Tell ’em they’re dreaming!

How the quick trade sale model for startup businesses distorts markets and kills innovation.

Yahoo!7’s purchase of Australian group buying service Spreets last week is great news for the Sydney startup’s founders and investors, but these deals aren’t so great for our economy, businesses and innovation.

The mark of the late 1990s tech bubble was the “renovation rescue” model of building start up businesses. Just like keen property speculators, this model involves an angel or venture capital investor putting in enough money for the founders to do enough – either by growing the business or embarking on a PR campaign – to attract the attention of potential buyers.

For the business founders that can be a lucrative result, but it often distorts the priorities of a new endeavour as the investors are focused on a quick exit instead of building a durable, long term enterprise.

This has a bigger effect on markets as incumbents buy out young, smart and innovative new entrants. Good examples of this were the buyouts of successful online shopping services by the major retailers in the early 2000s.

Once purchased, the large corporations let innovation and fresh thinking in the start up business wither and die as the larger business’ bureaucracy and management hubris subsumes the acquisition. Few acquired businesses avoid this fate.

Which brings us to the buyer in the Spreets transaction. At the press conference announcing the deal Yahoo!7’s CEO Rohan Lund said “we’re seeing social, mobility e-commerce completely changing the way we use the web at the moment.”

Rohan’s absolutely right on this – location based services are changing advertising and retail – the problem is Yahoo!7 has no local business capacity and relies on News Limited’s True Local directories.

Perversely if Yahoo!7 are successful in building up their mobile, location based services it’s actually News Limited that will get most of the benefit.

A similar situation exists with Cudo, the competing joint venture between PBL and Microsoft, which relies on Sensis’ Yellow Pages.

That Rupert Murdoch and Telstra stand to gain as much, if not more, from the efforts of Yahoo!7, Microsoft and PBL is an indicator of just how fuzzy the thinking is behind many big business acquisitions.

A bigger threat to these ventures is Google who last week announced their intention to start up their own group buying service. Given Google already have a local business platform that supports coupons, it’s going to make them a tough competitor.

Assuming big corporations will dominate this space may be flawed as the group buying business relies on hands on, aggressive sales people feeding a pipeline of interesting and compelling offers to the subscribers. Short the daily deals start becoming boring or perceived poor value, subscribers will ignore the emails and take their shopping elsewhere.

Strangely of all the Australian big businesses in this space Sensis, with their Yellow Pages sales network, and News Limited, through their media selling and classifieds networks, should have the capacity to launch successful competitors.

Despite Sensis launching their own group buying service it’s hard to think that either Yellow Pages or True Local can succeed in this space. Similarly with Google, the “hands-off” web 2.0 way of doing business simply won’t work in a market that requires a motivated sales team to drive the product.

Recognising that lack of selling expertise probably drove Google to offer 6 billion dollars to buy the group buying innovator Groupon last year. An offer which Groupon rejected.

Google’s track record on successfully integrating acquisitions outside of online advertising has been poor and is probably one of the reasons Groupon CEO and founder Andrew Mason rejected the offer.

Andrew Mason, like Mark Zuckerberg at Facebook and Geoff Bezos at Amazon, rejected the VC ‘renovation rescue’ model and while it’s early days yet for Groupon, there’s many indications they’ll be able to build a game changing, innovative business just like Amazon and Facebook.

While we should congratulate those like Spreets who do manage a big buyout, we should keep in mind those stories are the exceptions and don’t represent the experience of most business founders.

New businesses really change our society is when they challenge the incumbents and build new industries. We should keep that in mind.

Protecting yourself on Facebook

Some basic tips on guarding your online data

Social networks are great way of keeping in touch with friends, family and colleagues. With 500 million users, none is a more effective tool than Facebook.

Keeping in touch with friends and relatives though does have a downside, sometimes you might give away more than you intend to. When you share with friends on a social service, everyone in your network can see what you are doing.

To make things worse, many social media businesses will give away their customers’ private information to make a few dollars as the controversy over Facebook’s recent changes to their privacy settings and the company’s subsequent backdown shows .

Because this information is valuable, organisations are prepared to pay for it and the bad guys are eager to trick it out of you. Given the risks of identity theft, stalkers or all manner of Internet crazies finding you online, it’s important to guard this information.

Facebook don’t make it easy to protect yourself, but you can hide key information.

Take off personal data
The first, simple step to protecting yourself is to move as much data as possible off your profile – home address, phone number, relationships, sexual orientation, birth year  – are a few things that simply don’t need to be online. Take off everything that could potentially cause problems, you may need to use some judgement on what you’re comfortable sharing with your online contacts.

Birthdays are a good example of where you should use that judgement. Facebook’s quite a good tool for reminding you of birthdays, but your birth date is also an important part of identity theft. If you do want to share a birthday, never put your birth year in – your relatives and friends have a good idea of how old you are – and you might want to consider putting the date a day or two earlier than the real day.

To change your Facebook profile information, click on the Profile link on the right hand side of your Facebook home page, you can edit all your details from there as shown below. Remember to click Save Changes after making each change and move between the different categories to ensure you’re only sharing what you’ve comfortable with.

Changing your Facebook profile informationSet your privacy
Facebook makes assumptions about what you want to share with your network of friends. This is not always in your interests and you should regularly review what your settings are as Facebook have a habit of changing how the privacy settings work.

To enter the privacy settings, click Account and Privacy Settings as shown below. Once you’re in the Privacy Settings, click on Custom option and Customise Settings. You can then set your details to only be accessible to you or your friends. The following example shows a recommended configuration which may be suitable for you.

Facebook Privacy Settings

Choose your friends
Many people treat Facebook and other social media services as a competition to gain as many friends, connections or followers as possible. This isn’t the point and on Facebook in particular it opens you up to a number of risks.

Once someone is your Facebook friend, they are privy to any information you choose to share and much of what your other friends post on your wall. The main risk is that new Internet is not quite as stable or honest as you thought. By accepting friend requests from people you don’t know you increase the risk of letting risky individuals into your life, your family and your group of friends.

Another danger lies in the Facebook places feature which allows your friends to check you into locations. A malicious “friend” or a practical joke could see you being advertised as having checked into a place you really don’t want to be associated with.

If you decide that is an acceptable risk, then revise the above recommendations on your profile information. If you are promiscuous in who you befriend online then be very careful about the information  shared with them.

Be careful which applications can see you
Facebook applications are one of the reasons for it’s success. These applications – or mini-programs – allow you to play games, enter competitions and sign up with other services quickly.

The proposed change in January 2011 to the information Facebook gives out to application owners would have allowed a lot of your personal information to be shared with third party developers. As it is quite a few of these applications “scrape” information from the various services you subscribe to. A good example is with Twitter where private, non-public, messages can be seen by some of these services.

You should only allow applications to use your Facebook connection details if you absolutely trust them; right now, there are few services people can or should trust.

If you have been allowing Facebook to connect your subscriptions to other websites, then you may want to review who you’ve given trust to. To do this, click Account then select Privacy as shown above. In the Privacy page click Apps and Websites and the page shown below will appear. By clicking Edit Settings you can then delete applications or change what they are allowed to do on your profile.

Facebook Privacy Settings

Despite the risks of stalkers, identity theft and various privacy issues, Facebook is a valuable tool for millions of people who want to keep up to date with their friends, relatives and colleagues. By being sensible in choosing your online friends and what you share with them, it is a great website for keeping in touch with people you might otherwise lose track of.

The Rumsfeldian business plan

The unknown is our greatest risk and opportunity.

There are known knowns; there are things we know we know.
We also know there are known unknowns; that is to say we know there are some things we do not know.
But there are also unknown unknowns – the ones we don’t know we don’t know.

– Former US Defense Secretary Donald Rumsfeld

For business owners, the “unknown unknown” is always lurking – the risk of being caught by something we couldn’t see coming is one of the reasons investors and business owners accept higher returns than putting their money on deposit with a bank or taking a safe clerical job at the same financial institution.

Being able to respond quickly to the unexpected is an important factor in a business’ survival and that flexibility is what gives the small, lean enterprise the advantage over big corporations that can’t move rapidly in the face of change.

One of those “unknown unknowns” are changes to the market, the story Groupon is a great example where the owners of an older failing business decided the “group buying” model was a market worth trying.

This is what we should understand when writing a business plan, that there are “known knowns” such as rent, “known unknowns” such as customer demand and “unknown unknowns” such as market changes, recessions and natural disasters.

“Known unknowns” are always an interesting group as we tend to assume when doing the sums on a new business idea that there is a level of demand and all costs are immediately identified. Often, once we’ve set the business up we find that we’ve miscalculated our costs and sales, sometimes happily and often not.

This is why it’s not worth spending too much time diving into detail on a business plan as all of us almost certainly will get the numbers wrong due to the “unknowns” in the equation.

Those “unkowns” often bite us in other ways as well in that what we think we know turns out to be an “unknown”, often we overestimate our own abilities which turns what should be a manageable “known unknown” into a high risk “unknown unknown”.

When choosing a business partner, it’s worthwhile noting what they know about themselves – if your future business partner doesn’t know they are knucklehead at marketing or accounting while being a star salesman or programmer, then all your trying to convince them that you should hire in a marketer or accountant and let them focus on their strengths will fall on deaf ears and your partnership is probably doomed unless your strength is being a diplomat.

Having an idea of what is unknown is a great strength in business, it allows you to properly evaluate risk and be flexible in face of the unexpected. Of course, knowing the “unknown unknowns” such as sports results and share movements is the whole reason match fixing and insider trading is so lucrative.

Risk, and the reward for taking it, is the basis on which a capitalist economy is built. We shouldn’t be afraid of the unknown but acknowledge the unknowns are out there, identify those unknowns we can see and have the skills, flexibility and financial reserve to deal with those we can’t.

Dealing with the unknowns is what really marks the successful business.

Choosing a business partner

Being involved new enterprise is like a marriage, similar care needs to be taken.

The continuing fights between Mark Zuckerberg and the Winklevoss twins over their share of Facebook shows choosing partners to help you establish, fund and grow a venture is one of the toughest things in business.

Good partners are a formidable combination. Together two, three or more well matched businesses partners with complementary skills can give a startup huge advantages. Warren Buffet and Charlie Munger at Berkshire Hathaway are a good example of business partners whose skills and personalities build on each other.

Sadly those perfect partnerships are rare and all too often the differing personalities coupled with the financial and emotional strain of starting a business lead to the partners falling out. So what is it that makes the perfect business relationship?

Complementary strengths
All of us have weaknesses, in business these can manifest themselves in things like an inability to see bigger trends, too much focus on detail and – probably the most common of all – a boredom with doing paperwork and accounts.

The best partnerships are where each party adds something to the team, one partner might do the “big picture” strategic work while another focuses on the detail orientated operations. If you can find one that loves doing the books, marry them and do everything you can to retain them in your business.

Tolerance of weaknesses

The flip side of having complementary skills is that each partner has to be tolerant of the others’ weak spots. In any relationship, business or personal, that understanding of a partners’ weaknesses is essential to success.

Respect
All of the partners have to respect each others views and strengths. The moment one partner feels they are not being valued, even if it is only a perceived lack of respect, the relationship is heading for the rocks.

Equal contributions
In many small businesses, the biggest cause of friction is one partner not putting in an equal contribution. If all parties aren’t putting in their fair share of labour or capital then the arrangement is going to hit problems, particularly if the venture is successful as we’ve seen with the Facebook disputes.

Unequal contributions hurt, particularly in small businesses where one partner may have contributed a far greater slice of their capital or time than others. This is often the problem where some of the partners are working full time on the business while others have corporate jobs and can’t put in the hours required to be equal partners.

Some friends of mine had a falling out over what was looking to be a successful business when one of them found they couldn’t continue to juggle a successful corporate career with a running a start up as a part time job. The others in the partnership were running the new venture full time and were severely unimpressed with the threat to several years hard work on their part when they too could have been chasing a big business salary.

The worse possible small business partnership is where one of the partners subsidises the business from their other income, another friend of mine subsidised a cleaning business for two years while his partner forgot to put in invoices or quote for new work. When the business folded, my friend was out much of his savings from those two years.

Mismatch of expectations

People go into business for all sorts of reasons; some for love, a few to build empires and others with the expectation of becoming billionaires. Many of us find ourselves building businesses because we’re unemployable anywhere else. Having a common vision of where you want to the business to go is also essential or again the partnership will fall apart over those disagreements, often at the worst possible time.

A business partnership is very much like a marriage and can be just as expensive to undo, choosing the right business partners can make the difference between a middling small enterprise and a fantastic success. The right partners are a great asset to your business, but choose carefully.

The global online sales battle

The fight between governments, retailers and online traders has some big stakes.

Gerry Harvey’s and Bernie Brooke’s Fair Go for Retailers campaign drawing attention to the GST treatment of online overseas purchases is part of broader battle being fought around the world between multinational corporations, governments and small business. How it is resolved is going to affect all of us.

Last week, while Australians were focused on their major retailers campaigning for changes to GST rules, Internet retailer Amazon wrote to its Illinois affiliates warning that should the state legislature pass a law imposing sales tax on Internet purchases, the company would cut off their partners in that state, just as they already have in Colorado.

The actions of the Colorado state government, the Illinois proposal and Amazon’s ruthless response are just the latest phase in a longer term struggle between borderless online retailers and those governments, and businesses, limited by their physical locations.

What’s making this particularly acute in the United States is state governments are struggling to balance their budgets and sales tax is the one of the few avenues they have to raise revenues in an economy where incomes and property markets continue to stagnate, if not fall outright.

That balancing act isn’t just confined to the US, the UK government has increased VAT rates from the beginning of the year for the same reason and is facing discontent over increasing tax burdens, particularly on fuel prices.

For the moment the UK government and customs authorities seem to be fairly relaxed about the leakage of VAT income that has seen some British supermarket chains shipping online orders from their Channel Islands branches to avoid local taxes in the way Gerry Harvey and Bernie Brookes proposed last December when the floated the proposal to move their online stores offshore.

The British public hasn’t shared their government’s sanguine response with organisations like UK Uncut blockading stores accused of dodging taxes or owned by alleged tax avoiders.

Governments aren’t the only ones affected, while in Australian it’s the retailers who are publicly worried about their loss of sales at present, other sectors, particularly those providing business to business services, are even more at risk.

Last month The Economist described how US law firms are seeing high margin but relatively low skilled work moving offshore to India and it’s likely those contractors are offering similar services to Australian law firms and corporate clients.

Online bidding sites such as Freelancer.com, O-desk and 99 Designs are offering almost every business support service imaginable, from virtual offices to logo design. Anyone competing locally against foreign contractors on those sites starts from exactly the same GST disadvantage as Harvey Norman, Myer and the local shoeshop.

The power of international retailers and service providers like Google and Amazon to avoid taxes and deliver lowest cost products to customers are challenges to both businesses and governments.

Julia Gillard’s and Bill Shorten’s almost condescending responses to the retailers shows the politicians are somewhat more in tune with the public mood than the retailers. But we can be sure that should the porridge in Australia’s Goldilocks economy start going cold, then Treasury will start looking for those lost GST dollars.

While we can criticise Gerry Harvey, Bernie Brookes and the others behind the “Fair Go for Retailers” campaign for being out of touch and failing to respond to obvious threats to their markets, most businesspeople – and politicians – shouldn’t think for a moment they are immune from the same forces the retailers are complaining about.

Few of us, whether we run businesses or not, will be untouched by these forces realigning the global economy. We all need to understand what these changes mean to our livelihoods and investments, lest we get caught out like Australia’s big retailers.

Trusting the web

How the Wikileaks scandal has damaged the cloud computing industry

The US court orders demanding Twitter and others hand over Wikileaks related information may have killed the cloud computing trend.

Paul Carr in Techcrunch raised his concerns about how this has affected his views on storing his personal life and details online. He’s not alone.

Cloud computing relies on trust and confidence; for us to use it we have to trust our data is safe, secure and confidential. That many of us are even suspicious that Google and Amazon have quietly handed over the Wikileaks details shows how that trust has been eroded.

The behaviour of the US cloud providers shows most will buckle under the slightest political and government pressure, let alone a letter from the FBI of which the New York Times claims over 50,000 are sent each year.

That tens of thousands of these orders are made each year in the US alone – and we should have no doubt that governments in other countries are just as eager to seize online details – shows how insecure our information is in the hands of third party providers.

This is more than just activists who have upset the US government; in the event of a trade dispute, spurious copyright claim or a simple case of political malice or opportunism a businesses’ service could be shut down, often without any warning, due process or appeal.

Which is exactly what Amazon and various other cloud service providers did to Wikileaks.

Cloud services offers great business advantages, particularly to small and startup enterprises. But the Wikileaks shutdown scandal shows the managements of many cloud computing providers are untrustworthy cowards.

For many businesses it will still be worthwhile sticking with cloud services for the convenience, cost and scale however it’s also important to keep in mind these providers cannot be trusted and a backup plan has to be available should they fail.

The data we keep online has to be considered as well, it appears we cannot trust cloud services with our critical business and personal information so we need to be discriminating about exactly what we put online, this includes social media services like Facebook and Twitter.

Cloud service providers have to prove they deserve our trust, right now it’s difficult to see how they can regain it.

The entrepreneur’s biological clock

At what age do you stop being an entrepreneur?

In backpacker circles, when you turn thirty people ask “what’s wrong this guy? What you can get away with in your twenties, you can’t get away once you’ve passed the big “three-oh”. It’s not dissimilar to the “biological clock” many women in their thirties confront as they perceive their days of easily having children are coming to an end.

A similar phenomenon exists in the business world, both for employees and business owners, that there are age limits on what someone can easily do. Like the backpackers, it’s more a perception than a reality.

Once upon a time you were past it at fifty years old. Through the 1980s, 90s and the early part of this century that “past it” age contracted, along with the deskilling of the workforce, to 45, then 40 then 35.

In the eyes of many in the corporate world today should you not have an established corporate career path by your mid-thirties then you are well “past it” and destined for a middling career and income.

With entrepreneurs a similar quandary exists, once over forty there’s a feeling that the aspiring business owner should just stick to buying the local doughnut or lawn mowing franchise. Startup land is no country for old men.

The underlying cause of  this view is the belief every successful business founder is rich beyond their dreams by thirty – Bill Gates and Mark Zuckerberg come to mind – that’s clearly silly given most businesses never come close to the successes of Microsoft or Facebook  but it’s a persistent one nevertheless.

When the entrepreneur turns thirty, things begin to get tricky; sleeping on a friends sofa, working eighteen hour days and living on instant noodles isn’t an option when you have kids, partners and mortgages. At the same time, family, friends and potential employers start to ask “if this guy’s so good, how come he isn’t a millionaire?”

To make things more difficult, risk adverse peers start bragging about how their safe, well paid job is allowing them to buy second homes or go on holidays most business owners can’t contemplate.

Probably the hardest thing though is that the doors of the corporate world start slamming shut; for a 40 year old entrepreneur who has been running their own businesses for 15 years, it’s difficult to get a job in the business world and any position available won’t recognise the skills developed in running your own enterprise.

Similarly, the warning to anyone with a decent corporate career who chooses to leave their safe office job to run their own business is usually “how can you risk throwing all of this away?”

Risk is the difference between the ages; once you’re over 40 with there being little prospect of a plan B involving returning to a nice corporate position, then the cost of failure is a lot higher.

In some ways this can be better; an individual staring down the prospect of a long, poverty stricken retirement has a very good incentive to get their business right and doesn’t have time to waste on speculative or “me-too” projects.

The idea there’s an age limit to launching new, innovative businesses and products is silly, but it’s a persistent one nevertheless. The great thing though with being your own boss is you don’t have to pay attention to other people’s dumb ideas and this one is a dumb as it gets.

Choosing the business battlefield

Working from a strong position is a great help to success.

Across the world industries are in turmoil as the Internet and globalisation allow new competitors into once safe markets. How do the incumbents deal with the upstarts and how do innovators challenge the establishment?

One way is to redefine the market, instead of taking on the incumbent or challenger on their own terms, aim the product at a segment that hasn’t been properly developed. The best example of this is Apple’s iPod.

When the iPod was released there were hundreds of MP3 players on the market including those from Sony who were expected to continue their dominance in the personal entertainment device market which they had developed around the Sony Walkman in the early 1980s.

Apple took that market and redefined it on their terms, they then repeated the strategy with both the iPhone and the iPad.

While not every business will have Apple’s design talent, or the market opportunities that allowed Apple to time their entry with those products, their experience shows how choosing where you fight your market battles matters.

In the United States, major airlines are deciding not to compete with cut price carriers on travel websites, the reasoning being that these online comparison services only compare products on price which is not the legacy carriers’ advantage. Instead airlines like American and Delta are pushing their own websites that emphasise their advantages such as free baggage allowances, lounges, inflight meals or downtown check-in facilities that their low cost competitors don’t offer.

Qantas in Australia carried out a similar strategy when faced with low cost carriers entering their market. They set up Jetstar as a low cost carrier which started flying the price sensitive routes, mainly the leisure and holiday services, leaving the expensive full service legacy operations to focus on the business dominated routes that weren’t so concerned about price.

In doing this, Qantas chose where they were going to fight and on what terms, which has helped them remain profitable at a time when many other legacy airlines have struggled.

Traditional retailers are facing a similar problem to the airline industry as online stores are taking growing share of the shopping market. Some commentators are suggesting they need to compete with online services, but for many entering a field where someone else has the advantage would be a mistake.

Instead it may be better to choose where a business’s existing strengths lie and build upon those. For a bricks and mortar retail store, this may mean service and convenience.

A good example of this is the cornerstore of our grandparents days. With the rise of supermarkets, most of these smaller shops went out of business as they tried to compete with the better range, prices and convenience of the self service stores. We saw a similar process happen with speciality shops like butchers and greengrocers.

In recent times we’ve seen the corner store being reborn as retailers have discovered that consumers are prepared to pay more than supermarket prices in return for convenience. The modern convenience store is different to the corner shop of our grandparents’ days, but it is a recognisable descendant which caters to the changed society and customer needs.

This changing society and evolving customer demands is what today’s retailers, and every other industry, needs to consider as they look at the future of their business. The economy is going through a period of massive change and disruption.

Building on strengths and recognising other’s advantages and weaknesses is the key to survival in such an environment. For a traditional, bricks-and-mortar appliance store, an e-commerce solution might be the answer as could a social media strategy or offering bid discounts to Internet shoppers.

The key is to choose the marketplace where your business have the strengths, either by redefining markets as Apple often do or by focusing on key advantages like Qantas and the US airlines are trying to do.

A similar rule applies when challenging the incumbents in the marketplace, in fields where barriers are low and it’s difficult to simply undercut the established players, you have choose the areas in which they are weak and the demand is strong.

This isn’t to say incumbents shouldn’t adopt new technologies, they should and they can use them to build on areas they are strong while looking at how new methods can fix their weaknesses. Similarly upstarts can compete in an incumbent’s core market if the existing players are weak or aren’t adapting to changing conditions.

Choosing the battlefield is the key, whether you’re an incumbent protecting your market position or an upstart looking at building a new market, working from a position of strength makes success far more likely.

The customer is always right

Australia’s new business laws have a sting in the tail

From the beginning of 2011 a new consolidated set of national consumer laws took effect across Australia. These change a number of definitions and rules on business matters like sales, refunds and contractual arrangements that businesses need to be aware of.

While most of the regulations are revisions of existing Federal and state laws ­– the main changes seemingly aimed at tying down definitions of things like unconscionable conduct – there are few gotchas which even the most well intentioned business owner or manager needs to be aware of.

For most businesses the most difficult aspect will be the ACCC’s definition of “unsolicited supplies”. It appears the main thrust of the changes is to tighten up on invoice scams and dodgy door-to-door sales people, but the Commission’s interpretation of what is unwanted work may be a bit too restrictive in the real business world.

“If the client didn’t ask for it, they don’t have to pay” is the ACCC’s interpretation of the new laws. On the face of it, this black-and-white view seems fair enough but often what the client and supplier agreed isn’t so easily determined.

In fields where quoted work is the norm, the “unsolicited supplies” definition means the ACCC will now advise your clients not to pay any part of a bill they believe wasn’t authorised.

Most scrupulous service providers already check with customers before going ahead with additional work. The example in the ACCC’s handbook of a car repairer is a good case, as most mechanics already call up customers should they find unforeseen problems which will add to the bill.

One interesting aspect of the ACCC’s interpretations is how they will fit in with the duty of care that mechanic, just to choose one example, has to the customer should they find the car unroadworthy; do they repair the dangerous items and risk wearing the bill or do they let the customer drive off should they be unable to agree on the cost of making the vehicle legal and safe?

A more common example is the tradesman who finds midway through the quoted job that there’s a serious problem that prevents them completing the agreed work.

Does this mean the plumber who finds a tree root blocking a pipe, a carpenter who uncovers an extensive termite infestations or a computer technician who discovers a dying hard drive simply down tools until an agreement on the cost of the extra works has been agreed?

These are the sort of issues where the ACCC’s black and white interpretation of the law may come unstuck.

Another area where the narrow definition of the ACCC will fall down is where customers say “just fix it” with an ensuing argument over what was fixed. Advising the customer not to pay the bits they believe are excessive puts an unfair burden on the merchant and may not stand up to review by the courts.

It’s safe to predict the ACCC will find their interpretations being challenged in the courts sooner rather than later, though for the moment businesses will have to live with these definitions.

As a consequence businesses have to be precise in defining what work is covered in a quotation and scrupulously note every conversation and instruction from your clients, particularly ensuring you have clear approval for any works that might fall outside your initial agreement.

For businesses operating in areas where it’s difficult to give a fixed quote with a defined scope of works such as emergency plumbing or computer repairs, it’s probably going to be best to accept the uncertainty and just build an extra overhead allowing for these disputes into your cost structure.

Apart from the “unsolicited supplies” aspect most of the guidelines around these rules are general commonsense and there’s little that’s really changed for ethically run businesses.

The full guide to the new regulations is available for download from the ACCC website. You and your staff – particularly your sales team – need to read and understand how these rules affect your business.

The age of the whistleblower

Wikileaks shows how anonymous online channels undermine old media models.

“I would have done it anonymously” when the girl in the middle of the Australian football “dickileaks” scandal was asked what she would have done differently after being ordered by a court not to post any more nude photos of star players she had obtained through a relationship with one of their team mates.

Having unsuccessfully tried to pass them over the local Melbourne press, who instead tipped off the governing Australian Football League, the girl posted them on Facebook and was quickly shut down by lawyers and a hostile local media more concerned about their access to star footballers than the ethics or behaviour of their beloved sports teams.

The lesson has been learned with events like this and the systemic corporate shut down of Wikileaks; that the media, big business, governments and the media cannot be trusted.

For anybody with sensitive information that upsets people in power – be it Julian Assange, a girl with nude footballer photos or a US pilot posting inconsistencies in the Transport Security Administration’s policies – it is essential to get your message out, you don’t have to wait for a producer or editor to decide to publish the story based upon whatever news values they think have priority.

The next wave of Wikileakers won’t be waiting for Julian Assange to do deals with The Guardian, New York Times or Der Spiegel, they’ll be setting up anonymous websites on services like Blogger or WordPress and hiding their IP address to publish the details directly.

Sure most of them will get caught, but instead of finding the leaker in ten minutes, as would happen should they post on Facebook or contact a journalist more loyal to powerbrokers than their readers,  it may take the authorities weeks or months to find them and shut them down.

For the media – who have largely sat on the girl’s story since it first broke in May last year, kept silent on the TSA’s flaws and ignored much of the obvious that is stated in the Wikileaks cables – they are no longer the trusted brokers. Too many journalists and media proprietors have cosy, safe relationships with the organisations they should be reporting upon.

For those journalists, their cosy world is over. No longer are they the trusted gate keepers with the privileges that come with the position.

The next generation of media proprietors and journalists understand this and are figuring out the ways to regain trust as sources of factual, useful information.

Digital technology means there will be many Deep Throats and Daniel Ellsbergs in the future, while they won’t need a newspaper editor to get the message out, a channel to vouch for their veracity will be needed and that’s where trusted journalists will matter.

Wikileaks and similar direct publishing channels won’t kill media, but it’s going to be a very different world from that of the 20th Century.

The invisible hand

Sometimes a quiet market is trying to give you a message

It’s great to be passionate and believe in your business, without them it’s difficult to see how an enterprise can succeed.

But if you simply can’t make money out of your passion then it’s the market telling you there is no demand for what you believe in.

Sometimes a slap from Adam Smith’s invisible hand of the market is the best wake up call we can have in business.

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.