thingamy

FAS 157

I see that some bankers under pressure are pointing their finger at the newly introduced "mark-to-market" US accounting rule while muttering "that's the culprit!"

On the surface a sensible rule one would think, but some are sceptical as the markets are never quite effective. And now is such a time.
The new instruments we had so much fun with a year ago, the ones with long and trust-inducing names, are currently rather toxic so the market value is often zero while the banks think they're worth something. Thus no buyers, and no sellers. And of course valuations set by the non-buyers resulting in huge paper losses that might be virtual.

I think it's all kind-of-funny. If you create a financial instrument named "High grade structured credit enhanced leverage fund" and cannot really explain what it is, how can you expect a market to understand and price it? If the market is in an ebullient mood and goes "hey, gimme another vodka martini, I need the spirit to go with the purchase!", then of course anything goes. But on sombre days of sparkling water only, well...

Maybe the FAS 157 will remind the financial alchemists and product designers that their products have to be understood by a market even when market sentiment is closer to panic mode. Hey, the product even has to be understood by themselves! That would not be so bad, now would it?

Like products where I actually could calculate my return even if I did not sell it.

I am sure you've seen this many times before, one of my favourites and quite FAS 157 relevant:

at last

Seems it has dawned upon the VCs that yet another social network might not be the thing.

And when two "Facebook widget applications" (heh, a category by itself) startups are valued at substantially more than Bear Stearns, well, how can you avoid being hit by a blinding flash of the obvious: Something is not quite right.

Still, the reason for the VCs getting cold feet seems to me to be for the wrong reasons. Mind you a good reason but not what I would see as the major reason.

The argument is that there is a consumer fatigue out there, how many times are we to recreate our social networks for another new and shiny place? How many places are we to go, how many apps and browser windows do we have to refresh to hear the same messages from the same friends? I'm a victim of the fatigue for sure.

But what about the good old "how to earn money" - slow, fast or no growth in users - in my view kind of the most important aspect.

And they're all based on advertising, albeit with creative tweaks to exactly how, all touted as completely new and promising. Still the same source, internet advertising.

There are a few numbers around for the grand total spend on internet advertising world wide - I've seen 20 Bn $ up to 37 Bn. But whichever way you see it, it's a sum where you simply can deduct 70%, as that's what Google takes. Rest to be shared among all the Facebooks, Myspaces, Twitters, and... and 300 Mill $ valued Facebook apps.

Come on dear VCs, what about a bit of simple arithmetics? This simply does not add up.

sea, sailing and selling

22 years ago I met Lars for the first time. He's big, solid and Swedish - and if you've ever read Pippi Longstocking he would definitely remind you of (a young version of) Pippi's father, the seafarer and cannibal king. Although I don't think neither Ephraim nor Lars were into cannibalism.

Pippi's father, eh, Lars, left, owner hanging from boom like a monkey on the right, assorted deckhands in the middle

Lars and his at that time girlfriend, Robbie, were hired as crew on my boat, a Swan 59, build number 8 (current Thingamy build is 2.2.12 I think...) a white beauty named "Sassy" built up north in Finland (my third Swan no less).

For three years Lars ran the boat with deft professionalism and Robbie ruled the galley while Lars' nephew Lennart inhabited the forepeak and oiled winches when he was not making the best piña colada ever (a dash of bananas I think it was).

Antigua race week, 21 cases of Heineken consumed on first race day, owner sitting in shade

We even had our "own" chauffeur in English Harbour in Antigua, Jim, who normally ran one of the taxis. His son was a member of the local soccer team where Lars and Lennart joined in during the winter charter season. Myself I was limited to sponsoring the team uniform, numbered garments that were collected after each game to avoid too much wear and tear during the rest of the week.

Our team in baby blue sponsored team suits

Good times indeed. But every phase in life has an end so in 1988 I sold the yacht and Lars and I opened a yacht brokerage in Antibes, the yacht centre in Europe, and the world for that matter.

BCR Yachts

Since then Lars has run and built that business with the same diligence and professionalism as he ran the boat - I was merely the passenger and intermittent supporter as before. [The Fenderkicker blog is here by the way.]

One year ago time was ripe for yet another change as Lars moved on to New Zealand (his wife is Kiwi) but still keeping a keen eye on the operations up here.

And with that we felt an increased interest in our business among potential acquirers. Not only has the business been profitable for almost twenty years, it has a very good reputation and extremely capable people while being one of the few, if not the only mid sized yacht broker in this area not yet gobbled up by the big operators. In other word a perfect target.

The combination of having an interesting asset on our hands, a decision to move on and a need to shore up my wine budget (already under undue pressure from thingamy development) simply made us open the doors.

So now we're in multiple discussions, and if none of the current crop pans out we'll allow others to enter the fringe - we're sellers now. Just mail me if you want to enter the yacht business... ;)

A very good time it has been, but life goes on, and our co-workers deserve owners/partners with a more forward-looking yacht focus as I have shifted my focus ever so slightly to less salty business areas.

benchmark UIs

Swivel chairs (seen as conductive to creative thinking) with icon filled touch-screens perfectly placed for right hand users to run a whole country (well, almost).

Science fiction? Not at all, a working (but never completely finished) system built in 1971-73 in Chile by a burly and exuberant British consultant.

Enjoy the 35 year old UIs:

More about this remarkable story here and here.

(Hat tip to Oleg Liber!)

Header update

Finding that most of my posts are related in one way or the other to thingamy, a more appropriate banner would be the right thing to have.

Heck, "business, software and management" is all what thingamy is about anyway, so thus the new banner. Not to forget "Forthcoming"; thingamy has been forthcoming a long time now - perhaps dumping the name will make it appear? :)

A banner created by the ever creative Mr MacLeod of Gapingvoid fame!

attraction and seduction

This is a mail exchange with my marketing friend John that turned into a co-blog-post about marketing, in particular about my incessant protesting anything "push":

In essence it all boils down to what Hugh would have termed - "Having a totally fucking amazing product is Job One" - that's the start and the end.

To which John rightly goes - "once you have created this totally amazing thing you can't just sit back and wait for the pull to happen, you have to ensure that the pullers become aware of it  and that must involve an element of pushing."

But how to nudge? Can the nudging be pull or push too?

Being a lazy bloke I obviously love being seduced by war paint, deep cut front, high heels... etc. but:

• Seduction could lead to mutterings of "oh shit!" the next morning... I've heard.
• Seduction is "push".
• Seduction seldom leads to marriage.
• Attraction is "pull".
• Attraction takes more time.
• Being attracted is enjoyable too, but lasts longer.
• Attraction is best path to a long lasting relationship.
• Seduction requires much lip gloss, deep cut fronts, high heels...
• Attraction requires transparency, allow all to be seen - warts too.

But, as John puts it, even attracting means that you have to be there, nothing happens if you hide in a corner!

Seduction (if done right) is quick and cheap, attraction takes time... guess that's why tinkering with enterprise software is harder than doing web 2.0 flashy stuff. Ah, the lack of natural curves and lip gloss... sigh.

more on marketing, segmentation and SAP

In my last post my good friends hailing from the marketing "camp" of business rightly defended some aspects of marketing, so guys, sharpen your pencils while I naively do some market segmentation on behalf of SAP no less:

When at Sapphire we heard much about the SME products - A1S, B1, All-in-one - and almost every presentation included some segmentation of the market:
Small, medium, large.
Upper mid, lower mid, small.
I was almost waiting for lower, lower, mid upper SME market...

Then go read Brian Sommer's post discussing the "typical SAP customer" which pinpointed the obvious, they have the conservative types cornered.

Way back in August 05 I did a post on my very own market segmentation, so allow me to suggest an add on to SAP's...

...size segmentation pyramid:

The attitude upside-down segmentation pyramid:

Basically, here I give a hoot about size, or even thinking "firm". Only individuals in corporations. Theoretically OK unless your acquisition costs per customer is high, then of course many seats per customer is important.

My question would be, why should not acquisition cost per customer be the same for small and large? (Not talking implementation cost here, that's a variable and billable.)

You talk to one person. You lunch with one purchaser. You present for one or more, same Powerpoint. Why the difference? It's all about people and a person is singular, always.

And definitely so if you switch from push to pull, then there is no acquisition cost difference.

What now if the market, i.e. the people influencing new software installs, are drifting towards the more radical and risk willing attitude; wanting more flexibility and the possibility to stick their heads out trying new ways and differentiate themselves and their firm.

If that's only partly right the segmentation along the lines of "attitude" would trash the "size" segmentation. The latter only relevant for "acquisition cost" purposes, and not for "influence" issues.

I would obviously not suggest SAP ditching their current core market or go-to-market strategies, I would rather suggest they have a huge opportunity to increase their market through "targeting" (hear that guys?) the not-so-conservative population of business world wide with new very different products.
Not only tweaking the good-old for smaller buyers but actually do something crazy and radical on the side.
Coupled with "pull" (market-come instead of go-to-market) of course, keeping acquisition costs equal for big and small.

I'll bet that they even will find not-so-conservative influencers in very large organisations. I have met many of them, they're there, believe me. Go get'em now, even some large companies uses non-SAP products!

After all, the car industry knows well that a family of five might not only end up with a boring minivan. Dad might want a Porsche too... and one day he'll buy one if possible!

Three Schools of Marketing

I have enjoyed many discussions about products and marketing lately, and yesterday on a Skype call with Charlie, Dennis and David I said, "hang on, marketing is a mixed bag". Now I owe them an explanation, so here's a simplified take on three different schools of marketing:

1) The MBA

Aka. The Long and Incomprehensible paragraph approach - "Identify a subset of account in each vertical will be proactively covered and controlled by us".

"Go to market" is the rallying cry, market research, statistics and many meetings the tools. Design to avoid offending anybody, set clear goals like "37.8% of this subset of that segment using that channel in precisely 18.7 months".

Usual results: Exceedingly bland products, wrong target as nobody really understood questions asked by market research, but sometimes nice cup holders if applied to the automotive industry. And of course channel stuffing and similar to pretend the budgets had any value at all.

Example: Take a field trip to Detroit.

2) The Circus Act

Aka. This is A Cool Product, bugger the nay-sayers and let's have some fun.

"Wow" is the rallying cry, public stunts, good stories and extremely "cute" and confusing brochures the tools. Design so 90% hates you because then for sure 10% will love you, and that's better than 100% shrugging their shoulder. Budgets are for wimps.

Usual results: No usual results. Interesting products, some fly, some don't, and we the consumers are richer for it while some investors chew off their arms while others pop Champagne corks. And even burn-and-crash is entertaining to see, so the users win whatever the outcome.

Example: Renault when launching the first Twingo. Read any biography of Sir Richard Branson.

3) The conversation

Aka. I know my Cluetrain / Hughtrain or I'm blessed with absolutely no marketing theory whatever.

"Hello?" is the rallying cry, wikis, blogs, twitter, parties and anything social are the tools. Design with the users, spend much time in blind alleys but get there if you have enough time, funds and never used glue when building product.

Usual results: Like DIY projects; some I use all the time, some I liked to tinker with but never use. Successes and failures, but no crowd pleasing crash-and-burns as early pull-the-plug is easy.

Example: Take a field trip with your browser.

Big question - which is the best?

I think I would choose a hybrid of 2 and 3 - an "Interactive Circus Act", an "inspire and include" approach.

Which is your choice?

Swiss private bank

Sounds boring? And very safe I guess.

But not necessarily - I've got a friend who's partner at one of the oldest, based in St Gallen, a city even the Swiss think is old fashioned.

Otto is a partner at Wegelin & Co, and amongst his partners you will find Dr. Konrad Hummler who is the author of their frequently published news letter (In English, German, French and Italian - how's that's for service!).

At first glance a thoroughly dry Swiss private bank kind of discussion paper on financial matters of interest to the wealthy and conservative.

But read it and you'll be surprised! Why this man does not have a blog is beyond me! Not only well written but showing quite some lack of respect of the old ways and established truths when need be.

This morning, I enjoyed his "Literary award vs. poetry slam" which I cheekily took as support in questioning the phenomena of "Best practices" via poetry sessions no less (Yes, Thomas, I know, this is stretching it... :)

Not the typical theme you'd expect from a Swiss banker...

more on budgets

Hat tip to Thomas who pointed me to this article at accountingweb.

It's based on a talk at the 2006 CFO conference in London by Bjarte Bogens of Statoil, another Norwegian I might add.

As you need to register allow me to quote some of my favourite parts:

"I don't like budgeting and I don't like performance management either. I don't think you can manage performance. What you can do is create the environment and conditions for good performance to take place."

Statoil has dropped budgeting altogether as of 2006, and

"Svenska Handelsbanken abandoned traditional budgeting in the 1970s. The bank has consistently topped international tables for profitability. And it has done just as well at managing its costs without budgets. "That puts a hole in the budget myth," he told the audience."

Regarding performance goals he goes:

"Along with the total shareholder return, the ultimate measure of success for Statoil is how it compares with the competition. "Corporate performance is not absolute, but relative," he said. "It's about out-performing the opposition."

For example, he pointed out that Manchester United does not set out at the beginning of the season with a target to score 45 goals and achieve 39 points. It aims to top the league table. "We do that with return on capital employed. We have a league table of 11 oil companies and set targets of where we want to be on that table.""

So if you need some arguments for your next management meeting, go register and read the whole thing! Good stuff.