It was a tension-racked Vista Group lunch today, as a vital question was discussed. Would the prestigious group of Wellington business bloggers allow Jim Donovan to remain a member, after he announced his intention to write his final blog post on 28 March? There were conflicting accounts of the decision. One account reported that Donovan’s continuing membership was agreed only by the narrowest of majorities, just one vote. Another said that Donovan had received 100% of the votes. In reality, only one Vista Group member - Wellington mayoral candidate Jack Yan - was there to vote; the other members having pressing business elsewhere. However, Yan said that he had consulted online with the wider membership and was confident his vote had their full backing.
The Vista Group then returned to its more usual fare of business and branding matters. The scheduled topic of the month was “Wellywood! Whose bright idea was that?“ The recent proposal - that a Hollywood look-alike sign celebrating the Wellington film industry be permanently erected on a local hillside - has been almost universally panned by the media and by local citizens, not least Jack Yan. He argued out that not only would the Wellywood sign infringe Hollywood’s registered trademark, it would also be a poor me-too image for Wellington - a weak joke for a fortnight’s film festival, maybe; a permanent sign promoting the city, most definitely not. Branding is about being distinctive. However, Jack’s argument that city identities are becoming more powerful than national ones was rejected by yours truly, who came dressed head-to-toe in black, New Zealand’s national colour. It was a silent, but powerful refutation.
A couple of years ago, I wrote about 3D printers transforming manufacturing and distribution. I can add healthcare to that list. In one of its always-excellent science and technology articles, The Economist tells us that researchers are using 3D printers to produce replacement body parts:
Organovo’s 3D bio-printer works in a similar way to some rapid-prototyping machines used in industry to make parts and mechanically functioning models. These work like inkjet printers, but with a third dimension. Such printers deposit droplets of polymer which fuse together to form a structure. With each pass of the printing heads, the base on which the object is being made moves down a notch. In this way, little by little, the object takes shape. Voids in the structure and complex shapes are supported by printing a “scaffold” of water-soluble material. Once the object is complete, the scaffold is washed away.Researchers have found that something similar can be done with biological materials. When small clusters of cells are placed next to each other they flow together, fuse and organise themselves. Various techniques are being explored to condition the cells to mature into functioning body parts…
The raw material is grown in cultures from patient tissue samples, avoiding transplant rejection.
To start with, only simple tissues, such as skin, muscle and short stretches of blood vessels, will be made… Within five years, once clinical trials are complete, the printers will produce blood vessels for use as grafts in bypass surgery. With more research it should be possible to produce bigger, more complex body parts. Because the machines have the ability to make branched tubes, the technology could, for example, be used to create the networks of blood vessels needed to sustain larger printed organs, like kidneys, livers and hearts.
In case you think this is fantasy, the scaffold technique is already used to grow replacement bladders. Marrying the medical technique with 3D printing was a logical next step.Although the implications for healthcare are immense, I suspect that “appearance surgery” will eagerly adopt this technology. Replacement scalps complete with hair follicles will sell well, as will wrinkle-free, age-spotless skin. The mind boggles at what could be possible in the long term. Maybe those spam ads for enlarged male appendages might finally have something to offer that works! And who knows how competitive sportspeople will use this?
I’ve long argued that what NZ lacked wasn’t fast broadband to the home, farm or small town. If those communities want it, let them pay for it themselves (perhaps through a locally subsidised utility since it isn’t economic outside the CBDs and central suburbs of NZ’s significant cities). What we do need as a nation is superfast, attractively-priced telecommunications pipes between our major centres and the rest of the world.
It’s that need Pacific Fibre plans to address. At this stage, all they really have is an idea and an intention, so activity is focused on planning, partnering and funding:
The group is looking to secure funding and build a 5.12 Terabits/sec capacity fibre cable to be ready in 2013 connecting Australia, New Zealand and the USA – the initial proposal is a cable which will deliver five times the capacity of the existing Southern Cross system.
I’m told by chums in the broadband business that Southern Cross has plenty of capacity available now and in future, through relatively straightforward upgrades, but maximises its profits through high pricing, which discourages heavy broadband users such as film or online services being based in NZ. Pacific Fibre may simply be a PR pressure play against a de facto monopoly, but so far it looks real enough. I do hope that a viable alternative can get traction. Competition is always better than an unregulated monopoly - not just for price but also for quality, service and, when things go badly wrong, for back-up.
So, Rod & Co., I’m keen. Call me.
Disclosure: My family trust has been a long-time shareholder in Telecom, part-owner of Southern Cross. However, the trust’s investment manager has sold out now.
Update: Lance Wiggs has posted some technical details on the PF website.
Like any Telecom XT Mobile customer, I’m unhappy with the recent spate of outages, but I’m sympathetic to the harassed engineers at Telecom and Alcatel-Lucent striving to find and cure the problems. Anyone who’s ever built a large new system dreads a spate of apparently unrelated problems which act like pouring acid into an open wound. The shrilling and wailing of customers, competitors and often-ill-informed commentators does nothing to help. However, I’m struck by one curious feature of the New Zealand environment which should have alleviated the problem - roaming. One of the advantages of GSM-based systems is that roaming is very easy for customers and operators - it’s a built-in aspect of the technology and the business model. If I’m overseas, my phone selects a network from all those with coverage for my location (in my preset preference order), which I can easily override if I so chose. But back home, even though I can see other networks on my phone, my SIM card bars me from choosing them. That’s anti-competitive, as well as being a damned nuisance.I’m normally anti-regulation but telecommunication seems to need it. Operators naturally want to maximise revenue spent with them and not their competitors, but that should be achieved through pricing, service, quality and loyalty. Local roaming won’t diminish payment commitments under pricing plans and phone purchase agreements. If I was the regulator, I’d definitely be taking a hard look at mobile network operators barring their customers from using other networks (and while s/he’s at it, local and international roaming charges relative to own charges).
Put 90 minutes aside on 24 March for breakfast with veteran US investor Bill Payne while he talks about governance in early-stage businesses.. This is an Institute of Directors event at the Wellington Club, and neatly complements the IoD’s “Fresh thinking, First boards” programme aimed at lifting the performance of small and medium businesses through smarter governance.
Here’s some background on Bill:
Bill Payne is in New Zealand as the BNZ University of Auckland Business School Entrepreneur-In-Residence. to impart some of his experience to NZ entrepreneurs, investors and universities. Bill is a prominent angel investor - so well known he is often referred to as the closest thing America has to an Entrepreneur Laureate. His angel investing history stretches back almost 30 years after selling his own engineering business to DuPont in 1982 and includes being involved in setting up four of the most prominent angel organisations in the USA.
He has written a book, The Definitive Guide to Raising Money from Angels, as well as having written or been interviewed for articles in The New York Times, USA Today, Business Week and many other investor/education articles and websites.
From 1995 he served as Entrepreneur-in-Residence at the Kauffman Foundation for twelve years. The Kauffman Foundation is a not-for-profit foundation in Kansas City often referred to as the world’s largest foundation devoted to entrepreneurship. Its vision is to “foster a society of economically independent individuals who are engaged citizens, contributing to the improvement of their communities” and it does this through education (including mentoring), entrepreneurship, advancing innovation and research.
While Bill is in New Zealand he will be working with angel investor groups, running seminars, meeting with government organisations (NZTE, FRST etc) and serving as a mentor to some ICE Accelerator companies alongside the ICE Angels. He’s also got a blog up and running on the Icehouse incubator website.
It is very rare that we get a visitor of Bill’s experience and respect in New Zealand and for such a long time. Over 50 organisations including 6 incubators, 5 universities and potentially thousands of people will be able to gain directly from Bill’s visit.
You’ve got just two weeks left to enter the 2010 New Zealand Hi-Tech Awards. Even if you’re not an entrant, reward and encourage your team by booking a table at the Awards Dinner - it’s a great party (in Auckland this year on 7 May).
Once again, I’m a judge; it’s always inspiring to read the entries and interview the finalists. This year’s categories are:
PricewaterhouseCoopers Hi-Tech Company of the Year
NZX Emerging Hi-Tech Company of the Year
HiFx Innovative Service Product of the Year
Duncan Cotterill Innovative Software Product of the Year
Dell Innovative Hardware Product of the Year
International Business Wales Hi-Tech Exporter of the Year
Your core business isn’t doing very well, but you’ve uncovered a great opportunity for a new complementary product with low overheads, great margins and - best of all - recurring revenues. Wonderful! You’ve saved the company. Actually, no, you haven’t; not if your main business is still broken. All you’ve done is find some marginal new income which, more often than not, you’re hoping will disguise your poor performance elsewhere, hoping that a miracle will occur, hoping that the market for your old business will rebound, and hoping that your competitors won’t still eat your lunch.
Time and time again, I see firms - IT services, energy supply, retailing, telecommunications, consulting, manufacturing, etc, etc - chasing shiny new marginal revenue while avoiding the hard decisions in the core. Don’t kid yourself. New revenue might buy you time but, one way or another, you’ve still got to fix the broken old business; fix it or get out of it.
Completely one-sided but good-fun spoof interview with Bill Nighy playing a banker trying to argue against a a Tobin tax (a charge on financial transactions, initially suggested for currency transactions but much wider application is being advocated in the wake of the most recent financial system crisis).
A new initiative from the Institute of Directors in NZ aims to lift governance skills in small and medium businesses. Most are owner-managed, and many suffer from the owner spending too much time working “in the business” rather than “on the business”.
Perhaps the biggest fear for owner-managers is loss of control, but a good non-executive director isn’t there to usurp the owner’s authority, instead helping shape thinking and encouraging decisive action:
They are committed only to the company, but can be objective about it.
Combine this level of commitment with skill in critical areas - say, international trade, marketing or finance - and you can tap into a powerful source to guide the company and help it to grow and develop. A well-chosen board is also one of the cheapest sources of advice available.
A good board will challenge the perspectives and attitudes of the owners and managers. If the owners, perhaps unconsciously, have been used to getting their own way, they may find this a bit of a strain…to say the least. The smarter, progressive ones will get over it and recognise the benefits of being challenged, but also properly supported, by independent-minded people.
The role of owner, owner-manager or Managing Director can be pretty lonely. A board gives them the opportunity to test their ideas and get a sense of perspective from people not involved in the day-to-day
Another common fear is expense. However, just like hiring good staff, a good director will easily help you make or save many times the cost of their fees.
If you look at successful medium or large businesses, almost all have at least one independent non-executive director. Very few of those companies would consider not having that oversight and advice. Visit firstboards.iod.org.nz for more information.
Disclosure: I’m a member of the IoD Wellington branch committee.
Yesterday I signed a deal I’ve been working on since late last year. You’ll no doubt have noticed the paucity of posts to this blog while my time has been otherwise occupied. No, I’m not ready to reveal details yet, so don’t ask. I will share one thing, though - the power of a good term sheet.
Having got past the basic decision to do a deal in principle, negotiations often bog down because someone tables a detailed legal document and everyone turns into amateur lawyers. The wordsmithing takes forever with lawyers heavily involved on what is actually low value work. Deals can easily fall apart at this stage. Here’s the thing, though; a few basic forms of legal contract will cover most commercial transactions. Once the deal-specific principles are agreed, lawyers can quickly modify their boiler-plate templates to generate a deal-specific legal contract.
A term sheet is a non-binding document, often only one or two pages long, that lists the basic points of a deal. We saved time, headaches and a fortune in legal fees because we documented the basic deal in a term sheet before the lawyers got really busy. They made some suggestions as the term sheet was negotiated, but only to make sure we were clear on what we meant and to avoid any pitfalls. Once we reached agreement in principle, as documented in the term sheet, the lawyers quickly drew up the legal documents in a few days, and it only took one round of minor amendments to achieve final documents that we all were happy to sign.
Entrepreneurs, business leaders and investors should know and understand what’s in a typical contract, but focus on the deal and hire a good lawyer My experience is that good deal-oriented lawyers not only can advise you on the deal, but also are great on the words.
“It’s only words, and words are all I have to take your heart away”.
Do you ever shout at the TV, radio or newspaper when a reporter or vested interest representative quotes some superficial statistics and draws completely wrong conclusions. With increasing age, I seem to be doing this more often! This problem isn’t confined to the media. Misinterpreting simplistic numbers because of poor qualitative knowledge is a common business mistake.
I’ve often warned people about this risk, but I often wished I had a simple example to illustrate the problem. Thanks to Tim Harford I’ve now got one. Britain’s Daily Mail shouted this headline:
Cracked it! Woman finds six double yolk eggs in one box beating trillion-to-one odds
The Daily Mail reported a woman’s astonishment at cracking six eggs to find them all double-yolked. If the odds of a hen laying an egg with a double yolk is 1 in 1000, the Mail argues, superficially correct, then the chance of two consecutive eggs being double-yolked is 1 in a thousand thousand, and so on, meaning the odds of all six eggs in the carton being double-yoked is 1 in 1 trillion in traditional British nomenclature (quintillion if you use the more prevalent American scale). The report sparked a flurry of paid media and social media comment on the phenomenon. Some people argued that the statistics must be wrong, because they’d also, and more than once, bought cartons full of double-yolk eggs. This kicked off speculation on a variety of causes, eg. flock genetics - extremely unlikely given the way the egg industry operates (high volume hatcheries are separate from production farms).
The answer is more prosaic. Egg industry workers can spot double-yolk eggs by handling, and put them aside for themselves. If, due to normal statistical variation, they collect too many, the excess eggs tend to be put back into the packing process together.
Good designers don’t just rely on statistics. They observe what really goes on. Toyota uses a technique called “standing in the circle” - literally drawing a circle on the ground and standing in it for hours, silently observing what goes on during a production process and then asking the workers why they did what they did. (That requires mutual trust and shared desire for knowledge and improvement). Before and after designing a new visitor experience, Click Suite’s interactive media designers watch what people do without comment, and then seek explanations.
Too many people use superficial statistics without knowledge of the underlying situation. They make business decisions based on false premises. As Alexander Pope once wrote in “An Essay on Criticism” (1709):
“A little learning is a dangerous thing; drink deep, or taste not the Pierian spring: there shallow draughts intoxicate the brain, and drinking largely sobers us again.”
But remember, in business as in life, you can’t make an omelette without cracking some eggs!
Bear with me; this will make sense soon, I hope. Nearly 2 years ago, we put our stuff into storage and, with 2 suitcases each, we set off for the first of several extended trips to Europe. Having spent the time living in 5 different rented apartments in London and Wellington, last weekend we finally moved into our new (100 year old) permanent home. You’d think that in 21 months we hadn’t time nor space to accumulate much detritus, but no; it still took several car trips to transport our peripatetic selves to the new place. At the same time, the household movers delivered our possessions from storage.
Unpacking and putting everything in a sensible (at least for now) place is a chore, lightened by good and bad surprises - “I’d forgotten we had that,” and ” Why on earth did we bother to pack this?” However, one thing was no surprise. As we unpacked our clothes from the storage boxes and hung them with our clothes we had kept or acquired since, the pile of unneeded cheap wire and plastic clothes-hangers grew and grew.
Now I know we had a purge of such things before we put everything into storage, so how come we’d acquired so many since, and in such a short time? The answer is of course that virtually every garment you buy comes on a hanger, and every time you send something to the dry-cleaners or laundry, it comes back on a hanger. It’s a wonder we ever need to buy hangers at all. Inevitably you end up with far more hangers than you can possibly need. So where do all the surplus hangers go?
There’s much comment about unnecessary plastic and paper packaging, but at least there’s a recycling industry which can use it again. So what about all these metal and plastic hangers. Opportunity for some smart thinking, perhaps?
Having enjoyed a fabulous warm, sunny Christmas and New Year at the beach, I’m back in Wellington with a severe gale warning on the radio. 2010 will be like that - swinging between awful and fantastic.
On the awful side, I expect to still be involved in helping companies cope with the continuing economic downturn. Globally, things are definitely looking up, but the usual post-Christmas cashflow stress will have to be survived in 2010 without a 2009 cash cushion. While good companies have done well to survive 2009, some will struggle to make it through to the upturn, and I expect more company failures.
On the other hand, I’ve already seen several promising new businesses - too many to be involved in personally, but still great to see. And some existing businesses have survived in very good shape, ready to take full advantage of the upturn when it arrives.
What’s the difference between the failures, the strugglers and the fliers? Putting aside differences in market sector, scale, and life cycle stage, not a lot. The businesses I worked with in 2009 all typically have smart market offers, with good systems, people and leadership. But some will still fall by the wayside in 2010. While I usually say you make your own luck, sometimes you’re just in the wrong place at the wrong time. This recession is one such wrong time.
Tough times are an opportunity for buyers to get a good deal - I certainly expect to get some bargains this year. But you ultimately lose if you squeeze your key suppliers out of business, whether it be through overly-aggressive bargaining, slow payments, delayed decision-making or unthinking internal sloppiness. As a customer, you may want to be kinder to vendors this year. You’ll want good suppliers to survive this recession, to be ready to support you in the upturn.
So why not make 2010 the year that you look after your key suppliers? I don’t mean go soft, I mean get smart.
Mainstream telecommunications companies needs brands that relate to people as individuals; literally, everyone is a potential customer in their own right, even when they’re acting on behalf of their employer. New Zealand’s largest telco recently changed its very corporate look to this sketched asterisk logo and colour palette. I like it; it’s simple, light and human. Corporate rebadging always attracts critics complaining of waste, insincerity, “a child could have done better”, and so on. Rebadging is also a heaven-sent opportunity for those who hate a particular organisation (or large corporations in general) to replay all their historical grievances. Sometimes they’re justified, sometimes they’re not. However, I’m not commenting today on Telecom in general. I just think their rebadging is a good decision, and I look forward to seeing if and how they apply this lighter personality throughout their business.
Josh Forde asked a good question in his comment on “Setting the tone“. For those of you who rely on news feeds or Twitter to follow this blog, here it is, with my response:
Question for you Jim : What do you think gave you the authority to do that with other people? We all have situations of seeing behaviour that we disagree with but don’t always feel we can effectively confront it or that we carry the respect to do so. It can’t be just about being the boss, it has to resonate with something larger than that?
Good question, Josh. Actually being the boss does give you positional authority, but you use it carefully, and it only works well if it is backed up by personal authority - being assertive rather than authoritative, having confidence and conviction, and having earned respect for your past actions, knowledge and demonstrated behaviour. That’s something you build over time. Even if you don’t have it yet, it’s never too late to start. Most people recognise valid thinking when they see it, and although you may not persuade them this time, you’re building a personal ethos and reputation which will evolve into personal authority as a formal leader or as an important and respected influencer. And sometimes, all it takes is for you to speak out; you’ll be surprised at how often someone else jumps in to support you - the world is full of good people who want to do the right thing.
Some staff have an unfortunate sense of what’s appropriate. How you react will set the tone of your organisation. Your people will watch you closely to pick up that tone.
A customer mailing list file called “ratbags” (or somesuch). As soon as I saw it, I insisted the name be changed. There was some shame-faced bluster about it just being someone’s silly sense of humour, but a glowering look stopped that. The word went out - always treat customers respectfully.
Walking past some staff drinking wine at their desks in the middle of the afternoon, I came back. simply said “That’s not appropriate” and walked off. The wine was gone in a minute and the staff later apologised.
On hearing that I wanted a more effective approach to late payment for electricity supply rather than simply cutting off customers’ power, the team leader responsible for credit control and payments proclaimed that “they’re all liars, and it’s the only thing that works”. I said I doubted that, and asked him to produce an analysis of the past year’s late payers and their frequency. Out of 40,00 customers, approximately 10% had been referred for late payment - most only once, and only 200 were chronic bad payers. He acknowledged he was wrong, but didn’t change his approach. He didn’t stay long and we made credit control part of a new customer service approach under a team leader who saw her job very differently, looking for ways to help customers not fall behind.
On hearing a product manager suggest that we make unsubstantiated claims in our product specifications, I respond “We don’t lie to customers.” On hearing the justification that “everyone else does it,” I reply “I doubt that, and in any case I don’t care. We don’t lie to customers.” That product manager didn’t last long either.
A product development team, given the challenge of designing a new antenna product platform at half the cost of the existing platform, started calling itself the CNA team which, on hearing for the first time, I learnt stood for “Cheap and Nasty Antenna”. My instant reaction: “You will drop that name immediately. I never want to hear it again. From now on, you are the EYE team - Elegant Yet Economic”. It not only set a different expectation for the new product platform; that name became a badge of honour and they still called themselves the EYE team years after that particular project had successfully finished.
You don’t always have to be quick on your feet; sometimes, a measured reaction is appropriate. Sometimes you’ll want to take a more consultative approach; asking people to think about the matter and decide what’s appropriate. But an instant reaction sends a very powerful message, as does a direct order, especially if you don’t usually act that way. Importantly, be consistent. And always remember, who you hire or fire, who you give an important project, who gets promoted, rewarded or praised - these all send important and closely-watched signals. What you do sets the tone.
Last week’s Economist lists the world’s biggest corporate R&D spenders, drawn from an EU report on the top 1000 EU-headquartered companies and the top 1000 non-EU companies Those numbers are eye-wateringly huge, but I do seriously wonder about bang-per-buck (or should that be eruption-per-euro?)
I was at a breakfast function this morning to witness the induction into the NZ Hi-Tech Industry Hall of Fame (aka. The Flying Kiwis) of two of this country’s leading technology entrepreneurs - Rod Drury (whom I first knew 20 years ago as a junior consultant who could build clever spreadsheets) and Selwyn Pellett, (whom I first met 12 years ago when he sold us some components). Both thoroughly deserve their admission to the Hall of Fame. There’ll no doubt be plenty elsewhere on their careers, but it was interesting to hear them talk about dark moments. Rod was fortunate in not having any serious business disasters, but acknowledged the terrible loneliness of being away from home for long periods, staying in yet another hotel. Anyone who thinks business travel is glamorous clearly doesn’t do it much! Selwyn talked about launching his company on the London AIM share-market when there was an unexpected last-minute problem; the gap between what the new investors would pay and what the existing shareholders would accept had suddenly widened to what seemed like an unbridgeable gulf. It looked like the listing would be cancelled and with it all the plans which depended on the new capital. Fortunately a deal was done and the listing went ahead, albeit a day late.
I remember a particularly dark moment at Deltec. The global market for cellular network antennas had virtually dried up very suddenly. I’m talking about a 90% drop in the space of a month. Fortunately we’d built up a cash reserve and rode it out for a while, but after the 3rd straight month of no orders, we held a secret board meeting off-site in a private room at the Wellington Club. We’d asked the receivership partners at PwC to come in later and advise us on the actions we were taking as directors, since we didn’t want to be personally sued for trading while insolvent. After an hour of doom, gloom and tough decision-making, one of the independent directors suddenly said “**** this! It’s my 60th birthday today and we’re going to celebrate!“ He ordered champagne for us, served just as the the PwC receivership guys walked in. The look on their faces was priceless; a brilliantly funny moment in an otherwise awful day. On the positive side, PwC told us we were doing all the right things, and we survived the downturn, which was (inevitably) followed by a boom.
You rarely hear about the dark moments, but for most entrepreneurs and business owners, dark moments come along more often than most other people realise.
