Category: Innovation

Do you have customers or just users?

Are subscribers, visitors and users really supporting your business?

“I was on your mailing list for general info, for spams and scams etc which were helpful. Suddenly it changed and now the business format is not useful to me” said an lady when unsubscribing from one of my newsletter mailing lists.

The lady concerned had been on one of the mailing lists for over ten years and, once upon a time, had been a paying customer for my old business, PC Rescue. Although we’d only earned a $100 off her and that was seven years ago.

While it’s sad to lose a subscriber – you don’t run a service business for twelve years without caring about those who use your services – the question is was the lady really a customer?

This is an important distinction where many of us are giving away much of our knowledge for free; are our users really customers?

For the social media and web2.0 sites, this is easy; users are the raw material for their aggregated and segmented data feeds and audience, the customers are the advertisers. This is just a modern twist on the broadcast model that sustained the radio and TV industries for most of the 20th Century.

Many of those social media platforms aren’t making much money from that data and there’s a good argument those who are have been wildly overvalued by investors.

The value of user data, whether it’s aggregated or identifiable appears to be nowhere as high as most of us think, unless you intend to rob your users’ bank accounts.

Overvaluation of your customer, or user, database is a common problem for smaller businesses too. If you’re the local plumber, computer repair guy or coffee shop then the value of any mailing list is probably way overstated – the only metric that ultimately matters to the business is how much money you’re making from the customer.

If you care about the people that you deal with, this may be a hard reality to face but those who visit your shop, subscribe to your newsletter or download your free e-book aren’t your customers, only those who are prepared to pay are.

This is something we have to understand in this era of abundant free information and online services. The challenge for most of us is how many users we can convert from being window shoppers and freebie seekers into customers.

Similar posts:

The quiet revolution

Productivity gains of the 1990s were based on accessible computer technology, are we about to see a cloud computing revolution in our workplaces?

Earlier this weekPricewaterhouseCoopers released their Productivity Scorecard, which showed Australia’s business efficiency isn’t improving as fast at it once was and the country’s relative performance is steadily slipping down international tables.

One of the notable things in the PwC report is the massive growth of productivity in the 1990s, a point emphasised by the accompanying paper on business productivity in a presentation by economist Saul Eslake last month to the Reserve Bank of Australia.

Economists attribute most of this late 20th Century growth to deregulation and privatisation by governments in the 1980s and 90s but the driving force was really computerisation that allowed most businesses to do much more with less.

Immediately noticeable for an Australian walking into a British, European or Japanese office during the early 1990s was the lack of desktop computers.

Australian businesses adopted technology a lot quicker than their counterparts outside of North America and this alone was probably responsible for the country’s relatively good productivity growth in that decade.

The arrival of computers – followed by desktop printers and Internet access – suddenly gave small businesses access the means to do jobs that even the biggest corporations had struggled to do previously and drove a rapid reorganisation of most offices.

Everybody from secretaries to architects and graphic designers to lawyers – even economists – suddenly found they had the tools at their fingertips to do work they could have only dreamed of prior to 1990. This drove massive productivity gains in businesses of all sizes.

From 2000 onwards, things became tougher as the easy gains had been made and the incremental improvements in technology, such as smartphones, cloud computing and web publishing didn’t have the same substantive effect the early PCs delivered with spreadsheets, word processing and desktop publishing.

The real challenge we now face in business – and government – is to start harnessing cloud computing driven online services that promise to deliver similar productivity gains to what we saw twenty years ago.

We have the tools; online office apps, Customer Relation Management services (CRM) and sharing platforms all deliver major improvements in the way we work within our businesses and with external partners like contractors, suppliers and event clients.

One of the most powerful aspects of cloud computing services is reduced capital cost meaning reduced barriers to entry into markets we previously may have thought were safe.

This easy access into established sectors is one of reasons the retail industry’s giants are now struggling as online competitors can setup cheaply and quickly while offering better prices and service.

Retail is only one of the more obvious sectors being changed by these technologies and as the decade continues we’re going to close to every industry be radically changed by low cost computers accessing the Internet.

As business owners and managers we need to look at our own processes and systems with an eye on how we can improve workflows and customer service within our organisations.

Those of us who manage to get these new technologies are going to reap the benefit of the next productivity wave, those who don’t are going to go the way that many uncompetitive and slow to respond industries did in the 1980s.

Similar posts:

A Capital Question

How do we raise money for a new business?

How do you raise funding for new venture? Business coach Lindy Asimus asked over the weekend. It’s a question that perplexes many people starting out a new enterprise or trying to grow an existing one.

The real question though is “how much capital do you need?” Being undercapitalised will often stunt a venture’s growth and is probably the reason why many otherwise excellent business ideas fail to achieve their potential.

How much money do you need?

While business plans are often disparaged, one of the great advantages of doing one is the budding entrepreneur gets an idea of the capital required along with the cash flow required to service any debts. Even if the business plan itself is filed away and never looked at again, understanding the upfront cash requirements can help avoid some nasty mistakes.

The other key factor is the business itself, if you’re buying a fast food franchise, setting up a store or fitting out a restaurant then there’s going to be some big upfront capital costs involved before you start trading but there is more to it than just the immediate cash needs.

What is the type of business?

A business’ capital needs are going to vary with the type of business and the objectives of the owners, not just in size but also in type. As business writer and educator Steve Blank says, there are six types of startups and for certain types an equity investment from say an angle investor or venture capital company will be more appropriate than a bank loan.

For small businesses, the type that Steve Blank describes as “work to feed the family” businesses, a bank loan that can be paid back out of cashflow is going to be the most obvious way to fund an enterprise while it would be rare a venture capital investor would even answer a phone call from such a business.

On the other hand, a family member or friend might be interested in taking equity in such a business, the old “families, friends and fools” is a time honoured way of setting up a venture.

Government grants

In these times of rampant corporate welfare for big banks and major corporations, it’s tempting to think the government may be able to help the small businessperson. Sadly most of the grants available are small sums for specific purposes like export programs or hiring trainees, they aren’t designed or intended to provide entrepreneurial capital.

Bootstrapping and “sweat capital”

Most businesses though are best served by “bootstrapping” and “sweat capital” for most, particularly in the service sectors, funding your business out of cashflow and the hard work of the founders is the way to grow a viable enterprise.

The term “sweat capital” refers to the founders working hard and capitalising their businesses from the sweat of their brows while  scrimping and saving every penny. Most founders of successful businesses have stories of spending years expending that “sweat capital” while living on cheap pizzas or packet noodles.

Bootstrapping, funding your business through sales, is the other great capital source. In many ways, this is the best form of capital in that it proves a business is viable and doesn’t involve signing over assets to banks or giving equity away to investment partners. Again a well thought out business plan quickly shows whether this is feasible.

So the question of capital is complex, but having enough is always the biggest struggle for those starting a business.

Of course it is possible to have too much capital and we might talk about that in another blog post.

Similar posts:

Choices

In a time of change, hiding from the choices is not the best option.

“It’s too hard to keep up with all the choices. I can’t decide whether to use Facebook or Twitter, Microsoft or Google, Dell or Apple? Doing business today is just too complex…”

Maybe it’s true we have too many choices but yesterday’s business people had plenty of hard decisions to make.

Business people a hundred years ago had to choose between steam, gas or electrical power. If  they chose the latter, there was another decision between AC and DC electricity.

There was a further choice between keeping your horse drawn cart or buying one of those new fangled motor vehicles, which could either run on kerosine or steam.

So our great great grandparent’s weren’t easier and, unlike the relatively small investments we can make in technology today, their choices could easily bankrupt them if they made the wrong decision.

When we’re fretting over choices at least those on offer aren’t the simple alternative of whether we send our children down the mine or to the mill at the earliest possible age.

Instead of worrying about the choices, it’s time to get informed and understand what the alternatives mean. The time to worry is when our competitors, or the market, is leaving us behind because we didn’t care enough to find out what was happening around us.

Similar posts:

  • No Related Posts

The web’s big weakness

How a hands-off customer model may doom many of today’s social media and web services

There’s a fundamental flaw in the way the tech industry does business, that weakness could be what ultimately kills many of today’s new media, web and social media services.

AirBnB, an online home share service, is one of the darlings of the booming Silicon Valley start up sector, having recently being valued at $1.2 billion after a successful capital raising.

Like most Web 2.0 and social media businesses, AirBnB’s advantage is in the low operating costs where customer support is left to the service’s peer review and social media communities while AirBnB pockets a commission for simply making the connection between the landlord and tenant.

The flaws in this “all care, no responsibility” model became apparent last month when a lady posted a description of her house being ransacked by an errant housesitter she found through AirBnB.

AirBnB’s management responded to the article with assurances they were helping and working with their affected customer, claims which were promptly contradicted by the original victim.

To make matters worse, certain prominent members of the Silicon Valley investment and blogging communities alluded she was lying or was “batshit crazy.” Now that other stories of bad AirBnB tenants are appearing, the view this is simply the untrustworthy word of a deranged customer affected by their first such incident is looking hollow.

Failing to deal with customer problems is not unique to AirBnB, hiding behind impenetrable layers of “support” backed up by user hostile terms and conditions is familiar to anyone who has had to deal with an online service gone wrong.

Last month Thomas Monopoly found he was locked out of his Google account and had it not been for the intervention of a senior Google employee, Thomas’ problem would probably still be stuck in an endless feedback loop.

Exactly the same problem has been encountered thousands of times by other users of web mail, social media, online auction and matchmaking sites.

Many of the people running these services retort their products are free so users get the support the support they pay for – an argument conveniently overlooking that most “free” web services are based around selling customer data – but even this does not justify delivering the basic services users have been lead to expect, regardless of what a 5,000 word user agreement states.

Today’s tech startups, and many of their big established cousins in the IT industry, have the idea that customer support is an optional extra and an expense to minimised or outsourced.

In this respect they are not too far removed from dinosaur car manufacturers or some of today’s less dynamic retailers offering little in the way of customer service or after sales support.

That way of working has died as consumers have been able to go online to vent their dissatisfaction, strangely today’s hot tech start ups seem to have missed this aspect of the revolution they have helped start.

Ignoring consumer problems is exactly what’s bringing traditional businesses unstuck in the online world. The funny thing is it might bring many of the online business undone as well.

Similar posts:

Building Innovative Cities

How do we create the communities of the future?

The New Lunatick’s Newcastle as a Smart and Innovative City forum raised an interesting question; “how do you build an innovative city?”

In putting together the Digital Sydney project, this was something we closely looked at – how does a city become a global hub of innovation in the creative, digital, financial industries?

What leaps out when studying successful industry hubs is that all have developed without government intervention; most have been an accident of history where resources have come together and have driven by a small group of like minded entrepreneurs.

Those entrepreneurs have been attracted to various regions by the area’s proximity to the natural resources, transport links and available land suited to their industry. While those requirements vary between industries, access to a skilled workforce is the common factor between all of them.

In many respects this is how the current mining boom has worked for Newcastle. Unlike the rest of Australia’s mineral fields, the Hunter Valley has a major city with a skilled workforce that understands mining and engineering.

The challenge for Newcastle – and indeed for Australia as a nation – is diversifying the economy from depending upon resource exports and domestic consumption into creating wealth from the newer, knowledge based industries.

For hubs to develop in these industries, regions need the factors identified by Richard Florida in his Rise of the Creative Classes where he found these cities offered the “three T’s” – Talent, tolerance and technology.

Australian cities like Newcastle score well on these measures but to create hubs you need a motivated group of entrepreneurs and while these exist there may not be the numbers to create a critical mass.

The main reason for this is the domestic investment structure; most Australians invest in housing and aren’t particularly inclined to invest in comparatively risky businesses, particularly those in industries they don’t understand.

Governments can help by opening their data and making procurement friendly to new and smaller businesses – on both scores Australian governments at both levels do poorly with data often being unnecessarily guarded and tendering processes tend to be skewed towards large, usually multinational, corporations.

Assistance programs can also help on the fringes however it’s important not to repeat the mistakes of the film industry where several decades of government grants and funding has resulted in a generation of film makers more skilled at navigating bureaucracies and filling in application forms than telling stories.

Where government assistance can do a good job is in bringing together the various industry groups which was the intention of Digital Sydney. Well targeted, low paperwork schemes like the Australian Technology Showcase and various trade programs can also help growing businesses.

Overall though, the development of innovative cities lies in the hands of the residents, it’s up to the inhabitants of the city, town or region to bring build the hub.

This is exactly what happened with the original Lunaticks society in 18th Century England that created the region that became known as Birmingham which was the heartland of the English economic powerhouse for over a hundred years.

While we can wait for governments or investors, building industries is about innovators, entrepreneurs and workers. It’s time to get to work.

Similar posts:

  • No Related Posts

A tale of two conferences

How two very different events put their ideas across

Two conferences about ideas took place in Sydney last Saturday, TEDx Sydney and Social Innovation BarCamp. While both involved exploring concepts and thoughts they could not have been more different.

One was about exclusivity and elitism while the other was about a genuine exchange of ideas. Both the events tell us much about the new and old models of communication and learning.

Welcome sign to SIBSyd
The entrance to SIBSyd. Exit through the gift shop?

At the Paddington College Of Fine Arts, Social Innovation Bar Camp ­– SIBSyd – was open to anyone with an idea or who just wanted to show up a throw some thoughts around. Across town at the Everleigh Carriageworks, the TEDx Sydney offshoot of the prestigious US TED event featured high profile speakers before an invitation only audience.

Welcome sign to TEDx Sydney
Welcome to TEDx Sydney. May I see your invitation, sir?

Most TED events are exclusive and restricted you have to be qualified to attend, let alone speak and this showed in the way the audience were ushered into the auditorium and then asked to turn off their mobile phones unless they wanted to sit in the back two rows.

The speakers at TED were slick, rehearsed and had their presentations timed exactly to the minute – as you’d expect at an event where the content is carefully chosen – while at SIBSyd any of the audience could choose to speak.

Even with a speaker everybody at a SIBSyd is able to participate, with all the audience of giving their views. In the reforming education session I sat in on a quiet lady at the back of the room told her experiences of working with villagers in Chiapas, Mexico.

It’s unlikely that lady would get an invite to TEDx, let alone have the opportunity to tell her story and that illustrates the fundamental difference between the two conferences.

One is the formal, traditional one-to-many lecture from an expert imparting wisdom on an audience awed by the speaker’s knowledge while the other sees the speaker – who may be an expert – drawing out the collective wisdom of the room.

TEDx Sydney stage setup
TEDx stage ready for action

The “unconference” structure of meetings like SIBSyd probably does a better job of developing new ideas as the traditional conference TED is based upon that assumes the expert on the stage already has the answers.

Of the two types of conferences, it’s probably safe to say the collaborative “unconference” model works better in driving innovative solutions to problems. To work effectively though it needs the participants to be motivated by common issues.

The traditional TED style conferences do a better job of getting big ideas across to a broader audience and that’s probably one of the reasons why the event’s videos have been such an Internet success.

Some of the differences reminded me of British writer Paul Carr’s comments about the South By South West Conference in 2009 when he said “I really hope that next year one or two of those early adopters will organise – and I mean that in the loosest sense – a user-generated unofficial fringe conference to sit alongside the main event.” In many ways SIBSyd was the fringe festival to TEDx’s “establishment” status.

SIB Syd session in progress
SIB Syd session underway

Both have their role and probably the most worrying thing at the two events was the lack of Australia’s corporate and political leadership, with the exception of Penny Sharpe, MLC who appeared to be the sole member of Parliament attending TEDx, there was little representation from either group.

In a time of massive climate, technology and economic change that is challenging the assumptions and business models of previous generations, it’s a shame our business and political leaders aren’t engaging and listening to those outside their narrow circles.

But ideas are one thing and action is another. As journalist and enfant terrible Stilgherrian said during the day, “completely over events about ‘ideas’. We have plenty of ideas. What we need is a bit of effort put into execution.”

Hopefully out of both events we’ll see some of the ideas discussed turned into action

Similar posts:

  • No Related Posts