Category Archives: Business Models

New Year Wishes: What I hope for in 2014

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A new year normally brings with it the usual predictions for the 12 months ahead. Sometimes, as with political elections, the World Cup, fiscal budgets and the Oscars, most informed commentators can usually hope to get at least one or two things right. But as a former colleague once wrote, anticipating new developments in technology is like “trying to predict the unpredictable”.*

Rather than attempting to gaze into a crystal ball, here are a few of my personal wishes** for 2014

Politics

I think it’s interesting that in 2013, two of the political leaders that generated most of the news were Margaret Thatcher and Nelson Mandela – and in both cases, it was their passing that dominated the headlines. Neither had been in power for many years, yet in death they were more noteworthy than most of today’s world leaders. Why? Well, a lack of truly charismatic politicians could explain it. But I rather think the lure of holding political office has been undermined by the need to micromanage the machinery of government – so rather than attracting visionary leaders capable of projecting big picture thinking, we mostly get a collective mediocrity blinkered by the spin doctors and party pollsters, and rarely willing to tell the public what they actually think or what they personally believe in, for fear of offending voters in marginal electorates. Whether or not you agreed with or liked their particular brands of politics, it was pretty clear that both Thatcher or Mandela actually believed what they were saying when addressing parliament, giving interviews, or delivering campaign speeches.

In 2014 it would be wonderful to see the return of political leaders who were not simply trying to avoid defeat at the next election. Even better, wouldn’t it be wonderfully refreshing to hear politicians willing to amend their policies because they have been persuaded by informed argument, prepared to admit that they might have got it wrong, and able to speak their mind without being accused of knee-jerk reactions or heretical u-turns; situations change, so shouldn’t our politicians be entitled to adapt and clarify their thinking accordingly?

Leadership

Which brings me to my next wish – a willingness to openly embrace situational leadership. Yes, organisations should have a clear purpose, stated objectives and well-articulated means for achieving them, but there also needs to be flexibility and the ability to adapt and evolve based on changing circumstances.

We hear a great deal about the need for diversity on boards, among executive teams and across the workplace generally. Much of the diversity debate centres on gender and ethnicity – which is fine, but we require organisations with greater cognitive diversity. Such diversity could help avoid group-think, constructively challenge the status quo and counter the underlying causes of institutionalised inertia.

Business

Unless you are a single-product company, with a unique and proprietary production process, a guaranteed market monopoly, and an endless supply of materials and customers, your business cannot afford to exclude alternative thinking or ignore external perspectives on your industry, your markets or your products and services.

Equally, in a low-growth/no-growth market environment, companies have to develop or acquire better strategic growth skills. Expansion via capturing market share (usually achieved by competing on price, and resulting in lower margins) will be hard to sustain, and will likely result in a race to the bottom.

My big wish for 2014 is that businesses in general, and service industries in particular, will recognize what their true value proposition is, and build strategies for competing on quality (not just on quantity). For example, unless you understand your cost structures, and can relate those to your customers’ perceptions of what they are paying for, you will either waste resources on stuff customers don’t value, or miss opportunities for serving them better.

Technology and the Internet

It’s hard to think of any significant developments in popular technology or on the Internet during 2013. Sure, there was some consolidation among social media platforms, and product rationalisation at Yahoo! and elsewhere; but apart from launching iOS7 and the iPhone 5, Apple did not bring any major new products to market. Although Apple’s global share of smart phone sales may be declining, it may simply be market maturation rather than any product advances from its competitors. (There is also evidence that in key markets, iPhone 5 has boosted Apple’s smart phone sales, and the iPhone 5 itself lays claim to being the most popular model.)

The Internet continues to grow exponentially, largely driven by social media and user-contributed content. But I’m not sure that our collective knowledge and wisdom have improved at a corresponding rate. (Plus, targeted and streamed advertising means it takes much longer to watch YouTube clips, resulting in a lower return on the time we invest in consuming content.)

I’m hoping that 2014 will herald the launch of Internet 3.0 – an on-line environment that is more informative, more insightful and more interactive, and which connects more intuitively between my desktop and mobile devices. (For example, various upgrades to iOS and their associated back-ups forced me to transfer manually a large archive of Notes from my iPhone 4 to my iCloud account, simply because Apple unilaterally changed the way legacy content was “recognized” between my iPhone and my iMac.)

Culture

Perhaps we should also wish for a slightly kinder and more caring social media environment in 2014 – and as I heard one media commentator observe this week, professional sports people and other celebrities should probably refrain from using social media after 11pm, even if they are only slightly inebriated. Anyway, at the risk of revealing some of my own prejudices and preferences, this is what I expect from 2014 in Culture.

First up, I don’t want to see any more of the following categories of movie: sequels, prequels, comic-strip franchises, CGI extravaganzas or anything containing anthropomorphism (unless it’s a Director’s Cut of “Animal Farm”).

Second, I eagerly await the end of geo-blocking for digital content – copyright owners, music labels, publishers, licensors/licensees, distributors and on-line retailers please get your act together, and don’t make it unnecessarily difficult for me to buy your content just because of where I happen to live.

Third, I’d like to advocate a special tax on reality TV shows – the proceeds of which will be directed towards alleviating human suffering, solving important world issues, or nurturing genuine artistic/culinary/terpsichorean talent.

Finally, I hope that David Bowie’s return to form with 2013’s “The Next Day” was not a fleeting reminder of past glories….

NOTES:

* Anthony Kinahan in his introduction to “Now and Then 1974-2024: A Celebration of the Bicentenary of Sweet & Maxwell” (1999) a collection of essays on the future of legal publishing

** Aside from, of course world peace, the end of poverty and a global commitment to address the negative impacts of climate change

Amazon finally comes to Australia; local retailers still want government action on sales tax

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A short (and seasonal) post this week, as everyone starts easing off for the holidays.

It may just be coincidence, but about the same time Amazon launched their new Australian website local retailers renewed their campaign to lower the $1,000 sales-tax exemption for online purchases from overseas retailers. And both events came at the start of the Christmas shopping season….

Obviously too early to say which way this will go, but here are a few personal observations:

First, the local Amazon site is limited to e-books, games and Android apps. So, no access to music, television or film content (digital or physical), no sales of print books and no Amazon marketplace. For these products and services, customers are directed to the US site. (Previously, the dormant Amazon.com.au domain name referred customers to the UK site.)

[Note: neither the US nor the UK sites allow overseas customers to buy mp3 content, but they can download digital music via Amazon’s AutoRip service when purchasing physical goods – confused? Me too….]

Second, prices for e-books on Amazon’s Australian site appear to be comparable to the US store, and presumably include local sales tax (GST) to keep on-side of the local real world and online retailers (as well as the ATO, of course).

Third, the general consensus is that if the $1,000 threshold was lowered or even abolished, the amount of sales tax to be collected would be more than outweighed by the additional costs of processing, administration and remittance (which would likely be passed on to local consumers at a “cost-plus” rate by overseas online retailers).

Fourth, many local retailers who voice their opposition to the $1,000 tax-free exemption fail to understand some of the reasons why local shoppers prefer to buy from overseas online retailers:

1. Price – even if overseas sales attract the 10% GST, in some cases this would still be cheaper than buying locally (especially so when the A$ was above parity with the US$). For example, from time to time, Amazon’s UK store offers free shipping on physical goods to Australia….

2. Choice – many products available from overseas online stores just aren’t available in Australia. This is primarily due to geo-blocking, confusion over local distribution rights, and simple lack of interest in stocking some items for the local market

3. Service – from recent personal experience, buying from a local online retailer took much longer than buying the same product from an overseas site, because the supply chain logistics were woefully inept.

[Note: As a separate but related example, I recently ordered a new iPhone 5S direct from Apple’s local website, and received it within 3 days, including a weekend; whereas my telco provider – which prides itself on its on-line business model and customer service standards – took more than 2 weeks to send me a new nano SIM card….. I had also been told by a couple of local Apple re-sellers that it would take 3-4 weeks to order the new phone, unless I took out a new mobile plan with them – which may say more about Apple’s trading policies than the resellers’ business operations.]

My advice to local bricks and mortar and even some online retailers is to look at their own limitations before insisting that the government amend the GST-free threshold on overseas online purchases.

As for Amazon, I wish them well in developing their local service. Much has been made of the stated intention to focus on Australian titles, and the opportunity for local authors to self-publish via Amazon. But already there have been some rumblings that this new site may cannibalize Kindle sales made via some of Amazon’s local retail channel partners.

From student hacker to start-up mogul – an audience with Jonathan Teo

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“The man with the Midas touch…”

Jonathan Teo, tech VC with a Midas touch, has been back in Australia recently, and found time to stop by Lean Startup Melbourne for a Q&A with Michelle Bourke in front of an audience of 350 members of the local startup scene.

With a track record that includes Twitter, Instagram and Snapchat in his portfolio of start-up investments, Teo is obviously someone who deserves to be taken seriously, but the candour and humility with which he talked about his experience made for a very down-to-earth evening with such a high-profile investor.

As usual, the event was hosted by Inspire9, with generous support from Kussowski Brothers, Startup Victoria, Products Are Hard, BlueChilli, Investors’ Organisation, Startup Weekend and National Australia Bank.

Teo’s backstory has been told elsewhere (childhood in Singapore, college in Sydney, post-grad at Stanford, Google engineer, venture capitalist…) but the combination of having a great mentor, working in the (then) emerging technology of cloud computing, and some “right time, right place” good fortune has provided him with a powerful platform from which to join the upper echelons of silicon valley VCs.

“The Secrets of My Success”

Naturally, people wanted to know the key to his investing success. Rather than referring to some “special sauce”, Teo pointed to some simple principles:

  • Relationships – strong relationships are essential, both within the founding team, and across the right networks and insiders
  • Self awareness – many founders don’t see their own capability gaps, and therefore can overlook inherent weaknesses in their business
  • Key metrics – know what run-rates the business needs to achieve to meet its performance goals (cash burn rate, retention levels, acquisition costs, daily and consecutive customer usage)

In particular, Teo stressed that new distribution models form the lens for assessing new investment opportunities.

“Show me the money!”

During a discussion about bringing in investors, Teo was pretty sanguine – what works for some start-ups, won’t work for others. If you can self-fund, then do so; if you do need to tap external funding, start with friends and family (who will generally be more patient than professional investors); and if you have to bring in VC’s, make sure you know the trade-offs. He also suggested that crowdfunding is great for consumer plays, but ultimately valuations are determined by demand.

“New Thang”

When asked where “the next big thing” was going to come from, Teo was understandably coy (or simply discreet), and politely suggested it could emerge from somewhere in the audience. What he did offer were some thoughts on emerging trends that will influence future start-ups:

  • Fewer mass-market consumer products – according to Teo, “only China can support a purely domestic consumer play”
  • Less focus on patents, more emphasis on survival – not that IP isn’t important, just that the cost and effort of securing patents mustn’t outweigh the need to generate revenue in the early stages
  • Content niches – unique content is key to attracting advertisers and subscribers, and when combined with rich user data makes for compelling communication and network apps
  • The human touch – products that bring a more human digital experience will gain traction

Finally, Teo predicted the growth of disposable hardware – not sure I agree with this one, but I understand what he is getting at. Personally, I’d be more interested in recyclable hardware, and greater user-serviceable and customisable components.

Declaration: Thanks to the hosts and sponsors, I along with everyone else enjoyed the bounteous gift of free pizza laid on by the organisers.

Defining the Prosumer product

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This week, Do.com announced it will be closing down in January. It may simply be the latest in a string of social networking apps to call it quits, but it also highlights the difficulty in developing Prosumer products that generate market traction.

do-com-logoPositioned as a productivity solution, Do.Com was also viewed as an app that straddles the work/personal divide, to be a veritable Prosumer product.

The problem is, it did not have a clear vision of what defines the “Prosumer” market, and it did not adequately redefine workflow needs in a permeable environment that increasingly blurs the dividing line between the personal and the professional.

As a result, Do.com probably missed an opportunity to craft a new perspective on the elusive Prosumer demographic. For example, as a Prosumer, my primary need is to consolidate all the social networking and collaborative platforms I use. At the same time, I need to manage the different types of connections and co-ordinate the different degrees of sharing that these tools offer, but not based on “projects” or “transactions” – rather, based on “relationships” (which are not the same as “connections”).

Despite their attempts to capture “3-dimensional” linkages amongst my networks, most collaborative tools and social networking platforms are limited by their 2-dimensional perspective of linear connections, rather than multi-dimensional relationships.

Until tools like Do.com do a better job of managing the qualitative and contextual nature of professional and personal relationships (and offer better ways to manage the different facets of these connections), they will be interesting, but not essential.

POSTSCRIPT: Here’s why Facebook can never be taken seriously as a productivity or professional tool – when editing my “official” Facebook page the day, I was prompted to add my “likes” for music and films – why would I want to share that sort of information with my professional contacts (unless it was really relevant to our relationship – client karaoke night, perhaps?).