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When Docutel hit the ATM scene, the manufacturer was number one with a bullet. It looked as if the company might make the all-time hit list, but it couldn't sustain its success. It ended up as the industry's most famous one-hit wonder. by Kevin Gibson, contributing writer
Docutel was what one might call a one-hit wonder -- the Knack of the banking industry. It brought the Docuteller automatic teller to the world, created excitement for the banking future and, as heroically as it rose, floundered and disappeared from sight.
While even "My Sharona" still gets played on radio once in a while, the T3 is but a polished-steel memory. Why? Any number of reasons. Some say the savvy marketing that helped Docutel rise to the top outlived itself. Others say it was the bug-prone hardware combined with Docutel's failure to keep up with rapidly-improving technology.
Whatever the case, it was a surprise to Sharon Abrahamson, a Seattle woman who worked with the Docutel cash dispensers back in their heyday, when she recently got a call from someone who had purchased one.
"I thought, 'Don't tell me they're back in business,'" Abrahamson said.
Not quite -- it was a used machine -- but Docutel did enjoy quite a ride while it lasted.
Birth of automated banking
Born in May 1967 as a spinoff of Recognition Equipment Inc., which produced baggage handling equipment for airline terminals, Docutel was originally created to show short-term returns as an REI spinoff. Sales of baggage handling equipment were sluggish, but the company knew right away it was onto something with the Docuteller.
Legend has it that REI employee Don Wetzel had seen similar cash dispensing machines in Europe and believed a version of them would work in the U.S. Wire magazine reported in 1993 that Wetzel was waiting in a long line at a Texas bank when he got the inspiration to develop an electronic banking machine.
Whatever the case, Docutel researched the possibilities and found that, despite bankers' beliefs to the contrary, people preferred speed, convenience and confidentiality over personal, face-to-face service.
Therefore, Wetzel, along with engineers Tom Barnes and George Chastain, set about creating such a machine -- which cost more than $4 million to develop. Perfecting it and selling it would prove to be separate challenges altogether.
Soon the baggage handling equipment part of the company was sold, and the ATM (as American Banker magazine would later dub it) was off and running -- or at least jogging -- in the United States.
In a 1995 interview with the National Museum of American History, Wetzel said the first machines were off-line, because the software wasn't available and banks weren't interested in going on-line anyway.
Also, ATM cards needed to be different from the credit cards of the day, because account information had to be included on the card. This led to the revolutionary step of attaching a magnetic stripe to the card to hold that information.
The challenge, Wetzel said, was finding a manufacturer who could create such a card that actually worked.
"We had a machine, and if you just hand-made some plastic cards, the machine would work," he said. "But if you went to a manufacturer and asked him to run off 5,000 cards for you, most of them didn't work."
"No sooner than they would find a manufacturer who could do this and they would try to put it on," said Del Tonguette, a former Docutel client, "but it would warp the plastic, or it would come off. Docutel also had to come up with a printer, a cash dispenser -- all those things."
By 1971 Docutel had introduced its Total Teller machine, which not only dispensed cash, but also accepted deposits and made cash transfers from one account to another. Docutel also developed a drive-up version of the Total Teller called the T3. Another Docutel innovation was the first "pay-at-the-pump" type machine, but it was not immediately embraced by the oil companies.
In spite of these steps forward, the hardware itself still was troublesome.
Bob Heckman, who joined Docutel in 1973 as vice president of sales and marketing, described the original Docutel ATM as "very electromechanical in nature -- lots of belts and pulleys, gears and levers, all taking the card into the ATM, moving the money into the customer's hand and printing a receipt.
"The ATMs were slow and at times a little noisy. The message screen was actually a cylinder with pre-printed messages on it such as, 'Insert Card,' 'Take Money,' etc. They were also very bulky and hard to install."
The company persevered, however, gradually improving the performance of its machines. The next step was to sell them to banks and to the public.
Despite a failed attempt to create a European market for Docutel machines, sales were brisk by 1973, thanks mostly to the company's mastery of marketing.
One of the key marketing tools was the company's personable CEO, Jack Meredith, brother to Dallas Cowboys quarterback and later Monday Night Football announcer "Dandy" Don Meredith. When he took over the company, Docutel utilized that celebrity relationship to its fullest.
"He was great on a client visit and probably the best salesman I've ever seen," Heckman said, "and I've seen a lot of them."
Tonguette remembered a high-energy slide show synchronized to "Dueling Banjos" that won over clients.
"They go through this slide show, and it just psyches up people," he said. "Today, I don't think any of these manufacturers does the marketing job that Docutel did back then. You could almost write a book on some of their marketing."
By 1974, there were 50 Docutel salespeople in the field. The early game plan was to solicit the biggest banks first -- a chore made easier by the fact that much of Docutel's management was made up of former IBM employees who had connections in the banking industry.
The banks, once they started buying into the ATM concept, got even more outrageous than Docutel when promoting the product.
The National Bank of Detroit, for instance, ran a television commercial featuring a man in a button-down shirt and horn-rim glasses getting a shoe shine, Drennan said. When the shoe-shine person said, "That'll be two bucks," the customer realized he had no money. He ran, with the shoe shine man in pursuit, and ended up at an ATM with a smile on his face and money in his hand.
At least two ads were banned, according to Drennan. One was a take-off on the chase scene from the movie "The Manchurian Candidate," showing a customer careening through the streets to reach the bank before it closed. Another featured Mother Nature selling the service and included the nonsensical closing line, "It isn't nice to touch Mother Nature's wand."
The Equitable Trust of Baltimore, which utilized local celebrities to promote ATMs in commercials, hired a Richard Nixon look-alike who looked into the camera and said, "Let me make one thing perfectly clear: Equitable Trust never closes, never!"
What went wrong
By the middle of 1974, however, sales leveled off.
Quoted in a textbook (The Principles of Marketing, 9th Edition), Meredith said, "We realized that we needed to 'back down.' We had no idea how to go about it. All our experience was in planning for growth."
The eventual failure of Docutel -- it didn't last out the 1980s -- may go back to many different factors. Tonguette said that, ironically, marketing may have played a role. Rather than staying aggressive, Docutel was content to rest on its steel-plated laurels.
Also, the many bugs in the early machines were a hindrance, especially since it took Docutel a long time to work them out. Tonguette believes Docutel's proprietary approach to magnetic stripe technology probably contributed to the company's demise as well.
"Technically, on the magnetic stripe back in those days you had a superstripe; there were three tracks in it," he said. "Today you only look at track two -- it's a narrow stripe. Back in those days, it was half an inch or more wide."
Tonguette said the top track on a card's magnetic stripe was for use by the airline industry, the middle track was reserved for on-line use -- "although no one used that for years" -- and the third stripe was for off line use.
"Docutel, and this might have contributed to this eventual decline, didn't use stripe three," Tonguette explained. "They used what they called the Docutel Stripe, and it was in-between stripes two and three. Like Apple when they came up with the Macintosh, they kept it kind of secret and to themselves rather than make it like IBM. You could only use (that stripe) in a Docutel machine. As the industry grew, that became a hindrance."
Price was a factor too. An ATM's cost varied from $24,000 to $35,000, with up to $10,000 more for installation. Most ATM manufacturers also charged a monthly service fee of $130 to $350. Additional costs for supplies and internal processing for off-line machines could amount to another $800 a month (if on-line, it was only about $300).
By comparison, the average wage of a teller at that time was about $900 a month plus benefits. Nevertheless, by the middle of 1975, over 3,000 ATMs had been installed in some 500 banks. More than 80 percent of them were Docutels.
But with the market now open for others to manufacture the terminals, competition became stiff. While newcomers went after total markets, Docutel still courted only the first banks to install ATMs. That left way too much market share open to the competition.
Finally, Tonguette said, "When all these competitors came in with on-line ATMs, Docutel insisted on coming up with a brand-new, third generation unit called the 2300 Retrofit. They went back to all the banks that had these T3s and said, 'Rather than selling you a brand new unit, we will retrofit your T3 so it's online.'
"That retrofit program wasn't the answer, and it wasn't widely accepted. By the time Docutel tried to introduce this third-generation ATM, it was too late. ... I don't even remember seeing one of these things."
Heckman pointed toward Docutel's small size as its main setback. He classified Docutel as being ill-equipped to compete with larger companies like IBM, Diebold and NCR.
"They decided to get in the game with much stronger financial muscle, better features on the ATM and worldwide reputations," Heckman continued. "It was IBM or Diebold or NCR versus 'Who?' from Irving, Texas."
Heckman's least favorite memories of his Docutel years are being "constantly undercapitalized, having a really weak product, little research and development, and eventually fighting the industry giants.
"Personally, it was tough for me when the company started downhill, to have to lay off some of the people I had so sincerely encouraged to leave good jobs and take a chance on Docutel -- and me -- in a new, exciting business. Fortunately, most of them realized it was a risk and have gone on to do very well in other businesses."
For Drennan, who published a book called "Internet Strategies for Banks," the cost of the big bulky machines was a deterrent once the competition heated up, and there were the constant breakdowns -- breakdowns other manufacturers avoided by employing new technology and design.
The beginning of the end came in 1982, when an Italian company called Olivetti entered into a joint venture with Sharp Corp. of Japan to produce high-speed copiers and other office machines. Docutel merged with Olivetti Corp., an American subsidiary of the Italian parent company. The merger made the parent company the largest single stockholder in Docutel, which accordingly changed its name to Docutel/Olivetti Corp. In 1983, a quarter of Olivetti's corporate stock was purchased by AT&T in an arrangement that made Olivetti a major distributor of AT&T products in Europe.
The company is now called Olivetti USA.
Does the blame for Docutel's fall lie with marketing or hardware? Short-sightedness or lack of focus? Perhaps Abrahamson summed it up most succinctly when she said the Docutel machine "outlived its game."
But what a game it was while it lasted.