Right, the time has come for you lot to demonstrate your grasp of business, language and humour. Today I invite entries for the En Avant Business Fun Poetry Competition.
As well as a supreme winner, and depending on how many entries we get, we may have category prizes for best sonnet, best haiku, best modern style, best classical style, best limerick, etc. Style, use of language, and originality will all count, but especially humour and wit. Original compositions only, please, although good doggerel and bastardisation of renowned poetry and poetic prose is encouraged.
To inspire you, look at Capital Chronicle’s adaptation of the Shakespearean sonnet to poke fun at the US sub-prime debt issue. (RJHA - I take it you wouldn’t be averse to a drop of NZ Pinot Noir in recompense for stealing your idea?). Update: Also check Madeline Kane’s limerick ‘Pity the poor lawyer‘.
Entries can be posted as comments below, before 11.59pm, Friday evening, 17 August (update) 11pm Sunday, 12 August, NZ time. This is a friendly business blog, so anything too offensive or wildly off-topic may be moderated out. As usual, I am sole judge and arbiter (until I find someone to share the joy with me) , I (we) can be suborned, and the usual cheapskate prize is the acclamation of the blog-reading public, and maybe a drink if I’m in the same part of the planet as you some time soon - I do travel a bit.
Capital Chronicle’s RJH Adams - a UK investment manager and blogger operating from Grenoble - has turned his hand to poetry and doggerel. Here’s his latest effort:
Shall I compare thee to a margin call?
Thou art more subtle though less temperate.
Rough iTraxx does shake the darling hedges of summer,
And Bear Stearns’ lease hath all too short a date.
Sometime too hot the eye of credit derivative shines,
And often is his subprime complexion dimm’d;
And every REIT from REIT some time declines,
By fright, or forced-selling’s changing course, tanked-out;
But thy eternal cycle shall not fade
Nor lose possession of that danger thou ow’st;
Nor shall Death brag thou couldn’st trim his credit lines
When in eternal lines to time thou has always’st:
So long as men can over-leverage in hand with prime brokers,
So long lives this, and this gives life to thee.
You’re familiar with the problem of too much email. Now it looks like the same problems are arising with all the new web networking tools. Today I saw several posts by people trying to cut down the amount of stuff coming in, e.g. news and blog feeds or Facebook invitations and connection requests. I’m finding my inboxes at my various services filling up with this stuff too, and I’m not on that many. This tidal wave of connectedness quickly needs some form of filtration and moderation, or those with higher profiles might simply pull up the drawbridge against well-intentioned, but unsolicited inbound personal communication - which would be a shame, because they can lead to valuable new connections.
CIO Magazine has an article with a familiar story. After acquiring several other companies, the group’s CIO tells an IT manager to integrate 3 core work-order IT processes onto one common platform. The manager’s dilemma is whether to be dictatorial or to build consensus on which system to use. Which system did the users seem to like best and why? He didn’t know. He’s on a hiding to nothing. Unless their system is awful, each system’s users will eulogize their system and hate the others. Someone will have to make the tough call, and the users forced to change will hate the decision anyway. The suggested solution: tell the users the problem and give them 2 weeks to make a decision or they’ll have it done for them. It’s a technique I’ve used often when factions emerge and it usually works.
But why was the company in this position? Some key questions seem not to have been answered during pre-acquisition analysis, due diligence and planning:
Is the acquirer’s system compellingly better, and expected to enable superior performance from the acquiree business?
Is the acquisition being done to acquire the other team’s smart IT applications, which will enable superior performance from the acquirer’s business?
Is integration of IT systems (with lower operating costs) a key value driver for the acquisition?
Is there a clearly compelling and obvious case for one system over another?
If the answer is yes to one or more of these questions, there should have been a plan in place before the deal was finalised, with rapid implementation begun immediately after acquisition. Otherwise, don’t bother, until normal life-cycle replacement kicks in, with the users involved.
Pre-acquisition planning applies not only to IT, but to every aspect of an acquisition (marketing, development, sales channels, fulfilment, management, culture, organisation, support, etc.). What are the big value drivers that prompted the acquisition? Plan to get them realised quickly after acquisition and then get on with growing the businesses again. Too much navel-gazing will destroy the acquiree and be a huge distraction from achieving the value benefits from the acquisition.
I suggest reading ‘Five frogs on a log’ for executives and managers involved in pre- and post-acquisition planning and execution. Its primary advice? Plan the integration before you finalise the deal, and don’t kid yourself or the other team. Unless making a strategic pre-acquisition decision to take on a particular aspect of an acquiree, it’s the acquirer’s way that wins. It’s simpler, quicker, less painful and more honest.
Leading British trade journal The Banker made mobile banking the subject for its cover and lead article last month. Guess whose mobile banking solution they cited? That’s right - ours. You can’t buy publicity like that!
Morgo invokes the Chatham House Rule, to encourage sharing of otherwise confidential information and ideas. However, some stories have been written with the permission of the presenters. Rod Drury’s written about Atlassian and its co-founder Mike Cannon-Brookes, Australian Entrepreneur of the Year at age 29, and one of the star turns at the conference. Peter Griffin’s written about Datasquirt’s Australian IPO.
On the plane from Kerikeri on the way home, several thoughts occurred to me:
The NZ hi-tech industry is in good heart and confident about the future.
It’s still got a lot to learn about scaling up, but isn’t scared about it. (We heard about how one Indian company has grown from 400 people to 100,000. Now that’s scaling up!)
People are talking about building businesses, not just products.
The leaders of most of Wellington’s leading locally-owned hi-tech businesses are on this plane, which could make things tricky if we crash!
This is the first chance I’ve had all day to write something about this great conference. The theme this year is about scaling up your business when you want to go global (or at least, international). We’re hearing lots of success stories (and lessons learnt) from Kiwi, Ozzie and Brit perspectives.
Someone asked me over breakfast how I thought things had changed from an NZ export conference I’d addressed in 1999. My answer was “confidence”. We’ve got more hi-tech entrepreneurs, more successful international hi-tech businesses, and greater aspirations. I see lots of businesses here that are aiming for $100m annual turnover, and one or two who genuinely believe that they can scale to $1 billion businesses. That was almost unheard of 10 years ago. The buzz in the air is fantastic. Let’s spread it to the rest of the country.
I’m at Waitangi for the Morgo 2007 conference. This is the annual talkfest, networking and deal-doing conference for the New Zealand hi-tech industry. The attendees are a real hi-tech who’s-who. The schedule’s packed, but I’ll try to find some time to pass on some of the ideas from what should be a fun 2 days.
Right - I’m off to the ‘pre-dinner networking venue‘ for some ‘conversation‘. It’s a tough job representing your company at these events, but someone’s got to do it.
I was at a stock exchange function last night, for a very good presentation on the role of directors in takeover situations. Afterwards we chatted about those rumour questions we all get from time to time:
Is it true that you’re taking over XYZ?
Is it true you’re being taken over by XYZ?
Is it true that the business is for sale?
Is it true that you’re about to make an acquisition?
A lot of people fall into the trap of issuing an emphatic denial when there is no truth to the rumour, but fudging when there is some substance, and in effect confirming the rumour, which might have disastrous consequences.
The best way to deal with rumours like that is to say nothing - always and consistently. Do it right from the start. I get approached at least once a month with some question about us acquiring another business or vice versa. My answer is always the same:
‘It’s our policy to neither confirm nor deny such matters, and we apply this policy whether or not there is any substance to rumours.’
This gives nothing away, and it also says we follow this rule all the time - an important rider. I use a similar statement when asked by the media about our clients:
‘It’s our policy to not discuss any client’s business or their dealings with us, unless the client has given their permission.‘
In both cases, the answer is professional and honest. Most enquirers will respect you for giving such a clear, firm response. A journalist sometimes will try a second line “Well, if it’s not true, why not just say so?” Don’t be sucked into that logic. Just repeat your standard response. Then when you really do have a secret to keep, your standard response will be credible. This isn’t being devious or dishonest. It’s just that some things have to be kept confidential until the appropriate time to reveal them.
I wrote a few days ago about US FCC chairman Kevin Martin wishing for a single phone that could be used on any network - the big challenge in the US system. I favour the European standards-based approach: trade off possible technical efficiency for a pro-consumer, pro-competition choice, not just when you buy a phone, but everyday when you decide which network to use. Respected international telecommunications pundit Andrew Seybold takes a very different stance - see our short comment exchange.
Andy’s now written a submission to FCC chairman Martin, putting the case that the technology-competitive US system delivers better outcomes in the long run, with both lower prices and more efficient use of scarce spectrum. While he focuses on the US issue of the moment - use of the 700MHz spectrum - his argument applies broadly.
For those interested in this area of technology, markets, and regulation, does he make the case?
The global demand for ICT skills continues unabated, with the story repeated recently in Australia,Britain, Canada and the USA, despite offshoring IT jobs to lower cost countries. Computerworld covers a government report in New Zealand:
The demand for IT professionals has grown rapidly since 2001 …. Employment growth of IT professionals of 27.3% per annum was well above 2.8% growth for all occupations…. Only 64% of vacancies in the category could be filled and only 1.9 suitable applicants were identified per vacancy.
27% per annum for 5 years! And this in a country where IT tertiary degree programmes saw their intake halve since 2000 (though climbing again now). It must be sub-degree training and immigration that’s enabled such growth to be achieved, although that won’t solve the rapidly looming need to replace degree-trained specialists and managers as they retire and the global talent war heats up. Consulting firm Deloitte echoes CEO concerns that:
...the talent shortage will last for decades and that this poses a major crisis for the industry globally…. Technology companies in particular, which rely heavily on top talent to drive innovation, will suffer from this global problem. Over half of the companies surveyed said they plan to expand their workforce by more than 25% with the vast majority wanting to grow organically. However, all agree the biggest challenge to companies is finding, hiring and retaining qualified employees.
As I’ve noted in earlier articles, not only does IT need people, but so does the rest of industry, which looks to IT to solve skills shortages through smarter productivity. So while the IT career outlook is rosy, the outlook for IT services is even rosier.
I came across a site with more management tools on one page than I’ve ever seen before. A useful resource for decision makers, consultants and MBA students, despite the boring presentation - think of it as an online reference book.
The BBC has reported on a row in Britain about a mobile phone designed for elderly users that no-one wants to sell. The Lifephone - from Austrian firm Emporia - has big buttons, easy to read characters, and very simple functionality. It’s probably a great product for its target market, and aged advocacy groups seem to agree. The problem is - selling stuff to aged customers with the primary message that it’s specially designed for for them rarely works, when it’s a variant of a product for the general population. Who wants to think of themselves as a doddery old duffer? It’s also patronizing and insulting. Most marketers know this, which is possibly why they didn’t take up the pitch from Emporia. The best way to sell a product like this is viral - promote the phone is a low key conventional way, but invest heavily in building a network of senior advocates who’ll spread the word to other seniors by word of mouth. Never tell them it’s an old folks phone, and make sure it doesn’t look like an old folks phone. Seniors like being cool, too.
In a comment exchange on my last post, Falafulu Fisi asked what financial analysts do to earn their big fees, and Valuecrucher’s Mark Clare explained that they don’t get big fees. It was a good question and a good answer, so for the benefit of those who don’t keep track of the comment dialogue after you’ve read a post, I decided to make the exchange a post in its own right.
Falafulu:
In the Business Herald of yesterday (Friday), it mentioned there that ABN Amro , the broker for Software of Excellence (SoE) had lowered down the valuation of SoE from $2.76 to $2.54 . I have always wondered about the huge fees that financial analysts are charging for this kind of services. It is a good thing that online valuers such as ValueCruncher can do the same service for a lower fees.May be Mark Clare or Jim can correct me here, but what I have read something on the NZ Herald in the past , that such fees could balloon up to millions ($), depending on the value of he asset (company) that analyst is valuing? The higher the value of the asset, the higher the fees. Am I right here? To me, it looks like a rip-off. Also, does the broker or valuer contribute to this hyping up of IPOs?
I am developing a financial mathematics library (API) for an application in financial market analytics which also includes a sub-package on asset valuation. I just don’t understand why analysts are charging huge fees for this kind of services.
Mark:
I think you have some misconceptions there.
Analysts are not paid millions for their analysis. They provide free research for their clients and provide coverage of shares like Software of Excellence (SoE) because either they handled the IPO (as they did with SoE) or their clients will be interested (i.e. the major companies like Telecom (TEL) on an exchange like NZX) and trade via ABN for access to their research.
This area was a subject of debate around conflicts of interest in the US in the late-1990’s. This has meant new rules around analyst independence in the US market. This has meant more independent research - often delivered on-line. Valuecruncher is developing a product for this market at the moment.
Where investment banks get paid fees based on the size of a deal are for capital raising or handling mergers and acquisitions (M&A) transactions. Investment banks are paid for initiation, negotiation and execution skills around transactions (with remuneration focused on payment for success - i.e. fees are minimal or low for failed transactions). Financial analysis is only part of any of these services - certainly not the sole reason for the fees they are paid.
The independent appraisers report that Grant Samuel have prepared around the SoE transaction is a separate piece of analysis required by NZ law around M&A transactions. This is lucrative for firms like Grant Samuel - but certainly not millions of dollars (typically under $100,000 for a report).
Valuecruncher is planning some posts on capital raising (including the IPO option) in the near future. This will cover the costs of these processes - looking at disclosed information from recent IPOs like Xero and Burger Fuel.
An excellent post by Valuecruncher’s Sam Stewart Mark Clare on the so-called bonanza for investors in 42 Below, cited by enthusiasts for the recent successful Xero IPO and the current struggling Burger Fuel IPO. It’s worth reading the whole post, but the important takeaway is:
A professional early stage investor (i.e. a venture capitalist) targets a 10x return on investment over a period of 5-7 years*. The 42 Below return for IPO investors (even with the sale to Bacardi) is well below this targeted level. Although the 15.5% annualised return realised via the Bacardi offer was a significant improvement on the pre-offer price it can hardly be described as a “home run” return for investors in a startup IPO. Citing the 42 Below result as validation for investing in early stage growth companies on the NZX is misleading. Each investment should be considered on its merits. Companies such as Xero have the ability to develop into global players and have significant upside potential but investors should not be relying on a 42 Below style exit to realise their return. If these growth companies achieve a significant global presence, investors should expect a return well in excess of 15% per annum (of course any return is a function of the price paid).
Update: *If my math is correct, that VC target return is ~40-60% pa, but of course a VC investment doesn’t have the liquidity of a listed company.
Jack is cool. Jack wears ripped jeans. If I wear ripped jeans, I’ll be cool, too. Wrong!
You see it all the time - in life, in sport, and in business. Someone “cool” does something which draws acclamation, and everyone else starts doing it. Sometimes that’s fine, but sometimes it’s not. As Wade Rockett from marketing and PR firm Metia puts it:
Apple’s relative lack of transparency is cool because Apple is cool, not because a lack of transparency is cool. Apple is like a magician: those of us in the audience are waiting breathlessly for the moment when Steve Jobs whisks away the cape to reveal whatever amazing doohicky he’s been hiding from us. It’s a carefully orchestrated spectacle, a performance, born of Jobs’ natural instincts as a showman and perfected over the decades. If another company with a different corporate personality tries to pull it off, that company runs the risk of simply looking weird.
You rarely get to be a great brand by copying the other guys. Stand out from the crowd - it’s one of the oldest concepts in marketing. Do your own thing. Walk a different line. I can think of a dozen more cliches, but you get my point.
Successful brands have a distinctive personality which infuses everything they do. Your brand, market offer, promotion, product, process, people, culture, look and feel should be internally and externally consistent, and mutually reinforcing. Develop your own brand personality - don’t copy someone else’s.
In a recent post, I mentioned that our meeting rooms at Fronde in Wellington are named after pioneers of computing. I’ve had several people asking me for those names. Here’s the current list:
Babbage - the originator of programmable computing
Turing - fundamentals of computer science, etc, etc
Comber and Irving - Fronde’s founders.
Each room has a name plaque and a framed picture with a synopsis of the pioneer’s contribution to our industry.When we reconfigure our office space from time to time, some may get put into storage for a while, but they stay on the Outlook resources list for reactivation when needed. There are several other computing pioneers who merit a name-plaque and picture. Any suggestions?
Anyone who travels globally and needs a universal mobile phone will tell you that US mobile communication is a shambles of differing standards, frequencies, technologies and restrictive licenses. No wonder they’re miles behind in added-value services - any roll-out is fiendishly complex or functionality has been restricted to basic platforms like text/SMS.
Finally, Kevin Martin (the chairman of the US Federal Communications Commission) has acknowledged that the US has a problem, and he longs wistfully for a single phone that can be used on any network. It will need more than just a fiendishly complex phone to solve the problems in the US. It will probably mean killing off some technologies, standardising on common frequencies, and establishing a pro-customer, pro-competition business, technical and regulatory framework with easy network interchangeability, roaming and wholesaling.
Impossible task? Europe’s had the answer for over 20 years. It’s called GSM. It works.
Australia and now, it seems, New Zealand have woken up to this fact and have started moving towards the European model. It was a poor decision not to have done so from day 1, but better late than never. If the US FCC can win a mandate for a similar change (update: which is problematic, to put it mildly), it will be extremely bloody; but it needs to happen.
Marketing guru Seth Godin has written about sloppy naming for product families. He’s particularly scathing of Apple. It’s a familiar problem. People keep playing amateur brand-name creator, especially if they are responsible for dreaming up new products and services You know who you are!
I’ve seen it all - twee word-plays on primary brands, me-too versions of i-this and something-mate, ghastly alliteration, overlap, duplication and just plain randomness, not to mention customer confusion and law suits for trademark infringement.
Stop it right now! Put someone in charge of product branding for your business, get them to develop a credible product naming architecture which is consistent with your strategic positioning, market offer and product development plan. Debate it, agree it and mandate it. Then enforce it with absolute central control. It’s the only way, folks - your brand is too important to your business.
The 
Jack is cool. Jack wears ripped jeans. If I wear ripped jeans, I’ll be cool, too. Wrong!
Anyone who travels globally and needs a universal mobile phone will tell you that US mobile communication is a shambles of differing standards, frequencies, technologies and restrictive licenses. No wonder they’re miles behind in added-value services - any roll-out is fiendishly complex or functionality has been restricted to basic platforms like text/SMS.