Paul Wallbank – Brilliant Communications

Author: Paul Wallbank

  • Why we should give Gerry Harvey a break

    Why we should give Gerry Harvey a break

    Gerry Harvey’s been having a bad year. This time last year he was moaning about the Internet stealing his business and now his profits are down.

    In Mark Fletcher’s Newsagency Blog, Gerry gets a serve for dragging the entire retail channel down.

    Mark quite rightly points out that Gerry’s problems are of his own making and his chain’s difficulties aren’t necessarily those of the rest of the industry or even shared by individual franchises within the Harvey Norman group.

    While I’ve been as critical of Gerry as anybody else, maybe it’s time to give him a break.

    It’s worth considering how Gerry made his billions. When he started in business in the late 1950s, it was tough for the average person to get credit. At best working families could get something put aside at the local store or enter into an Encyclopedia Britannica style subscription plan.

    Gerry and his generation of retailers changed that. They made credit available to the masses who could suddenly afford to buy household appliances and electrical goods without years of savings.

    I remember my parents buying things from Norman Ross, Waltons or the ACTU’s Burke Street store (Bob Hawke once stepped on my mum’s foot while she was shopping for a sofe) because working class people could get credit there.

    Gerry was at the beginning of the consumer revolution that defined the second half of the Twentieth Century.

    In the late 1980s financial deregulation changed the game again and Gerry’s business took off as credit became even easier to get with new providers entering the market. First we saw three month interest free offers and by the mid-2000s six year interest free deals were available.

    These deals were so good that Harvey Norman franchisees often made more money selling the credit deals than on the actually product that the ‘no interest’ loan had been taken out to buy.

    For Gerry, this was insanely lucrative as his business was able to clip the ticket at almost every level of the retail and distribution chain while moving much of the risk and capital cost onto franchisees and landlords hungry for high traffic anchor tenants.

    In 2008 this entire model changed as the credit boom came to a crashing halt and consumer spending with it.

    Business models based on cheap credit now have to find something else that works and this is what Gerry Harvey is now struggling with.

    To complicate matters, the Internet has changed the distribution model that worked for Harvey Norman and other bricks and mortar retailers. All of them are now having to make a major shift in the sales cultures.

    Adapting to this new world is tough for everybody and we should have some sympathy for Gerry Harvey as our businesses and jobs are being affected by exactly the same forces.

    How Gerry adapts, or doesn’t, could be a bellwether for our own industries.

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  • The clique

    The clique

    A Fortune story about the inner workings of social media service Facebook reportedly claims the business is increasingly dominated by friends of the Chief Operating Officer.

    On Sheryl Sandberg and the circle of friends she has brought into the company: “There’s a term spoken quietly around Facebook to describe a cadre of elites who have assumed powerful positions under the leadership of Zuckerberg’s chief operating officer: They’re FOSS, or friends of Sheryl Sandberg.

    Most tellingly is the quote, “‘You can’t really cross a FOSS,’ says one former senior manager.”

    While this may not be true at Facebook – the reporters are quoting anonymous sources so their story can’t be taken as gospel – when a small, interconnected clique runs an organisation things usually don’t turn out well.

    It’s bad enough when it’s a government agency like a police force or a not for profit like a charity, but in big and small business things are usually worse.

    The main imperative of clique is to protect its members regardless of the damage they do to their organisation or even the global economy, as we saw in the banking crisis of 2008.

    Inside the clique, you often have incompetence, corruption and almost always a strong thread of nepotism. None of this makes for an effective organisation or efficient business.

    As investors, employees, suppliers, customers and taxpayers we have to be on guard against these cliques as they rarely act in the interests of those outside their circles.

    It may not be the allegations at Facebook are true, but this is happening at other organisations right now. It’s probably happening in your government as well.

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  • Omni Channel Buzzwords

    Omni Channel Buzzwords

    Retailer entrepreneur Gerry Harvey yesterday unveiled his strategy to arrest the declines in his home goods chain’s sales.

    One of the key points in his investor presentation was “continued investment in strengthening our Omni channel strategy”.

    When asked exactly what an “omni channel strategy” is, Gerry reportedly admitted that until last week he had no idea what it was.

    For an entrepreneur whose business model is suffering badly in the face of changed markets, Gerry seems to be remarkably flippant about how he and his team are going to react to the challenges.

    Gerry lack of understanding is bad news for his team, because appears there is no management commitment to the major changes Harvey Norman, and many other incumbent retailers, are going to have to make in order to recover the sales and margins they have long been used to.

    The “omni channel strategy” is an interesting beast, which was described by Myers CEO Bernie Brooks last April on ABC’s Inside Business.

    We’re building our own omni-channel approach, which will include everything from kiosks in store right the way through to being able to provide very good office online up to 250,000 items, free delivery.

    What’s interesting with the retailers’ talk of “omni-channel” is the talk of service. Both Myer and Harvey Norman claim customer service is the centre of their strategy but their emphasis in the past has been to reduce customer service.

    The reduced emphasis on service has been part of the decline of the both chains; Harvey Norman could get away while consumers were happy committing to “no-interest for 72 months” finance plans, while Myer steadily declined as their key difference with discount chains like K-Mart and Target was eroded.

    Hopefully both Gerry Harvey and Bernie Brooks will get their omni channel strategy strategies working, though it will be interesting whether both can get their management teams to re-discover the meaning of “customer service”.

    Without getting the service right, their “omni channel strategies” will just appear to be another management buzzword in a declining business.

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  • Competing in a high cost world

    Competing in a high cost world

    It’s often said that Australian businesses can’t compete and the nation can no longer can support manufacturing or high tech industries.

    With the high Australian dollar, many economists, business leaders and politicians have said industries have to adapt to being an expensive economy. Interestingly, few of these experts explain how businesses should, or can, adapt.

    At the recent Kickstart forum I had the opportunity to meet two Australian companies succeeding with high tech products and using the high dollar to their advantage.

    David Jackman of Pronto Software, a thirty year old business intelligence company, is proud of the fact the business he leads does most of its development in Australia. As business owned by it’s employees – Pronto had  an employee buy out in the late 1990s – he sees his role as building the business to last centuries like some European businesses.

    Linus Chang developed his Melbourne based business, Backup Assist, when he discovered the data backup tools built into Microsoft Windows weren’t very good. Taking the basic Microsoft products, he added the features that made these tools usuable at a fraction of the cost of bigger companies’ data backup software.

    Today Backup Assist is sold in 124 countries with the US as the biggest market.

    Both Backup Assist and Pronto find keeping the bulk of the software development in house in Australia makes sure they are producing high quality, effective products.

    Software development isn’t the only sector dealing with the high cost evironment, David Jackman says Pronto has many customers in the Australian manufacturing industry who have adapted to a high cost environment with niche and high value added products.

    Identifying these opportunities is where the challenge lies; what do our businesses do well that customers in international markets are prepared to pay for?

    We also have an advantage in being a relatively open economy with first world standards. This is another reason why investment in new infrastructure like the National Broadband Network is important.

    One thing is for sure, selling low priced commodity products with small margins is not where the future lies, even if the Aussie dollar collapses.

    We have success stories and businesses adapting to being a high cost economy, it’s a matter of understanding how our industries can add value while  do this.

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  • Understanding the virus epidemic

    Understanding the virus epidemic

    Researching last weekend’s post about the Mac Flashback Trojan, I stumbled across a bunch of articles referring to John Gruber’s 2011 “Wolf” post looking at nearly a decade of Mac malware security false alarms.

    One of the rebuttals titled Hey Gruber, You Might Want to Reconsider Crying Wolf is typical, stating;

    Fact is that the day will come when Macs, iPhones, iPads become equal opportunity targets for malware and all those other nasties out there and no amount of quote stuff into a quasi post by John Gruber will change that.

    Nine months after that article was written the Mac malware tsunami is still being breathlessly awaited for by the Big Target school of security experts. Just as it has been for a decade.

    Origins of an epidemic

    The theory that the Mac, along with smartphones, tablets computers and Linux systems, were spared the virus epidemic that plagued Windows users last decade is a based on a misunderstanding of the problem.

    What caused the Microsoft malware epidemic was laughable security in Windows 98, ME and the early versions of XP.

    Users running Internet Explorer with no firewall in Administrator mode – which is how these versions came out of the box – could be infected in minutes. I once saw a Windows XP system infected within six seconds of going on the net, although that was partly because of the ISPs lousy security practices.

    Despite the fantasies of some security “experts”, other software companies like Apple didn’t follow Microsoft’s lax security attitude of the late 1990s.

    Microsoft itself has moved on. After Bill Gates’ Trustworthy Computing memo, the company tightened its security practices and the later versions of XP along with subsequent versions of Windows like Vista were far better protected.

    Big target fallacies

    This is why we won’t see similar malware epidemics on Windows 7, Macs, Linux, smartphone and tablet computer systems regardless of how big the targets become.
    What “Big Target” advocates also overlook is the nature of crime and vandalism; most of it is opportunistic. For every bank that gets robbed by a gang of skilled, patient safecrackers there a millions of old ladies who get mugged for the change in purses.
    Yet according to the “Big Target” folk, there should be a queue of cunning bank robbers standing outside every branch because, as Jesse James said, “that’s where the money is.”
    What Internet users should understand is the nature of the virus threat has changed, today malware writers are looking at using well crafted social engineering scams that trick us into allowing them access into our systems and bank accounts.
    One of the big concerns are rogue apps that plug into our social media services, smartphones or tablet computers – particularly those which ask permission to access our data or share logins.
    A great example of this is a reported piece of malware for Android phones that uses fake Facebook requests to trick users into installing it on their phone which will then dial premium SMS numbers.

    We are the weakest link

    No system is truly secure and usually we, the users, are the weakest point. Serious discussions about computer security look at today and tomorrow’s threats and don’t try to spin past experiences.

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