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The Economist Magazine just came out with a good overview of cloud computing and how it is the next phase of computing.
See it here.
Basically cloud computing is where you use a browser (the thing you are reading this blog on) to actually do productive (or not) work on vs. old fashioned packaged software. It is also called Software As A Service or SAAS. numia.biz, our free online small business accounting software is in the vangaudr whe it come to this next phase of computing.
I passed by a computer store today that also sells smart mobile phones. There was a line outside of about 20 people trying to get in to buy the latest version of the phone. Each potential customer was attended on hand and foot by a salesperson. Only when one salesperson was free would another potential customer be let inside.
Obviously people demanded their latest mobile smart phone but the company was smart in limiting supply by only allowing a few people in the stores at a time. This had the effect of seeming to create even more demand. Every person who walked by the store could not help but wonder what was going on. It brought attention to the store & the product. Very smart way of marketing, by creating artificial demand.
Unfortunately, I think in the long run it will hurt the company. Making people along the street go around the line caused ill will among those of us just walking by. In addition, later this year, at least three other firms will enter the smart mobile phone space. Pushing down price and expanding into the mass market. This firm will see margins compress and its market share decline dramatically. They have gone through cycles like this before. Developing new & innovative products which they can sell at high prices with a lot of support. And then, over time, once they have braved the new trail, seeing competitors steal their thunder. Not a bad business model but also not sustainable over time. What happens if they cannot think of the next greatest thing? Then they will be stuck competing in a very competitive commodity business with high fixed costs.
We have a one time event for a non-profit coming up in a week that has been scheduled for a year now. The project leader never made a timeline of important tasks that needed to get done. They never trained people on the different software packages or delegated responsibility of what had to get done. And now, one week before the event, a major life changing event (and not the good kind) has affected the project leader.
What kind of backup plan does your organization have?
Are you a hand’s on leader who maybe should not be?
I know of a small one man firm with a great product, excellent customer service and fantastic prices. He has customers lined up outside his door and around the corner every day.
He would like to grow and know he can easily except…
Except no one can do the little things he does every day just like he does and teaching them and managing others would take away his productive time. And so, he will always be a small one man firm.
Learn what the key points of your business are and learn to delegate everything else. Figure out how to replicate yourself and then clone your success many times over just like a franchise restaurant (McDonalds) does.
One of my businesses is a mutual fund. We try & beat the stock market every day, what we sell is trust. The horse & buggy makers thought they were in the carriage market and not the transportation market. They got beaten by cars. Likewise, rail roads forgot they were in the transportation business and got beaten by trucks. Now they call themselves logistics firms and know they compete & cooperate with trucks & FedEx.
This story comes from The Knack by Norm Brodsky.
There once was guy named Fred who owned a fish company that supplied a number of restaurants.
“You want to know why I’m successful?” asked Fred.
“Because you sell to a lot of restaurants?”
“No,” said Fred, “because I know what business I’m in.”
“You’re in the fish business.”
“Not exactly,” said Fred, “I’m really in the banking business. I make loans to restaurants in the form of fish. You see, a restaurant is a seasonal business. Like any good banker, I know when my customers are short of cash, and I know when they’re busy. I carry them during the slow periods and collect after they’ve had a big week. They pay me not only for the fish but for the credit I extend to them. I build the cost of the credit into my price.”
You may not know what business you really are in at first. Fed Ex Kinkos, a copy chain, started out selling copies, pens, paper, posters and many other items at first before they figured out they not just sold copies but piece of mind to harried people needing to make copies.
A few years ago my brother and I were skiing.
“That proves it” Said my brother, “You fell at least four times today and I didn’t fall once, that proves I am a better skier then you”.
Actually, I am the better skier because I fall. Falling shows me my limits. He is playing it safe.
Do you know the limits of your business or are you playing it safe?
Nothing wrong with playing it safe, on the other hand, do you know how fast can you grow without having growing pains? Only one way to find out, grow fast and see what happens.
How is your human resources department doing?
Great, no lawsuits.
Maybe that’s the wrong thing to measure. Fire a few people. You don’t want poor performers or people who are a bad fit working for you.
How are your credit sales going?
Great, not a single write-off.
Again, wrong measurement. Credit sales are supposed to extend your reach into markets that otherwise would not be customers. Maybe you have no write-offs because you are just giving credit to people who would normally buy your stuff with cash.
Losing any customers because of pricing?
No?
Then you are under pricing yourself and losing profits.
Be bold, find your limits.
There are 5 powers you have as a manager to get others to do what you want them to. Which, as manager, is your job. They are:
- Pay & Rewards
- Charisma
- Force
- Knowledge
- Culture
Pay & Reward
This is the simplest to understand and execute.
“I am your boss and you will do as I say or else…
… I will fire you.
… You will not get a pay raise.
… You will be given a new (worse) job.
… Your request for vacation, flex time or new computer will be denied.”
Every boss and employee knows this big stick approach to management. Some bosses only know it.
Expand your repertoire as a manager away from only using Pay & Reward as inducements. Try,
Charisma
Reagan had it, Obama has it, you can have it too. When people talk about natural leaders, they are talking about charisma. The ability to sway others toward your direction. Any group of 5 or more people will have a natural leader emerge over time. Just look at who facilitates the meeting (not talks the most), whom do others glance at for confirmation during inflation points like who should talk next or is the meeting over?
Charismatic leaders are not just glad handling salesmen exuding over confidence. They listen and are aware of group dynamics. This is the hardest power to master and the most effective. It’s authority does not come from the business like Pay & Reward does but is inherent within you. It can therefore be extended into others realms outside of business like politics, religion, civic organizations or anyplace else groups of people get together & need direction.
Force
The ability to physically beat up or threaten someone and make them do what you want is discouraged these days (for good reason). It is bully or thug behavior and does not belong in a place of business. And yet, sometimes, some bosses revert to it. The boss from hell who only knows how to yell & scream at get their way is using force.
Knowledge
I would guess that most bosses these days use knowledge to lead.
The old hand who has been doing something forever and knows all the tricks of the trade, the software programmer showing off to her fellow geeks the latest Andoid Ap from numia.biz or the (marketing, law, finance…) expert espousing arcane jargon are using their own hard found knowledge to try & influence others.
Continuous education is your key to holding on to and growing this power.
Culture
Every established business, even a mom & pop pizza parlor, has its way of doing business, a culture. Knowing and working with the culture can give you power while working against it or trying to change it will lesson your effectiveness or power as a manager.
How many new CEO’s have come from outside the organization vowing to be a change agent just to have the firms’ immune system effectively thwart all initiatives and eventually toss out the now discredited CEO?
Learning a businesses culture and working within it, even to change fundamental aspects of the business, takes real leadership and power.
Creating your own culture from scratch can mean years of effective leadership even after you are long gone. Just look at firms like Hewlett-Packard or IBM which successfully continued to grow long after their founders had left. What type of culture do you want to be known for?
I pick the open book and lead by example approach but those are stories for another day. In the mean time, think about examples of the 5 powers you have seen or done and comment here. Our shared knowledge makes us stronger.
I saw a picture today of 1,000 people lined up for 35 firefighter jobs in Florida. Now either the pay and lifestyle of being a firefighter is very attractive or there are a lot of good well qualified people looking for work.
Hire them.
I know this sounds crazy, to hire people when 1 in 20 is unemployed, when sales are going down and your own firm is having difficulty but now is the time to bite the bullet, to take advantage of circumstances and to plan for the recovery.
There are more qualified people available now at better rates then ever. They will probably add to your bottom line immediately vs. the normal 3-6 months. They are already trained, know your industry and have sales leads waiting to be called on.
Let others cut back. The good will and market share you gain now by hiring exceptional people will carry you for years to come.
PS- Version 2 of numia.biz should be up & running by the end of February.
Scale in business has nothing to do with fish scales or measuring devices. Scale means the ease & ability to grow. As in, economies of scale. For example, a mutual fund money manager has tremendous economies of scales. It is very easy to grow. If assets under management double then revenues will also double without any need for additional infrastructure (people, office space, computers…).
The firm the money manager uses to answer their phones cannot scale as easily. If assets under management double it means that twice as many people are now investing in the fund. This means twice as many phone calls. If each phone answering person can only handle so many calls an hour, the only way to grow is to add more people, more phones, more phone lines, desks, etc.
The law and accounting firms the money manager uses cannot scale well at all. The only way they can double revenues is to double their number of hours billed. There are only so many hours in a day so unless lawyers can clone themselves, they need to hire more qualified and experienced people. It is not as easy to staff a lawyer or accountant as it is someone answering a phone. Lawyers and accountants have years of education and have passed tests that admit them to practice. You cannot just pick someone off the street and say “Want to be a CPA today?” Growing a professional practice means either stealing someone from another firm or waiting until the next class of lawyers or accountants graduates, which takes time. If a firm needs time to grow because of skill shortages or to move into a larger building, it cannot scale well.
What does this have to do with thinking backwards or MBO?
A lot, if you have a business that can scale well (money manager, writer, software or any business that can outsource most of its functions) you do not have to plan for future growth except about how to get it. On the other hand, if you have a business that does not scale well (steel foundries, construction, dentists & other professional practices) then you need to think and plan backwards.
In other words, you need to imagine what infrastructure you will need to support the future sales you want. If you want 10% more sales next year will that mean 10% more people? Will it mean 25% more office space? Maybe your current office space is already crammed and you want to move at most every three years. This means thinking about your business three years from now and planning backwards. How do you get from here to their? That’s called Management By Objective or MBO.
How well does your business scale?
Increasing variable costs vs. fixed costs will allow a firm to scale better but more on that later.
There once was an old hot dog salesman on Wall Street. He sold his hot dogs to the brokers through thick and thin. Neither rain, fog, hot sun or cold snow would stop him from showing up each day and selling his hot dogs from Sun up to Sun down.
He even worked weekends selling to tourists.
He saved all the money he made and helped put his son through collage and get an MBA.
One day his son showed up and said he was doing everything wrong. His business methods were out of date. In addition, interest were going up, commodity prices were rising and the economy was in the worst recession the son had ever seen.
“Oh my” said the old man. “What should I do?”
Cut inventories immediately, stop giving away free mustard & ketchup with each hot dog, and move to a better location.
The old man did as he was told. Needless to say, people liked having a choice of kosher, polish, Ball Park and extra long hot dogs, no one charges for condiments and the new location was terrible.
He went out of business.
The moral of the story is:
Hard work and experience trumps theoretical business plans any day.
Have confidence in yourself.
numia.biz
