Creating International Currencies

Currencies enable commerce, acting as a recognised standard unit of exchange; they are closely associated with nation states – usually being either created or controlled by governments, within their (geographic) spheres of economic and legal influence.  What is interesting about the early cryptocurrencies is they have been able to address very large communities –  crossing many national boundaries in the process – and although we have seen certain countries seeking to dissuade the use of cryptocurrencies (for example China and Korea) – the growth of the populations ‘using’ (in the widest possible sense of the word) continues.  In this respect cryptocurrencies are functioning much like the multinational currencies of the past, for example the Spanish Real de a Ocho or the Bohemian Thaler, transcending national boundaries in their use as a medium of exchange.  What is also thought-provoking in this comparison is the Real and Thaler were made of gold and silver respectively – which many would recognise as having tangible value during their period of dominance – versus cryptocurrencies which would be considered ‘intangible’ under most classical definitions.

I conform to the view that, having moved away from being based on a tangible commodity, the value of modern currencies is defined by their ability to enable exchange – and thus those with the most developed usage networks or economies behind them are the strongest currencies (not necessarily from an exchange rate perspective, but from a longevity perspective).   In order to maintain the value of a currency, a government must ensure it is linked to a strong economy and is well used (both domestically and internationally).

Adam Smith and Tokenisation

This brings me to Adam Smith, who put forward the following roles of government:

  • Defence
  • Justice
  • Public works and institutions

Why? Because like national currencies, cryptocurrencies are also governed – and there is a compelling argument to view the relative value of cryptocurrencies and cryptotokens on the basis of the governance regimes that manage their use creation and use. These mediums of transaction can be apportioned value in line with their relative merits, when compared to Smith’s framework.

Defence of a territory (within which a currency operates) is the first responsibility of the state – and equally it should be the first consideration of those seeking to develop new cryptotokens.  If the environment within which the token is used cannot be defended, the token will lose its value (both as a store of value and as a mechanism for enabling transactions).  But what are we defending from?  There are a number of things that immediately come to mind:

  • Better substitutes e.g. cryptocurrencies with lower transaction costs – something that Bitcoin is frequently exposed to
  • More ‘attractive’ environments for use e.g. Coinbase versus Mtgox (more attractive security, in this case)
  • (Public knowledge of) poor integrity e.g. on the fork date of Bitcoin Gold, it was well publicised that the codebase does not offer protection against replay attacks (amongst other issues)

For the developer of a cryptographic token, the first question that should be asked is ‘how do I ensure the use case for this token is defensible in the long term, as countless other tokens will likely be brought to market to address the same use case(s) I am addressing if I am successful?’

The second role of government is the delivery of justice.  In the days of yore, justice and defence were intrinsically linked – on the basis of manpower availability.  A community’s ability to defend itself was proportionate to:

  • total manpower
  • its approach to defence
  • its technological capacity

Manpower and science would grow in permissive environments – think of the first Persian Empire’s reputation for legal process, scientific advance, and military might.  Contrast that with the fall of the Ottoman Empire hundreds of years later, which was a divided state with clearly distinct (and often marginalised) groupings in the population – often conflicting with the state’s own laws, which were poorly enforced.

So how is this relevant to the development of a cryptotoken?  Bitcoin was not the first form of electronic currency (see Chaum’s ecash for the first successful implementation) – but it does have a strong, simple governance model which ties the ‘miners’ into the model and incentivises them to behave in line with the community’s needs.  For a token to be successful, I would suggest developers consider a number of points (in line with delivering ‘justice’):

  1. Incentive mechanisms – how does the governance model encourage adopters to move to using the token?
  2. Dissuading poor behaviour – for example rent-seeking – is there a methodology that prevents free-riding or market abuse?  The token developer should consider their own potential role here (see the change in Ripple’s value in May 2017 when 55 billion of retained XRP were placed in escrow with a defined plan for their use)

Both of these points are congruent with how ‘laws’ operate within a nation – they either incentivise or dissuade behaviors.

Smith’s final role is that of public works and institutions – Smith advocated these for the facilitation of commerce and trade.  The time has now gone where a token can be created as a standalone, without a defined use, and still be attributed value.  Token creators must think as much about facilitating the use, as the use itself – for example:

  • Is the token launched such that speculators can engage with it in a secondary market via engaged exchanges?
  • Does the token creator provide ‘the market’ for the use case? For example, the Bristol Pound has a use case because Bristol has onboarded its consumers and retailers – but David Coin has no use case – I have no consumers nor suppliers prepared to use it.

Cryptotokens are, to my mind, the best current example of Metcalfe’s (and Beckstrom’s, and Reed’s, and Sarnoff’s) law on the value of networks.

Taxation

This brings me onto the second part of this blog:

How does the state pay for its functions, and what does this tell us about how cryptotoken communities can pay for themselves?

The simple answer, to my mind, is: tax.

A nation state taxes its citizens and economic operators, and the purpose of this tax revenue is the delivery of the functions of state.  Of course, the state must be aware:

  • Of Frédéric Bastiat’s comments on the state
  • Of the impact of rent-seekers
  • That if a ‘tax’ model is implemented to provide revenue to enable its functions, this is not done in a way that alienates its users (/citizens).

There will always be a temptation in any token-enabled environment to implement a simple tax model – 1% of all transactions, for example.  However, history has already shown that a simple levy is not the most effective approach – and in fact any modern tax system is used to both encourage and dissuade activities which, whilst legal, are considered more or less attractive to the population.  They can also be extremely complex (the US Federal Internal Revenue Code has 9834 sections; there are over 100 HMRC tax manuals) – which represents the extent to which the modern nation seeks to bestow benefit for certain activities, and discourage others.

The creators of cryptotoken(s) should bear these points in mind – as the governance model applied at the establishment of a new community have, to date, been shown to be difficult to change without significant disruption to the underlying population.  Recall the warnings not to transact in bitcoin for a number of days either side of the Bitcoin Cash fork.  Whilst mechanisms have been built into many cryptotoken models, I do believe these will continue to evolve in the coming years.

Thoughts on Crypto Assets, Initial Coin Offerings, and the Utility Value of Blockchain Technology

Thoughts on Crypto assets, Initial Coin Offerings, and the Utility Value of Blockchain Technology

New to Bitcoin, blockchain, and cryptocurrencies? Read this primer

A new asset class

I am a believer, or maybe I just want to believe. Is this Amsterdam in the 17th century? My view is: no; a new asset class is emerging, and we are about 45 seconds into the evolution of the species.

I have read yet another sceptical article on Seekingalpha this morning, specifically focussed on the Bitcoin (BTC)/Bitcoin Cash (BCH) split.  The author’s supposition is that there is evidence of a bubble in Bitcoin because the combined value of the two coins (BTC and BCH) straight after the split did not closely equate to the value of Bitcoin before the split. Discuss.

It is a reasonable argument that someone coming from equities perspective would (or perhaps should) make. However, there is a large debate to be had around the utility value of the new coin (and the original coin) – this is not a stock split, after all.  Then there is a further debate to be had regarding the value of an asset that is perceived to be neither created in significant quantities, nor destroyed or consumed in significant quantities; this is the gold (aka ‘store of wealth’) argument.

As I see it: Bitcoin (as well as other cryptocurrencies) is currently acting as a store of wealth; the bet you place is that in the future it will remain worth something to someone who also wants to store wealth (or to whom Bitcoin has utility value). From the wealth manager’s perspective, I can also see the portfolio diversification argument: to date, cryptocurrencies have not moved in line with any of the major asset classes (unless we make the argument that quantitative easing related asset value expansion-which appears to have taken place in most asset classes in many major markets- has driven cryptocurrency values upwards).

From a personal perspective, I agree with the portfolio diversification and store of value arguments.  From a professional perspective, I continue to seek to understand how this emerging technology fits in with businesses, which for me, is anywhere it has utility value.

A view on utility

Over the last three years the investment community has made an argument that value lies in the underlying blockchain concept as much, if not more than, the individual ‘currencies’ – and that blockchain use cases can drive value in cryptocurrencies/assets/ tokens (some of the many terms applied – and from here in this article, ‘crypto’) through giving them utility.  Off the back of this narrative we have seen a diverse group of businesses emerge where the phrase ‘blockchain’ appears, to some extent, to be relevant to their business models.  That word alone has led to millions of dollars of capital has been raised through initial coin offerings (ICOs), preselling crypto before its utility value can be unlocked – normally because the environment for its application has not yet been created.

The value of these ICOs has become so significant that major regulators have taken an interest in the market.  I would argue that the prior lack of interest related not so much from a failure to recognise some of these ICOs as ‘pump-and-dump’ schemes, but more because the value involved is low with very few (retail) investors involved.  Not a place to deploy the limited resources of any national regulator.

The first thing that readers should understand is that, as I currently perceive this technology class, there are two aspects that provide utility to businesses: one is as a currency, i.e. as a tool for enabling transactions.  The second is through the crypto token concept, where ‘tokens’ represent a play which is either equity-like (so get regulated if you want to participate here), or as single use objects that can be applied in a specific ecosystem.

Initial coin offerings

These tokens are interesting: one could use these purely to raise capital for a business, and in fact with good governance regime it may make the concept ‘shares’ significantly less relevant – why seek to operate an international business, yet confine business ownership to those who can access the confines of a single regulatory domain (which may not be easy to access to all those who wish to participate in the business)? Instead, one can buy-in at the inception of the business via a token (usually exchanged for Bitcoin), which is subsequently easily transacted on exchanges in the major markets i.e. China and the United States.

Tokens also have a single (/limited) use utility model, i.e. as a non-equity type instrument, enabling an entity to buy in bulk a token at an ICO that will provide utility in markets that currently do not exist, and through doing so providing upfront capital to enable that community to come into existence.

A key part of the process for those seeking to raise capital through an ICO is the ‘white paper’, and I see no likely change to this approach soon.  Somewhat like a share prospectus, a white paper demonstrates to readers how a team (primarily a technology team) intends to use crypto technology (blockchain) to create a marketplace, often to replacing existing markets. The quality of this white paper cannot be understated – it is critical to raising capital in an increasingly educated market.  Other critical elements that support capital raises are emerging to support the white paper – particularly a detailed track record of those on the team (because now some individuals are into their second or third crypto business), as well as the existence of a quality advisory board (and the existence in that team of those with significant experience in the proposed market operation adds considerable weight).

One challenge I foresee for the ICO marketplace is that of credibility – we will have a bust, or a series of busts, because many of the teams who have raised tens, if not hundreds, of millions of dollars in funds will either squander the capital (or incompetently deploy the capital, depending on perspective) whilst seeking to create markets. Investors will lose confidence on many occasions.

Practical application within growth technology businesses

Coming back to the companies I work with, the concept of blockchain and crypto is less interesting from the perspective of ‘imagining’ a new business (and running speculative ICOs), as it is to supporting businesses that already exist.  Many companies, although they will not be aware of it today, will need to implement this type of technology in the future.  This will be either to retain competitive advantage or to source new funds.  Where I believe companies that I work with can leverage significant advantage is where they have an existing business and a proven business model.  Given the nature of crypto tokens – they can be created, destroyed, and traded – and the enthusiasm that exists around ICOs today-they represent an extremely interesting way to propel a business forward.

Yesterday I presented one company I work with to a group involved in fundraising for crypto.  To say that the response was ‘enthusiastic’ would be an understatement.  What they saw was a valid application for blockchain technology (as opposed to paying ‘lip service’ to the concept), along with a significant number of market participants already working within the defined ecosystem – which to me is what these blockchain-based technologies best enable, given their role as a medium of exchange.  To someone seeking differentiation during fundraising in a market dominated by ‘get rich quick’ scheme noise  selling ‘ vapourware’, seeing a real business is something that creates significant excitement.

My subsequent call with another business I am working with moved to crypto.  Within two or three minutes we were discussing how this type of technology could apply to his business – where two days previous there was an awareness of blockchain, but no detail around how support could be provided by the technology class – and within five minutes we had identified how blockchain technology could be leveraged by their business (again, a business with a considerable number of customers, and a strong blockchain applicable model foundation) to provide differentiation, and utility.

The Future

I am a strong advocate of blockchain and crypto, and will continue to be so.  The ICO market is increasingly hard to ignore – if only because of the vast amounts being raised through these crypto sales.  It is certain the crypto market will go through a few booms and busts, but where there is utility value within well understood marketplaces there is a significant opportunity for businesses.  I expect to be working with several companies over the coming months of projects to investigate how this emergent area can bring value to their work.

 

Overcoming the listed company innovation paradox – Part 1

I was recently interviewed as part of a research project into corporate innovation by a group seeking to establish how large corporates could create new service and product lines.  It was early in the morning, so I was at my most blunt.

Me: “Tell them not to waste their time and money.”

Interviewer: “Why?”

Me: “Corporates cannot innovate.”

Nothing ground breaking here; nothing to see, move on, move on.  I’ve taken a side in one of life’s eternal arguments; I’ve occupied the space for years.  Corporates cannot innovate.

Respondents to the ‘can corporates innovate?’ question usually results in people taking binary positions; of course the reality is more subtle.  My less-blunt view is complex: corporates will always struggle to compete as innovators, particularly if they seek to innovate ‘from inside’, yet they can enable significant innovation – and the challenge for them is how they benefit rather than suffer as a result.

I am a shareholder.  If I am honest, I don’t care if the listed businesses I invest in continue to do what they are doing or change business lines entirely (within limits of what is morally and ethically acceptable to me) – as long as they make profit.  This places me at odds with the vast majority of people employed within the companies I invest in; corporates employ people who are (I hope) process experts – they should drive the hell out of the business models the company operates to create shareholder equity for myself and my fellow shareholders.  They do this because, I’d always hope, they enjoy it (or the remuneration for doing something they don’t particularly enjoy adequately compensates them for the inconvenience).  I don’t want livewires employed in these businesses – not livewire innovators – yes, I’d want inspiring people from the top down, but I don’t want too much free thinking.

Why?  Because I invested in the business because I like the results of what it’s doing and I don’t want to upset the apple cart.  I don’t want any of these highly paid executives using their salaries to indulge themselves as start-up gurus (in their heads, at least).  Yes, Unilever can buy a new food line, or a new deodorant line, or even design their own – but if I read an annual report that said they’d set up a team to create an Amazon competitor I’d be upset.

My position builds from my conceptualisation of ‘innovation’.  A few years into my career a guy I went to university with told me about his work in the innovation function of a major bank: they were implementing Salesforce.com across the sales teams.  At that point Salesforce.com already had a $20bn market capitalisation, and I observed that I didn’t really consider implementing tried and tested software products from major vendors as ‘innovation’.  I accept today that from the banks perspective it was innovative, but not innovation as I would consider it – they were making an incremental change to process (which as a bank shareholder I would have been happy to see happen), but coming from a background of innovation I felt the term was being abused.  I don’t consider incremental process improvement to be true innovation – true innovation disrupts the status quo; improvements are not a disruption but an inconvenience to business as usual (no matter how the process people feel!).

True innovation requires major disruption to business processes and practices, and this means that – rather than supporting these – the vast majority of corporate entities, and particularly listed ones, will actively oppose innovative activity.   Consider some examples of why resistance will take place:

  1. Sales team incentivisation structures.  Going back to Salesforce.com, what CRM consultancy sales director in 2005, with a remuneration package based on big ticket Seibel deployments, would have been able to switch to selling the low cost, out of the box Salesforce.com option?  Whilst the client’s bank balance and cash flow would have felt a benefit, his or her bank balance and personal cash flow would have felt quite differently.  Similarly, corporate sales teams incentivised to sell the same big ticket items will have no desire to take several years of financial pain to sell disruptive, lower cost options.
  1. Earnings growth.  Earnings per share has to be one of the key metrics considered by investors looking at listed companies, and personally I want to see stability (potentially with some growth) over time.  True Geoffrey Moore-style from-the-bottom-up-value-chain-disrupting innovation tends to have a significant impact on the way in which companies earn, and in the short term are likely to significantly reduce earnings per share (EPS; consider the Saleforce.com versus Seibel example given previously).  Only with the most understanding shareholders in the world would the CEO of a company be able to hold onto their job whilst explaining to the market why they appear to be introducing innovation that’s ruining the company’s EPS track record.  I would suggest that the vast majority of CEOs do not want to have to do this, and the vast majority of shareholders do not want to hear such apparent insanity.
  1. I have experienced these throughout my professional career; the empire might consist of a professional and their secretary, or involve offshore teams with hundreds of operators diligently executing to improve existing processes.  As a social animal, most people are externally driven – and perception is incredible important – empires ‘improve’ how executives are perceived.  Having built up a position of power over others, how many executives would have skin thick enough to reduce their empires to dust in order to drive improved shareholder performance?  It will take the most extreme pressures to induce such change (and we often only see this in firms who are themselves feeling the earnings impact of innovation brought to market by other players).

All business people have, knowingly or unconsciously, experienced these situations and others.  The conservative, innovation-resistant agencies in a shareholder owned business are brought to bear on to resist change.  However, many businesses also know that they must embrace change – the question is ‘how?’.  How do I benefit from innovation, remain relevant, grow this business for my shareholders, and create long term value?

My ideas on how listed companies can innovate will be addressed in a future post.

Fifteen Thousand Pounds – The Cost to Dig Your Own Hole

“Fifteen thousand pounds”

 

That’s the point I knew the client had lost the deal.  And with the deal, the long term viability of the company.

 

One of the most fundamental tenets of a successful growth company is ‘making yourself easy to do business with’.  I think sheer greed got in the way here, or perhaps a total misreading of the strategic situation.  It was explained to me post-meeting: that development work would be costly, so something would need to be charged to the client.

 

Rewind.

 

I’d started working with the client two or three years earlier.  They were selling services, charging an annual subscription fee on a headcount basis, into the people management space.  Human resources has plenty of critics (/administrators), so I will not repeat them here – but to make matters worse, the client was disorganised and emotional, but worst of all it learned slowly and was subscale.

 

I cannot even remember quite how they got into the situation, but one of the major UK water companies was brought round to the idea of doing a pilot of the service.    They certainly needed it – the management systems ‘human resources’ had in place were poorly implemented, and the Head of People knew it.  The client’s service offered the opportunity to solve the problem, and in order to get well embedded (knowing such a service would always go to public tender), it was manoeuvred into a three month limited-headcount pilot.
Remember I said the client was slow learning?  It must have been obvious to the water company throughout the pilot that the client was learning on the job.  This is not necessarily a bad thing – learning together, which certainly needed to happen, can build bonds between a company and its customers.  Quite why I was directing the learning was never clear – but I knew someone had to grip the situation, because the opportunity was too important.

 

Remember I said the client was subscale?  Getting the water company on-board probably would have trebled the ‘people under management’, which was the key metric for this particular client.  The investment in the technology and outsourced relationships needed to deliver the service was a leveraged investment – and they were short of break even.  Trebling the numbers, almost at any price point, would have been enough to put the company into that happy space where bills were covered, cash was being generated, and everyone would be able to sit down and think about what to do long-term now the company was ‘washing its face’.

 

Pilot was completed, a big thumbs up for the concept from the water company, and then to public tender.  Everyone knew three people would be pitching at the final round, and despite the obvious learning going on during the pilot, as an ‘incumbent’ (in the loosest possible use of the term), one would expect to be at that pitch.  And the client was.

 

Now as I said before, it didn’t matter what the price point was (within reason) – all that mattered was trebling the number of people under management.  So basically, unless the water company decided to totally reframe the tender at the last month, all the client needed to do was ease into pole position (with a three month head start) and they were good to go on a three year contract.  On to thinking about the business and how to develop it now faces were being washed…..

 

Water company: “So one of your competitors, being open with you, is offering us a set of metrics over and above those which you are currently providing.  Can you produce the same set of metrics?”

 

The data set was identical – same information going into the database, so:

 

Client: “Of course, not a problem …. But, er…… there will be a cost – that’s out of scope.”

 

(hold on, we prepared for this meeting – I don’t remember any additional costs being discussed)

 

Water company: “Oh …. right …. Er, how much?”

 

Client: “Er …… er ….. fifteen thousand pounds”

 

Talk about dropping the ball.  This was a knock on by the wing, once it had run round the opposition’s tardy back line, and was clear through for a try.

 

I was asked to speak to the water company’s procurement people to get feedback, once the client had received notification that the pilot was over and the tender was lost.  Apparently, and of course unsurprisingly, the water company hadn’t wanted to switch the client out – too much effort – but fifteen thousand pounds was not in the budget, and the other company was levying no extra charge.

 

I was on the team that put that company into administration a couple of years later.

 

The fifteen thousand?  That would have been made in margin in year two; the client CEO, for whatever reason, justified the unilateral action to themselves at the time and came out with it.  The company never ceased to be subscale.

 

The moral of this story?  Focus on what’s important (your company’s key metric); don’t get greedy; be easy to do business with.

Corporate Masochism: What’s the safety word?

Flogging a dead horse.  Wasting your time and mine.  Competing in a rapidly diminishing space.  Failure to find product market fit.  Not knowing when to stop.  The definition of insanity (doing the same thing over and over again and expecting a different result).

Whilst still unacceptable in larger organisations, at least these practices can be resourced (assuming the whole of the rest of the organisation is not similarly engaged in fruitless tasks).  In a growth organisation they are terminal; resource spent in pointless activity starves other avenues of investigation of oxygen.  A strong narrative raises more money to pour back into the leaky bucket, ultimately burning investors – and potentially destroying markets.

Jack Welch’s biography described the senior management of GE’s nuclear power division discussing their new plant sales targets with him in the early 1980s.  What was significant in the nuclear power industry then?  Three Mile Island – the disaster of 1979.  Welch told the managers the market for new plants was dead, and that they should adapt the division’s business model to services – no one was going to be buying new power stations with public opinion firmly against nuclear power.  He didn’t understand the way the business worked (he was told), but a) he was CEO, and b) he understood how people made purchase decisions – particularly in the domain of critical public infrastructure.

It reminds me of the Grolsch man in the late 1990s and early 2000s adverts – someone needs to step in and just shout ‘stop’.  Group think is a terrible thing, leading to terrible consequences.  Without perspective organisations are prone to engaging in extended periods of corporate masochism – it’s not working, so try harder, and everyone remains or becomes increasingly miserable.

There are endless management texts on this subject (see above: Jack is a good primer), so I won’t indulge in a set of paragraphs doing a bad job of regurgitating these – rather, here’s a list of scenarios which, if you find yourself in them, should lead to pause for thought – and asking the question ‘Am I engaging in corporate masochism?’

 

  1. ‘What we need to do is push harder’
    • Why?  Pushing isn’t working, so find a way around whatever’s stopping you

 

  1. ‘What I want is a keen young person who’s entrepreneurial to …..’
    • So you want someone else to do something you don’t like doing, involving the expenditure of lots of energy, ultimately for your benefit?  If you don’t like doing it, there may be an underlying problem (assuming everyone enjoys success)

 

  1. ‘We need boots on the ground’
    • Do you?  It hasn’t worked in countless international situations – and a military ‘solution’ is never a solution – it’s just an enabler of political solutions

 

  1. ‘This worked before’
    • But the world, in my personal experience, changes immensely – it might not work now

 

  1. ‘I want a sense of activity’
    • Do you?  I generally want a sense of success, not a set of busy fools

 

  1. ‘It’s obvious’
    • Show, not tell – it might be ‘obvious’ because of a firmly held, outdated, value system – if the audience cannot see it, it isn’t obvious

 

  1. ‘How can you be so sure?’
    • It’s not always possible to be sure – but mix known ‘activity to output’ efforts with some risk taking, because a risk appetite enables innovative thinking

 

What’s the safety word?  The Grolsch man has the answer, and when someone says ‘stop’ take care to listen to them to understand why they are applying the breaks.

Why should we work with YOU? Circumventing the challenges faced by small enterprises selling into corporates

 

“No-one ever got fired for buying IBM”.  Frustratingly, not all suppliers are created equal.  Quality of service is just one consideration; innovation another consideration; too often, the critical consideration of a corporate buyer is the risk, or perceived risk, of buying services from ‘small’ players.  Importantly, this risk may not be organisational risk, but more personal (read: career) risk.

I have worked through this problem, with varying degrees of success in the outcome, many times during my career advising growth companies.   As with any challenging situation involving people, a good starting point for problem solving is ‘the other person’s shoes’.

Consider yourself as a buyer in a corporate.  You are leading a programme that, given your meteoric rise through the ranks, is of such profile that it hotly tipped to create major organisational benefits across multiple geographies.  Conceptually, the intent is defined – you understand what the organisation needs to achieve, and in some cases how it is going to do it.  Your next step is to identify supporting companies to help achieve the aim.  Remember, potential suppliers: corporate customers are not waiting for you to come and solve their problems – they are already seeking to solve them.

You line up a series of companies that appear to fit the bill, inviting them in to present how they believe they can support you in achieving your aim and the value they will add over and above.

The first supplier wanders in.  Hopeless; the sales team has a big brand behind them, but the sales execution is poor and they haven’t picked up on the hints you’ve been throwing them as to the true requirements.    This is going to be a long day.

Next is a big western brand; the sales team is highly motivated, the sales lead is inspirational, the proposal almost exactly what the organisation is looking for – looking good!  Furthermore, they’ve done loads of work with you before so have lots of great relationships around the organisation so they can get things done.

Finally is a ten man technology company – the ‘wildcard’ selection.  The CEO runs the pitch, is inspirational, and the proposal scope goes way beyond what’s needed – at a competitive cost.  Then you move onto the questions – you work out, through questioning, that the deal will equate to a 100% uplift in the company annual revenues – it will ‘make’ them.  Clearly there needs to be a plan as to how the CEO will manage this – but under questioning the CEO falls down: has he managed this level of growth before? Is he intending to recruit more people to service the work? What are his proposed ways to de-risk the project?  These weren’t expected, and the supplier sales team flaps.

You choose the big western brand, and share some of the ideas from the wildcard with them (some of the other parts of the pitch they made didn’t really make sense in the first show, so you bin those – even though they were probably pretty good), and your career continues happily.

You are the Wildcard – What should have happened

 Understand the customer requirements, and either fit them exactly – or adjust and explain why.

  • Identify how your offering can we credibly expanded beyond the customer’s requirement – and explain the how and importantly why in simple and succinct language
  • Highlight the competition’s weaknesses
    • In the UK, this is invariably by highlighting your ‘strengths’ (which you know to be the competition’s weakness)
      • Or, and as I understand US sales culture, openly attack the competition’s weaknesses
  • Brainstorm all the questions you don’t want to be asked – invariably these are asked – and produce rational, practiced answers.  A starter for ten:
    • How will you manage a piece of work of this magnitude ?
      • Think: people, processes, and partners who can support
  • Why should we work with you (….over and above the big blue chip supplier you are pitching against)?  Turn size to your advantage:
    • Emphasise the importance of the customer within the business’s world – the most important customers get all the senior management attention
    • Consider the flexibility of a smaller business (“please submit your change request to the appropriate subcommittee two weeks in advance of their quarterly meeting”)
    • Go in heavy on the experience of the management team – just because they work for a smaller organisation doesn’t mean they always have – nor that they have no experience of larger corporate
  • What happens if you fail? Think:
    • Software code in escrow
    • Transfer of dedicated staff to the customer
    • The nature of the people currently funding the business – how deep are their pockets, and how supportive have they been to date (consider taking them along to show how serious you are)
  • Practice, practice, practice – and go in confident.

‘I always encourage my clients to think global.’

I always encourage my clients to ‘think global’.

Obviously.

Bland blog statement?

Possibly.

Here’s why it isn’t:

In my experience, most businesses do not truly ‘think’ global.  They might ‘describe’ global – which always helps with those TAMs and SOMs – but they do not have an international attitude.

Thinking global is not the same as planning for global, nor engaging globally.  It is, however, related.

The best businesses are those that can disrupt markets globally; those which establish fresh paradigms.  Some entrepreneurs start businesses because they feel passionate about something; many entrepreneurs start businesses because they want to make a lot of money.

Making a lot of money.  There’s two ways to do that: pay yourself a lot (so you need a vehicle that generates a lot of cash), or sell a vision to someone else that they are willing to pay handsomely for.  The best vision to sell is one of paradigm shifts, long term customer lock in, and huge competitive moats.  And global markets.

To sell that story effectively, the entrepreneur needs to be convincing – the statement ‘and international markets’ is not convincing to the cynic.  The cynic wants to see one of two things: ideally evidence, or at least understanding.

Hey Mr Trade Buyer, I may not have a global customer set – but I’ve been focussed on this, this, and this, and I know that we can replicate / adapt what we do with very little effort to spank the competition here, here and here, because this is the market dynamic and these are the competition’s short comings.  And it was similar in this market we entered last year.

This is all achieved through an attitude towards one’s business.  Okay, we are going UK and Ireland today – but I am thinking about how we can apply what we do outside of those markets.  I work with a company involved in legal information – the company started in the British Isles, which anyone familiar with law will tell you is based on common law.  But we know there are many legal systems in the world – there’s civil law, there’s religious law, there’s customary law, and of course there are plenty of hybrids.  In order for the company to address a global set, the approach to information could not be based on structuring data to be perfect to the common law system, and nor (importantly) could it assume publicly available legal documentation to support its service.

The CEO there thinks global: he builds a business knowing that things are different in different parts of the world – and makes his technology, and more importantly his information structures, flexible enough to cope.  In his market I have spoken to a number of competitors who started on the wrong foot, and cannot recover without rework that would most likely end their company profitability for several years. And what’s worse, it’d be hard!

So my advice:

  • Don’t be channelled by what you see in front of you
  • Seek to understand the rest of the world’s approaches and problems early
  • Seek to remain flexible with every decision you take

Startups are an experiment

The most interesting technology startups, in my experience, are those who are trying to do something new.

In Europe, prior to the Enlightenment, one group of people who tried to do something new were the alchemists. Classically stereotyped as people who sought to create gold from base metal, they were lampooned by Tim McInnerny as Lord Percy Percy with his nugget of purest Green. His depiction was of a group of people who attempted, seemingly at random, to apply treatments and actions in order to create change.

Picture of an alchemist

The alchemists were swept away, in part, by the propagation of the scientific method throughout Europe. The scientific methods remains with us today, informing the approaches we take to discovery – and arguably creating innovation cycles that are faster than any could have imagined a thousand years ago.

Do you want to be an alchemist or a scientist? I subscribe to the latter approach over the former – and I believe that those establishing startups should view them through the lens of a scientist, treating them as an experiment

What does this mean? To me it means following an ordered process in order to best understand what you observe and maximise your chances of proving your hypothesis.

Think back to school – hypothesis, methodology, results, conclusion (no, I cannot forget!) – and take the same approach. With reference to startups, I would summarise the scientific method as follows:

  • Question – how can consumers and/or businesses most effectively complete an activity?
  • Observe – what do they currently do, what are the deficiencies to the approach?  Coupons in magazines in 2008 – why?
  • Hypothesise – we believe that businesses / consumers would use coupons more if they were online, promoted on single days
  • Create a methodology – build a site, and promote it for those interested in saving money via coupons; get businesses to provide aggressively priced coupon deals on a daily basis
  • Analyse the results – are people using my coupon site?  Is the promotion right, are the coupons offering deals in the right industries?
  • Interpret – yes, people really like daily coupon sites
  • Create a new hypothesis – people are willing to pay a monthly subscription of £15 to access my daily coupon site

New businesses are created by inquisitive minds who ask questions and observe deficiencies. However, just having a great idea (or a hypothesis) does not mean automatic success.

Consider your business – are you sitting in a candle lit room in a pointy hat, creating nuggets of purest green? Or are you a scientist in a laboratory conducting a series of experiments to prove or disprove hypotheses about businesses and consumers? I know which I’d rather be.

Startups are an Experiment

The most interesting technology startups, in my experience, are those who are trying to do something new.

In Europe, prior to the Enlightenment, one group of people who tried to do something new were the alchemists. Classically stereotyped as people who sought to create gold from base metal, they were lampooned by Tim McInnerny as Lord Percy Percy with his nugget of purest Green. His depiction was of a group of people who attempted, seemingly at random, to apply treatments and actions in order to create change.

Picture of an alchemist

The alchemists were swept away, in part, by the propagation of the scientific method throughout Europe. The scientific methods remains with us today, informing the approaches we take to discovery – and arguably creating innovation cycles that are faster than any could have imagined a thousand years ago.

Do you want to be an alchemist or a scientist? I subscribe to the latter approach over the former – and I believe that those establishing startups should view them through the lens of a scientist, treating them as an experiment

What does this mean? To me it means following an ordered process in order to best understand what you observe and maximise your chances of proving your hypothesis.

Think back to school – hypothesis, methodology, results, conclusion (no, I cannot forget!) – and take the same approach. With reference to startups, I would summarise the scientific method as follows:

  • Question – how can consumers and/or businesses most effectively complete an activity?
  • Observe – what do they currently do, what are the deficiencies to the approach?  Coupons in magazines in 2008 – why?
  • Hypothesise – we believe that businesses / consumers would use coupons more if they were online, promoted on single days
  • Create a methodology – build a site, and promote it for those interested in saving money via coupons; get businesses to provide aggressively priced coupon deals on a daily basis
  • Analyse the results – are people using my coupon site?  Is the promotion right, are the coupons offering deals in the right industries?
  • Interpret – yes, people really like daily coupon sites
  • Create a new hypothesis – people are willing to pay a monthly subscription of £15 to access my daily coupon site

New businesses are created by inquisitive minds who ask questions and observe deficiencies. However, just having a great idea (or a hypothesis) does not mean automatic success.

Consider your business – are you sitting in a candle lit room in a pointy hat, creating nuggets of purest green? Or are you a scientist in a laboratory conducting a series of experiments to prove or disprove hypotheses about businesses and consumers? I know which I’d rather be.

How to think when building or reviewing your website …. 101

I want to turn the reader’s attention to websites – an object that evokes responses ranging from an obsessive-compulsive requirement to update, to that akin to a toddler who has seen a new pigeon in Trafalgar Square (with the old website being the previous pigeon).

I don’t sit at either extreme, but I do believe that for the vast majority of today’s companies the website is the ‘shop window’. Now everyone knows that a good shop window pulls in customers – provided it is seen – no matter what the size of the organisation behind the shop. The website provides the entrepreneur with the opportunity to present their wares on a level playing field (the internet) against much larger rivals.

“But I am no designer!” you might cry. Irrelevant; I am not talking here about the prettiest shop window aiming to attract the most conscious fashionista.  This is about getting the right message across to the intended reader.

Have a look here; did that site make any sense? Probably not. To its intended reader, it’s spot on – XP Power is one of the fastest growing companies of its type globally.

So, how can the entrepreneur make sure that they are hitting the (right) mark with the company website? I would advocate the creation of a simple grid – on one axis list your stakeholders (the people you want to communicate with), on the other axis list the reasons you believe people are going to come to your website.  Here are some examples of each:

  1. Stakeholders:
    • Investors
    • Specific customer sets e.g. middle aged men, human resources directors etc.
    • Journalists
    • Potential employees
  2. Reasons for visit:
    • To get contact details
    • Information for an business degree thesis
    • Find out about the company
    • Identify fit between product / service and need

Next, put a cross through each box on the grid that is clearly nonsense, e.g. the box which is at the intersection between the ‘investor’ column and ‘identify fit between product / service and need’ row.

Then review each of the remaining boxes. If you already have a site, match all the pages to the relevant boxes in the grid. Where a page appears in multiple boxes ask yourself ‘can I realistically service all audiences through a single page, or should there actually be multiple pages?’. In some cases, the answer will be ‘no’ – the homepage is the homepage; contact details remain the same for all audiences. In other cases, you might wish to consider creating multiple pages to reflect the differing information requirements of the audiences.

You will also find …. gaps. Be honest with yourself, identifying a gap is a good thing – it shows where you need to put in some work to give your stakeholders the information they need.

A final thought: make sure you are running and reviewing your Google Analytics data. I won’t accept any excuses on this one – Analytics will tell you where your audiences are going, and where you should be focussing your energies when producing content.