Planet Google?

Just read a piece about where Google might be in ten years and considering the success of Gmail between 2004 and now, the author might just be right even though his forecasts may seem wild at times (e.g. Android prevailing in the mobile OS wars). That gives me an opportunity to comment and discuss a bit further Google's amazing ability to execute beautifully a bold strategy of massive innovation to deliver on an audacious vision to organize the world's information.

A couple of comments on Google in 10 years

Interestingly Devinda Hardawar (@devindra on Twitter), the post's author, reminds us that Gmail was launched only in 2004. Few people can argue it's gaining traction in the segment of people who use predominantly  email in SaaS mode and even making inroads into the segment of more traditional users who are stuck with legacy solutions like Outlook Express. Gmail grew 43% in 2008 and took #3 spot in August leaving AOL behind. It's gaining momentum and is probably a good indication of what Google can do in terms of winning market share with a patient approach that it can afford thanks to its advertising revenues.

Furthermore Devindra makes a couple of very powerful statements regarding Google Wave, stating his belief that it's much more important than it may seem on the surface and could well revolutionize the way knowledge work gets done. In keeping with a recent post on this blog, I very much agree with him and do intend to spend more time testing Wave, not dismiss it as Scoble has done, foolishly in my opinion. 

Google's execution excellence

Google ability to consistently pursue specific targets is an amazing characteristic of the company. They've been able to roll out a number of major services over the past decade accomplishing key strategic targets with each of them:

1. search, their bread and butter and the foundation for any endeavor having to do with managing information at an age of information mostly uncontrolled proliferation. With that they accomplished brand recognition and created necessary technological foundations.


2. email in what was not called SaaS yet, thus increasing the touch points with the market and making a first move towards managing some of the world's information.


3. advertising based on search and content: building on the previous and targeting and industry which was both very inefficient and well endowed. With that they achieved financial viability and independence as well as consideration by financial markets.


4. analytics, building on the previous one to help make the process of marketing communications and ultimately marketing more efficient and rational. With that they earned a position as a trusted provider of quantitative information.


5. office productivity suite, to increase the share of their direct contribution towards managing the world's information by accessing a new kind of content.


6. e-commerce capabilities with Checkout, to start processing transactional information on behalf of merchants and buyers.


7. Android, to extend the reach of their services to mobile contexts and facilitate seamlessness of user experience across networks and contexts.


8. voice services, to go beyond text and enhance the experience of users across the full range of Google services with a view to serving more and better the business world.


9. technology as a service, to provide infrastructure as a service, operating system as a a service, storage as a service, programming platform as a service... and leverage the web as a platform.

Arguably, there's more and there are other ways of viewing what Google is doing, but in every case you'll find great consistency and clarity of purpose in strategy execution.

Google acquisitions: a string of success stories

Looking at the string of their acquisitions over the past decade (another way to assess strategy execution), the consistency of purpose is obvious and their ability to integrate acquired companies and technologies is impressive. Some people tend to focus too much on plays that did not turn out to be successful and fail to see the bigger picture: Google successfully embeds  80% of its acquisitions in the Google system, when the market average is much much lower (I'd say 20% based on the business news I've followed for the past 20 years).

Significant and successful moves included:

• 
  Deja in 2001, which became Google Groups, now integrated in Google Apps and arguably a successful service with important synergies with targeted advertising, Google's current bread and butter


• 
  Outride in 2001 and Kaltix in 2003 which became iGoogle, personalized search and the search wiki.


• 
  Pyra Labs and Genius Labs in 2003, which is the foundation of Blogger... No comment.
  Picasa in 2004... again not exactly a failure, especially considering the early success of Flickr


• 
  Baidu in 2004... and oh, China is a fairly big market they say...


• 
  ZipDash, Where2 and Keyhole in 2004, Endoxon in 2006 and Image America in 2007, which gave Google Maps


• Urchin in 2005, which became Google Analytics subsequently enhanced in 2007 with the licensing of GapMinder's great data visualization technologies (commercial entity was called Trendalyzer)


• Android in 2005... you have heard of the Droid success in the US I'm sure. In fact it's been estimated that 75% of all web resources visited with mobile phones in the US were either iPhone OS or Android... Nokia and Symbian are in the dust over there, so that's a decent accomplishment, no?


• @Last software, in 2006, which gave Google Sketch still insufficiently acknowledged as a revolution in computer aided design and very used in engineering communities


• Upstartle and 2Web Technologies in 2006 and Zenter in 2007, which power Google Documents, a foundation for online office productivity applications and online form building


• JotSpot in 2006, which became Google Sites, an extremely powerful tool that some people like David Dossot (not exactly a tech nitwit) use to build websites and some other use to provide customized secure online workspaces for their customers (BusinessQuests humbly but proudly claims to be among them)


• Grand Central in 2007, which became Google Voice and is still insufficiently acknowledged as a major disruption in telecoms because it does enable a form of unified messaging & communications


• DoubleClick in 2007, which I believe holds a good share in all of its markets
  Postini in 2007, which provides fantastic anti-spam protection for all Google Apps for email users, amongst which yours truly very humbly and happily so


• re-CAPTCHA this year, arguably a good security enhancement for Blogger
  and last but not least YouTube in 2006, which I think was a fair success amply justifying its acquisition price of 1.7 billion USD

Google is recorded as having purchased 59 companies for a total amount that is hard to assess but likely stands in the region of 15-18 billion USD. The track record of acquisitions can in no way be considered as bad. In fact I know only of one company that is better: Cisco. Both Google and Cisco are hugely analytical players, with extra smart employees on board, giving huge attention to recruitment and equally huge attention to acquisitions.

Another thing worth mentioning is Google's creation of an arm dedicated to early stage investments, which is called Google Ventures, a fund that started this year with 100 million USD. Google Ventures has made a couple of very smart bets in clean-tech with smart grid technology (Silver Spring Networks) and biotechnology (Adimab)...

Top global brands: big swings and US dominance

The list of top global brands was published a few days ago by Interbrand and BusinessWeek. The top 10 brands are largely the same as last year, but the list of brands that have made the biggest gains is interesting: Google (+25% in brand value), Amazon (+22%),  Zara (+14%), Nestlé (+13%) and Apple (+12%) make up the top-5 of the year's winners. Brands that have lost value are (unsurprisingly) those of financial institutions with UBS (-50%), Citi (-49%) and Amex (-32%) leading the pack.

A break-down by country shows the US brands account for nearly two thirds of top global brands, while the top 3 countries of origin (US, Japan, Germany) are home to over 80% of top global brands (see chart - click to enlarge).

The total value of global brands based in the US reaches an amazing 744.2 billion US dollars, while Japan's are worth about 91.8 billion dollars, only slightly above Germany's 91.2 bn$.

P&G lead by example in engaging constructively: Ariel's facts and figures

Recently I posted some thoughts based on a case study that questioned the practices of P&G which stood accused of trying to fool customers by falsely stating that the new bottle type of Ariel contained "10% more product" (tan the previous type of bottle presumably). 

Much to my surprise, I got an answer from somebody working for P&G who reacted within just a couple of hours and that's quite impressive since this blog has never been about building audience or making noise and is therefore not particularly influential. I'm absolutely WOWed by P&G ability to monitor online resources and take reasonable action on any alerts and that's the kind of defensive marketing tactics modern brand management should always feature. More often than not that's not the case.

In this post there's a quick analysis of the facts provided by P&G, which infirm the assertions of the presentation although they do not necessarily prove the accuracy of the "+10%" claim, which I'd rate as "almost true" or "true enough" if I were to run the "truth-o-meter". Naturally that means there is no reason to state that P&G is fooling their customers and the very fact that they engaged in a discussion with this blog shows that they're treating online sources and people out there in a very respectful manner.

First let me give you a copy of P&G's reply, which I found very well formulated, very factual and showing great respect for a very humble blogger without any influence whatsoever. To respect privacy I'm witholding the name and details of the author of the reply:

 Dear Alex,

I’m working for Ariel (P&G France) and I’m regularly looking, thanks to a Google alert, what is said on the web about the brand. That”s how I’ve found a post you made on your blog and on slideshare.net about the “Ariel and the mathematics” French power point presentation. I also read your post titled “No you cannot fool your customers P&G... or whoever else”.

http://blog.businessquests.com/

http://www.slideshare.net/businessquests/ariel-et-les-mathmatiques-capitalistes

I’m kindly writing to you to draw your attention on the fact that the data in the presentation are wrong. The author of the presentation, who lives in Germany, has already acknowledged his mistake, distances himself from the content of the presentation and regrets having circulated it.

What has happened?

The author of the presentation did not compare the Ariel bottle from 2009 (+10% more content; 1.4L content equalling 20 wash loads) with the real predecessor from 2008(1.26L content equalling 18 wash loads), but with an older bottle from 2005 (1.5L content equalling 20 wash loads), that he found in his house.  

The compared Ariel bottles origin from different years and during those years we have launched several new product generations. According to the production code the featured old bottle was produced in the year 2005, the new product is from 2009. Our products are constantly improved to fulfil the increased consumer needs. In comparison to the product of the year 2005, new Ariel liquid 2009 offers a formula that has been constantly improved over five years, plus it offers an improved washing result by an even lower dosage per wash load (now 70mL per wash load versus for example 75mL still in 2005). This can be seen on the dosage instructions on the back of the bottle.

We hope we could clarify the misunderstanding with this statement and we would really appreciate if you could post this statement online or if you could delete the initial post itself.

Of course, don’t hesitate to get in touch with me for more information.

Best regards,

Now to translate the content's of P&G response into dry facts and figures I created the table below to try to assess the actual impact of changes to Ariel's bottling in terms of effective quantity of product provided to consumers. Since we do not have any idea of the evolution of the product's price in inflation adjusted terms we cannot say whether the 2009 bottling is a better deal or not, but depending on whether they could actually do 18 or 20 (18+2) wash loads with one bottle the effective quantity purchased could either be a real increase of 11.1% or an unchanged situation, but it is in no case a decrease of 5% to 7% in quantity provided as shown in the presentation:

Needless to say I'm very impressed that P&G was able to spot the post within only a few hours from its publication, that their response was so swift and effective and I can see why they've been so good at building world class super valuable brands: Ariel is #84 and worth close to 7.8 billion USD in the 2009 top 100 and Pampers is ranked #31 and valued at 18.8 billion USD. For your convenience I'm embedding the ranking of top 100 brands below:

Global top 100 Brands 2009 -

Dating, an anti-cyclical business?

A most intriguing article in the latest issue of The Economist states that dating sites seem to be doing rather well in the recession. The correlation between the Dow Jones falling by more than 100 points and the increase in the traffic of one of the dating sites was arguably the most astonishing of all facts presented in this article.

clipped from www.economist.com

Online-dating websites prosper in the recession

It may be that people have more time to devote to their private lives as the economy slows; that uncertain times increase the desire for companionship; or that living alone is expensive, whereas couples can split many of their costs.

25% of women said stress about the state of the economy made them more inclined to seek a long-term relationship. The company also noticed that the number of visits to its website was higher than average on days when the Dow Jones Industrial Average fell by more than 100 points.

Back in September, users were sending 6,000 on-site instant messages a day, says Sam Yagan, OkCupid’s boss. Now that number is over 18,000.

“The majority of relationship discord stems from economic troubles,” he says. Instead of fighting, married people are taking stock of their lives. “They want to do something that makes them feel better about themselves,” Mr Biderman says, “and $49 is a tiny expenditure for a life-altering affair.”

Conference on the economic situation

Last Thursday BusinessQuests helped organize a conference on the financial situation. We had Prof. Bruno Colmant, who also happens to be the CEO of Euronext, and Prof. Philippe Defeyt on the panel and they presented a number of interesting developments to explain the causes and the dynamics of the current situation. Aside from the content, which is very much within my field of attention, the event has been a great opportunity for me to test the adoption of online tools by a predominantly tech-conservative  audience. Results of my tests in a future post. This one is about the content of the conference.

Here are a few of their most noteworthy points:

• while there have been crises before, this one is like no other because of the speed of information processing that we now have


• according to Colmant the roots of this crisis are in the Internet bust of the early part of this century (needless to say it's an assertion that had me raise my eyebrows)


• Defeyt made a passionate case against established practices of trade liberalization without any effort being done to bring better coherence to labor and fiscal legislations of trading partners


• both panelists expressed concern that the consequences of the current period could be social unrest similar to what we now see in Greece


• panelists agreed that the causes of this mess are in the US and that the collapse of Lehman Brothers prevented this crisis from hitting Europe much more than it does. According to them the extent of the banking problems is significantly smaller in Europe compared to the US


• Defeyt and Colmant felt that the lack of trust of citizens for established institutions, be it banks or governments is cause for real concern and probably the single biggest impediment to relatively quick recovery


• they also both agreed on the principle that nothing should be done to help the auto industry because its future is behind us at least insofar as its current form is concerned. Interestingly they mentionned that there's production overcapacity in the range of 30% to 35%


• Colmant made a vibrant case in favor of market mechanisms claiming that markets are efficient for letting supply and demand meet to define the fair price of assets, something that had Defeyt react by saying that there's a host of resources that are used by the economy, which are completely unaccounted for. Defeyt also questionned the way in which economic prosperity is measured in our countries and claimed that we should be looking for free circulation of people, ideas and culture, not products because it does not make economic-ecologic sense to be transporting vegetables across Europe when they could be sold on markets closer to the place of production


• the audience had a couple of very interesting questions about the extent to which Adam Smith's vision is actually verified in the real world, whether the market is relaly efficient considering irrational jumps in prices of assets, whether China is where the world economy's salvation will come from...

Overall good stuff and an interesting evening although I doubt anyone got out of the room with clear answers. One of the reasons why we put totether a participative site on Ning to give attendees an opportunity to continue the discussion and access photos, video and notes from the event. I am curious to see whether people will start conversations and see the opportunity to take an active part in this crucial public debate...

For me this has been a great way to test how a more conservative audience of late adopters of technology reacts to the usage of tools like Amiando (excellent stuff) for setting-up the conference or Ning after the conference. Furthermore, we ran a survey on SurveyMonkey about the economic situation, its causes according to the audience and the assessment of the quality of information people got from the media and from banks. A vast majority of the people (we polled about 30% of the attendees) were really unhappy with the way banks handled the matters pertaining to the crisis. I'll publish some of the conclusions later this week.

Below is a mind map hosted at WiseMapping, but it's in French, the language of the conference.

How would you salvage the banking system?

Over the past few weeks I've been doing some research work around the financial system because I have an idea that I might pursue as an entrepreneurial venture aimed at making a difference in the following areas:

• funding for privately owned European SMB companies


• the way investors (LPs) structure their deals with fund managers


• how relationships are (not) created between LPs and companies in which a fund invests


• the degree of transparency allowed into the system for various stakeholders


• the way investment performance is measured to account for environmental, social and human cost of decisions taken by companies and by the financiers to pursue growth (and wealth)


• how companies share the benefits of their success with all stakeholders not just between shareholders


• ...

I still need to do some work, but the thing is taking a nice shape, especially after a sudden satori I had over the weekend... It now seems so obvious I am in bewildered wonder at the idea that something so evident that was right before my eyes could have escaped my attention even as I was working on stumbling blocks that it helps remove! Anyway, more in a future post. For now, I'd be grateful if you could help me by voting on a question I have: how would you go about salvaging the financial system? To answer on LinkedIn, please click here.

Keeping copyright sound

That's a worthy cause. Copyright extension is perfectly useless for people who create new stuff and only a means to securing the dominance of organizations that are increasingly made irrelevant by the radical changes in the media distribution landscape. We don't need our legislators spending time, energy and money on building perpetual streams of income for antiquated forms of content usage. Perhaps they'd be much better inspired to consider enforcing Creative Commons as the official copyright management system.

Watch this and sign the petition on the site of Sound Copyright.

Becky Hogge: Speech at Sound Copyright conference in the EU Parliament 27.01.09 from Open Rights Group on Vimeo

More pressure on marketing expected

A few short months ago there were worries about marketing budgets being cut but most professionals were sounding reassuring in saying that the bulk of marketing budgets would be transferred to online and interactive initiatives. The theory went that brands would want to keep taking initiatives and would continue the same intensity of communication by shifting their marketing dollars to more affordable channels like the Internet.

Even then this thesis did not seem to hold against careful analysis and discussions with senior decision makers even back then. Recent news seem to confirm the pain to come for agencies and marketing professionals, irrespective of the nature of their business, with an exception that is not what most people seemed to think, but makes economic sense.

A recent survey carried out by the ANA (see clipping at the end of this post) shows a bleak outlook for big classes of marketing spending and therefore for agencies and professionals offering services in those fields. I think this is particularly relevant for the European market because it’s only a matter of time before we see a similar contraction in Europe and because, with just a few exceptions, European decision makers tend to be even more reluctant to any spending in hard times (it’s a sort of all-or-nothing approach to marketing budgets). More specifically here are a few points worth considering:

1. 
   
   
   there will be painful budget cuts across the board and cuts are a priority of senior management that will not be adequately addressed by a mere shift of money to online and interactive marketing.



2. 
   
   
   the nature of initiatives taken will be seriously and increasingly scrutinized to make sure they are compatible with the mood of our times. No advertiser can afford to seem completely oblivious to the hardship suffered by the market. The survey shows quite clearly that the focus will be on initiatives that address the increased price sensitivity of buyers.



3. 
   
   
   the survey shows the top five areas where marketers plan to reduce costs or expenses in marketing and advertising and looking at them carefully we see that four out of the top five are areas which will affect “creative” initiatives with important investments in media and event / interaction management. So much for the idea that there would be some sort of magical immunity for online and interactive marketing.

The main implications of the way things pan out are:

1. 
   
   
   of the six competencies identified by the Media Management Center (see their excellent post here), there’s ony one that seems 100% essential and critical in this environment and that’s the Data Miner.



2. 
   
   
   because key decision makers are still largely professionals that in most cases have only a very limited vision of the benefits they could get out of the web and interactive technologies, the marketing dollars will go to very basic, simple, no-nonsense, zero-risk initiatives for which there’s a clear case for the return on investment.



3. 
   
   
   this is the golden opportunity to set standards to make absolutely all initiatives traceable and measurable, which means that one can feel positive about anyone involved in providing enabling technologies for tracing the performance of marketing initiatives like promotions and direct marketing.

It does seem that the crazivity of the past couple of years is going to be out of question for some time…

What’s crazivity? It’s initiatives that are primarily crazy and yet presented as creative: in this business the crazier something is the more creative it’s called even though it’s not always so and that often comes at the expense of relevance of an initiative with respect to the brand’s goals.

clipped from www.marketingcharts.com

Marketers are cutting costs, putting pressure on agencies to do more with less, and reducing budgets much more than they were six months ago

37% of respondents today plan to reduce budgets by more than 20%, up substantially from the 21% in the first survey.

• Departmental travel and expense restrictions (87% vs. 63% in the previous survey)



• Reducing advertising campaign media budgets (77% vs. 69%)



• Reducing advertising campaign production budgets (72% vs. 63%)



• Challenging agencies to reduce internal expenses and/or identify cost reductions (68% vs. 63%)



• Eliminating or delaying new projects (58% vs. 61%)

“In the current economic environment, there’s a need for brand building that’s right for the times - that acknowledges consumers’ financial circumstances

For some marketers, that will mean skewing their media mix toward promotional spending and direct marketing. For others it will mean framing a new, relevant and timely brand message.

Skype growing impressively but what's the ROI?

Skype seems to be showing signs of sustainable growth not only in terms of new accounts but also in terms of turnover and profitability. What's the impact of VoIP adoption overall and how good an investment has Skype been for eBay? Follow the link below the clipping for more on these questions.

clipped from business2press.com

Internet telephone company Skype, an eBay company, has released impressive user numbers. The company now has 405 million users worldwide, and it is adding 380,000 new accounts daily. Skype continues to offer free calling between Skype users and low cost rates to all other physical phones. The company also posted a $45 million Q4 2008 profit, the 8th consecutive quarterly profit for the company. Skype also says 2.6 billion SkypeOut minutes were used, and SkypeOut minutes are estimated to be growing 61% quarterly, which will bring significantly more revenue to the company if the trend continues. Skype recently launched Skype 4.0, the biggest and most comprehensive upgrade to its service.

Skype's apparent success is good for Skype, but the real long term relevance of Skype's performance is how it's going to translate in the economy. And it's not Skype specific, but that company is iconic when it comes to adoption of VoIP and new practices of global communications. Skype's performance, especially the 2.6 billion minutes sold, make me wonder whether there are going to be larger benefits for sustainable development of the economy, e.g. in the forms of:

1. better, faster, cheaper way of running businesses


2. public services, less and better travel for meetings


3. better service in e-commerce contexts


4. more productive interactions between people

Let's get back to Skype because for an investment to be really relevant and really meaningful, it should benefit all stakeholders. That's increasingly going to be the case in the economy of the 21st century (which also means that the way we measure performance is going to have to evolve). In Skype's case, eBay is obviously a key stakeholder. The $45 million in quarterly profit posted for Q4/2008 is nowhere near the kind of amounts that would justify the price paid by eBay to acquire Skype in September 2005 ($2.6 billion - an interesting report report here). In fact, with a quarterly corporate profit of $45 million, assuming it's sustained through 2009, the pre-tax profit could be in the $200 million ballpark. In fact that would mean a return on investment of just 3.95% for eBay...Not that good a financial deal for eBay although it may have strategic value that has yet to translate financially.

President Obama blasting bankers' bonuses

How could one disagree with the opinion expressed by President Obama regarding the bonuses some Wall Street bankers have decided to pay themselves? We’re really witnessing recklessness of untold and unprecedented proportions. Those bankers’ behaviro testifies to the fact that there is a complete disconnect between modern finance and the field reality of what we call the "real" economy. But of course when things are getting tough for their girlfriends, wives and mistresses who need to change lifestyle (see the DABA Girls blog to get a feel for the utter disconnect of this crowd from real life), these guys feel the pressure to do something, no? Sadly enough a limited number of people damage the reputation of an entire profession. Most of my contacts in the world of finance are just very fine persons, working hard and decently to fulfill their mission and serve real companies with real customers and real services and real employees and real profits and real problems. They’re part of economic life, whereas the people President Obama is targeting are causing economic death and loss of confidence. If we are serious about solving the current crisis, both they and the pervert system they’ve created must be taken out of the system.

Read on for an analysis take and a video embedded.

It’s quite clear that for this sort of things to be happening in broad daylight several conditions must be logically true:

1. 
   
   the checks and balances described in annual reports don’t check anything and don’t balance anything. There is simply no control regardless how numerous the members of compensation committees might be or how “foolproof” their procedures are considered by both internal and external auditors


2. 
   
   the individuals concerned (the beneficiaries of the bonuses) are completely out of touch with real life, living in the fantasy world of board rooms with their very special kind of fauna, i.e. professional executives and board directors who make up a closed group of individuals with virtually unlimited powers and supposedly enormous responsibility as directors. Theoretically US legislation is tough on the responsibility of directors, but that seems to be valid for everyone bar those companies that are either too big to fail or too big to be controlled and punised for any wrongdoings


3. 
   
   the set of people who hold positions as directors of major corporations, especially banks, is too small for complacency, carelessness and tacit conspiracy not to exist: those who play the role of oversight on one board are, in another company, under the oversight of the very people they control in the first one. How can we possibly think that there is no exchange of favors even if it’s just unconscious? Those who sit on all sorts of board and eventually cover for one another. Just take a look at the Board of Citicorp, Fortis or Goldman Sachs and check out how many people are actually execs or former execs of other companies able to exert influence in ways that may not necessarily be transparent or acceptable


4. 
   
   there’s an unacceptable degree of collusion between senior decision makers and board members of major corporations and people who are supposed to be running government by the people and for the people. Was Cheney ever in trouble for his ties to the oil industry and Halliburton? Did anyone react when Halliburton opened its second headquarters to the United Arab Emirates under the pretense of developing is business in the “Eastern hemisphere”, but in fact in order to avoid corporate income taxes in America? How many former Goldman Sachs senior execs ended up managing public money in the US, Henri Paulson being the least competent IMHO?


5. 
   
   corporate governance need to be fundamentally reviewed to become more inclusive of all categories of people who work for companies. It’s also absolutely essential to force a degree of transparency on the decisions being made, their implications and their rationale, using the information provided openly to key constituencies and communities within a company to allow the companies’ people (after all they all claim it’s their most precious asset) to express a view and provide feedback on what is being done. From that perspective the governance model of German companies is a good first step.

Roubini confirms deep crisis: how will you shield your business?

Nouriel Roubini’s (RGE – Wikipedia –  Page at NYU Stern) interview on Bloomberg is something you ought to listen carefully (podcast at the end of this post) if you’re a business founder, a manager or an asset owner. It’s not exactly the sort of content that will boost your morale, but I don’t believe the Coué method is the right way to go because it’s much more than a mere crisis of confidence. On the other hand neither denial, nor pessimism are going to take us anywhere.

Rather a pragmatic take on the situation is an essential first step if you’re serious about adapting and being in a position to fully benefit from an eventually recovering economy. This is only one of the reasons why it’s worth getting down to some of the implications of this analysis for business. Today helping business people deal with anxiety and make sense of this chaos is part of my work in different industries, from commodities to tech-innovative sectors, in different areas of Europe. So what does a pragmatic analysis of the situation mean for business? Read on and listen to the podcast.

Economics have seldom been as crucial to business as today. That’s a fact across the board, from young industries enjoying the fat marging allowed by rapid innovation to older highly commoditized sectors. So it only makes sense to be listening to scholars and thought leaders – at least those who have been issuing alerts for the past decade or so: Roubini, Stiglitz, Krugman, Taleb, Bernstein, Bookstaber, Tobin, Thoma…  

Roubini’s assertions – well documented, no doubt – that the top US banks are probably insolvent and that China is probably in recession, not merely “just” growing slowly, are causes for concern. His analysis during the interview with Bloomberg suggests the following:

1. 
   
   the massive amounts of money already committed by governments and central banks may not be enough to take the world economy out of the crisis within an acceptable number of quarters. In fact we may be looking at a period of several years of slow and painful economic growth


2. it’s probably going to take more than government stimulus measures to clean-up the mess created by years of recklessness in government, greed and lack of integrity in financial services and shameful collusion between those who were supposed to control and assess (audit firms, rating agencies, regulators) and those who should have been controlled


3. 
   
   there is a need to completely review the international financial system and its governance, which was (re)shaped by followers of the infernal Bush-Greenspan duo during the past decade in a way that makes key institutions like the World Bank, the IMF, the Bank for International Settlements and even a number of programs of the United Nations (UNDP, International Conference on financing for development…), useless or powerless. This adds to the concerns of those of us who doubt the viability of a global economic and financial system working in a wicked way as "poor" nations in effect lend to "rich" nations. At the end of the day, globalization can be extremely beneficial, but should be reviewed, in particular when it comes to global trade liberalization, which has been artificially disconnected from labor, social and other human development issues: if international trade is based on markets playing freely, then how can the lower cost of producing in countries without any form of welfare state not lower global standards of human development?
   Yet another ill effect of failing to build multilateral support and a clear indication that the world governance cannot remain unchanged if peace, progress and prosperity are goals we want to pursue.

The picture Roubini paints is pretty grim and scary, but factually speaking he’s probably right and we need to acknowledge and take stock of the situation as it is right not, not by discovering ugly bits and nasty pieces of the big picture in a seemingly unending stream of randomly chosen snapshots. Nothing is more damaging to business confidence than the constantly disproval of previously accepted opinions as to the scope and depth of the crisis.

With most economies in a state of frozen shock,  difficult access to cash and several assets fast becoming almost illiquid, the degree of anxiety is high in business, for owners, managers and employees alike. The principal cause is not the crisis itself, but the uncertainty about its real nature, its consequences and its true extent as well as the often unspoken lack of confidence that governments know how to solve this one.

So considering the work I do with customers in Europe, the most important implications for business are as follows:

For established businesses

Despite government’s efforts to pump cash into the economy, banks seem completely upset, fearful and paralyzed to the point of actually failing to making funds available even to established and fundamentally healthy businesses. So, if you’re managing an established business, perhaps a family owned business that cannot rely on access to global money markets, you need to consider the following:

1. 
   
   make sure you reduce the amount of cash you business needs to operate by pulling all levers from operational efficiency to customer relationships and supplier relationships management. In one of the businesses I’m advising negotating with supplliers to reduce the volume of raw materials purchased and kept in inventory, made a measurable impact on net working capital


2. 
   
   secure the stability and reliability of any short-term funding and credit lines you’ve arranged to get from your banks. Banks are always willing to lend you an umbrella when it’s not raining and when it’s raining on them things can get pretty shaky. To achieve this goal you need to communicate on a regular basis in as open a manner as you can with your bank. At another company we’ve gone the extra mile to discuss the business plan with the bank, especially as it contained a forecast for the cash situation of end 2008


3. 
   
   consider reviewing core processes that can be improved to use less cash. Now, that’s a great area in which to consider better use of information technology whether to achieve a more efficient link between inputs and outputs, getting closer to demand-driven production or to improve logistics and customer service. Being a user of some of the latest stuff I’m utterly amazed at how slow adoption is in most established businesses. This is a great time to adopt, especially when you adopt tools and methods that make you more efficient, more effective and faster. Just a hint: consider Salesforce, the Zoho suite of applications and Basecamp…


4. 
   
   adopt cheaper means for communicating and spending time with customers: voice over IP exists, so you don’t need to pay these outrageous roaming charges (hint: take a look at Jajah, a company I covered 3 years ago on this blog, and your phone will never look the same again…). Another little something you might want to consider is Cisco’s Webex or telepresence (here’s a video by an employee of the company), to interact with your customers without having to spend precious time and money travelling.


5. 
   
   train, train, train and train your people for better expertise on your business, on your industry, on their functional areas. Also, train for better customer service. It’s amazing how few customer facing professionals know how to actively listen to customers and get down to what they really need, cutting through what they say.

For more recent going concerns

For more recent going concerns, the issues highlighted above for older and more established companies
are valid and should be considered although one may assume that in many
cases younger going concerns have better patterns of adoption of new
tools and methods. In your case, you need to be concerned with your
customer portfolio because unlike older more established companies you
are likelier to be more exposed to commercial and customer credit risk.
One of my customers is in this situation and we know full well that it
is crucial to keep close contact with all key customers and to go the
extra mile to share a bit of the burden of going through this storm.
Something that’s been possible in this case was to agree on a
schedule for payments such that the immediate pressure on key
customers’ cash situation is reduced by 10% to 15% and those customers
commit to a longer term supplier relationship with my client. Factors to be considered with special care include

1. 
   
   the concentration of business with a smaller set of customers that increases the business and financial risk if those customers require less of what you’re offering


2. the nature of these customers and where tey are in terms of life-cycle: startups, growth stage, recent going-concern or established company. Beware this parameter though because many business pros tend to have a bias for it in their decision making: if there’s something we should learn from the collapse of “blue chips” like Enron, Bear Sterns and Fortis, that’s the fact that one cannot assume a large and old company to be better, safer or more reliable than a younger and smaller player


3. the industry in which your customers operate because you’re likely to see some domino effect if you’re working a lot with financial institutions or car companies for example. Same thing if you’re serving companies that sell products and services that are not essential, “must have” items.

For start-ups and companies at growth stage

For startups and companies looking to finance growth, I know for a fact that there are good businesses out there with healthy commercial situations and well-performing operations that nevertheless find themselves under financial pressure. As long as there will be such situations investors who have cash to invest are likelier to acquire distressed assets than new businesses or growing businesses without long track records or whose industry is too unstable. So, if you own or manage an early-stage or growth-stage business, especially if you are considering to raise money, you need to consider the following:

1. consider what happens if your don’t raise a dime and identify where your pragmatic opportunities actually are


2. get back to the drawing board and drop every
   single activity, service, offering that does not give you paying
   customers or financiallly quantifiable results within 3–6 months


3. reconsider funding strategy to use all the tips and ticks of bootstrapping (here’s a great resource from Inc magazine and here are inspirations
   from companies that started on less than 1,000 euros) in order to be
   able to provide service to customers even if your product is not
   complete
   the time when you could say you had a company
   without having a business model are over for some time at least. I’ve
   always been extremely skeptical about how adequate it is for people to
   venture without a business model (see post of 2006 here)

Enjoy Roubini’s interview and visit his RGE site.

Click fraud on the rise: a threat to measurability of ads?

Interesting and worrying figures from a recent study on click fraud showing deterioration of the situation on the front of click fraud. I wonder whether fraud can be curtailed and if not whether it can derail the project of genuinely measurable advertising and marketing communications...

clipped from www.marketingcharts.com

Botnets, Click Farms Propel Click Fraud to Record High 17%

The internet click fraud rate hit a record level of 17.1% in Q408 and click fraud traffic from botnets surged to an all-time high of 31.4%, according to Click Forensics, Inc., which today released its quarterly pay-per-click (PPC) Click Fraud Index figures, writes MarketingVOX.

Specifically, click fraud traffic from botnets was responsible for 31.4% of all click fraud traffic in Q408. This is up from 27.6% in Q308 and 22.0% in Q407.

The average click fraud rate of PPC ads appearing on search engine content networks, including Google AdSense and the Yahoo Publisher Network, was 28.2%. This is an increase from the 27.1% rate reported for Q308 and down slightly from the 28.3% rate for Q407.

In Q408, the greatest percentage of click fraud originating from countries outside the US came from Canada (7.4%), Germany (3.0%) and China (2.3%).

Social media gaining more traction than expected

A very interesting conclusion of recent study by Pew shows that social media is on track for faster adoption than previously believed. And this means that the media landscape is on the brink of yet another radical change in the way owners of content relate to their audience and communities. Exciting stuff.

clipped from www.poynter.org

"The share of adult Internet users who have a profile on an online social network site has more than quadrupled in the past four years -- from eight percent in 2005 to 35 percent now."

"It appears that American adults are moving into social networks more quickly than top 100 news organizations."

McLellan cited recent Bivings Group research, which found that only one in 10 major news organization sites offer social networking features

It's not the site, it's the links, the connections and the network.

I think McLellan is on to a couple of interesting ideas here. First, that mindset and culture -- not resources and technology -- are the key barriers to news organizations benefiting from social media.

the willingness to continuously experiment is the most likely path to success in media. This includes not just trying out new technologies, but learning how to value engagement other than page views on your site.

one of the more rewarding ways news orgs can connect more fully with their audiences

Congratulations Nimbuzz!

Almost a year and a half ago on I covered Nimbuzz on this blog because I felt they had a pretty cool and promising proposition. Since, their team has been able to progress even more and get to the point of receiving the prestigious Red Herring Global 100 award.
As always, I am thrilled to see entrepreneurial ventures find their way and reach new heights, so congrats to the team of Nimbuzz for beautifully pursuing an entrepreneurial quest that creates value.

An interesting correlation

These past few days I came across an article published by CNET News listing the seemingly unending announcements of layoffs of these past months. One of the questions that occurred to me was whether there is a correlation between the importance of a company's layoffs and its stock's price-to-earnings ratio (P/E). I chose to use the P/E ratio before the beginning of the crisis, because that's when future expectations of growth where factored into the price of a stock and hence the layoffs reflect the fact that these very expectations were disproved.

My take is that our economies have been running into trouble since the second half of 2007 and hence I used the P/E of 2007 for a subset of tech companies of the CNET list. The companies included in the data set are: Adobe, Alcatel-Lucent, AMD, AT&T, Autodesk, BMC Software, Borland Software, Cymer, Dell, Electronic Arts, EMC, Ericsson, Lenovo, Level 3 Communications, Lexmark, Logitech, Microsoft, Midway Games, Motorola, Netflix, Oracle, Plantronics, RealNetworks, Seagate, SGI, Sony, Sun Microsystems, Unisys, Viacom, WebMD, Western Digital, Yahoo

I got the P/E ratios from Prof. Damodaran's web page that I got from Prof. Farber's page of resources at Solvay Business School, my Alma Mater. So I'm once again grateful to professors & academia for sharing knowledge, the only way for knowledge to grow.

While this is by no means enough to draw conclusions and the analysis is only very rough relying on many opinions, the indication is that the higher a company's P/E is in good times, the likelier it is to lay-off personnel when the economy sours . To illustrate this result, I used IBM's Many Eyes visualization resources, which I find prety cool, so thanks Big Blue for making great tools available freely to those who seek, for those who are on their quest, sometimes a business quest :) Here's the link to the chart. I'm also including a screenshot of ManyEyes below because the link doesn't always work properly:

I also used data visualisation software Tableau to verify the correlation: quite a powerful product. Below is the analysis of the model produced by Tableau:

 

And the Tableau visualization is below:

Mobile telephony in crisis

A day doesn't go by without further indication that the crisis is deepening and hitting sectors previously thought to be shielded to a some extent. This piece of news also shows that consumers and businesses alike are unlikely to resume investments and spending before they are certain that the worse of the crisis is behind us. In the field of mobile telephony a sharp drop in capacity used by subscribers is to be expected and in particular in those patterns of usage rightly considered to be most expensive (roaming, mobile multimedia Internet...) Not too good news for GSM operators and companies like MACH, whose prospects of getting listed on a stock market have all but disappeared for the foreseeable future.

This is all rather good news for Jajah, (which I covered on my blog more than two years ago) as well as for Skype, because as consumers and businesses become more price sensitive they'll be looking for VoIP solutions that do not require of them to be incurring major upfront investments and that can be used without too much impact on operating expenses. Furthermore, I expect broadband ISPs, IPTV operators, video on-demand and providers of infrastructure and services for remote collaboration to do well as consumers spend more time at home and businesses cut back on their travel spending.

clipped from www.businessweek.com

Mobile sales are slowing much faster than expected, and even Nokia, once a stock market favorite, is suffering the humiliation of downgrades

Only a few months ago, it looked like the mobile-phone industry might escape the worst of the global economic slowdown.

Those hopes are evaporating fast. Market watchers are now warning that sales are slowing faster than expected even in markets such as China, which had seen explosive growth for years. After a fourth quarter of 2008 that some analysts are calling disastrous, manufacturers could be stuck with millions of unsold handsets. Weaker players such as Motorola (MOT) and Sony Ericsson, which were struggling even before the downturn, could drastically scale back their ambitions or even leave the market.

Strategy Analytics, for example, officially predicts a 1% decline in global handset sales for the fourth quarter of 2008 as well as all of 2009.

growth has been slowing for years