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In case you’re wondering why I haven’t been keeping up my usual weekday posts, this trip to Britain is purely social, with no business agenda; the first ever for me, I think, in 30 years of making the long journey. Even for weddings, funerals and holidays, I usually tack on some business; but not this time. Unless something amazing crops up, I’ll resume writing in January.
In the meantime, I wish you all a happy solstice and a prosperous 2009.
It’s after 3 in the afternoon, and already it’s getting dark on the streets of London. The streetlights are starting to go on in Muswell Hill. I’m sitting in the John Baird pub, named after the father of television, John Logie Baird; Alexandra Palace broadcasting centre is nearby. Free wifi, pork scratchings and a pint of Weston’s cider all help to lift the gloom. If only that were true of the UK economic situation.
The Times has several gloomy pieces today on the employment outlook. Some developments are long overdue, eg. the Woolworths closure, which should have happened 20 years ago - tired general merchandise format, undersized stores, and no consistent, credible market offer. Others are due to the credit crunch. Banks are daftly shortening overdrafts to good businesses, and turning down profitable loans, because their bosses are embroiled in a crisis of fear and confidence.
The government and the various regulatory institutions are caught on the multi-pronged horns of dilemma. Moral hazard from propping up businesses that otherwise should be allowed to fail (which leads to further recklessness), unfundable banking guarantees, the bizarre possibilities of deflation and rampant inflation both being consequences of the situation and the counter-measures. Who’d want to be in government right now?
After some initial enthusiasm for the steps taken by Gordon Brown’s Labour government, there’s an increasing sense of panic here. Or not, if you believe what the contrarian investment community are saying. In other words, it’s all very confusing for the average punter. It seems a far cry from my enthusiasm for the UK economy at the start of the year.
And yet, someone’s just rung me about a business opportunity here; probably not my cup of tea, but that’s not the point. Life goes on. The gloom outside means it really does feel like Christmas for this British-born lad, and Christmas is a time of good cheer and hope. Your enthusiasm for opportunities in business everywhere should remain undiminished; it’s just a case of spotting and seizing the right one for you and your business.
Right, must be time for another pint. Cheers!
Getting ready for yet another trans-global trip from Wellington to London tonight. Thinking about getting some of those “anti-jet-lag” pills. Decide to see what Google has to offer on the subject. Up pops this recent article from the Economist which I somehow missed when reading the magazine itself. Seems the answer is to wear orange-tinted sun-glasses.
Glenn Wilson from NZ First Capital sent me this:
1 year ago RBS paid $100bn for ABN Amro. For this amount it could now buy:
- Citibank $22.5bn
- Morgan Stanley $10.5bn
- Goldman Sachs $21bn
- Merrill Lynch $12.3bn
- Deutsche Bank $13bn
- Barclays $12.7bn
And still have $8bn change…… for which you would be able to pick up GM, Ford, Chrysler and the Honda F1 Team!
Leading UK political blogger Iain Dale posted this Christmas Card on his website. Unfortunately, I can think of a myriad of people and organisations who could send it out!
The Vista Group (sans Mark Di Somma) met yesterday for its last lunch of the year, with everyone dining on a beautifully light and fresh vegetable and pasta dish (except JY again ordered chorizo with his). As it was our Christmas lunch, we had little business-related chat. Actually, I lie. The real reason is that I forgot to nominate this month’s topic until just before lunch: “What difference will Google Street View make, apart from better travel directions and supporting real estate sales?” Add to the short notice the fact that Jack Yan hasn’t even seen Street View, and it made for a very short discussion. Anyway, for those who haven’t already seen it, here is Vista on Google Maps Street View. (Try the rotational view too).
Natalie Ferguson and I both really like Street View. Google’s Satellite View was a big improvement on conventional maps, but Street View adds a powerful new dimension to geophysical information. We can foresee a time when the top locations will have live feeds, rather than static images which are out of date as soon as they are taken. That means outdoor webcams might finally have a convenient and common access point. Imagine seeing for yourself the weather or road conditions ahead of you, or how the beach is looking right now; but there are undoubtedly many more applications and opportunities, eg. emergency services.
Of course, this just gives the great-Google-conspiracy theorists more to worry about. I’ve already heard the claim that Google is really building SkyNet (cue Jack impersonating Arnie).
Christmas is traditionally a time when firms send some seasonal greeting to clients, by way of thanks for business and maintaining relationships. There are mixed views as to whether it’s worth it, but if you are going to do it, do it well. An “interactive” seasonal greeting from KPMG (my accountants) arrived in my email inbox yesterday afternoon. I showed it to a friend who’s an expert in such matters. Her reaction says it all:
Oh my god – I can just see how they:
- Decided not to mention Christmas because that might offend someone, somewhere
- Decided to cut back the budget – shouldn’t look too flashy
- Thought they’d be so cool and make something “interactive” then got scared and went back to an animation
- Had the idea to write their own copy to save some $
- Said it had to be in corporate colours to be “on brand”
- Ended up with a message so bad it’s almost worth spoofing….
The covering email (below) is even worse. Impersonal, automated and downright boring. Frankly they shouldn’t have bothered. I think it goes down in history as the worst corporate Seasonal Greeting I’ve ever received. Bah! Humbug! Just as well that the real people I deal with at KPMG are much better than their marketing communications department.
News is out of an amazing new theory in geology. But it’s not based on any fantastic new discoveries. All it does is pull together a whole lot of knowledge that even laypeople like me can remember from school. And yet it’s rocking (nudge) the world of geology. The new theory - Mineral Evolution - explains the development from a relatively few (60) mineral types that originally made up our planet to the rich diversity we have today (4300), and where it might go in future. The evolutionary change agents have been gravity, volcanism, plate tectonics, water, oxygen and life, with civilisation and technology now starting to have an effect. It all looks obvious when you see it, but it’s only now that the theory has emerged as a neat, coherent and simple framework. For those interested, there’s a summary on The Technium, or you can read the research paper if you have scientific publication access.
What’s this got to do with business, you ask? Well, how often has your business seemed unduly complex? You’re trying to deal with a situation where “you can’t see the forest for the trees“? I’ve always believed that the best businesses have very clear, simple and coherent business models, internally and externally consistent for everyone associated with them. When you get that model right, the business can really take off.
Now this might get a bit weird for some of you, but in my mind’s eye I see a cluttered, incoherent business model as a tangled, dirty cloud of bits and pieces, threads and wires. As I get to understand what I’m seeing, at some point I get a blinding flash of the obvious; obvious after I’ve thought it, but not obvious before, even though I knew nothing different. I’ve been able to create a mental framework which makes sense of what I already know and strips out the irrelevant and redundant to create a clear coherent business model. That tangled cloud has evolved in my mind to a shining golden latticework sphere turning gracefully on its axis in space, simple and elegant. (I told you it might get weird). Good strategy is often like that - obvious when you finally pull it all together. A bit like “Mineral Evolution”.
Of course, not everyone may agree when I expound the structure of my new “golden latticework sphere” business model, but that’s a different issue.
Today marks the 100th anniversary of New Zealand physicist Ernest Rutherford’s award of the Nobel Prize for Chemistry. Rutherford is the father of modern atomic physics. He first discovered radioactive decay, which led to his discovery of the structure of the atom, which in turn led to the achievement for which he is most famous, “splitting the atom”. As Einstein said, Rutherford “tunnelled into the very material of God”. Rutherford’s rueful comment on having no funding for scientific research has become a proud, if ironic, maxim for Kiwi innovation and entrepreneurialism.
Every country seems to have them - campaigns to buy goods made in-country. Buy British, Buy American, Buy Australian, Buy New Zealand Made. Well, the New Zealand government has just canned its Buy NZ Kiwi Made programme, and quite rightly so; such campaigns are a proven waste of time and money.
When asked in surveys, people often say, “I prefer to buy locally-made”, but they very rarely do so. That’s not surprising; people’s stated intentions are often self-deluding, but are used by agenda-pushers to justify all kinds of dubious initiatives. Buy Local campaigns are a classic example. In reality, people usually buy the best value product for their needs and budget (by whatever idiosyncratic value criteria they choose). Country of origin is rarely an issue during the actual purchase, except as a possible indicator of quality. (Chinese milk powder, anyone?) So the campaigns don’t achieve their goal.
Even if they did achieve their goal, Buy Local campaigns are based on a economic fallacy - that buying locally-made goods is better for the country than buying imported goods. Take that argument to its logical conclusion. You’d grow all your own food, make all your own clothes, build your own home, fill it with furniture and appliances you’ve made yourself, teach your own children, and treat your family illnesses yourself. Except you wouldn’t. 99% of humanity wouldn’t be here, and those that are would be living a primitive subsistence existence with low life expectancy.
Imports are paid with exports. Not buying imports means that someone will not buy your exports. It’s a nil sum game. However, trade gives you access to better goods and services than you can provide for yourself, paid for with your better goods and services. Trade is the primary means of improving standards of living. Trade started within a family (role specialisation, eg. hunters, gatherers, nurturers), then a tribe, then between tribes, then towns and regions, and now countries. Trade is good. Buy local campaigns are anti-trade and diminish overall standards of living.
I used to be on the board of the New Zealand Manufacturers Federation (now part of Business New Zealand). Every year we’d sign off the money for the Buy New Zealand Made campaign, but I suspect that few of us believed in it, and to be honest, we had bigger fish to fry at the time. The campaign champion, the irrepressible Dalton Kelly, was such a nice bloke and so enthusiastic, that no-one could bring themselves to kill the sacred cow. Finally, someone has had the gumption to fire the stun gun.
Update: Ben Kepes has advised me that it’s the government’s Kiwi Made campaign that’s got the chop, but that the industry-funded Buy NZ Made programme is still going. My arguments remain unchanged.
Update 2: Maybe I should have called them Buy National campaigns - to distinguish them from the food-miles enthusiasts , where I’d agree that some campaigns have worked, in so far as some people believe that they are more emotionally connected to the local land, or that (mistakenly or as a cover for anti-trade measures) that this is less environmentally damaging. As I’ve written before, the former is a powerful motivator, the latter would be more effectively achieved through proper carbon taxing.
Michael Intrilligator (a professor of economics, political science and public policy at UCLA) has suggested an alternative to bailout or bankruptcy for the Big 3 US automakers: outright takeovers. Intrilligator cites two benefits of a Toyota takeover of GM:
This is wrong thinking. Let’s deal with the first so-called benefit:
As US automakers continue to beg for federal money, you may recall that I’m in favour of a forced receivership (Chapter 7) to break up these behemoths. The best bits (and there are actually quite a lot) could be acquired by more effective owners, either as stand-alone nimbler businesses or as useful add-ons to already successful corporations. That’s the best way to preserve US jobs, and yes, Toyota might be a buyer for some units.
As for the second benefit, this is largely irrelevant to GM’s problems and any Toyota takeover.
This is a typical example of tacking another agenda onto a rescue plan. If you want “green” cars, tax the “non-green” drivers hard (preferably through carbon taxes). Then it doesn’t matter who owns or makes what. Carmakers will respond, or go out of business. And isn’t that what’s happening? A Toyota takeover of GM is the wrong tool to achieve the “green” end.
Disclosure: My family trust owns Toyota securities.
I’ve found the next economic opportunity for Invercargill, New Zealand’s southernmost town. It can become NZ’s cloud computing data centre hub. The BBC reports that Invercargill’s near-antipodean cousin, Inverness in Scotland, is to be the site of a major new data centre. The rationale: its cold climate means less server cooling will be needed, there’s plenty of cold water in the harbour for cooling systems, the waste heat can be sold to nearby buildings, and there’s plenty of electricity generation nearby. The same applies to Invercargill. Sounds plausible to me, assuming two important provisos:
The BBC has provided a platform for Sir Evelyn de Rothschild, one of Britain’s most noted financiers, to express his views on the global financial situation:
All of us - countries, corporations and consumers - have neglected basic principles.
Ethics - we have lost sight of an honest day’s work for an honest day’s pay.
Careful management - we have indulged our wants without the taxes or the prices or the cash to pay for them.
Oversight - public relations and spin have replaced disclosure and transparency; casual yet complex accounting and accommodating rating agencies left us blissfully unaware of the problems, and we revelled in our ignorance.
Hubris has replaced community responsibility as a requirement for executive positions.
American automobile executives and British bankers have been unable to form their lips into an apology.
Yet their institutions lie in ruins and the rest of us are left feeling embarrassed for them.
Their customers worry that their savings or their working capital will just vanish, their mortgage will be transferred to a new institution they have never heard of.
Their employees wonder which of their colleagues - or they themselves - will be unemployed in the coming week, with bleak prospects for working again anytime soon.
Where is the shame of those who only months earlier boasted of ever increasing profits, of ever more clever products, of ever easier loans?
Remaining credit
The US automakers may be the worst of the lot, so far.
Years of incompetence and now manoeuvring in the halls of Congress for a massive bailout.
Management prefers to hold onto private corporate jets rather than push for fuel efficiency standards to make their products more competitive.
Union members would rather hold onto their gold-plated pensions for life than to save their companies.
Why should taxpayers help those who have so frequently refused to accept responsibility themselves?
If the US government uses up its remaining credit to help the auto industry carry on as usual, who will lend the country the money to repair its bridges, build its power stations, clean its water, fuel its navy?
Slow revival
Thirty years ago, New York City found itself in a position similar to GM, Ford and Chrysler today.
They asked Washington for help. The government refused.
The Daily News summed it up in its front page headline - Ford to City: Drop Dead [ed. the president]
Instead New York balanced its budget, taxed itself, reduced hiring, negotiated better labour contracts and gradually worked itself back to fiscal health.
It took more than 10 years.
Take responsibility
This era of struggle may last as long.
Until we can be generous in accepting fault for our predicament, we will have difficulty dropping our suspicions about others so that we can get on with repairing the damage.
Unless action is taken soon, we can only see a long time of difficult and very onerous problems continuing.
Could be one or two years.
It is therefore essential that management must take a firm look at its problems and accept its faults and redeem them.
A lot of talk and a lot of words have been written.
But in the end action has to be taken and action must be taken very soon if we are not going to see this stretched out over many years.
I’ll be in London for the last two weeks of December, if anyone wants to catch up.
Further to my previous post on advertising, here’s my very own customised Tui TV and billboard ad. Wait for the punch line at the end. Great fun, Tui, and a great example of building a brand personality.
The BBC reports that UK discount furniture retailer DFS has been censured by the UK’s Advertising Standards Authority for superimposing images of people on room settings featuring its sofas, with the person’s image downscaled relative to the size of the sofa, making the sofa look bigger. I’ve suspected similar tricks in NZ, even in the same product category. Another tactic is using very small people in advertising, especially for cars, creating an impression that the product is bigger than reality.
I am amazed that businesses would think that this is a smart tactic:
Either advertisers adopting this tactic hope that making the product bigger will draw more buyers, or they are engaging in bait-and-switch, hoping that customers will switch their purchase to a bigger, more expensive product. Bait-and-switch is illegal in many jurisdictions. But even if it isn’t illegal, it’s not a smart tactic if you want to stay in business over the long term. You want customers to trust you, to buy from you again, and to tell their friends and family about you. Some people will fall for bait-and-switch, but some won’t. 1 satisfied customer tells 3 people, 1 dissatisfied customer tells everyone they meet.
Either way, the practice is unethical and bad business. DFS said that they didn’t do it deliberately. I expect someone also said that the ad agency did it without their approval. As the Tui beer billboards say, “Yeah, right!” (Update: See my very own Tui ad).
I don’t normally mention product launches, but this one is significant. I’ve been following New York State-based Apprenda for some time, and I’ve met Sinclair Schuller, its CEO. Apprenda has just announced the public release of SaaSGrid, its Cloud Computing platform offering. SaaSGrid takes care of a lot of the essential important details that young Software-as-a-Service companies struggle with:
SaaSGrid works with a network of hosting partners who provide scalable infrastructure. The combination makes SaaSGrid an attractive offering to software companies wanting to quickly establish a new online product, freeing them to concentrate on application functionality and marketing, avoiding the need to reinvent and invest in heavy-duty infrastructure, administrative and technical functionality.
However, that’s not the only reason to be interested in Apprenda’s offering. Apprenda has very smartly targeted SaaSGrid at the world’s biggest network of software developers - the Microsoft community. The vast majority of software sold in the world is designed to work with and on top of Microsoft’s platforms. Most software people are familiar with MS tools. Indeed many software vendors and system integrators are unashamedly MS shops - understandable when you see how dominant are the MS platforms. SaasGrid supports Microsoft .Net applications, which means the myriad of MS-aligned software vendors, implementation partners and programmers can easily develop and offer SaaS solutions using their standard skills.
Apprenda’s strategy is very smart: there’s a vast army of developers wanting to get into SaaS, and SaaSGrid offers them a very easy route to get there.
Here’s something for engineers, photographers, architects and historians. Robert Howlett - the young photographer who created this iconic image of engineer Isambard Kingdom Brunel - died 150 years ago in December 1858, probably due to the chemicals he used in his work. In the early days of photography, the ever-innovative Brunel commissioned Howlett to photograph his constructions and create a slide show which Brunel used to make presentations to investors and the public. Plus c’est la meme chose, plus ça change! Another young photographer, David White, has recreated Howlett’s camera and re-shot some of those photographs. Click on this link to visit the BBC and watch White’s narrated photo-essay. It certainly got my day off to a good start.
Over some particularly tasty Sauvignon Blanc (St. Clair Pioneer Block 6 2008) this evening, I stole this little gem from Deloitte consulting partner Alasdair MacLeod (we’re both good Celts; he stole some of my stuff too).
The Cow Path
One day through the primeval wood
a calf walked home as good calves should;
But made a trail all bent askew,
A crooked path as all calves do…The trail was taken up the very next day
By a lame dog that passed that way;
And then a wise bell weather sheep
Pursued that trail o’er hill and steep,
And drew the flock behind him, too
As good Bell Weather always do,
And from that day, o’er hill and glade
Through these old weeds a path was made…And many men wound in and out,
And dodged and turned and bent about
And uttered words of righteous wrath
Because ’twas such a crooked path…The forest path became a lane
That bent and turned and turned again;
The crooked lane became a road,
Where many a poor horse with his load
Toiled on beneath the burning sun
And travelled some three miles in one…The years past on it swiftness fleet,
The road became a village street;
And this before men were aware,
A city’s crowded thoroughfare…Each day a hundred thousand bout
Followed this zigzagging calf about,
And o’er his crooked journey went
The traffic of a continent.
A hundred thousand men were led
By one calf near three centuries dead.
They followed still his croaked way,
And last one hundred year a day;
For this such reverence was lent
To a well-established precedent.For men are prone to go it blind
Along the calf path of the mind,
And work away from sun to sun
To do what other men have done.
They follow in the beaten track
And in and out, and forth and back,
And still their devious course pursue
To keep the path that others do.
They keep the path a sacred groove
Along which all their lives they move;
But how the wise old wood gods laugh
Who saw the first primeval calf!–Sam Walter Foss
So how much of your business (market offer, product range, pricing, promotion, employment, business processes, etc.) or your economy is built upon an early random decision by a lowly calf just wandering home?