Nov 302015

Quartz magazine describes how the American middle class has lost its taste for mindless consumerism. Companies in sectors as diverse as department stores, motor manufacturers and restaurant chains are being caught by surprise as consumers turn away.

As a result business models based on selling ever increasing amounts of cheap products are now being questioned as consumers look for better quality goods and experiences over volume.

This change in consumption patterns should concern both governments and businesses as the mindset the assumptions underpinning planning decisions, infrastructure provision and revenue projections are based upon known public behaviour.

Changed consumption patterns mean new business models, the old thinking is going to fade with the old customer mindsets.

Nov 252015

Are we seeing a new digital divide develop between big and small businesses, particularly in areas like retail and hospitality?

This thought occurred to me during a radio spot earlier today where we were talking about Apple Pay’s Australian launch. Many small businesses don’t have the capital or expertise to implement many of these new technologies.

A number of factors contribute to this including the legacy systems installed in small businesses, the proprietors having a poor understanding of technology and, most importantly, the lack of either capital for reinvestment or cashflow to fund the monthly charges that are standard for cloud computing services.

The expensive cloud

One unstated factor with cloud computing services is how the cost of services add up. For example a Premium 10 Xero customer with Receiptbank attached is looking at a $100 a month in charges. It’s not hard to see how adding cloud based Point of Sale, rostering and customer service software could see a small business incurring $400 a month in fees, throw in Salesforce and you could be looking at a very expensive exercise.

No doubt for those companies that can afford these services this is money well spent but for many margin or low turnover businesses, the charges could be a deal breaker.

Spaghetti Junction

Another aspect to the cloud services is the myriad of different platforms that need to be stitched together in most businesses, one cloud service founder calls it “digital spaghetti.”

Managing this bowl of complexity isn’t easy and raises a number of business risks as different services apply varying policies and practices to the data they collect and store. A breach or service failure at one could cause a ripple effect through all business operations.

For many small business owners, particularly older proprietors, managing this complexity is intimidating if not downright scary.

It may well be there’s a number of opportunities for a canny service provider to offer an out of the box small business solution, but for many older small operators with limited capital and restricted cashflow affording such a product might also be difficult.

The risk though for those businesses is they will find themselves falling further behind as markets, consumer demands and the workforce’s expectations evolve. A business digital divide could be fatal for those caught on the wrong side of it.

Nov 142015
which investment choices right for your business

HR startup Zenefits is the latest tech unicorn to feel the wrath of an investor downgrade.

It’s becoming clear that even if the current Silicon Valley boom isn’t over then at least the mania is draining from the market.

For businesses looking for investor funds, this is bad news as money is going to be increasingly hard to come by. Making matters worse, a funding shortage will cause some of the companies with high burn rates to go broke which will increase investor caution.

We may be about to see a lot of the tech startups looking closely at how they are spending their money and that may not be a bad thing.

Nov 062015

Crowdfunding is not for every business or project, however the great story on the success of Flow Hives shows how it can be done right.

Flow Hives, based on the North Coast of the Australian state of New South Wales, is a father and son business that has cracked the way for consumers to raise bees and get fresh honey from the hives without having to suit up.

There’s a few notable points in Flow Hives’ story  that challenges a lot of the basic wisdom about starts ups and funding we’re hearing at the moment.

Taking the long path

Flow Hives’ founders,Stu and Cedar Anderson, spent ten years getting the basics right. That’s a long time to get a Minimum Viable Product to the market.

On top of that, they were experienced bee keepers, not keen young outsiders looking to ‘disrupt’ what they saw as a staid industry.

Carefully choosing support

Like all good Australian businesses, the Andersons’ first stop was at the government where they found the support programs were too cumbersome and onerous. Another problem they’d have encountered with that path would have been the funds available are trivial compared to the time spent on compliance.

They found a similar thing with the courting of investors being too much of a distraction and, rightly, saw that VC and seed money is actually quite expensive. This made crowdfunding a viable options.

Selecting production methods

While 3D printing worked for prototypes it didn’t scale for production runs. Knowing they’d need injection moulding for their plastic parts, the Andersons chose a local supplier rather than dealing with the lowest cost operator in China so they would have better control over their supply chain.

Coupled with choosing a local supplier for their plastic components the Andersons’ also chose a US supplier for the wooden enclosures based upon the service they received.

Going with trusted suppliers meant they were able to get a good product to market quickly. When a Chinese company attempted a cheap imitation it failed because of the shoddy quality.

The Flow Hive story is a good reminder that the principles of the today’s tech startup culture are only applicable to small group of the businesses in specific sectors.

In a diverse economy, there’s many different other business principles and models that might apply. Trying to shoehorn one type of business into a different model may well be a mistake.

Oct 262015
business confidence is essential to the cloud

“The cardinal sin of the computing industry is the creation of complexity,” is quote attributed to Oracle founder Larry Ellison and often repeated at the company’s Open World forum which I’m attending at the moment in San Francisco.

For the computer industry that complexity has been a very profitable profitable business with everything from the local computer shop through to the big technology vendors and integrators.

One of the biggest beneficiaries of that complexity were the salespeople, big complex enterprise deals meant big commissions.

With the shift to cloud services and apps, those fat margins and commissions have evaporated, leaving the lucrative old models of business stranded. IBM are probably the greatest victim of this while Microsoft are, once again, showing the company’s ability to evolve in the face of a fundamental market change.

For the salespeople the days of fat commissions are over, with thinner margins it’s not possible to pay big lump sums for winning contracts.

The simplification of the computer industry is changing the fortunes of many IT businesses, but that change isn’t limited to the tech sector or their salespeople as those fundamental changes are rippling into other sectors.

A constant claim by Internet of Things evangelists is that the IoT will squeeze inefficiencies out of businesses and this is exactly what we’re seeing with cloud and mobile based services like Uber and AirBnB.

If you’re in a business that profits from market inefficiencies then it might be time to figure out how to survive in a low margin environment. The challenge facing companies like Oracle is one whole industries are now having to face.

Oct 112015
Personal computer Dell manufacturer

Two struggling tech giants are reportedly set to merge with persistent rumours that Dell is about make an offer for storage provider EMC.

Both companies have been hit by shifts in the computing industry with cloud computing undermining both businesses, Dell was also hit by the collapse of the Windows upgrade cycle which changed the buying patterns of computer purchasers.

A combined company offers some theoretical advantages in bringing together one of world’s biggest server companies with a storage business, however it’s difficult to see how the two businesses combined would slow the decline of the segments both are strong in.

Mergers can slow the decline of companies like EMC and Dell, but without innovating and finding new opportunities to exploit it’s unlikely they can recover lost ground.



Sep 302015

Businesses would be wise to stop telling people what they should want and let customers tell them what want says Shel Israel in his latest book, Lethal Generosity.

In this book, Israel’s previous works include Naked Conversations and Age of Context which were both written in collaboration with Robert Scoble, he looks at the technological and social changes affecting business and how they can adapt to a rapidly evolving marketplace.

Key to that evolving marketplace is the explosion of data offering businesses deep insight into their customers. as Scoble describes in Lethal Generosity’s introduction in talking about social analytics service Vintank;

VinTank was acquired by a big PR agency that wants VinTank to do for all sorts of industries what it has done for the wine industry. Are you a restaurant or a winery ignoring that data? Go ahead and keep doing that for a decade. Your competition won’t.

Israel illustrates the need to watch the marketplace in citing a campaign where Canadian brewer Molsons completely wrong footed an oblivious competitor, something similar to how one bank discovered a rival’s successful marketing campaign through real time bank deposits data described  at the recent Splunk conference.

Focusing on the customers

A customer centric outlook, not looking at competitors but focusing on what consumers want is key to success in the new economy, Israel believes. This is enhanced by technologies that allow both products and marketing to be personalised as shown in the chapter detailing how retailers and airports are using beacons and data analytics in their operations.

One good example is AirBnB, while Israel trots out the ‘biggest hotel chain’ in the world fallacy that’s pervasive among commentators, its effects on the established industry has been profound and have forced hospitality operators around the world to re-evaluate their business models.

Israel suggests the best response for businesses affected by the ‘Uberization’ of their industries is to adopt the social and analytic tools and strategies being used the upstart businesses and he provides a wealth of examples.

Seamless sales

Tapingo, the food ordering service for US college students, illustrates the seamless experience that consumers are increasingly demanding in their shopping, business and leisure activities. Israel cites how Tapingo’s merchant partners are seeing an in-store traffic boost of 7 percent and a gross profit rise of 11 percent as a result of using the service.

Shel also illustrates some of the failures in deploying new technologies, specifically London’s Regent Street Alliance that failed due to poor execution and a failure to engage the marketplace.

One of the weakness in the book – which Israel acknowledges – is its focus on US, and specifically Bay Area, case studies. While there are some non-North American examples such as Australia’s Telstra and China’s Alipay, most of the examples cited are of companies based in or around San Francisco and Silicon Valley.

Focus on Millennials

Another weakness of the book is the over-focus on Millennials or Digital Natives. While this group is important that obsession risks Israel’s message being pigeonholed amongst the noise of poorly thought out pop demographics and poor analysis that marks much of the discussion around changing tastes and habits between generations.

Israel’s point that the post 1982 generation will soon outnumber older cohorts in both the workforce and the marketplace in the near future though is an important aspect for businesses to keep in mind with the safe certainties and predictable customer behaviour of the baby boom era being long gone.

However the shift in consumer and workplace behaviour is just as pronounced among all the post World War II generations as technology and the economy evolves in the early 21st Century. Focusing on the younger groups risks missing similar shifts among older members of the community.

The value of customer service

Ultimately though, Israel’s message is about customer service. Shel himself flags this is not new, in describing the competition between hiking goods suppliers The North Face and Sierra Designs in 1970s Berkeley.

What is different between today’s businesses and those of forty years ago is technology now allows companies to deeply understand their customers and provide customised marketing, products and experiences to the connected consumer.

For the business owner, manager or entrepreneur, Lethal Generosity is a good starting point to understand the forces changing today’s marketplace. The case studies alone are worth considering for how an organisation can adapt to a rapidly evolving world with radically shifting customer behaviour.