Author: Paul Wallbank

Paul Wallbank is a speaker and writer charting how technology is changing society and business. Paul has four regular technology advice radio programs on ABC, a weekly column on the smartcompany.com.au website and has published seven books.

The innovation myth

Is innovation really the lifeblood of an organisation?

Innovation is the buzz world of the moment, along with the belief is that all organisations have to innovate to survive. Recently the Massachusetts Institute of Technology’s Sloan Review looked at what they believe are the five myths of innovation.

All five have good reasoning behind them, particularly the rebuttal of the idea that every innovation requires a “Eureka” moment as most good business ideas are steadily developed over time.

One of the writers’ ideas that can be taken issue with is that today’s innovations are now about business processes. This overlooks that  innovation and the resulting competitive advantage throughout the industrial revolution – such as Henry Ford’s mass production, Josiah Wedgewood’s sales stategies and Alfred Sloan’s building of General Motors – were about applying innovative business processes to new production technologies.

While dispelling some myths, The article perpetrates one of its own by concluded “innovation is the lifeblood of any large organization” as not all organisation are innovative, or need to be innovative.

The innovative drive might actually be the wrong thing for many institutions. For instance, we certainly don’t want doctors and nurses trying out innovative treatments without first going through various ethical and safety tests.

For public service departments, being innovative is usually outside their mandate as they are legally required to carry out a function, such as registering a motor vehicle or collecting statistics. While innovation may help them carry out their mission it isn’t necessary or the lifeblood of the organisation.

In the private and public organisations innovation can be anathema to many managers who didn’t get to where they are by taking risks. In many larger organisations, successful managers are a group selected by survivor bias, they are there because they didn’t take risks and their innovative colleagues long ago dropped away when their ideas “failed”.

Many of those big corporations operate in markets where two companies dominate the market, so there’s little incentive to be innovative, just do enough to differentiate yourself from the competition through some expensive marketing. Telecommunications providers, television stations and cable TV companies are good examples here.

Some of these businesses, to be fair, are highly regulated so managers and staff are cautious to be innovative as they are wary that implementing new ideas or business processes may find them in breach of various laws or regulations. This particularly true in industries like insurance and the legal professions.

We can also see how innovation doesn’t matter even in companies that appear to be innovative; the tech sector provides some case studies where businesses like Microsoft and Google have steady cash cows so the innovative sides of their businesses don’t matter. They just need to do enough to protect their critical cash cows and all other innovation, while fun and stimulating, is largely irrelevant.

Innovation is the lifeblood for high growth and start up businesses. If you are challenging existing players, as Google did with Yahoo!, then you need to be innovative and if an organisation wants to grow fast, it needs to be innovative in what it offers to its customers.

While innovation is important it isn’t the lifeblood of many organisations, particularly bigger ones. That’s where the opportunity lies for new businesses.

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Misunderstanding risk

Have we lost the capacity to judge physical and financial danger?

During the recent snowstorms that affected Europe and North America, the summer floods that struck Australia were almost unnoticed except for those living in the inundated areas.

The authorities wisely advised people, particularly tourists on their summer holidays, to avoid the affected areas.

A friend of mine decided to ignore those warnings and take his family on a drive through those backroads despite multiple flood warnings and evacuations. In disregarding the risks, he’s not alone in Western society.

Living the risk-free life

In the Western world we believe we’ve engineered risk out of our society, that we can make investments without risk, that we can build houses in fire, flood or earthquake prone areas without risk, that we plan a holiday without the risk of snowstorms, volcanoes or accidents disrupting our  trips.

As a society we believe the government will bail us because we’re good people and life, and fate, is always kind to good people.

When things do wrong, our mobile phones will work, our emergency services will come promptly and the government will quickly shelter and support us until the insurance company comes good on the damage.

Though it’s not just natural calamities where we believe this. It’s evident with people who quit their cubicles to find new enlightenment and riches as entrepreneurs.

Most of them misunderstand the risk-reward ratio that for every wildly successful new business founder, there are dozens who blow their money chasing the dream and hundreds of us that would have been better off working for a salary.

Finance markets and risk

The subprime crisis is another good example; millions were lulled into buying property on the promise that real estate values never fell and that their no cash down, defray your payments for years deal was bullet proof. These folk did not understand, or were equipped to understand, that real estate prices could fall.

During the subprime boom, the lenders thought they’d engineered out risk – Collateral Debt Obligations, default swaps and securitisation meant risk was a thing of the past – and they were proved wrong.

Indeed, the most frightening thing is our banks today believe they are still bullet proof and their profits and executive bonuses are risk free as governments will bail them out at the slightest hint of trouble. When the history of The Great Recession is written, and we are still in the early chapters, the guaranteeing of our “too big to fail” banks may prove to be the biggest mistake of our generation.

Because we believe there are no costs and little genuine threats to our lives, income or savings we don’t understand risks and therefore miscalculate them. If we think someone will be there to catch us, we’ll head up that flooded road, build that house in an earthquake zone or invest in that Ponzi scheme.

We have to understand there are risks and there are limits our governments and societies have in responding when things go wrong. If it’s clear we don’t understand those risks, then it’s probably best not to take them in the first place.

Endnote: My friend and his family made it back from the floods, although he ended up taking the family on four hour detour through some areas that sensible people would have avoided. Hopefully he’s learned a lesson about evaluating risks and won’t be taking his family into disaster areas again.

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Destroying your brand

How your online presence can hurt your reputation.

One of the constant business tips in the last few years is that be competitive in the new economy an enterprise – big or small – has to blog, tweet and have a credible online presence. But there is a downside to this, a business or individual that lets too much hang out runs the risk of trashing their brand.

Two recent examples of this are a PC Repair business on Queensland’s Sunshine Coast and a bar on the Gold Coast, there’s no links to the businesses in this post as the intention isn’t to trash their brands any  further.

Customer service is always a tough business and the Gold Coast bar their blogger, who bills themselves a “jaded bar worker” and is obviously one of the younger members of the staff, recently wrote a post on customer “whining”. Some of the whines include;

  • asking to change the music
  • wanting a drink in a different glass, or with less ice
  • preferring a decent head on a beer (referred to as “foam” in the post)
  • asking for a table to be cleared
  • complaining about a wobbly table

While all of those customer requests can be irritating, and sometimes unreasonable, there’d be little sympathy for the bar staff dealing with these complaints from any hospitality professional or a customer expecting any standard of service.

It appears the blog’s intent is to be a local, chatty version of the successful Waiterrant blog whose author, Steve Dublanica, chronicled the adventures of New York waiter. Waiterrant was good for Steve’s brand, but would have been disastrous for some of the restaurants he worked at.

Steve got around this problem by remaining anonymous until he landed a book deal – always a bad sign for a blogger – along with never identifying the establishments he served at.

While whining about customers is a necessary pressure relief for anyone serving the public, it’s not a good idea to do it publicly unless a particular patron has done something spectacularly rude or stupid. Asking to clear a table or for less ice in their drink does not qualify as even being unreasonable.

By just moaning about the typical day to day work that most of us have to deal with, this blog is not helping the bar’s brand. They might want to consider shutting it down or getting a more senior person to write or edit it.

A little further North on the Sunshine Coast, a local computer tech has built a successful YouTube channel with 20,000 subscribers based around his rough, Aussie larrikin persona featuring some very, very robust language and views.

With eight million views, the YouTube channel is doing well, but as an advert for the business it doesn’t portray his outlet in a particularly positive way and as the video clips become more popular, the damage to the shop’s brand becomes greater – along with the risks given he’s already had one legal threat against him .

Online channels give us the opportunity to get our businesses before the world but with every opportunity comes a risk. When we post a blog, video or tweet online the entire world can see what we’ve said.

Understand those risks – and they are very real – and be careful with what you post and which staff members you trust to post on your business’ behalf. What might have once just upset a few people can now turn the market against you.

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When the smiling stops….

a business isn’t working if you can’t smile at a customer

I was asked a while ago why I stepped away from my PC Rescue business despite it doing well.

The reason was I’d stopped smiling. I found myself dreading calls from customers.

When serving your customers becomes a chore, when you spend more time whining and moaning about your clients or you start fearing their phone calls, then you’ve crossed the line in the sand and it’s time to move on.

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Business tech 2010

What did the year bring for the connected enterprise?

2010 was always going to be an interesting year as the tech and business worlds came to grips with the economic shocks of 2008 and 2009 and the big tech companies like Apple, Google and Microsoft made their moves to meet various challenges and changes in their marketplaces.

Microsoft’s release of Windows 7 late in 2009 and the release of the new Windows Phone operating system made us think 2010 would be the year of Windows, but if anything 2010 will be most remembered as the year of the iPad.

The iPad
At the end of 2010 it’s difficult to think that the iPad isn’t even ten months old such has been the way Apple has captured the tablet computer market. For a decade, the corporate market had been gagging for a decent tablet system but had been continually let down by poorly designed Windows based models. The iPad delivered what the market wanted and the second version, expected in March 2011, will probably cement Apple as the leader in this segment.

Cloud computing

The iPad’s success was partly due to the plethora of cloud based applications available for the device. Being able to store your data or run your software on a remote server that can be accessed from anywhere made portable devices like the iPad and smartphone killer business tools. While the underlying principles under cloud computing are nothing new in the IT world, cloud products really started to take off in the business and consumer world.

Wikileaks
The fundamental flaws in the cloud and how the Internet works were exposed by the visceral reaction to Wikileaks’ release of the US State Department Cables. Wikileaks’ release of the Climategate emails, Iraq war tapes and finally the State Department Cables forced us to look at security, the ease of setting up websites and how dependent we are on the arbitrary whims of the privately owned corporations who own great chunks of the Internet.

Investment mania
As Helicopter Ben and his counterparts in Europe and China printed money to avoid deflation and to save big to fail banks from failing, hot money started to slosh out of the bank vaults and into the venture capital market with a mini dot com 2.0 boom beginning to appear. This was illustrated best by the group buying mania, best illustrated by Amazon’s $175 million investment in Living Social and Google’s rejected offer to buy Groupon for $6 billion.

Plagiarism
An entertaining side issue was the Cook’s Source plagiarism scandal which showed how much content is being stolen on the net, the attitude of many who do copy and paste other people’s work and how the Internet can quickly mobilise angry mobs.

Crowdsourcing
Probably the biggest buzzword of 2010 was crowdsourcing, the technique of getting those Internet mobs onto solving your business problems. While there’s still some confusion on the difference between outsourcing, crowdsourcing and running dodgy pitch competitions – which raise even more interesting questions about plagiarism, IP protection and business ethics –we’re seeing the hype die down and the real business models start to evolve.

The march of Facebook
With the passing of the 500 million user mark, Facebook showed it was a market force to be reckoned with. The launch of Facebook Places in August seeks to extend their network strengths into the local search business, making them an even greater threat to Google and smaller startups like Foursquare.

Politics meets technology
Something no-one would have expected is how the National Broadband Network became the defining issue of the 2010 Federal election. The fact it did probably speaks more for the policy vacuum on every other issue the two parties presented to the electorate. In many ways it’s a shame the discussion of how we should build such important infrastructure became bogged down in cheap partisan politics on both sides and it illustrates the hollow “Restaurant At The End Of The Universe” mentality that is the feature of modern Australian politics.

As 2010 draws to a close, a reflection on the year would see it’s been the year of connectivity. Businesses, particularly those in the retail and media sectors are beginning to figure out what drives the online economy and how it can be profitable for them.

2011 will be the year we start to see more businesses experimenting with iPads, Groupon, Facebook and other devices or services that help them connect with their markets and communities. it’s going to be an exciting year and we’ll have a look at what’s in store for January’s first column.

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The line in the sand

Setting a limit is critical to business success

Albert Einstein is quoted as saying the definition of insanity is doing the same thing over and over again and expecting different results. In business, we have to draw a line where we decide what’s working and what has failed.

Problogger’s Darren Rowse recently discussed with Smart Company his journey of becoming a professional blogger. After experimenting with his blog, and finding the niches that worked for him, the turning point came with an ultimatum from his wife;

“My wife humoured me for a long time, but eventually gave me an ultimatum, saying that I had been talking about this as a business but hadn’t been treating it as one. So I put more time into it, and then set myself a six-month goal. I was either going to be full-time by that point, or I would get a real job. And that’s what kicked things off, like me approaching advertisers directly and that sort of thing.”

The line in the sand is a critical point for our business ideas. We need these self imposed deadlines to measure when we’re wasting our time or to define when an idea is successful.

By drawing a line, we can decide when a project or business idea needs to be wound up – is that industry group working for you, that annual conference you attend still delivering leads, that product line still delivering profits?

Killing an idea or project you been passionate about can be one of the toughest things to do in business, but if it’s time to move on then you need to cross that line.

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The five year business plan

How does a business idea grow?

Recently I was talking to an old business partner about why our venture failed, we agreed we’d spent too long on trying to keep an idea alive way past the date it was clear it didn’t work.

This formed the idea of the Five Year Business Plan. It’s not a detailed plan, just the broad cycle that the typical start business follows.

Years one and two: The formative years
The first two years are the most exciting, exhilarating, toughest and frustrating periods of running a business. This is when you test your assumptions, discover what works and ditch what doesn’t. You make mistakes, learn and build upon the lessons

Not only is this the time your business develops, it’s also the time you learn about yourself and your business partners. Some of the lessons you’ll learn about debtors, staff, suppliers and customers will break your heart and make you tougher. You’ll also probably require cash reserves to see your way through much of the first two years as well.

In many cases the assumptions are too wrong and cash demands too great. If the cashflow isn’t standing up, sales are too short of projections or the development is too slow, it’s often best to draw a line in the sand and move on before you invest too much of your life on an idea that doesn’t work.

Consolidation: Years three and four
Once through the formative stage, the third and fourth years are about consolidation. Having got your business running well, now is the time to be proving the model and making money.

This period is where you start booking real profits, build goodwill and start laying the groundwork for your exit strategy.

Year Five: The next steps
In the fifth year, you’re looking at where the business will go next. Some entrepreneurs will look at cashing out to a buyer while others want to franchise out their systems or build the business into a world beater.

With a four year track record and solid profits you’re in the position to seek buyers, investors, franchisees or lenders to execute the next stage of your business, and personal, growth.

This five year plan is nominal as not every business will follow it. For instance a franchisee will probably short circuit the first two years as they are buying many of the systems and products a start up entrepreneur has to develop and that’s why a good franchise costs money.

Also, the phases may vary depending on the industry, the state of the economy and just plain dumb luck but by understanding where the business is in the cycle, you can time the right moves for your business from when to grow and when to close it down.

In many ways, starting a business is like being an early explorer like Christopher Columbus, Marco Polo or James Cook. You have a rough map with some ideas and assumptions on it but no real idea of what you’ll discover. That’s part of the challenge of being entrepreneur.

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