Category: business advice

Legacy people

Virgin America shows how quickly legacy operations are falling behind their younger competitors

“The problem with legacy businesses is legacy people” said David Cush, the CEO of Virgin America at the Dreamforce conference.

For many organisations this is indeed the problem; that managements, workforces and shareholders are locked into a way of doing business that has worked for them in the past, so when change arrives they are ill-equipped to deal with it.

One of the key take aways from the Dreamforce conference is that the rate of business change is accelerating as technologies like cloud computing and the Internet mature.

For the legacy businesses locked into old ways this means they are going backwards faster than they could imagine.

A good example of this is when Virgin America showed their vision of how customer service works in a connected, social world.

The problem for companies like United and the other legacy carriers with their older aircraft and lumbering IT systems is they simply don’t have the infrastructure to provide these services if they wanted to.

One of the characteristics of 1980s management thinking is under-investing in equipment. ‘working your assets’ by flogging them way past their replacement dates is a handy way to increase profits and management bonuses, but it leaves a business exposed when newer technologies come along.

That’s the problem the legacy businesses, whether they are airlines, banks, telcos or in any other sector. Those who are nimble and those who have invested in new systems can take advantage of the change.

For some of these businesses even if they had the wits, and cash, to make those investments it’s dubious whether they could make the tools work properly.

‘Getting it’ is more than just understanding how to turn on an iPhone or send a tweet, it’s about how these tools can be used in a business.

If you don’t know how to use these tools, or understand the consequences of using them, then the investment is wasted.

For those organisations who are falling behind, they have to start moving quickly or their legacy is the only trace there will be of their existence.

I’m not paid to have doubts

What do you do when the CEO has no doubts?

The Seattle Times has an interesting interview with Microsoft CEO Steve Ballmer this weekend where he discusses what has been one of the biggest years ever for his company.

Midway through the Seattle Times story there’s a telling exchange.

Q: What is Microsoft’s plan if Windows 8 doesn’t take off?

A: You know, Windows 8 is going to do great.

Q: No doubt at all?

A: I’m not paid to have doubts. (Laughs.) I don’t have any. It’s a fantastic product. …

There is no plan B – Windows Phone is running late and their hardware partner Nokia is looking more foolish every day. Last week not only did they flub the launch of their latest phone, but they also managed to alienate the world’s tech media at the event.

It’s nice not to have doubts, but from outside the comfortable corporate headquarters Microsoft looks like they are struggling in this space.

Steve Ballmer might be more credible if he did admit to doubts and at least hint there is a plan B in their smartphone strategy.

Companies need leaders with doubts – doubts about their strategy, about their managers, about the economy and – most importantly – about their own infallibility.

One of the worst aspects of 1980s management ideology was the myth of the CEO superstar. Too many good businesses have been destroyed, and too much damage done to the global economy, by senior executives who have believed in their own infallibility.

Some doubts might help a business, particularly when that company is struggling with some serious threats.

Will write, play and cook your dinner for free

Playing for love is different to working for free.

From the Internets;

Craigslist Ad:
We are a small & casual restaurant in downtown Vancouver and we are looking for solo musicians to play in our restaurant to promote their work and sell their CD. This is not a daily job, but only for special events which will eventually turn into a nightly event if we get positive response. More Jazz, Rock, & smooth type music, around the world and mixed cultural music. Are you interested to promote your work? Please reply back ASAP.

A Musician’s Reply:
Happy new year! I am a musician with a big house looking for a restauranteur to come to my house to promote his/her restaurant by making dinner for me and my friends. This is not a daily job, but only for special events which will eventually turn into a nightly event if we get a positive response. More fine dining & exotic meals and mixed Ethnic Fusion cuisine. Are you interested to promote your restaurant? Please reply back ASAP.

Shamelessly lifted from the Telecaster Guitar Forum via Bob Lefsetz’s blog.

The discussion about Amanda Palmer offering unpaid gigs for local musos on her US tour has been heated and the perspectives are interesting.

What’s missed is the difference between artist and workers – the local violin player or trombonist getting up on stage with Amanda Palmer in Poughkeepsie isn’t going onstage to make a buck, it’s because he or she loves playing and is honoured to get an opportunity to perform with a big act.

On the other hand, one of the sites that’s been critical of Palmer advertised for a “insightful, knowledgeable and talented writers to contribute to the ongoing and ever-intriguing discourse on music and film.”

For submitting three 200 word blog posts a day, the lucky writer will receive a grand payment of six dollars. That’s one cent a word. Plus a cut of advertising revenue.

Should anyone be tempted to think that revenue could amount to much, they should keep in mind the web is awash with crap content that’s worth one cent a word; there’s no reason why any half decent writer couldn’t set up their own blog and stick adwords on it for a better return.

A few decades ago when printing was expensive and distribution networks difficult to set up, indy magazines offering little but an outlet to their writers served a purpose.

Today you can setup an outlet in five minutes on Blogger or WordPress and let the web do the distribution for you.

Any business that relies on free or cheap content is doomed – we’re in a world awash with cheap, crappy content and the public don’t see much reason to pay for it.

That there is no market for crap is something our once esteemed newspapers, magazines and TV stations should keep in mind as they sack subeditors, retrench journalists and increasingly source material that was available on Twitter a day earlier.

There’s a big difference between a musician or blogger creating something for love versus a business ripping contributors off  – one needs a market to succeed, while the other just does it because they want to.

Google tries to drive American business online

Can Google convince reluctant American businesses to move online?

Google’s quest to sign the world’s businesses up to websites stepped into the big time this week with the launch of America, Get Your Business Online.

The US program is based upon the Getting British Business Online program which was followed up with similar projects in Australia and then Texas prior to being launched nationally across the States.

An interesting aspect with the rollout of the various programs has been Google’s choice of partners — in Britain the key supporter was the incumbent telecommunication company BT.

For some reason the subsequent programs have chosen to partner with accounting software companies and small business groups. The US program is no exception.

These partnerships are interesting as the software companies involved are threatened by online cloud services — both Intuit and MYOB have their business models of selling boxed software to small businesses under siege.

While Google regularly cite the Boston Consulting Group’s survey on the importance of websites to business, it seems most small operators don’t care as about half of small businesses don’t care about an online presence most developed countries.

In Australia, the Getting Aussie Business Online fell short of its 50,000 sign up target which indicates smaller enterprises still don’t see the point.

They may be right — for the local locksmith or lawn mowing service a Google Places account may be all they need rather than a relatively high maintenance website.

Part of the problem is that small business proprietors are probably the most time poor people on the planet, so  filling in another set of forms is one of the last things they will do.

Were Google to link Google + for Business to their other services so information wasn’t being duplicated there would be a far quicker and greater take up of their services.

America, Get Your Business Online should be a useful service for some local enterprises but the real challenge for Google is to integrate their services to make it easier for smaller operations to use.

Six billion pairs of socks

How shallow beliefs don’t substitute for economic analysis or business sense

Ever since the days of Napoleon business people have lusted over the idea of selling into the Chinese market – the idea of a billion people clambering to buy just one widget each brings a gleam to the eyes of even jaded entrepreneurs.

When Deng Xaioping opened the Chinese economy in the mid 1980s Australian brewers, Swiss watchmakers and German motor manufacturers rushed into the country believing that a billion liberated peasants would rush to buy expensive beer and watches.

As it turned out, the real opportunities for foreigners were in the other direction. When China joined the World Trade Organisation in 2001 the boom that had already started in the Special Economic Zones along the southern Chinese coast spread across the Eastern provinces as manufacturing from Hong Kong, Japan and Taiwan to find cheaper labour.

300km South-West of Shanghai the city of Datang became “sock town” where local companies manufactured a third of the world’s sock supply.

Chinese sock manufacturers became so competitive that their Japanese counterparts were forced to move upmarket in an effort to secure a position in an industry awash with cheap products.

Today the Chinese sock industry is looking sick as manufacturers go broke and inventories pile up reports The Observer.

Excess capacity is a problem in many industries, particularly motor manufacturing where governments around the world have supported their local producers resulting in a glut of cars and trucks. Socks are no exception to the laws of supply and demand.

The travails of China’s sock industry are a cautionary tale for those who project straight lines for Chinese growth.

Facile assumptions that every man, woman and child on the planet needs to buy two pairs of socks a year, or that China will build millions of steel hungry apartments each year, is not economic analysis and any business built on such shaky beliefs is leaving itself vulnerable when things don’t work out.

The same is true for nations. Hollow assumptions can put an entire economy on shaky ground. Just thinking that every Chinese family needs six pairs of socks doesn’t guarantee economic success.

This is what happens when you rush things

Nokia’s Lumia 920 debacle shows why artificial deadlines don’t work

Nokia are going to release a smartphone with the best camera seen so far on a mobile phone.

Desperate for good news and positive coverage, Nokia decided to announce the Lumia 920 prematurely and their marketing people are forced to fake the videos and sample photos.

Then they get caught.

And instead of having the media fawning over the impressive features of the Lumia 920, Nokia are scorned. A particularly damaging thing in a fortnight where Amazon and Apple have major announcements.

The problem is giving yourself artificial milestones that can’t be met. People take shortcuts to meet those deadlines and debacles like Nokia’s are the result.

Artificial “drop dead dates” are the mark of panic by poor management. One wonders how long this can continue at Nokia.

When disruption meets regulation

Innovation wasn’t meant to be easy, particularly when you’re against vested interests.

Taxi booking applications have been one of the big areas for smartphone developers. Around the world apps for hailing cabs have popped up following the lead of San Francisco’s Uber.

One of the opportunities for copycat developers is that in most places taxis are regulated by the local city or state government, so an app for New York will struggle in Los Angeles, Paris or Tokyo and savvy entrepreneurs can create their own Uber knock off suited to their own location.

The problem is in most places taxis are regulated as a cartel, not a public service. Sometimes that cartel is to protect drivers, sometimes the companies that run the networks and often taxi license holders.

Sydney, Australia, is a good example of the latter two. The New South Wales state government’s rules are designed to protect the interests of the greedy ‘investors’ who’ve bought taxi license plates and the networks who run the booking systems and management of the cabs.

The result is Sydney cab drivers are treated like serf in what can only described as a feudal system while customers have to put up with lost bookings, poorly kept vehicles and high taxi fares.

It’s a lousy deal all round and is a great example of where disruption can change things for the better.

The problem is the incumbents will fight innovation that threatens their cosy and profitable arrangements and the regulators are part of that comfortable alliance.

In New York it looks like the Taxi and Limousine Commissioner does have some of the consumer interests at heart, pointing out that the metered fare is what passengers have to be charged by law. In most cities though, particularly Sydney, protecting the passenger is just another smokescreen for protecting vested interests.

Something that many innovators don’t realise is the power of those vested interests.

In the case of the taxi app developers many of them are about to get a nasty taste of just how vicious incumbent and their tame regulators can be when confronted with a threat to their cosy business arrangements.

Signing off voicemail

Voicemail’s decline is a symptom of the telecommunication industry’s shrivelling profits.

A survey by US phone company Vonage reports cellphone users are ditching voicemail and moving to alternatives.

Messages left on user accounts in July fell 8% while retrievals fell 14% compared to last year.

While those figures may have something to do with the billing practices of US carriers, it shows a much bigger trend in the telecommunications sector away from products which have been very profitable over the last two decades.

Voicemail, like SMS text messaging, has been a lucrative earner for telcos since the arrival of mobile phones.

Users get billed for calling a number then for leaving a message – often with a few delaying menu items to make sure callers get hit with a couple of billing units. In turn the receiver is charged for being notified they have a message, billed again for retrieving it and then pays a monthly fee for the privilege for all of this.

Five bites of the cherry for one phone call – nice work if you can get it.

This entire revenue stream is now dwindling as customers start using Internet based services to send messages. While the telcos charge extortionate rates for mobile data it is still far cheaper per message than the alternatives.

In many ways the profits from voicemail and SMS were a classic transition effect – a profitable window of opportunity opened for a short period when a new technology was introduced. Now those windows are closing.

For telcos, they have to find some profitable new channels. Even if they achieve their dreams of becoming media distributors or even content creators they’ll find both of those fields are far less lucrative than the mobile phone networks of a decade ago.

While telephone companies aren’t going to grow broke soon, today’s data networks aren’t the golden goose many people expect from telcos.

The smart telcos will adapt and survive, the ones who think the good times of a decade ago are coming back soon are in for a miserable future.

Nightlife Computers: Sockpuppets, trolls and fakes

Can you trust what is written on Facebook or online review sites and what are the responsibilities for business on social media sites?

Paul Wallbank joined Tony Delroy for the 6 September 2012 ABC Nightlife technology spot to discuss sock puppets, what they mean on review sites and what this means for businesses using social media as a marketing tool.

If you missed the program, you can listen to the podcast from the Tony Delroy’s Nightlife page.

This week’s sock puppet scandal puts the light on authors’ book reviews on sites like Amazon while other review services like TripAdvisor, Yelp and Urbanspoon continue to struggle with figuring out which reviews are real.

Businesses also have to worry about what people are posting in light of the recent Advertising Standards and ACCC rulings making businesses more accountable with what’s posted on Facebook.

Some of the questions we’ll look at include;

Join us from 10pm, Australian Eastern Time on Thursday September 5 on your local ABC radio station or listen online through their streaming service at www.abc.net.au/nightlife.

We’d love to hear your views so join the conversation with your on-air questions, ideas or comments; phone in on the night on 1300 800 222 within Australia or +61 2 8333 1000 from outside Australia.

You can SMS Nightlife’s talkback on 19922702, or through twitter to @paulwallbank using the #abcnightlife hashtag or visit the Nightlife Facebook page.

Owning the customer

Is it possible to own the customer?

During the tech boom of the late 1990s the early wave of web developers had a business model that required locking customers into a relationship.

Having spent thousands of dollars for designing and building a website, a business then found they would have to spend hundreds of dollars every time they wanted to make even a minor change.

While that model didn’t work out for web designers as new tools appeared that made it easy for customers to look after their own sites, it’s still the ambition of many businesses to ‘own’ as much of the customer as possible.

Department store credit cards, supermarket petrol cards and airline frequent flier programs are all examples of how big businesses try to lock their customers into their ecosystem.

Possibly the dumbest, and most counterproductive all, are the media companies with policies of not linking outside their own websites. The idea is to keep readers on their sites but in reality it damages their own credibility and betrays their lack of understanding how the web works.

The airlines too have discovered the risks in trying to ‘own’ their customers as their devaluing frequent flier programs has irritated and disillusioned their most loyal clients.

Many businesses, particularly banks and telcos, try to tie you up into knots of contractual obligations with reams of terms and conditions. All of this is an attempt to make the customer a slave to their business.

Outside of having a legally protected monopoly, you can’t ‘own’ a customer – the customer has to grant the favour of doing business with them.

They’ll only do business with you if they trust that you’ll do the right thing by your promises; whether it’s delivering the cheapest product, the best service or quickest delivery. The moment their trust begins to slip, you risk losing their business.

Executives who talk of the concept of owning the customer are either working in organisations with little competition or those steeped in 1980s management practices. If you hear them talking like that, it might be best to take your business, and investments, elsewhere.

Owning customers didn’t work for the web designers of the early 2000s and it won’t work for businesses in other sectors. The only way to ensure most of your clients keep coming back is to deliver on what you’ve promised them.

Empathy and the genius salesman

Apple’s Genius training manual shows the importance of empathy and investing in staff.

One of Apple’s great successes has been in delivering services through its stores. Tech site Gizmodo managed to get a peak at Apple’s training manual for their in-store ‘Genius’ technicians.

A word that keeps popping up in the manual is ’empathy’ – as Gizmodo says;

The term “empathy” is repeated ad nauseum in the Genius manual. It is the salesman sine qua non at the Apple Store, encouraging Geniuses to “walk a mile in someone else’s shoes,”

While the Gizmodo writers and many of the site’s readers seem surprised or cynical about this, it’s not surprising for anyone who’s worked in sales or tech support, and the Apple Store Geniuses are doing both.

Empathizing with the customer or caller gives them confidence and builds trust. For someone in sales, listening and emphasizing is how one finds out what the customer really want. On the support desk, putting yourself in the customer’s position makes it easier to diagnose the problem.

That empathy a real return on investment – US Apple Stores earn 17 times more per square foot than the average retail store. The next most profitable retailer is Tiffany & Co who only boast have the revenue.

What Apple again show is that training matters. Every surly computer store assistant, every grumpy flight attendant or bored call centre worker can, with the right training and incentives, be just as effective as an Apple Store genius.

Sadly too many businesses, particularly retailers, see training as a cost and their employees as naughty children. Those businesses have a serious problem.

Without empathy – the ability to put yourself in your customers’ shoes – your business is working with a distinct disadvantage.

A world of criminal sheep

Are we are all criminally inclined sheep that need to fleeced and controlled?

Notorious unpaid blogger Michael Arrington recently described his battle with a bank over direct debit charges.

To overcome a fraudulent recurring charge on his credit card, Arrington cancelled his account only to find the bank moved the recurring charges to the new card, a ‘service’ designed to avoid fraud and save customers the hassle of re-establishing legitimate direct debits after a new card is issued.

Both of those are noble reasons but the core of this philosophy lies in a contempt for customers which can be summarised in two principles.

A customer is;

  1. A sheep to shorn of any available cash through sneaky fees and shady business practices
  2. A criminal

In the 1980s business school view of the world, customers are criminally inclined sheep who have to be regularly shorn to enhance profits and controlled so they don’t go anywhere else.

Only businesses operating in protected environments can get away with this today and the two obvious sectors are banking and telecommunications.

The telco industry long soiled its nest with consumers with dodgy charges and a contempt for customers which reached a peak (nadir?) with the ring tone scams where kids had their phone credits pillaged by fees they never knew they had signed up for.

While those dodgy charges paid the handsome bonuses of telco executives, it proved to another generation of consumers that these companies see their customers as sheep to fleeced on a regular basis.

Ironically it’s that lack of trust that dooms the telcos in the battle to control the online payment markets – their practices of the 1980s, 90s and early 2000s mean few merchants or consumers will trust them as payment gateways.

One of the strengths banks bring to that market is trust. Like cheques, credit cards succeeded as a payment mechanism because people could trust them.

In screwing customers over direct debit authorisations, the banks are damaging that trust as Arrington says “I really don’t think I’m going to be giving out my credit card so freely in the future.”

That’s a problem for businesses as direct debiting customers have been a good way to ensure cash flow and reduce bad debts but when clients perceive there is a high risk of being ripped off they will stop using them.

Businesses that insist on direct debits will be perceived as potentially dodgy operators who rely on locking customers into unfair contracts rather than providing a decent service for a fair price.

So the banks’ position of legal power works in their short term interest and against them – and the merchants using their services – in the longer term.

While bank and telco executives with safe, government guaranteed market positions will continue to treat customers like criminal sheep it’s something the rest of us can’t get away with.

The winners in the new economy are those who deserve to be trusted by their customers and users, if you’re abusing your market and legal powers then you better hope politicians and judges can protect your management bonuses.