But he got stopped by Frankel, who thought what Moore was proposing was underpowered, according to Burns. The most a million-dollar IBM 360 could hold in memory were those 64,000 characters of information. That's the same maximum storage a Sinclair personal computer would have two decades later, at a starting list price of $99.95.

"We thought that was tremendous,'' Otten says. But, "it was a drop in the bucket. We needed three or four times that much.''

Frankel would go along with Moore's plan—when Moore agreed to boost the number of machines that would be bought and include a development staff of at least 16 programmers. Final approval came from Rhodes; Otten became the project's manager. Burns, Ed Adolph, Ruth Ritchie and Betty Kahrs would become the builders and dressers of the elegant lady, as her lead developers.

By the time the new filing system was launched at the end of 1969, Reader's Digest would possess three IBM 360/30 computers and three copies of the Model 40. The coding, programming, systems work, support work and coordination would consume 150,000 work hours. And $30 million of Reader's Digest cash—roughly the equivalent of $158 million today.

Moore had stuck to his guns, insisting that the value of knowing how customers would react to marketing appeals far outweighed the initial cost of the technology, even if the cost of the hardware doubled or tripled.

"It was very courageous to make a statement, back then, that information was worth a lot,'' Burns says. "That was the true vision.''

Tom was editor-in-chief of Interactive Week, from 1995 to 2000, leading a team that created the Internet industry's first newspaper and won numerous awards for the publication. He also has been an award-winning technology journalist for the Dallas Morning News and Fort Worth Star-Telegram. He is a graduate of the Harvard Business School and the University of Missouri School of Journalism.

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