Category: economy

The irrelevant operating system

No-one cares about operating systems anymore

Last decade, people queued around the block to buy the latest version of Windows, today no-one cares. What next for a market that has become commoditised?

When you visit a website your browser reports, among other things, what type of system you’re using. Net Applications – a US based web monitoring company who analyse online browsing statistics – keep a regularly updated list of what people are using when surfing the net.

On their latest statistics, Windows XP finally fell below 50% in September 2011, just on ten years after it was released. Windows 7 is taking over from XP while Apple steadily gain market share.

These statistics show how the operating system has become irrelevant, only really dedicated geeks really care anymore about their version of Windows or whether a computer is running an Apple Mac or Microsoft product.

As most computer users are drifting to cloud computing services and consumers are increasingly using their PCs to access online games and social media sites, it doesn’t really matter anymore what systems are used as long as they work.

For many in the computer industry, this is a problem as they desperately want to sell a product in a market that has become commoditised. It’s another example of the PC industry’s broken business model.

It’s not just the computer industry with this problem, the 3D TV hype of 2010 was a desperate attempt to sell new television sets in a market that had stalled; recession hit consumers had no desire to replace their perfectly good TVs that were less than a decade old, just like Windows XP users.

This year’s Consumer Electronics Show that launches in Las Vegas this week will see similar desperation as the various PC and mobile phone manufacturers trying to generate excitement about their new products.

For the journalists and PR folk at the CES the problem is customers largely don’t care anymore. As the failure of 3D TV illustrates, consumers aren’t buying the hype.

Just as with operating systems, most customers want something that works, if you’re going to get them to replace older proven technology you’ll have to show where the new product adds value.

The era of products flying off the shelves because they are new and shiny is over – just ask Microsoft about it’s operating systems.

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The death of the netbook

Is the cheap, ultra portable computer a dead product line?

“You don’t want to buy one of those of things,” said the electronics store assistant, “they don’t have much memory and the CPUs in the notebooks and ultra books are better.”

I was shopping for a cheap netbook for the kids, each of which had been saving up to buy one as they are sick of me yelling at them for playing Minecraft on my work system, and the consensus from the store staff was to do everything to steer folk away from the cheap systems.

This is understandable as most electronic store staff are on commissions, and these are lean on cheap computers. It’s much better to sell a thousand dollar unit – with upgraded warranties and accessories – than a low margin, one off unit.

For manufacturers, similar problems exists; these cheap unit cannibilised their higher priced products with better margins. Dell recently announced they are getting out the netbook market and others are following.

Netbooks themselves are in trouble as the market they addressed for cheap, portable, Internet connected devices is now largely covered by smart phones and tablets which offer better battery life and usability.

Interestingly, the battery life argument was even used by the computer store salesfolk who pointed out – correctly – that the newer laptops have better power management than their cheaper netbook cousins.

While the netbook as a category is dead; the concept itself isn’t. As the uptake of tablet computers like the iPad show, Internet connected portable devices are becoming the computer of choice for many people and the advantages of a laptop form factor; a proper tactile keyboard, USB ports and other external connectors are still attractive.

Probably the worse thing for the manufacturers and retailers is the price points are now established in customers’ minds – $400 is what people want to pay for laptops, which doesn’t bode well for those higher priced systems.

Those manufacturers can’t even get into the tablet computer market as Apple now own that sector that the PC vendors and Microsoft squandered a decade’s lead with substandard equipment and badly designed software.

Despite the best efforts of the electronic store’s salesfolk, my kids ended up buying cheap, low specced netbooks out of their savings and those systems run Minecraft quite nicely. Which is another problem for shops and manufacturers stuck with a 1990s business model.

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Why governments fail in building Silicon Valleys

Can governments build entrepreneurial hubs?

Don’t Give the Arnon Kohavis Your Money warns Sarah Lacy in her cautionary tale of what happens when an economic messiah comes to town promising to create the next Silicon Valley.

“Hopefully this story finds a way to circulate out to the wider audience of government officials and old money elites who have good intentions of wanting to make their city a beacon for entrepreneurship.” Writes Sarah. “Hopefully it reaches them before they get bamboozled into giving the wrong people money to make it happen.”

Bamboozled Bureaucrats

For 19 months I was one of those government officials and saw those good intentions up close while developing what became the Digital Sydney project, that bamboozlement is real and a lot of money does go to the wrong people.

Sarah’s points are well made, Silicon Valley wasn’t built quickly with its roots based in the 1930s electronic industry and the 1960s developments in semiconductors – all underpinned by massive US defence spending from World War II onwards.

In many ways Silicon Valley was a happy and prosperous accident where various economic, political and technological forces came together without any planning. Neither the Californian or US Governments decreed they would make the region an entrepreneurial hotbed and sent out legions of public servants armed with subsidies and incentives to build a global business centre.

This is the mistake governments – and a lot of entrepreneurs or business leaders – make when they talk about “building the next Silicon Valley”; they assume that tax free zones, incentive schemes and subsidies are going to attract the investors and inventors necessary to build the next entrepreneurial hotspot.

For governments, the results are discouraging; usually ending in failed incubators and accelerator programs all conceived by public servants who, with the best will in the world, don’t have the skills, incentives or decades long timelines to make these schemes work.

New England’s failure

At worst, we end up with the corporate welfare model that sees governments and communities exploited like the tragic story of New London, Connecticut, where the local government spent $160 million and cleared an entire suburb for drug company Pfizer to establish their research headquarters, which they closed a few years later and left a waste dump behind.

While the New London story is one of the worst examples, this sort of corporate welfare is the standard role for most government economic agencies. The department I worked for gave subsidies to supermarket chains to open distribution centres and stores that they were going to build anyway.

One of the notable things with development agencies and the provincial politicians who oversee them is how they are easy victims for the economic messiah – it could be a pharmaceutical giant like in New London, a property developer promising Sydney will become a financial hub or a US venture capital guru flying in and promising Santiago will be the next San Francisco.

The truth is there are no short cuts; building a technology centre like Silicon Valley, a financial hub like London or a manufacturing cluster like Italy’s Leather Triangle take decades, some luck and little intervention by government agencies or outside messiahs.

Silicon Valley and most other successful industry centres are the result of a happy intersection of economics and history. The best governments can do is create the stable financial, tax and legal frameworks that let inventors, innovators and entrepreneurs build new industries.

All government support isn’t bad as well thought out, long term programs that help new businesses and technologies grow being the very effective – we should keep in mind though taht Silicon Valley couldn’t have happened without massive US military and space program spending.

Like a parent with a baby, the best governments can do is create the right environment and hope for the best. Interfering rarely works well.

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Lords of the digital manor

How free content and expensive management can’t live together

There is something fundamentally wrong with AOL’s media business states a Business Insider headline.

What is fundamentally wrong is quite basic to anyone who has owned or managed a business – money.

The problems at AOL illustrate the deep flaws in the “digital sharecropper” business model of putting free or cheap content on the web to harvest online advertising.

Lords of the digital manor

Sites like Demand Media and Huffington Post can’t make money from content if too many staff expect to get paid. Chris Anderson illustrated this in a rebuttal to Malcolm Gladwell where he examined the economics of his GeekDad blog and the work of its manager, Ken;

So here’s the calculus:

  • Wired.com makes good money selling ads on GeekDad (it’s very popular with advertisers)
  • Ken gets a nominal retainer, but has also managed to parlay GeekDad into a book deal and a lifelong dream of being a writer
  • The other contributors largely write for free, although if one of their posts becomes insanely popular they’ll get a few bucks. None of them are doing it for the money, but instead for the fun, audience and satisfaction of writing about something they love and getting read by a lot of people.

It’s almost touching to picture the modern day digital serf touching his flat cap and murmuring “thank you m’lud” on receiving a ha’penny from the lord of the digital manor before scampering back to working on becoming a well read, but unpaid writer.

We don’t pay writers

The business model of the Geek Dad blog or the Huffington Post relies upon these unpaid writers donating their work and time –the digital sharecroppers as described by Jeff Attwood.

Low paid or free labour is essential to the success of these site, when the bulk of advertising income goes straight to the proprietors the digital aristocrats – Lord Chris of Wired or Duchess Arianna – can live well.

The business model falls apart when management starts taking a cut of the profits; install a highly paid CEO and management team with their squadrons of Executive Vice Presidents or Group General Managers with the Medici-esque perks and entitlements these folk demand and the profits disappear.

AOL’s problem is it has too many highly paid managers extracting wealth from the company’s cashflow.

This is exactly the same problem print and television media empires have, once the rich rivers of gold allowed them to build up well paid management castes that are now crippling the businesses as revenues can’t support their financial burden.

Paying for digital media’s future

Over time, online media revenues are improving. As Morgan Stanley analyst Mary Meeker pointed out in 2010 that U.S. consumers spend 28 percent of their media time online, yet in 2010 only 13 percent of ad spending goes to the Internet. As advertisers follow consumers, publishing on the web will become more profitable.

The risk for big media organisations is their money will run out before the digital renaissance arrives and when it does, they may have squandered their natural advantages by shedding quality journalists, experienced sub-editors and good editors in an effort to prop up executive bonuses.

AOL’s management problem is part of a much bigger problem across markets and industries, we can call it managerialism – there are too many highly paid managers getting in the way of the writers, engineers, scientists, artists and tradesman who add real value to their organisations.

Strangely, it may be Chris Anderson’s “free” model that kills the managerial culture as enterprises that can’t afford to pay product creators certainly won’t pay an Executive Vice President’s entitlements.

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Business is fine

Everything is good in business, until one day it isn’t.

“I don’t need high speed broadband,” snarls the businessman in a country town, “business is fine as it is.”

A hundred years ago this year the iconic Australian horse coach company Cobb & Co went into its first bankruptcy as it declined from being the dominant transport service of rural Australia.

Cobb & Co was founded in 1854 by four young Americans in the Victorian gold rush and grew around the expansion of Australia’s rural farming and mining industries. By 1900 the company had 9,000 horses travelling 31,000km (20,000 miles) every week.

By 1924 Cobb & Co was gone. Displaced by the motor car and restrictive state government rules designed to protect their railways.

Many businesses, including the management of Cobb & Co, thought the motor car was a fad. No doubt many at the time also thought electricity was dangerous and unnecessary.

Business worked fine as it was when stagecoaches carried the mail and bullock carts carted the crops, steam engines were fine to power the farms and businesses while the telegraph was just fine for those times when a three month letter to your customers or creditors in London or New York wasn’t quick enough.

All those businesses went broke. They didn’t go broke fast, it was a slow process until one day owners realised it was all over and then the end came surprisingly quickly.

That’s where many of us our today – cloud computing might be the latest buzzword, social media might be a distraction for coffee addled children of the TV generation and the global market might be just a way to dump cheap goods and services on gullible consumers – but markets and societies are changing, just as they did a hundred years ago.

Sure, your business doesn’t need fast Internet. Business is fine.

Stage coach image courtesy of Velda Christensen at http://www.novapages.com/

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The case for faster internet

Is the argument for a national broadband network being lost?

The National Broadband Network (NBN) is a project designed to deliver faster and more reliable broadband to Australia’s regions. While a good idea, it’s not without its critics and a fair degree of controversy.

One of the problems the project has is the inability of NBNCo, the company established to build and run the network, to articulate the benefits and scope of the project.

Last Friday night “John from Condobolin” grilled the Gadget Guy, Peter Blasina, about the project. John’s questions, and Pete’s answers, which can be found at 35 minutes into his program, illustrates the confusion the surrounds NBN and the failure of the project’s supporters to explain the benefits.

So how should proponents of the National Broadband Network – people like me who believe that high speed broadband are the freeways and railways of the 21st Century – respond to questions. Let’s answer John’s questions from last Friday.

Lightning might affect fibre networks

John’s first question was about lightning affecting the NBN, commenting when Pete confirmed electrical storms would affect the network that “it’s no better than the existing service.”

Sadly all infrastructure is affected by weather – a freeway is just as affected by fog as a dirt road, perhaps even more so, but it doesn’t mean you don’t build a highway because of that. The same applies for the NBN.

Interestingly the wireless and satellite alternatives proposed to fibre optic cable are even more susceptible to electrical storms, which perversely makes a better argument for running a fibre optic network.

I don’t need any NBN

“I have got quite good reception in Condobolin and I don’t need any NBN, I can assure you” was John’s next big statement.

That’s nice for John that he’s happy with what he has – the rest of us should be so lucky.

For many of his neighbours and those in the surrounding district, particularly those dealing with remote suppliers and overseas markets, reliable and fast communications are essential.

Now is good enough

A farmer doesn’t need broadband for selling into America, he’s able to do that today, was the crux of John’s next comment after he and Pete had an exchange about rolling broadband out to remote locations.

It’s true that farmers can do a lot with today’s satellite and ADSL connections, then again they were able to ship exports in the days of bullock carts and sailing ships. We could extend that argument against railway lines, roads, containers and bulk carriers.

Once upon a time some guy argued against the wheel. Today’s technology has been good enough has always been the argument of those who don’t see the benefits of new tools; we’re talking about tomorrow’s markets and society, not today’s.

Broadband is all about fibre

“You’re talking about satellite dishes and things like that, not NBN.”

The National Broadband Network isn’t just about fibre; fibre optic cables makes up the network’s core and bulk of connections, but wireless and satellite are essential in order to make sure the entire nation has access to the network.

Unfortunately the nonsense argument that technology improvements in wireless will render fibre optics redundant has been allowed to take hold by self-interested politicians and sections of the media pushing a narrow agenda.

Wireless, satellite, fibre optic and other cable technologies are all part of the mix, the real argument is on the proportions of that combination and the consequences to the government’s budget.

Spotting the clueless

As an aside, the cable versus wireless argument is a good yardstick for measuring the knowledge of anyone joining the NBN debate.

Someone clueless arguing against the project says investment in fibre optic cable is unnecessary as it’s speed and data capacities will be one day superseded by those of Wireless networks.

This betrays a failure to grasp the inherent advantage of having a dedicated cable connection to your property as opposed to sharing a wireless base station with hundreds, if not thousands, of others.

Equally anyone pro-NBN who says that fibre is faster because it travels at the speed of light is equally clueless as wireless, copper wire and even smoke signals also travel at – or close to – the speed of light.

Games and videos

“Is this only to watch videos and DVDs?” was John’s last question.

Well, does Condobolin have a video store? A quick Google search shows it does, along with local and satellite TV stations. So the residents of Condobolin are just keen as the rest of us to watch the tube.

Increasingly our viewing habits are moving online and fast broadband is necessary to deliver that. John may be happy to exclude his town from being able to do that, but my guess is plenty of his neighbours would like to have that option.

What’s more, many of those farmers, processors, trucking companies and other service providers in the Condobolin region will need those video facilities for tele-conferencing with suppliers, customers and training companies.

Building for the future

Video conferencing isn’t the only application for what we consider today to be high speed networks, these are going to change society and business in the same way the motor car changed us in the 20th Century and railways and telegraph in the 19th.

Australia made a mess of the railways and the roads, in both areas we’re still playing catch up. The National Broadband Network is an opportunity to avoid the mistakes of the last hundred years and get the 21st Century right.

Unfortunately, the objectives of building a better nation are being lost in a fog of disinformation, political opportunism and corporate incompetence. We can do better than this.

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Mad, bad or dangerous: The One Percenters we need to avoid

There is a certain type of customer business need to be careful of.

“I’m not going pay you, your technician was constantly looking at his watch,” growled the customer when asked why she’d stopped a cheque for some work we’d done for her.

There’s many excuses for not paying your bills but a tradesman trying to keep the client’s bill to a minimum is an excellent dodge.

Over the phone call’s ten minutes, it was clear this lady was going to be a tough customer.

First the job wasn’t done properly, then the charges were too high, she accused us of taking advantage of vulnerable women and finally she was going to complain about us to her union.

It was clear we were in for a fight to get a hundred dollars from her, so I let it go. She went away believing she was right.

The saying “the customer is always right” was coined by US retail pioneer Marshall Field and exported around the world by Harry Selfridge, one of his employees who also founded a business empire.

We can be sure neither of them actually meant that customers are always correct in what they do, just that the key to successful service is the client walking away believing they are right.

Regardless of how well we deliver on our promises, there are always going to be some that aren’t happy. In most cases this is due to misunderstanding, or just a bad day on our part, but sometimes there’s the one percent of customers who are mad, bad or dangerous.

The Mad

Some customers just aren’t quite with us. These people, some of whom have genuine psychological problems, simply aren’t going to be reasonable.

There’s no point in fighting them as that’s only going to make their issues worse and maybe even transfer some of their problems to you.

Fortunately as you become more experienced in business you get better at detecting and avoiding these type of customers although there’s always the odd one who sneaks through.

The Bad

There’s a certain breed of people – and businesses – who don’t pay their bills, seeing their suppliers as banks and an invoice as an interest free loan.

Often these customers are charming and the perfect client before the bill is presented then they string you out for months of years before paying your invoices.

For these people and organisations, who are genuine deadbeats, there’s the fool me once, shame on you; fool me twice, shame on me philosophy. It’s usually better to write them off rather than sink hours of management time.

The Dangerous

Of all the bad payers, the most dangerous is the game player. To these people, not paying debts is an intellectual challenge which they enjoy and play for fun.

These folk will just as happily mess around the phone company or the tax office as much as the local plumber or newsagent, it’s just a game which they’ll play to their maximum enjoyment and your frustration.

For the big companies, these people can be a benefit as they justify the existing of entire bureaucracies dedicated in getting them to pay; small business though don’t have the time and resources to spend the hours of work over years to extract payment from them.

Thankfully these folk usually stonewall as the first invoice so there’s early warnings you’re dealing with trouble. Resist the urge to play the game with them as they are usually better at it than you.

Regardless of which category these bad debtors fall into, in each case it’s better for your valuable time and sanity to let them believe they are right, write the debt off and move on to helping customers who really matter.

Fortunately these people really are the One Percenters and only representative of a tiny proportion of our customers.

The taste of copping a loss is always painful, but at least we get good stories from the excuses they give. What’s the best reason you’ve heard for a customer trying to dodge a debt?

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