Author Archives: Content in Context

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About Content in Context

Content in Context helps companies to define the market for their products and services, to identify customers and build the business pipeline, and to develop their content marketing strategies. By working with our clients to design, build and grow their business, our primary focus is to extract commercial value from unique assets, including knowledge, data, know-how, processes and transactional information.

CRM systems and the KISS Principle

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I’ve recently been working on CRM implementation projects, and I am astounded at the level of complexity that some systems have managed to impose on the organisations that deploy them. Paradoxically, the complexity is usually the result of either data models that are far too rigid, or data entry standards that are far too flexible – so that users have to find “work arounds” or create a whole new business operating model to accommodate their CRM….

For example, changing some data labels can be impossible (e.g., “Client” may have different applications, but the system only recognizes one type), and I have seen a client name entered in multiple ways within the same database: J.P.Morgan, JPMorgan, J P Morgan, J. P. Morgan.

When working with such CRM platforms, I’m frequently reminded of the KISS Principle (Keep It Simple, Stupid) as being the preferred approach to systems design, or as the architect Heinrich Tessenow eloquently put it:

“The simplest form is not always the best, but the best is always simple.”

Has streaming killed the video store?

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In the era of Quickflix and internet TV services, why would anyone continue to patronise a bricks and mortar DVD shop? Well I, for one, am a  regular customer of my local independent video store, and here’s why:

First, choice. Clearly, they don’t have every film or TV series ever made, but there’s more than enough to discover during my lifetime. And they stock loads of titles not yet available to stream or download in Australia. (See previous blog on geo-blocking – and at the time of writing, Netflix is not available in Australia.)

Second, they have a great international selection, and their catalogue is not dominated by the latest Hollywood blockbusters. They have a particularly good section of art-house titles, as well as all-time classics, mainstream comedy and big-name dramas.

Third, it’s cheaper. There’s a minimal sign-up cost, no monthly subscription fees, and on average, the nightly cost of a DVD rental can be far less than alternative services. Plus, with most of their DVD’s, you get the bonus material not always available via streaming.

Fourth, it’s quicker. I know this sounds counter-intuitive, but with the slow internet speeds in Australia, it actually takes me less time to walk the few blocks to the video store and back than it does to download a full-length film.

Fifth, the staff make informed recommendations. OK, recommender engines are getting more and more sophisticated, but many still seem to be based on what people bought/downloaded, and not so much on what they actually watched, and really liked. But the video store staff are very knowledgeable about films, and having watched a lot, they can usually offer some personal suggestions based on what I have previously enjoyed.

Finally, the local DVD store is something of a community service, and for that alone I will continue to support it.

10 Obstacles to Startup Funding in Australia

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The increasingly popular Lean Startup Melbourne kicked off 2014 with a session on Melbourne’s Startup Ecosystem. And while the tag of World’s Most Livable City is a draw card for attracting startup talent, the apparent lack of institutional investor interest in the startup movement is creating a barrier to funding options.

The Panel: Susan, Brendan, Leni - Chair: Indi Photo by @marksmithers via Twitter

The Panel: Susan, Brendan, Leni – Chair: Indi
Photo by @marksmithers via Twitter

After the traditional beer’n’pizza, an audience of around 300 people was first treated to a couple of lightning talks: Scott Handsaker’s presentation on Melbourne’s startup infrastructure was a great survey of the networking events, meet-up groups, co-working spaces, incubators, tech co-founders, angels and media resources. It also confirmed what everyone already knew, that the local startup community is thriving, and represents a positive force for change and innovation especially in the SME space (which is traditionally seen as the backbone of Australia’s economy). This was followed by Simon Moro’s guide to offshoring/outsourcing development and coding projects – including many helpful and practical tips.

Then came the main event, a panel discussion chaired by Indi from OutTrippin featuring serial entrepreneurs and startup gurus Susan Wu, Leni Mayo and Brendan Lewis. (For a brief but succinct write-up, see my fellow blogger Chris Chinchilla’s account.)

The main takeaways for me were:

1. Strong local infrastructure, but not yet as robust or scalable as Silicon Valley, London or even Dublin (Melbourne ranks #18 in the world)
2. Great community enthusiasm, but not clear what the role of government is or should be (e.g., should public money be used to “pick winners”?)
3. An established coterie of successful angels and VCs, but total lack of interest in the sector by institutional investors (e.g., still focused on investing only for profit, not in changing market behaviours)

In fact, the conspicuous absence of institutional investors at this type of event simply underlines why they actually represent a barrier to funding options for local startups. Here are 10 reasons why I believe instos have not engaged with the local startup community:

  1. They don’t understand the technology – this is not a new complaint; I have heard many entrepreneurs and corporate advisers bemoan the lack of appreciation for new technology developed locally.
  2. Not made here – conversely, there is suspicion about successful technology from overseas that is not yet proven in Australia (which is a challenge for local licensees seeking to develop local market opportunities).
  3. Preference for asset-based lending – partly influenced by regulatory attitudes, banks and other lenders prefer to lend against secured assets, such as plant, equipment or the family home. However, many startups and young entrepreneurs don’t own such assets (or their businesses are designed to be less capital-intensive). Instead, especially in the early stages, they would like to see funding based on cashflow lending linked to their current and future revenues (which are increasingly subscription and annuity based).
  4. Don’t understand the business models – with new technology come new business models, which traditional lenders and investors struggle to get their heads around. Traditional lending criteria are tied to traditional business concepts.
  5. Restrictive investment criteria – post-GFC, banks are more risk averse, and the regulators are also stifling investment product innovation with more stringent risk and regulatory capital management. In addition, institutional operating costs are eating into investor and lender margins, and local investment banking is diminishing, especially as foreign banks continue to scale back their local presence or exit altogether.
  6. Lack of a credible second board for smaller listings – if you don’t want, or cannot justify the cost of a full IPO on the ASX, then your options for raising wider shareholder capital are limited to platforms like ASSOB or NSX, neither of which have quite the same profile as London’s AIM or Hong Kong’s GEM.
  7. Restrictive crowd-funding options – yes, there are active crowd-funding platforms available in Australia (e.g., Pozible), but in most cases the “investor” has to be rewarded by tangible products and services (which has stymied some crowd-funding efforts by local film-makers), otherwise the financial market regulators might come knocking on your door. (This may change, if/when VentureCrowd begins to launch.)
  8. Tax structures can favour equities – without getting all technical, the use of franking credits by Australian companies offers considerable benefits to their shareholders via relevant tax concessions. As such, this makes equities (especially highly liquid stock) attractive to institutional and retail investors, and therefore inhibits the use of alternative funding options.
  9. Limited corporate bond market – most corporate bonds in Australia are bought by institutional investors, and despite various attempts to stimulate demand among retail investors, the vast majority of individual investors can only access these bonds via managed funds (which carry manager fees and other administrative costs), or more complex financial instruments such as hybrid securities. The institutional market itself is not especially liquid (there is limited trading activity), and if the federal government scales back public borrowing, this reduces the availability of treasury benchmarks for corporate bonds.
  10. Lack of loan syndication – it is common in many overseas capital markets to establish small syndicates of institutional investors to participate in corporate lending opportunities. This can help spread the risk for lenders, and diversify the funding base for borrowers. However, because of the loan sizes, and the highly concentrated banking market, there is little need or demand for loan syndication among Australian banks.

Until there is a better way to fund local startups beyond the initial rounds of angel and VC money, Australian entrepreneurs will continue to beat a path to Silicon Valley to raise capital. The irony is, a lot of Australia’s $1.6tn in assets under management are allocated to US money managers to invest back in Australia – in my opinion, this is an expensive boomerang. Instead, we need to build better dialogue (and more direct dealings) between the local startup community and our institutional lenders and investors.

5 Challenges for Performance Management

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I recently facilitated a round-table discussion on Performance Management, with senior executives from commercial, not-for-profit and public sector enterprises. Our topic was current practice in Performance Management, and was hosted together with my colleagues at Bravo Consulting Group.

At the outset, we posed a number of discussion points, including:

Are there direct correlations between Performance Management, Employee Engagement and Productivity?

How is Performance Management linked to Rewards, Recognition and Compensation?

Do your people understand the context for Performance Management?

We also discussed the true costs of Performance Management systems (time, resources, software, administration), as well as the different attitudes of management, team leaders, HR and employees toward current processes.

The good news is that all the organisations represented are running annual or semi-annual employee appraisals. There was also an increased focus on performance outcomes (i.e., it’s not just about effort expended on job-defined tasks, but more about what is being achieved and how). And our participants reported the importance of using appropriate tools to deliver effective employee communications around corporate strategy, organizational goals, change management and project roll-outs to ensure greater alignment with, and context for Performance Management.

However, we identified a number of key challenges and critical issues facing any organization that takes Performance Management seriously, or who wishes to increase the effectiveness of their current practices:

1. Negative Perceptions of Performance Management

Despite the widespread use and acceptance of Performance Management systems, there remains considerable negativity around the process, the context, and the even discussions themselves. There appears to be a sense of foreboding when it comes to the mid- or end-of-year appraisal, a fact that was borne out for me just a few weeks ago: I was in the furniture display area of a well-known department store, when I overheard the floor manager say to one of her sales colleagues: “Mike says he’ll do your one-on-one at 3pm today.” What might appear to be a fairly innocuous statement visibly filled the employee with dread, at the prospect of his annual review. Surely Performance Management discussions should not be fraught with such unnecessary anxiety or stress?

2. Performance Management Systems Are All Different, And Too Rigid

Our round-table participants all reported using different software (and paper-based) systems, which is understandable given the proliferation of HRMS tools that support Performance Management. But many of these systems resemble accounting or project management software, and lack more qualitative or cultural performance measures. Alternatively, systems tend to be rigid, process-driven applications that often take a checklist and compliance approach to conducting Performance Management. They can also suffer from a “one size fits all” solution, and don’t readily help organizations to develop meaningful performance measures or point-in-time indicators, mainly because they are backward-looking and use retrospective data. Shouldn’t Performance Management help employees move towards the job that they want (and towards their longer-term career objectives), rather than confining the discussion to current or out-dated tasks?

3. Formal Processes Are Disconnected From Informal Processes

By making it a “process” (and an infrequent one at that), Performance Management becomes artificial, and divorced from day-to-day reality. This can result in performance issues being stored up and only “discovered” during the formal appraisal – which will add to the anxiety and stress if long-term resentments about manager-employee behaviours and relationships are only brought to light during the Performance Management process. A common outcome from the formal Performance Management process is a corrective or punitive response, due to the absence of continuing efforts to manage and direct performance. Why should employees only hear feedback about their performance at the end of the year, when it might be too late to address the issue, leading to knock-on implications for remuneration, recognition and promotion. Shouldn’t Performance Management be part of the everyday dialogue between colleagues?

4. Many Managers Are Simply Ill-Equipped To Have The Performance Conversation

Without the appropriate skills to foster meaningful and open dialogue with their direct reports, managers end up having to manage the Performance Management conversation, rather than helping their people self-manage their own performance. This awkwardness is compounded if there is a lack of organizational context for Performance Management; worse, poor performance is ignored or circumvented because managers do not feel confident to start the dialogue, which is not fair to the individuals concerned if they are not given the opportunity to discuss what might be the root cause of a performance issue. If there is no dialogue around Performance Management, how can employees know what they are being held accountable for, or appreciate the consequences of not meeting performance goals and objectives?

5. Performance Management Systems Ignore The Middle Majority

Most Performance Management systems (certainly the ones I have been exposed to) end up using forced bell curve distribution analysis to classify employees according to high, middle, low and under achievement categories of performance. I recall one former colleague who used to cite Garrison Keillor when annual appraisal ratings had to be allocated according to the expected distribution curve: “Well, that’s the news from Lake Wobegon, where all the women are strong, all the men are good-looking, and all the children are above average.”

When we asked our participants “what keeps you awake at night?”, one CEO commented that he worries about the middle 60%-65% of his employees – the bulk who “do a good job” – because more of his attention and focus is on the high and low performers (the top and bottom 15%-20% respectively). This “bias” can distort management perspective, and lead to disaffection in the middle band, unless there are adequate ways to recognize and reward solid performance independent of annual compensation or promotion. (This issue is particularly acute in Australia when we consider the impacts of slower economic growth, comparatively high wages and sluggish productivity – yet, employers face a war for talent as new and highly valued skills become harder to resource.)

Conclusion

If Performance Management could become a continuous dialogue, backed by meaningful performance criteria and underpinned by a greater emphasis on employee self-awareness and self-directed Performance Management, then organisations could spend more time on strategy and execution, and less time on managing individual performance. Not only would this create greater cost efficiencies in the Performance Management process itself, it would likely lead to improved productivity outcomes because there would be more clarity and engagement around goals, outcomes and incentives.