Jan 312014
sales going cheap

Does tying together two lame men give you an Olympic sprinter?

It’s quite common in the business world to see two second rate companies merging in the hope that their combined market share will give them enough momentum to overcoming the market leader.

The tactic rarely works as the businesses running third, fourth or fifth in a market are usually doing so because they have ordinary products or indifferent management rather than any inherited size disadvantage.

Merging two second-rate companies usually results with a pair of competing silos of mediocrity where the former workforce and management of the original business squabble over power in the new entity.

Far from being more competitive, the merged company is even more distracted with internal politics and power plays.

The story that Australian department store Myer proposed a merger with its rival David Jones is a very good example of this as two poorly run companies whose managements that have abjectly failed to adapt to the modern times, try to paper over their chronic problems by merging.

Both companies have failed internet strategies – Myer’s website managed to collapse during the Christmas sales season and no-one could be bothered fixing it for over week.

Along with lousy internet strategies, both companies have underinvested in IT systems leaving their point of sales and logistics systems antiquated and incapable of meeting modern customers’ needs.

Probably the greatest mistake that Myer and David Jones’ management made though was a focus on cutting costs through reducing sales staff.

The resulting lousy and often pathetic service resulted in both brands being seriously tarnished and had the effect of driving high value customers away.

Further damaging the stores reputation was the tactic of offering perpetual sales which trained the customers that would still shop with them into waiting for goods to be marked down rather than paying full price.

Merging the two operations would have done little to resolve any of the long term management failings of the two businesses, although no doubt there would have been some fat advisors fees for some of the boards’ friends.

Nothing fixes poor management better than getting rid of the poor managers, merging two poorly run business like Myer and David Jones does nothing.

Retailers failing as their poor management struggles to deal with changing marketplaces is an international problem, as this story about US chain Sears illustrates. The Australian experience though is a classic case study of two poorly led organisations trying to pretend their failings can be fixed through mergers.

Resolving the problems of troubled companies like Sears, David Jones and Myer involves having good management and smart investment, merging with a similarly troubled organisation solves little except perhaps putting off the day of reckoning.

Mar 192012
how businesses can use crowdsourcing and the web

One of the consequences of the Internet becoming accessible to the most of the world’s population is the rise of crowdsourcing.

Crowdsourcing, the concept of tapping the wisdom or skills of large groups of people, changes the economics of many industries.

Getting Results From Crowds by Ross Dawson and Steve Bynghall look at how crowdsourcing works and the strategies for those who want to use crowdsourcing services and those providing them.

An important part of the book for those new to the concept to crowdsourcing are the comprehensive definitions of exactly what it is, the benefits, the ethics and situations where it may not work.

In examining the pitfalls, Dawson and Bynghall make Getting Results From Crowds a valuable guide that gives a realistic view for managers, business owners, entrepreneurs and activists to evaluate where crowdsourcing works best.

A refreshing point with the book is that it doesn’t fixate on price; much of what has been written about crowdsourcing has focused on “free” services where organisations call groups together to contribute their time.

While there have been some notable successes in this – Wikipedia and the Guardian newspaper’s corralling its readers to evaluate the UK Parliamentary expenses scandal are two – Ross and Steve point out in their Key Principles of outsourcing that cost should not be the driving factor;

The initial attraction to crowdsourcing for many businesspeople is the potential reduce costs. While this is a valid objective, minimizing fees paid rarely leads to optimal outcomes.

Where the guide does miss the mark is the sheer scope of what the authors try to cover and many of concepts discussed don’t sit under the crowdsourcing definition but are more akin to outsourcing, or as one of the new buzzwords calls it, cloudsourcing.

Many of the concepts discussed in the book are more about using crowds to tender for a project such as service marketplaces like O-Desk and Freelancer.

One of the problems with outsourcing is that many businesses and government organisations don’t have the skills required to specify, select and manage outsourced staff. Ross and Steve identify this and devote most of the book to the challenges of managed outsourced and crowsourced projects.

Getting Results from Crowds is an important book for those wanting harness the global workforce effectively for their organisation and business.

If you’re considering using crowdsourcing or outsourcing platforms, Getting Results From Crowds is a good starting place for understanding how to use these tools.

Feb 072012
John Mauldin looks at the end of the debt supercycle in the endgame

“There are no good choices – only bad ones” could sum up John Mauldin and Jonathan Tepper’s Endgame which looks at how our economies will evolve the end of the late 20th Century debt “supercycle” that has driven the world economy for the last fifty years.

Endgame examines the choices that confront governments, societies, businesses and investors as the world economy adapts to the realities of the West’s aging populations and excessive debt levels.

Much of Endgame relies on This Time Is Different by Carmen Reinhart and Kenneth Rogoff which the examined eight centuries of financial crises. While Reinhart’s and Rogoff’s conclusions are that speculative bubbles driven by debt almost always result in a banking crisis and painful economic restructure, each episode does have unique characteristics.

In each case governments have three basic choices; reforming spending which is rare and maybe impossible given the debt levels in many nations, inflating debts away as Western governments have done since WWII or through outright defaults which have been associated with less developed nations.

As we see with the convulsions the European Union is currently going through and the massive support given to banks around the world since the 2008 banking crisis, the default option is the one which governments will avoid at all costs.

While the bulk of the book concentrates on the US, John does dedicate several chapters to the how the debt endgame will play out in other nations including Japan –“a bug in search of a windshield” – the UK, Eastern Europe and Australia, where he finds a massive property bubble that he believes could be the most spectacular endgame scenario of all.

The clear lesson from Endgame is the post World War II social compact of working taxpayers supporting the aged, the sick and unemployed is over and was only propped up the illusion of wealth generated by loose credit and financial engineering throughout the 1980s, 90s and early 2000s.

Some are hoping the Chinese economy can provide the global demand that was provided by US consumers. While Endgame doesn’t specifically look at this aspect, it’s unlikely China’s economy can do this.

With consumers and governments now exhausted by debt and at the limits of what they can spend, the assumptions that have driven the economy along with our investment and consumption patterns of the last fifty years no hold true.

Endgame is primarily a book for investors and John Mauldin’s emphasis is on where the safest investments will be in at the end of the debt supercycle. His view is it depends on whether governments choose to eliminate their national debts through deflation or inflation.

For business owners, wage earners and retirees this is an important question too and Endgame describes what the consequences for everyone are under either scenario.

The message of Endgame isn’t overwhelming negative; John Mauldin also looks at where the opportunities will lie after the credit endgame plays out. “We don’t know where the jobs will come from, but they will come” is another theme of the book.

Whether you’re an investor or a business affected by the changing economy or building those businesses of the future, this is an important book for understanding the changing economic world in which we live.

Jan 252012
How do we deal with our information overload

We all know a diet of fast food can cause obesity, but can consuming junk information damage our mental fitness and critical faculties?

In The Information Diet, Clay A. Johnson builds the case for being more selective in what we read, watch and listen to. In it, Clay describes how we have reached the stage of intellectual obesity, what constitutes a poor diet and suggests strategies to improve the quality of the information we consume.

The Information Diet is based upon a simple premise, that just as balanced food diet is important for physical health so too is a diverse intake of news and information necessary for a healthy understanding of the world.

Clay A. Johnson came to this view after seeing a protestor holding up a placard reading “Keep your government hands off my Medicare.” Could an unbalanced information diet cause a kind of intellectual obesity that warps otherwise intelligent peoples’ perspectives?

The analogy is well explored by Clay as he looks at how we can go about creating a form of “infoveganism” that favours selecting information that comes as close from the source as possible

Just as fast food replaces fibre and nutrients with fat, sugars and salt to appeal to our tastes, media organisations process information to appeal to our own perceived biases and beliefs.

Clay doesn’t just accuse the right wing of politics in this – he is as scathing of those who consider the DailyKos, Huffington Post or Keith Olbermann as their primary sources as those who do likewise with Fox News or Bill O’Reilly.

The rise of opinion driven media – something that pre-dates the web – has been because the industrial production of processed information is quicker and more profitable that the higher cost, slower alternatives; which is the same reason for the rise of the fast food industry.

For society, this has meant our political discourse has become flabbier as voters base decisions and opinions upon information that has had the facts and reality processed out of it in an attempt to attract eyeballs and paying advertisers.

In many ways, Clay has identified the fundamental problem facing mass media today; as the advertising driven model requires viewers’ and readers’ attention, producers and editors are forced to become more sensationalist and selective. This in turn is damaging the credibility of these outlets.

Unspoken in Clay’s book is the challenge for traditional media –their processing of information has long since stopped adding value and now strips out the useful data, at best dumbing down the news into a “he said, she said” argument and at worse deliberately distorting events to attract an audience.

While traditional media is suffering from its own “filter failure”, the new media information empires of Google, Facebook, Apple and Amazon are developing even stronger feedback loops as our own friends on social media filter the news rather than a newsroom editor or producer.

As our primary sources of information have become more filtered and processed, societal and political structures have themselves become flabby and obese. Clay describes how the skills required to be elected in such a system almost certainly exclude those best suited to lead a diverse democracy and economy.

Clay’s strategies for improving the quality of the information we consume are basic, obvious and clever. The book is a valuable look at how we can equip ourselves to deal with the flood of data we call have to deal with every day.

Probably the most important message from The Information Diet is that we need to identify our biases, challenge our beliefs and look outside the boxes we’ve chosen for ourselves. Doing that will help us deal with the opportunities of the 21st Century.

Clay A. Johnson’s The Information Diet is published by O’Reilly. A complimentary copy was provided as part of the publisher’s blogger review program.