I arrived in San Francisco yesterday. This is my first time in the city itself - previously, I’ve gone out to San Jose and Silicon Valley. I was somewhat surprised by the standard attire of city professionals here. Instead of Silicon Valley chinos and polo shirts, they were nearly all - men and women - in black suits, now seemingly universal among professional groups in most major cities. Of course, they could be supporting New Zealand’s Rugby World Cup campaign, but, given even a large Adidas store here didn’t have any rugby paraphenalia, I doubt it. Somehow, I’d been expecting more imagination and individual style here, especially seeing the fantastic variety of smart clothing available from a huge range of retailers. Or maybe I just came on a black kind of day.

For months, rumours have been swirling that one of the major international vendors is acquiring one of the major Kiwi IT businesses. All possible combinations have been touted, but now the real story is out. Fujitsu has made an offer to the shareholders of Infinity. (It’s safe to assume that the offer was agreed in principle before it was finalised).

While some will be sad to see the end of local ownership of Infinity, this deal is a big plus for both companies and their clients. Fujitsu doubles in size in NZ and broadens its local market offer, while Infinity gains the credibility of a global brand.

Fronde uses Acumen in NZ and Metia internationally as our communications advisers (and very good they are, too). Which global corporation now has the same advisers - Acumen and Metia - following their recent appointment of Acumen in NZ? Here’s a clue: the global corporation is headquartered in Redmond, Washington, USA.

Congratulations to Acumen on their success and Microsoft on their decision.

(No doubt the 1+1=17 rumour-mongers will draw deeper significance from this news).

Finally, after over a decade of dithering, the NZ government has decided to impose operational separation onto Telecom, the NZ market leader and former state monopoly. Back in the mid 90s, I was running a newly corporatised and privatised power company. I realised that the only way to get real competition for the customer was to separate network ownership from energy generation and retailing. I warned my fellow electricity sector CEOs that, unless customers believed (whatever the reality) that real competition existed in the industry, the government would intervene. The government eventually did intervene, forcing the line companies to sell off their generation and retail busineses. (The government then decided to keep most of its own generation businesses and, further, to acquire most of those retail businesses, which was not part of the plan and rather defeated its purpose, but that’s a different story).

In 1995, I suggested to the then Ministry of Commerce that the same concepts could apply to the telecommunications business, and recommended that they look at the Rochester model. Rochester Tel was the first telco to operationally separate its network operations from its customer services business, with open and equal access to other customer service telcos.

First question for Telecom - keep the network business or spin it off? I’d spin off, clearing both new companies to go for gold. Issuing shares in a new network company to existing shareholders would be the quickest way, and both companies would probably see a quick lift in market value.

Next question - what to do about brands, and whether to keep the Telecom name? I’d go for new names to signal a new start, but I’m notorious for that (e.g. Electra, Fronde). Telecom has got tonnes of talent in its people, they can be great marketers (always a good sign for me), and they can be very smart at targeting different customer groups with relevant bundles of services. That talented team can now focus on devising, selling and delivering great customer services, while the network business can focus on building and operating great infrastructure.

Disclosure: I have investment interests in all 3 major telecommunications providers operating in New Zealand, and all 3 are Fronde clients, partners and/or suppliers.

Time and time again, I hear business leaders complaining that their business is barely viable. Typical issues:

• providing essential attributes of a service for free because the customer refuses to pay for it
• allowing arbitrary changes in terms e.g. stretching out payment
• giving away customisation for free
• agreeing to prices below true long run cost (including cost of capital).

The list goes on.

When someone comes up with a genuinely smart new way of doing business, and chooses to compete on price, that’s a real challenge. But many businesses - especially those offering similar services - are essentially distinguished not by lower costs, but by the knowledge, modus operandi and reputation for delivery of their people. Getting trapped into a downward spiral on price, especially when you’ve got competitors even more stupid than you, is a road to nowhere. Your business becomes a death march.

To get out of this mess you have to do five things:

1. develop a distinctive market offer which is designed to appeal to the customers you want and who are prepared to pay for it;
2. understand in depth the operating cost model for your business, including the cost of risk and capital, and use that to define your absolute bottom-line on pricing and terms;
3. develop your business to sell and deliver your market offer to your target customers;
4. don’t sell to people who don’t want your offer;
5. walk away from existing customers with whom you can’t do viable business.

That last one is the hardest to do. Sometimes you have to wean yourself off unprofitable customers over time, so you don’t destroy your business during the change. But be very clear, if you can’t make a decent buck out of what you’re selling to your customers, either change what you sell or change your customers. Don’t compete with stupid competitors, and don’t serve customers who don’t want what you have to offer.

It’s almost fashionable these days to slag off Microsoft, which is a tad ungrateful, given how many of today’s techies owe their careers and/or businesses to the world that Bill Gates and his team have helped create. (Even the MS opponents need MS to oppose). On the other hand, Kiwi serial entrepreneur Rod Drury has always acknowledged how much of his multiple successes have been due in no small measure to his long-standing relationship with Microsoft.

The word “partner” is sorely misused by all and sundry in business. Many organisations - vendor and client - will invite you to become their “partner”, but mostly it seems to mean “give me a deal, but I’ll still shaft you when it suits me”. We all know someone like that, don’t we? Fortunately, that’s not always the case, but it requires genuine two-way commitment to the partnership, you need to be clear about what you will forego, and you need to think about your partner’s needs too.

Rod’s advice:

• Understand what the Microsoft individuals you are working with are goaled on. If you’re sync’ed up with that you’re in good shape.
• Normally the individuals goals are in sync with the MS corporate goals. Ask what they are. Then you can line up your messaging and themes and the magic starts to happen.
• You need to build a relationship. Get to know the people you are working with.
• Look for ways that you can add value.

This week’s big IT industry news is SAP’s launch of “Business by Design“, SAP’s Software-as-a-Service enterprise business system. Given my earlier comments on SaaS strategies for packaged software vendors, this is very significant and marks the first direct entry by a major player into the SaaS market. Even Oracle’s Larry Ellison entered via a separate start-up, NetSuite.

I’m not in a position to give any view on the technical merits of of SAP’s SaaS offering, but initial reaction from the professional SaaS watchers has been positive.

SAP has targeted mid-size organisations (100-500 end-users) with this very comprehensive application. Current per-user fee structures deter penetration into mid-size organisations. At US$195 per user per month, SAP will collect ~US$234k each year from a 100 seat organisation. That’s a lot of money for a business that size, and there’s probably a critical threshold not far above, after which additional user fees need to drop rapidly to be competitive with in-house solutions. How the pricing shapes up versus NetSuite will be interesting. The current high per-user fees could be a deliberate ploy to ration take-up and avoid cannibalisation of in-house licenses, in which case neither SAP nor Netsuite have anything to gain from starting a price war. That will probably come from ambitious start-ups.

My only criticism is about the name. “Business by Design” is an advertising tagline, not a brand name - it’s a clumsy effort from SAP’s marketing people. That quibble aside, I’ll be interested to see how this SaaS service goes for SAP, whether or not it moves up into the corporate market, and of course what opportunities it offers to Fronde. We do a lot of work building, integrating and implementing unique market-facing applications for the corporate enterprise - the things that make them different and connect them to the world. That usually involves integration with the core business systems, and increasingly, implementing and integrating SaaS applications, as well as working with SaaS vendors on their platform development and operations.

For those fired up by my recent article on EU economic activity compared to the USA, here’s more fuel for the flames. The Economist blog has a couple of views on why Europeans (a sweeping generalisation) don’t work as hard/long as Americans (also a sweeping generalisation). Those still interested can read for themselves, but in essence the argument is that Europeans are approximately as productive as Americans per hour, but the Americans work longer, when they can reap the rewards of doing so - which sounds like another sweeping generalisation to me.

(updated: first version lost most of the last sentence).

Update 2: Just to be clear, I find these generalisations too broad.  While I may disapprove of some, but not all, aspects of the socio-economic frameworks of some countries in Europe and some aspects of the EU itself, equally there are aspects of the individual states and federal systems in the USA that also do not win my approval.

Today Fronde hosted a very different type of open-invitation conference at our Wellington office - a BarCamp on eGovernment. BarCamp is very social, very participative, and free.

There’s a great deal of interest and ideas around how government can enhance its interactions with and between its citizens, its institutions and its community. I was impressed with the quality of the many attendees, where they came from, their ideas and their participation. There were 4 conference rooms going all day, with presentations and discussions self-organised by the participants.

I couldn’t do justice to the sessions I sat in on, but I learnt heaps, including, for example, a whole new way of thinking about places, and how rich the information possibilities are when you move away from simplistic approaches to location.

For obvious reasons, I also sat in on a session which looked at why public sector CEOs blog, or rather, why they don’t. This led into a much wider discussion on audiences, branding and positioning, and the constraints on government employees.

I must have got very enthusiastic at one stage in a session on Agile methods. Apparently, I’ve volunteered to talk to the top levels of the government service about achieving smarter outcomes via Agile management, design and development methods, both in IT and in wider strategy/policy initiatives. That needs a major shift in executive thinking and procurement processes, not just within operational departments, but also within those arms of government and the legislature responsible for funding, audit and oversight.

A great day. Congratulations to the organisers, and thanks to our fantastic Fronde reception team, who ran an awesome coffee production line.

Here are other people’s views on the day and any presentations posted on the web (to be updated as and when I find them): BarCamp eGov 2007 website, Eduard, Sandy, Thomas, Mike (great organising, mate).

Cringely thinks he’s figured out Google’s master plan to become the world’s biggest internet service provider and the USA’s dominant comms company, in the context of the US 700MHz spectrum auction and the launch of Apple’s iPhone. As a piece of intellectual musing, it’s an interesting read, strategically credible and scarily compelling. Flight of fancy or brilliant insight?

The BBC has scooped the announcement of Superbrands’ 2007 survey of the UK’s “Coolest Brands”. Why did they need a survey to find out that Aston Martin is the height of cool? Most blokes secretly want to be James Bond, most girls want him, and he drives an Aston Martin. What else do you need to know?

The Top 10 are:

1. Aston Martin
2. iPod
3. YouTube
4. Bang & Olufsen
5. Google
6. Sony PlayStation
7. Apple
8. Agent Provocateur
9. Nintendo
10. Virgin Atlantic

Congratulations to Kiwi marketer and VC Andy Lark, who has joined computer-maker Dell as vice-president of Global Marketing & Communications, and will shortly move to Austin TX. It will be fascinating to see where Andy takes Dell’s conversation with the market.

I’ve just spend a great day with professional services guru David Maister, at his leadership and management seminar. David’s style is to introduce a topic and then see where the discussion goes, which this talented researcher, consultant and educator artfully weaves into his themes for the day. I can’t possibly cover the whole range of his material, all of which is available on his website and in his books, so here are some tidbits:

• It’s easy to come up with a good strategy. The hard bit is to do what you said you’re going to do.
• The primary role of leaders is to create and sustain enthusiasm (not just compliance) in others for what you are trying to achieve.
• What are your real standards - those things which absolutely must be adhered to, with no exceptions? They’ll be the behaviours that define your firm, and demonstrate to everyone what you value and what you’ll condone. Don’t compromise.
• Agree what’s important to be done next, by whom and when. If you agree to do something, do it. Don’t tolerate non-delivery.
• Managers spend too much time on the lowest performers, and the least enthusiastic. Cut to the chase and demand of those people “If you’re not excited about what we’re trying to achieve, what are you doing here?” Anything less devalues the rest of the team.
• Adopt the rule: “If it can be delegated, it must be.” You’ve got to help your people develop. A good manager works themself out of their job, by developing their team and their successor.

Regular readers of this blog will be familiar with these themes. As David disingenuously puts it, “There’s nothing new here - it’s all common sense. You’ve just got to mean it.”

Recently, an IT services competitor asked me why we (Fronde) were “wasting our time” on stuff that “the market isn’t ready for”. He did acknowledge our focus on business transaction systems is distinctive; that architecture, integration and online transactions skills are important; and that Agile management and development practices are gaining traction. But he didn’t understand the logic behind our investment in mobile channels and Software-as-a-Service.

His strategy was to listen to what his customers wanted, and then to quickly build capability when enough said they wanted something new. It’s a perfectly valid “fast reactor” strategy. It’s the strategy of the big gorilla (with market momentum and established channels) and it’s also the strategy for the “I’m happy with what I’ve got and I’m not risking it” service business.

That’s not what we’re trying to do with Fronde. Don’t get me wrong. Being responsive to customers is important, but it takes time to develop new capabilities, products and services, especially if they mean big shifts in core business processes and mindsets. If you wait for customers to ask you for it, it’s too late. Yes, there is a risk that we might pick the wrong things, but it’s less risky setting our own strategic agenda than having it set for us by today’s thinking:

“You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new.”
- Steve Jobs

Over the last 2 years, we’ve been steadily moving from being a generalist IT services provider into one with distinctive capabilities and competencies. In our case, that’s meant a focus on business transaction systems : enabling businesses to transact with the world (i.e. how businesses do business, with customers, suppliers, staff and partners). It’s also meant choices about which clients we want to serve, in what vertical sectors, so that we can build deeper knowledge of their industry and business. And it means being ahead of the game in important new services, products, technologies and techniques that support our core position. Put those themes together, and we become a product and service provider that can genuinely help lead our clients into the future.

As I like to put it, we do the stuff that makes our clients different. We’ve still got lots to improve upon, but now it’s more about deepening and strengthening our position, not about moving into it. And our competitor is wrong - the market is asking how to make use of these new solutions, and it’s asking us.

I just found out that professional services guru David Maister is in Wellington on Thursday and Auckland on Friday to give a one day seminar. The focus is on strategy, management and client relations and draws on his forthcoming book “Strategy And The Fat Smoker .” What a title! This guy is good - I frequently refer to his classic book “Managing the Professional Service Firm“. I know it’s late notice , but break your schedule and attend if you can.

I came across this excellent presentation from Marty Neumeier at Neutron, which summarises his book “The Brand Gap“. The presentation would make a good discussion starter when you and your team need to think about your own brand.

Don’t be put of by the number of slides - it’s actually very quick to run through, and works best if you click on SlideShare, then the full screen icon.

Cartoon by Dave Walker. We Blog Cartoons.

GSM is 20 years old. On 7 September 1987, 15 phone firms signed an agreement to build mobile networks based on the Global System for Mobile (GSM) Communications. I’m a big fan of what the GSM accord has meant for customers and competition in those countries which wholeheartedly embraced it: a common upwards-compatible phone technology, which enables the customer to choose which phone and which network to buy and use - every day, over most of Europe, and increasingly, the world:

• China has 445 million GSM customers
• There are 2.5 billion GSM connections worldwide
• The world will reach four mobile connections in early 2010
• 64% of mobile users are in emerging markets
• About seven billion text messages are sent every day.

And those stats have yet to reflect the forthcoming explosion in traffic as the mobile phone becomes your primary personal mobile transaction and information device.

There are technical shortcomings in the GSM technology and its derivatives, but they are far outweighed by the benefits of standardisation and customer freedom. To get the best results, GSM needs smart regulators and judicious spectrum management to enable vigorous competition (low barriers to entry, fair and reasonable wholesale and retail regimes, site co-location, roaming rights and cross-border protection, etc.). I’m not normally a fan of regulators, but on the whole, GSM works a whole heap better than the alternatives.

Business executives and CIOs wanting to know how to take advantage of this technology to open up new customer and service channels (on both GSM and CDMA based networks): Fronde will be delighted to advise and assist you.

No, I’m not talking about that kind of sex appeal (note: I did attempt to appeal to both sexes). I’m talking about appealing to people’s emotions. Engineers and IT guys are emotional creatures too, just like the rest of us. You’d be amazed how many technical people, pitching products and services to other technical people, concentrate on the dry-as-dust details of functional purpose and price. How about finding a way to make your product or service appeal to the emotional side?

Let me give you a mundane example. Mobile phone cell-site antennas all look much the same on the outside - light gray metal boxes with a light grey plastic radome (or cover). Light grey is the least intrusive colour against the sky, but beyond that, no-one cares too much about the design aesthetics - they are installed 30-100 metres above ground. Most radomes are just bland smooth plastic, and one looks very much like another.

Deltec’s plastic supplier didn’t have a smooth extrusion roller of the right size, but they had one that could be smooth on the outside, if we didn’t mind having an embossed leather-look grain on the inside (they used to make those nasty “leather-grain” plastic briefcases). We gave it a go, but when our design engineers saw the extruded sheet, they immediately decided to make the radomes grain-side up. Who would see this feature 50 metres above the ground? No-one. But at trade shows and product demos, the radome is at eye level. The grain-effect had no functional purpose at all, but it gave an impression of quality and aesthetically-pleasing design which greatly appealed to our technical buyers, and supported our very real superior functionality and value proposition (and much higher price). A happy accident from which we learnt a valuable lesson.

Ask any car designer (and most car buyers). Functionality is important, but so too is sex appeal. How can your product or service appeal to your buyer’s emotions? Oh yes, it can work for services, too, but that’s for another time.

The International Telecommunications Union reports that there are now 4 billion phone connections globally: 1.3b fixed line connections, and 2.7b mobile phone users. There are also more than 1 billion internet users. Just think about those numbers for a moment, and the number of people on the planet, and what that implies about the pace of change and development over the last 20 years.

At Deltec, we defined our mission as “helping the world to communicate, through wireless technology“. Wireless communications, and especially mobile phone networks, were seen as an essential ingredient for increased well-being in many countries (and not just economically) . Seeing those numbers, I like to think that, in our own small way, we helped to make it happen.