Paul Wallbank – Brilliant Communications

Tag: finance

  • When startups should think like designers

    When startups should think like designers

    Thinking about design and getting to market should be a priority for startup businesses says Murray Hunter, founder of Sydney’s Design + Industry.

    Having won over 160 design awards during 30 years of running Design + Industry and employing 50 specialist designers and engineers in his Sydney and Melbourne offices, Murray has many insights in what makes a successful product.

    “Some of those companies have gone on to become world leaders, it’s a hell of ride and it’s a fabulous relationship where 15 or 20 years later you have a client relationship that’s dominating the world.” he recalls.

    Thinking like designers

    The current startup scene in Australia provides an opportunity for the country, Murray believes.

    “We’re losing manufacturing industry but there’s a whole new wave of businesses and startups based around new technologies, particularly around IoT”

    Cyclone pruning shears

    “The world wants to think like designers and lead by innovation, which is a really interesting line. You have the American government that wants to design think and you have all these large accounting firms that want to be design thinkers as well.”

    “But everyone wants to be innovative and provide a better experience to the customer and we have all these new technologies that are giving us the ability to have a lot more information, be more informative.”

    “It started with Apple with the iPod and then the iPhone and it’s led right through so we now have high expectations of what we want for products and services.”

    Finding funding

    His advice to startups is blunt, “the first thing you need is funding, If you don’t, start the process of development sufficient to develop collateral which enables you to gain investors.”

    The development process itself starts with knowing the market.

    “Products should be designed to suit the market, not on a hunch,” he says. “So you start with what the market wants and you go backwards. You don’t get dressed and say ‘where are we going’, you find out where you’re going and then get dressed.”

    “The intelligent and qualified entrepreneur will have a lot of the problems solved, they’ll have done research, they’ll have knowledge of the market, they’ll know the segments it’s aimed at and quite often they’ll have route to market realised.”

    BlueAnt Pump HD earbuds

    “Crowdfunding makes a big difference as entrepreneurs can run a crowdfunding campaign, get initial sales and worldwide recognition for it. If it isn’t successful, that could be the end of it. Others know people who can fund it.”

    “They may not have funding or they may, we have quite a few suppliers around us who will help with the funding process. We also know private individuals with deep pockets who are interested in investing.”

    Changing the design industry

    Over the past few years, the design industry has changed dramatically with the rise of Computer Aided Design, 3D printing along with new materials and manufacturing methods. Medical devices are one area that’s seen a rapid change.

    “Thirty years ago medical products were low volume,” Murray recalls. “In Australia typically we’d make them out of sheet metal. Now the volumes have increased because the world is more easily accessed so we’re designing for higher volumes.”

    CliniCloud non contact thermometer

    “We’ve also got low cost manufacturing sources to provide solutions so we can develop a more sophisticated product that will be better received worldwide.

    “The biggest change I think has been CAD (Computer Aided Design), the Internet and 3D printing.”

    “CAD because we went from 2D drawing to 3D models, the internet because we no longer send DVDs or CAD files to our manufacturing partners and it means we can access manufacturers all over the world.”

    “We’re working on a 3D printer that can make biomatter, in other words skin, there’s talk of doing teeth with the rigid externals and soft nerves. So where we go I can only think of organs, prosthetics, replacing cartilage which is a big thing for the elderly.”

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  • Deeper in data and debt

    Deeper in data and debt

    Data collection agency Experian’s deal with Finicity to collect and process borrower information is an example of the how Big Data is being used by the financial services sector.

    Recently I wrote a piece for Fairfax Media on the Science of Money which included some quotes from Experian’s Australian managers. They were quite explicit about their use of data.

    That a company like Experian is adopting more advanced analytics isn’t surprising given the power of the tools available. What’s also driving the adoption is the proliferation of devices available to track people.

    Notable among those devices are personal assistants, as David Pogue writes in Scientific American, household technologies like Amazon Alexa, Google Home and Apple Siri are vacuuming up huge amounts of data on our behaviour, likes and dislikes.

    Increasingly all of this is being fed into machines that determine our suitability for marketing campaigns, credit and financial services.

    For companies like Experian this is a massive opportunity although the focus on credit suitability betrays a mindset more suited to the 1980s finance boom than the more complex times of the early 21st century.

    It’s hard though not to think that given a choice the finance sector will happily use these tools to take us into another subprime lending crisis which would be a shame as these technologies’ potential for allowing us to make better decisions is immense.

    How we use these tools will define our businesses, economies and communities over the next thirty years. We need to be careful about some of the choices we make.

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  • Entering an era of surpluses

    Entering an era of surpluses

    With the global Zero Interest Rate Policy experiment failing, we’re now entering the era of negative interest rates with a quarter of the world’s central banks charging savers.

    The world is flooded with money, but we also have surpluses in manufacturing, a surplus in most commodities, of energy and an increasing surplus of labor.

    From Shanghai to Barcelona, the surplus of labor is beginning to be felt as industries become increasingly mechanised and the consequences of short sighted economic policies over the last thirty years begins to be felt.

    That labor surplus is also driving the political shifts in Europe and North America as workforces are finding their living standards being pressured and their economic prospects dwindling. As a consequence, voters are looking for scapegoats – immigrants in Europe, the EU in Britain and Mexicans in the US.

    Regardless of which scapegoat you choose to blame for the global economy’s uncertainty, the fact remains we are in a time where scarcity can’t be assumed.

    This means business models that are based upon restricted supply are, in most sectors, under threat. The whole economics of scarcity becomes irrelevant when there are no shortage of suppliers around the globe.

    In some fields, such as energy, technological change is seeing the dominant positions of oil companies, electricity generators and distributors being challenged in ways that wouldn’t have been thought possible a few years ago.

    Even regulated industries where government licenses artificially controlled supply – like taxis, broadcasting and telecommunications – increasingly new distribution methods are changing the economics of those industries. No longer is buying a government license a sure fire way to big profits.

    Right now, the imperative for businesses to find the areas where there is scarcity and supply constraints. For many industries that may be too difficult a transition.

    Negative interest rates though take us into uncharted territory. How the global economy responds to virtually free and unlimited money is going to be an interesting experiment.

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  • Collapsing unicorns and business basics

    Collapsing unicorns and business basics

    UK e-commerce service Powa Technologies, once valued at £1.8 billion went into receivership after the lead US investor called in the £200 million loans it had made to the business.

    It turns out most of 1200 corporate clients the company had claimed as clients were actually expressions of interest in the service rather than firm orders.

    Powa now has the distinction of being the first of the tech unicorns to go broke – although it’s almost certain 2016 will see many of the companies with private billion dollar valuations join them.

    While the focus on Powa’s demise will be the deceased unicorn aspect, the company’s story illustrates some business basics.

    The key one is that sales only count when the money is banked, all too often cashflows, profits and valuations are inflated by booking income long before it’s received – if ever.

    Another aspect is valuations are not cash in the bank, Powa may have been valued at £1.8 billion but it only had raised £250 million in capital along with a similar amount in loans. This was not enough to keep the business going at what must have been a spectacular burn rate.

    While tech startups have unique aspects, the basics of business remain constant; Cashflow is king and adequate capital is essential. These are aspects managers, investors and employees need to watch closely.

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  • Confessions of a serial creditor

    Confessions of a serial creditor

    One of the sad facts of business is that ventures go broke, and when they do there’s a trail of former customers, suppliers and employees that end up out of pocket.

    The recent appointment of administrators to the recently listed Australian electronics retailer Dick Smith Holdings leaving thousands of gift card holder – including the writer of this blog – out of pocket is a good example of this.

    Over twelve years of running a service business having customers go bust was a regular thing. Luckily this wasn’t frequent as once the assets had been liquidated and divided among creditors one was lucky to get five cents for every dollar owed.

    Early warning signs

    When a customer did go broke it was rarely unexpected. With long standing clients the payment times would blow out and often a business going bust showed the signs of poor maintenance, declining stock levels and distracted management long before the money ran out.

    The other notable thing was the failing company’s staff were often on your side. At one company, a whisky broker that went under owing millions to creditors who’d effectively bought ‘time share’ in liquor, the receptionist insisted in paying for some of the work we’d done out of the petty cash.

    Five years later the remaining outstanding invoices were settled and, as expected, we received almost nothing apart from the entertainment of reading the administrator’s reports detailing the struggles of angry creditors trying to get their drinking money back in the face of what had almost certainly been a scam.

    Ethical proprietors

    Most business owners that go broke aren’t crooks however, most are honest people who made bad decisions or were just plain unlucky. Often these people suffer far more than the creditors.

    One pleasant experience we had with a failed customer was a dance studio on Sydney’s Lower North Shore. The business went broke, the proprietor fled to her native New Zealand and I resigned myself to never seeing the outstanding thousand dollars.

    Two years later the formal liquidation proceedings had finished and unsurprisingly we received none of the monies owing. A few months after a cheque from the business owner arrived for the entire outstanding amount with a note apologising.

    A tough life

    While the former dance studio owner probably broke the rules in paying back the debts outside the official channels, she illustrated most failed business people are good people who were caught out by their own mistakes or being on the wrong side of lady luck.

    Business failure for those running startups or smaller enterprises often comes at a high personal financial, mental and relationship cost so it’s not surprising those sinking trying to hold on later than they should and then take personal responsibilty for the damages they cause.

    Sadly the same doesn’t hold true at the corporate level and in the case of Dick Smith Holdings the executives, the institutional shareholders frittering aways investors’ money, the private equity swashbucklers and the staid corporate managers responsible for the firm’s failure probably won’t see a hiccup to their stellar careers.

    The moral for anyone in business remains never to be too exposed to any one creditor. Regardless of how well a client’s management means, when things go bad it’s unlikely you’ll see most of the money you’re owed.

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