Monthly Archives: July 2008

On the subject of Advisory Boards

The other week I sat down with my technology advisory board and felt my self lucky.  Here I was with a group of industry leaders that I barely knew, talking about great ideas for my business.  The cost to me was close to zero but their ideas were invaluable.
But getting to the point were I have an effective external advisory board was laborious though.   I have studied business at the undergraduate and postgraduate level, but never heard the words “Advisory Board” spoken at University, because its not a legal structure.   So when we first decided to implement the idea, it took a while to get things right as I couldn’t find much information around about how to organise one. Questions arose such as; Should you keep minutes? How big should it be? What’s the objective? When should we meet? How many should we have? Whom should be on it?  Wikipedia didn’t have much to say.

Two years down stream and the Churchill Club now has:

  • A Board of Directors which focuses on strategy and governance,
  • A technology advisory board that focuses on event ideas around emerging technologies, and
  • An entrepreneurship advisory board that focuses on event ideas around entrepreneurship skills/knowledge that appear to be weak or missing in the community.

I think that putting together our advisory boards was one of the most important things I have done, but your probably asking what are they good for?  Well the answer is:

  1. Engaging high quality people whom may be wary of a legal relationship. (Really, who’d want to be a director of a small business that can provide little in the way of remuneration but a lot in the way of risk).
  2. You get an impartial sounding board who can help you with advice, ideas and networks (120+ years of technology business experience on tap for $70 worth of wine and cheese!)
  3. You can get to know people (and they you) before inviting them to get further involved with your company.

So, some tips for putting together an advisory board.

Construction
You can have as many advisory boards as you want (check out Melba Recordings ) and call them whatever you like, but don’t make them too big or too small.  I think 10 people around a table is a great maximum number as you can have plenty of voices but only one conversation.  Also, make membership of the advisory board an annual thing so you don’t have an uncomfortable moment when you want to “retire” a member.

People
The advisory board gives you a great chance to get to know new people and see whether you aligned with your values and goals, before offering them a directorship.  Therefore shoot as high as possible when selecting people  you would love to have involved in your business.  Its also great to have a variety of perspectives, or pick someone you want to do business with.

Purpose
Have an agenda and simple specific goals, because its irritating to the members if the advisory board seems ineffective or pointless.  For instance my technology advisory board has the job of discussing potential event ideas by picking emerging technologies and suggesting appropriate speakers from their networks.  A simple agenda, therefore we get an outcome.  You can of course have advisory boards on any topic.  What about a product development advisory board made up of customers?

Schedule
Only meet a handful of times a year at a convenient time with plenty of notice.  This creates a relationship that isn’t onerous.  I meet my advisory boards twice a year with at least 6 months notice of the date.  We normally meet on a Tuesday afternoon between 4:30 and 6:30pm.  This “easy” relationship means I can access people whom are incredibly busy.

Mechanics
Advisory board  meetings needs to be interesting for the members and not a chore.  I limit meetings to two hours as a round table conversation with an agenda.  Not too strict, not to sloppy.  I make sure I put on interesting cheeses and wines so they are enjoyable at a number of levels.  I send out short notes (not minutes) afterwards

Advisory Boards are an incredibly useful tool that are often overlooked.

Who can you trust?

The other week I caught up with one of my brothers for lunch, and as per usual we spent a while character assassinating members of the extended family, before moving on to the main topic of the day which was expert advice.  My brothers position that was that business is simply too complex and you can’ operate without getting expert advice.  I, more cynically, felt that most advice was worthless because if you asked around you were sure to get opinions both for and against any subject.  Especially when the question was something along the lines of “will this idea work”.  I say most advice is worthless because the closer the advice is to the “fact” end of the scale than the “opinion” end of the scale, the more likely I am to value it.  However facts are also of course open to interpretation which causes further issues.

Getting back to the office, I mentioned my position to our office techo (studied politics, philosophy and computing before dropping out).  He mentioned that the issue is actually a classic problem. As the world becomes more complex and you need to rely on experts, the question is whom do you trust and how do you determine whom you will trust.?

Certainly I look around I find that that my level of trust is low:
•    Politicians appear to be pretty much self interested after their first term.
•    Lawyers, Accountants and Consultants have their own commercial objectives they are trying to meet.
•    New reporting organisations are only interested in today’s stories that they decide to be “news worthy”.
•    And having worked in IT for many years, I am comfortable with the concept that every expert can make a convincing argument why their software is the only choice I should ever make.  They can’t all be right.

I feel therefore that trust,  is one of the major emerging issues of the western world.  For example who do you trust re climate change?  Their appears to be expert voices both for and against.  As the total volume of information available in the world is increasing at an almost exponential rate, and I am forced to trust others just to cope with living.

Determining how I will determine whom to is difficult.  On the couple of occasions I have purchased something on eBay , I have noticed that their trust system has been compromised.  Many sellers, have a 99.9% confidence rating. But when you dig deeper you find the underlying patterns are too strange to be real (thousands of positive recommendations, all one sentence long, posted 6 seconds apart).

I get the impression that one of the reasons social networking sites have developed is based on the fact that Gen Y find the recommendations of their friend far more trustworthy than any third party expert or advertising.

I am only just starting to think about systems for generating trust as I think this area will be huge in the future (if not covertly now), however Open Business Models have really caught my eye. So much so that we are having a look at it tomorrow night at the Churchill Club .  Some of the basic principles of Open Business models inherently make products developed from it more trustworthy.  Principles such as:

  • Unrestricted access to all information
  • Management by Meritocracy [pls link to the definition of meritocracy on wikipedia ]
  • Licensing arrangements that encourage innovation

These types of principles make software products inherently more trustworthy as you know they haven’t been bastardized by overt or covert commercial agendas.  Outside the software area you can see Open Business Models being applied in a wide variety of areas from education, to football teams to just recently a boutique brewery.

My thought is then that Open Business models are recognized as attractive because they generate trust, and trust is increasingly becoming a rare commodity.

So What?

So I am laying in a ditch, in the rain, its two o’clock in the morning, I haven’t actually been to sleep yet and haven’t washed in a couple of days, there are  practice mortar rounds being dropped around us, and someone’s yelling in my ear “SO WHAT?”  I am miserable.  The question is a good one though.

The question “so what?” is part of the Army’s way of teaching people to think.  Every fact can have significance, but it needs to be uncovered.  For instance when I was lying in that ditch, it wasn’t my wellbeing that was being enquired about.  It was about the simulated mortars.  Mortars don’t come into existence by themselves; they are carried by a mortar platoon.  Mortar platoons don’t run around by themselves, they are part of a company (around 100 men) and they also have a maximum range (which I’ve forgotten but lets say 500m).  The “so what” question makes me think along this chain of inference.

So Mortars?  It means I have at least 100 enemy soldiers within 500M, and that probably not a good thing.  In theory I need to move at least 500M away to get out of range of the mortars.

So what?

Well all too often I find that in my commercial dealings, the chain of inference just simply isn’t followed.  Which means, to borrow a phrase, there’s information left on the table.

Customer X has cancelled his order.
So what?
His requirements are down or he is buying off a competitor.
So what?
There is an opportunity to help him improve his business or we have lost his loyalty and need to figure out why?
So what?
We need to meet and get an insight.

Lets give Salesman A a payrise
So what?
Salesman B is sure to find out
So what?
Salesman B will then demand a pay rise.
So what?
The pay rise will actually cost double what we thought and cause some tension.

Customer A is upset and is going to pull his business.
So what?
Customer A is stressed because his business is going badly and we aren’t making it easy.
So what?
Customer A is likely to go broke when his business fails.
So what?
Customer A is likely to be a bad debt in the immediate future.
So what?
Let’s not chase his business………

Next time a horrible fact is laid out your feet in a meeting, try saying”So what?” you may be surprised where it takes you.

5 reasons why commercialisation isn’t business

I’m feeling a bit feisty, so I thought I might bring up the topic of commercialisation.

I have just finished up directing an interesting all day forum for the InnovationXchange on the intersection of food and pharmaceuticals.  During the conference, I found out that we (Australian Scientists) now have the capability to treat a number of  diseases by delivering pharmaceuticals in food.  A specific example given was the clear opportunity to alter the proteins in some cereal crops so that we can have “non-toxic gluten” cereal crops (easily do-able).  People suffering from  celiac disease can then have a sausage in bread and a beer at your bbq, without paying for it a couple of hours later.  People on gluten free diets currently spend around an extra $1,000 a year on their diet and there are 600,000 of them in Australia alone.  Nice opportunity for the guys with the IP !

Anyway, whilst talking to a huge variety of people as I was putting together the forum, I found I ran into a large number of commercialisation experts.  Most of them weren’t coming though as they were off to a biotech function in the US.  I wasn’t really stressed by this (other than from a revenue point of view) as commercialisation people tend to make me feel quite uncomfortable.

Commercialisation is a reasonably new word and every Research Institution now has some “commercialisation people” as employees.  The commercialisation people are thought to be more business focussed than their research colleagues.  The plan is that the Commercialisation people will licence their institutions intellectual property to a multinational, or sell it direct to customers.  Apparently millions will be made.

As I mentioned though, these people tend to make me feel quite uncomfortable, and here’s 5 reasons why:

1.    People whom deal in commercialisation almost always deal in what I call “supply push” innovation.  Basically trying to create a revenue stream from new intellectual property that has been created.  The problem here that I see is that although supply push type innovations may have potential to generate extraordinary returns, they are unlikely to.  They are a solution looking for a problem.  The converse of this is “demand pull” innovation,  new intellectual property created to solve existing customer needs.  This type of innovation is guaranteed to generate revenues.  Note that commercialisation experts don’t bring these solutions to market, its marketers and salespeople.  Which brings me to………….

2.    I feel that the concept of “commercialisation” is an abstraction from real business.  Although we don’t like to talk about it, every business has the same model, we all generate and harvest customers; just our specific executions are different.  So at the end of the day if your not talking about customers and selling, then your not in business.  Doesn’t matter whether your using fancy multisylabic words, spending a small fortune on IP lawyers, travelling the world and meeting complex KPI’s (Key Performance Indicators).  Your not in business.

3.    People involved in commercialisation appear to have a very limited world view.  They tend to disregard businesses that don’t have unique IP that’s being managed.  They appear to have no gut feel on the importance of brand, business models, distribution networks and unique selling propositions.  Every successful business that doesn’t have unique IP is seen as an aberration (note to car and petrol companies, you’ve apparently got it wrong !)  Having a science degree and an MBA, simply means you have a science degree and an MBA.  It doesn’t mean you are hungry or can negotiate worth a cracker. Which brings me to………….

4.    I have yet to meet one that has serious revenues under their belt.  They always seem to be in current negotiations with a major multinational, or have closed a deal but revenues haven’t actually started to fall.

5.    Its usually my taxes paying for these people.  (I don’t think I need to expand on this further).

So next time a public servant with an MBA tells you he is a commercialisation expert, smile and move on quietly.  Or if your looking for some action, ask him or her, how much revenue they have booked this year.  And for those of you I have pissed of by this blog, the solution is simple.  Get an entrepreneur to review your opportunities and some real salespeople to sell your IP!

On the subject of goal alignment

I once sat next to and old general at a formal dinner.  After chatting to him for an hour or so I decided he was a genuinely nice bloke that had a wealth of knowledge about all things  military.  Not history, but the esoteric stuff like “why does the handle of my cup have a funny shape cut into it that nothing seems to fit”.  Because he was a nice bloke and seemed interested in me, I decided to ask him a question that had been bugging me for a while.  It had nothing to do with the amount of red wine in my tummy.

The question was “Why is every General I meet a really nice guy, but I only ever seem to meet Colonels that are seriously unpleasant”.  His response was “Son, that’s because Colonel is the highest rank your can get promoted to when you’re an aresehole, and you have to be a nice guy to get things done”.

This conversation was very much about military things, but I felt the parallels with my civilian career of entrepreneur were strong.  I met lots of arseholes that were running small ventures (and crowing about how good they were), but anyone achieving major success, seemed to be a genuinely nice guy.

My thoughts in regards to getting new ventures up was that anything worthwhile doing is going to take a while to get done and will be difficult to achieve.  Like Seth Godin says in his book The Dip If there is no pain,  anyone can achieve it and therefore the returns are much lower.

As the entrepreneur working by yourself this isn’t an issue, you take the pain for the long term gain.  But it can be a bugger getting other people to help out with your venture or do you a favour, because  only the insane would take short term pain without an expectation of gain.

Assuming that this week we are a bit short on insane people, your options to get people involved with your venture normally are:
1.    Share the long term gain, i.e. make them a partner in the venture (either conditional or unconditional, depending on the person).

2.    Get lucky and find someone whom happens to have a different long term goal, that happens to be helped by the same short term actions.  For many large enterprises, this is the principal behind joint ventures.

3.    Pay them to ensure they have a short term reward for their actions (employees, contractors or suppliers).

4.    Provide other short terms gains for their action.

Now I think its mostly likely that option 4 is the most desirable as it maximizes your return.  How do you then figure out what other people want in lieu of money?  Well you can start by being genuinely nice guy and  interested in them.   It then becomes easy to do them favours they value.

On the subject of lifespan

Last week I discussed one of the major problems I had with my IT services business Edion, the issue that the business wasn’t scalable.  Another issue we had is that my concept of its lifespan was wrong.  As anyone who goes into business for himself is aware, no business lasts for ever, in fact 95% of ventures are gone by the end of year two.  Generally though we tend to work with this fact by simply reassuring yourself that things will be different for us.  Maybe though, we should take a different tack.

Edion was started after we picked up a two year contract to support a lot of very large computers for a bank. Sweet!  I then set about trying to grow Edion past this contract.  Initially we had a lot of wins but things generally got harder and harder.  Two and a half years later the bank was still 40% of our billings.  Things then got really tough when the contract finished.

My partners and I spent a lot of time fighting over direction, and some of the fighting was reasonably vicious.  I wanted to build a McDonalds, they wanted to build a boutique restaurant.  Turns out we were both wrong.  Hindsight, because its such a beautiful thing, showed me the truth.  We would never have tried to turn Edion into a business with a future.  We would have been best suited it we had looked at it as the vehicle we were running a lucrative project out of.

A finite lifetime business!

Property Developers do it all the time, film makers too.  Lots of other industries have companies that are setup just to do a project, in fact it is the norm in joint ventures in mining and research.  Problem was it wasn’t the norm in IT, therefore it never occurred to me at the time.  Some of the benefits of this approach I think are obvious.

1.    You get to maximise your profits as you don’t waste anything.

2.    You don’t get headaches as you can have simple goals agreed to upfront.

3.    Your partners are selected to take advantage of a specific opportunity, and your not stuck with them for future opportunities.

4.    You don’t have the stress of trying to adapt to changing market conditions, especially when all stakeholders aren’t aligned

5.    You don’t have entanglements when wanting to take advantage of other opportunities.

Of course there are some downsides as well, especially if you are the guy your partners dump at the end of the project. However in terms of the big questions you should ask yourself before taking advantage of an opportunity (such as what’s my exit) maybe you should also ask yourself, “Is this a business, or simply a project?”.

The lifespan of Edion turned out to be about 2 and 1/2 years.  If I had recognised that at the beginning, I could have made a hell of a lot more money out of it.

On the subject of Scalability

A number of years ago I had a business that offered IT professional services.  We defined professional services as high level IT project skills such as designing networks and commissioning  web server farms.  Edion ran hard and fast from the beginning, clocking up over $1M in sales in year one, and around $3M in year two.  However our sales plateued and I simply couldn’t solve the problem.  After much deep thought and discussion with customers, I came to the conclusion that our customers weren’t purchasing our service, instead they were purchasing our people.  My people had serious reputations and that’s what was being chased by my customers; whom would rather wait until a consultant became available (in one case up to 6 months), rather than use someone else.

I didn’t know how to solve this problem of scalability, it seemed to be inherent in the business.  And that was my clue.  On discussing the issue with a psychologist friend of mine, he suggested something that has stayed with me ever since.  Maybe Edion wasn’t meant to be expandable, maybe I should just extract maximum cash from it and invest those funds into something else.

I have realised since that I wasn’t an orphan with this problem, in fact I often run into people that are selling a product or service and finding it hard work.  They seem to have three main problems:

1.    One unit of effort returns one unit of reward, and when they stop selling they stop getting paid.

2.    They find it nigh on impossible to get good people to increase the scale of the business

3.    They find that they, as the founder, are responsible for 90% of sales.

If this sounds like you, then this strategy advice could come in handy.

A.    Stop fighting it and accept the fact that you have a non-scalable business, its not the end of the world though, rather the beginning of an exciting new phase.

B.    Stop trying to grow this business because it’s a waste of your intelligence and energy.  With the time and energy you just freed up, you can focus on maximising profit from this non-scalable business.  For instance stop investing in systems for growth and in fact pare it back to a bare minimum, and get rid of those ineffective salespeople.

C.    Use the free cash flow now generated to invest in building products in a new business.  One what’s complementary to the existing business but scalable.

What makes for a scalable business is a different discussion, however its not that hard to figure out.   Have a look around at any business that has made an idiot wealthy and you will spot most of the attributes of a scalable business (eg mobile phones, fast food, ISP’s, petrol).

Everyone can be in business

About once a month I go to the movies with a mate of mine, a kind of very tame boys night out.  Anyway, whilst we were having a beer after the movie he mentioned to me that he had run into a women who owns a couple of hair dressing salons in the UK.  Apparently she is able to travel around as much as she likes, but still has a vice like grip on her businesses.  Using webcams, a web integrated accounting system and Skype, she’s able to monitor almost every aspect of her salons in real time from her home, or from a hotel room from another country.  How cool is that?

Which got me thinking about how virtual I could make a business, and here’s what I came up with.  A business setup for under $1,000 , that can be created without leaving the house, and run from anywhere I have an internet connection.

THE PRODUCT
My products will be the books that I am currently writing on business development. If my product was soft toys or say specialized lamps, I would change the warehousing arrangements.

THE MARKETING
Firstly I am going to buy a domain name to develop my own brand and make it easy for people to find my products, something like www.brendans-brilliant-business-books.com.au (maybe not that one actually). I can buy the domain name on the cheap at Intaserv or a bit more expensively at Melbourne IT .  Intaserv,  is the cheapest for com.au domain names but their domain name management tools are no where near as easy to use as Melbourne IT.   You get what you pay for, no surprises there.

The products will be advertised online using campaigns purchased from Google Adwords and via the Sensis site .  Of course my online shop will be Search Engine Optimised so it can be found easily.

I will keep a record of what’s happing and run email campaigns using a web based CRM (Customer Relationship Management) system.  The one I have chosen in SugarCRM as; Its Open Source, which for me means its more robust and free.  The trade-off though is that the documentation can be crappy.  SugarCRM requires the same supporting technical environment as my shop.

For the online shop, I am going to use OSCommerce.  This is another Open Source product available at Source Forge or at www.oscommerce.com Again its powerful, robust and free.  It also uses the LAMP stack (Linux operating system, Apache webserver, Mysql database & Php language) as its operating environment.  I will connect the shop to my bank account using a merchant account I will setup at paypal

ADMINISTRATION  AND LOGISTICS
I going to create the company online at a company registration site such as www.incorporate.com.au  Sites such as this have a web based wizard that walks you through all the steps required then sends you the company register as a pdf document once the bill is paid.   The end result is a not big sexy leather look binder, but I’m not looking for that anyway.

The shop and CRM system need to be hosted somewhere.  I’m going to choose someone like Quadrahosting Which have customer control panels to make life easier.  For around $150 a year I can get around 20 websites hosted and my email chucked in as well.

Since I have purchased some web hosting that comes with email, I can use the control panel at Quadrahosting to setup a whole lot of email addresses that forward email to my gmail account.  I can then get my email, anywhere in the world, that is sent to addresses such as accounts@brendans-brilliant-business-books.com.au and sales@brendans-brilliant-business-books.com.au

Now since I want to be as virtual as possible, I don’t particularly want to hold stock.  I’ve decide to use an online book sales site called www.lulu.com to layout and print my book on demand.  I simply (warning : loose use of the word simple) upload a word file, and select the design and title.  I believe a 100 page hardback will cost about US$16 to produce for a
print run of one.  Lulu will effectively become my on-demand warehouse, printing and sending out books as I want.

My banking is of course easy to setup online.  Many companies now have the internet only account.  Its normally an interest paying, zero fees account that you can tack onto another fee paying account you have.   I tend to use The CBA as my other accounts are there and I like suing the one net banking interface to manage my affairs.  And as mentioned before I will also setup a paypal account that will be the gateway between my bank account and my shop.

Since I want to have a local landline number (rather than giving out my mobile) I am going to use skypeIn .  I can have a local landline number that I can forward to my mobile, or simply leave it as an internet based voice mail system.

Now I can simply have my home as the postal address or the traditional Post Office Box.  However there is now a large number of virtual office suppliers in the market.  I can have a Collins St address for as little as $10 per week.  Companies such as Silent Partner offer you the ability to have that address and rent meeting rooms on as ad needed basis.

To keep track of what’s going on I need a good Accounting System that I can create GST compliant invoices with.  A quick search reveals a number of Open Source (free and configurable) web based (accessible anywhere) solutions, including  SQL Ledger .  There are also some interesting paid solutions for nominal amounts such as SAASU at around $250 per year.

Finally since things are now working well and my overheads are minimal, I am profitable.  Therefore I need to be paying tax (both income and my GST). Just as well that he ATO allows me to do everything online at www.ato.gov.au

My estimate is that I have invested about $800 (before marketing) to get the virtual business up and running and worked for maybe 2 days in total over an elapsed time of 2 weeks.

So…….

There are lots of other options for doing all of this.  For instance if I was selling art or t-shirts I would probably use Red Bubble as my shop and warehouse, if I was selling services I probably wouldn’t use a shop,  maybe I would use a free online content management system such as Joomla to run the website.  The principle is the same though, there is now no reason (investment, physical space or time available) why every technically literate Australian can’t be an entrepreneur on the side.