Category Archives: Management

Talent Attraction Narrative Needed

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Creating an innovation economy has many challenges, not the least of which involves locating and securing skilled workers to help build and grow high technology ventures. There is little point in cultivating a tech start-up culture without the fundamental building blocks in place to fuel growth. Tech founders need to be proactive about building a team, as well as extolling the virtues of New Zealand as place to re-locate to.

Recently I received several requests for assistance from aspiring tech entrepreneurs eager to find a technical co-founder for their start-up project. Of course I was happy to help, but I needed to prompt for some basic web based information, so that I could share the opportunity. If you are a tech founder and you value an open approach to enrolling people into your project – please do yourself a favour and start telling your story online!

I probably reach around 4000+ individuals in the New Zealand tech scene directly through my social media channels, community groups and various blogs. My advice to start-up founders is to take a similar approach. Turn up to events, write blogs, tweet, organise and support stuff in your community, if you want to reach the kind of people who can help get your start-up going. I don’t just mean making a Facebook page or sending a Word document around to a few likely suspects. Get creative, if you want to surround yourself with creative people.

You might also need to look offshore. I’ve recently been involved in recruiting a new employee for iwantmyname and we ended up engaging a guy from San Francisco. When you look around at the most interesting emerging tech companies in New Zealand, at least half were established by skilled migrants. So there’s certainly no harm in attracting more people from abroad to deepen our talent pool; but remember we are competing with every other economy around Asia-Pacific. That’s why we need to get our brand values aligned in a regional sense, so we can be clear about what we have to offer.

We began some important work on this last year through the Inspire event with KEA and Grow Wellington. I’m looking forward to continuing that conversation in 2013.

Paul Spence is a commentator, technology entrepreneur and is a co-founder of iwantmyname, a New Zealand based global Internet venture. You can follow him on Twitter @GeniusNet

Old Industries Are The Pits

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Railways, coal mining and industrial scale manufacturing were all economic activities that had their origins in the 19th Century. This week has not been a good one for anyone employed in those businesses in New Zealand, with widespread redundancies having been announced. The reasons for the collapse of these industries differ, but they share the historical hallmarks of “creative destruction” as expounded by Austrian economist Schumpeter.

Schumpeter was remarkably prescient for a man of his time. Drawing upon the political organisational theories of both Marx and Weber he concluded that innovation was the primary driver of economic change and that every industry was subject to a cycle of emergence, ascendance and decay. He controversially proposed that democracy could never truly empower the ordinary citizen because the electorate were largely ill-informed or ignorant. His predictions that social democratic governments would emerge in the West (rather than socialist revolution) have largely come true.

None of this will be of any consolation to our miners, factory workers and railway engineers. But it does underline precisely why we need to be moving up the value chain through exporting our knowledge rather than relying upon filthy, dangerous and extractive commodity based industries. After more than a decade talking about it, the penny has finally dropped and the government is now attempting to reorganise commercialisation of publicly funded research and has been increasing the investment in research, science and technology. Bullish talk by government ministers about opening up more public land for mineral exploitation also seems to have faded for the time being. That’s why I spend a lot of my time promoting and supporting knowledge based entrepreneurship and emerging technologies and industries.

Paul Spence is a commentator, technology entrepreneur and is a co-founder of iwantmyname, a New Zealand based global Internet venture. You can follow him on Twitter @GeniusNet

iWantMyName – The Next Steps

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A lot of people have been asking me recently how iWantMyName is going. The short answer is that it’s going great! We’ve been profitable this year and have had our heads down working hard laying both the technological and business organisational foundations that we need to grow. The challenge has been in making the transition from a small start-up business to a fully fledged, high growth technology story.

I certainly won’t say that it’s been easy. Everyone on the team has made sacrifices and we even had one or two nervous moments during the early days when we wondered if we would make budget and be able to pay salaries or rent. It comes with the territory. Being a start-up entrepreneur is like being on a mad roller coaster ride. It can be both thrilling and terrifying, especially if you are bootstrapping.

I meet a lot of budding web entrepreneurs and one of the first questions I ask them is, “are you ready for 2-3 years without a proper income?” It can easily take that long to carve out a niche for yourself and get meaningful revenues going. That’s without factoring in the vagaries of foreign exchange rates.

Notwithstanding the challenges ahead, we’ve got big plans for lots more features and fresh content on our New Zealand domain registrar site plus a major makeover of our search functionality across all four of our sites globally. There are also new and popular hosted services being posted almost weekly, so users can have smart one-click DNS set-up on their domains. We’re positioning iWantMyName as a next generation domain and DNS management service with an eye on future opportunities emerging with the new top level domains and internationalised domain names.

In addition, we’ve also started a new venture to advise young web entrepreneurs and share some of the experience we have gained on the journey so far. In fact we continue to be actively involved in supporting tech community events such as through Unlimited Potential, Startup Weekend, PXLJam and Perl Mongers to name but a few. We think it’s an exciting place to be as technology entrepreneurship continues to gain a greater profile as a career and lifestyle choice.

Keep in touch with us on Twitter @iWantMyNameNZ

Decoding Startup DNA

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A recent joint study by Silicon Valley VC firm Blackbox and academics from Stanford and Berkeley universities provides some interesting insights into what makes Internet start-ups successful. The project involved 650 web start-ups predominantly investor funded and based in Silicon Valley. However the findings also have relevance for tech firms outside of the Valley ecosystem.

“Entrepreneurship is strongest at the intersection of science and art”, say the research authors who set out to define the science of technology entrepreneurship more clearly through a better understanding of what drives entrepreneurial success. By codifying the features of high performing tech start-ups the researchers hope this success can be replicated elsewhere. The research findings naturally extend much of the methodology ingrained within the lean start-up movement; for example it was found that companies that pivoted once or twice did better than others in terms of both market growth and capital-raising.

The study identifies a typology of three major types of Internet start-ups based on the approaches to customer development and acquisition. It also describes a set of common milestones and stages that start-ups tend to have in common. Companies that skipped stages tended to do less well. But perhaps the most interesting finding was that start-ups with balanced teams of business and technical oriented founders achieved the most success overall and chose the right time to scale up after validating their markets.

The report can be downloaded for free.

Wild About Wellywood

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Just when we thought common sense had prevailed, the sneering face of Wellington Airport’s Australian born CEO appears in the media to inform us that the hideous and ill-conceived “Wellywood” sign will go ahead after all. Haven’t they got better things to spend their time on?

First it was the turd shaped international terminal, then they wanted to block off a public roadway, now the ridiculous “Wellywood” sign is back on the agenda. It’s clear that Wellington International Airport Limited (WIAL) have no interest in considering public opinion when it comes to their development plans. What is less clear is why 34% shareholder Wellington City Council is not strongly representing the public’s views at board level. Even Mayor Celia Wade Brown admits that the proposed sign is not a suitable reflection of the city.

WIAL management just don’t seem to get it. If you want to market a region as creative and fresh, why would you purloin an overused and derivative icon from an entirely different culture? Furthermore, why would you enflame the public with such a thoughtless and arrogant approach? The “Wellywood” sign concept is so tacky and poorly thought out it beggars belief from those of us who love and value Wellington’s beautiful seascape and are hugely proud of the achievements of all the digital creative industries across the city.

Majority WIAL owner Infratil is currently appealing to our national pride in a bid to encourage more customers to embrace their newly refreshed and wholly Kiwi owned fuel brand “Z”. Yet they seem oblivious to the conflict that is brewing with the airport’s proposal. “Wellywood” says nothing at all about Wellington, it’s not even funny and it certainly sends the wrong message about our ability to be creative. One can only hope that WIAL management will have a change of heart, for I fear a great many people will not take lightly to having their noses rubbed in it.

 

Riding the Wave

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It’s exciting being at the forefront of innovation in your industry and riding a growth wave. But there are dangers lurking in the breakers for service oriented web companies with big goals.

Selling services online front loads a business with customer acquisition costs including infrastructure, marketing and customer support. But if sales are subscription based then cashflow can be lumpy and tends to lag well behind sales conversions. Another reason for this problem is that, for online sales, the payment gateway at your bank holds funds until they are cleared. If you are a new company, the holding period can be up to a month. In the meantime there are bills to pay and mouths to feed.

There are only two ways to get around this problem, bootstrap the business or raise capital. By bootstrapping, the founders are effectively providing the operating capital by contributing their time until the business reaches profitability. This is the approach we took at iWantMyName. Bootstrapping generally leads to slower, more manageable growth and allows founders to retain control. Raising growth capital is a valid strategy as well, but the task itself takes up a great deal of management time and head space that can distract from improving the core business. Ultimately, happy customers are your best source of capital.

Whether or not you go for raising capital, the ultimate goal should be investing time in improving the service offering. This in turn lowers the cost of customer acquisition. By improving the customer experience you should attract more referrals, have fewer support enquiries and enjoy better margins through additional sales of premium services. It seems intuitive, but for us it was a thrill seeing organic growth tick upwards as we gradually improved our site. Happy surfing.

A Tale of Two SOEs

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Two recent media articles illustrated the different approaches to innovation taken by a pair of high profile state owned enterprises (SOEs) with which I am well acquainted. What these stories have in common are the fact that both businesses were turned around by strong leadership.

Rod Oram’s pre-Christmas cracker about Air New Zealand’s cabin layout innovations was a timely reminder about how (with an injection of taxpayer funded capital) the national carrier went from being a basket case to business success. I love Rod’s work and the fact that he has been for many years a tireless champion for innovation and technology as a way for New Zealand businesses to add value to exports and grow the economy.

The second story was about MetService, my former employer. The NZ Herald article outlines how the company leveraged a stake in a UK company to acquire expertise in the European marketplace. The company executed this strategy under the tutelage of Paul Reid, who is about to move on from the company. Reid inherited a mess when he took over the CEO role several years ago but he forged ahead and infused the senior management with some core competencies that had been somewhat lacking previously. Incredibly for a knowledge based business, the company had limped along for many years until this time without either a human resources manager or a CIO. He also took the time to genuinely listen to any staff member, his door was literally always open.

Being a former Air New Zealand staffer himself and mindful of the highly competitive nature of the industry, Reid actively led MetService away from its traditional aviation market base and into the media and consumer markets of Europe and the Middle East. This has proven to be a good move, although in light of volcanoes and snowstorms and rapid developments in platform technology, aviation still looks like a missed opportunity for the company. Unfortunately, it was very clear to me at the time that it meant a death warrant for the position I was employed in. But now that I’m engaged in a challenging role developing a high growth technology export business that I actually have a stake in, it seems like the best possible outcome all round.

Best wishes for 2011.

Is Branding Part of the Value Proposition?

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I’ve recently finished reading a book called “How Brands Grow” by Prof. Byron Sharp. Although it is not specifically technology venture focused, I would highly recommend it for any marketer, especially those marketing web-based B2C services such as we do at iWantMyName. The author questions much of the accepted wisdom on marketing and turns a lot of traditional textbook strategies about marketing on their head.

In a dynamic market, you can compete on price, but this is akin to an arms race and damages everybody. You can also compete by innovating and making your product more feature rich, but this is expensive and takes time. A third approach is to have a brand strategy in place from the outset that puts you in a stronger position when competition arrives. But product developers sometimes overlook branding as part of the overall value proposition.

In his book, Prof. Sharp argues that the quickest way to build a market is to make your brand physically and mentally available to consumers as well as targeting the large pool of dissatisfied customers that change brands each year. He scoffs at differentiation, citing cases like Coke and Pepsi who have attempted to differentiate within the cold drinks category, but whose respective market shares hardly change year after year.

Coke and Pepsi are constantly fighting off cheaper brands and do so quite successfully because customers are prepared to pay a premium for a brand they feel connected to. That connection has been built up through generations of consistent positioning. Everybody recognises the Coke symbol, right? It’s irrelevant whether or not the product itself is substantially better than the cheaper ones. What matters is that customers mentally associate positive attributes with a brand such as trust, some kind of meaningful narrative plus “sticky” graphical images. Customers ascribe value to intangible features and this should not be overlooked.

This post is an extension of a discussion on a value based strategy to competing in new markets started by Libby Russell on the New Zealand Software Alliance LinkedIn page.

Why Customer Acquisition Is Trumps

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Companies traditionally put a huge amount of resources into carving out and dominating niches within a particular product category. Airline loyalty programmes are one example of the lengths marketers will go to in order to retain customers. But in more dynamic markets such as web-based services, the old rules no longer apply. Customer acquisition trumps retention every time. Do the math.

For argument’s sake, let’s say that there are a total of 100 customers in your target category and that 20% change their loyalty each year. So, ignoring any organic growth, there is a total pool of 20 customers up for grabs in any given year. A start-up entering the field does well and secures 5 of these floating customers in the first year. But they will lose one of these customers at the end of the first year on average. In the second year there are still 20 customers looking to change provider. If the start-up succeeds with customer acquisition at the same rate it will still more than double it’s user base.

Being a small brand in a market with high defection rates is risky. Growing customer numbers as quickly as possible is insurance against future defections. A larger brand can weather the storm. For many product categories in fact, 20% loyalty churn would be extraordinarily high. So a new entrant has its work cut out for it on both fronts because in some industries the number of shifters is fewer.

I’ve over-simplified the figures, but you see my point. Acquiring customers from the pool of dissatisfied users is the primary goal of a start-up. In the case of web-based services, create a better user experience and you immediately tap into that pool. Customer retention will also take care of itself. Because the domain registrar industry is in dire need of innovation and there is a large number of disaffected users, this is the approach we have taken at iWantMyName.

Air Affair Needs Pre-Flight Check

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You have to give credit where it’s due. Air New Zealand’s spin doctors have had a delicious time making their engagement with Virgin Blue sound like a huge bonus for customers. Unfortunately the reality of the situation is somewhat different. Our national airline’s lusty desire for consummating a union with Virgin may sound like a match made in heaven but it should not be allowed to get airborne without a proper pre-flight inspection.

The two airlines plan to merge and rationalise all their trans-Tasman operations in order to compete more effectively. With Qantas and its low cost offspring Jetstar making rapid inroads into market share and a host of other carriers dumping excess capacity in the region the blue team are taking a beating. It makes perfect economic sense for the airlines to work together, but there is no upside for passengers – especially those from Wellington, where ANZ and PBN already face little opposition. 

No matter what spin the airlines put on the alliance proposal, there are only two possible outcomes for consumers if it proceeds – fewer flights and higher prices between New Zealand and Australia. That is the sole objective because it is the only way the airlines can get revenue per seat to a sustainable level. The net result is that eventually one brand will cease to exist. Given that Air New Zealand is entrenched, it is likely to be Pacific Blue that dies. This will also reduce competition on the domestic scene. That would be a shame because both companies are highly innovative and have excellent customer service standards.

In any event New Zealand’s domestic market has never been able to sustain more than two airline brands historically and somebody will blink eventually. Then the era of cheap airfares will be over, at least for a while. On the other hand Singapore’s Tiger Airways is waiting in the wings – so to speak, although with its appalling customer service record it is questionable whether Tiger’s arrival would be either beneficial or long-lived.

There are however two possible benefits of the proposed alliance to consider. Firstly, Air New Zealand gains access to Virgin’s domestic feeder traffic and marketing machine. That would be a plus for the New Zealand tourism industry and a long awaited return to the Australian market since Air New Zealand’s near death experience with its misjudged acquisition of Ansett back in 2000. Secondly, with more A320s on the way, Air New Zealand will have more capacity irrespective of its partnership status. There may be scope to launch some kind of new low cost option to address this section of the market and placate the regulators.

There is a certain inevitability about all of this, so it’s important that any deal gets properly examined. Australia handles such proposals through the Australian Competition and Consumer Commission, but in New Zealand it will likely be a Cabinet level decision. Considering that the New Zealand government is the majority shareholder in one of the applicant companies, that would seem to be a slight conflict of interest. Hopefully a compromise can be hammered out that both ensures the viability of airline services and protects competition in the market.