Tag: business

Australia – the Noah’s Ark of business

Cosy duopolies leave the Australian business community exposed to a changing world.

During a week of big business news, the buyout of another boutique brewery by a big corporation was barely noticed, but Lion Nathan’s takeover of the Little Creatures brewery illustrates the duopoly problem that is crippling Australian business.

A few days after that deal was announced, rumours that Business Spectator – which the above link takes you to – would be taken over by News Limited started circulating. These turned out to be true.

In both cases, existing duopoly players bought out small competitors, a process that’s been going on since Australia decided industry duopolies were necessary to protect the nation’s managerial classes, and these takeovers kill genuine innovation and stymie new thinking.

For those duopolies the definition of success is grabbing a few percent of market share off each other while using their market powers to screw down supplier costs.

A good of example of this is the retail duopoly, the farmers and producers get screwed while the supermarket chains engage in price wars driven by truly awful advertising campaigns.

Un-imaginative, un-original and plain un-inspiring. Any smart young kid wanting to get ahead in the retail industries knows they have to look overseas for job opportunities or inspiration.

Therein lies the real problem with Australia’s duopoly business culture – it triggers a brain drain as comfortable managements block any innovative new thinking as being too hard or just unnecessary.

In the media duopoly, telecoms analyst Paul Budde illustrated the problem in his account on trying to convince Fairfax of where the media industry was heading in a connected economy.

Fairfax’s management didn’t get it and didn’t care – today they still don’t get but they care deeply as their business model crumbles.

It’s not just future managers that are looking overseas for opportunity, the customers are well.

The duopoly model that evolved in Australia over the last thirty years depended upon the tyranny of distance to act as an effective trade wall. The Internet has demolished that wall for most industries.

Almost every Australian duopoly is living on borrowed time. If, like the proprietors of Business Spectator or Little Creatures, your business plan relies on selling out to a local duopolist then you’d better move quick.

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Delivering products

Focusing on delivery misses why we we are in business.

Once upon a time the local plumber got to work by bicycle, then he got a jalopy and now he shows up in a van or a hotted up ute. The plumber and his customers don’t care about the way his services are delivered.

A hundred years ago the retail industry was dominated by corner stores that customers could walk to, they received their deliveries by horse drawn carts and made deliveries on bicycles.

Then along came the motor car, which changed shopping habits and delivery methods.

Fifty years later the corner stores were a dying breed as they were replaced by supermarkets which customers could drive to and they took their deliveries by truck.

Today the retail industry is changing again, as the Internet changes shopping habits and society in ways similar to the motor car.

A similar pattern of change happened in the media sector; the evening paper died as commuters switched to cars and reading the Tribune on the tram or train home became less relevant.

Morning papers survived as people took deliveries to read over breakfast before driving to work.

At the same time radio and television became the dominant way most people got their news.

Even more the retail, the web has dramatically changed news distribution methods.

As the effects of Fairfax’s restructure sinks in, there are a group of people who don’t seem to want to accept reality – newsagents.

Mark Fletcher’s initial post about Fairfax’s restructure on his Australian Newsagency Blog attracted some harsh comments;

“Whilst the print media is arguably in decline I consider this post to be scare mongering……Fairfax will be here in print for years to come and to say or suggest that some days of the week will be or may be cut is pure conjecture at this point.”

” I am in semirural metropolitan Sydney. We have just added another 100 customers to our delivery run. Majority dont like reading their news online – old habits die hard. I hope that Fairfax dont abandon them. They like getting their newspapers in print.”

“Hi i will not pay to read online why it is all free, but will buy paper”

Focusing on print condemns those newsagents to the fate of the corner shop.

What is missed in the discussions about the future of the media is that medium is not message – people want relevant content delivered in the most convenient way.

This is true in every business. What we do is not really related to how we deliver the product, if we’re tied to one way of getting our services to a customer then we’re in trouble.

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Transparent falsehoods

Openness is more than a buzzword and organisations have to do more than shutting down bloggers.

Transparency, openness, innovation and entrepreneurialism are all popular buzzwords, but do organisations really value these attributes?

At a cloud computing conference this week I sat in on an innovation presentation. Almost everyone in the room was wearing a dark suit.

Despite their dress, most of those folk desperately wanted to be ‘innovative’ and almost all of them worked in organisations that would really benefit with a dash of genuine creative thinking.

I thought of that conference when reading of the attempted shutting down of a primary school student’s food blog by her local education authority.

The saga of the Never Seconds food blog illustrated the classic responses of managers when faced with something they can’t control – shut it down on whatever grounds you can find.

In the case of Never Seconds it was because the food service staff feared they would lose their jobs. Bless the council for caring so much about their staff.

As always in these situations, it was an opportunity missed to promote the school district and improve the services they provide.

Never Seconds is also a great place where other school students shared their school lunches. It is a great idea to promote healthy eating for kids.

Thankfully the Argyll and Bute Council relented on their ban and the Never Seconds blog is back for lunch.

Educators around the world talk about promoting children’s curiosity and creativity yet when a child expresses them in a way that threatens staff or bureaucrat power, they are quickly slapped down.

The same happens in the workplace, most organisations will treat truly innovative and original thinkers like the naughty children they probably were.

For too many organisations – businesses, political parties and even schools – words like innovation, creativity, openness and transparency are just empty buzzwords.

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Beating Buzzword Bingo

Some see buzzwords as an irritating curse of modern business, but they can indicate opportunity

One of the curses of modern business is the buzzword, a perfectly good word that is ruined by constant use.

The IT industry is particularly prone to buzzwords as people try to distil complex concepts into easy to understand terms – cloud computing is a good example of this.

More malign in the tech sector, and many other industries, are clueless managers and salespeople who try to baffle superiors, clients and staff with buzzwords to cover their total ignorance of what their business actually does.

For the canny supplier or contractor, the buzzword addled customer is a great sales opportunity as the customer’s managers are always grateful to buy a product tagged with some complex sounding terms that they can impress other with.

The security software vendors are very good at this as are management consultants who’ve literally written books stuffed full buzzwords guaranteeing them millions of billable hours.

One of the current favourite buzzwords is IPv6, the Internet standard replacing the current protocol that has run out of numbers. Saying you’re IPv6 compliant even when your business is more affected by cabbage prices in Shanghai is good to impress a few people who should know better.

Probably the greatest buzzword of the last decade was innovation. Every company, every new product and even government departments had to be “innovative” or lose credibility on the information superhighway.

Eventually though terms fall out of favour and innovation is one of those whose time has passed – those still dropping it into conversations today are usually 1990s MBA graduates who’ve dozed through the last five years of their professional development courses.

Watching out for those outdated buzzwords is useful not just as a sucker indicator for smart salespeople but also for job hunters.

For instance, when a company or recruiter constantly uses the word “innovation” in their job descriptions, you can be sure the organisation is one the least innovative on the planet, except possibly in the way management have structured their KPIs and option packages.

Generally the use of buzzwords in job descriptions or “mission statements” (another 1990s MBA fad) is inversely proportional to how applicable those terms are in the organisation.

For instance an organisation that claims it wants employees who are “self-motivated, curious and are selfless enough to seek what’s best for the company first,” is almost certainly run by control freaks practicing CYA management who mercilessly punish anyone under them foolish enough to take the initiative or ask questions.

Overall, buzzwords are a force for good as they let savvy employees identify those workplaces and managers that are best avoided. For those of us running businesses, it could mean opportunity or danger depending on what we’re selling to these organisations.

The greatest thing with buzzwords though is they are constantly evolving, meaning I get the opportunity to rewrite this column again in two years time by just changing a few words.

Innovation is already passé and “cloud” is peaking. What are next buzzwords we should watch for and enjoy?

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Feeling the currents

Customer service means listening to clients, we have the tools to do it.

Internet and marketing everyman Seth Godin makes an interesting point on his blog post Silencing The Bell Doesn’t Put Out The Fire.

Seth’s point is that satisfying vocal complainers doesn’t address underlying problems in the business and cites the Dell Hell saga of Jeff Jarvis as an example of where load complaints were a symptom of a much deeper issue within the business.

For Dell, this had been the choice to focus on the low value, high volume market segments. To compete there it meant cheap components and selling to comparatively uneducated, price sensitive consumers.

Compounding that decision was Dell’s decision to partly address the inevitable cost pressures they had put themselves under by outsourcing their support lines to truly dire, lowest price providers.

As a consequence of abandoning its service culture, Dell rapidly gained a reputation as being unreliable and unhelpful. One only has to look at the Dell Hell comments on Jeff’s original posts to see how damaged Dell’s name was.

I encountered Dell’s shocking support during that period first hand in PC Rescue, one customer asked me to troubleshoot her Dell PDA after their support line had reduced her to tears.

Very quickly I discovered why, the installation software supplied by Dell didn’t work properly – testing was obviously another victim of budget cuts – and the tech support people were working with an early version.

We managed to fix the problem without the “help” of Dell’s helpdesk and the client swore never again to buy Dell. She’s now a happy Apple customer who is a happy to pay a slightly higher sticker price for a better product and service.

The real concern was that during this period Dell’s management were oblivious to the problems they were suffering in the marketplace, they were meeting their KPIs and appeared to be growing sales while the business itself was about to go over a cliff.

Dell’s management could have recognised this had they chosen to, the company had plenty of market intelligence, customers surveys and their support logs to tell them they had a problem. It wasn’t in their interests to do so.

Today every business has those tools to monitor what customers are saying about them. Google Alerts, Facebook and – if you’re in hospitality – Tripadvisor, Yelp or Eatability.

With social media it’s easy for the bad message to get out; it’s also easy for management or owners to watch out for problems.

Dell only survived the Dell Hell experience because they were big and well capitalised, no smaller business could have survived similar damage done to their reputation.

Smaller businesses don’t have the luxury of ignoring their customers until the screams become too loud.

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Too much money

Overcapitalisation of a business can be worse than too little money.

Having too little money is the problem for most businesses, for a few though the opposite is the case. Overcapitalisation can be as fatal to a venture as being starved of funds.

In the dot com boom of the late 1990s we saw young companies being swamped with too much money which was squandered on flashy offices, comfortable chairs and expensive executive diversions.

Most of the businesses failed as staff didn’t have to worry about gaining and retaining customers while investors didn’t put pressure on managers or owners to perform.

The hospitality industry is particularly prone to this, with cafe and restaurant owners plunging hundred of thousands – sometimes millions – into expensive fit outs and ridiculously expensive kitchen equipment.

Most of these overcapitalised outlets fail because the owners have spent too much on setting up the business and not enough on staffing or providing for ongoing costs.

We’ve seen in the past few years many celebrity chefs teaming up with flush investors to build expensive restaurants with these ventures rarely ending well.

The story of Justin North’s chain of restaurants going into administration is a classic case of this, as the Australian Financial Review describes it;

The Norths, both in their mid-30s, don’t have a wealthy financial backer. They poured in all the cash they had and sold kitchen equipment and other assets to finance the venture.

Westfield kicked in an undisclosed amount.

Ostrich-skin leather tabletops, hand-printed wallpaper, and a huge custom-designed Fagor induction stove imported from Spain (the first of its kind in Australia) contributed to the huge fit-out cost.

In a statement to employees, the North Group said its “businesses are currently in financial difficulty”.

“The administrators are now in control of the group’s assets and affairs and intend to trade the business in the ordinary course whilst undertaking an urgent review of the financial position and explore various restructuring options,” the statement said.

For much of the Australian hospitality industry, the Norths’ problems are a glimpse of the future – the success of the Australian and Chinese stimulus packages in keeping their respective nations out of the mire the US and Europe indirectly led to a boom in restaurant spending and investment.

We saw that boom manifest itself in the opening of pretentious restaurants and the explosion of food blogs as desperate PRs flogged their clients’ venues to the media.

There’s a lot of journalists and food bloggers who are going to find a welcome improvement in their eating habits as the fine dining market now sorts itself out.

It’s going to be tough for those who’ve invested too much or the smaller suppliers to those restaurants.

An area we should be critical of journalists is with headlines like “Restaurant Group Collapses“. A business going into administration is not “a collapse”, it’s in fact the opposite where the shareholders, directors or creditors seek to find an orderly way out of trading difficulties.

Putting out the word that a business has “collapsed” makes the task of salvaging the enterprise much harder for those working to fix the problems.

The Norths have taken the honourable and sensible option. While putting a business into administration can be a brutal process – particularly for the shareholders, investors and smaller creditors – it at least shows the group’s founders have acknowledged the problems in their businesses and are looking to fix them.

All too often, we ignore the fact our businesses are going broke and don’t take the action needed to save them. Doing it early means less pain for everyone.

Having too much money is often worse than having too little money, although most of us would love to be in the position of having big money backing our ventures.

We often talk about learning from failure and not stigmatising entrepreneurs who’ve given it a go and failed, how we treat Justin and Georgia North will be a good measure of whether we are really an entrepreneurial culture.

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Raising venture capital is not the measure of success

Bringing investors on board is an important part of a business’ growth, not the end game.

“Those guys are successful, they’ve raised half a million from investors,” one startup commentator recently said about a business.

Is raising money the benchmark of business success? Surely getting investors on board is part of the journey, not the destination.

Having some investors coming on board means others share the founders’ belief their idea is a viable business and it’s a great ego boost for those working hard to bring the product to market.

That cash also exponentially improves the survival chances of the business – too many promising ventures fail because the founders haven’t enough capital.

While it’s an important milestone in the growth of a business, raising capital is not the end game. Only minds addled by the Silicon Valley kool-aide believe that.

In fact, if you’ve set up a business because you hated working for a boss, you might find your new investors are the toughest task masters you’ve ever worked for.

Good luck.

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