Category: business advice

Killing credibility

One dumb campaign can hurt a brand

Microsoft’s Smoked by Windows Phone Challenge aims to show their mobile phones are the fastest on the market.

Unfortunately if you beat them, it appears you might not win the prize as Sahas Katta discovered.

Going back on a prize in a competition that already looks somewhat biased doesn’t just hurt Windows Phone’s credibility but it hurts the whole company’s – it looks cheap, lame and petty.

Realising the damage this does Microsoft’s brand, evangelist Ben Randolph offered Sahas a laptop and phone, although already the botched promotion has probably already hurt the product.

Windows Phone is a “must succeed” for Microsoft and that company would stage poorly thought out stunts with high chance of backfiring is disappointing given what is at stake for them.

Trust and reputation and the hardest things to earn and the easiest to squander, Microsoft’s management needs to be careful with this.

Hopefully Microsoft will show us some compelling reasons to buy an alternative to an iPhone or Android handset beyond dodgy marketing stunts.

A website can’t save a dying business

Online tools can’t fix an organisation’s structural problems

The last week has seen some interesting changes in the local online business community.

Embattled department store David Jones’ announced they are following Harvey Norman into an “omni channel strategy”.

Harvey Norman chief executive in turn appeared on national television to state the “internet drives no sales.”

In the political field, it was reported the Australian Labor Party are looking at using Blue State Digital tools to counter voter and member apathy.

Each one in it’s own way illustrates how organisations can be distracted by shiny new technology while ignoring much deeper problems.

In the case of David Jones, the department store ignored their core competencies and tried to ape their down market competitors in milking the financial services cow.

This worked fine while they could offer 24 and 36 month interest free deals and as soon as their partners American Express started charging a monthly “Administration Fee” that business evaporated.

One of DJ’s down market competitors is Harvey Norman, co-founder Gerry Harvey has spent his life building a fortune based upon providing cheap credit to consumers.

It was always going to be a mistake for DJs to compete with Harvey’s as Gerry is far better at the business than the well connected, genteel board of David Jones and their snappily dressed friends in the store’s executive suite.

Worse for DJs, the whole strategy alienated their core markets and while management focused on financial services customers went elsewhere to find the quality goods and services that the upmarket department store should be providing.

For both though, the financial services business model is now fading as the 20th Century debt supercycle comes to an end; consumers no longer want to load up on “buy now, pay later” schemes.

So all the talk of “omni-channel strategies” really doesn’t address the underlying weaknesses in both business.

This disconnect with reality is true in politics as well where the ALP is reported to be considering using the Red State Digital tools that Barak Obama used so well in his 2008 US Presidential campaign.

While the tools are impressive, they don’t address the problem that the electorate – and the member bases of the major political parties – have become rightly disillusioned and disconnected from the political processes that exclude everyone except an increasingly smaller circle of cronies and insiders.

The only good thing that will come of using US political communications tools in the spectacular eruption the first time one of the ALP’s factional warlords encounters a grass roots online campaign like The Great Schlep.

Heck, the resulting furore might even see some of the apparatchiks distracted from partying and whoring on their union credit cards for a day or two.

All the frivolity aside, the reality for the Australian Labor Party, David Jones and Harvey Norman is their problems are far deeper than a well designed website and impeccably executed social media strategy can fix. These organisations need major rethinks about how and why they exist.

It doesn’t matter how much money you throw at the web or how effective your social media strategy is – if the foundations of a business are shaky then a nice “omni-channel strategy” aren’t going to fix things.

For some of organisations, a failure to embrace the online world may be one of the causes for their problems, for many though there are far more basic issues they need to address.

Overstuffing the social media goose

Businesses are struggling with too many online services

“Small business has to get on Pinterest” urges the social media advisor.

“Oh no, not another of these social media thingummies” thinks the business owner or marketing manager.

Pinterest is just the latest of a dozen online services that businesses have been urged to join in recent years. An incomplete list would include the following;

  • Pinterest
  • Google Plus
  • Facebook
  • Facebook Timeline
  • Quora
  • Color
  • Yelp
  • Tumblr
  • Google Places
  • True Local
  • Blogging
  • LinkedIn
  • LinkedIn Groups
  • Twitter

The question for the time poor business owner or under resourced manager is “where do I find the hours for all this?”

It’s not just smaller businesses either – most corporations don’t have the resources to dedicate to all of these services, let alone provide the 24×7 coverage many are beginning to expect.

When it comes to online services and social media businesses owners and managers are like geese being stuffed for foie gras, they’ve had so much stuffed down their necks they can barely move.

Like the foie gras ducks, businesses have become glassy eyed – when someone tells them they have to sign up to another online service they just switch off.

We’ve reached the point where are too many networks for event the most underemployed social media expert to handle.

For those advocating social networking or other online services for business, it’s time to start acknowledging the time poor reality of most businesses and consider exactly which services are best suited for the organisation.

In businesss it’s not time to switch off, that could be the worst thing to do as so many new ways of talking with customers are developing.

Instead of feeling overwhelmed, it’s time to start carefully considering which services will work best with your markets, products and staff and choose carefully.

The days of just charging into the latest social media sensation are over, these services are growing up and they have to prove its worthwhile for businesses – or individuals – to invest their time.

David Jones’ wasted decade

Poor decisions by unaccountable management are killing industry icons

In 2001 Australian retailer David Jones shut down their website.

Back then, the future was clear; profits were in financial services and certainly not in online sales or investing in improved stores and service.

Today the company released their strategic review that looks forward to financial years 2013 and beyond. You can downloaded it from David Jones’ investor website.

On Page 13, they show just how far David Jones has fallen behind their international competitors. Less that 1% of DJ’s sales are online compared to 4.5% of the UK’s House Of Fraser and 13% of John Lewis.

Australian executives claim they are in a global market for their talents which is why they deserve world standard remuneration. David Jones’ results show how hollow that mantra is.

The problems start with the board, five of the eight current David Jones directors were with the company when that decision was made in 2001.

None of them have been held to account.

David Jones illustrates the weakness in Australia’s business sector – largely unaccountable boards answering only to institutional investors who themselves have grown fat and lazy on clipping the compulsory superannuation ticket.

One hopes the some of the competitors who are displacing flaccid incumbents like David Jones are based in Australia or the locals may soon find that many of these sectors, not just in retail, will go offshore to better run companies.

Milking the dead cow

How Sensis killed itself and the lessons for Australian business

Many big Australian businesses seem untouchable as they dominate their markets to degree almost unknown in most other developed countries. As the story of Sensis shows, Australia’s big duopolies may not be as strong as they appear.

The last few months have been tough for Sensis; revenues last year fell nearly 25%, the once strong business was folded into the latest incarnation of Telstra Digital Media and now the CEO Bruce Akhurst has departed after seven years.

What could have been a dynamic business is now shriveling away, what went wrong?

Milking the revenue cow

Bruce did a good job of keeping revenue coming in during a period that the then owners, the Federal government, wanted to maximise the book value of Telstra before its sale.

Year upon year Sensis could be relied upon to squeeze more money out of the businesses advertising in it.

Management were focused on extracting revenue from the existing client base rather than responding to the obvious threat from online search.

Expensive distractions

When senior management decided to respond to the online world, they were sucked into unnecessary and expensive distractions; the most notable being the 2005 launch of Sensis Search where the then Telstra CEO – the disastrous Sol Trujillo – famously sneered “Google Schmoogle”.

Three years and hundreds of millions of dollars later, Sensis admitted defeat. By then the small business advertisers who were the life blood of the directory market had woken up to the reality their customers weren’t using the Yellow Pages anymore. Sensis had missed the boat.

Clunky processes

Whenever I spoke to small businesses about Sensis through the 2000s there was the same complaint, “I don’t have time to deal with their sales people, just let me tick a box on a web page or send a fax!”

Purchasing space was difficult for customers, their 1950s Willy Loman sales model should have been automated in the 1990s and never was.

Instead Sensis was locked into a high cost sales model and added friction for advertisers which they shouldn’t need, not only were they expensive but they actually made it difficult for their customers to place orders.

Should Sensis have been sold?

At its peak in 2005, Sensis was valued at between 8 and 10 billion dollars as a stand alone company.

Many, including myself, believe that breaking Sensis away would have been the best result given Telstra were at the time focused on protecting their fixed line copper wire monopoly and the directories business was not getting the management attention or capital investment it needed.

History shows though that we might be wrong.

Commander Communications was spun off from Telstra in 2000 and like Sensis had inherited an almost monopoly position in the small business communications market.

By 2007 Commander was out of business thanks to a combination of incompetence, management greed and an inability to recognise the changing communications marketplace.

The Australian disease

Commander’s biggest problem was it saw its customers as cash cows, just as Sensis did. This exposes a much deeper problem in Australian industry and management culture.

Over the last thirty years Australian government policies have seen duopolies develop in almost every key sector of the economy.

All of these duopolies share the same “customer as a milk cow” philosophy which, along with the rampaging Australian dollar, has dragged Australia into being a high cost economy.

The banking industry, while not a duopoly for the moment, is an even more debilitating example of the cash cow syndrome where small business has been crippled by excessive interest rates and fees – particularly since the 2008 crisis.

Sensis’ demise is systemic of a culture that fixates on extracting maximum revenue from customers; concepts like innovation, R&D or adapting to market trends don’t have a role in this mentality.

Milking cows is a fine business, but sometimes you have to think about the health of the herd.

Overselling technology

Do technologists promise too much?

“We’d like to allow remote band members – say a violinist in the Australian outback – be able to participate in an orchestra as if they were there. We hope the NBN will be able to do this.”

When the band organiser said this at a business roundtable all the technologists, myself included, choked.

There are many things the Australian National Broadband Network will deliver but the ability to teleport a violinist from the outback to downtown Sydney or Melbourne isn’t one of them.

One of the problems with technology is we tend to oversell the immediate effects; as Bill Gates famously said “The impact of all new technologies is overestimated in the short term but under estimated in the long term.”

Because we tend to sell the immediate sizzle, customers are disappointed when our promises don’t eventuate. In the decade it takes to win them back, those initial benefits we didn’t deliver in six months have become commonplace.

This is probably one of the reasons why businesses are reluctant to invest in new technology or online services; they’ve heard the promises before and they don’t trust what they can hear.

In the late 1990s businesses spent tens of thousands – sometimes millions – establishing websites that didn’t work. Those financial scars still hurt when they hear talk, some of them are still paying off those sites. So it’s barely surprising they are reluctant to return to a sector that has now matured.

Perhaps it’s best to underpromise; instead of cloud computer vendors committing themselves to 80% savings and social media experts promising millions of customers from their new viral video, it may be better to be more realistic with the expectations.

Customers have become deaf to wonderful promises, they are expecting us to deliver. Promising the world is no longer a business strategy.

Does small business need government support?

Can governments provide business assistance?

The New South Wales State Government’s decision to axe their long standing small business programs raises the question of whether small businesses need government support at all.

Last week’s announcement the NSW Government are abandoning their business education programs and replacing them with a previously announced network of local business advisors shows where small business lies in the state’s list of priorities.

Taken at face value, the changes appear to be moving back to the face-to-face business advice model of a decade or so ago that was common before the winding back of small business programs and local enterprise centres by then Federal Liberal and state Labor governments under John Howard and Bob Carr.

On closer examination, it’s a cut to business support and an effective withdrawal of NSW government assistance to small business. The remaining services will be outsourced to the same local business centres that have been starved of funds for over a decade.

A concern with the individual advisors will be how many businesses they can reach, according to the NSW Trade & Investment annual report 2010-11 the axed events had an audience numbering over 5,000. It’s difficult to see how the advisor network will match that and makes one wonder how the more important events couldn’t have been streamed or podcast across the Internet.

Putting aside the pros and cons of this restructure, the bigger question is should small business expect any government support at all?

The record of Australian government support for industry is not good. We only have to look at repeated visits to the trough by what remains of the Australian car making industry, the bipartisan debacle of assistance to the renewal energy sector or the support given by the Keating Labor government to Kodak to see how well schemes have worked out.

Most of Australia’s economic success stories have happened despite, not because of, government’s pouring money into industries. For example, the first five years of the current mining boom was completely missed by the political classes along with the Canberra press gallery and the media economic commentators.

This is where small business steps in – rather than relying on access to the ministerial suite to protect their industries, the little guys and the startups compete on price, service and innovation. Aspects that organisations in protected industries or those dependent on taxpayer largess struggle with.

Indeed many small business owners and entrepreneurs struck out on their own because they felt stifled by bureaucracy. So offering them programs wrapped up in paperwork is counter intuitive.

Where the government can help is with keeping busy business owners up to date with new developments in business, markets and technology which was exactly what the events programs like Small Business September and Micro Business Week did.

It’s difficult to see how the individual business advisors employed by local Business Enterprise Centres will keep up with their clients up with changes regardless of how skilled or well intentioned they are.

All of the changes are justified by the report from the Small Business Commissioner’s listening tour. Apparently she was told businesses didn’t want events like Small Business Septtember

I certainly didn’t hear any complaints at the breakfast fourm I attended at the Northern Beaches, most of the concerns seemed to be from cafe owners arguing about council outdoor seating permits. If the commish wants to get involved with that nest of vipers, I wish her the best of luck.

Overall, small business can’t expect much from government; particularly in the modern corporatist society where Big Government does Big Deal with Big Unions and Big Business while Big Media selectively reports what suits it.

Probably the best thing for small business is stay nimble and avoid being stepped on the Big Dinosaurs as they dance obliviously to the major changes that are happening in the world around us.

Big dinosaurs look after their own, don’t expect them to give you anything except a big shower of dung.

Disclaimer: I’ve been hired by Trade & Investment to host various events on the now axed programs and worked for 19 months at what was then the Department of State and Regional Development. I wish all of those former colleagues who now find their positions abolished the best of luck in finding another role.

Channel blues

Cloud computing is changing the IT industry

“We do the pre-sales work then they come along and steal the customers. It’s wrong, just wrong” growled the sales manager of an IT integrator while talking about one of the leading cloud computing services.

The business model of systems integrators is to be a company’s, or home’s, trusted advisor on IT and make money from charging for their services and the profit in selling software and equipment.

In the last few years that model has become tough – the collapsing price of hardware has made the profits on selling systems leaner while the increased life of systems has meant the big lucrative upgrades have become scarcer.

At the same time services have become less lucrative as more participants have entered the market, many using offshored cheap labour to provide remote support. It hasn’t helped that computers have become vastly more reliable, particularly since Microsoft have largely solved Windows’ gaping security holes.

The icing on the cake has been the end of boxed software and corporate licenses. These were extremely profitable for the systems integrator – a big sale of Microsoft Office or Oracle licenses to a government department could see an IT salesperson pay for a holiday home or cover the kids’ school and college fees.

Cloud computing has largely been the driver of all of these factors’ decline and now it is really hurting those integrators and their salesfolk who were used to a very profitable existence.

While that’s good news for computer consumers – and even better news for hapless shareholder and taxpayers who’ve been largely dudded by big IT sales pitches to gullible directors and ministers – it does beg the question of how customers now get advice and support.

Largely cloud based services rely upon customer self service and many of the providers would struggle to include user support in their list of core competencies.

There’s a business model there for systems integrators, but it’s difficult to see how many those used to fat profits in the past can, or will, adapt to the new environment.

An interesting side effect of this change is how it affects companies like Microsoft where their channel partners – largely those big and small systems integrators – are one of the most important distribution networks for their products and probably their best defense against competitors like Google and Apple. That strength is being steadily eroded.

It’s tempting to think that change affects just “old” industries like retail, publishing or car manufacturing; in reality it affects all sectors and sometimes the most modern might be hurt more than the established players.

The allure of free data

It’s user generated, but is it worthwhile.

It looks like a nice business model, you get users to generate your content for you. Many of the new digital media empires like YouTube, Facebook and Foursquare are built upon it.

The Register’s Simon Sharwood looked at the downside of this business model – junk data.

Even the most well intentioned users makes mistakes with thing like addresses and that’s before you get mischief makers or competitors putting in false information.

There’s another aspect too, what one person thinks is relevant may not be to other users or to the people running the service, Simon cites the dozens of “mom’s kitchens” on Foursquare.

For those who’ve added their mom’s house, that’s relevant and maybe even funny to them.

All of this illustrates the downside to the free, User Generated Content (UGC) model; you have to accept what the users give you.

Which means it isn’t free – it has to be collated, processed and the noise has to be filtered out.

At worst, somebody has to make the decision what is relevant and what has to go. This isn’t easy and, as Google found with their Name Wars, can upset a lot of users if it isn’t handled well.

Nothing in life is truly free and with data becoming increasingly important to business it’s worthwhile considering the quality of that free or cheap stuff you get from the net.

Investing in the future

Investment is not a cost

UK supermarket chain Tesco announced it intends to create 20,ooo new job over the next two years through “significant investment in customer service, refreshing existing stores and opening new ones”.

That word – investment – is the key to business growth. Not whining about the internet stealing jobs or begging the government to bail out failed industries and their managements.

Investment is more than just buying a shiny new machine, it’s also research, development, training and educating a business’ management, staff, suppliers and customers.

Too many businesses and governments are locked into the the 1980s mindset that investments, along with things like customer service, are a cost that that has to be driven down.

Driving down costs was profitable for many managers through the 1990s and early 2000s, in fact we could argue this was one of the big drivers of corporate profits and productivity through that period.

While some of those costs were undoubtedly unnecessary and deserved, it’s now clear that many governments and businesses ran down investment as well.

Today we’re seeing the results of that; crumbling infrastructure, skills shortages and businesses that can’t compete in a changing global economy.

What we invest in our businesses – be it time or money is essential to its long term success. Only the biggest companies in the most protected industries can survive for a while without investment.

Reinventing point of sale

Cloud and mobile devices are changing retail systems.

One of the banes of running a business computer support organisation were cash registers.

Retail Point Of Sale (POS) systems were almost always arcane, clunky and difficult to maintain, at PC Rescue we dreaded a call from a shop, pub or hairdresser having problems with their registers.

Frequently this was by design, the POS system supplier would try to lock in their business customers into expensive support contracts.

By making it difficult for anybody without intimate knowledge of the product to actually do anything with it, the retailer was stuck having to hire overpriced custom support.

To make things worse, many of the POS systems ran on outdated hardware which offered the suppliers another opportunity to hit their customers (victims?) with high support costs.

Since the iPad was released, I’ve been waiting for an application using cloud services for a back end that challenges the existing Point of Sale systems and today US online payments system Square has announced their Square Register app.

While only available in the US, Square has been setting the pace for physical payment systems like taxi fares and coffees using online technologies so it’s hardly surprising they are leading this push.

The iPad as a cash register is a logical step for the device and tied in with a robust Point Of Sales platform behind a simple to use app, it will probably make a huge dent in the point of sale market.

It may be the Square service won’t be the point of sale leader – Square is more a payments service than retail platform – which means this field is way open for some savvy operators.

One of the concerns with the Square service, and any iPad based application, is the spectre of vendor lock-in. Being fixed on the iOS platform means there is a risk of being held hostage to Apple’s business plans, also being locked into Square’s payment systems may not be the best choice for many merchants.

The payments and point of sale industry is another that’s being radically changed by mobile devices coupled with cloud computing. It’s not a time for incumbents to rest on their laurels.

When tails wag dogs

Have essential functions taken over business?

A recent Business Insider examination of how patent “aggregator” Intellectual Ventures works is a good example of one of the problems in modern business – essential ancillary processes have overtaken doing business itself.

Intellectual property rights are an important part of doing business, however what should be an adjunct to doing business has consumed many enterprises.

As the Business Insider article point out, Intellectual Ventures has become some sort of modern day privateer, extracting loot from hapless companies that cross its path.

This problem with intellectual property is part of a larger problem with lawyers, where they have been given too important a role in business.

In any civilised society lawyers are essential and carry out an important role but in western society over the last fifty the scope of the legal system has expanded so dramatically that now the legal tail wags the business dog.

Today company directors, business owners and entrepreneurs live under the shadow of breaching some obscure law that they had no inkling existed. Of course, the lawyers can help with this.

A similar thing has happened in the financial world, accountants have also moved from being an essential adjunct of business into being at the centre of most enterprises.

Much of this explosion in lawyering and accounting has been due to the increased role of government in our lives; each time a new law or regulation is enacted it makes it harder for the average person, or business owner,  to understand the system.

A cynic can argue this is by design but most government actions are intended to address some injustice or flaw in society. The problem is there are always unintended consequences.

One can also argue that the increased growth in business overheads like lawyers, accountants and patent attorneys is because of fat, prosperous business conditions.

So maybe what western business has seen in the last fifty years has been because of a favorable market place; politicians have introduced a morass of often contradictory financial and legal rules because they know business, and society, can afford it.

Now times have changed and both business and society can’t afford unnecessary overheads it will be interesting to see exactly how our laws and regulations evolve to respond.

Maybe they won’t and we’ll see a black economy develop where whole groups of society ignore the rules, dispense with lawyers and accountants and hope for the best. This would not be good.

Possibly we’ll see legislatures and courts winding back and reigning in some of the more silly and egregious excesses as they recognise society can’t carry the burden and remain productive.

Whatever happens we can be sure the lawyers, accountants and people like Intellectual Ventures will fight hard against any change that reduces their status and income.