Walter Adamson

	| | | | | | Save to Mobile Scan my QR Code	I blog about the IT Industry & the Cloud Shift, customer engagement & social media , and business value & innovation, and in particular where they overlap.
Melbourne Lead for Kinship Digital - delivering to business social strategy, tactics, monitoring, governance and tools. IT exec since way back, former Internal Auditor, blogging since early 2004, Tweeting since 2007, certified social business strategist since 2009, still learning. CoFounder and Partner of the Social Business Consulting Group. Qualified in Mathematical Statistics, Computing Science. Old eyes, new views. Give me a tweet. More bio here. Contact: walter@walteradamson.com  m: +61 403 345 632 Keywords: Social enterprise, social governance, social monitoring, community platforms, predictive analysis, IT strategy, customer value proposition,SaaS, cloud strategy, go-to-market, digital engagement.

Is the perfect "social" business video?

One of the most common hesitations I see with businesses wishing to deploy more social techniques of engagement is their hang-up about making a video. This example from Google strikes me as the perfect example of a "social business" video i.e. the "casual" video for social engagement with an invisible professional touch.

I see this reticence whether the discussion is about making videos for internal use (for enterprise social networks) or for external consumption somewhere on the social web. The argument is usually polarised and runs like this:

• "We need to professionally present our business and have it professionally made and that will cost us $3,000 per video, I know that because I have just spoken to the video people we usually use".
• "No, everybody is used to Youtube and they even use those types of amateur videos on the daily news and even business programs - these days we are all able to get the content without fussing about the quality".

I actually favour the second view, just make it with your iPhone and do the best you can to hold things steady and get some good lighting and sound. People just want to hear what your customers or other employees are saying and if that is in their noisy office or factory that is ok.

OK I'll admit that my leaning towards the more casual approach does not usually solve the problem. Mostly I just think that in time those in the "professional" camp will become more relaxed, and until then they just miss out on the opportunity. 

But there is a middle ground, and the Google Deep Learning video shows it. Here's what struck me about this video (aside from the astounding content):

1. The setting is extremely casual;
2. The framing, angles, and lighting are professional.
3. It's extremely "business social".

I think that this is a perfect model for those companies concerned about conveying a professional image in a "social" video. I doubt very much that this cost $3,000 to make, but on the other hand it was carefully planned.

What do you think?

Walter Adamson

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The Ten Ways Solar Energy will Destroy the Electricity Network Operators and The Poor

Just 19 words recently attributed to Grant King CEO Origin Energy portend the implosion of electricity network operators. Lost in a large glowing article on the benefits of solar energy those 19 words were simply washed away in the deluge of daily information flow. Learn below why those words were simply one step in ten steps towards the commercial demise of the power grid operators. 

It's not the electricity network failing but the commercial failure of the power grid business

Firstly, let's set the scene. I did not say that the grid is headed for failure. It could fail, as the ultimate outcome, but that's not my point here. Firstly the private companies responsible for the electricity transmission and distribution grid structure will face commercial collapse. Then, to prevent subsequent failure of the grid government intervention will be required. We're focused here on the steps leading to the commercial failure of the network operators.

The rise of independent power production by individuals and companies as epitomised by the rapid uptake of domestic solar energy installations has set in train an unstoppable national disaster for the power transmission and distribution network operators, and the nation. As more people go off-gird the networks companies as private entities are doomed. Already Australians pay 130% more for electricity than Canadians, according to new research - a power premium to rise to 250% once the carbon tax and locked-in price increases take effect.

Solar energy spells disaster for power network operators and the disadvantaged

Australia only produces about 1.2% of it's annual power demand from solar, the trend to solar is accelerating due to compelling triumvirate of government incentives, falling equipment prices, and rapidly rising power bills, as noted recently by the Clean Energy Council:

More than two million Australians are now getting cheaper power and saving some half a billion dollars a year on their electricity bills, because of their switch to solar energy. The number of Australian homes with solar power systems has passed the one million mark, according to figures from the Clean Energy Regulator that confirm the milestone was reached in March. Clean Energy Council Chief Executive David Green said this meant that approximately 2.5 million Australians now lived in one million homes with a set of solar panels on the roof.

Ironically, the greed of the power companies, through their rorting of the pricing regulatory system, has probably been the most powerful and emotional incentive for people to want to install solar panels. There is $55 billion worth of network upgrade spending already locked in, and it was recently estimated that on a national level, network costs would contribute about 40% to increases in electricity prices from 2011/12 to 2013/14. Even the Australian Consumer and Competition Commission has caught on to the sport of the power companies:

Sims [Rod Sims Chairman of the Australian Competition and Consumer Commission] is only the latest in a succession of independent authorities to identify the huge cost of a flawed regulatory model for electricity pricing that allows power companies to use investment to game the system to gouge consumers. Ross Garnaut was the first prominent figure to call for a fundamental overhaul of electricity regulation when he updated his climate change reports in 2011 and identified market, government ownership of power companies and regulatory flaws as a key reason behind rising power bills.

Electricity companies unethical behaviour accelerated the market failure

The companies outwitted the various governments in their privatisation negotiations, fair enough that's what happens 90% of the time. And, they had what they thought was a monopoly, like the privatised airports, tollways and water service providers, so they could gouge to their hearts content right?

Yes, right, they did. When pricing submissions came around they employed special purpose consultants who were expert in every nuance, trick, and rort in the regulations. Big bonuses were paid all around when the rorts came off and the price rises gave a lot more bang for the buck of projected capital investments. They gamed the system with intent.

Yes, the outcomes here would have happened anyway. But they would have been slower, and with far less emotion and rancour had the electricity companies acted ethically, which they did not.

Solar energy spells crisis for power grid, doom for the network operators

What is this impending commercial crisis, and why? It's consequence of these 9 steps, leading to #10 which is the actual market failure of the network operators:

1. The grid needs to be maintained at (a nominated) peak capacity;
2. People buying less energy means that the grid cannot be maintained without huge price increases
3. The people who can least afford it e.g. not on solar, will be hit extremely hard
4. People who can afford it will go completely off-grid HOWEVER they will want to retain a connection as emergency backup
5. The effect of #4 will accelerate the affect of #3 on those that cannot go solar or off-grid
6. Network operators will lobby government to dramatically raise the cost of just "being connected" in order to try to cover maintenance costs, and governments will have no choice but to agree
7. Solar panel owners will then install more and more on-premise energy storage capacity, which is also falling in price very rapidly
8. Micro-communities e.g. large blocks of apartments, will realise that they can share capacity and then wire themselves up with enough backup to go off the network entirely
9. The scope of these self-networked self-wired communities grows which results in greater backup capacity and more and more people completely off-grid, in part driven by the "outrageous" connection cost imposed by the network operators
10. Inevitably, the network operators fail financially - one by one- and the Government has to ultimately re-claim the networks and run them as a public service, at substantial cost.

Why Governments will have to Reclaim the Electricity Grid as a Public Service

You are probably thinking that this is all fanciful, or even fairyland right? If it were so then many energy "leaders" would be talking about it right? Well if you do some searching you will find some conversations, but you're right in that you'd have to search and with some diligence.

So maybe I'm to be treated in the same way as a climate change skeptic - what do you think? Perhaps I can simply cast into the dark corner of "anti-solar" and all will be fine?

But, wait ! What DID Grant KIng actually say? On page 8 of The Age on the 5th of April 19 words were attributed to him. He issued words of caution in a large positive article on solar energy:

The spread of solar, though, has its critics, such as Grant King, chief executive of the largest retailer, Origin Energy. He said PV owners retain grid access but as they buy less power from it, costs will rise for everybody else.

Now it's extreme to be against solar per se, although Grant King is speaking from a position of self-interest. But never-the-less the BIG point he makes is what we are saying here. And those 19 words, and that warning, went no further. So this is a topic not yet on the public energy or political agenda.

But this issue is not going away, it cannot go away, it cannot be ignored any longer. It will mean massive restructuring of the electricity network operators, and it will mean that governments will either have to own the networks again, or pay huge social subsidies to the operators.

The looming solar tax as a social payment

Where will those subsidies come from?

They will have to come, in the main, from those that operate solar for their own benefit - either identified by definition or demographic or income. The only other option is to raise general taxes which in one way or another will further penalise those than can least afford their electricity.

What will probably come about is a Power Benefits Scheme analogous to medical, where it becomes part of a social safety net.

Does any of this mean that we should stop deploying local solar systems? Not at all, and there is really no way to stop it anyway except by punitive legislation, which would be extremely controversial.

Questions on solar and the power network operators

• What do you think - do you see alternatives to this scenario?
• Which of my steps is fatally flawed, leading the demise of my prediction?
• How does Germany solve this issue when at times 40% of their grid's power is supplied from solar?
• How do you think governments should react, or even better how should they plan for this?

Walter Adamson

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PS "Electricity generators manipulating the market"

This in the Australian Financial Review p10 April 10, 2013 - which is why it is uncontroversial to say that the electicity companies are behaving unethically. They are entitled by the laws of the land to exploit the rules to the full. That does not make it ethical behaviour, which it is not. Here are the key phrases from the article:

• "manipulating the national electricity market"
• "commercial gain"
• "bidding designed to game the system".

-----

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The Analog-to-Digital wave of disruption - Google Driverless Car

There are many massive disruptive waves crashing on the shore of business today, perhaps more than at any time in history and certainly moving with more momentum. Think not just cloud computing, social media, big data, predictive analysis, collaborative commerce, mobile platforms, and biological waves but think of where they intersect and overlap - that's massive.

Up until now general computing and global networks e.g. the Internet, have concentrated on digitising all things analogue. Feedback from the real world obviously has existed in parallel in everything from space rockets to oil refineries, and very sophisticated at that.

But the Wave of Analog-to-Digital (A2D) Disruption brings a level of accessibility to a new level for the masses, and at rapidly diminishing cost points, and feeds that information back into the global digital networks.

For example the Google Driverless Car brings analogue back into the Google digital world and along the way has huge social, political and economic consequences. Suddenly roads hold more traffic, far more, because the density, speed and braking distances are optimised. Less fuel is used, the need for most city parking space is eliminated, and potentially fewer cars are needed.

Analog to Digital consequences

The outcomes of that need to be pondered, and by more industries that you think. Investments by superannuation or mutual funds in companies with parking lot real estate assets will fall in value, same for their investments in toll roads owners and operators, taxi fleet owners would suffer as driverless cars were co-opted through collaborative commerce, etc.

Shopping Centres could offer perks and incentives to have cars bring customers, and among a million other scenarios the fact that everything is connected and located means that real time interactions across all facets of daily life could be optimised and bargained for negotiated in near real time.

More digital disruption

If we consider other big disruptive consequences, think of the motor vehicle insurance companies - a massive global business. All of a sudden everything is based on real vehicle data (noticed that I did not say driver data).

That means that companies which are most nimble and agile digitally and with the best algoritms and "big data" can now pick off all the low risk customers and offer them very substantial savings on their premiums. This leaves all the high risk vehicles with the incumbents, notoriously not nimble nor digitally agile.

So these are big industry disruptions, from digitalisation and in particular from the accelerating connection of analog back into the digital empires. And this is only one of the huge disruptive waves coming over the horizon. 

Do you have your head above the waves and can see them coming and have considered their impact in your industry?

Walter Adamson

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Lessons for business, political and association leaders from the Bar

Not I don't mean the drinking bar, but the legal Bar. When Chief Justice of Victoria Marilyn Warren recently appointed 21 new Senior Counsel to the Victorian Bar she gave some words of advice (Australian Financial Review December 7, 2012, p33). It is brilliant advice, and something which I think business leaders, political leaders in particular, and Association leaders should heed.

She said "there are four matters which I ask you to remember":

1. You have been universally recognised as a person of the utmost integrity. Maintain your reputation.
2. Appear in cases or give advice in matters that warrant the involvement of senior counsel. There is an expectation underlying your appointment that you are needed for the more complex and difficult matters to which you bring your intellectual acumen and experience.
3. You are a leader of the bar and should do that very thing that the description connotes; that is, lead.
4. Judges in trials and appeals will turn to you with the full expectation that as a leader of the bar you will always assist the court and acknowledge your paramount duty to the court.

I think that is simply brilliant and both simple and brilliant.

I need hardly say if these four points of the value compass were used as a health check with a scale of 1 to 10 then our political "leaders" over the last 20 years would rate a -1. They have been and continue to be a self-serving bunch of sycophants on all sides of politics and it's the likes of this clear cut guidance which hammers home that point with a sickening truth.

If some our our Association leaders e.g. the Australian Dental Association which endorses TV ads (in return for funds) which warn kids and parents off eating fruit and fruit drinks, took this as a wake-up call and at least tried for a semblance of social responsibility then we're all be better off.

And as for business, to be frank I think they do a better job at all this than the two aforementioned groups, but they would do well to pin this to the front of every leadership meeting and check-in against it. For business I would suggest that there is also one other important value or trait to be monitored at each such meeting - that of being authentic.

Such succinct and compelling guidance for new incumbents! Well done Marilyn Warren.

Feel free to use the following pictorial download 1-page PDF from Scribd.com. Follow me on Linkedin or Twitter.

Marilyn Warren On Leadership | Infographic

Why I Didn't Delete my Child's Photos from Facebook

When I received a note from my 2nd daughter asking me to delete all photos of her children from Facebook of course I agreed.

there have been some really disturbing cases on FB recently of people taking other peoples photos of children and posting them on pages...

She asked if I would be asking the same of others in regard to my newest daughter (aged 2 1/2), and I replied "based on what I know at this time - no".

Here are three reasons that, based on what I know at this time, I won't be asking anyone to delete photos of my daughter, nor restricting who can see them. I'll start with the least contentious and "work up":

1. Firstly, each day 250 million photos are loaded to Facebook, and it is estimated that there are currently more than 250 billion undeleted photos in the system. Therefore, if you have 1000 of your own photos in Facebook then a person will only have a 1/250000000th chance of finding your photos. Of course we don't know how many of the photos are made "Public" but it's still likely that even photo trolls will have a very low chance of ever coming across your own public photos.

   The odds rise as your photos are shared, and of course as your Friends add photos of your children and they are shared. I think that it's logical to say that if all photos are shared equally then the odds of being found by a troll remain the same as if no "Public" photos were shared, in any case it's still a very remote chance. You can't cotrol your Friends but if you want to reduce the odds even more then just make your photos viewable only by Friends. I'm leaving mine Public for the time being.

2. Secondly, I enjoy sharing my photos of my daughter and seeing others enjoy them. I'm not ready to surrender that enjoyment to the photo trolls and have my actions dictated by them. The risks, as I perceive them, don't outweigh the enjoyment.

3. Thirdly, the most contentious reason. Facebook has generated a whole industry of journalists and many others who specialise in "Facebook Fear" stories (here's one from 2007).There's an associated set of people who flog Facebook pyscho-babble to the TV morning shows to feed their programming formula of fear, fashion, fads, fat, froth and cheap sympathy - for example Channel 7 (Australia) a perfect customer. The participants get their 15 minutes of fame, and for some it becomes addictive.

   How is this relevant to my decision? Because it means that stories like the child troll story are going to emerge ad-infinitum. And certainly worse. Nothing is ever going to get better for Facebook because the "Facebook fear" industry has buyers. So if these stories worry you then for you things are only going to get worse. You might be best to quit Facebook now to avoid unnecessary worry.

For me, unless there is a totally reprehensible breach of faith by Facebook or a similarly reprehensible act of hacking of the information which I have in Facebook, then I will continue to use it in an open and public way. Facebook is what it is, and the Facebook Fear industry is what it is with its own agenda, and you have to weigh up the balance for yourself.

At this time, I don't intend to change anything about the way I use Facebook.

Lessons for Enterprise from Facebook and its 1 billion users

I was surprised today to see relatively little in the tweetstream in Australia about Facebook's achievement in reaching 1 billion users. I had to search to find comments as they weren't streaming through, and then I also discovered that about half the comments were sceptical or negative, which surprised me.

It's a massive achievement, with big implications for business and enterprise IT. Here are 5 - off the top of my head. They are not very well researched - forgive me - but at least I'm putting out thought-starters about the implications of Facebook's achievement.

1. The power of the smartest combination of technology, technologists, business strategy and execution

It demonstrates how dramatically the smart choice of technology and business models can decimate the competition. We know the story but it's worth repeating that Myspace was bought for $580m in 2005 and reached a peak of about 100m unique visits a month in 2008 and at those times Facebook was deemed to be an also-ran. Facebook's architectural platform strategy together with its computer science and computer engineering prowess a la Google and its incredible ability to execute rocketed it past the competition while at the same time running on a relative shoestring.

And furthermore Facebook has made much of its secret sauce public, through contributing to open source projects and the establishment of its own Open Compute project. That's partly because of its mission, and mostly because it knows that the knowledge alone isn't precious, it's the ability to execute.

Which brings me to my next point, how Facebook has revolutionised the economics of computing.

2. Computing Economics

Facebook's total cost of revenue is about $1b. A large chunk of that goes to running IT infrastructure including "data center operational expenses include facility and server depreciation, equipment rent expenses, energy and bandwidth costs, support and maintenance costs and staff salaries, benefits and share-based compensation".

In Australia the big banks, big telcos, and some other large organisations spend in excess of $1b per annum each on IT to serve a minute fraction of the user base of Facebook.

Can we even calculate how small that fraction is? Let me see, let's say 25m/1,000m = 2.5% right? Now even if you throw in all the reasons that "we're different" and double that 2.5% to 5% then we're seeing 20 times less value for money in Enterprise computing than Facebook can achieve day-in and day-out.

We’ve always been small in terms of number of employees. We have this stat that we throw out all the time here: There is on the order of 1,000 engineers and now on the order of a billion users, so each engineer is responsible for a million users, says Zuckerberg.

In fact, Facebook has reinvented the economics of data centres and computing. Which brings me to my next point - reliability.

3. Facebook's reliability across 1b users is astounding

Australia's major banks all have very public problems in keeping their basic ATM & EFTPOS networks running "Angry customers slam Commonwealth Bank meltdown". In response some have committed huge sums - $300m, $400m - to remediating their systems. The end result for the customer is no difference in anything except that the service will stay up as promised. On the other hand Facebook manages to stay up to high levels of availability and runs all this across public infrastructure - not dedicated expensive networks.

Once again, I am sure that there are all sorts of nuances, all sorts of reasons why "we're different" we're more complicated" etc etc but for all intents and purposes Facebook stays up globally for 1 billion customers while very expensive dedicated enterprise systems in a single country serving a minute fraction of users don't stay up.

If these enterprises knew what the Facebook engineers know than they'd be equipped to deliver a lot better value for money. And furthermore Facebook never intentionally goes off the air for system upgrades, which brings me to my next point.

4. Very clever zero-downtime system upgrades

Facebook has developed a remarkable 100% uptime service while at the same time constantly experimenting, innovating, bug-fixing, updating and upgrading their software. This hasn't fallen out of the sky in to their lap. They've invented most of it, building on the experience of some others like Google. Facebook's proven processes of gradual releases and dark launches should be the envy of large-scale enterprise IT. Their A/B testing processes are phenomenal and they now have the amazing ability to A/B test on just 1% of their active user base and gain feedback from 10 million users!

Read the real account of rolling out Facebook's new Timeline feature

In contrast, to my knowledge all the banks in Australia are still taking their systems off the air at least every week for system upgrades. And remember, these outages are just repairs, not the continuous raft of new features and substantive user service upgrades managed by Facebook with zero downtime.

5. The value of a platform

The essential reason that Facebook crushed MySpace was that Facebook build a platform while MySpace tried to build a closed community system. Facebook's approach is conceptually the same as building a mobile ecosystem of content and apps, as invented and launched by NTT DoCoMo in 1999 and as copied by Apple 7 years later. This is the essence of why cloud computing is so important. Cloud is only trivially about the dial-up of infrastructure and just outsourcing iron. Rather, it's fundamentally about the ability of platforms to interact and mash-up through defined application and data protocols e.g. APIs and the Open Graph.

It's an old story, but a poorly learnt one. In 1999 DoCoMo when set out to make its i-Mode service the most successful internet and app store-enabled mobile system in the world (in which it easily succeeded) it deliberately aimed to make the content providers and app developers as successful as possible. That's why it gave them 90% of the revenue, and why many listed on the Tokyo Stock Exchange and made thousands of millionaire entrepreneurs. Facebook as a platform has spun-off similar success stories.

With a "flick of a switch" Facebook could become the biggest of many things - the biggest virtual currency provider, the biggest bank, the biggest postcard generator, the biggest flowershop, the biggest video streaming company, the biggest news company, the biggest green electricity retailer etc etc.

That's the power of building platforms and not applications. Is it relevant to enterprises? Well I think if Facebook decided to become the world's biggest bank, or just enter a few prime markets as a banker, then we'd have an answer wouldn't we? And then it would be too late.

Summary

Well done Facebook. What a lesson for enterprise IT there is in the taming of complexity, the agility, the reliability, and the power of the platform. It's a combination of technological mastery and business strategy and execution ability and agility which the world of business has not seen before.

And I didn't even touch on Facebook's data mining and personalization and their ability to do data analytics at a huge scale to connect everyone and to build the map of who and what 1 billion people know. WITH FACEBOOK YOU AIN'T SEEN NOTHING YET!!

Related: Facebook's 'Next Billion': A Q&A With Mark Zuckerberg

Counterview? For a "counter view" of why all this isn't going to shake up large Enterprise IT quickly it's worth reading this The Enterprise: I’m Not Sexy And I Know It

The myth of “It’s only 1%” and why to fear it

When Harvey Norman founder and Chairman Gerry Harvey launched a barrage of criticism of the “Internet” at the release of his most recent financial year results I couldn’t help reading on. In fact I was intrigued to read on.

Why was I intrigued to read on?

Well there are a number of reasons. Firstly because having been labelled a “dinosaur” for his previous “Internet denial” e.g. online retail, and having now started an online store he now has real online experience, and yet still decries the potential of that mode of selling – I wanted to see why.

Secondly, he IS a very successful retail business founder and owner – he’s often epitomized as one of the great Australian retail success stories. And he is; although that journey may be coming to an end as reflected in the 31.6% drop in full year net profits for 2011/2012, and the 7% fall in revenue.

Thirdly, Gerry Harvey always says it like it is, he’s that kind of guy, and I always enjoy straight talk. This article was headlined “Gerry Harvey sick of internet 'spin'” and knew I’d been in for a good non-nonsense read – whether I agreed with it or not.

So I read on.

I loved his comments about the marketing spin and “omnichannel”:

"You devote all this time to your omni-channel and integrated bloody ... and you go on with all this bullshit and the result is that it is 1 per cent of your sales. But if you don't go on with the bullshit you are out of fashion, you are not with-it."

He went on the say that retailers were “almost forced to come out with spin to plump up their online strategies to the market”. He's right there, let's admit it. 

"I am reluctant to do it but I do it, because if I don't they label me a dinosaur. I'm out there labelled as a bloody dinosaur."

All good stuff and can’t agree more that it looks totally stupid for CEOs to be spruking “omnichannel” guff and especially when inside they think that the Internet and social are all BS. I do have some sympathy for them because if you followed the recent Australian Marketing Institute Marketing Conference 2012 you would have NOT seen a SINGLE tweet mention of "omnichannel" - the CEOs are caught up in already dead marketing jargon.

Now, here’s where Gerry Harvey and I disagree.

Only 1 per cent of your sales

While like the style of what Gerry says, the content concerns me:

...“when you check with Myer or David Jones, whoever, JB Hi-Fi, Good Guys, it’s nothing of their sales, somewhere between half and one-and-half per cent”, says Harvey

"I get out there and tell it like it is, but I get bloody castigated and pilloried."

Gerry's saying that online gets the media attention but the facts are that it is not doing anything significant.

Let's consider a few points of reference:

• National (Australian) retail sales are dropping – the trend is down;
• Department stores sales tumbled 10.2 per cent, making them the largest single contributor to the July retail sales fall, according to the Australian Bureau of Statistics. So-called 'other' retailing fall 2.8 per cent while clothing, footwear and personal accessory retailing slipped 0.9 per cent in the month;
• In contrast, online sales are growing at up to 25% per annum – the trend is up;
• Online purchasing rose by 24 per cent to a record $11.7 billion over the year to July, according to the National Australia Bank online sales index, released in August;
• Online sales accounted for 5.3 per cent of the retail market, up from 4.9 per cent in January, NAB said.

 What does that mean?

It means that if Gerry Harvey and his cohorts are only seeing “half to 1 percent” of their sales in online then they are under-performing the current online market by at least 5 times. You might say that their product categories are just misaligned with the online market, but that's not what Kogan sees as they report explosive sales growth and record sales for the month of July 2012, and Appliances Online also reports explosive growth (from a low base).

So if your sales as a whole are dropping in a segment which is trending down, and your online sales are performing at 1/5 of the average in a segment growing at 24%, then what's the straight-talking prognosis? I'll leave that to you!

Place your bets please gentlemen

Now if you were to place your bets on online versus “the Gerry Harveys” which would you choose?

Jack Welch once said "If change is happening on the outside faster than on the inside the end is in sight".

On that basis some commentators have called for Gerry to sack himself, "not because he's too old or frail — he remains whip-smart — but because his initial success in building Harvey Norman blinds him from imagining a different future for it".

On face value that's a fair call.

Why are they researching and not buying from us?

In recent comments Gerry Harvey also observed that customers did do price and product research online.

"A lot of them [Harvey Norman franchisees] say people do research online and so the number of people that are researching our product online has jumped 25 per cent but our sales haven't jumped at all."

Does that suggest something to you? I don't get it, this man has been so successful, what can't he see?

I do research online in a store, If I like the people I ask for a price match. If I don't like them I just go to another store where I like the people AND they price match. If they don't price match then I don't buy from them - it's that simple.

Here's the problem, I'll spell it out. I know that the pimply-faced kid in Dick Smith is just trying to sell me the thing that gets him the highest commission, same in Harvey Norman in the mobile and computers. Sure, the guy in whitegoods is older and smoother but he's just flogging the aircon or washing machine with the highest commission as well. Officeworks is staffed to the lowest cost, and that's the only thing I'm interested in there. And all of these people are totally uninformed, which you can establish by spending 2 minutes on the Internet. Now you are the expert with 2 minutes investment - and these sales people and shop owners expect us to take them seriously - that they add value? That's a 1990s joke I'm afraid.

Playing to the reality

In fact the Masters CEO Don Stallings CEO of the Woolworths/Lowes Masters hardware chain says that an amazing 50% of customers do online price comparison while in-store. That’s a reality and it seems that Woolworths and Masters are playing into that reality, not fighting it. They unveiled their online store in June this year.

"MORE than half the visitors to Masters' hardware stores who are shopping for whitegoods are using a smartphone to check out competitors' prices before making a purchase".

“Customers have the power at their fingertips and Masters fully intends to cater to every customer, regardless of how, when and where they want to shop with us", said Stallings at the launch of their online store.

You'd think that Blind Freddy could see that Masters is on the right trajectory. They know people are researching in their stores. They build a strategy around that reality. They know the people researching will know more about the products and the alternatives than their staff. They know that they have to have an in-store price which is within a "warmth factor" of the prices found online.

So they have to win by trying to capture the customer's heart - build a connection, build a reason to like the staff as people, a reason for customers to want to take their kids with them to Masters and even pay a fraction more but enjoy the experience.

Of course, all this also requires a deep belief in the power of social technologies and especially social enterprise technologies to make a difference. If you don't believe that then prepare now to see your sales shrink in all channels.

Conclusion - place your bets now

So I'm placing my bet on those retailers who know that online might only be minuscule now, but who also understand that they have to adapt and who also appreciate that getting a disproportionately small share of a rapidly growing online segment is a big big red flashing light.

Jack Welsh's observation is a keen one, and closer to home Rohan Lund the new COO of Seven West Media Group was recently quoted in the Australian Financial Review saying that the thinks that the next 5 to 10 years will be transformational for Australian business.

"I think retailing will fundamentally change from what it is today".

Just to remind you of what Gerry thinks:  "it’s nothing of their sales, somewhere between half and one-and-half per cent”.

Where are you placing your bet?

Are you comforted by the "it's only 1% argument"?

Gerry Harvey is not a dinosaur and I don't agree with him being portrayed as one, but he does have his head in the sand on this issue.

Walter @adamson
http://xeeme.com/walter
Join me on G+

Related: Paul Wallbank just posted Goodbye to the electronics store
Related: The great online shopping debate — how the locals can win
Related: Customers queue overnight outside Topshop Sydney October 4, 2012

PS: Today (20 September, 2012) comScore released a study on U.S. smartphone behavior with respect to retail and shopping. The study found that 4 in every 5 smartphone users ... accessed retail content on their device in July. If this smartphone usage ratio applied in Australia then it would represent about 12m users! (Australia has a mobile penetration rate of 130% and 66% of mobiles are smartphones, and the 2nd highest smartphone penetration rate in the world after Singapore.)

PPS: Another proof point: a survey just released (26 September, 2012) by Choice, a consumer advocate group, identified Harvey Norman as having the lowest customer service rating among large Australian retailers with "pushy, poor service" and a "lack of product knowledge". Somewhat predictably Gerry Harvey responded that Choice has "got an agenda" and claimed "our service is fantastic". Oddly enough, those retailers that topped the list did not claim that the survey was poorly conducted or biased or had "an agenda"!

PPPS: Also reported today (26 September, 2012) that Dick Smith who rated a mention from me in the post as an example of a past-use-by-date retail model is to be sold for a song by its owners. For a business that a short time ago had 380 stores, and recently wrote down $420m, today's valuation of between $10m and $50m is a testament to the dangers of denial in retail today.

Is enterprise software a fools paradise for start-ups, or not?

I was intrigued by two opposing views coming out of TechCrunch Disrupt this week - one saying that start-ups have an “unfair advantage” in the enterprise market and the other that "tech start-ups needed to find new opportunities away from traditional technology".

Yammer founder David Sacks, the holder of the latter view, says that "technology is too mature for entrepreneurs to be trying to upset the big boys".

"Don’t try to disrupt the redwoods", he told an audience at TechCrunch Disrupt in San Francisco.

On the other hand Box co-founder Aaron Levie said in his view, the enterprise market isn’t just getting "sexy" today, but it's actually now a very attractive market for start-ups.

The traditional enterprise vendors, after all, are accustomed to slow innovation cycles that’s just not sustainable now that so many consumer trends have infiltrated the enterprise.

Levie outlined his reasoning:

• start-ups don't have to go through the usual channels, especially with the SaaS model;
• it's easy to trial new products with the web-native freemium model
• mobile/table brings new expectations;
• the consumerization of IT is real;
• for incumbent enterprise companies, the transition to these new business models is very cost intensive.

I'm on the side of Levie. The transformational effects of cloud, mobile and social are huge, and we generally talk about the impact of that on enterprises and how they function. But it will have an equal impact on enterprise software vendors and their ecosystems.

In this world, at the convergence of these massive forces, I think that the traditional enterprise vendors are particularly vulnerable, in the same way that enterprises which don't transform using cloud, mobile, social are also vulnerable.

The cloud is more than real, but there is still a lot of cloud hype and usually about the irrelevant. I think what is missed is that the cloud isn't something we do things ON, it's something we do things IN. Most of the attention goes to infrastructure which is the doing ON stuff. That's important, and Amazon, Google, Microsoft, Oracle, IBM etc are sorting that out. Once the big things starting happening IN, and we get enterprise Mashups that's when the world starts changing.

It's not just "cost intensive" for the incumbents to move to new models, it's intensive and costly with respect to all their legacy attributes including culture, sales models, remuneration, product line cannibalisation, margins, cash flow, support structures etc. All the usual legacy issues which turn successful companies into potential failed companies. 

I think all that is well known, I was just intrigued about the opposing opinions from two smart people. Probably there is something more to David Sack's view that did not come across in the interview.

Walter @adamson
http://xeeme.com/walter
Join me on G+

STOP PRESS: This just published Sept 13, 2012 "It's 'Shocking' That Startups Are Ignoring A $500 Billion Market" by Sequoia Capital partner Jim Goetz.

Enterprise remains an "enormous opportunity" because companies are spending about $500 billion a year with legacy enterprise companies and those budgets are ripe for the plucking. "We believe most will be disrupted in the next decade," he says.

What Best Buy could learn from David Bowie

On the 10th of January 2012 The Next Web noted how "David Bowie’s 2002 predictions about the future of music were pretty close". Bowie predicted, in 2002, that "The absolute transformation of everything that we ever thought about music will take place within 10 years, and nothing is going to be able to stop it".

Furthermore, as he rounded out his predictions he said something which really struck me, just as powerful as the predictions themselves:

"But on the other hand it doesn’t matter if you think it’s exciting or not; it’s what’s going to happen".

The day before, in Forbes, Larry Downes wrote about Best Buy (The People vs. Best Buy, Round Two) where he described the reaction to his first article Why Best Buy is Going out of Business...Gradually.

The responses to my article could, in the hands of the right senior executives, form the playbook for a compelling new strategy for Best Buy, one that could do far more than simply preserve the company’s existing market share. But rather than drink in all that free advice, the company’s responses simply wish it away. It’s more denial, now tinged with a dose of anger. According to Dr. Elisabeth Kübler-Ross’s classic psychiatric study, for a patient with a terminal diagnosis those are the first and second stages of grief.

In many years (OK, many, many years) as an entrepreneur, investor, and consultant working with Fortune 500 companies, I’ve found there are two kinds of senior executives. There are those who see mistakes as an opportunity to improve their business and those who waste their energy explaining away real problems.

Downes outlines reason after reason why best Buy needs to change, and how nothing they can do can change the progressions which are happening, for example:

• Online competitors are certainly part of Best Buy’s problem, but not for the reasons it thinks. What’s really going on is more basic. Best Buy just doesn’t understand its customers’ point of view.
• What I meant was that consumers easily adapt to alternative retail channels.  Before the Internet, there was catalog shopping and home shopping from television. For consumers, buying online was just the next step in an obvious progression of more convenient ways to buy.
• For brick-and-mortar retailers, however, the shift was jarring.  Moving online required new thinking, new management structures, and new strategies.
• To compete successfully against new online retailers, traditional retailers would also need to find ways to transform the expensive liabilities of physical locations with limited hours and high labor and inventory costs into assets that complemented rather than competed with the online experience.

Best Buy's leadership team's reaction, from what we see, is to create PR "crisis management" scripts for its staff, respond in rote, dig in, and deny. Nothing usual I suppose.

What is unusual is that David Bowie saw beyond his entire livelihood, his total current world view, and was able to articulate and to acknowledge its demise:

"Music itself is going to become like running water or electricity. So it’s like, just take advantage of these last few years because none of this is ever going to happen again".

Astounding really. Best Buy need David Bowie's help, don't you think?

Let's run over that quote from David Bowie once again:

"But on the other hand it doesn’t matter if you think it’s exciting or not; it’s what’s going to happen".

How do you break strong leadership teams out of their mindsets?

How do you demonstrate the "reality" which they cannot see?

What are the keys to action and follow-through and not just acknowledgement?

Please comment below.

Walter @adamson
http://xeeme.com/walter

Help! How To Comment at New Facebook for iPad app

I've been keenly awaiting the new Facebook iPad app. It's OK. There's a quick and reasonable summary at LifeHacker.

But I'm stuck on one thing. I can't figure how to comment on posts!

See the screen shot to the right and also the video.

The Enter/Return doesn't work and there is no other way that I can see to enter the comment.

Who can help?

As LifeHacker says: "While not a revolutionary app by any means, if you love (or even just like) Facebook and have an iPad it's pretty much an obligatory download".

Agree - but I want to be able to comment!!

Please comment below.

Walter @adamson
http://xeeme.com/walter