Monthly Archives: May 2008

Don’t let IT people manage your IT

A couple of years ago I accepted an offer to work in Advertising.  Having a background in Information Technology (IT) and Accounting, it seemed like an odd career move, but it was a good one.  The trade off was that I would learn a lot about mass marketing, and the agency would get me to restructure them profitability and growth.

One of the early projects I tackled was getting the IT infrastructure under control, which I want to discuss here.  Although originally I was reviewing expenses. My methodology was to look at a couple of expense line items each month, bringing them under the microscope. The first line item I looked at was equipment leasing.  It was a chore to find the documentation for each lease but eventually it sorted out.  The results though were disturbing.  It turned out we were paying for equipment where not only had the lease already run its course, but also for equipment that died years before and been thrown out.  Cancel the pointless leases = $8,000 straight to the bottom line.

My opinion on the reason why this had occurred, was that the agency’s management had abdicated its role in managing the  businesses IT.  No one wanted to know about IT, because it was technical.  IT support got outsourced and the technical guy had no boundaries or objectives set.

My firm belief though is that IT is just like legal issues or tax issues.  You may not understand the detail, but you still need to understand the big picture and give clear instructions or you are going to get burnt.    However after 6 years of running IT services business, I found that almost no-one in the SME space actually manages their IT.

So, no more excuses: The first step in managing your IT, is to do three things.

1.    Build an Asset List.
2.    Put together Asset Boxes.
3.    Build a Network Notepad.

Build an Asset List
You need to know what you have first and almost anyone can do this.  Have a whole lot of stickers with numbers on them printed up, and go through every room in your office placing stickers on each piece of IT, whether its being used to write proposals or used to hold up a bench (dead stuff).  Taking off my accountant’s hat and putting on my entrepreneurs hat, I define an asset as anything that would piss me off, it went missing.  Monitors are normally a separate asset from the computer, but keyboards and mice are just consumables.  I consider my portable business card scanner (sweet) as a separate asset as I connect it to different computers.  Software generally doesn’t get treated as a separate asset as it belongs to a single computer.  Make sure you record the master list of what Asset ID  belongs to which asset.

Put together Asset Boxes
Most people like to keep the boxes that come with the software or hardware comes with because the colours are pretty.  Get over it.  As soon as you have a couple of computers running, life becomes a lot more complex and you can’t afford to waste the space (or the time looking for lost things).  Buy some box files and put the Asset Id and description on the back of each one.  Then stuff those boxes full of all the relevant junk for each Asset, including software, manuals and licenses.  You want software and serial numbers in the box for the computer, not separate.

Build a Network Notepad
The network notepad is a live document that details everything you need to know about what you have.  I like to start with a drawing of the network that shows which cables connect to which objects in the network.  It’s great for representing what you have and potential problems.   Get your IT person to do it for you, as he is sure to have network mapping tools that will break the back of the job.  The next part of the Network Notepad is have a list of every computer or appliance on your network, and for each appliance all the relevant details; Its Name, its Serial No., its Asset ID, its location, its purpose, its manager, the administrator username and password.  This stuff is critical because if your IT support person leaves you in the lurch, your equipment can quickly become a boat anchor or door stop if you can’t log into it.

Once this is done, you have the basics of managing your IT.  The next step is figuring out where you want to go, and finally, how to get there.

So don’t let IT people manage your IT.  Sure, leave the execution to them, but remember they don’t care about your profit, your customers or your brand.

The 5 Intangibles of Raising Funding

In mid 1999, I had a multimedia business called Carradale Associates.  Apart from building websites, we were starting to do some cool work in online animation and getting some fairly interesting insights into online business.  One of those insights was that an online auction business would do well in Australia.  At that stage, Ebay was in negotiations to come to Australia and the market was pretty much empty.  A quick search and I came across an auction model that sold excess stock for quality brands that was run out of Chicago.  Their key IP was dynamically timing of the release of goods to the website to maximize profitability.

Anyway,  my business partner and I went to pay them visit, and signed a licensing deal.  A week after arriving back in Australia, we had $2M sitting in a bank account that we raised from investors.  Two million in seven days with almost no documentation.  How easy was that!

Since that moment in time though, raising capital has been tough.  As I don’t work in the venture finance industry but have always been a student of it, I have watched with interest many, many people try and raise capital.  Some win, some lose, sometimes its been me who’s the winner or loser.  I have felt though that certain patterns have appeared that don’t seem to get mentioned by the venture finance community.  They always talk about the deal, but I have been looking at more the human side of raising funds.

Last week I was approached by two different groups that wanted me to introduce them to “potential investors”.  Both had nice pitch documents and a good story, but it occurred to me that if your asking for introductions at the time you need the money in today’s market, you are probably not going to have a happy ending.

My observations over the last 10 years on the 5 ways to successfully raise money are:

1.    Get Lucky
No, Im not being silly.  Plenty of people have bad opportunities that are badly presented.  Unfortunately 1 in a thousand of these people runs into someone whom has cash burning a hole in their pocket.  They get funding regardless of the quality of the deal.  Unfortunately the one undeserving person who gets funding, gets remembered by all and held out as an example of what you can achieve.  The other 999 are forgotten – hard to deliberately get lucky though.

2.    You have a Sensational Story
Your opportunity is fantastic; Great profitability,  unique and protected, globally scalable, low risk and validated in the market.  This seems to be what the investment community is really looking for.  However you have really got to ask yourself; if I could tick all the above boxes, why would I give away equity?  Why not just get debt financing.

3.    The Market is Booming and you are in a Hot Segment.
During the dot-com boom, if you had an interesting story (see my initial experience above) you can get money without a business plan (despite what advisors say) and its not just technology businesses.  It wasn’t that long ago that any mining company only had to mention uranium to have someone throw money at them.  The trick here is to pick a market that’s booming, before looking for a problem to solve.  Not the other way round.

4.    Develop the Relationship before asking for Investment.
A number of people I have spoken to over the last couple of years, have had long term relationships with their investors, prior to investment.  In most cases they have targeted potential investors well before the investment event and have provided regular updates on basically “how we are doing what we said we would”.  So if you want to raise money in a years time I suggest you start developing a relationship with likely investors, so that your credibility is a given.

5.    Get a Trusted Hand.
It appears that if all else fails, a good way of raising funding is to give away equity first.  If I had something that was risky, needed money and I had no credibility I would offer Alan Moss a free carry in the business.  Almost anyone in the market will invest in something that the ex-head of Macquarie bank is involved with.  Of course Alan may not be interested,  but there is a very large number of high profile, credible people whom are happy to be given equity in return for their profile and credibility being used to raise funds.  The key here is negotiating how much you give away and what are the triggers for it.

Most Venture Finance people I know are happy to tell me this either complete bullsh*t or only a tiny part of the story.  However I am happy that it explains all the investments I have seen to date, including all the ones where sophisticated investors have done their dough.  And the reason we raised $2M in seven days in 1999?  We were in a hot segment in a booming market.  My business partner was a  “trusted hand” and we tapped on his existing relationships.  It cost me 50% of the equity but it was a lot better than 100% of nothing.

Failing or Flailing?

In the late 80’s when I was training to be an Army Reserve Officer, one of the major training (and leadership development) techniques that had a major impact on me was ownership of failure.  If you taught a lesson and more than a handful of people failed the quick test at the end, then you the instructor failed.  If your team was depressed, your fault, if they got hurt or “killed” it was your fault.  From the smallest mishap to the greatest catastrophe, you owned the problem.

All this failure from a training point of view was massively useful.  It let you gain an intimate understanding of why successful strategies or tactics worked, and how to execute on them seamlessly.

From my point of view, this focus on failure worked because of two major reasons.
1.    The objective you were trying to achieve was tightly defined, and therefore the failures had enormous learning value.
2.    There was a culture that accepted, and valued, failure in training as the pathway to sustainable success.

Interestingly, I have recently discovered a connection between the military and creativity.

Preparing for the upcoming Churchill Club Panel on Creativity , I have been reading a book by Nadja Schnetzler called the Idea Machine : How to Produce Ideas Industrially . Nadia runs a Swiss business called The Brain Store which was founded in 1989.  Nadja’s business focuses on the industrial production of ideas, and has a premium client list in Europe and the USA.

Anyway, an area that Nadja discusses early on is failure.  The Brain store has a culture that accepts failure on the path to success, and in fact sees it as necessary and highly valuable.  The key for them is to tightly describe the question before they start generating ideas to solve it.  This ensures that that every single failure has value when reviewed.  The result of the study of what went wrong leads to the development of the world beating idea (rather than mediocrity).

The process of tightly describing the question is so important that they have set up a business offering just to train staff!  They have a shop front service that allows people on the street to come in and get great ideas for a token fee.  Eg. A guy comes in and asks “What shall I buy my girlfriend for her Birthday?”.  This then gets improved into something that includes pricing information, her interests, what she hates, what you have purchased in the past and what would really excite her.  All this and more before the ideas flow.

Nadja describes the process as the difference between failing and flailing.  Failure is good, but when you regularly fail, don’t learn from it and are not sure where you are going, you are just flailing about.  I’m sure the Army would agree.

Just too bad that 95% of people I meet in business would rather eat worms than accept they may be responsible for a failure and get value from it.

Sticky Labels

Instead of writing some amazing strategy insight, I thought Id pass on a simple tip that will save you time and frustration when dealing with your computer.

When I started an IT Services business called Edion in 2000, we had one spare computer used for centrally storing and sharing all our stuff. This file server quickly mutated and grew. Two years later it had its own room and had become a number of files servers, a firewall, a web server, a mail server and a variety of computers and routers used as a test bed by my network engineers. Apart from our electricity bill going through the roof and being introduced to the necessities of cooling the environment, we now has a mass of cables to deal with.

To the techo’s, the solution was simple. Every cable was labeled at both ends with a code number. These code numbers were kept on a table in the server room that allowed anyone to quickly figure out what cables were up to. All cables were marked, including Ethernet, power and USB cables.

Now my current office (and home) are no where near as a complex environments, as I pretty much just have to look after myself. However I have noticed that no matter how many spots I have on the power board, I always have one too many items that need plugging in. Underneath my desk is generally a mess as I regularly pull things out and swap them around. Murphy’s Law dictates though, that that whenever I pull a plug out (to make room for something else), I will always pull out the wrong plug and bugger something up I have been working on. I will then bump the back of my head as I quickly scramble back up to see what damage I just caused myself.

The solution to this problem is a variation on what my tech’s used to do. I have one of those $49 dollar label makers. Every time a pick a new appliance ; Computer, Printer, Phone charger, Monitor, Thermal label printer, Bluetooth charger, Camera charger, External Hard Disk, ADSL Modem, USB Hub etc) I put a label on both ends of the cable, indicating what the cable for . Eg “Printer”. This means that when I scramble around in the shadows under my desk, I can still change the right plugs, without having to unscramble the spaghetti.

The bonus is that when I find a powersupply or charger in a box, I know immediately know whats its for. My wife also finds it handy as stashed behind the CD player in the kitchen, we have a tangle of mobile phone chargers, some of which are for phones we still own.

So, not an amazing strategy insight, but instead maybe, a useful tip on managing your IT assets and preventing data loss.