Stuart Patterson, CEO, SpeechWorks

Q What are some of the lessons you have taken away from a difficult 2002?
A While we have taken away some lessons from 2002, few of them are new! We still believe that the best speech services put the needs of the caller first. We still believe that our challenge is to develop and deliver products and services that complement, and integrate smoothly with, the offerings of our partners around the world. We still believe that standards (such as VoiceXML, SALT and MRCP) and open architectures will ultimately accelerate the growth of the speech market. The only new lesson, therefore, may be that even a market with as much momentum as speech can be slowed down a bit by the mother of all recessions! Q It seems it is much more difficult being a public company today than it was a few years ago, have your thoughts as a CEO changed since SpeechWorks went public in 2000?
A As you note, the environment for public companies, and public company CEOs, has changed dramatically since August 2000. In my view, the three most significant changes have been: (a) a dramatic downturn in the economy, particularly IT spending by large organizations; (b) a change in stock market sentiment and investment priorities; and (c) a series of corporate scandals and bankruptcies that have eroded the public's trust in private sector leaders and the capital markets. In the midst of all this change, SpeechWorks has tried to stay true to our mission and our values … and I believe we've been quite successful on both counts. We still seek to gain the trust of our partners and our customers and to deliver on our promises with best-in-class technologies, products and services. We also still practice open and honest communications both internally and externally. Finally, we still believe very strongly in the future of the speech market and that causes us to pursue a long-term strategy of leading by example. Q You have seen the SpeechWorks stock price vary greatly over the past couple of years, why should someone invest in SpeechWorks today?
A Of course, all investors should make their own decisions based on publicly available information. That said, we believe that speech is one of the few, new "disruptive technologies" that will - over the next 5-10 years - fundamentally change the way we communicate. If we are right, then SpeechWorks may represent an attractive way for an investor to benefit from the growth of demand for speech technology and speech solution because of: our industry-leading products for speech recognition, text-to-speech and speaker verification that operate in a network server and embedded mode; our standards-based integrations with partners such as Intervoice, Avaya, VoiceGenie, Microsoft, Nortel, Cisco, Genesys, Convergys, NetByTel and West; and our unparalleled record for customer - and caller - satisfaction around the world. Q During your address last year at SpeechTEK you said, "touch-tone is the enemy" do you still feel that way and why?
A Yes, I still feel that touch-tone is the enemy or, to put it another way: "We are in the business of saving the world from touch-tone!" Touch-tone does not deliver an intuitive user interface that makes callers hang up with a smile once they've completed their goal; nor does it convey a company's brand effectively. The public at large has learned to "live with" touch-tone (at least some have!) … but certainly not to "enjoy" or "appreciate" it. At SpeechWorks we believe that the ROI of our solutions and the satisfaction of the caller drive the success our customers' deployments. We have lots of data that shows that our customers are experiencing increases in caller satisfaction over touch tone and stronger, differentiated ROI with speech. For example, our ROI Study conducted by the Kelsey Group showed that in instances where respondents were upgrading from existing touchtone IVR applications to speech, increases in successful speech automation rates ranged from a low of 30 percent to a high of 55 percent over the touchtone solution. We are very encouraged by the remarkable ROI results that our customers have enjoyed from the speech solutions that they've deployed, with the support of our partners, over the past 2-3 years. We believe that the positive reception and economic success of these services stems from our nearly fanatical attention to the goals and the needs of the callers that they serve and the superior user interface that speech offers compared to touch tone. Q Please tell us about the 5-C strategy for companies and why do you think it is important for companies to implement this strategy?
A Every large-scale corporate marketing initiative or technology investment requires a solid business case and strategy statement. From a high-level perspective, every organization needs to understand their major objectives - including goals for better customer service and increased operational efficiencies - competitive dynamics, branding requirements, etc. However, what do industry best practices tell us about the framework for a successful Speech Strategy? Are there critical success factors that should be addressed on an enterprise- and application-specific level to ensure maximum benefits from speech? SpeechWorks believes so. A model developed by SpeechWorks called the 5-C Industry Achievement Model defines five "Critical Speech Factors" for successful speech implementations in any organization. They include: ·Caller Monetization: the precise financial value, to the enterprise or carrier, of a caller interacting with the speech service (cost savings, revenue generation, etc.) ·Caller Motivation: the degree of usefulness of the speech service to a caller ·Caller Performance: the technical components of the speech service that influence a caller's success ·Caller Affiliation: the feeling of connection, appreciation, service and satisfaction a caller experiences after interacting with the speech service ·Caller Behavior: the likelihood a caller will reuse a speech service, and perpetuate its growth Working together, these five Critical Speech Factors (CSFs) represent the difference between an adequate return, and a return that exceeds customer expectations. Why? Because the CSFs take into account the entire speech application and its expected results. Moreover, the CSFs focus on the most important constituency - the caller. To help organizations set goals and evaluate success using the 5-C model, SpeechWorks created a simple yet powerful measurement system called the "Speech IQ". The Speech IQ is a graphical representation that benchmarks each of the Critical Speech Factors. An organization's Speech Strategy can take many shapes and forms - from a Powerpoint presentation to a written proposal. There's no "one size fits all" for every organization. The challenge is to think enterprise-wide yet maintain an obsessive focus on the caller's experience and success. The opportunity the Speech Strategy affords is to maximize results from speech services by defining a design and deployment strategy for the first and subsequent services a company intends to roll-out to its caller-customers. Q You made an acquisition earlier this year of verification technologies, why did you do this and what does it mean to SpeechWorks?
A This acquisition completes a strategic process we undertook over two years ago to offer our customers three different speech technologies -- speech recognition, TTS and speaker verification - for both networked and embedded environments. Speak EZ is patented speaker verification technology from T-NETIX, the leading provider of specialized call processing and fraud control software. This acquisition allows SpeechWorks to develop its current speaker verification product, known as SpeechSecure, using the Speak EZ technology for both network-based services and embedded applications use. Along with the acquisition of this industry-leading core technology, we are pleased that Dr. Kevin Farrell, the primary developer of Speech EZ has joined SpeechWorks. Kevin will lead the future development of our verification and identification products. The technology acquisition allows us to control and accelerate the development of speaker verification technology and ensures that our customers will benefit from SpeechWorks' vision and support as they increase their use of this technology around the world. Q Many of us think of SpeechWorks as a telephony, server based organization and now we are seeing you move more into the embedded space. Why are you doing this and what does this mean for your clients?
A We view this unit as a natural extension of our growth strategy to accelerate market adoption for speech in wireless applications. SpeechWorks is actively leveraging its core competencies to penetrate the device market. Embedded systems. Telematics. PDAs. Handheld phones. Those devices represent a re-packaging of what we do best - high-performance, speech technologies and services - with additional innovation applied to ensure the footprint is compact enough to meet the memory requirements of the various devices. Add to that DSR technology that links 'clients' or devices to servers, and multimodal technologies and applications which add visual input/output to our audio input/output processing and you have several related, market-expanding initiatives enabling SpeechWorks to effectively deliver next-generation applications to Enterprises, Telcos and Automobile and Device manufacturers worldwide. Within the last twelve months, we've seen customers in the automotive, mobile device and set-top box industries make substantial commitments to integrate speech technologies into their products. We're delighted to have a team at SpeechWorks focused exclusively on meeting the demands of these customers, and we view the Automotive and Mobile Device Customer Focus Unit as a natural extension of our leadership in the network-based market. Q What vertical markets do you anticipate seeing a stronger IT spend on speech technologies over the next twenty-four months and why?
A We anticipate continued business from our key vertical markets that have been strong adopters of speech technology in the past including: financial services, hospitality & travel, healthcare, government, and telecommunications services. Q Discuss your thoughts on geographic areas where we can expect to see increased IT spend over the next twenty-four months.
A We expect to see increased IT spending in North America in the next 24 months, particularly in the verticals noted above. We also expect other, large economies to recover in the next 1-2 years and that will result in IT spending - and speech growth -- in major overseas markets such as Asia Pacific (Japan, Korea, Singapore and Australia) and in Western Europe (e.g., UK, France and Germany). Q OK Stuart, not to make you a prognosticator, but a lot of people look to you for insight concerning the speech technology market, please give us your thoughts as to what you think will happen with speech technologies in 2003. Please also include items you wish would happen.
A I do believe that there is still market momentum based on four factors: (1) we continue to have customers - and their callers - tell us that their speech-activated services are producing the desired results (i.e., improving customer service over the phone AND saving money); (2) we continue to sign up NEW customers who are dedicating substantial resources to speech services based on the perceived success of their competitors (e.g., in the travel industry) and their expectation that the ROI on speech services are strong; (3) the number of companies who have expressed an intent to implement a speech-activated service has increased steadily over the past year; and (4) the interest in speech - as indicated by the number and seniority of the teams evaluating our technology and our partners solutions - is much more serious than it was a year ago. As an industry, there are several ways to move the market forward including: standards support and focusing on the caller experience. ·Industry Standards: Promoting the adoption of industry standards such as VoiceXML, SALT and MRCP will allow the large developer community to quickly develop and deploy quality speech applications for the enterprise and carrier markets. ·Focus on the Caller: It really is 'all about the caller'. At SpeechWorks, we've examined our most successful applications to tease-out the major criteria for their success. The theory: Understanding the model of what makes the best be 'the best' will allow us to replicate that model for more and more SpeechWorks customers. We've distilled 5 key attributes -Critical Speech Factors - and again, that model gives us a vision, a path to follow so all our customers not only achieves their goals, but exceeds them. At SpeechWorks, we've built more applications, for diverse industries, on diverse platforms, in multiple languages, than anyone, and the mantra of our world-class solutions services organization has always been "Know thy Caller". It's just vital. ·Industry Cooperation. Particularly in these economic times, this industry needs to prove itself. We need to show prospects that 'yes, speech works.' That means that speech delivers the goods - the monetary return - and that speech satisfies. That callers like using speech systems. That's an industry, not vendor, issue. We need to cooperate to expand our market and kick-start industry growth.