business advice | Paul Wallbank - Communications Professional

The five stages of product recall

In an eerie way, a company’s response to a product recall is like Dr. Elisabeth Kubler-Ross’ five stages of grief. Lets have a look at them;

A weekend of research into exploding iPhones didn’t come back with much in the way of firm evidence, but what came out is a pattern in responses to past debacles from exploding batteries to filmsy laptop screens, dud operating systems, support failures and the Leyland P76.

In an eerie way, it’s like Dr. Elisabeth Kubler-Ross’ five stages of grief. Lets have a look at them;

1. Denial and Isolation

“There is no problem. Go away.”

“You still here? Damn. Well the claims are product is crashing randomly, exploding, setting fire to people’s balconies and scaring their cats and toddlers is a figment of a few anonymous bloggers and a media beat up.”

2. Anger

“Our product is designed to the highest Engineering standards and manufactured to .0001 micron precision. Any failure in them is due to operator misuse and will void the customer’s warranty.”

“Claims the product has a design flaw are unsubstantiated claims by journalists in the thrall of our competitors and proof of the left wing, anti-business bias of certain media organisations.”

3. Bargaining

“We have no comment as to whether we are compensating customers for the damages allegedly caused by our product.”

“Accusations we’ve offered Caribbean holidays to the entire tech journalist and blogger communities are totally unfounded.”

4. Depression

“Yes, we have discovered an usual and unexpected flaw in our product. As a consequence we have fired three contractors in our Mount Gambier sales office and senior management will go on a five day dealing with crisis course in Tahiti.”

“We still maintain our products are designed and manufactured to the highest standards and are considering legal action against scurrilous bloggers and those media outlets that misreported this unfortunate chain of events.

5. Acceptance

“Okay, we messed up.”

“We’ve dropped the lawsuits, paid the fines to EU consumer protection authorities, plea bargained a five year prison sentence for our North American managers, compensated our injured customers and are now working on a better product that won’t lose your data, catch fire on your back balcony or break down in Lane 6 of the Harbour Bridge during a wet winter morning peak.”

“We’ve learned our mistakes and won’t repeat them.”

“Honestly. You can trust us.”

No fear of failure

Failure is the biggest test of friendships and trust. Being in a sinking business is a stressful time and you quickly find who can be trusted, who’ll stand by you and who isn’t as reliable as you like. Once you’ve established who you can really trust in business, you then have the foundations for a wildly successful second business.

Most IT support businesses are doomed to failure and that’s why they are such a good training ground.

“My friend cannot find work so he wants to start a computer repair business. Do you think this is a good idea?”

When a taxi driver or anyone else asks me this, my reply is “why does your friend think it’s a good idea?”

Most people think computer repairs and IT support is easy and anyone can do it – after all it’s just a matter of clicking a few buttons and if you know how to use email, you can fix most PC problems.

Strangely, the only industry that shares this mentality seems to be coffee shops. Many people seem to think they can run a café because they can drink coffee, but at least setup costs are a barrier to entry which doesn’t exist for the mobile computer support businesses.

The funny is were you to ask the same people if they could be a swimming pool cleaner because they go swimming or if they would be a good motor mechanic because they drive a car to work, they’d think you were crazy.

That said though, I usually don’t discourage friendly taxi drivers or anyone else from telling their friend to go ahead and set up that computer business.

Even though I personally think the computer support sector is a graveyard for most entrepreneurs, it’s a great training ground. You learn about the importance of cashflow and how it’s different to profit – although some techs take a while to pick up they arent’ the same thing.

More importantly, you learn how customer service is the greatest challenge in most business. As a proprietor of a computer repair business you learn quickly how to politely explain the customer’s problem lies between the keyboard and chair or that the error is really a code ID10T.

But the main reason for recommending an IT support business precisely because most are doomed to failure.

Once you’ve established who you can really trust in business, you then have the foundations for a wildly successful second business.

Watching those software licenses

The recent story of how Skype may be forced to shut down is straight from the Bill Gates textbook on how to do business.

This article originally appeared in Smart Company on August 4, 2009.

The recent story of how Skype may be forced to shut down is straight from the Bill Gates textbook on how to do business.

In late 1980, IBM were casting around for an operating system suitable for their new line of personal computers. The obvious choice was the CP/M program. However, IBM couldn’t come to an agreement with Intergalactic Digital Research (seriously, that was their name) over using the software.

So they ended up on the doorstep of a small company in Seattle who specialised in programming languages, not operating systems, who’s main product was previously highway traffic counting systems.

Microsoft didn’t have an operating system so they bought one from a nearby computer store, modified it slightly and did a deal with IBM.

Most of us would have sold the system to IBM and happily congratulated ourselves on making a quick couple of million dollars or so, but that wasn’t Bill Gates’ style.

Rather than selling the program outright Microsoft licensed it to IBM and so millionaires and one or two billionaires were made.

It also set the course for the world’s software industry. By and large software is licensed, not sold. Buying a disc at the local computer superstore gives you nothing but permission to use the program.

That’s the same model Skype’s founders, Niklas Zennström and Janus Friis used when they sold the business to eBay for $3.1 billion US dollars – the underlying software that actually drives the service was licensed to eBay.

Now Zennström and Friis are claiming eBay have breached that license and want to withdraw eBay’s rights to use the technology.

For eBay this is a big problem as they were hoping to sell Skype and the founders’ move makes that almost impossible.

Both the Skype and Microsoft stories show licensing can be a lucrative option with the bonus of a steady cashflow if you have the right product.

For business buyers, the lesson is stark – do your homework, talk to your lawyers and understand exactly the ramifications of licensing and similar arrangements.

If you’re a Skype user, you don’t need to worry as the case isn’t expected to be heard until June next year. By then either an agreement will have been reached or your Skype credits will have long expired.

Twitter 101

To help businesses establish themselves on Twitter, the service has released a free guide to show companies how to use it, to help them build relationships, along with some of the best practice tips and case studies.

Twitter 101 opens with a basic description of the service and illustrates how Twitter can be used by businesses, most of which we’ve discussed previously. There are also a few cute stories, such as ice-cream-deprived workers in the empire State Building sending out tweets to a delivery service.

Having established what Twitter can do for your business, the next page goes through the set up process.

One important flag they raise is how they don’t support name squatting and supply a contact link to report people who are trying to hog names, so if you find your business or trade name has been pinched by someone who doesn’t have a valid claim to the name, you can take action.

Once online, Twitter 101 takes you to the basic terminology. If you wanted to know what a hashtag, trending topic or Tweetup is, this is the page to visit. Probably the most valuable page is the Best Practices section, which details the good, the bad and the spammy. It also provides a link to report spammers and other dills who abuse the service.

If you are going to only read one section, Best Practices is the bit to read. You’ll avoid many mistakes and get more from the service, both as an individual and a business.

Finally, the site finishes up with some case studies. Along with the well-known Dell and JetBlue stories, is the description of how Dave Brookes of Teusner Wines in the Barossa Valley started using Twitter after watching Lance Armstrong in the Tour Down Under.

Finally, there’s some links to useful resources on using Twitter. The guide continually emphasises how it is all about building relationships. Twitter may not be the right tool for you or your business, but the Twitter 101 guide will certainly help you decide one way or the other.

Death of the cashback scheme

I’m no fan of cashback schemes. Having dealt with them on behalf of customers in my old IT support business, I’ve seen too many people messed around by them.

So the news that the Officeworks chain will stop offering them is welcome and hopefully will see the industry move away from these often unethical and unfair practices.

The main reason for offering cashback schemes is to keep commisions up for salespeople. If a TV or laptop vendor simply cut prices by $200 they would find the salespeople steering customers to more expensive competitors.

So it’s no surprise to see which stores aren’t following Officework’s lead.

If you are offered a cashback, ignore it while negotiating a price as it’s none of the store’s business what you do with it and most certainly won’t help you if there’s a problem down the track. Treat any cashbacks as a bonus and don’t factor it into your purchase.

Or better still, avoid electronics stores staffed by commission driven sharks.

Why paying for Twitter followers is a dumb idea

I’ve just read the Smart Company article on uSocial’s Social Media marketing services. I find the idea of paying for followers in Twitter, or friends in Facebook or contacts in LinkedIn, bizarre.

What uSocial’s prospective clients don’t understand is social media isn’t a game to collect the most fans, it’s a way of building communities around you and your brand.

It’s far better to have twenty passsionate fans than two thousand Twitter followers who just ignore you anyway.

To build a community you need people who care about what you do, your product or your brand. If you have to pay to get the appearance of having people who care that shows you don’t have anything worth caring about.

You can’t buy friends online or offline, so save your money and focus on why you’re different and why people should love what you do.

Why networking is essential

I met a business owner last week who complained other business at his local chamber of commerce meetings spent most of their exchanging business cards.

He couldn’t see this was the point of a local chamber of commerce; to meet and get to know the other businesses in your community.

Community is what business is about. Every business, big and small, is part of a community. Put those communities together and we have a society.

Running a business is a social endeavour above everything else and networking is one a required skill. Some of us do it well while many of us do it poorly.

But you still have to do it.

If you have a problem networking, or you don’t like exchanging business cards, then you need to hire or partner with someone who does.

A failure of trust and communication

Webcentral’s much publicised e-mail failure left thousands of small business owners without email last week.

The most breathtaking aspect of this saga is the total lack of communication by WebCentral. They failed on every level to keep their customers informed.

A simple, short message stating there was an outage on the front page of their website and on their support lines would have saved many of their customers hours of troubleshoting and stress.

The amazing thing is after this embarrassment, WebCentral still launched their new online backup service.

The success of software as a service depends upon trust and Webcentral has shown they cannot be trusted with their client’s critical systems.

The joke is Webcentral’s parent company, Melbourne IT, uses the slogan “trusted for online success”. Webcentral has shown they cannot be trusted.

Big hairy audacious goals

While reading the details of the Federal Government’s broadband plan I was reminded of Jim Collins’ BHAGs, or Big Hairy Audacious Goals.

The Federal government’s plan is a BHAG and the beauty of this particular one is that it will spawn many other BHAGs.

Has your business got a big hairy audacious goal? If so, what are you going to do about achieving it?

Lipstick myths

Is the lipstick theory of recession spending really true?

Is the lipstick theory really true? I’ve been hearing a lot about it lately and I’m not so sure.

The “lipstick theory” is people will spend money on small, modest priced luxuries in a downturn to make up for not being able to afford big luxuries.

It’s been used to justify everything from increased fast food sales to Belgain chocolates to expensive beer to, well, lipstick.

I recently heard it used by a software developer as the rationale for investing in a software as a service product.

But is it true?

The Economist isn’t so sure and shows there’s little correlation between past recessions and lipstick sales.

My suspicion is if it was true in the twenties and thirties, it was more because better manufacturing and distribution techniques meant a better, cheaper product could get to the market.

Even if the lipstick theory is true, it’s dangerous to assume your product is the same.

For a start, some lipsticks will do better than others, partly because of marketing and partly because their price points are smarter.

Should your “lipstick” product be successful, it might not make much money for you anyway. In the last recession we saw McDonalds and other fast food chains introduce $1 and $2 meals, we’re seeing a similar trend at the moment with sub $500 computers.

These “recesssion busters” may keep your market share up, but they aren’t going to be particularly profitable. Indeed, for the computer manufacturers, the sub $500 laptops may well be cannibalising what’s left of their profitable product lines.

The reality is a lot of the products that are claiming the “lipstick theory” will save them are really doomed. The vast majority of shops selling expensive chocolate, lingerie, beer and other pricey but non essential products are simply marking time until the effects of the popped bubble reach them.

It’s best to base your business plans on sound evidence rather than blind hope in an idea that may or may not be true and may or may not apply to your products.

Dangerous Game

Associated Press have warned they will start taking action against news aggregrators like Google. Rupert Murdoch made similar noises last week.

As Fred Wilson has pointed out, the problem for AP and News is the web is now the newstand and taking publications off the shelves is not good business sense.

We see that with the Australian Financial Review. Its position as an Australian journal of record has been diminished by Fairfax’s incompetent obsession with protecting content.

As result, other channels such as The Australian, Business Spectator and blogs have stepped into the vaccuum and eroded the AFR’s online authority.

Following the RIAA path and suing Google, the Huffington Post and any blog that dares link to their sites will backfire on the news industry just as it did on the record industry.

In many ways newspapers are even more vulnerable as journalists employed by organisations like News and AP are quick to rip stories off from blogs, web forums or MySpace and Facebook pages with little regard for permission or attribution.

I suspect it’s one legal quagmire Associated Press or Rupert Murdoch might rue becoming bogged down in at the very time their business models are challenged by both economic and technological change.

Motivation

I was listening to a speaker yesterday describing the difference between public sector and private employees.

An interesting point was that the motivations are different; public sector staff are more motivated by a work/life balance while private sector workers are more motivated by money.

This started me thinking about recent blogs I’ve read by Valerie Khoo and Seth Godin regarding the motivation of Wall Street bankers and entreprenuers.

The question of money motivating people is vexed and I suspect overstated. As Seth says in his column, once you’ve an income over a million or so dollars money really isn’t that important; it’s all about status.

A point made by yesterday’s speaker was when he managed scientists he found most researches care about about peer approval. Money matters far less to them than appearing at conferences, presenting papers and being recognised for their hard work and discoveries.

In a strange way, that’s the real explanation for the financial industry’s massive salaries and bonus. The dollar amount is simply a yardstick to measure one’s status. The bigger the yacht, house and birthday party you can afford, the more recognition you have among your peers.

Which brings me to entreprenuers. Unlike Valerie, I don’t think business builders are interested soley in amassing banker like piles of cash. The cash is nice, but they are more interested in doing great things with their businesses or invention.

Cash is a useful measure and it’s nice to have some spare, but that’s as far as it goes. Far more important for most people is the recognition of their peers, security of their families and the satisfaction of a job well done.