Category: management

Privileges and princelings

Many companies have developed a culture of executive privilege in an era of easy money.

A strange thing about Australian business reporting is that its often full of gossip and name dropping as any third rate scandal magazine.

In a perverse way, treating business executives like the Kardashians gives the average mug punter – and shareholders – a glimpse into how these companies do business. Like this story in the Australian Financial Review;

Hamish Tyrwhitt was unaware of the latest drama unfolding within the Leighton board as he relaxed in the Qantas First Class Lounge in Sydney on Friday morning.

Indeed, the contractor’s chief executive officer was busy chatting to former Wallabies captain John Eales while waiting to board a flight to Hong Kong where he was due to close a recent deal to build the Wynn Cotai hotel resort in Macau and enjoy the Sevens rugby tournament.

The timing was not good. Tyrwhitt had only just boarded the flight when the news broke that chairman Stephen Johns and two directors had resigned. Tyrwhitt was forced to change his plans and is expected back in Sydney for a board meeting convened this weekend.

Nice work if you can get it.

A few pages further in the day’s AFR is another gem;

One July evening about four years ago, off the south coast of France between Cannes and St Tropez, two men sat in the jacuzzi on the top deck of a 116-foot Azimut motor yacht. It was about 3am and the sea was rough. The spa water was sloshing about and had given the latest round of caprioskas a distinctly bitter taste.

Dodo boss Larry Kestelman was telling his good friend, M2 Telecommunications founder Vaughan Bowen, about the challenges of growing his internet service provider business.

It’s tough doing business when the spa waters are choppy. One expects better from a seven million dollar boat.

That second article raises another point that’s often overlooked, or unmentioned, when reporting Australian business matters.

on Thursday the 14th, something unexpected happened. At 12.30pm, after no activity all morning, shares in the thinly traded Eftel started to rise sharply. By the time the market closed at 4pm, Eftel had soared 44 per cent to 39.5¢. Someone with knowledge of the deal was insider trading.

Insider trading? On the Australian Security Exchange? Somebody had better call those super-efficient regulators who were responsible for Australia cruising through the global economic crisis of 2008.

Somebody obviously wanted their own 116ft luxury yacht or corporate box at the Hong Kong Sevens.

Both of these stories illustrate the hubris and privileges of corporate Australia and its regulators.

One wonders how well equipped these organisations are for an economic reversal when their leaders are more worried about caprioskas and their spots in the first class lounge.

We may yet find out.

First class airline seat images courtesy of Pyonko on Flickr and Wikimedia.

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The high cost of new media experiments

The BBC’s expensive exit from their Lonely Planet investment shows the costs and risk for old media empires as online business models evolve.

The BBC yesterday sold Lonely Planet to US media company NC2 Media. Their £80 million loss on the venture puts them in good company as established media struggle to find new online channels and revenue streams.

While the losses aren’t trivial, they are not quite in the league of News Corporation $545 million loss on MySpace or Time Warner’s billion dollar adventure with AOL.

All three stories show how tough it is for ‘old media’ adapting to a new landscape.

The problem is there for ‘new media’ as well, most ventures struggle to make money and many of the success stories like Huffington Post rely on a combination of free content and a greater fool buying them.

No-one has really figured out what the new media revenue models are; not the established publishers or the online upstarts.

Lonely Planet’s online success was due to their forums which, like most web discussion boards, can feature discussions politely described as “robust”.

This was always going to a problem for the BBC’s public service management culture and it resulted in the shutdown of the Lonely Planet Thorn Tree forums over Christmas.

So it’s not surprising that the BBC has decided to end its experiment and now the corporation’s management is dealing with the criticism of those losses.

While it’s easy to criticise the BBC for the deal, at least the broadcaster was attempting something different online, doing nothing is probably a poorer strategy than buying MySpace or Lonely Planet.

Over time, we’re going to see a lot more experiments and many will be public embarrassments like those the BBC and News Corporation have suffered, but there will be successes.

Someone will crack the code and they will be the Randolph Hearsts of this century. It could one of the Murdoch heirs, it could be the owners of NC2 Media or it could be some young, hot shot developer working in a Rio favela or the slums of Kolkata.

But it will be someone.

It’s an exciting time to be in business.

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Will Google Deals be the next service to join the graveyard?

Google Deals was an attempt to compete with group buying services like Groupon, that experiment has failed and another tombstone for Google’s Graveyard should be on order.

Google’s graveyard of discontinued services is getting crowded, with Google Reader being one of a dozen services to bite the dust in last week’s springclean.

As Google ruthlessly cut services that don’t make the grade, the question is ‘which ones are next’?

Towards the top of the list has to be Google Offers, the group buying service that was set up in a fit of pique after Groupon spurned the search engine giant’s $6 billion acquisition offer.

Google Offers has only rolled out in 45 locations across the United States over the last two years and the deals in recent times have become increasingly desperate, here’s a recent New York deal.

an example of how Google offers is dying

Schmakery’s Cookies may well be fine products, but getting one free cookie isn’t exactly a jump out of your seat experience and it shows just how Google are struggling with this service.

That Google are struggling with Offers isn’t surprising though, the daily deals business relies on sales teams working hard to acquire small business advertisers. Small business is a sector that Google struggles with and running people focused operations is the not the company’s strong point either.

Google’s exit from the group buying market may be good for Groupon and other companies in the sector. The Economist makes the point that Google’s presence in these markets distorts the sector for other incumbents while scaring investors and innovators away.

This is rarely permanent though as companies like Google and Microsoft often suffer a form of corporate Attention Deficit Disorder – Knol is a good example of this and Seth Godin describes what happens “when the 800 pound gorilla arrives”.

Eventually the 800 pound gorilla finds there aren’t a lot of bananas, gets bored and wanders off.

Which is what has happened with RSS feeds and Google reader. Now the little guys can get back to building new products on  open RSS platform while Google, along with Facebook and Twitter, try to lock their data away.

For Groupon, the departure of Google from the deals business may not be good news as it could mean smart new competitors enter the field. Either way, there’s some challenges ahead for the owners of group buying services.

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A business lesson from the Catholic Church

The election of Pope Francis shows why the Catholic church is such a successful business. Many of us could learn from them.

The Catholic church may be a two thousand year old institution with medieval beliefs and beset with scandal, but the clerics know how to handle business succession well.

Pope Benedict’s resignation was not only unexpected but also almost unprecedented with it being six hundred years since a pontiff quit before dying on the job.

In many organisations such an unexpected and rare event – dare one use the ‘black swan’ line – would create havoc, or at least paralysis. Instead the clerics handled the process smoothly.

This contrasts with the succession planning in many companies. In larger business even when the CEOs handover is planned, there’s a period of write downs and blood letting as the new leader stamps their authority.

Sometimes it gets very ugly indeed, particularly if the former CEO has been kicked upstairs onto the board.

In smaller businesses, there’s no succession planning at all. Many businesses die when the owner retires if there’s no buyer for the operation.

That shortage of buyers is a major problem for smaller business owners. Many baby boomers have planned their retirements around getting a good sale price for their businesses.

If they can’t get the sale price, the boomer small business owners work until they drop.

Which is what popes usually do.

It’s often said the Catholic Church is the biggest corporation on the planet. Given how smoothly their bureaucracy deals with succession planning, that’s not surprising.

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First we kill email, then Powerpoint

French company Atos intends to eliminate email, Powerpoint and meetings from their business. Few organisations are brave enough to follow them.

Two years ago French technology firm Atos raised eyebrows after announcing the company would go email free.

Atos CEO Thierry Breton said at the time,

We are producing data on a massive scale that is fast polluting our working environments and also encroaching into our personal lives. At [Atos] we are taking action now to reverse this trend, just as organizations took measures to reduce environmental pollution after the industrial revolution.

Eighteen months on, the Financial Times reports Thierry is well on the way to eliminate the office pollution that is email. Lee Timmons, one of Atos’ Vice Presidents, tells the paper,

“At the 2012 London Olympics, we were able to zero-email certify some processes – a first – and (we) look set to be email-free internally by the end of 2013,”

Now Atos is looking at eliminating other business distractions, notably Powerpoint presentations and meetings.

Eliminating inboxes, Powerpoint and meetings from the workplace seems a noble cause. Few organisations would be prepared to even consider this.

For many staff and managers, spending hours sorting email, attending pointless meetings and futzing around with over-elaborate Powerpoint presentations is how they justify their time.

It’s going to be interesting to see how Atos goes with thier objective of streamlining the workplace and how many other companies are prepared to copy them.

Man sending an email image courtesy of Bruno-Free at SXC.hu

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Are Small Businesses becoming Digital Roadkill?

We all agree that the internet is changing business, but how many smaller companies are prepared for the massive changes ahead?

Technology Spectator today discusses if fast broadband initiatives like the National Broadband Network will be good for all small businesses.

Andrew Twaites of Melbourne consultancy The Strategy Canvas posits that many businesses aren’t equipped to compete against  global competitors.

The additional competitive pressures that the NBN rollout is likely place on segments of the small business sector that have to date enjoyed a degree of natural protection as a result of their customers’ inability to access super-fast broadband.

Once that natural protection falls away, many small businesses will for the first time be exposed to competition from interstate and overseas businesses

This is a very good point; many small businesses are transaction based service providers who can be easily replaced by lower cost overseas companies, particularly now foreign suppliers are easily accessible through services like O-Desk and Freelancer.com.

Every time I see Freelancer.com’s CEO Matt Barrie talk to a small business audience, I’m surprised the room doesn’t lynch him as he’s describing how their businesses are threatened species and many are living on borrowed time.

One of the reasons why small businesses are threatened is because they are under-capitalised, many simply can’t invest in the technology or training they need to compete.

There’s also a reluctance to embrace technology, that half of all small businesses – in the US, the UK or Australia – don’t have even a basic website.

On a recent holiday in Northern NSW, I checked dozens of tourism businesses’ online presences. Few had a website and almost none had bothered filling in their Google Places profiles, let alone set up social media presences.

Yet almost all of their new customers are looking for them on the web, increasingly through mobile devices or social media services where they are invisible.

Not having a website, local listing or Facebook page are trivial things; but the fact that most businesses haven’t done the basics doesn’t bode well as the speed of commerce accelerates over the rest of this decade.

That many small businesses will be put out of business by today’s changes isn’t unprecedented – blacksmiths were out of job shortly after the motor car rolled out and whale oil manufacturers by gas and then electric lighting.

As Andrew points out, we assume ‘creative destruction’ just disrupts big incumbent corporation. In reality it’s the little guys who feel more pain than insulated executives of big business.

Many of us little guys are going to have to start thinking about adapting to very changed times, the risks of being digital roadkill are real.

Doll roadkill image courtesy of Pethrus through WikiMedia

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Door to door blues

How short term management thinking caught energy suppliers and telecommunications providers short.

The news that energy companies have decided to drop direct door to door selling in the face of prosecution is the latest example of poor thought out performance metrics and managers unsuccessfully trying to shift risks out of their business.

Electricity and gas distributors Energy Australia and AGL embarked on a door-to-door sales campaign to gain more customers. Like most modern corporations, they don’t do this stuff themselves and engaged outsourcing companies who in turn took on commission salespeople to do the ground level selling selling.

It didn’t work well and in face of complaints, both companies had to back away from their campaigns after suffering legal and reputational damage.

The sad thing this has happened before, at the time of telecoms deregulation in the 1990s telcos did the same thing to grow their market share. Door to door sales teams fanned out across the suburbs to sign households up to telephone plans.

In one example, a company hired dozens of backpackers, bussed them to outlying suburbs and sent them out on the streets to sign up as many households as possible.

Initially the campaigns were a success with providers reporting increased signups, greater market share, fat executive bonuses and happy commission earning salespeople.

Then the complaints began.

Customers discovered they’d been lied to, or in some cases falsely signed up, as hungry salespeople did everything they could to get a commission.

At first the telcos thought they could throw the problem over the fence so they blamed the contractors. Eventually the damage became so great the telcos had to back down on their door to door selling as problems multiplied and consumer protection agencies expressed their irritation.

At the heart of the problems with this type of door to door selling is the mismatch of incentives – for managers, contractors and the teams going door to door in the suburbs.

Door to Door Blues

At the coalface are the salesteams trudging around suburbs. In the 1990s telco boom they were largely made up of backpackers whose interests were to sign up as many customers as possible in order to fund the next stage of their travels.

Often, the telco or its contractor would only discover a sign up was the family dog or toddler long after the traveller was sunning themselves at Koh Phi Phi.

Using Indian students as the energy contractors were doing largely fixed some of the worst excesses of the 1990s but it didn’t address all of the problems

Management misalignment

Driving the rush for sign ups are usually poorly designed  management Key Perfomance Indicators – a dumb set of executive benchmarks rewards poor  behaviour and creates unforeseen risks. Particularly when those KPIs are focused on short term metrics.

Very quickly the risks in the short term focus become apparent and managers back off from these programs.

In this case it appears Energy Australia’s managers heeded the early warnings and backed off before the problem became too great, unlike the telcos who let the sales teams run rampant before reigning them.

What’s saddening about Energy Australia’s and AGL’s problems is they were totally forseeable and those who warned of the risks in a door-to-door customers acquisition strategy – and there were almost certainly some in these organisations – were overuled by enthusiastic executives aiming to bust their sales and market share metrics.

Sometimes we are condemned to repeat history repeatedly in business.

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