business | Paul Wallbank - Communications Professional

In it to win it – does overcompetitiveness hurt entrepreneurs?

Does the winning at all costs mentality actually hurt entrepreneurs when business isn’t a zero sum game?

I’ve written before about entrepreneur and venture capital investor Mark Suster and his writings about business are always worth reading.

His recent post pulling together writings on the DNA of an entrepreneur is interesting reading however one point jars – competitiveness.

In Steve’s view competitiveness is about winning at all costs and crushing the opposition.

That’s fine when competing for a customer, fighting over market share or pitching to the same VC investor, but business usually isn’t a zero-sum “if I win, you lose” equation.

Sometimes its about complimentary strengths. In the early days of PC Rescue I tried to partner with an old colleague who had set up a competing business.

Mark was actually a better computer tech than I was, my strengths lay more in sales and administration, had we teamed up we’d have been a good combination.

Unfortunately Mark took Suster’s view of ‘winning at all costs’ and when I foolishly referred customers to him because I was either busy or thought he could do a better job, I found he was stealing those customers.

Eventually I had to cut ties with him, and it cost him money and the chance to be part of something bigger. Mark was greedy but I’m sure he thinks he ‘won’ against me when there really wasn’t a contest.

Geeks are particularly poor at admitting they have weaknesses, in fact their lack of self understanding could be their greatest weakness of all. So drumming a ‘win at all costs’ message into their heads is almost certainly counter productive.

It may well be that this win at all costs view is damaging the mental health of many entrepreneurs, by viewing what others are doing through a prism of “I have to win” almost guarantees depression as often the life of an entrepreneur is more steps backwards than forwards.

As most reporting of startup and entrepreneurs is distorted by survivor bias, we often gloss over this latter point – in reality starting your own business, particularly one that’s under-capitalised, is hard and tough work with a high chance of failure.

That chance of failure means a ‘win at all costs’ mentality could result in a generation of mentally damaged former entrepreneurs.

Mark Suster’s views are really good on what drives the Silicon Valley model of business. We need to take care though we don’t take the wrong lessons which end up hurting our businesses, families and our own mental well-being.

Jackpot image from Henriette via SXC.HU.

Can Yahoo! disrupt the disruptors?

Business partnerships require bringing something of value to the relationship, Yahoo first has to define its strengths before searching for partners.

Yahoo! CEO Marissa Mayer packed out the room for her interview at the World Economic Forum this week where she spoke about some of the challenges her and the company face.

One of the areas she sees for Yahoo! is in collaborating with other tech industry giants.

Mayer also is making a point of collaborating with companies such as Apple Inc., Google and Facebook, instead of competing.

“It ultimately means there’s really an opportunity for strong partnerships,” she said.

The problem for Yahoo! is that it doesn’t have a lot to offer companies like Apple, Google or Facebook – they are steaming along on their own and have moved ahead of the areas which Yahoo! dominated a decade ago.

Generally in the tech industry partnerships are more the result of the sector’s also-ran coming together in the hope that their combined might will overcome the leader’s advantages.

It’s the same philosophy that thinks tying the third and fourth placed runners legs together will make them faster than the winner.

A good example of this is Microsoft’s tie up with Nokia over the Windows Phone. If anything, the net effect has put Windows Phone and Nokia even further behind Apple and Google in the handset market.

Even when two tech companies have united to exploit their individual strengths, the results usually end in tears. Probably the best example of this was the IBM and Microsoft joint venture to develop the OS/2 operating system which eventually sank under IBM’s bureaucrat incompetence and Microsoft’s disingenuous management.

Those two examples show how partnerships only work when each party has something valuable to contribute and all sides are committed to the venture.

Marissa Mayer’s task is to find Yahoo!’s strengths and build on them, then she’ll be in a position to enter partnerships on an equal basis.

Whether its worth entering into partnerships with the big players though is another question. It may well be that Yahoo! has more to offer smaller businesses and disruptive startups.

Entering into a desperate alliance with Apple or Facebook could possibly be the worst thing Yahoo! could do, the company is no longer a leader and now needs to be a challenger or a disruptor.

Facebook’s locking competitors out of data feeds is an example of how complacent the big four internet giants are becoming, Yahoo! are in the position to upset that comfortable club.

The value of partnerships is that we all have weaknesses and strengths, a properly thought out venture builds on the various parties’ strengths and covers their weak spots. Right now Yahoo! has more weaknesses than strengths.

Firing your customers

Getting bad clients out of your life can be very therapeutic, it’s something all business owners should do on a regular basis

Running your own business can be tough, but one of the therapeutic advantages of dealing with the stresses of self-employment is the ability to fire stroppy customers.

Steve Cody, the proprietor of marketing agency Peppercom, gives a list of five types of clients worth sacking in Inc Magazine.

It’s a good list although it misses the general “pain in the ass” client who demands a solid gold level of service for a pittance. These are particularly common if you pitch to the lowest end of the market.

Lists like Steve’s are good reminder of Pareto’s Law, or the 80/20 rule which is usually put in terms of 80% of business revenues come from 20% of customers.

The converse is also true, 80% of business hassles come from just 20% of customers and they are almost certainly not the most profitable ones.

Pandering too much to the bad customers can hurt your health as well – running your own business is stressful enough without dealing with troublesome clients.

So sacking bad clients is good, not only is it therapeutic but it also helps the bank account. It’s worthwhile doing whenever a customer drives you too far.

Go on, you know you want to.

Proudly designed in Gyeonggi

Asian manufacturers are moving up the value chain. Could Korea, China and Taiwan start competing with Apple?

“Designed by Apple in California ” is the boast on the box of every new iPad or Macbook. That the slogan says ‘designed’ rather than ‘made’ says everything about how manufacturing has fled the United States.

Last year the New York Times looked at Apple’s overseas manufacturing operations, pointing out that even if Apple wanted to make their product in the the US many of the necessary skills and infrastructure have been lost.

Now the US is facing the problem that Asian countries are looking at moving up the intellectual property food chain and doing their own designs.

In some ways this is expected as it’s exactly what Japan did with both the consumer electronics and car industries during the 1960s and 70s.

The big difference is that Japanese manufacturers travelled to the US and Europe to study the design and manufacturing methods of the world’s leading companies. In the 1990s and 2000s, the world’s leading companies gave their future competitors the skills through outsourcing and offshoring.

In the next decade we’ll see the latest consumer products coming with labels reading “Designed by Lenovo in Fujian” or “Developed by Samsung in Gyeonggi”.

For western countries, the question is what do we want to be proudly be putting our names to?

Image from Kristajo via SXC.HU

Digital hunter gathering

Digital hunter gatherers are another mis-reading of history and the economy. We should be careful about these labels.

It has come to this – we’ve had the digital natives, the digital immigrants and now we have the digital hunter-gatherers.

This is the logical end of the ‘sharing economy’ philosophy which sees retweets, mentions and Facebook likes a hard asset.

Unfortunately having 100,000 Facebook friends giving the thumbs up to your latest retweet of an article of dubious value doesn’t translate into income – most of the digital curators find themselves living a hunter-gatherer lifestyle.

Life as a hunter gatherer is not pretty or easy – it’s short and brutal. The only certainty as a hunter gatherer is if you don’t find something to eat today, you will starve tomorrow.

In some ways, it’s fair to say the modern social media expert is not dissimilar to the prehistoric hunter gatherers in that their days are numbered and starvation is a near certainty.

One conceit of modern times is that life was so much better in the pre-industrial era; that before the industrial revolution people worked less and primitive man lived a noble life unshackled by possessions.

That’s all nonsense. Mankind shifted to an agricultural and then an industrial society because life is a lot better than fighting sabre toothed tigers for buffalo or trying to live on berries.

Myths like this are part of masking the steady decline in middle and working class incomes. George Freedman, the CEO of the Stratfor security consultancy, discussed this in his blog post The Crisis of the Middle Class and American Power.

The rise of the precariat, workers employed on a casual or project based basis, is part of that erosion of incomes. As Freedman says, the “the decline of traditional corporations and the creation of corporate agility that places individual workers at a massive disadvantage”.

In this respect, today’s digital hunter gatherers are more like the day labourers of a hundred years ago where workers, like my great-grandfathers, would wait at the gates of the factories or docks hoping to be picked for the day’s work.

One of the truths of today’s workforce is that it’s a harder place than a generation ago and the expectation of naturally rising incomes is gone for the bulk of the population.

This means we have to re-imagine our own roles in a changed economy. The assumptions of the post-war economy which have sustained us for over fifty years no longer hold.

Hunter gathering hopefully won’t be option which we end up with.

Reproductions at the Museo del Mamut, Barcelona 2011 from quinet on Flickr

NFC and the car key revolution

Near Field Communications (NFC) systems are more than just ways to pay bills with your smartphone, they promise to upset many industries.

Many businesses have made easy money by ‘clipping the ticket’ of the customer, new technologies like Near Field Communications and cloud computing threaten the easy profits of many organisations.

During yesterday’s 2UE Tech Talk Radio spot where Seamus Byrne and I stood in for Trevor Long, host John Cadogan raised the prospect of replacing car keys and even dashboards with smartphones equipped with Near Field Communications (NFC) systems.

Since NFC technologies appeared we’ve concentrated on the banking and payments aspects of these features but there’s far more to this technology than just smartphones replacing credit cards.

With the right software an NFC equipped smartphone, tablet computer, or even a wristwatch could replace any electronic controller – this is already happening with Wi-Fi or Bluetooth enabled home sound systems, TV remote controllers and games consoles.

An important effect of this is that it cuts out expensive custom replacements like bespoke control units or electronic car keys.

Car keys are a good example of how what was previously a high cost profitable item becomes commodified and those business that had a nice revenue stream find new technology cuts them out.

As keys become replaced with NFC enabled devices then then the scam of with new sets of keys costing up to a thousand dollars with fat profits for everybody involved becomes redundant.

This is something we’re seeing across industries as incumbent businesses find their profitable activities disrupted by smart players using new technology.

Just as manufacturing and publishing have been dealing with these disruptions for the past two decades, it’s coming to all industries and it’s going to take smart operators to deal with the changes.

Fiddling the prices

Has the Internet’s promise of transparency failed as online retailers vary prices.

Discriminatory pricing is nothing new, a good salesperson or market stallholder can quickly sum up a punter’s ability or willingness to pay and offer the price which will get a sale.

Anybody who’s travelled in countries like Thailand or China is used to Gwailos and Farang prices being substantially higher even for official charges like entrance fees to national parks and museums.

The Internet takes the opportunity for discriminatory pricing even further arming online stores armed with a huge amount of customer information which allows them to set prices according to what the algorithm thinks will be the best deal for the seller.

Recently researchers found that the Orbitz website would offer cheaper deals for people searching for fares on mobile phones and prices would vary depending of which brand of smartphone people would use.

Writers for the Wall Street Journal did an experiment with buying staplers and found the same thing.

Interestingly, one of the factors Staples’ seems to take into account is the distance customers live from a competitors’s store – the closer you live to the competition, the lower the price offered.

There’s also other factors at play; sometimes you don’t want a customer, or you don’t want to sell a particular product and it’s easy to guess the formulas used by Staples and other big retailers do the same thing.

One of the great promises of the internet was that customers’ access to information would usher in a new era of transparency. In this case it seems the opposite is happening.

Are executives taking privacy seriously?

Executives and boards need to start taking privacy seriously before their businesses’ reputations are damaged and restrictive laws enacted.

In an article for Business Spectator on Lord Justice Leveson’s Sydney speech last week, I looked at the commercial aspects of privacy, an area that was overlooked in the reporting of the two Australian lectures by the British jurist.

Privacy is a serious issue which is also being overlooked by boardrooms, possibly because it’s often conflated with IT security and so it’s seen as a technology problem and, to be honest, executives see it as being a bit ‘soft’ and airy-fairy.

Sony’s humiliations in 2011 with a series of embarrassing privacy breaches that left the company’s reputation in tatters show the real and embarrassing risks in not taking privacy seriously.

The UK prank phone call scandal is another example of poor privacy policies which have real world impacts on both the hospital’s patients and staff, whether the management there is held to account or even learns any lessons remains to be seen.

In California, the US state with the strongest privacy laws, Delta Airlines is being sued over its smartphone app’s policies however the state itself isn’t immune from serious breaches.

Giving away social security numbers opens up all sort of identity theft opportunities although any privacy breach exposes the victims to potentially serious consequences, some of that pain is going to be passed onto those who give the information away.

The worry for businesses is that in the absence of serious action by governments and the private sector, the evolution of privacy law is going to take place in the courts with unpredictable and inconsistent results.

As we now have the tools to gather, store and process huge amounts of data about our customers and staff, we also have an obligation to protect it. This is something managements need to understand and take seriously.

Blind faith in the algorithm

Putting too much faith in computer programs may cause problems for the unwary.

It’s fairly safe to say Apple’s ditching of Google Maps for their own navigation system has proved not to be company’s smartest move.

The humiliation of Apple was complete when the Victoria Police issued a warning against using the iPhone map application after people became lost in the desert when following faulty directions to the town of Mildura.

Mapping is a complex task and it’s not surpising these mistakes happen, particular given the dynamic nature of road conditions and closures. It’s why GPS and mapping systems incorporate millions of hours of input into the databases underlying these services.

Glitches with GPS navigations and mapping applications aren’t new. Some of the most notorious glitches have been in the UK where huge trucks have been directed down small country lanes only to find themselves stuck in medieval villages far from their intended location.

While those mishaps make for good reading, there are real risks in these misdirections. One of the best publicised tragedies of mis-reading maps was the death of James Kim in 2007.

Kim, a well known US tech journalist, was driving with his family from Portland, Oregan to a hotel on the Pacific Coast in November 2006 when they tried to take a short cut across the mountains.

After several hours driving the family became lost and stuck in snowdrifts and James died while hiking out to find help. His wife and two children were rescued after a week in the wilderness.

Remarkably, despite warnings of the risks, people still get stuck on that road. The local newspaper describes it the annual ritual as find a tourist in the snow season.

Partly this irresponsibility is due to our modern inability to assess risk, but a more deeper problem is blind faith in technology and the algorithms that decide was is good and bad.

A blind faith in algorithms is a risk to businesses as well – Facebook shuts down accounts that might be showing nipples, Google locks people out of their Places accounts while PayPal freeze tens of thousands of dollars of merchants’ funds. All of these because their computers say there is a problem.

Far more sinister is the use of computer algorithms to determine who is a potential terrorist, as many people who’ve inadvertently found themselves on the US government’s No Fly List have discovered.

As massive volumes of information is being gathered on individuals and businesses it’s tempting for all of us to rely on computer programs to tell us what is relevant and to join the dots between various data points.

While the computers often right, it is sometimes wrong as well and that’s why proper supervision and understanding of what the system is telling people is essential.

If we blindly accept what the computer tells us, we risk being stuck in our own deserts or a snowdrift as a result.

Did online democracy ever exist?

The idea of democracy in an online world dominated by private interests is a misnomer.

“Democracy is dead” proclaim online pundits as Facebook closes down their corporate governance feedback pages.

The question though is whether democracy really exists online; the internet is largely a privately run operation which makes the hysteria about the International Telecommunication Union’s attempts to impose standards on the web all the so more fascinating.

As a consequence of almost every internet service being run by private organisations, rights and concepts like “democracy” are pretty well irrelevant and have been since the first connection to ARPANET.

When we use services like Facebook, or even our internet provider’s email account, we are only being allowed to do so within the companies’ interpretation of their terms and conditions.

Often those interpretations are wrong or bizarre as we see with Facebook’s War on Nipples and often the results of misinterpretation are costly for businesses.

But we have little recourse as these sites are private property and the owners can do pretty well what they like within the law.

Just a like a shopping mall, if the managements of Amazon, Google or Facebook want you to leave their service then you have no choice but to do so.

We can squeal about rights online, but in reality we have few.

That’s something we should keep in mind when investing our time or business capital into any particular platform.

Stumbing into recession

An obsession with surpluses and satisfying the ratings agencies is going to have harsh consequences for Australians

The Committee for Economic Development Australia (CEDA) today released its 2012 Big Issues survey looking at the responses of 7000 business people on the issues confronting Australian industry in 2012.

One of the notable results is that business people don’t care about government surpluses. A third are neutral on the question “do you believe maintaining a government surplus is important” while 35% disagree that it is a high priority.

Yet despite the electorate and business saying the deficit is not a priority, the politicians still obsess about maintaining their surplus.

Now Australia’s mining boom has come to an end – along with the blue sky economic assumptions that underlie both sides of politics’ spending plans – governments are desperately trying to fudge the books and continue the pretense that their budgets are in the black.

Driving this obsession with avoiding deficits is the religious belief among Australia’s political classes that Triple – A credit ratings from the discredited Wall Street ratings agencies is more important than educating the nation’s children, caring for the country’s sick or building the infrastructure to compete in the 21st Century.

The real danger with this deficit obsession is that there is a very high possibility that state and Federal governments are going to tip Australia into a recession driven by European style austerity. Already we see this developing as various states start slipping backwards according to the ABS’ latest accounts.

Another interesting result from the CEDA report is how business’ view the Australia in the Asian Century report with nearly 80% of respondents saying the issue is important or critical.

It is questionable whether Australian business is prepared to face the realities of an Asian Century as David Llewellyn-Smith writes at the Macro Business Blog, Australia’s businesses are looking more at getting help from the government to cut domestic costs rather than sell into Asia. That inward focus of Australian business since the mid-1990s is the topic for another blog post.

The sad thing is that the government aspects of Asian Century report is stillborn as surplus obsessed politicians carve into skills training and innovation programs in a vain attempt to balance the books while failing to reform the tax system or address the middle class welfare that’s squandered most of the returns from the last decade of prosperity.

Australia’s politicians are very soon going to have to decide who they govern on behalf of, the corrupt and incomptent ratings agencies or the people who vote for them and pay the taxes which support them and their political parties. For some, this might be a tough choice.

Is Australia missing the Indonesian opportunity?

Mary Meeker’s state of the internet report emphasises the opportunities in South East Asian markets.

Mary Meeker’s annual State of the Internet Report looks at the trends driving the online economy. One area that should be of concern is that Australian entrepreneurs are overlooking one of the world’s biggest growth markets that is sitting right on the nation’s doorstep.

Early in Mary’s overview, on slides 5 and 7, she shows the growth of various markets. Indonesia is the second biggest growth market for internet users – 58% year on year to 55 million – and eighth in the world for smartphone growth with a 36% increase last year taking total users to 27 million.

Given the penetration of both smartphones and the internet are low with only one quarter of Indonesians connected to the internet and less than one mobile phone in ten currently being a smartphone, there is massive potential for the savvy entrepreneur.

While there’s a steady stream of stream of Australian app developers and entrepreneurs heading to Silicon Valley, London and a few to Singapore there’s very few looking to their biggest neighbour.

This ignoring of Indonesia is one of the many omissions in the Australia in the Asian Century report; despite being one of Australia’s closest neighbours with the world’s fourth largest population and an economy growing at over 6% per year, both businesses and governments tend to overlook the nation.

For Australia, the tragedy is that Indonesia has a lot offer businesses that do more than just dig up coal and iron ore.

Perhaps now the mining boom is over, entrepreneurs and governments might start to take markets like Indonesia, and other South East Asian countries more seriously. It’s an omission that’s currently costing the country dearly.