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A look at Lazy but Successful Businesses

Have you ever noticed that some service businesses are inherently weak at marketing themselves, but still tend to be very lucrative? Professions that tend to centre around compliance (and adding little direct value) such as legal services, accounting. However many other services, which may have a much more positive impact on your business and have enormous value, such as pretty much everything in the marketing domain, struggle to gain and keep customers and all to often go under.

You, like I, may ask yourself, “what the hell is going on here?”

I’ve been mulling this over and come up with a two by two matrix that I believe explains what’s going on, and can be useful to those finding themselves fighting this battle.

High Barriers to Entry ^ Architect        Solicitor

                       |                     

Low Barriers to Entry  | Marketing       Bookkeeping

                        ————————–>

                         Wanted           Needed

 

Firstly its about being Wanted versus being Needed

Some businesses supply what you need, and some what what you want. Insurance is something that you need, especially if you are bidding for a government contract. accounting services is something that you need, especially if you don’t want to get fined by the tax department, legal services is something you need, especially if you are being sued. Alternatively, training of staff, public relations, design services etc are just something something that you want, but can do without.

Secondly its about Barriers to Entry

Some services have high barriers to supply. You need 6 years of training before you can even think of specialising as a surgeon, you need a licence to be an electrician and you need to hold vast amounts of capital, before you can become licensed to loan money. Alternatively anyone can do their own bookkeeping, learning to write HTML is a free course on the web and you can buy press release templates and media lists online. Y

Positions in the matrix are not fixed in stone though, barriers are constantly dropping and new needs arising. For instance the rise of free online courses such as Code Academy and Scratch are lowering the barriers of entry to professions such as software engineering. Legislation can also create new professions and specialisations, such as mortgage brokers and financial planners. Note also that the “needs v’s wants” and “barriers to entry” attributes for your service business don’t have to be real, they just have to be perceived to be real. This creates an option of tweaking your business to make life easier. Consider:

 

You can move from “Wanted” to perceived “Needed”:

Robert Cialdini wrote about this in his seminal “Weapons of Influence” with techniques such as Reciprocity, Commitment & Consistency, Social Proof, Liking, Authority and Scarcity. Behavioural Economics also focuses on this when discussing irrational buyer behaviour. Examples of how this actually plays out include:

  • Fear Marketing – The perennial favourite line of consultants is “You will go bankrupt/be shunned/die unless you use me”.
  • FOMO – Or Fear of Missing Out. Grants Consultants use this technique to get customers to pay high success fees for money that they are led believe is just waiting for them.
  • Industry Statistics – Everyone loves a good survey that will tell you what your competitors are doing and why you are a loser for not doing it to…

You can also move from “Low Barriers to Entry” to “High Barriers to Entry”:

High Barriers to Entry can be real or just perceived to be real. For instance real barriers that you acquire could include:

  • Industry Certifications
  • Being the Local Node of a Global Network.
  • Being the sole licensee of a methodology or system in your region.
  • Owning registered designs, trademarks or methodologies.

Perceived barriers to entry could include:

  • Having access to individuals or relationships that others don’t.
  • Having unique insights.
  • Having a secret formula.

If you have value, are needed and have high barriers to entry, life becomes very, very easy.

good at business?

Not that I ever want to be seen as a cheersquad for lawyers, but all to often I am driven mad by business people completely ignoring the legislative framework we operate within. What do I mean by this? Some recent examples:

1. A employee telling me that their probationary period only technically finished on the date listed in their contract (3 weeks ago) as their manager told them it would run to the end of this month instead.
2. A contractor telling me he had been grossly underpaid, receiving only 10% of the value invoiced to a client for work he had done. When asked what did his agreement say, it turned out there wasn’t one, but he still insisted he had been cheated.
3. A very, very senior industry consultant being surprised he was 10% worse off when he had to wear the GST on a contract that was provided to him by an Australian local office instead of the New York parent.
4. Turns out that a group running events in Melbourne and Sydney for a couple of years for money, is trading as an entity that doesn’t appear to actually legally exist anymore!
5. An investor in a business turning over some millions of dollars thought Directors and Shareholders were pretty much the same thing.

What’s fascinating is in that every instance above, Continue reading good at business?

innovation and birthday gifts

I believe that the major reason Australian businesses don’t like internet based competition is it forces the clever businesses to innovate, and the lazy businesses to drop prices before dying.

Last week I realised I hadn’t done anything about birthday presents for my wife, despite the fact her birthday is easy to remember, as its on Valentine’s day. Anyway, on the Thursday I went online and ordered two presents, both physical goods, one order from the UK and one order from about 50km away in in Victoria. The UK goods were a clothing item she had seen in a catalogue and therefore in an industry where there is lots of competition. The Australian goods however were fairly unique, being a subscription to a magazine with no direct competitors.

The result
The goods from the UK were delivered on the Monday morning, 4 days after I had ordered them (via DHL).
The goods from Australia were despatched on the Tuesday, 5 days after I had ordered them, and delivered 6 days after the order (via AusPost).

Now I know the sample size of this example is tiny, but Continue reading innovation and birthday gifts

noticing stuff.

Two things I noticed recently.

1.  Having driven around Gippsland last school holidays, I noticed that no one in Regional Victoria drives a newish Landrover.  Its all Nissan Pathfinder and Toyota Landcruiser.  There was some really old Landrover Defenders and their predecessor but no Discoverys or Range Rovers though.   In my suburb their are plenty of Rangerovers, Discoveries on the streets, despite the fact we aren’t four wheel driving anwywhere.  Makes me wonder what the country people know about the robustness of 4WD’s.

2. Hard waste collection day todayand  I have never seen so many TV’s  (big CRT style) on the nature strip.  I cannot believe they have all gone on the blink at the same time.  My only assumption is that everyone has decided to changeover to a cheap LCD or Plasma over the last 12 months.  I say changeover rather than upgrade as the old TV’s still displayed the same television content.

My off the cuff conclusion is that the people in my area are all reasonably affluent (unsurprising) and easily persuaded by advertising into making stupid decisions (surprising).

 

Maps to Real Life

I know a guy that has moved his family to Italy, so his children would grow up with a bit of culture in them. The driver was his increasing belief that his kids were evolving into something he’d like to shoo off his lawn. And no, he’s not of Italian descent and neither’s his wife. He just thought that spending a couple of years in Europe would do the family the world of good. He occasionally posts on line to Tumlbr, with a blog called “Shit I Learned – things you pick up on the way” I like the title, because it reflects how I feel about my journey.

Anyway, one of the things I reckon I have learnt along the way – is that the closer a solution maps to real life, the less problems you find you have. I use this as a guide for when coming up with solutions. Whenever a process or proposed solution starts to feel a bit too abstract or too complex or too removed from people’s actual motivations – I ask myself what’s really happening here? Is this how real life works? Are the general steps the same, and the motivations and goals aligned?

For instance, in one of Flinders Pacific projects, we get bonuses paid on our assessment of what is the likely outcome of our marketing efforts, at both one and three years in the future. The bonus gets paid today, but the auditing of our performance won’t happen for several years – by which time we are likely to be long gone. This arrangement doesn’t particularly well “map to real life”. Although unsurprisingly, I don’t complain.

However this belief in arrangements being more effective and robust when they “map to real life” made me excited when I heard about some arrangements in the innovation area in Finland. Göran Roos, who’s currently in Australia, is the chair of the VTT which a bit like Finland’s version of the CSIRO. It employs around 3,000 researchers to come up with cool ideas in a variety of domains. The VTT’s underlying purpose is one that I find highly attractive. Its objective is to come up with technical innovations to improve the competitive performance of Finnish industry.

But the bit I love, the bit that maps to real life so much better than our arrangements, is that is performance is not judged by itself, Government Ministers or their staff – its performance is actually judged by Finnish industry, its customers! Who better to assess your performance than the customer.

Despite the fact that we consider ourselves to be a clever country, it kinds of makes me wish that our government had learnt this along the way. CSIRO, NICTA, the CRC’s and in fact any government funded research agency would surely benefit by being judged by their customers.

Own Goals

Last week I was honoured to sit in a meeting of a team that was assured of success. I say this with disgust though as the group refused to clearly define what they they were trying to achieve, specifically so they couldn’t fail. Sadly its too easy to get away with this in a NFP environment.

And because I have the shits up, I thought I would write about the 3 most common areas of failure that I see amongst leaders.

1. Lack of goals

Don’t define desired outcomes, don’t define what success looks like, and especially don’t define what failure looks like. This means that you are absolutely assured of not failing. You can carry on about culture and process if you like, but culture and process without one eye on outcomes means you can end up with some really nasty results. After things go really bad, you tend to hear “I was only following orders”. Employees of AWB, Securency and OneTel all thought they were doing a fabulous job.

2. Create small goals

If you create really small goals, its really easy to be successful. Unfortunately you tend to get stuck in this cycle and tend to believe your own success so much, you don’t even notice the big opportunities that wave to you as they pass you by. Certainly Real Networks thought it was doing pretty well when it rejected Tony Fadell‘s idea for a content delivery system for MP3 player. Apple liked it and launched iTunes with its music player into a crowded market. And speaking of music, the record industry did really well for artists when protected their revenue streams by suing Napster. They now have a tiny share in the digital music market.

3. Change your goals to suit your outcomes

The number one area of failure I see in start-ups is that they change their goals to match their outcomes. If you don’t get sales, you were just trying to validate a market. If you don’t get profits, you were just exercising your production systems. Blogger was a side project of Pyra Labs inc. who were building an online project management and CRM tool. After it was bought by Google, Google let the founder Evan Williams, of Twitter fame, go.

If you set smart goals, you risk failure. You also learn and get better.

Going to go home and wash now.