business advice | Paul Wallbank - Communications Professional

Privileges and princelings

Many companies have developed a culture of executive privilege in an era of easy money.

A strange thing about Australian business reporting is that its often full of gossip and name dropping as any third rate scandal magazine.

In a perverse way, treating business executives like the Kardashians gives the average mug punter – and shareholders – a glimpse into how these companies do business. Like this story in the Australian Financial Review;

Hamish Tyrwhitt was unaware of the latest drama unfolding within the Leighton board as he relaxed in the Qantas First Class Lounge in Sydney on Friday morning.

Indeed, the contractor’s chief executive officer was busy chatting to former Wallabies captain John Eales while waiting to board a flight to Hong Kong where he was due to close a recent deal to build the Wynn Cotai hotel resort in Macau and enjoy the Sevens rugby tournament.

The timing was not good. Tyrwhitt had only just boarded the flight when the news broke that chairman Stephen Johns and two directors had resigned. Tyrwhitt was forced to change his plans and is expected back in Sydney for a board meeting convened this weekend.

Nice work if you can get it.

A few pages further in the day’s AFR is another gem;

One July evening about four years ago, off the south coast of France between Cannes and St Tropez, two men sat in the jacuzzi on the top deck of a 116-foot Azimut motor yacht. It was about 3am and the sea was rough. The spa water was sloshing about and had given the latest round of caprioskas a distinctly bitter taste.

Dodo boss Larry Kestelman was telling his good friend, M2 Telecommunications founder Vaughan Bowen, about the challenges of growing his internet service provider business.

It’s tough doing business when the spa waters are choppy. One expects better from a seven million dollar boat.

That second article raises another point that’s often overlooked, or unmentioned, when reporting Australian business matters.

on Thursday the 14th, something unexpected happened. At 12.30pm, after no activity all morning, shares in the thinly traded Eftel started to rise sharply. By the time the market closed at 4pm, Eftel had soared 44 per cent to 39.5¢. Someone with knowledge of the deal was insider trading.

Insider trading? On the Australian Security Exchange? Somebody had better call those super-efficient regulators who were responsible for Australia cruising through the global economic crisis of 2008.

Somebody obviously wanted their own 116ft luxury yacht or corporate box at the Hong Kong Sevens.

Both of these stories illustrate the hubris and privileges of corporate Australia and its regulators.

One wonders how well equipped these organisations are for an economic reversal when their leaders are more worried about caprioskas and their spots in the first class lounge.

We may yet find out.

First class airline seat images courtesy of Pyonko on Flickr and Wikimedia.

Does Google have corporate Attention Deficit Disorder?

Are Google paying the price of not paying attention to their core business?

The news that Google were releasing a service called Keep designed to store things you find on the web for future reference received a hostile response yesterday.

It seems the company’s dropping Google Reader into the deadpool proved the final straw for many of the tech early adopters who’d invested too much time building their feeds and other digital assets only to find services taken away from them.

This isn’t just Google Reader, various other services are suffering; Google Alerts has become functionally useless while the Frommers guide book franchise is slowly dying after the company bought it from John Wileys.

Corporate Attention Deficit Disorder

Google are suffering corporate Attention Deficit Disorder (ADD) where management find a bright shiny thing, play with it for a while then get bored and wander off.

This is trait particularly common amongst cashed up tech companies. In the past Microsoft and Yahoo! were the best examples, but today Google is the clear leader in the Corporate ADD stakes.

Corporate ADD requires a number of factors – the main thing is a big cash flow to fund acquisitions.

In companies with this luxury, bored managers find themselves looking for things to do with all the money flowing through the door and when a hot new product or market sector appears those executives want to be part of it.

So a company gets acquired or a project is set up and the advocate drives it relentlessesly within the corporation, usually with lots of PR and write ups in the industry press.

Then something happens.

Usually the advocate – the manager or founder who drives the project – gets bored, promoted or sacked and the project loses its driving force within the organisation.

Without that driving force the service stagnates as we saw with Google Alerts or Reader and eventually company closes it down.

This has unfortunate effects on the marketplace, users invest a lot of time in the company’s service while innovators in the affected market struggle to get funding as the investors say “we can’t compete with Google’.

A changed perspective

What’s interesting now though is the sea-change in the attitude towards Google’s Keep announcement – rather than dozens of articles describing how competing services like Evernote are doomed in the face of the search engine giant entering their market, most are saying this validates the existing startups’ investment and vision.

More importantly, most commentators are saying they are going to stick with the services they already use because they no longer trust Google to maintain the product.

This is what happens when you lose the trust and confidence of the market place.

One of the mantras of the startup community is “focus” – focus on your product and the problem you want it to fix. That large businesses lack that focus shows how far from being a lean startup they have become.

Google’s real challenge is to regain that focus. Right now they have rivers of cash flowing through their doors but in an age of disruption, it may well be that they could dry up if no-one pays attention.

Ritalin image courtesy of Adam on Wiki Images

Democratising customer service

How a cloud computing service wants to radically change customer service and business

“Nobody got girls on the helpdesk” says Mikkel Svane, founder of online customer service company Zendesk.

Mikkel hopes to make customer service sexy again as businesses find they have to focus on keeping clients happy.

This is a reversal of management thinking of the 1980s where, as Mikkel says, “customer service is a cost centre, outsource it, don’t spend any time on it and don’t let customers steal any of your time.”

Now the internet gives customers to tell the world about a company’s service, the days of outsourcing or disregarding support are over.

Mikkel Svane and Michael Hansen of Zendesk

Cloud technologies are changing how software is used in business, as Mikkel found when he and his partners started Zendesk.

It became very obvious that building something that was easy to adopt, web based and integrated with email, websites. Something easy to use that didn’t clutter the customer service experience.

Something that moved from managing the customer service experience to focusing on customer service.

We built it, put it out there and customers starting coming.

A lot of these companies thought they could never implement a customer service platform. Suddenly small companies found they could compete with bigger competitors.

The appeal to investors

Having customers signing up proved to be a big advantage in Silicon Valley, no-one knew anything about a Danish company, but with local customers starting coming on board US Venture Capital firms understood what the company does.

That customer base proved powerful as Zendesk has to date raised $84 million dollars over four rounds of VC funding and is looking at a stock market float with an IPO in the next few years.

“Silicon Valley has a great tradition of building businesses.” Says Mikkel, “coming to Silicon Valley was such a big step for Zendesk, in taking it from being some little startup to being a real company that could scale very quickly.”

A question of scale

Groupon is a good example, when Mikkel and his team first met the Groupon team the group buying service was a team of four guys in Detroit. Groupon founder Andrew Mason personally signed off on the initial Zendesk subscription.

“What the hell is this company, we don’t get it.” Mikkel said at the time.

Three years later Groupon was the fastest growing company in history with thousands of support agents on their systems supporting hundreds of thousands of products.

Despite Groupon’s recent problems, Svane is proud of how Zendesk helped the group buying service with growth that no business had seen before.

“With Zendesk they got not only a beautiful, elegant system they also got the scale and the trajectory. Imagine if they’d tried to do that with an Oracle database? You’d have never been able to grow so quickly.”

On being a good internet citizen

In the past we talked about platforms – the Oracle platform, the Microsoft plaftorm – today the Internet is the platform.

“We are a good citizen on the Internet platform,” says Mikkel. “Shopify is a good citizen of the internet platform, these type of tools are easy to integrate. We are all good citizens of the Internet platform.”

Having these open system is the great power of the cloud services, they way they integrate and work together adds value to customers and doesn’t lock them into one company’s way of doing things.

The threat to incumbents

Vendor lock in has been a curse for businesses buying software. The fortunes of companies like Oracle, Microsoft and IBM have been built holding customers captive as the costs of moving to a competitor were too great.

Cloud services like Zendesk, Shopify and Xero turn this business model around which is one of the attractions to customers and it’s why huge amounts of money are moving from legacy solutions to cloud based services.

Another reason for the drift to cloud services is the reduction in complexity, the incumbent software vendors made money from the training and consulting services required to use their products.

Having simple, intuitive systems makes it easier for companies to adopt and use the new breed of cloud services.

Focusing on the business

Mikkel’s aim is to help businesses focus on their customers and products rather than worry about IT and infrastructure. In the long term it’s about helping organisations establish long term relations with their clients.

“Companies today realise that it doesn’t matter how much it matters how much I can sell to you right now, it pales into in comparison of how much I can sell you over the lifetime of our relationship. This ties into the subscription economy. It’s much more important for companies to nurture the long term lifetime relationship.”

Having a long term relationship with customers is going to be one of the keys for business success in today’s economy.

The days of transaction based businesses making easy profits from skimming a few percent off each sale are over and companies have to work on building long term relationship with customers.

Services like Zendesk, Xero and Salesforce are those helping new, fast growth companies grab these opportunities. For incumbent businesses, it’s not a time to be assuming markets are safe.

Recruiting big data

Software company Evolv is an example of how businesses can use big data

One of the predictions for 2020 is that decade’s business successes will be those who use big data well.

A good example of a big data tool is recruitment software Evolv that helps businesses predict not only the best person to hire but also who is likely to leave the organisation.

For employee retention, Evolv looks at a range of variables which can include anything from gas prices and social media usage to local unemployment rates then pulls these together to predict which staff are most likely to leave.

“It’s hard to understand why it’s radically predictive, but it’s radically predictive,” Venture Beat quotes Jim Meyerle, Evolv’s cofounder.

There are some downsides in such software though – as some of the comments to the VentureBeat story point out – a blind faith in an alogrithm can destroy company morale and much more.

Recruiters as an industry haven’t a good track record in using data well, while they’ve had candidate databases for two decades and stories abound of poor use of keyword searches carried out by lazy or incompetent headhunters. The same is now happening with agencies trawling LinkedIn for candidates.

Using these tools and data correctly going to separate successful recruitment agencies and HR departments from the also-rans.

It’s the same in most businesses – the tools are available and knowing them how to use them properly will be a key skill for this decade.

Job classifieds image courtesy of Markinpool through SXC.HU

On being a good Internet citizen

What are the hallmarks of a responsible digital business?

I grabbed a quick coffee with Zendesk founder CEO Mikkel Svane and his Australian manager Michael Hansen in Sydney yesterday where they told me about the company’s story to date.

While I’ll be writing in the interview up in depth in the next few days one thing that stood out was Mikkel’s comment about Zendesk being a good internet citizen.

Those traits of being a good online corporate citizen include open APIs, a transparent culture and giving customers full access to their data.

Online companies have to embrace those principles if they are going to succeed and it’s the key to the fast growth of businesses like Zendesk and other cloud based services.

These principles have been the underpinning of the success of companies like Twitter, Facebook and Google.

What’s interesting with those companies is how they’ve moved away from those principles as they’ve grown and the pressures to ‘monetize’ have increased.

Abandoning those principles opens opportunities for many new players to disrupt the businesses of what have become the market incumbents.

With the pace of business accelerating, the assumption that companies like Google, Facebook and Twitter will retain their positions might be tested as the market moves to providers they can trust.

Those principles of being a good internet citizen may prove to be more important to online businesses than many of their managers and investors believe.

A business lesson from the Catholic Church

The election of Pope Francis shows why the Catholic church is such a successful business. Many of us could learn from them.

The Catholic church may be a two thousand year old institution with medieval beliefs and beset with scandal, but the clerics know how to handle business succession well.

Pope Benedict’s resignation was not only unexpected but also almost unprecedented with it being six hundred years since a pontiff quit before dying on the job.

In many organisations such an unexpected and rare event – dare one use the ‘black swan’ line – would create havoc, or at least paralysis. Instead the clerics handled the process smoothly.

This contrasts with the succession planning in many companies. In larger business even when the CEOs handover is planned, there’s a period of write downs and blood letting as the new leader stamps their authority.

Sometimes it gets very ugly indeed, particularly if the former CEO has been kicked upstairs onto the board.

In smaller businesses, there’s no succession planning at all. Many businesses die when the owner retires if there’s no buyer for the operation.

That shortage of buyers is a major problem for smaller business owners. Many baby boomers have planned their retirements around getting a good sale price for their businesses.

If they can’t get the sale price, the boomer small business owners work until they drop.

Which is what popes usually do.

It’s often said the Catholic Church is the biggest corporation on the planet. Given how smoothly their bureaucracy deals with succession planning, that’s not surprising.

Are Small Businesses becoming Digital Roadkill?

We all agree that the internet is changing business, but how many smaller companies are prepared for the massive changes ahead?

Technology Spectator today discusses if fast broadband initiatives like the National Broadband Network will be good for all small businesses.

Andrew Twaites of Melbourne consultancy The Strategy Canvas posits that many businesses aren’t equipped to compete against global competitors.

The additional competitive pressures that the NBN rollout is likely place on segments of the small business sector that have to date enjoyed a degree of natural protection as a result of their customers’ inability to access super-fast broadband.

Once that natural protection falls away, many small businesses will for the first time be exposed to competition from interstate and overseas businesses

This is a very good point; many small businesses are transaction based service providers who can be easily replaced by lower cost overseas companies, particularly now foreign suppliers are easily accessible through services like O-Desk and Freelancer.com.

Every time I see Freelancer.com’s CEO Matt Barrie talk to a small business audience, I’m surprised the room doesn’t lynch him as he’s describing how their businesses are threatened species and many are living on borrowed time.

One of the reasons why small businesses are threatened is because they are under-capitalised, many simply can’t invest in the technology or training they need to compete.

There’s also a reluctance to embrace technology, that half of all small businesses – in the US, the UK or Australia – don’t have even a basic website.

On a recent holiday in Northern NSW, I checked dozens of tourism businesses’ online presences. Few had a website and almost none had bothered filling in their Google Places profiles, let alone set up social media presences.

Yet almost all of their new customers are looking for them on the web, increasingly through mobile devices or social media services where they are invisible.

Not having a website, local listing or Facebook page are trivial things; but the fact that most businesses haven’t done the basics doesn’t bode well as the speed of commerce accelerates over the rest of this decade.

That many small businesses will be put out of business by today’s changes isn’t unprecedented – blacksmiths were out of job shortly after the motor car rolled out and whale oil manufacturers by gas and then electric lighting.

As Andrew points out, we assume ‘creative destruction’ just disrupts big incumbent corporation. In reality it’s the little guys who feel more pain than insulated executives of big business.

Many of us little guys are going to have to start thinking about adapting to very changed times, the risks of being digital roadkill are real.

Doll roadkill image courtesy of Pethrus through WikiMedia

Beer and 3D printing lead a Belgian town into the future

One town in Belgium shows how new industrial hubs are developing around emerging technologies like 3D printing

While many cities and states are fighting to subsidise declining businesses others are becoming hubs of future industries. The story of Leuven and 3D printing is one of the latter.

A great article and accompanying presentation from Reuters illustrates some of the possibilities with 3D printing technologies.

Most of the article revolves around the Belgian company Materialise whose CEO, Wilfried Vancraen, has been a pioneer in 3D printing.

An interesting upshot of Materialise’s development is how the company’s hometown, Leuven, is promoted by the firm as the ‘world capital of beer and 3D printing.’

Calling yourself the ‘World Capital of Beer’ is a big – and one suspects risky – call in Belgium so it’s not surprising that the town itself doesn’t use the tagline.

Being the world capital of 3D printing though does have some allure of Leuven being able to build itself into one of the world’s hub for the new technology.

Those hubs are a feature of every industrial revolution – whether it’s Silicon Valley and the manufacturing centres of South East China today or the English ironworking and cotton milling hubs of the 18th Century.

For governments looking at attracting job creating industries, instead of desperately trying to attract the old industries of the 20th Century it might be worthwhile to consider what the community has to offer the business leaders of this millennium.

Leuven may or may not become one of the world hubs of 3D printing, but at least the city has a chance – those bidding for car factories, movie productions or prisons are destined to decline even if their bids succeed.

Beer pouring image courtesy of dyet and sxc.hu

Risky business – is crowd funding too rich for investors and innovators

Do recent kickstarter failures show that crowd funding is too risky for most entrepreneurs and investors?

It’s sad when a Kickstarter project fails to meet its promises and the story of the Collusion Pen, a stylus designed for iPads, is a salutary lesson of how many people don’t understand when they buy into or set up a crowdfunding proposal.

The idea behind crowdfunding sites like Kickstarter is that artists, designers and inventors can publicise their projects, interested supporters can pledge funds in return for benefits like advanced previews, a signed book or an early version of version of the product.

For the Collusion pen, it’s the early version that’s upset supporters who’ve complained that the device is unusable in its current form.

Not getting the product when it was promised is standard for Kickstarter projects, late last year CNN Money reported how 84% of the site’s top listed ventures missed their target delivery dates.

The reason for Kickstarter’s apparent failures is that ideas are risky. Often, entrepreneurs and artists overestimate their skills and underestimate the scale of the task they’ve given themselves.

Added to this, Kickstarter is an expensive way to raise capital. When another Australian startup Moore’s Cloud went onto Kickstarter to fund their internet connected light, they found that to cover the $285,000 development costs they had to win pledges worth $700,000.

Moore’s Cloud missed their target and have gone on to raising money independently.

Apart from the those risks we set our expectations too high – we believe the first versions will be perfect out of the box and every idea will make the founder a billion.

In his article The Fake Church of Entrepreneurship, US business founder Francisco Dao discussed how much of the start up community is based up on religious beliefs about the sanctity of founders and that everyone can become rich by selling their idea to a greater fool.

The sad thing is that ideas are like armpits – most of us have a couple and almost all of them stink.

Not that people shouldn’t have a go; having a hare brained idea and making it a reality is the foundation of human progress. It’s just that most ideas don’t work out.

Making matters worse is our inability to evaluate risk; notable in the Sydney Morning Herald story are the consumer and investor protection angles.

If someone isn’t getting what they thought they had been promised, then “the government aught to do something.”

The biggest risk of all to Kickstarter and other crowdfunding sites is that governments will regulate them either as stores or as investments.

As investments crowdfunding projects will be hiring lawyers and bankers to draft densely worded product disclosure statements which will see ventures like Moore’s cloud having to raise a couple of million more to cover their legal costs.

Should crowdfunding be considered as a consumer issue, then projects will have be expected to deliver or face action from consumer protection agencies which would make most nonviable.

The stories of crowdfunding successes have to be considered in the same way as most artistic and entrepreneurial ventures; we hear about the winners, but we don’t hear so much about those who didn’t ‘succeed’.

While we – as consumers, investors and entrepreneurs – don’t think through those risks, we’ll be disappointed in tools like crowdsourcing which would be a shame as its a good way for some ideas to get a healthy start.

Failure image courtesy of cobrasoft on sxc.hu

Retail and the internet of machines

Paypal and eBay are using the Internet of machines to put service station cashiers out of work.

Online retail and payment giants Ebay and PayPal hosted a media lunch in Sydney yesterday to publicise their Australian Business Update.

While eBay dominates the online selling market, PayPal’s position in the payment market place is extremely powerful with Internet monitoring company Comscore reporting in their Digital Wallet Roadmap how PayPal dominates the US market and does likewise in other markets like Australia.

Their update confirms the trends which have been obvious for some time, particularly in how mobile devices are now driving retail. eBay’s research indicates properly implemented multichannel strategies drives six times more sales than just having an online presence.

What was particularly notable with eBay’s presentation was how the Internet of Machines is changing the retail and logistics industries as smartphones and connected point of sales systems are cutting out jobs and middle men.

Paypal are particularly proud of their US partnership with cash register manufacturer NCR that integrates smartphone payments with the point of sales systems in restaurants, convenience stores and gas stations.

eBay illustrated this with their examples of coupon offers being tied to smartphone payment systems so people paying for gas with their smartphone get a voucher offer for various up sells.

Studies in the US have found a $10 offer can result in sales of up to $100. A pretty compelling deal for most merchants.

With these technologies, we’re seeing how connected machines are changing even the most mundane business tasks.

It may well be that the days of the service station cashier are numbered; it’s quite possible that in one generation we’ll have gone from full staffed gas stations to totally automated facilities.

The example of gas station attendants and cashiers is just one example of how automation is changing many retail and sales tasks. It would be a brave person to say their job isn’t safe.

Facebook’s struggle to stay relevant

Are Facebook’s advertising policies alienating users and leaving advertisers unimpressed?

Are we getting sick of Facebook? Tech magazine CNet stirred up the interwebs on the weekend with the claim that Teenagers are Tiring of Facebook a meme was pushed by the New York Times’ Nick Bilton dissecting his experience with the service.

It’s not just teenagers moving away from social media sites though, many adults are getting sick of intrusive adverts and promoted posts getting in the way of the news about family and friends.

As an example, here are the ads taken off the page of one fifty year old woman’s feed.

“I find these offensive” she says, “I’ve been posting my results from a fitness program and now my Facebook page is plastered with ugly weight loss advertisements.”

Clearly the targeted advertisements are working too well and clumsy marketers are destroying the user experience with ugly and offensive ads.

Not that those ads are working as Nick Bilton found when he decided to promote a post to his 400,000 followers.

From the four columns I shared in January, I have averaged 30 likes and two shares a post. Some attract as few as 11 likes. Photo interaction has plummeted, too. A year ago, pictures would receive thousands of likes each; now, they average 100. I checked the feeds of other tech bloggers, including MG Siegler of TechCrunch and reporters from The New York Times, and the same drop has occurred.

When he decided to advertise, his engagement went up by ten times. Leading Nick to conclude that Facebook were suppressing his unpaid posts while pushing the one’s he pays to promote.

Even for advertisers, a few hundred likes doesn’t translate into much of a return.

That suppression of useful posts is one of the reasons teenagers are moving, one 17 year old I asked about why he’s moved from Facebook said the ads cluttered up his feed.

Which leads us to the reason why people use Facebook – they use it to talk to friends and relatives; not to watch ads.

It took commercial radio and television a decade to figure out the right mix of advertisements and contents, a balance that is still tested today. Social media sites are going to have to get that mix right soon.

Facebook has the most at stake and their time is running out.

Using big data to find the cupboard is bare

Yahoo! Chief Executive Marissa Mayer is an example of how modern managers are diving into big data to figure out what is going on in their company

Last week this blog discussed whether telecommuting was dead in light of Marissa Mayer’s banning of the practice at Yahoo.

While I don’t think telecommuting is dead, Marissa Mayer has a big problem figuring out exactly who is doing what at the company and abolishing remote working is one short term way of addressing the issue.

If Business Insider is to be believed, Yahoo!’s absent staff problem is bad.

After spending months frustrated at how empty Yahoo parking lots were, Mayer consulted Yahoo’s VPN logs to see if remote employees were checking in enough.

Mayer discovered they were not — and her decision was made.

Business Insider’s contention is that Mayer makes her decisions based on data analysis. At Google she drove designers mad by insisting on reviewing user reactions to different layouts and deciding based on the most popular results.

If this is true, then Marissa Mayer is the prototype of tomorrow’s top executives – the leaders in business by the end of this decade will be the ones who manage data well and can sift what matters out of the information deluge.

For all of us this is going to be a challenge with the probably the biggest task of all being able to identify which signals are worth paying attention to and which should be ignored.

Of course, all this assumes the data is good quality in the first place.

An assumption we’ve all made when talking about Big Data is that it’s about marketing – we made the same assumption about social media.

While Big Data is a good marketing tool, it’s just as useful in areas like manufacturing, logistics, credit evaluations and human resources. The latter is what Yahoo!’s staff are finding out.

In age of Big Data it may not pay to a slacker, but it’s going to be handy if you want to know what’s going on your business.