Nothing is sadder than a government or business that believes it will gain huge savings through outsourcing.
Part of the 1980s management mindset is that outsiders can do a job better and cheaper than existing staff. Almost always this is proved to be expensively wrong.
The announcement the New South Wales Government will outsource Sydney Ferries is a good example of this. Media reports claim the “government is hoping to save hundreds of millions of dollars over the next decade.”
Advocates of outsourcing always overlook the cost, time and skills involved in supervising contractors.
This is something the banks found in the early days of offshoring services as the claimed massive labour cost savings by moving operations to the developing world were offset by higher supervision costs.
Governments have a bigger problem with outsourcing as the public service generally lacks the contractual and project management skills to effectively specify and supervise major service outsourcing contracts.
A good example of this is the Royal North Shore Cleaning contract where the hospital has seen a fall in hygiene levelsas the contractor attempt to meet their KPIs under an agreement that has been designed primarily to save the area health service money.
Focusing on cost savings when outsourcing is almost always a recipe for failure. In both business and government its rare that a function or operating unit is so badly managed that savings offset the increased management expenses.
This isn’t to say outsourcing isn’t always appropriate. Sometimes those savings are achievable – albeit not as often as proponents claim – and outsourcing can deliver skills that the parent organisation lacks.
Which is another concern about the Sydney Ferries outsourcing. The Sydney Morning Herald article referred to above says the following about the CEO of the winning consortium.
Mr Faurby, who has more than 20 years maritime experience, has never run a passenger service before. But he said he understood what it would take to improve Sydney’s ferries.
”It doesn’t really matter very much if it is a towage, tug company, or a container shipping company, or for that matter a ferry company … what matters is that you have the competencies to run it in an efficient, safe and effective manner.”
Um no. That’s 1980s management school thinking where every business – from airlines to software – can be reduced to selling soap.
Not having experience in running a passenger service with all the customer service issues that come when you’re dealing with the public is a concern. One hopes, prays even, that Mr Faurby and his employers have the wisdom to support the CEO with managers who do have a customer service ethos.
Then there’s the black hole of Australian public transport – ticketing.
While it’s impossible to quantify just how poor Australian governments have proved themselves to be with ticketing systems; Sydney’s convoluted, complex, siloed and passenger unfriendly public transport system adds another layer of complexity that the new management of Sydney Ferries is going to have to deal with.
There’s no doubt though that Sydney Ferries need reform; its management was incompetent and, beyond the usual cheerful deckhands, the staff were surly with little concept of customer service.
Done well, outsourcing Sydney Ferries could be for the better; but the emphasis on cost savings and what appears to be naive management expectations should make taxpayers’ hearts sink.
Customer service gods
After years of neglect, customer service now matters again.
“Treat your customer service people like gods,” says online business advisor Todd Alexander.
One of the conceits of the 1980s business model was that customer service, like training and capital investment, is an expense that should be driven down at all costs.
In corporations, government departments and politics those who dealt directly with the customers, taxpayers or voters were seen to be the low level, low status employees who could be outsourced at the first possible opportunity.
That was great when markets were growing and there was an abundance of low hanging fruit to be plucked from the marketplace.
Now that customers are cash strapped and margins are falling, keeping customers happy becomes more important.
A statistic often quoted is that acquiring a new customer costs five times more than keeping an existing one, that difference may be exaggerated but it’s not far from the truth.
Those departing customers can do great damage to the business as well.
In the 1980s customers had little recourse apart from taking their business elsewhere. Often they didn’t have that choice in sectors where duopolies reign.
Now customers can vent their frustrations to the world on the web or through social media and there’s no hiding from the loss of reputation.
What’s more, many of the businesses that relied upon picking the low hanging fruit of a growing economy, high immigration or increasing consumer debt to find more customers through the last thirty years now find the rules of changed.
Customer service now matters.
Any management that considers customer service to be low status is a dinosaur and will soon be following them.
It’s a good time to be disrupting comfortable business models.
The Free Myth
Free services often come at a cost of your time.
One of the biggest dangers to businesses is the belief that something is “free”.
As we all know, there is no such thing as a free lunch. When another business gives you something for free it’s safe to say there is a cost somewhere.
One of the speakers at the City of Sydney’s Let’s Talk Business social media event stated this when talking about social media saying “I can’t believe all businesses aren’t on Facebook – it’s free.”
Social media isn’t free. We all know the value services like Facebook are mining are the tastes, habits and opinions of their users.
For businesses, engaging heavily in Facebook or any other social media service hands over far more information about their customers to a third party than they themselves would be able to collect.
All of that information handed over to a service like Google or Facebook can come back to bite the business, particularly if a well cashed up competitor decides to advertise at the demographic the business caters to.
The core fallacy though is that these service are “free”. They aren’t.
Every single service comes with a time cost. Every social media expert advises the same thing, businesses have to post to their preferred service of choice at least three times a week and those posts should be strategically thought out.
That advice is right, but it costs time.
For a business owner, freelancer or entrepreneur time is their scarcest asset. You can always rebuild your bank account but you can never recover time.
Big businesses face the same problem, but they overcome this with money by hiring people for their time. In smaller businesses, this time comes out of the proprietor’s twenty-four crowded hours each day.
The computer and internet industries are good at giving away stuff for free, in doing so they burn investors’ money and the time of their users. The social media business model hopes to pay a return to investors by trading the data users contribute in their time.
While businesses can benefit from using social media services, they have to be careful they aren’t wasting too much of their valuable time while giving away their customers to a third party.
Often when somebody looks back on their life they say “I wish I had more time.” They’ve learned too late that asset has been wasted.
Wasting that unreplaceable asset on building someone else’s database would be a tragedy.
Sport’s big problem
Can sports organisations survive a deleveraging economy?
One of the great successes of the Twentieth Century was professional sport.
As television – first free to air TV then subscription pay networks – developed through the 1960s to 90s, the owners and executives found professional sport delivered viewers and advertisers.
Having a sports portfolio was essential for a successful TV network, the leagues knew this and rights fees ratcheted up with every new contract.
The process reached its peak in the 1990s as Rupert Murdoch built his pay TV empires in North America, Europe and Australia.
During the 1980s and 90s we saw News Corporation buy up rights across the world, even founding new competitions like Premier League Soccer in the UK, Super Rugby League in Australia and the UK along with the multinational Super Rugby that allowed Rugby Union to become an openly professional sport.
Any organisation that finds itself sitting on a cash mountain sees its costs accelerate and the sports organisations are no different. The cost of fielding of professional sports teams has soared with huge player salaries supported by armies of assistant coaches, middle managers and specialist assistants.
Broadcasting rights were supplemented by corporate hospitality and sponsorship arrangements, all of which increased exponentially over the last thirty years.
The big problem for professional sport sector is all of these revenue streams are affected by the deleveraging economy. Even more concerning for them is the precarious financial position of many of the media companies who bidded rights up during the 1990s.
News Corporation’s mission of dominating TV markets by buying up sport rights is largely accomplished and the empire is fading along with its founder.
When Rupert Murdoch goes, so too will the world’s biggest driver of sports broadcasting rights. There doesn’t seem to many other broadcasters with the ability to pay the extravagant bills of professional sports teams.
There’s no doubt broadcast rights for sports will remain lucrative, albeit no longer growing, so clubs and competitions with business plans based on big increases of rights payments are going to struggle.
As a consequence, sports organisations are going to become more aggressive in finding revenue streams and we can expect to see them bullying photographers, monstering people uploading clips to YouTube and ejecting those with the temerity to bring their own sandwiches into the few cheap seats remaining.
The problem for sports is their value lies in their engagement with mass culture. If they isolate themselves from the people and society then they’ll find themselves becoming irrelevant.
Like many of the media companies that are now struggling.
Despite the pleas of sports administrators and their tame journalist friends, this doesn’t mean junior sport or the codes themselves will die. Grass roots sport will survive without a layer of obscenely paid professional players and managers suffocating the games.
As business rules are re-written in the 21st Century, all industries are going to have to adapt. Professional sport is no different.
Is the Paperless Office promise about to come true?
For twenty years abolishing paper has been promised. Is the promise about to be delivered?
For as long as personal computers have been around the paperless office one of the holy grails of the IT industry.
Paper is messy, difficult to file or store and cruel to the environment. So being able to move and save information electronically made sense.
Despite the promises of the last twenty years, the quest for the paperless office seemed lost.
While the networked PC gave us the ability to get rid of paper, its advanced word processing functions and graphic capabilities along with the data explosion of email tempted us into generating more paper.
To compound the problem, over the last thirty years paper manufacturers found cheaper ways to make their product which meant the price of paper dropped dramatically just as we found more ways to use it.
So rather than delivering on the promise of eliminating paper, computers generated more than ever before.
Just as it seemed all was lost in IT’s War On Paper, the tablet computer came along. Coupled with cloud computing services and accessible fast wireless Internet, suddenly it appears we might just be on the verge on delivering on those promises of the last twenty years.
At a suburban football game I saw this first hand as I watched the ground officials electronically filing match information with their league.
“This used to be a pile of paperwork that used to take until Tuesday to be filed and collated” the ground manager told me, “today it’s done within half an hour of the game ending with almost no paper involved.”
For amateur sports clubs, money isn’t so much the problem as time. There simply are never enough volunteers to meet the workload of getting a team on field.
This is true with almost any community based organisation – from volunteer firefighters to community kindergartens organisers struggle with rosters and finding helpers.
In business the same resource constraints exist except we know we can fix these problems by paying a worker to do it. The problem there is few businesses have unlimited funds to employ filing clerks and form fillers to handle the paperwork.
By killing paper in the office, we’re making business and the economy more efficient. We’re about to deliver on that promise.
Bill Gates once wrote that in the short term we overpromise what technology can deliver while in the long term we underestimate its effects.
This is true of the paperless office – now that promise is being delivered the effects on business and government will be profound.
Is your business prepared for these changes?
Flunking the Local Search Market
Are we repeating the mistakes of the tech wreck?
At a breakfast last week a business owner told me about his struggle to counter negative reviews about his B&B on Tripadvisor.
There’s little doubt that sites like Tripadvisor and Urban Spoon are important to the hospitality industry, as customers check out reviews of establishments before they make a booking or set off for an evening’s entertainment.
Over the last two years most of us in the industry thought Facebook and Google’s Local Search services – both confusing called “Places” – would dominate the market for these services.
Google seemed to have the biggest advantage as the integration of local search and user reviews seemed to be a no-brainer for the search engine giant.
A combination of poor implementation and anal retentive policies left Google Places stranded. The distraction of trying to slap a “social layer” onto the search platform can’t have helped.
Facebook haven’t fared any better. Much of the problem for the dominant social network has been that users aren’t particularly interested in engaging with businesses unless there’s an incentive like a freebie or prize.
Just last week a US based social media expert was recommending local businesses offer incentives such as “a slice of apple pie” in return for favourable Facebook reviews and likes.
Business owners themselves are finding it too difficult with the demands of too many social networks overwhelming them. This isn’t helped by the services offering confusing products, arcane policies and requiring information being duplicated.
Most importantly though is customers just aren’t using these services. Increasingly it’s clear we want to use custom applications, particularly if we’re using smartphones where it’s difficult to navigate through a social media service’s multiple options.
It could well be that we don’t want to use all in one “portals” – this was the web model that companies like Yahoo! and MSN tried to impose upon us when it became clear that the walled gardens of AOL and The Microsoft Network didn’t work on the Internet.
One of the factors driving the tech wreck of the early 2000s was the failure of those portals as highly valued web real estate proved to be based on faulty assumptions and shaky maths.
The failure of specialised search engines and social networks to expand into mobile and local services indicates many of our assumptions today are flawed.
Could it be that the next popping of a tech bubble is a repeat of the mistaken assumptions we should have understood over a decade ago?
Cargo cults and your business
Do you think the government, China or big business is going to save you?
“We need an interest rate cut” thunders the business media.
“Give us GST relief” plea the big retailers.
“China will boom forever” assert the government economists.
“Big corporations will buy us out for a billion dollars” pray the hot new start ups.
“I’ll win the lottery this week” thinks the overworked cleaner.
We’re all waiting for the big saviour that’s going to rescue us, our business or the economy.
It could be a big win, a big client or a big government spending program to rescue us.
Sadly, should we lucky enough for that saviour to arrive, it may not turn out to be all we expected.
There’s many lottery winners who curse their win while many disaffected founders who watch their startup baby fade away neglectful new owners.
For a lumbering department store, tax changes will do little to save them from market changes their managements are incapable of comprehending.
Interest rate cuts are great for business when customers are prepared to take on more debt but in a period where consumers are deleveraging a rates cut will do little to stimulate demand.
The clamour for interest rate cuts are a classic case of 1980s thinking; what worked in 1982, 1992 or 2002 isn’t going to work the same way in 2012.
What’s more, the Zero Interest Rate Policies – ZIRP – of the United States and Japan are a vain attempt to recapitalise zombie banks saddled with overvalued assets rather than an effort to help the wider economy.
China is more complex and there’s no doubt the country and its people are becoming wealthier and there are great opportunities.
The worry is most of what we read today could have been the wishful thinking written about Japan thirty years ago. Lazily selling commodities to the Chinese while they create the real value is not a path to long term prosperity.
In business we have a choice, we can pray for luck or we can make our own luck.
Some choose to join the cargo cult and pray, or demand, that someone else does something. Others get out and do it.
John Frum gravesite image by Tim Ross through Wikimedia Commons
Undermining the cloud
Google’s broad claim on users’ data risks the viability of their services
Whenever I do a presentation on cloud computing and social media for business, I focus on one important area – The Terms Of Service.
Google’s relaunch of their Cloud Drive product has reminded us of the risks that hide in these terms, particularly with the one clause;
This is an almost identical clause to that introduced – and quickly dropped by file sharing Dropbox – last year. It’s also pretty well standard in the social media services including Facebook.
Basically it means that while you retain ownership of anything you post to Google Drive, or most of other Google’s services including Google Docs you’re giving the corporation the rights to use the data in any way they choose.
While the offending clause does go onto say this term is “for the limited purpose of operating, promoting, and improving our Services, and to develop new ones” there is no definition of what operating, promoting or improving their services actually means.
Not that it matters anyway, as one of the later terms says they reserve the right to change any clause at any time they choose. So if Google decided that selling your client spreadsheets to the highest bidder will improve the service for their shareholders, then so be it.
If you’re a photographer then the pictures you upload to Facebook or Google+ now are licensed to these organisations as are all the documents stored on Cloud Drive.
To be fair this is not just a Google issue, Facebook has similar terms as do many others. Surprisingly just as many premium, paid for services have these conditions as free ones.
Because these Terms Of Service are about establishing a power relationship, there’s usually an over-reach by large companies with these terms.
While an over-reach is understandable, its not healthy where the customer has to trust that the big corporation will do the right thing.
Right now, if you’re using a cloud or social media service for important business information you may want to check that service doesn’t have terms that grant them a license to your intellectual property.
Locking in the mobile market
Where are the next challenges for a phone industry that’s re-invented itself?
Mobile phone carrier Vodafone yesterday announced its purchase of Cable and Wireless, the company that rolled out the telegraph and phone networks that connected Britain’s empire.
Vodafone’s purchase is one of the final phases of the telco industry’s long term restructure where customers – both home and business users – have switched from land lines to mobile devices.
It’s long been acknowledged the profit in this market lies in devices and data usage which is why Cable and Wireless steadily declined over the past quarter century.
While there’s good money to be made in running undersea cables, which is what C & W did, the big profit is in delivering the data over the “last mile” to the customer.
For most customers, that last mile is the radius around a cellphone base station.
In Australia, this is best illustrated by Telstra’s undisguised glee at being able to offload their legacy copper network and backbone services to the government owned National Broadband Network allowing the former land line monopoly to focus on the mobile, data customer.
That data aspect is important too, one of the big changes in telecommunications over the last 25 years has been the rise of data.
A quarter century ago, voice communications were the main traffic of these networks. For companies like Cable and Wireless, data was a profitable sideline with services like Telex and ISDN being lucrative business niches.
Those rivers of gold distracted incumbent telcos in the early years of the public Internet as they tried to protect those expensive data plans and discouraged customers from using the net.
Over time, a new breed of Internet Service Providers rose who could supply those data services customers wanted.
Ironically, the same thing has happened with mobile phone manufacturers and the rise of the smartphone. Unlike the incumbent telcos, they haven’t adapted.
The incumbents phone manufacturers like Nokia and Motorola missed the rise of data communications and the mobile web as the iPhone and Android devices delivered the portable utility that “dumb phones” couldn’t deliver.
For Nokia, that miss appears fatal with the company rapidly running out of cash as their smartphone devices fail in the marketplace and margins collapse in the sectors they still dominate.
Research In Motion – the manufacturers of the Blackberry phone – are in the same trap. While their devices were data orientated they were more akin to corporate “feature phones” where they did one or two things well but couldn’t deliver the full features mobile phone users increasingly wanted.
The rise of the iPhone threatened Blackberry’s market and the arrival of the iPad with applications like Evernote killed most of the product’s demand.
Blackberry and Nokia’s decline while companies like Telstra and Vodafone survive – not to mention massive profits of companies like Mexico’s Telefonica – illustrate the value of government licenses to telcos and the breathing space it gives the management of these licensees.
We shouldn’t underestimate though the risks to all these businesses if they don’t adapt.
Inflating titles, inflated apirations
How job title inflation can affect an organisation
This story first appeared in Smart Company on 19 April 2012.
“She listed her job on LinkedIn as my ghostwriter,” reflected the journalist about his publishing business’ Gen-Y staff member.
The journalist’s lament reflects an unexpected corporate risk in social media; that of employees giving themselves grandiose and sometimes damaging job profiles.
Over the last 20 years, title inflation has been rife in the business world as corporations and government agencies doled out grandiose titles to soothe the egos of fragile management egos.
So it isn’t surprising that many of us succumb to the temptation to give ourselves a grand title online.
In the journo’s case a young graduate working as an editor in his publishing business listed herself as his ghostwriter, risking a huge dent to his credibility among other the lizards at the pub or the Quill Awards.
That business journalist is not alone, in the connected economy what would have been a quaint title on a business card or nameplate is now being advertised to the world.
Making matters worse, we now have tools like LinkedIn and other social media sites to check out a business’ background and who are the key contacts in an organisation.
So what your staff call themselves is now important. It can confuse customers, cause internal staff problems (“how come he’s an Executive Group General Manager?”), damage business reputations and quite often put an unexpected workload on a relatively junior employee.
In your social media policy – which is now essential in any business that employs staff – you need to clarify what titles your people can bestow upon themselves.
As well as making this clear to new staff, a regular web search on your business that includes all of the popular social media sites should be a regular task.
Just as economic inflation can hurt your business, so too can uncontrolled title inflation. Watch it isn’t affecting your operations.
Culture beats strategy
What does the executive car park tell us about a business’ management culture?
Writer and business consultant Joseph Michelli says”Culture beats strategy, in fact it eats it for breakfast and lunch”.
This was one of the key points in a recent webinar about online retailer Zappos and its customer service culture.
Joseph’s right, the culture of an organisation is the ultimate key to its success, if managers and staff work “according to the book” and declaring “it’s not my job” then you end up with a siloed organisation where management are more interesting in protecting and growing their empires over helping customers.
With Zappos it’s interesting how it appears easy the integration into Amazon’s ownership has gone and this is probably because both have service centric cultures.
Both companies seem to have avoided employing Bozos as Guy Kawasaki famously put it a few years ago.
Your parking lot’s “biorhythm” looks like this:
- 8:00 am – 10:00 am–Japanese cars exceed German cars
- 10:00 am – 5:00 pm–German cars exceed Japanese cars
- 5:00 pm – 10:00 pm–Japanese cars exceed German cars
Guy’s German car observation is spot on. When I was running a service business, one measure I used for a potentially troublesome client was how many expensive German cars were in the executive parking spaces, it was usually a good indicator that an organisation’s leaders are more interested in management perks than maintaining their technology.
Another useful measure was where those cars are parked, a good indicator of management’s sense of entitlement is when executive parking spots are conveniently next to the building entrance or lift lobby while customers expected to find a spot anywhere within ten blocks.
It all comes down to culture and when management are more concerned about parking spots and staff about free lunches, you know you’re dealing with an organisation where the customer – or the shareholder – isn’t the priority.
It’s all in the timing
Being first is no guarantee of success if your timing is wrong.
This morning I sat in on a corporate breakfast and heard a well known presenter talk about social media for business owners and managers.
The advice was terrible and what was valid could have come from a 2008 book on business social media marketing.
But the room loved it and obviously the client – a major bank – thinks the speaker’s work is worthwhile. He has a market while many of us who’ve been covering this field for a decade don’t.
Timing is everything in business. Earlier this week stories went around the Internet about how Microsoft could have invented the first smart phone.
Microsoft could well have done it, they tried hard enough with Windows CE devices through the late 1990s and there was also the Apple Newton and the Palm Pilot.
While all these companies could have developed the smartphone in the 1990s it wouldn’t have mattered as neither the infrastructure or the market were ready for it.
Had Microsoft released the smartphone in the mid 199os it would have been useless on the analogue and first generation GSM cellphone networks of the time.
Customers were barely using the web on their personal computers, let alone on their mobile phones, so the smartphone would have been useless and unwanted.
Ten years later things had changed with 3G networks and real consumer demand so Apple seized the gap in the marketplace left by Motorola, Nokia and the other phone manufacturers with the iPhone and now own the market.
Apple weren’t the first to market with a smartphone, just as Microsoft weren’t the first with a Windows-style operating system and Facebook weren’t the first social media platform.
Those who were first to the market stood by while upstarts stole the market they built.
Plenty of people have gone broke when their perfectly correct investment strategies have been mistimed – “the market can stay irrational longer than you can stay solvent” is often proved true.
That’s the same with the speaker this morning; he’s not the first to discover social media’s business benefits but his timing is impeccable.
Being first is no guarantee of success if your timing is wrong.