Paul Wallbank – Brilliant Communications

Tag: managerialism

  • This is what happens when you rush things

    This is what happens when you rush things

    Nokia are going to release a smartphone with the best camera seen so far on a mobile phone.

    Desperate for good news and positive coverage, Nokia decided to announce the Lumia 920 prematurely and their marketing people are forced to fake the videos and sample photos.

    Then they get caught.

    And instead of having the media fawning over the impressive features of the Lumia 920, Nokia are scorned. A particularly damaging thing in a fortnight where Amazon and Apple have major announcements.

    The problem is giving yourself artificial milestones that can’t be met. People take shortcuts to meet those deadlines and debacles like Nokia’s are the result.

    Artificial “drop dead dates” are the mark of panic by poor management. One wonders how long this can continue at Nokia.

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  • Stranded markets

    Stranded markets

    “Stranded assets” are an accounting term for property that’s worth more on the books than it is in the marketplace.

    Often the valuation problem has come about because of market, legislative or physical changes – what was a valuable and useful asset becomes isolated from the rest of a business.

    Customers are biggest asset we have in our business – so what happens if our customer base becomes a “stranded asset”?

    This situation isn’t far-fetched in a time when technology changes a marketplace – a blacksmith providing services to stagecoach companies would have been in this situation a hundred years ago.

    In response to Are Businesses Fleeing the Online Space?, Xero’s Australian CEO Chris Ridd made some points about the problems MYOB have in the accounting software marketplace.

    We see that going online to the cloud is finally allowing many small businesses the opportunity to avoid the “walk into Harvey Norman and fork out hundreds of up-front dollars on on-premise software” experience and instead go straight to the simplicity and cost efficacy of the cloud.

    This is evidenced in our numbers and the fact that 40% of new customers signing up to Xero are coming from no software. (I mentioned last week at the NBN Forum that it was 30%, but we doubled checked and were staggered to find it was actually a lot higher). So we are creating a new market and cloud is therefore increasing the addressable market for accounting software. The cloud changes the economics of doing IT and makes automation of the business accessible and attractive to  a whole new category of SMEs.

    Chris’ point is interesting – the new generation of businesses aren’t going to the computer superstore and buying box software. Which is a problem for those who sell box software such as MYOB and Harvey Norman.

    What’s more, customers have moved away from those same superstores along with things like phone directories and classified ads, which is the problem companies like Sensis and Fairfax have to deal with.

    A decade or so ago, MYOB, Sensis and Fairfax were dominant in their markets with a loyal band of customers. Today the remaining customers – many of whom have not changed their business plans for decades – are”stranded markets” made up of holdouts who won’t move to new technologies.

    Those holdouts aren’t particularly profitable and they are slowly leaving their industries through retirement or, increasingly for these slow adopters, going broke.

    Being dominant in a market that’s declining in both profits and sales is not the place to be for any business.

    It’s difficult for the managers of these enterprises to move as their existing products are their core business, which is the classic innovators dilemma, but the alternative is to end up like Kodak or Sony.

    One thing missed in the eulogies for Steve Jobs is how he overcame the innovator’s dilemma problem within Apple. When it became apparent the old Mac OS was a barrier to innovation, he killed it along with the floppy disk and Apple Device Bus.

    Apple’s customers hated it as most of them had a substantial investment in the hardware which Jobs had made obsolete overnight. But almost all of them came back and became greater fans.

    News Corporation are trying a different tack to Steve Jobs in splitting the operation into an “old” business and a “new’ business. That way the old business can find a way to make money or quietly fade away without affecting the newer, more dynamic entertainment and electronic arms of the organisation.

    The challenge for MYOB – along with Harvey Norman, Fairfax and Sensis – is to move their customers to the new technologies, those who won’t go are the past and those stranded customers will isolate the business from the mainstream.

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  • Outsourcing the service economy

    Outsourcing the service economy

    Through the 1970s and 80s we accepted manufacturing industries moving jobs offshore because those jobs were done by working class, blue collar workers and the future lay in white collar, middle class service industries.

    As a consequence of moving manufacturing offshore, the US, British and Australian economies became more service based. The thought in the 1980s was that while goods could be made in Taiwan, the ‘knowledge industries’ couldn’t be.

    Then the Internet came along.

    A panel on The Future of Outsourcing convened by the Indian Institute of Technologies Association of Australia last night discussed some of these issues.

    Now the service industries are being offshored, at first it was the low skilled service jobs like call centres but it didn’t take long for higher value work – such as paralegal, medical transcription and of course IT services – to follow.

    The belief that white collar jobs couldn’t be taken over by cheaper foreign labour has been proved wrong.

    It isn’t just those working in the call centres or IT departments of telcos and big banks that are being affected, those small businesses in support industries like secretarial services or design are finding their clients are moving offshore too.

    What’s interesting with all of this is how long the executive classes can resist being outsourced. Indian and Chinese managers work for harder for less than their US, British or Australian colleagues and in many cases are better educated.

    One can only wonder how long the partners of major consulting business can hold the line as well, these guys – the vast majority are men – have done very nicely charging first world rates while increasingly paying developing world rates.

    Already Indian outsourcing companies, including at least two sitting on that Sydney panel, have set up their own consulting arms that cut out the expensive middle men. Without the overheads flashy offices and big packages for entitled partners, they’ll have a pretty competitive offering.

    While we can cry for the high paid management consultants and executives who are increasingly threatened by these changes, the Anglo-Saxon economies have a real problem as service industries move offshore.

    In Australia, the Bureau of Statistic’s 100 Years of Change in Australian Industry tracks how the nation’s industries have changed – in the 1950s Australian manufacturing peaked just shy of 30% of the workforce, by 2000 it had shrunk to 11% while service industries were doubled from around 25% to 50% of the economy.

    While it’s unlikely we’d see the service sector workforce shrink by 2/3rd over the next fifty years, there’s a good chance incomes will fall in these industries unless we start to invest in education and skills which allow Australia to stake a place in the global economy.

    One of the key takeaways from the Future of Outsourcing event was that this change is happening regardless of what we think is a fair wage for our work. It’s something our government and business leaders need to start considering.

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  • Ranking managers

    Ranking managers

    Vanity Fair’s analysis of Microsoft’s lost decade focuses on an unlikely culprit – the management tool of stack ranking.

    Stack ranking, or “forced distribution”, is the practice of listing staff members in order of effectiveness or placing them on a bell curve where those in the middle are satisfactory and those at the right hand of the graph are exceptional.

    Those on the left of the curve or the bottom of the list are deemed to be underperformers and risk losing their bonuses or even their jobs should the company be shedding staff.

    Like all business tools, stack ranking can be useful. One manager of a North American multinational who encountered this when working with an Indian outsourcer described how it was used.

    “A senior manager told me how he applied it in his group. Of 300 people, everybody was given a ranking and were told that ranking and given a chance to put their case if they thought it was unfair.
    Then the bottom 5% were culled. Tough but fair.”
    So at the Indian outsourcer it was applied to large groups and the bottom tier were given the opportunity to put their case. There was some transparency and at least some fairness in the process.
    Used poorly though, it can backfire, “using it for groups of ten is stupid and lazy” said that manager who later saw it introduced at his own corporation with catastrophic results.

    The real problem at companies misusing tools like stank ranking is too much management.

    Like the old saw of “too many cooks spoil the broth”, too many managers create mischief. To justify and protect their positions they build little empires and make work for themselves.

    Give empire building middle managers a tool like “stack ranking ” and you have a problem where office politics and patronage become more important than technical skill or performance which is exactly what the Vanity Fair article describes at Microsoft.

    Ranking employees in a mindless way is symptom of a bigger problem in an organisation. In Microsoft’s case, the problem is too many managers.

    The solution to that problem is simple.

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  • Australia – the Noah’s Ark of business

    Australia – the Noah’s Ark of business

    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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