The big news of the moment is that New Zealand and China have signed a free trade agreement. The NZ market would be lost in the roundings of most Chinese exports, and NZ is already tariff-free for most Chinese goods, so what’s in it for China? A huge precedent, that’s what. This is China’s first FTA with a developed nation and will attract world-wide attention. It proves to the rest of the world that China can and will cut a fair deal if the circumstances are right. China cuts out a lot of noise in future negotiations. The deal with New Zealand will act as a clean template for future deals with more powerful nations, which might otherwise become entangled by petty domestic politics, tortuous negotiations, delays, and “special arrangements” - the bane of such deals. China can now point to its NZ agreement and say “that’s the model we’re happy to accept, so let’s get on with it”.

A few Kiwi naysayers are predicting NZ job losses. They’re missing the point. Notwithstanding that NZ has a labour shortage and needs to free up scarce labour for more valuable activities, most Chinese goods already have tariff-free access, and most import-driven restructuring has already happened.

New Zealand gains tariff-free access for most goods and service categories (except forest products and professional services, which leaves something on the table for future developments). That’s good news for NZ commodities, food, beverages, and high value specialist manufactures. And for a while, New Zealand will enjoy a window of opportunity while it is a star international trading partner, which should enable a lot of Chinese doors to be opened and friendly deals to be done, before the bigger players get their FTA deals in place.

Some people mistakenly think China buys cheap. My experience is different. Chinese customers buy the best when they understand and want the value proposition (be it a hard-nosed business case, or an emotional one such as status). My old firm Deltec did a lot of business in China, thanks to a great product, smart marketing, and a savvy local distributor (an ex-employee). We held our price for 3 years, while competitors without our Teletilt technology fought fierce price wars. We’d probably have done even more business if an FTA deal was in place then.

This agreement is a good one for both countries - clean, tidy, fair and both sides get what they really want out of it. Everyone else will be rushing for a deal with China now. Kiwis would be advised to make hay while the sun shines.

Rowan Simpson, successful web business product strategy guy (Trade Me and Xero), has written about the development choices for web businesses:

1. Spend months and months (perhaps longer?) trying to make the site perfect before letting it see the light of day.
2. Throw it out there, and follow quickly with a huge marketing campaign hoping that people won’t notice that the site itself isn’t all that you’re cracking it up to be.
3. Launch quietly, get a few users, watch closely to see how they are using the site and how you can make it better for them, be patient, continuously improve the site, and focus on making sure that those people who discover the site have a good experience and tell their friends.

He argues that, while each option has flaws, option 3 worked for the web’s big successes (Google, Yahoo, Facebook, You Tube, Amazon, eBay, My Space, etc, etc).

Rowan’s article reminded me of our incremental development approach at Deltec (now part of Commscope). Deltec’s first Teltilt cellular base station antennas were clunky, requiring skilled soldering of complex components and precise lengths of coaxial cable. The unique actuator mechanism to vary the length of the signal pathway and change the beam pattern was a large, clumsy, brass trombone structure, adjusted manually or by an electrically driven screw drive, with an inflexible, hardwired user control unit. It was difficult and costly to make - just as well we only made 10 a day. Three years later, the antennas comprised enormous (1m long) printed circuits with almost no cabling, snap and fit assembly, a tiny precision actuator mechanism, a PDA control unit, and we were shipping hundreds a day - with a similar workforce. Today, the Teletilt technology is licensed to most of the leading antenna makers. If we’d waited to get everything perfect, we’d have not created the market we did, and missed the window of opportunity that enabled us to compete successfully with companies 50 times our size.

One instance of not getting trapped by perfection was dual band antennas (a 900MHz antenna and an 1800MHz one mounted in the same enclosure). Everyone said that these had to be no bigger than the existing 900MHz antennas (lower frequency = bigger antenna) to minimise visual impact and cell tower loading. That would mean fitting the 1800 MHz elements in the gaps between the 900 MHz elements. We could have done it, but it would have taken us another year or more to develop and redesign. Instead, despite the sales team’s objections, we focused on the primary need - antennas with both frequencies. We just mounted a 900MHz antenna alongside an 1800MHz antenna inside a 50% wider enclosure, and launched it within a few months. For a long time, we had the only dual band adjustable beam antenna on the market, which helped reinforce our place as the leader in our niche.

And guess what? No-one was worried about the 50% bigger size, and we never did develop an interleaved version. There’s another lesson there - the customer might tell you something’s important, but it ain’t necessarily so!

When I was in France in early October, I decided that the time had come for me to leave Fronde.

As usual (my blog title means Get Going), once I’d made my decision, I immediately put it into action. I resigned the first day back in the office, but we didn’t announce it so I could help with some important changes. Now that those changes are largely underway, and should produce great long term results next year.

A CEO who hangs around after he’s told his team he’s decided to leave them can be like a bad smell in the room - everybody feels slightly uncomfortable, but is too polite to say something! I put this to the chairman, along the lines that the team has a plan, they know what to do, and I’m only likely to get in their way. So (at my suggestion) I’m on “gardening leave” from here on until the end of my notice, although I’ll still sit on some Fronde subsidiary boards for a while.

I do want to say thank you to the Fronde team for their support and commitment – we’ve achieved some important changes. I’m honoured to have been part of the Fronde team, and I’m privileged to have worked with everyone there. I’m a Fronde shareholder, so I’ll still have a keen interest in Fronde’s future results - I’m expecting great things from them. I’m not leaving because of any doubts about the Fronde team’s talent and potential.

Update: I couldn’t say so at the time - the half year result wasn’t published, but it is now - that, although the result was a huge disappointment and lousy timing, it wasn’t the reason I resigned. It’s just that I have other things I need/want to do. But don’t expect any big project. This is a lifestyle change.

One of the most frustrating things about succeeding in the professional services business (or rather, our place in it) is that you can’t tell anyone very much about your wins. Your client hardly ever wants to announce the project, let alone your involvement, when you win the project. Typically they’ll only agree to announcing your involvement after the project goes live, if it’s a huge success, and only in a supporting role (and sometimes. not even then). If the project fails, you and your clients are doubly damned - not only for a failed project, but for hiring you too! Guess who’s the scapegoat! And it’s even worse when you win the project, but it gets cancelled before it finishes (or even starts). By implication, it must be your fault.

We have two high points - winning the job and delivering the project. We celebrate the first internally in a low key, discreet way, but, thank goodness, our people are so good that we can almost always celebrate the second, albeit modestly. But in our unassuming way, it doesn’t do justice to the huge effort and achievement of our pre- and post-sale teams. So without revealing who the clients are and what the projects are, I want to say “Great job, thank you and congratulations” to the Fronde team for delivering some big jobs in the last few weeks and winning some huge new ones, and to those clients who’ve given us those opportunities. I know who you are, guys, even if I can’t tell anyone else, and I’m proud of you, and grateful.

Last night, I was at a dinner attended by a a number of the NZ technology industry’s leading lights. I fell into conversation with the CEO of a large and successful competitor. He asked me how the market saw our two companies. My response was “You’re a supermarket chain and we’re a speciality store chain.” Seeing his eyebrows raise, I explained what I meant. Supermarkets can offer goods that are available in specialty stores (and often do), but their market offer is based on their range and price point, rather than their specialisation. Our ~200 people have a reputation for satisfying a particular set of IT service needs with a particular suite of capabilities and modus operandi. Within his many times larger business, there are almost certainly 200 people who could do what we do, but that’s not what their company is primarily known for. His business has a much broader market offer and a different value proposition. It’s not that one is better than the other. We’re just different.

Earlier that day, I’d met another competitor CEO - another “specialty store chain” if you like. His company’s challenge is to decide what it’s not, as much as what it is. That’s a critical decision for any business, but especially important if you’re in the specialty store game. Many businesses think they are spreading their risk if they have lots of irons in the fire. I’d argue that’s absolutely the riskiest strategy. Strategic thinking is about making choices and meaning it. You concentrate your resources on your unique strengths, and you avoid attacking your competitor where it is strongest.

Incidentally, it’s my experience that CEOs of competing companies can enjoy a good relationship, united as we are by the common challenges we face as CEOs. We compete hard, but we usually respect each other as individuals and get along fine at a personal level. Chewing over these kind of ideas is part of that.

Keith Turner, the founding CEO of Meridian Energy, has just announced that he plans to depart from the company in March 2008. I’ve known Keith since the early ’90s, when I was CEO of local electricity company Electra, and he was a senior executive with the Electricity Corporation of NZ. Keith was given the job of setting up what was to become Contact Energy, the privatised power generator, and did it well. After completing that job, he returned to Electricorp, where they then made him redundant - which didn’t go down well with many people. When Electricorp was itself split into 3 more companies, there was a rich irony in seeing Keith get the leadership of one of them.

At Meridian, Keith has led the company’s expansion of renewable energy generation in a very substantial way, as well as making his shareholder a tonne of money from Meridian’s foray into Australia. He’s regarded as one of NZ’s most influential people, and he’s also a nice bloke. He’ll be a hard act to follow.

Disclosure: I have investment interests in Contact, and most of the major players in the electricty sector are clients of Fronde.

It was a great party at the NZ 2007 HiTech Awards tonight, made even greater by the awarding of the Enatel Innovation Award to Fronde Anywhere and its TwoSecure product. This comes just 3 weeks after Anywhere’s Kiwibank mobile banking solution was named by TUANZ as the mobile application of the year. Congratulations to the Anywhere business, especially Caroline Dewe and her product marketing and development team, who kept the flame alive over 7 years while the world decided if it really wanted mobile applications.

I was part of the award-winning Deltec team in 2000. That was an awesome experience. To be part of another award-winning team, albeit in a very small way as chairman, is very fulfilling. Thank you, team; and congratulations to all the other award winners and finalists - a truly impressive field.

Am I chuffed, or what?

Having spent nearly 3 weeks in France (I’m currently in Nice), I’m increasingly impressed by what I’ve seen - well-educated and cosmopolitan people, huge investment in infrastructure, and a strong belief in and application of technology as well as social mechanisms, without compromising on style and quality. Not to mention wonderful countryside, great food and wine, and good weather.

President Sarkozy wants to liberalise the economy, bureaucracy, social welfare and tax. Let’s not kid ourselves - it’s a massive change he’s propounding, which he may not be able to deliver. But if he can, France feels like a nation with the inherent scale, space, ambience and lifestyle to be a very good place to live, work and play. Dominic, you were spot on.

Fronde has some important clients in France, and we expect to do well with our mobile banking and mobile 2-factor security products.

Part of our strategy for Fronde Anywhere - our mobile application products venture - is to build market reach through relationships with significant global and regional players. This rapidly increases our potential exposure to new customers beyond our own on-the-ground presence, and takes advantage of our high profile among leading technology and finance industry analysts.

In the last 3 weeks, Fronde Anywhere has announced partnerships with RSSS in South Africa, ccPace in the USA, and LogicaCMG globally, in addition to its existing in-house relationship with the rest of the Fronde Systems Group. Fronde Anywhere can focus on market entry, channel support and product development, while its partners, with their long-standing and more intimate client relationships, are in the best position to identify and satisfy individual client needs for mobile banking and enterprise authentication applications, including business implementation, customisation, integration and support.

I arrived in New York today (Monday) to visit our Americas branch on 3rd Avenue (pictured - our office is on the 2nd floor) and to meet some people. Unfortunately they may not have got me at my best. After a full day of sightseeing yesterday in San Francisco (including an unexpected wonderful choral service at Grace Cathedral, which was a visual and aural treat, even for this unbeliever) I caught the overnight flight to JFK but only managed 1 hour’s sleep. I went straight into our offices on 3rd Avenue at 9am. Let’s just say I’ve been finding it hard to string two sentences together in any logical sequence. Add to that, falling asleep in the middle of conversations and then waking myself up again with a loud snore, and it’s a wonder people stayed in the room with me. Oh, the joys of international travel.

Still, despite those difficulties, I’m finding that NYC has got a real buzz to it. Also, I finally met in person someone I first encountered through our mutual business blogging. You never know if someone is as good in person as they are in a structured communication, but I had nothing to worry about. And, if things pan out right, we could do some business together. There’s method in this madness, folks.

Right, next stop, Harry’s Bar and then a genuine New York Grill. Who needs sleep!

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.

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.

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).

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.

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.

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. Fronde is hosting BarCamp WellingtonNZ egov on Saturday 15th September at our Queen’s Wharf office. BarCamp is a very different kind of forum, very social, and very participative. It’s also free. Read ‘BarCamp’ background and what to expect.

8 things you can do now:

1. Read about BarCamp Wellington NZegov
2. Book it in your diary (Sat 15th Sept)
   
3. Tell others you’re coming along (edit this page and enter your name)
4. Add your name to the mailing list:
   Subscribe by sending a blank email to barcampwellingtonnzegov-subscribe(at)googlegroups.com
5. Get a T-shirt
6. Copy this posting and add to your own blog or website (different sized images available)
7. Put your hand up for a ’subject’
8. Participate, communicate and be active

‘Fronde’ is a French word meaning sling, but today we also like to think it means ‘the spirit that inspires people to challenge orthodox thinking and provoke change’. As part of our promotion of the Fronde brand, we organise debates whenever we can. At 1.30 on Tuesday in Auckland, I’m chairing the Fronde Debate at Microsoft’s TechEd 2007. The moot is ‘Software as a Service? Yeah, Right!‘

Speaking for the opportunities that SaaS offers are Alastair Grigg from Xero and Gavin Lennox from Healthphone. Arguing for the challenges that SaaS faces are Andrew Connor from Auckland University of Technology and Ron Jacobs from Microsoft.

We’ve kept the speakers on very short time constraints to make this a concise and punchy interchange during the TechEd lunch-break. So, if you’re going to TechEd - and who isn’t? - grab your sandwiches and come watch the fun.

Leading British trade journal The Banker made mobile banking the subject for its cover and lead article last month. Guess whose mobile banking solution they cited? That’s right - ours. You can’t buy publicity like that!