Category Archives: Management

Almost Free Software – Have Your Cake and Eat It Too

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The debate over whether or not software should be made freely available has been around for a long time. Can we afford such idealism? Perhaps there is a middle ground.

There are two different threads when we talk about “free software”. The first involves releasing actual code for public use; the second discussion is about providing free access to an application but without giving away the code. The latter is obviously a lot more manageable these days because of the SaaS model. But why would you bother? If you have to pay for employees, premises and some hosting, you better make sure there is some revenue coming in.

On the other hand, the fact that I can even publish this article here today is a direct result of the “crowd sourcing” approach that has spilled over from the open source community into the development of social media. Also, I’m sure we can all think of plenty of businesses which gave away their software and then built a lucrative consulting revenue stream around it. So there are clearly some tangible benefits to encouraging the open source philosophical movement to flourish and grow.

There was a great discussion thread about the (non)monetisation of Web 2.0 over on Diversity recently. Giving your product away, before you can figure out how to make money out of it, is the quickest way to destroy value in any business argues Ben. I agree. Using venture capital to prop up an ultimately unsustainable business model with over-inflated valuations is an abomination only one step removed from pyramid selling. But, maybe it’s how you go about giving away your software that matters.

We have a couple of products in the pipeline at ideegeo but with two completely different marketing and monetisation strategies planned. The first is a mobile application targetted at a niche audience which we will sell for quite a low margin through an online store. I will be overjoyed if we break even on the time spent developing it. However, it will raise our profile and demonstrate capability. The second product will be given away completely for free through our own website. The hook is that we get paid a small amount every time someone actually uses it (which is often). The clients will happily pay because the application demonstrably drives more business their way. If the application needs improvement, we will also get very rapid feedback.

My point is that the Internet has completely revolutionalised both software development and marketing. If you develop “almost free” software and then make it available to a very large number of users at only a very modest cost, everybody wins.

Next month Unlimited Potential are proudly hosting Richard Stallman as special guest speaker in the lead up to the Geeks, Games and Gadgets ’08 event.

Stallman founded the GNU Project an open source software development project that contributed substantively to the genesis of the Linux operating system. At times controversial, the title of “open source guru” seems quite aptly applied in the context of Stallman’s thought leadership. Social media and especially Wikipedia had not even been conceived of at the time of this 1996 interview, but it illustrates his visionary abilities.

Whatever your position on open source or the debate around competing public licensing systems, this seminar is likely to be a thought provoking one. Registration is highly recommended for what will no doubt be a popular session.

Can Business Get Its Head Around Social Media?

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Developer meeting held in SmallworldsFrom virtual worlds to dating sites to online gaming, there’s no denying that people are spending more time than ever before engaged in digital social media of some form or other. It comes as no surprise then to learn that, in the first half of 2008 alone, venture capital firms invested US $345 million in virtual worlds or related enterprises. As more sophisticated business models emerge around virtual economies, it has become clear that there is now real money to be made online.

In a world where travel costs are spiralling ever upwards, more and more people are opting to stay at home for entertainment. Does it mean that shopping malls, movie theatres and public bars are sunset industries, to be replaced by bits and bytes residing on a remote server? Perhaps not just yet, but rarely a day goes by that we don’t hear about the launch of a new web community, social mash-up or cool online game of some sort. 

Unfortunately research suggests that about 75% of these communities will never even achieve 1000 users. We set up ION almost six years ago and only recently celebrated our millenial sign-up. In any event there must be a limit to the proliferation of online social networks because once users become uber connected there is far less incentive to keep signing up to new networks. As network density increases, the advantage gained by the user decreases.

So when even Bill Gates gives up on his Facebook account, it really makes you question how much value large corporates see in social networks and virtual worlds. Some people continue to question whether or not virtual spaces will ever become meaningful in an enterprise setting. Although businesses have been using applications such as Sharepoint and Lotus Notes as knowledge management tools for years, corporates are still struggling to make the quantum leap into virtual communities and interactive game type environments as forms of collaborative business tools.

On the other hand corporate dinosaurs are belatedly waking up to the power of social media as a marketing tool. This videocast from the Harvard Business School offers advice to large companies about managing the change processes around implementing social media strategies. Now – I’m pretty sure I don’t need to belong to a web community for kitty litter or some other weird or random social network. I would however join a business network or film club that had an online community component for example. Whatever spins your wheels, I suppose.

New Zealand has a couple of promising virtual world ventures of its own. Smallworlds launched recently with a high quality browser based world for young adults that leverages advances in Flash based functionality and graphics. Socialise was an early entrant with a dating and friendship focus. Socialise is a regional community that has secured advertising sponsorship as a revenue stream, whilst Smallworlds is pitched at a global audience and intends to establish a virtual economy within the site.

Smallworlds users create and populate their own individual home spaces, which raises the question of identity portability. If players participate in several communities, plus own a Facebook or MySpace page, how can they manage their global identity? For dedicated social networkers with multiple sites to share and manage, aggregating all those links at one web address would seem to make sense. That’s a problem that we hope to address in a creative way very soon at ideegeo.

Thank-You So Much for Waiting

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Why does it take a major telecommunications provider eight days to rectify a simple fault on a phone line in New Zealand? No. it’s not a bad joke, it really happened to me last week.

A couple of weeks ago I noticed there was a lot of background noise on my phone line. About the same time, my home office ADSL broadband began to get mighty slow. Eventually I lost all access to the Internet, although my phone remained working, but with even more noise. So I set about eliminating all the possible causes of the fault including swapping the router/modem, replacing the cabling and testing wall socket filters. No joy, so now it’s time to call the helpdesk.

Now when you call the helpdesk you first have to navigate the voice activated interface which (if it works) places you in a queue to speak to a real person. That’s fine, they play some cool Kiwi music that I like whilst I wait (Liam Finn, Anika Moa etc). Any moment I will get to speak to a technician who can resolve my fault – wrong. After a few minutes a lovely Filipina lady called Maria answers and we go through all the standard questions like, “have you turned your modem on and off?” She’s very polite, so I play along. When this fails to solve the problem she decides to put me on hold in order to speak to her supervisor. More music. After ten minutes in the holding pattern I realise she has lost the call.

Second attempt to call helpdesk, virtual receptionist then more music. Then I get a charming fellow from Manila called Arvin. He’s a bit more technically savvy and we talk about testing and swapping filters on all the wall jacks (I bought new filters and a very long cable in anticipation of this conversation). Still no luck. But Arvin agrees there is a line issue and kindly books me a service call with “Advanced Broadband” the division who actually fix the phone lines back in New Zealand. Next day I wait at home for the scheduled call. Nobody calls.

Then I have some meetings and don’t get to follow up. I use CafeNet in the city to check my email and do a bit of business online. Couple of days later I try again. Another call patched through to Manila and the same music whilst I hold. Another lovely lady re-books my technician call, “thank-you so much for waiting”, she chimes. But the technician again fails to call the following evening. Why is this is taking so long? I head off to bed tired and annoyed. The next day, an early helpdesk call, more holding music and then a very sleepy sounding night shift worker in the Manila call centre. We both manage to remain polite. He books me another service call. This time the technician calls as per the agreed schedule. The technician agrees there is a line fault (told you so) and promises to contact me when he is at the local exchange. He makes good on his promise and cheerily calls back to report that a small wire-end was loose at the exchange. Back in business.

So I guess my first question is: why does it take eight days, five phone calls and two hours of my valuable time to resolve a simple fault? Now to be clear, I received very polite and helpful service at all times from the call centre workers and the technician. The problem is the system and how it is managed. Outsourcing call centre work is a great way to lower costs, especially so given that recruiting locally is also getting harder. But if the helpdesk staff do not have authority to make any decisions it reduces their role to that of triage and placating the customer. Furthermore, when they do take action, better make damn sure that request is followed up locally or risk alienating the customer.

I have long maintained that broadband speed is not the issue in New Zealand. I can run my consulting business from home on 500kbs or 100Mbs line speed or anything in between. There are other more pressing problems like international connectivity. And as long as we have a monopolistic situation we risk the continued imposition of high prices and poor service levels for broadband. Bring on the competition.

My second question then is this: if it takes eight days to reconnect a loose wire, how long do you reckon it will take to build and support a nationwide fibre network?

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Epilogue of Enragement

gunmen

I don’t normally speak out on such issues, but I am growing tired of political correctness and can hold my tongue no longer. A father of three young children has died as a result of another armed robbery by three bandits in South Auckland. [Subsequent to first posting this article, an 80 year old Asian woman has been beaten to death in the same area and another Asian businesswoman intentionally run over and killed in a carpark.]

I hope Tapu Misa, who attempted to rubbish a recent controversial research paper by Greg Clydesdale on Polynesian social , educational and economic underperformance, will visit the family of the shot man and apologise for the way both Maori and Polynesians continue to be overrepresented in the violent crime, child abuse statistics and in the prison population. I hope she will explain the reasons why the adoption (by some) of L.A. style gangster culture has led to an increase in drug taking, teen promiscuity and gun ownership. 

I hope she will also write another editorial detailing why some members of her community feel they are somehow exempt from aspiring to contribute economically apart from in the colourful street markets of Otara or mopping toilet floors at nearby Auckland airport.

Clydesdale’s research was not anti-migrant and neither is my argument. The victim in this attack was a migrant, a family man who came to New Zealand and was prepared to work hard for a better life. His attackers were young Polynesian or Maori males probably born and raised locally. The issue here is that we are growing a brown underclass and nobody seems to want to talk about it nor acknowledge the likely downstream consequences for our society. If embarrassed government agencies try to shut down this discussion, how can we possibly find a solution?

Forget broadband or taxation. This is the real election issue debate we should be having because it impacts on our collective economic futures and our prospects for ongoing social cohesion – irrespective of our skin colour.

Research Profile: Vietnam – A Nation on the Cusp

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After repelling foreigners and enduring wars for the last 150 years Vietnam is finally at peace and enjoying an economic renaissance that may well surpass that of its neighbour China. Therein lies some opportunities for New Zealand businesses.

When I visited Vietnam in 2005 it was obvious that the country of some 84 million inhabitants was on the cusp of something big. Rapidly industrialising and with a young and highly motivated population, the South-East Asian nation has recorded consecutive GDP growth rates of around 8% for many years since the economic reforms of the mid-1980s. An example of this growth was the recent announcement that Samsung will build a plant for manufacturing mobile handsets with an eventual capacity of up to 100 million units. But manufacturing is not the only economic growth driver.

The mighty Mekong river basin, which fans out from the south of the country, is also the food basket in a region renown for its delicious Eurasian fusion cuisine. With a huge output from intensely farmed field crops and fisheries that are managed under a centrally planned system, the Mekong directly supports about 18 million farmers and fisherman and their families and provides food for at least 60 million.

Vietnam continues to move towards full market economy status and has benefitted from substantial inflows of capital from neighbouring states and the U.S. since the lifting of trade sanctions by President Clinton. total foreign investment was around $US 20 billion in 2007. As well,  Vietnamese dispora who left as refugees are now returning newly educated and with new capital and fresh ideas. There are many challenges remaining however, particularly in the areas of environmental sustainability and infrastructure.

Work is about to commence on a $US 8 billion project to build a new airport for Ho Chi Minh City (Saigon) at Long Thanh for example. Although the existing airport was recently upgraded, it sits amidst the low-roofed shacks within the Ho Chi Minh city limits and is constrained from further growth. The new airport is expected to become a regional hub of some significance.

New Zealand exports to Vietnam grew by a whopping 62% last year. Dairy products and educational services are leading the charge; but there are a multitude of other opportunities for small businesses who can find smart ways to partner locally and secure access to the region.

Vietnam is a nation of huge contrasts. On the one hand a booming economy and beautiful scenery on the other tremendous environmental challenges and horrific human legacies from the war. But with a sound strategy and local partners there are rich pickings for those that can stay the course.

Contact GeniusNet for business research and connections into emerging global markets.

Not in the Spirit of Good Customer Service

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I have always been fascinated by things aeronautical and have had a long association with the local aviation industry as both a recreational and commercial pilot. I’m an unashamed plainspotter from way back and I follow developments in the global airline industry quite closely. So it was with some surprise that I read about an appalling incident in which the arrogant CEO of a U.S. airline sent a vitriolic personal email response to a customer that had complained.

I always thought that customers were stakeholders in any business, the oxygen supply that ultimately determines the difference between success or asphyxiation. Apparently not according to Ben Baldanza, CEO of Spirit Airlines in Florida. Spirit is a high growth low cost carrier that primarily serves a niche market between the U.S. and Carribean/Central America. Most of its customers are low to middle income holidaymakers and returning migrants.

Last year Baldanza was forwarded a complaint by a couple who missed a concert because their flight was delayed. The couple wanted a refund for both their flights and concert tickets. In any angry outburst Baldanza “inadvertedly” replied directly to the couple by email instead of forwarding his response to the customer service rep. He basically told them where they could shove their refund claim form. “We owe him nothing…let him tell the world how bad we are.”

That’s exactly what the complainants did, with just about every consumer advocacy and business blog in the U.S. picking up and running with the story. Bad news travels fast. I first read about this incident through an article in Air Transport World appropriately entitled “How Low Can You Go?”. Apparently Spirit Airlines prides itself on the fact that there is no receptionist to greet visitors arriving at their headquarters because this saves 2 cents per customer. It seems like the company has a lot to learn about relationship building and delivering on service.

I mention this episode because it underlines how the Web can be a twin edged sword. Sure it allows aggregation of content and customers and a hefty global reach. But it can also bite back hard when things go wrong. Corporations can no longer rely on anonymity in a connected marketplace. It doesn’t matter that James and Christine only paid 75 buckseach  for their air ticket – they are still valuable customers. Reputational capital is an important part of a company’s intangible asset base.

To be fair, the airline did offer to refund the price of the air tickets only. But why was the CEO even dealing with this complaint in the first place? Clearly not his area of expertise. If your business does not have a quality assurance programme and strategy for dealing with complaints it is fatally flawed. Oh – and by the way, Spirit Airlines made a loss of $US 49 million in 2007.

How (not?) to Measure Innovation

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Recently I wrote a short article about the OECD assessment of the status of NZ’s national innovation policy. Now Fujitsu Consulting have published a piece of commissioned research that purportedly measures innovation levels within organisations in Australia and New Zealand.

I have to confess that I’m still struggling with the mere concept that you can actually measure innovation, let alone draw any scientific conclusions on the subject from polling a bunch of potential clients for your consultancy offering. However, I’m not saying we can’t learn something from this industry study (or others), because it does at least provide a useful benchmark for a number of key organisational issues. Unfortunately there are almost as many “innovation matrices” as there are innovation commentators.

The Economist Intelligence Unit (EIU) describe innovation as “the application of knowledge in a novel way, primarily for economic benefit”. The Economist publish a global innovation survey involving 485 mainly large corporate firms and which results in country comparisons of innovation output. Japan, Switzerland, the United States and Sweden lead the pack on this basis. However this survey is heavily weighted towards using numbers of patents issued as a lead indicator. Some would argue that patents actually crush innovation.

To their credit, the EIU also produce a composite index by including other innovation drivers such as educational levels, regulatory framework and broadband penetration. They also observed that the rankings in the composite index closely match the patent output index. To my mind, these indices are simply a guide to innovative potential because intangibles like creativity, knowledge and effects of organisational culture are either difficult to measure or simply not considered. Furthermore, many patents never see the light of day, let alone generate any economic wealth through commercialisation.

An interesting observation to emerge from the Economist survey is that “small countries with clusters of world class companies in research intensive sectors” outperform on the innovation index. I hope this important point does not go unnoticed. New Zealand’s ranking of 22nd out of 82 countries survey, is forecast to remain static over the next 5 years according to the EIU. But bootstrapping smaller technology firms around a number of emerging core industries could easily put paid to this forecast.

My pal Simon Young reported on last year’s Fujitsu innovation report for an Idealog article and he noted that a number of academics had questioned the intention and methodology behind the annual survey. The Fujitsu research samples 175 New Zealand firms, but no doubt mainly medium to large firms were hit because that is their target client base. That only leaves about 350,000 small NZ enterprises that were left out of the study. So I think we need to be a wee bit careful about making overly general statements about the state of innovation in New Zealand business.

Oddly, the Fujitsu report suggests that increased spending on innovation related activities appear not to improve a firm’s overall standing in the innovativeness stakes. That might not be quite the result Fujitsu was hoping for.

Dental Software Deal Hard to Swallow

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Investors may be spitting blood in the wake of a $77 million takeover bid for Software of Excellence (SOE). American healthcare mammoth Henry Schein cites “cross selling opportunities” as the fundamental attraction for absorbing the newly profitable dental software provider. Are they serious?

Henry Schein is a Fortune 500 company with 12,000 employees across 19 countries and a multi billion dollar turnover. Why are they interested in a tiny software company from the other side of the world? The answer is that the cheapest way for a large U.S. company to innovate is to simply buy in what it needs to dominate a global market whilst simultaneously smothering the competition. That strategy makes a lot of sense – for them.

One doesn’t need to look far afield to find several recent examples of American corporations swooping on New Zealand technology firms, buying up the intellectual property and then shutting down the local side of the business. That’s fine if you are a foundation shareholder looking for a nice fat return, but it doesn’t help the economy much. Jobs are lost and profits head offshore. Sound familiar?

But, I hear you say, haven’t cashed up entrepreneurs reinvested into new ventures? Yes they have, but most of those new companies have not yet made a dollar in profit and some possibly never will. For every headline sale of a tech company abroad, there are a hundred firms that never make it. I guess the question we have to ask ourselves is a simple one. Is it an acceptable model for NZ to be an ideas incubator to the rest of the world and for us to accept that we have neither the organisational heft nor the capital required to fully exploit global markets?

Perhaps incubation and sale is a perfectly acceptable model? But it seems to me that you need to be sequentially churning out lots of quality ventures to make that model work for the broader economy. I don’t think we are quite there yet. Whatever happened to the plan to build and grow 100 by $100 million tech companies?

Considering some of the other recent trade sales, $77 million seems a little on the light side. I hope SOE shareholders don’t sell themselves short.

Going Global from New Zealand

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Rod Drury, a well known New Zealand technology entrepreneur, runs a great weblog talking all about the challenges and rewards of taking NZ technology to the world. Rod is passionate about the subject and is committed to adding value when he works with technology ventures.

Drury has also become a self-titled “digital socialist” because of his strong views on how the current digital communications network model is failing New Zealanders and why we need to open our digital trade routes. There was also a recent discussion on his blog about the role of mindset in overcoming the challenges of geographical separation.

From an organisational researcher perspective, I agreed that the discourse/mindset, within which an organisation frames its global strategy, does make a difference to how it projects itself. But I also thought that we should not downplay the challenges of small size and geographical isolation. For example, if we truly aspire to increasingly become an exporter of digital knowledge, then we need to sort out some fundamental structural issues like bandwidth and network peering – and fast. 

As a nation I think we tend to lack a collective sense of self esteem. Outside of rugby and the haka, we don’t quite seem to know what we stand for – it’s cringeful at times. On the other hand, I’m fascinated by the biographical accounts of people like Peter Jackson, Burt Munro and Bruce McLaren. All examples of hero innovators from our recent history who (in some way or another) crossed the Valley of Death and went on to build dominant positions in a global niche, based on their creative talents. We don’t give these role models nearly enough public exposure at home. 

There’s a funny TV ad for theft insurance running here at present that implicates “foreigners” who swipe all our Kiwi icons eg. Dame Kiri, Split Enz, Coutts and Butterworth etc. It sums up our current inwards looking mindset. In fact these iconic characters saw opportunities to go global with their talent and were cocky enough to do so.

[tags]globalisation, export, technology, New Zealand, innovators, organisational discourse[/tags]