Apr 17, 2023 | Change, Innovation, Strategy
Over the years I have helped a number of start-ups. Almost all have been single or a few people who have a drive to start something they own, where they can call the shots, and be away from the dead hand of corporate bureaucracy. Sometimes this has been a formal assignment, more often, the result of a series of casual conversation in cafes, networking meetings, and at BBQ’s.
Across these conversations, there have been some consistent themes,
They focus too much on the little things that do not matter much in the long run.
Logo, company name, design of the proposed website, details that do not make or break a new business. At the early stages, these things can be easily changed, modified, and often are dumped.
What this does is take the attention away from what really does matter. Clearly defining the product and/or service to be provided, who is the most likely ‘ideal’ customer, why they should buy from you rather than elsewhere, and how they communicate with them about the value they can deliver without wasting resources. These are the things that matter. Their common characteristic is that they are qualitative, hard to measure, and they evolve.
Evolution happens on auto pilot, make it positive.
Things change, often they change while you are not looking, and only become evident with the benefit of hindsight, by which time it is sometimes too late to do much. The other side of the coin is that evolution also applies to the good things. The task of a new company is to set the guiderails so that the good stuff outweighs the bad. Alignment of all personnel and outside stakeholders is vital in this process, as the pressures will be coming from all sides. And like a child learning to walk, you need to have some of those guiderails in place, or you will wander off in random directions. I call it having a robust, deeply considered strategy.
Imposter syndrome always plays a role.
Unless you are a sociopath, imposter syndrome will grab you from time to time, you will feel out of your depth, wondering why everyone is looking to you for direction and confirmation. It will feel like that first time on a big public stage, dread about what is to come. When you look back, assuming you have done the preparation, you will recognise it for what it really is, a test, and a great learning opportunity.
Spreadsheets are liars.
Most businesses start with some sort of plan, most often articulated via a business plan template and a few spreadsheets. If you are looking for outside finance, these will be mandatory. However, I have never seen a spreadsheet or written plan that accurately reflects what actually happens. Most are nice, comfortable extrapolations of continuous growth along a predictable path. The growth of every successful business looks like a game of snakes and ladders. 3 steps forward, and whoopsie, 2 backwards. The trick is to ensure the steps upward and forward outweigh the falls. Sometimes this simply does not happen, and the snake hole swallows those who fall into it. Spreadsheets never allow for the ‘snake-holes’
Internal Vs External.
Most start-up failure comes from two sources. Firstly, from the lack of cash management. To my mind, there is no greater sins that not being proactive with cash, a simple set of disciplines often ignored. The second is because they have neglected the management of their customers by looking inwards, managing the inevitable personal and process friction that occurs, rather than looking at how they can add value to their customers. Customers do not care about your internal challenges, they are paying you to release them from theirs.
People are your greatest asset, and liability.
A business without people is just a scrawl on a piece of paper. A ‘micro-business’ which is what almost every business is at birth, can be strangled by one poor choice. Equally, that one choice can be the making of you. In the early days, when everyone is acting in all sorts of roles, you need people who are self-reliant, resilient, and happy to ‘muck in’. They are very hard to find, and even harder to keep when you do find them. Equally, when you think you have found the one, only to realise they are not as advertised, which is what they were doing during the interview, remove them quickly. A wrong employee at an early stage can become toxic very quickly. Sometimes that person is great at what they do, are seen by others to be vital, but they are a pain in the arse for some reason. Experience tells me that the benefits of what they are good at are usually outweighed by the hidden costs of them not being aligned with the rest of the team, and its objectives.
Being seduced by opportunity.
That old cliché of working in the business instead of on the business is almost always true in the early days. You will be swamped from all sides by problems as well as opportunities, both of which will radically dilute, if you allow it to, that characteristic of successful start-ups: focus. Plan for what comes next, focus your very limited resources on the key drivers of that outcome, and eliminate everything else. This is never easy, but is absolutely necessary.
None of this is easy, if it was, everybody would be doing it.
The failure rate of start-ups from the corner coffee shop to high-tech gizmos is very high.
Finding the right sort of outside ‘reality check’ advice and input that delivers true value is perhaps the eighth challenge, which so many get wrong, but which can change the outcome dramatically.
Header credit: Arrived via my new AI mate Dall-E
Mar 29, 2023 | Change, Governance, Strategy
The government’s $15 Billion National Reconstruction Fund faces a range of strategic and management dilemmas.
The Treasurer Jim Chalmers set out the governments priorities in his essay ‘Capitalism after the crisis’ in February. He called for focus on three things:
- An orderly energy and climate transition of the economy
- A more resilient and adaptable economy
- A focus on growth hand in hand with equality of opportunity.
The response has been roughly equal from those who see his views as the defining principles for development of the economy from the poor relations role currently played amongst the OECD, to those who condemn his views for their generality and naivety.
Given these seem to be about equal, he must be close to the mark.
The dilemma in the deployment of any ambitions public program is governance.
The opposition condemns it, claiming that it will achieve no useful outcome, being just a huge a magnet for rent-seekers. I guess they should know how to recognise a snout-ready trough when they see one. The government seems to dismiss this concern as something that can easily be managed, and while it is an admirable sentiment, the ‘yes minister’ syndrome will play a big role. Again, the very difficult middle path seems to be the ideal outcome.
From my experience running a tiny, micro version of this initiative 25 years ago there are some lessons to be learnt and applied, or at the very least, considered in the design of the management and operational infrastructure:
- There needs to be an accountable board made up of mix of experienced and wise people from outside the vested interests, committed to the outcome of moving Australia up the various ‘industrial complexity’ scorecards.
- It needs to be separated from the bureaucracy and run its own management processes, and grant budgets that are multi-year. Tying the operational and grant budgets to an annual calendar dictated by allocations in the national budget is to ensure its failure as a strategic tool. This choice will be difficult for any government, and will probably precipitate another bureaucratic turf war.
- A company limited by guarantee is one structure that can be useful. This does not in any way compromise the accountability of the management for the financial governance of the ‘business’. The shareholders would likely be Federal government, via Dept. of Industry, CSIRO, and one of the credible business associations with a wide cross-industry membership.
- The board would be chaired by a credible figure like Proff. Roy Green. Board members will represent the shareholders, and include several non-aligned members familiar with the areas of strategic focus from the perspective of the evolving technology, financial constraints and opportunities, business development, and strategic marketing expertise.
- The first job of such a board must be the definition of the strategic priorities of the ‘business’. These are one step down from the general outline in the Treasurers essay and take the form of a priority list of industry sectors that will be eligible to receive funding. Within this pathway there must be some discretion, as predicting the future is a challenging task, and you never know what will bob up in the development process that deserves support. The parameters of ‘deserve support’ should be at the discretion of the board, but widely agreed.
- Staffing and budgeting of the ‘business’ must be from outside the bureaucracy. Bureaucratic rules and conventions need to be taken only selectively when they clearly add value to the process. It is quite likely there will be very qualified people currently within the bureaucracy, who may elect to take a leave of absence from those roles to take up one with the business. This could be regarded as a secondment, but the management of the personnel concerned must be at the discretion of the management of the ‘business’.
- Non-profit, research institutes, and quangos are not eligible for funding unless in collaboration with a viable commercial operator. The business will play a pivotal and catalytic role in putting these two pieces of the puzzle together in ways that may lead to funding.
- Dictate to collaborative bureaucracies that they are required to collaborate and co-operate with the ‘business’. This is not to ensure primacy, but to ensure collaboration within the boundaries of commercial in confidence. The business must be ‘cross departmental’ and seen as a neutral player there only to be a ‘compounder’ of public resources.
$15 Billion is a big chunk of money, although dwarfed by the magnitude of the challenge facing the country. This sort of approach should have been implemented 30 years ago, but better late than never, so long as it is done right!
Header credit: Knicked from the NRF website
Mar 6, 2023 | Governance, Strategy
The first is to have a monopoly, preferably a regulated one, such as a public asset that has been privatised.
Sydney’s Kingsford Smith airport was flogged off by the government to a private operator who makes obscene profits, not just from the landing rights, but parking, retail concessions, and every other opportunity to gouge. What are your options… catch a train to Singapore?
The second is to be in a market where the person shelling out the money for your product is not the decision maker in the purchase.
The Australian publicly funded pharmaceutical benefits scheme is such an opportunity. Once on the list, the pharma companies sell to the doctors, persuade them to prescribe their magic to their patients, who pay a consistent subsidised cost, whatever the price of the drug to the public purse. Perhaps inconsistently, I am in favor of this scheme, despite the obvious rorting potential it delivers, just disturbed by the lack of governance and oversight. During the height of the Covid pandemic, champagne must have been popping in the boardrooms of Pfizer et al as the governments delivered a marketing nirvana.
I am always caught between amazed laughter and despair when I hear a politician whining in the lead-up to an election about the prices of some commodity, the ownership of which they have flogged off to private enterprise, who then proceeds to make an outrageous profit, because they can. When the buyer is a multinational, you often see that profit disappear, as corporate financial engineering kicks in, and the tax havens suddenly appear as key corporate players.
Just look at what has happened to power prices since the privatisation of the poles and wires, the toll costs of driving from the western suburbs to the cities east, both done in a strategic vacuum for short term political gain.
The reason given was to free up capital to apply against community priorities of education and health. This is a fine aspiration, unmatched by the outcomes.
No matter what words are used, what they have done is subsidise private profit from the public purse.
The Northern beaches hospital at French’s Forest is a prime example. The NSW state government poured 2 billion dollars into the hospital and surrounding infrastructure, in a so called partnership with Healthscope, then an ASX listed company, and all but closed the alternatives in the area, Mona Vale and Manly hospitals. Subsequently, Healthscope was acquired by Canadian group, Brookfield, that featured in the Panama and Paradise papers as protagonists in tax avoidance via trusts located in tax havens. Meanwhile, chaos reigns in the hospital and public health outcomes are compromised.
So much for the competition, community outcomes, and for the tax on the resulting profits.
What a great way to make a bob!
Mar 3, 2023 | Strategy
Strategy is an exercise of informed fortune telling.
What will happen if we do this? Is that better than if we do that? How will others react, do the ducks really all align the way they seem to?
A thousand questions we set out to answer, to allocate our resources to best leverage the outcomes we plan/hope will emerge.
It is a messy business, full of uncertainty, mistakes, dead ends, and outright failures, most of which we hear little about. Instead we hear a lot about the few successful exercises in strategy, the few that work as hoped, or as is usually the case, not as planned, but great outcomes.
We read about the success because people are able to analyse them with the benefit of hindsight, which delivers to those developing the strategy, a sense of prescient certainty that they almost never deserve. Fact is, your strategy will never be spot on, the magic is in the ability to adjust tactically on the run, while achieving the outcome for which you planned.
The strategic process benefits greatly from being subjected to informed and critical thinking being applied to the inputs, both quantitative and qualitative. The greater the level of critical thought and diverse thinking that can be brought to bear on a strategic challenge the better.
The context of strategy implementation is always different to the context in which you do the planning, simply because it is the future, and things evolve in unpredictable ways.
I expect that in about 12 months there will be a rush of erudite papers and articles reporting on successful Corona instigated transformations. Strategic initiatives that make the protagonists look like they had great foresight others lacked. in fact, in most cases they will have ended up with the lollies despite being as confused and muddled as the rest of us during the lolly fight.
They had the benefit of hindsight to clean up their bedrooms before anyone came along for a look.
Strategy is messy because in development, it lacks hindsight.
Feb 15, 2023 | Branding, Innovation, Strategy
Bing and its sibling ‘Edge’ have been coming third in a one-horse race for a long time now. Suddenly the emergence of the AI equivalent of a plutonium battery powered race whip in the form of ChatGPT has delivered a proper kick up the arse.
The world has changed, pivoted on a dime as they say, as a result.
No longer will Google search be the only game in town, and Chrome the default browser housed on 98% of devices. The new race has begun with a wider field, and no doubt some roughies hiding in the wings.
Microsoft announced 2 weeks ago that it has extended OpenAI’s models across their Azure services, widely used by developers, so who knows what might spring out of that. Last week Microsoft confirmed ChatGPT is being incorporated into Bing and Edge.
Google have the most to lose here, so have scrambled to announce they intend to incorporate their version of OpenAI’s google-killer ‘Bard’ into search making it more ‘ChatGPT like’. It is just a pity the horse stumbled at the first hurdle by failing to answer a simple question, leading to a share price nose-dive into the turf.
This is a must win race for Google, as 80% of their revenue comes from advertising. With hindsight, they have bet the farm on the one horse, never a great strategy in a volatile environment.
It is going to be interesting!!
Feb 10, 2023 | Innovation, Strategy
Never have I seen a more definitive example of Clayton Christianson’s ‘innovators Dilemma’ than what is being played out right now, in front of our eyes.
In summary, the dilemma is that dominating incumbent businesses are loathe to change the model that made them dominating incumbents. This results in them failing to innovate in ways that have potential to erode the cash flow from former successes.
Christianson had many examples in his book originally published in 1997, but none better than the existential crisis being faced by Google from ChatGPT, launched in November 2022.
Googles control of the search market is almost absolute, with a share of well over 90%. When you add in the rebranded search engines that simply use Google under another name, like Apples Safari, and discount the mistakes that lead to Microsoft’s Bing being clicked, it is probably 97% or above.
Ask Google a question, and the first 5 or 6 responses are ads. They represent potential answers to your question, but just potential from the indexed websites. The revenue from those ads that also follow you around the web is 80% of Googles total revenue, most of the balance coming from ad revenue on YouTube. After scrolling through the ads, you will have to skim and review a number of possible sites that may deliver you the answer you are seeking.
Ask ChatGPT the same question, and you get back one answer. No ads, yet. You may have to become increasingly explicit in the question you ask, but the response time is close to real time, and you get the best answer available. It may not be the perfect answer, although we can expect it to improve, but it will save heaps of time.
Google claim to have a similar system sitting on the shelf. In addition, they made a $400 million investment in an AI start-up called Anthropic in late November, just after Chat was launched. I’m sure they have the capability to deliver an answer to Microsoft, as they have been playing with AI for a long time. Perhaps they did not launch because it is not yet perfect, what new product ever is, but more probably they delayed because it is a threat to the existing revenue of the business.
Since the early days, Google has sat on its mountain of cash and not innovated. They have fiddled at the edges, as shown by their site that keeps tabs on their hits and misses, killedbygoogle.com but never confronted their cash cow, search, with any sort of innovation that might eat their breakfast. This is in stark contrast to what Apple has been prepared to do, several times.
Whatever else happens, ChatGPT and its backer Microsoft have taken the initiative, and I suspect this will be the best $10 billion investment Microsoft has made in decades. Incorporating ChatGPT into Bing suddenly gives Bing a reason to exist and a competitive advantage to which many will be attracted.
I can only imagine there are late nights in Sundar Pichai’s (Alphabet’s CEO) office currently as they try and figure out a way to combat this competitive threat while preserving their river of cash from advertising.
As I wrote this post, Google shares tanked and Microsoft announced a new generation of Bing running the next iteration of ChatGPT, customised for search.
Header: Google meets ChatGPT in the style of Monet in blogs used courtesy Dall-E, ChatGPT’s graphic AI stablemate.
Update No. 1. Feb 10, 3 hours after the original publication. probably the first of many.
I came across this Google post on their own site, via Visual Capitalist. If anything, it absolutely confirms the contention in the above post that Google have badly fumbled the ball. Timing is a much underrated quality in marketing. On several occasions, I have done the right thing at the wrong time, usually well before the market is ready, and failed as a result, only to see a competitor succeed at a later date.
