Category: business advice

Pay Pal and the Modern Spice routes

PayPal trace the modern online spice routes with some important messages for retailers.

Online payments company PayPal has released a paper on the The Modern Spice Routes which describes the pattern of online trade across the US, Germany, UK, China, Brazil and Australia.

The results are a snapshot of how online commerce patterns are evolving.

PayPal commissioned the Nielsen Company to survey 6,000 online shoppers about their cross border online buying habits to determine some of the characteristics of global internet commerce.

What immediately stands out in the report is the United States’ dominance with 45% of global market share, China follows with 26%.

At the bottom of the pack is Australia with 16% and, surprisingly, Germany with 13%.

The US itself is an interesting study with the most preferred overseas shopping destination being the United Kingdom followed by China.

Why are people shopping online?

American respondents were overwhelming shopping overseas to access more variety, with 80% of respondents citing the reasons for shopping offshore being “more variety that cannot be found locally”.

Finding more variety was the key factor in all the markets. Even in countries like China and Australia were respondents cited saving money as their main reason for shopping internationally online, more diversity in offerings came a very close second.

That in itself show the opportunity for companies selling internationally  – be unique and don’t offer what can be found at the local WalMart or Tesco.

Illustrating this, the PayPal report cited Australia’s Black Milk clothing and Germany’s Hatshopping as two international success stories.

Intra-region trading

An understated point with the report is just what proportion of international shopping is of each country’s spend – in the United States’ case it is only 18% while in Australia it’s 35%.

Illustrating those internal trading patterns are the British and German figures that show online shopping in other European nations is substantial, so intra-EU trade is a considerable factor.

Similarly, the second popular destination, after the United States, for Chinese online shoppers is the Hong Kong SAR. In fact the Chinese statistics show that intra-Asian trade is just as substantial as EU commerce with Japan, Korea and Singapore all feature highly on the list of shopping destinations.

This illustrates a problem for Australia as it has neither the United States’ massive domestic market or a group of closely integrated neighbours and the high level of international online shopping indicates just how poorly local merchants are doing with their internet strategies.

Indeed, for Australia that the proportion of online shoppers buying overseas is so high should be a worry for local merchants.

Today’s modern trade of bulk carriers, courier companies and shipping containers is very different to the spice routes of Marco Polo’s day, the world is evolving around new trading patterns right now.

For businesses like Australia’s retailers those changed trade routes may not be kind to those who can’t change.

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Lessons in crowdfunding from an unsuccessful Kickstarter campaign

Crowdfunding is in its early days and Moore’s Cloud founder Mark Pesce explains some of the lessons we have to learn about this new way of raising capital.

“I’d rather eat a bullet than do a Kickstarter campaign again,” says Moore’s Cloud founder Mark Pesce in the latest Decoding The New Economy video when asked about crowdfunding his project.

Moore’s cloud is an internet of things company that focuses on lighting, “we think it’s interesting and something that expresses emotion” Mark says.

With their first project, Moore’s Cloud looked to raise $700,000 to build their first project but fell well short of their target.

Falling short lead to Mark and his team executing a classic business pivot from a static lights to Holiday, a system of intelligent fairy lights.

“We took exactly the same technology and put it into a different form factor,” said Mark. “It’s as if we took the light and unwound it.”

The failure of the Kickstarter campaign gave the Moore’s Cloud founders an education on how crowdfunding works.

Customer focused from day one

An important aspect of crowdfunding is it’s very customer focused. From day one of the campaign, the venture has to devote resources on relations with those who’ve pledged a contribution.

Most startups don’t have those resources, or the time and skills, to deal with those relations.

“People say it’s a better way of getting investors. I would have to say ‘it’s not better, it’s different.'” Mark says about crowdfunding.

The psychology of investors

One of the differences is the psychology of investors. Mark was urged by the CEO of Indiegogo, Slava Rubin, to set a low target as participants like to back successful campaigns.

“There’s a whole bunch of psychology I didn’t understand going in,” says Mark. “If we’d had a goal of $200,000 we probably would have filled it in the first two weeks.”

“Once a campaign is fully funded, it tends to get overfunded.”

A truism of business is that banks will only lend to you when you don’t need the money and it strangely appears the same thing applies to crowdfunding.

We’re in the early days of crowdfunding and there’s more to be learned about the way it works and for which ventures the fund raising technique works best.

The experience of campaigns like Moore’s Cloud are part of how we’ll discover the nuances of crowdfunding and the psychology of the crowds that contribute.

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For God’s sake get a website

Setting up a website is one of the easiest, and most important, things a new business should do.

The annual MYOB Business Monitor was released earlier this week with the depressing news that half of the Australian businesses surveyed didn’t have a basic website.

MYOB’s survey reinforced the finding of PayPal’s Digital Literacy Report a week earlier that found only 34% of Australian small businesses list their contact details online.

This is madness – over a decade ago consumers moved online and now with the mobile internet any business without a website is almost invisible in the marketplace.

What is really dispiriting about these reports is that listing with the various online services and setting up a website is not hard, at worst it should take half a day for a simple site and to complete Google Places, Facebook and Yellow Pages listings.

The easiest way to create a website is to setup a free Blogger page, it takes about twenty minutes and is more than adequate if you just need a site that lists your services, location, contact details and phone number.

While Blogger is good for the basics, it does run the risk of locking a growing business into Google’s walled garden which is why WordPress is the better alternative for more advanced companies or proprietors.

Most readers of this site already know how important an online presence is for any organisation, but it’s almost certain that everyone knows a business owner who doesn’t have a website.

If one of those business owners is someone close to you, then the best thing you can do for them is to sit down with them and setup their basic online presence.

Unless you think it’s time they went out of business. In which case you won’t have to wait long.

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Venture capital investors as mentors

Early investors bring more than money to a young business

LinkedIn founder Reid Hoffman has a wonderful post on his blog detailing what he wished he knew when he first pitched his business to investors.

His seven myths of pitching are well worth reading whether you’re seeking capital from Silicon Valley venture capital firms, a sceptical bank manager or your mum and dad.

The first point is the most pertinent — a successful financing process results in a partnership that delivers benefits beyond just money.

Raising investor funds is only a step in the journey of creating a successful business, it is by no means the end point.

Hoffman’s point is something every business founder needs to keep in mind, those early investors are important mentors and their advice could prove to be more valuable than the money they bring to a venture.

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What if you built a broadband network and nobody used it?

Broadband internet can only drive economic growth if society and business can embrace change

The assertion that internet connectivity drives economic growth is largely taken for granted although getting the maximum benefit from a broadband network investment may require more than stringing fibre cables or building wireless base stations.

A key document that supports the link between economic growth and broadband penetration is the International Telecommunication Union’s 2012 Impact of Broadband on the Economy report.

While the reports authors aren’t wholly convinced of the direct links between economic growth and broadband penetration, they do see a clear correlation between the two factors.

ITU Impact of broadband on the economy report 2012
ITU Impact of broadband on the economy report 2012

One of the areas that disturbed the ITU report editors were the business, government and cultural attitudes towards innovation.

The economic impact of broadband is higher when promotion of the technology is combined with stimulus of innovative businesses that are tied to new applications. In other words, the impact of broadband is neither automatic nor homogeneous across the economic system.

For South Korea, internet innovation is a problem as the New York Times reports. Restrictions on mapping technologies, curfews on school age children and the requirement for all South Koreans to use their real names on the net are all cited as factors in stifling local innovation.

In reading the New York Times article, it’s hard not to suspect the South Korean government is engaging in some digital protectionism, which is ironic seeing the benefits the country has reaped from globalised manufacturing over the last thirty years.

The problem for South Korea is that rolling out high speed broadband networks are of little use if local laws, culture or business practices impede adoption of the services. It’s as if the US or Germany built their high speed roads but insisted that cars have a flag waver walking in front of them.

Indeed it may well be that South Korea’s broadband networks are as useful to economic growth as Pyongyang’s broad boulevards just over the border.

Similar problems face other countries with Google’s high speed broadband network in the US so far not attracting the expected business take up and innovation, although it is early days yet and there are some encouraging signs among the Kansas City startup community.

In Australia, the troubled National Broadband Network has struggled to articulate the business uses for the service beyond 1990s mantras about remote workplaces and telehealth – much of the reason for that has been the failure of Australian businesses to think about how broadband can change their industries.

Like Japan’s bridges to nowhere, big infrastructure projects look good but the poorly planned ones – particularly those no-one knows how to use – are a spectacular waste of money.

Hopefully the fibre networks being rolled out won’t be a waste of money, but unless industries start using the web properly then much of the investment will be wasted.

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Do business awards help companies?

Winning business awards are great for helping a company focus on its operations, but they aren’t necessarily great for growing an organisation.

The latest clip on The Decoding the New Economy YouTube channel is an interview of Cameron Wall of Melbourne’s C3 Business Solutions about business intelligence, data analytics and whether winning awards helps a company.

Cameron’s business has been a successful enterprise having grown to over a hundred employees since being founded seven years ago.

As a high growth business, the company was listed in the 2010 BRW Fast Starters list, interestingly though Cameron didn’t see a great deal of benefit from winning the accolade.

“I look at it as being a credential, just because you get the credentials it doesn’t necessarily mean you can charge a premium in the marketplace,” Cameron says. “It all helps in terms of recognition, but we haven’t been thrown anything as a result of the award.”

On the other hand the company has won the BRW Best Australian workplace three years in a row and Cameron has found this improved the business’ recruitment.

“Being in a service company you often hear ‘people are our greatest asset’, basically they are our only asset.” Cameron says, “Having a great place to work is really important for us.”

Cameron found that after winning the great place to work that the flow of resumes increased. “Some of the benefits of that were a lot of people applied to join C3 and it makes the recruitment process a lot easier.”

How business awards do help companies is in reviewing their operations and practices as Cameron explained, “using the great place to work process is a great way to understand if we’re trending upward, downward and where we’re going.”

“It was a difficult award to win, as you get probed by every angle.”

With the growth in data science, business analytics and Big Data companies like C3 are going to need good employees in the global race for talent. Having a reputation as fine place to work is a good way of winning the global race for talent.

Trophy image by RoyM through sxc.hu

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Google, Facebook and the Silicon Valley paradox

The paradox of Silicon Valley is cloud and social media companies want us to use the products they won’t use themselves.

One of the great advertising campaigns of the 1980s featured entrepreneur and Remington Shaver CEO Victor Kiam telling the world “I liked the product so much I bought the company”.

The modern equivalent of Victor Kiam’s slogan is “eating your own dogfood” where businesses use their own products in day to day operations. It’s a great way of discovering weaknesses in your offerings.

One of the paradoxes of modern tech companies is how they don’t always eat their own dogfood when it comes to their business philosphies – they expect their customers to take risks and do things they deem unacceptable in their own businesses and social lives.

The best example of this are the social media services where founders and senior executives take great pains to hide their personal information, a phenomenon well illustrated by Mark Zuckerberg buying his neighbours’ houses to guarantee his privacy.

Just as noteworthy  are the policies of Google’s IT department, for past five years most tech evangelists – including myself – have been expounding the benefits of business trends like cloud computing and Bring Your Own Device (BYOD) policies.

Now it turns out that Google doesn’t trust BYOD, Windows computers or the Cloud, as the company’s Chief Information Officer, Ben Fried tells All Things D of his reasoning of banning file storage service Dropbox;

The important thing to understand about Dropbox,” Fried said, “is that when your users use it in a corporate context, your corporate data is being held in someone else’s data center.”

This is exactly the objection made by IT departments around the world about using Google’s services. It certainly doesn’t help those Google resellers trying to sell cloud based applications.

Fried’s view of BYOD also echoes that of many conservative IT managers;

“We still want to buy you a corporate laptop, get the benefits of our corporate discounts, and so on. But even more importantly: Control,” Fried said. “We make sure we know how secure that machine is that we know and control, when it was patched, who else is using that computer, things like that that’s really important to us. I don’t believe in BYOD when it comes to the laptop yet.”

Despite these restrictions on Google’s users, Fried doesn’t see himself or his department as being controlling types.

“But the important part,” Fried said, “is that we view our role as empowerment, and not standard-setting or constraining or dictating or something like that. We define our role as an IT department in helping people get their work done better than they could without us. Empowerment means allowing people to develop the ways in which they can work best.”

Fine words indeed when you don’t let people use their own equipment or ask for a business case before you can use Microsoft Office or Apple iWork.

That Google doesn’t give its staff access to many cloud services while Facebook’s managers restrict their information on social media shows the paradox of Silicon Valley – they want us to use the products they won’t use themselves.

Back in the 1980s, Victor Kiam liked what he saw so much that he bought the company. You’d have to wonder if Victor would buy Google or Facebook today.

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