Paul Wallbank | Paul Wallbank - Communications Professional

Software’s mini revolutions

How the CIA are driving a business revolution

The CIA’s ‘revolutionary’ announcement of their changes to the way they buy software shows just how the relationship between software vendors and businesses is evolving as cloud computing methods become widely adopted.

For businesses it means more flexibility and efficiency while for software companies the new marketplace is requiring them to be more flexible and responsive. Those changes will challenge some vendors.

What’s driving these changes is ‘big data’ – the explosion of data being collected and stored – and the move to cloud based computer systems.

The CIA, like most businesses or home computer users, used to buy software by the license. For small businesses and homes this was by buying a box of disks from the local computer shop while for big organisations there were volume licenses where they bought the right to use tens of thousands of copies of the one program.

Box licensing was never satisfactory, it was difficult for users to know what exactly they bought and customers were always a year or more behind the trend.

Keeping up with Technology

One of the big pluses with cloud based systems is you don’t have to wait a year or two for a new release incorporating the latest technology. It’s rolled out as it becomes available without any work by the user.

With the old box software model you had to wait for the latest release and even then the features you were waiting for could still be missing.

As technology is moving fast online, organisations like the CIA can’t afford to wait.

Pay as you go

Another problem with the old software model was that big and small organisations found they were buying things they didn’t need.

This is particularly true with licensing agreements where a company might have 100,000 licenses when they only needed 15,000.

Pay as you go billing, which is the standard model for cloud computing services, means a lot more flexibility and a much more efficient way of managing software spend.

Closer relationships

In his speech describing the changes, the CIA’s top technology officer Ira Hunt said the agency is prepared to give vendors a “peek under the covers”.

This sort of closer relationship between suppliers and customers is one of the biggest attractions of the cloud computing model. It means both users and suppliers are more closely aligned.

For software vendors that close alignment is where the opportunities lie; the old days of flogging fat, expensive licenses are over and the successful sellers of computer programs will be quicker and nimbler.

The CIA has been accused of formenting many revolutions around the world, this is one most business owners should be happy about them leading.

The over reach

Sometimes we take things too far

Sometimes we’re on a roll, all is going well, everything we touch is successful and those around us seem not to be able to win a thing.

Then we over-reach.

We get smart, we get cocky, we decide one more demand or humiliation will show the other guy just how good we are.

And everything starts to wrong, because we took things too far. We over-reached

The greatest asset all of us can have is a little humility and respect.

Rather than wanting everything, maybe leaving a little bit on the table for the other guy may turn out to be a wise business move.

The limits of SEO

Having a nice web site is only part of a winning business

On their busiest day of the year, the florist site Ready Flowers had a shocker. With dozens of customers upset their Valentines Day flowers didn’t arrive.

Their reaction was to stop answering their calls, as one Ready Flowers angry customer on the Whirlpoool website said;

Calling through to their 24/7 hotline was no good, all it told me (after 30 mins on hold) was a automated message saying it was valentine’s day (duh), that they were busy and that I should leave a message.

So on their one key day of the year, they didn’t have enough staff to meet demand.

Ready Flowers has been a success story expanding to 17 countries since being founded in 2005. The service is a modern version of the Interflora model where the company takes the order which they pass onto a local florist who creates the flower arrangement to Ready Flowers’ or Interflora’s specifications.

The risk for Ready Flowers is that the local florist isn’t very good and that’s where customer support and tight supplier management comes into place.

Which is clearly where they fell over on Valentines Day.

In a 2009 interview with the Financial Review that’s quoted in the Sydney Morning Herald, Ready Flowers’ founder Thomas Hegarty claimed his success was due to good search-engine optimisation, online advertising, and landing pages for every delivery location.

Missing is the term “customer service” – in that interview Thomas went onto say, “We saw that we could add value by applying more efficient technology without needing a large number of people to run the business”.

This is the flaw in the web 2.0 business model. In the real world, businesses don’t run on remote control – mistakes are made, deadline missed and people do dumb things which the algorithm can’t handle.

Over the last thirty years, customer service has been seen as an unnecessary cost centre. This was fine in a world where automated, low margin and fast moving goods were seen as the business model to emulate.

If you can’t compete on price, it’s service that matters and this is where you’ll need more than a lost cost call centre and a well optimised website.

Is the problem in the cockpit?

Who is in control anyway?

In the Daily Reckoning newsletter editor Callum Newman uses Malcolm Gladwell’s description of power relationships to draw a parallel between Korean pilots crashing planes into mountains and the economy, pointing out our politicians are like distracted, doomed aviators ignoring the obvious features they about to collide with.

Is that fair though? In a plane the passengers are strapped in their seats and have to take their the pilots in trust, in real life we have control — all of our actions affect the vehicle that is our economy.

Unlike a plane we can jump out and do our own thing, we can refuse to buy one good or service and we can set up a business for ourselves when we see a market that isn’t being serviced.

Where the analogy does work though is our politicians – and many business leaders – aren’t paying attention to major demographic and economic shifts.

The question is “why?” Most of these people aren’t stupid and they have access to better information than most of us, which is one of the reasons they are in power.

Perhaps it’s because we don’t want to hear the truth; that our assumptions about what the state will provide and how our economy is developing are flawed.

In many ways, particularly in a modern Western democracy, our politician are mirrors of ourselves. They tell is what they think we’d like to hear.

The problem isn’t in the cockpit, it’s back at the boarding gate where we’re more worried whether we’ll get a packet of nuts than whether we should agree to embark on a rough journey to a destination we don’t expect.

Knowledge and power

Can we use the data revolution effectively and well?

In the 16th Century English courtier Sir Francis Bacon declared “Knowledge is Power”, something certainly true during the conspiracy prone reign of Elizabeth I.

Today the data available about ourselves and our communities is exploding along with the computer power to process that information to turn it into knowledge.

We see that knowledge being used in interesting ways – US shopping chain Target recently described how they used data mining to determine, with 87% accuracy, to figure out if a shopper is pregnant.

That 87% is important, it says the algorithm isn’t perfect and bombarding a false positive with baby wear advertising could prove embarrassing, or in some families and societies even fatal.

A good example of data misuse are the two unfortunate Brummies (alright, one’s from Coventry) who were deported from the US for tweeting they were “going to destroy America and dig up Marilyn Monroe”

For the US immigration and homeland security agents, they ready the jokey tweets by the Birmingham bar manager through their own filter and came to the wrong conclusion, although it’s likely their performance indicators rewarded them for doing this.

This is the Achilles heel in big data – used selectively, information can be used to confirm our own prejudices, ideologies and biases.

In 2003 we saw this in the run up to the US invasion of Iraq with cherry picking of information used to build the false case that the ruling regime had weapons of mass destruction that could attack Europe in 45 minutes.

For businesses, we can be sure data showing the CEO is wrong or the big advisory firm has made the wrong recommendations will be overlooked in most cases.

Despite the Pollyanna view of a world of transparency and openness driven by social media and online publishing tools, the information is asymmetric; governments and big business know more about individuals or those without power than the other way round.

In a world where politicians, business people and journalists trade on their insider knowledge rather than competing in the open, free market we have to understand that filtering this data is essential to retaining powers and privileges.

Usually when the data threatens the existing power structures it is repressed in the same way a dissenting taxpayer, citizen, employee or shareholder is discredited and isolated.

At present there’s lots of data threatening existing commercial duopolies, political parties and cosy ways of doing business.

The fact many of those in power don’t want to see what their own systems are telling them is where the real opportunities lie.

Entrepreneurs, community groups and activists have access to much of this data being ignored by incumbents, it will be interesting to see how it’s used.

Finance by the masses

Can crowdfunding work for business?

“Crowd” is one of the hot terms of the moment – the idea that groups of connected, motivated people with the right incentives can deliver great value when their skills and talents are bought together.

One of application of this idea is crowdfunding where businesses, artists, writer and movie producers can call on the community to donate or invest small sums into a project in return for a benefit like a copy of the book or being an extra in the movie.

The biggest success in this space is the New York based Kickstarter which was founded in 2008. Pozible, an Australian equivalent, that provides local creatives with the opportunity to raise funds without dealing with the hassles of US bank accounts or social security numbers.

Both of these services make money from taking a commission on the money raised, for Pozible users this fee ranges from 5 to 7.5%.

While the focus of Pozible and Kickstarter is on creative projects like books, music and movies, it’s interesting to consider how this model can work for other businesses.

Perhaps an IT business can offer a free year of support or food delivery service free shipping in return for a donation. The possibilities are endless.

It’s not without risks – there’s no doubt the regulators will at best be suspicious of fund raising through these services and anyone participating has to accept the risk of not getting any sort of return.

Since the 2008 banking crisis, funding for small business has dried up around the world. Many viable enterprises found their lines of credit being withdrawn and some even went under as a result.

With banks rationing small business credit, there’s a need – we could even argue an economic necessity – for alternative sources of capital. Crowdsourcing could be an option.

Now the days of easy credit are over; businesses, banks, investors and governments have to adapt. Believing models and regulations that were designed when capital was cheap and abundant won’t work in a very changed economy.

Crowdsourcing will be one of the issues confronting regulators, it’s going to be interesting to see how they deal with it.

Scammed

Social media opens up new opportunities for conmen

“Executive-level income without leaving home” claims the Facebook page, a sign at the end of my street promises a six figure wage from your own computer and one of the lead stories in this morning’s news is the tale of retirees being ripped off by ‘boiler rooms’ offering high return ‘investments’.

We all believe we have the right to be rich so the quick, easy option and the promises of those that say we can be wealthy by simply handing over a modest amount of money or trusting our investments to someone else is a tempting offer.

Deep down we know we’re being scammed.

Right now nations are on the verge of collapse because politicians promised easy wealth, corporations skirt bankruptcy because executives were entitled to bonuses regardless of performance and in the suburbs desperate people clinging to the middle class lifestyle they believed was theirs by birthright fall for get rich quick scams.

Just as the railways opened up opportunities for snake oil merchants in the 1850s and cheap telephone systems gave rise to the boiler room ripoffs of the 1970s and 80s, social media tools open up a whole new range of possibilities for the sneaky to fool the gullible or desperate.

Naturally we’ll get the nanny goats and nincompoops demanding something be done about Internet scams – maybe a law, perhaps a treaty or a code of conduct – all of which will be as effective as stopping railways, telephones or the postal system in an effort to stamp out fraud.

Fraud is technologically neutral; fraudsters just use whatever happens to be the most effective tools available at the time.

The sad thing with the social media based scams is we get to see who among our friends and family have fallen for it. Invariably when we warn them we’re told off because we aren’t believers.

Again though this is nothing new, the same thing happened when the snake oil merchant came to town or the shaman visited the village.

In the 19th Century the phrase “there’s a sucker born every minute” was coined. In today’s hyper connected world, there’s one born every second. Don’t be that sucker.

The high stakes of Lumia

Microsoft and Nokia have a lot riding on their new mobile phone product

Yesterday Nokia and Microsoft gave a preview of their upcoming Lumia 710 and 800 phones for the Australian market. It’s make or break time for both companies in the mobile space.

The phone itself is quite nice – Windows Phone 7.5 runs quite fast with some nice features such as integrated messaging and coupled with good hardware it’s a nice experience. Those I know who use Windows Phones are quite happy with them (I’m an iPhone user myself).

Whether its enough to displace the iPhone and the dozens of Android based handsets on a market where both Nokia and Microsoft have missed opportunities remains to be seen.

The battle is going to be on a number of fronts – at the telco level, in the retail stores and, most importantly, with the perceptions of customers.

Probably the biggest barrier with consumers is the perceived lack of apps, to overcome this Nokia have bundled in their Maps and Drive applications while Microsoft include their Mixed Radio streaming features along with Microsoft Office and XBox integration.

As well the built in services, both parties are playing up their application partners with services like Pizza Hut, Fox Sports and cab service GoCatch. Although all of these are available on the other platforms.

While application matter, the real battle for Nokia and Microsoft is going to be in the retail stores where the challenge shouldn’t be underestimated.

Apple dominate the upper end of the smart phone market and Android is swamping the mid to low end. How Windows Phone devices fit remains to be seen.

In Australia, if they going to find salvation it will be at the tender hands of the telco companies.

The iPhone is constant source of irritation for the telcos as not only do Apple grab most of the profit, but they also “own” the customer.

On the other hand, Android devices are irritating customers who are bewildered by the range of choices and frustrated by inconsistent updates that can leave them stranded with an outdated system.

So the Windows Phone does have an opportunity in the marketplace although one suspects commissions and rebates will be the big driver in getting sales people at the retail coal face to recommend the Microsoft and Nokia alternatives.

Overall though, it’s good to see a viable alternative on the market. For both Microsoft and Nokia the stakes are high with the Lumia range – it could be Nokia’s last shot – so they have plenty of incentives to get the product right.

Microsoft has consistently missed the boat on mobile computing since Windows CE was launched in 1996 while Nokia were blind-sided by the launch of the iPhone in 2007 and have never really recovered.

To make things worse for Nokia, the market for basic mobile phones where they still dominate is under threat from cheap Android based devices. So even the low margin, high volume market isn’t safe.

For both, the Lumia range is critical. 2012 is going to be an interesting year in mobile.

On becoming a Captive Business

On being trapped by your suppliers or customers

I’ve been writing a lot recently about the risks of businesses aligning their interests too closely with one or another platform, last weekend The China Law Blog discussed the opposite – being a captive customer.

The term “captive customer” is new to me but it’s a familiar concept; in the IT industry most of us found ourselves hostage to Microsoft’s whims at one time or another and it wasn’t a good place to be.

Many smaller businesses and consultants fall for the trap of having just one big customer which their income becomes dependent upon.

While Dan’s point on The China Law Blog is about manufacturing, this risk is becoming even more pressing on the web where there’s a tendency to be captured by one platform or another.

Sometimes entire industries are captured – the Search Engine Optimisation sector is wholly dependent upon whatever Google chooses to with their search algorithm. To make things worse, no SEO expert knows exactly how Google’s equations actually work.

We’re seeing the mass media being captured in a number of ways – by granting licenses to Facebook, one suspects unwittingly, or developing content for Apple’s iPad.

For startups depending upon cloud services or single payment platforms like PayPal there are serious risks as we saw with the co-ordinated takedown of Wikileaks.

In nature, the animal or plant that depends on one source of food or habitat is at risk from even small changes in their environment. Be careful you aren’t a business dodo.

The New Soviets

For many companies, customer service owes more to the Soviet Union

US based investment writer Mike “Mish” Sherlock called Sony’s support line to get a repair for his recently purchased laptop computer.

What followed was something from the 1970s Soviet Union – a simple request turned into a twelve day, 34 step odyssey of structural incompetence on the part of Sony.

The tragic thing is Mike’s tale is all the result of mis-matched rewards in Sony’s organisation;

Sony’s management wanted to increase profits
Extended warranties were identified as a revenue generator
A senior manager decided cutting support costs would improve returns
The technical support is outsourced
Costs are saved by splitting contracts
Each outsourcer has a different IT platform
The outsourcing contracts have quotas and penalties
Individual staff are penalised for escalating problems
Support staff have tight performance criteria

At every level performance indicators were met, despite the whole process costing far more than fixing the problem efficiently would have had – not to mention the loss of Mike as a customer – something that Sony can ill afford.

Not surprisingly, the computer ended up being fixed by a local IT guy. Richard almost certainly earns a fraction of Sony’s Executive Vice President Group General Managers, or whatever the title they have to match their compensation packages is, yet he gets the job done.

In Sony we see the Soviet model of management at work – an unaccountable, out of touch cadre of apparatchiks meeting their requirements under The Five Year Plan and are rewarded accordingly.

Just like today’s Executive Vice President Group General Managers with their KPIs and bonuses.

As we all know, the Soviet Union failed in 1991. One wonders when we’ll say the same thing about Sony or the dozens of other large corporations that have lost their way.

Webskills training course

The webskills training course gives you the essential online business skills

The Webskills course is a sixteen hour course, four hours over four weeks, that gives participants the skills to create a basic business digital presence.

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Over the four week course, we cover the basics of setting up a business website, ensuring you’ve protected your business’ intellectual property, the fundamentals of search engine optimisation (SEO) and how to use social media in the enterpise.

At the end of the course the participants will have created a basic online presence for their business or organisation. The course is suitable for staff members, managers, small business operators or those looking at setting up their own venture.

Participants cover

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Choosing the right online tools
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Online security
Listing with search engines
Understanding social media
Developing an e-commerce platform
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Requirements

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More details

Contact Totco for more details on this course or Netsmarts for other ways we can help your business, organisation or community group identify and deal with challenges of our exciting era.