Archive for the 'Business Strategy' Category
Aug 02, 2008, post by Randall
In today’s mail I received a tantalizing offer from Bell Canada Long Distance. It promised the ability to “Call the world without limits” by delivering “Unlimited World Long Distance Plan $29.95/mo.” With calls to over 50 countries plus Canada and USA included, on the face of it, that’s a pretty attractive offer.
But, I’ve learned that, when dealing with the telecoms industry whether landline or wireless, it pays to read the fine print. And, sure enough, in very small type at that bottom it says “excludes calls to mobile phones and wireless devices.” Sadly, when I call overseas, where mobile penetration is generally at or even above 100 mobiles for 100 population, over 95% of my calls are to mobile phones. So, far from being unlimited, this plan is really a bit of a “bait and switch” which might well increase my calling costs. In the monthly billing cycle, the arrival of the first bill post sign up would almost certainly make any customer’s blood boil. At a macro level, I’m really curious as to what such deceptive marketing campaigns say about customer relations and basic trust in the 21st century?
Also this week, Canadian Minister of Industry, Jim Prentice, dialled up his earlier suggestion to mobile operators Bell and Telus to reconsider their ill-conceived plan to charge customers for incoming SMS text messages, including SPAM. Minister Prentice, after meeting Bell CEO George Cope, publicly raised the spectre of increased wireless regulation in Canada as a way to increase pressure for the pair to see common sense. Clearly, for companies that act in the public interest, using the police-like powers of regulation to curb those who stray from this idea must strike a delicate balance. Again, is this a trust issue? Are Bell and Telus exhibiting corporate greed or simply strategic incompetence?
Speaking of trust, a week ago a good friend lent me a fascinating book called 24 Days, by Rebecca Smith and John R. Emshwiller, Harper Collins, 2003. The co-authors, two Wall Street Journal Reporters, lay out a factual and totally rivetting chronicle of how the once “great” company called Enron went from being on top of the world into a death spiral in little more than three weeks. To quote the authors, “so much of Enron’s energies were devoted … to exploiting accounting rules to make profits out of thin air. So much brainpower went into temporary gains rather than into building projects with lasting value. By any means, was the Enron way. … Service to its customers and clients, didn’t enter into it.” Having once run a public company where we took our fiduciary and regulatory duties to our shareholders and the public markets seriously, the sheer magnitude of the greedy cleverness of the malfeasance at Enron boggles the mind. Again, why have the fundamental ethical standards of human trust in the corporate world sunk so low? While it is easy to build a house of cards, without long term trust, I firmly believe it is impossible to build any entity (corporate or otherwise) with lasting, long term value.
Trust issues aren’t confined to the US and Canada. In Germany, T-Mobile has been advertising their new iPhone mobile data plans as “open internet access with unlimited data” (”Freier Internetzugang mit unbegrenzter Datenflatrate”) For the details, see a fascinating post from TMCnet. Indeed, customers were finding to their dismay that this open internet access specifically disallowed such basic mobile web services as VoIP, IM, and VPN. Furthermore, the supposedly unlimited data plan was actually capped. This is almost unbelievable, especially in Germany which, being in the European Union, generally benefits from far superior mobile regulation than we enjoy in US and Canada. In a David versus Goliath situation, sipgate, a small VoIP application provider for Apple iPhone, stood up for consumers and has won a preliminary court injunction against mighty T-Mobile. In this instance, there can be no doubt that t-Mobile is just plain wrong. Once again, we wonder how clearly deceptive advertising affects trust between T-Mobile and its cusotmers?
For once, the lessons for companies are simple, yet so often overlooked. In this age of call centres, web self service and mobile nomadism, opportunities for developing personal relationships between companies and customers are on decline. As people feel increasingly distant from the companies that provide them goods and services, the importance of trust in business dealings goes up. I would argue that because trust is built over the long term, it needs to become a vital part of every company’s brand equity. Although economists have yet to devise specific measurements, it is clear that a lack of trust can kill a multi-billion dollar brand very quickly and in such a way as to make recovery extremely difficult and costly, if not impossible.
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Jul 10, 2008, post by Randall
New York Times on Sunday contained an article which immediately caught my attention, as it appears to provide the missing piece pulling together all of my recent postings outlining an “Entrepreneurial Toolkit”, so far consisting of these five core skill sets:
- “Fearless Passion”
- “Don’t Drink Your Own Bathwater”
- “Embrace Change”
- “Taste the Cash Burn”
- “The Power of Two (or Three)” (coming soon)
The article, “If You’re Open to Growth, You Tend to Grow”, New York Times, 6 July, 2008, in extolling an individual’s openness to change and personal growth, really provides a common thread, weaving together the above skills.
To quote Carol Dweck of Stanford University,
“People who believe in the power of talent tend not to fulfill their potential because they’re so concerned with looking smart and not making mistakes. But people who believe that talent can be developed are the ones who really push, stretch, confront their own mistakes and learn from them.”
The notion that nurture trumps talent, is an interesting one. It underscores why defining some great attributes for an entrepreneur in my Entrepreneurial Toolkit is such a good idea. For the right people, if they strive for personal growth, each and every one of these attributes is in reach.
I’ve always held an innate belief that hiring is about way more than the credentials from the best schools and relevant job experience. By finding people who value “stretching themselves”, companies are adding those who can navigate today’s complex and every-changing environment to their team mix.
It’s also a very positive and empowering message.
Good mentoring and management, like good parenting, works.
Think about it.
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Jul 10, 2008, post by Randall
Yesterday’s climbdown by Rogers on 3G iPhone (in fact, quicly extended to all smart phones) data pricing was nothing short of spectacular. Since the weekend, I’ve watched as many of my colleagues in the Blogosphere have pushed a campaign of long term customer lobbying over the goal line. Clearly, in addition to influential bloggers, Apple is the industry titan that has been able to unclog an uncompetitive wireless market in Canada unlike any other company (or government) so far.
The story has been well covered, with a good selection of the chronology, below:
However, apart from the obvious power that an internet-engaged base of consumers now has over even the largest companies and apart from a major victory for grassroots campaigning, there is an even bigger lesson to be learned from this.
In a blog post back in April “Early Adopters versus Business Models: Shooting Yourself in the Foot?”, I stressed that companies who fail to engage early adopters and keep them happy risk both sabotaging an emerging market, but also creating long term ill will that is almost impossible to reverse. My personal hypothesis is that that the ratio of the cost to reverse grassroots consumer dissatisfaction (bad will) to delivering a message when the company brand is seen as consumer friendly (good will), may well be as high as 1000 to 1.
While we must await the long term customer fallout from this major misstep and climbdown by Rogers, I suspect that Rogers has suffered a significant long term liability on its balance sheet.
Again, it is clear the companies ignore early adopters at their peril.
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Jul 08, 2008, post by Randall
Whether you run a startup (pre-revenue and running on fumes), a larger, later stage company (with actual revenues and earnings) or even a public technology company, the topic of cash should never be far from your consciousness. And, it goes without saying that keeping tabs on cash is generally even more germane in social enterprises.
For many early stage entrepreneurs, skilled in technology, marketing and strategy, the notion of vigilance around cash burn might seem mundane, something to be avoided or delegated. There is no question that companies endowed with more cash on their balance sheets can act more strategically. Conversely, It is the rare company indeed that isn’t significantly cash constrained at some part of its life cycle. As a result, you need to be on top of cash burn and not let cash crises catch you off guard.
Of course your need, or even better should virtualize, solid financial and accounting management skills. Notwithstanding this, as CEO, cash needs to figure as a constant item in your personal mental checklist. In the New Venture 2.0 Playbook, discussed in much more detail in an earlier blog post here, Grover Righter has aptly dubbed the level of importance of cash as “The CEO’s Mistress” (pictured at right).
Yet, many entrepreneurial CEOs can’t answer simple, but fundamental, questions, such as:
- what is your monthly burn?
- what is the life of existing (and committed) cash in the business?
- Which expenses could be cut, should I wish to extend this cash life by lessening burn?
- What was that cheque really for?
While the Venture 2.0 Playbook outlines a complete methodology to build certain entrepeneurial technology startups, from beginning to exit for much less money, the key point of today’s post is that every entrepreneurial CEO must internalize the whole issue of cash burn. Remember, it’s not enough to sleep peacefully at night, comfortable in the notion that your CFO is handling all of that cash stuff.
And, ironically, this need doesn’t disappear even in a larger firm. When I ran a public company, portfolio manager expectation was that the CEO knew the business model, budget and forecast to a reasonable level of detail for up to 2 years into the future and also with longer term strategic thinking. Because public CEOs (and CFOs) are expected to give “street guidance” of future quarters, it feels like trying to drive a car where the steering column is very long — in this case say 18 months long. Keeping all of this in your head can be challenging. And, furthermore as you discussing product, market and strategic questions, all may well have financial implications. In other words, even minor adjustments in one area of the business can significantly alter the “18 month steering” problem of future financial guidance.
To summarize, for the entrepreneur without formal financial training, seriously consider upgrading your financial skills (by formal training, finding a good mentor or via your own research). And, even more important, take them to heart - particularly in the area of cash management.
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Jun 28, 2008, post by Randall
Successful entrepreneurs must push themselves to develop a set of, often seemingly contradictory, business and life skills. We’ve already talked about fearless passion and not drinking your own bathwater.
Today, we’ll expand on a skill that is becoming ever more important in these times of rapid technological, social and business evolution — the need to embrace change. In my own life, it has been a personal hallmark, so much so that without major new challenges and course corrections, my life satisfaction drops precipitously. Therefore, seeing Guy Kawasaki’s recent interview with Ariane de Bonvoisin called Change is Good reminded me to add change into my personal Entrepeurial Toolkit as skill #3.
For me personally, it is wonderfully affirming that, what I used to consider a pathological need for change, is in fact highly adaptive for the future world. Ariane’s book defines ideal entrepreneurs as “chance optimists”, who believe change is mostly good. Furthermore, those who have a strong believe in the positive power of change can flex their “change muscle” to overcome adverse emotions, or “change demons.” I think you get the picture, but it is certainly well worth reading, if only to re-affirm how important change has become to building lasting value.
The notion that change is cool has long been a hallmark of the culture of Silicon Valley, and most technology startups. Entrepreneurial founders are naturally aggressively impatient, pursuing change with an ADHD-like intensity. In fact, one influential business school commentator, who will remain nameless, suggested that the management style favoured in the Silicon Valley, which is so tuned to rapid growth and a challenging environment, would totally fall apart in the more repetitive world of “traditional” business. The truth is that the technology startups of the 1980’s and 1990’s were almost certainly belwethers heralding the morphing of our economy into one that is largely knowledge-based. I’m really not so sure that a business built on repetition and “continuous improvement” (which, sadly, is often more like “death by a thousand cuts”) has much of a future. But, what is unquestionably true is that the change-intensive technology startup culture is miles apart from traditional businesses whose historical rate of change was measured in decades, not weeks or months.
In a world full of change, do maturity and learned experience continue to have value? Absolutely. Serial entrepreneurs learn to “replay a tape” of past successes, and even more importantly, to 
avoid pitfalls that have bedevilled them in the past. However, replaying the tape is much more complicated as the pace of change accelerates. A good analogy is that you are replaying the tape as the format transitions through 8-Track, to Cassette, 
CD and now to MP3s in Flash memory, while the music genre morphed from Disco to Punk to Rap. Notwithstanding this, there are still enduring universal truths about making great music that transcend format or genre. The same is true for entrepreneurs building great businesses.
I mention this because I still have people ask me to talk about experiences in developing “go to market” strategies from 10 or
