I’ve just watched the documentary Startup.Com (borrowed from my local library, but available from Amazon), which tracks the birth, rise and fall of Govworks.com in 2000 and 2001. Govwork’s story is still relevant today. You see the enthusiasm of the founders, the frustration and excitement of the money-raising, the early plaudits and adulation, and then the fall into nothingness as the realisation strikes home that the business isn’t working.

The technology and the product were incidental to the story. The central theme is the relationship between the founders. One is kicked out early because he won’t risk his day job. One of the two principal founders is fired as things start to go wrong, because although he isn’t co-CEO, he acts as if he is, countermanding the actual CEO, his best friend from high school. Their friendship goes through massive strain, and although renewed, you wonder if it will ever be the same again. (However, they did patch things up as they went on to other ventures together including JumpTV.com)

Every budding young entrepreneur should watch this documentary - if only to realize that it will get tough (it always does), friendships may get hammered, and success isn’t guaranteed.

Phil Wainwright has written a useful summary of the stack of services needed to successfully deliver Software as a Service (in a nutshell, business and other applications delivered to the end user without the need for any in-house IT infrastructure apart from your personal internet access device). From my discussions with some of those developing or planning to develop SaaS application offerings, I fear that too many focus just on the high level application functionality, naively ignoring what it takes to run a big system.

Being in the SaaS game demands industrial-strength underpinnings. We’re starting to see a range of service solutions for each level of those underpinnings (Apprenda et al), which enable the start-up to easily focus on application functionality and user experience. However, you still need to make some fundamental decisions on which underpinning solutions you intend to adopt from Day One . Trying to add them in later may prove impossible without a very costly rebuild and major service disruption - also expensive. Ignoring them (even if only while you get started) could see your great new SaaS idea brought down by unreliability, insecurity and slowness.

Nokia has put out a video showcasing its researchers’ ideas on the future of mobile phones, not so much in applications but more about the form factors (structure, look and feel) which will radically change the user experience. This is the 5 minute version (just click on it), but there is a shorter one available.

Kevin Roberts has written 12 rules of modern business travel:

1. The less time you have, the longer it’ll take.
2. The more important your objective at your destination, the more tension and frustration you’ll face en route.
3. Being in a hurry guarantees you will land at the airport 10 minutes after all the passengers disembarking the three jumbos from Nigeria, Korea and Bangladesh form queues at your immigration counter.
4. Whoever said the transit the time at LHR, LAX and JFK is 45 minutes has a grim sense of humor. It’s 3 hours.
5. If you’re running late for a connection, it will depart as scheduled for the first and only time that month.
6. None of the food on board is good for you.
7. Any wine tastes average at 30,000 feet.
8. Apart from the horizontal beds on Air New Zealand, Virgin and British Airways, not all airline beds are equal. You can prove this by trying the angled ones on Delta, Continental and American.
9. If for some strange reason your flight lands on time, there will be no parking gate for the plane and you will be bussed to the terminal 20 minutes late.
10. Any spare part required to fix a mechanical problem on your aircraft is stored at an airport no less than 2 hours flight time away.
11. The most talkative, most boring idiot in the world is in the seat next to you.
12. Take the train!

We all know exactly what he means!

Last month I wrote about using a simple poem by Rudyard Kipling as a tool in strategic thinking.

I keep six honest serving-men
(They taught me all I knew);
Their names are What and Why and When
And How and Where and Who.

- from The Elephant’s Child

Today I came across a similar article by Doug Goldstein (Amex’s head of new product development ) suggesting that marketers should go to journalism school. Apparently, journalists are taught a questioning technique called the 5Ws (When, Where, Why, What, Who. plus How). According to Wikipedia (which mentions Kipling - also a journalist), this is a fundamental concept in news investigation and writing style. The maxim of the Five Ws (and one H) is that in order for a report to be considered complete, it must answer this checklist in its opening paragraphs. That fits neatly with my strategy concept of the market offer - summarising the guts of what your business is about.

Does this mean that business journalists might actually know more about business strategy than most business leaders usually attribute to them? Of course, my contacts in the business media all have impeccable understanding of such matters!

Some years ago, I worked with the board and owners of a mid-size business which had the opportunity to expand, and had several funding options available. At the same time, we also considered the implications of outright exit. Adding to the issues was the realisation that the status quo wasn’t a long-term survival option.

This table summarises the discussion of the pros and cons of the options:

Obviously this is a gross over-simplification of the alternatives, and was in the context of the structure and behaviours of their industry.

We explored each alternative in terms of complexity, risk, growth, the impact on shareholder value, and perhaps most importantly, the appetite of the owners for the next stage of the journey. This led to the conclusion for these owners that their first preference was to seek a financial investor for expansion, with an exit strategy based on a 100% trade sale within 5 years. If no acceptable financial investor could be found within 12 months, then the business would be put up for 100% trade sale, while it still had the market expansion opportunity.

Now that wouldn’t necessarily be the conclusion for every business, e.g. Xero went for an IPO as its primary expansion capital funding mechanism. The point is that you shouldn’t make a quick assumption about how you should fund your business expansion or, indeed, if you should expand at all.

No comment needed. I stumbled upon it by accident.

One of modern society’s new concerns is overweight, under-exercised children spending all their time in front of the TV, game console or home computer. SPARC, the NZ government agency charged with addressing this problem, engaged interactive media studio Click Suite to create an innovative interactive social networking website for kids, as part of a broad multi-faceted programme called Mission On. The idea is to get children enthusiastic about doing real exercise and eating well. Using the online equivalent of collecting stars on the fridge, children earn points for undertaking physical activities and healthy eating. Points are currency to spend on customising the child’s personalised web pages. The programme is kept fresh with popular celebrities demonstrating and encouraging new activities. And for parental peace of mind, there are heaps of safeguards and moderation.

The Mission On website has just gone live, so it’s too early to say if it will achieve its objectives. However the pre-launch pilot school and its children have been very enthusiastic users, and have already begun to see positive results. This is an innovative way of using the social power of the web to help solve a modern problem, and of course is a great showcase of Click Suite’s savvy interactive media design skills.

Postscript: Yes I know it’s counter intuitive - a website to encourage exercise - so I suggest you get your kids or grandkids to give it a go, and see for yourselves.

Disclosure: I’m non-executive chairman of Click Suite.

The latest ploy in the Microsoft/Yahoo takeover battle has now been revealed. Yahoo has put a poison pill takeover defence in place, in the form of expensive staff ‘termination payment in the event of takeover” provisions.

I commented on Rod Drury’s blog that if I was a Yahoo shareholder, I’d be very angry. Existing staff contracts will already cover termination, and set the ground rules when people accepted their jobs at Yahoo. So what’s this about? Protecting the incumbent management. MS (or any other bidder) will discount the cost of the poison pill in any final price, and Yahoo shareholders will pay the bill.

If you invite in external shareholders, you have to treat them right, and this is wrong. Yang and Co should get the sack for this stunt.

Over lunch at Vista Cafe again today, business bloggers Jack Yan, Mark Di Somma and I had another ramble around the world of branding and strategy. Between Jack’s scarily accurate impressions of UK ex-PM Tony Blair and Mark’s stories of outrageous conference speech openers. we did actually talk about some other stuff.

• Do methodical cook-book approaches to creating brands work? Is Kevin Robert’s Lovemark idea a valid branding concept or just adman hoopla? And can you deliberately turn your brand into a cult icon?
• Does your brand have the power of ‘The Nod‘? (thanks for the link, Mark). Do you see a stranger in the street and nod to each other to acknowledge being co-customers of the same brand? Think Harley Davidson riders or Mercedes SLK drivers (like Jeremy Clarkson and me, except his is the top of the range model and mine, um, isn’t).
• How lingerie branding works - think Elle MacPherson versus Trelise Cooper; the difference is more in the brand personality and not so much the product.
• This morphed into intellectual property suits and when they’re a wise move or not.

The picture shows fashion mag publisher Jack explaining lingerie branding (really). Draw your own conclusions! By the way, guys, since it looks like we’re now a regular monthly date, I’ve dubbed us The Vista Group. Do you think we’ll get sued?

I was asked today what are the most important things for the CIO to concentrate on. Here’s my two bucks worth:

1. Helping the business to create and fulfill its strategic purpose.
2. Making sure IT is fit for future purpose.
3. Making sure IT works day to day.
4. Choosing how to implement and fulfill IT solutions.
5. Choosing IT technologies.

Of course, these are all important, but too many CIO’s get the priorities the wrong way round.

• If they’re constantly revisiting the cost of in-house vs. contractors vs. outsource design/build/operate, they’re missing the point.
• If they’re often evangelising for Microsoft or Oracle or Opensource, they’re missing the point.
• If they’re spending most of their time getting the email server fixed and shaving the cost of telecommunications, they’re missing the point.

The IT function in a business is there - and only there - to help the business create and fulfill its strategic purpose. The rest is tactics and technique. What does your CIO spend most of his or her time on?

Yesterday’s announcement that global food company Fonterra’s owners (New Zealand’s dairy farmers) need more time (years) to consider the company’s listing plan is code for saying that the board doesn’t have the numbers to get the plan approved, but it’s hoping it can still win the day. (Bernard Hickey, as usual, has something trenchant to say on the matter).

Fonterra dominates cross-border trade in dairy products (commodities, branded food, and specialty ingredients), but is still small compared to Nestle and Kraft. I was in favour of the plan, given the political nature of cooperative ownership. It would see the farmers retain majority control, but allow outside investors in, which would fund Fonterra’s global expansion. There is a certain irony in the possibility that a well-funded Fonterra could have teamed up with the Sage of Omaha to take a major stake in Kraft.
Despite the global scale of Fonterra, it illustrates a classic owners’ dilemma seen in owner-operated and other tightly-held businesses. Do you allow outside investment in order to expand and grow the value of your investment, but also give up a degree of freedom?

Many owner-operators are, frankly, terrified by the loss of control while they’re still working in the business. They are prepared to give up substantial long term value just in case they might (repeat, might) lose some short term income (of course, this fear usually disappears when it comes to exit time). In Fonterra’s case, this is even though the farmers would still be the majority owners and in a position to make sure that they aren’t disadvantaged.

I’ll be looking at the pros and cons of external investors in tightly-held versus widely-held businesses sometime soon, but there is one point I’ll make now. Although you might seek and act on advice, you wouldn’t accept anyone telling you what to do with your business (investment, house, car, holiday plans, etc). Neither do most business owners, especially farmers who are by their very nature tough-minded, individual owner-operators. Fonterra is their business - literally. Whatever other people, or indeed they themselves, might see as more rationale alternatives, they can (within the limits of the law and their bank) do whatever they like with it.

Paraphrasing Warren Buffett, he once said that he likes stock market collapses, because they make great companies cheaper to buy without making them any less great. So it’s no surprise to hear that, during the last year’s US bear market, Buffett’s Berkshire Hathaway has bought enough shares to become the largest single shareholder in global branded food business Kraft. Again paraphrasing Buffett, when the market falls over a cliff, the best place to be is standing at the bottom with a bag full of cash.

Classic strategic thinking says that you don’t attack your opponent where he’s strong. Instead you choose the ground that suits your strengths. The current noise about Microsoft’s bid for Yahoo seems to mainly assume that it’s an attempt to gain strength in ’search’ capability to fight Google. I don’t buy that, because it’s bad strategy.

So what do you get if you put Microsoft and Yahoo together? Dominance in free ‘email’ - a far bigger application than search, both in user-specific traffic and in eyeball time. Email is personal information and communication. Email has a more natural progression than search to other applications involving personal information and communication. And despite the apparent appeal of free tools like Google Apps, the reality is that the vast majority of the world’s users (i.e. the non-geeks) are very comfortable with MS products for this kind of thing.

If MS pull off their takeover bid, watch what they do with email.

It’s Valentine’s Day, so I’m making no comment whatsoever on the following excerpt from an article on Undercover Economist Tim Harford’s website:

“I don’t care too much for money, money can’t buy me love.” A great tune, but don’t believe everything you’re told by The Beatles. Money can buy you love, and it can buy you happiness as well.

The economist Lena Edlund (whose own greatest hits include an economic “Theory of Prostitution”) finds that wherever the men are rich, the women are plentiful. Women outnumber men in the cities of almost every developed country, which is why the girls from “Sex and the City” were always grumbling that all the good men are taken. In Edlund’s home country, Sweden, the towns with the highest average male income are the towns with the largest proportion of women aged 25-34. Still think that money doesn’t buy love?

Apparently, it’s even more pronounced in places like London and New York. So, who’s man enough to try that as a conversation starter at Friday evening’s after-work drinks?

One topic I really enjoy is mergers & acquisitions. Planning for them, finding them, evaluating them, promoting them, negotiating them, and executing them - on the buy side and the sell side. I’m not just talking about the deal itself, but the strategic and operational execution, pre- and post-deal, usually as part of a long-term growth, transformation or exit strategy.

Last year, I wrote an article or two on M&A, but they caused some speculation about what I was up to - as if I’d be stupid enough to signal a deal through my blog. However, I no longer have that concern, so from time to time from now on, I’ll be looking at the theory and practice of smart business execution of M&A.

Am I working on any deals for either myself, or any companies I’m associated with, or any clients of my consulting business Isambard? Well, to quote myself:

‘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.’

After years of continuous improvements, quality initiatives, product launches, marketing promotions, organisation restructurings, management promotions/transfers, strategic change, and all the myriad of ’stuff’ that gets done to a business, many lose cohesion and suffer from complexity, bureaucracy, and confusion. In an article deserving a wider audience, CIO Magazine looks at addressing complexity in very large organisations. Actually, their suggestions apply to mid-size businesses, too, who often fall into the trap of using bureaucracy to cope with growth:

• Include simplicity as a theme of the organisation’s strategy.
• Simplify the organisational structure.
• Prune and simplify products and services.
• Discipline business and governance process.
• Simplify personal patterns (meetings, comms, etc).

One of my key tools is ‘lean thinking‘. Don’t fall into the assumption that this is a ‘by the numbers’ process methodology. The best lean thinking requires a different state of mind, not a methodology. Some organisations just don’t get it, but if they do, the results can be amazing.

Don’t try to do everything at once. After much trial and error, I’ve found a cyclic approach works best:

• Stabilise: Get the organisation under control, fix any red ink and major pain points.
• Simplify: Get your market offer tight and then organise to only do the stuff you need to make and deliver that offer.
• Develop: New or improved processes, products, markets, skills, etc. that fit your market offer. with an emphasis on simplicity.
• Grow: Only when they’re working, ramp them up.
• Repeat.

A conversation this morning prompted my recollection of an off-site planning workshop I once facilitated for a large corporate with an extremely competitive internal culture. The executive group was widely dispersed, but spent more time competing with each other rather than their outside competitors. We somehow had to get them to agree on a strategic direction for the business,

As usual for an off-site day, everyone wore casual clothing - far more individual than their everyday corporate dress of dark suits. The early plenary sessions were chaos. Despite agreeing to the usual workshop rules of engagement, everyone pushed their own agendas, the senior guys shouted down the junior ones, there was no sense of common purpose. Smaller groups were even worse than the plenary sessions.

So we mixed people up into workgroups, gave each group particular colour T-shirts, and set them to work on a subset of the issues and opportunities. Interestingly, these colour teams quickly gained traction and were able to put forward cohesive summaries of their conclusions. Also interesting, at the next plenary session, teams were highly parochial about their ideas and teammates, while highly critical of the presentations of their ‘opponents’ as they still saw everyone else.

For the next round, we put everyone into white T-shirts (with the company logo and its principal advertsing tagline, which summed up its market offer). Again we mixed up the workgroups. It will be no surprise to hear that the plenary sessions also became much more open and accommodating, and we started to make real progress.

In part, I put this down to the normal workshop effect of getting to know colleagues better and building up mutual respect, but I’m convinced the simple tribalism of the T-shirts was a big factor. Look how this one unites people of every colour, creed and class in a certain small nation I know:

PS Original clip changed - Youtube says it’s no longer available, but this one is still great.

Whether or not the Microsoft bid for Yahoo is a smart move, it’s produced some interesting metaphors for bad mergers & acquisitions. The two I like best are:

It’s like taking the two guys who finished second and third in a 100-yard dash and tying their legs together and asking for a rematch, believing that now they’ll run faster. (Fake Steve Jobs).

and this one over coffee on Tuesday (although I had heard it before from my ex-colleague Ian Clarke on other M&A ideas of dubious merit):

Tying two boat anchors together doesn’t make a life raft.

For the benefit of the non-nautical amongst you, in this context a boat anchor is the heavy object on the seabed or lakebed to which a mooring buoy is attached. It’s usually a heavy concrete block, but can be any very heavy object. Hence when asking what you can still usefully do with expensive but obsolete equipment, you might be told ‘Well, it’d make a good boat anchor’.

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