Consultant's View, 2014

January 2014

Trailing and Leading indicators

We have heard about the small business person walking into their accountant's office with a shoe box of receipts and asking if they are making a profit. While most businesses operate with a lot more financial discipline, they are often looking at the wrong indicators. Finances are a trailing indicator, not a leading indicator. There are many other indicators that lead financials and can give a far better picture of what might happen to the company.

The Internet of Things

Over the last few years, the price of sensors has been dropping dramatically. When coupled with the low cost of an Internet connected computer, we find that more and more items are being connected to the Internet. While this has some real benefits (such as being able to watch your children at their day care), it is happening before the Internet has been really secured.

Bubbles and Human Nature

Over the last few months, I've received many a spam message claiming that we were on the brink of a financial catastrophe. Financial bubbles have been a part of Western Civilization since the 1500's (and perhaps even before). Is there anything that can be done to prevent such bubbles? Can we prevent bubbles from bursting?

Coupon Changes

Coupons have been a way of life for retailers and consumer products. However, more and more people are "gaming" the coupon system. In 2012, a Phoenix Az woman was arrested with $25 million in fake coupons. This is causing retailers and manufacturers to change how they deal with coupons.

Lessons from the Target Breach

Last year's attack on Target shows some serious problems with the credit card network. A key lesson is that if a credit card image exists in memory of any PC POS system, it will be stolen. The push for upgrading to EMV is only a bandage on the problem, not a complete solution.

Amateur Bankers

As the west was being settled, it was a fairly lawless place. Often, the richest person in a small town would be the only person with a safe. Thus, he became the banker for the town. We are seeing something very similar with the Bitcoin craze. That whole area is full of amateur bankers.

High Speed Trading

Recently, there has been a bit of discussion about "high speed trading". Some people are quite upset about the fact that this type of trading is actually happening. However, competition and the chaotic nature of life and the market will limit the effect. The problem is not the high speed trading, but the violating of the trader's responsibilities to their clients.

Forecasting Disasters

Between the tornados bouncing over the country, the earthquake in Chili, volcanoes erupting, and the landslide wiping out a village, we have had a number of disasters. It can be easy to see that a disaster will happen but very difficult to forecast when. Business disasters are equally difficult to time.

Managing with Hope

Hope - a vital part of humanity. With every new birth, we celebrate the hope. Without hope, we fade away. As managers, we can motivate people with hope, attempt to motivate them with their own greed, or we can drive them with fear. The choice we make depends on the type of organization we want to have and if we are facing a crisis or if we are boldly going into the future.

Copying Silicon Valley

The financial success of Silicon Valley has been viewed with envy by numerous other states. Many have tried to duplicate Silicon Valley. They have set up "incubators", had conferences, and changed laws to try to duplicate the place. Silicon Valley still reigns. All these attempts have focused on the "supply" side. They have ignored the "demand" side.

Digital Loyalty

We were recently asked if we had a "Digital Loyalty" program. What sales people want is a program that slides into a merchant's setup without any additional hardware or cost. There isn't a digital loyalty program that fully meets that want. Nearly any effort to get a digital program will require hardware at the merchant site and might require multiple Apps. Right now, targeting only part of the market might be enough.

EMV - the Risks

Although Visa has mandated that merchants either switch to EMV or accept the liability, the risks of moving to EMV have not been widely known. EMV is not the panacea that some people are stating. The reality is that it is also pushing some liability to the card holder.

Why do Organizations exist?

Travelers around the world can find piles of dirt and ruins bearing fabled names. Troy, Ephesus, Babylon were once thriving cities. It raises the question; "Why do cities exist and why do they fail?" Watching Detroit imploding and looking at why these famous cities failed gives some answers. Cities exist to take advantage of new ideas and trade. The same is true for companies and other organizations.

Are you on a Roll?

At times, do you feel like you can't make a mistake? Or are there times when luck turns against you? It turns out that the way that we feel about our decision making affects the quality of our decisions and the way that we play poker shows a lot about how we make executive decisions.

The Necessity of Failure

In today's society, people are trying hard to protect others from failure. We see "helicopter parents" trying to protect their children from any problems to over achievers getting perfect scores to get into the right university. The trouble with this is that human beings learn the most out of failures, not successes. There are many people who have not experienced failure after failure. Instead of avoiding failures, we need a system to learn from failures

Politicians make bad Venture Capitalists

There have been a number of programs run by states and other localities to try to improve the business environment. Some are even given names to suggest that they are to operate as Venture Capital programs. These have repeatedly failed. Politicians and government bureaucrats make bad venture capitalists.

Managing Software Development

In the comic strip, Shoe, the IT person comes dressed in a wizard's hat and robe and waves a wand over the malfunctioning equipment. If you feel like that is what is happening in your IT department, you are not alone. Most people do not understand the IT department nor know how to manage it. The traditional management methods don't work but other methods do.

Valuing Intellectual Work

As we shift from a manufacturing society to an intellectual work society, we are facing a deep problem. Our financial system was set up to properly value manufactured goods. It does not have a good way to value intellectual efforts. A shipment of manufactured goods are all valued the same. The value of intellectual efforts depend on not just what was done, but when it is done and who received it. It is this mismatch that partly fueled the crash in 2008.

Protecting Corporate Secrets

In the 1780's, Britain had a significant advantage in textiles due to a number of inventions. That advantage was so profitable that laws were passed to prevent anyone from leaving the country with the knowledge of them. However, the class structure meant that not everyone got what they thought was a fair share of that profit. Eventually, the knowledge got out.

Strategic Planning Flaw

Many a company has worked on strategic planning. Many a corporate retreat has focused on that. But strategic planning has a fatal flaw: it assumes we can know what the future will bring and that all we have to do in order to succeed is to perceive that future and align our efforts to it. But nobody really knows the future or we would not have Ebola in this country right now.

Outsourcing and Responsibility

During the 1930's and 1940's, hitchhiking was a common way for people to travel. Later on, it became associated with the poor and with danger. Today in our difficult economic times, we see people sharing cars, homes, and much more and the companies coordinating that sharing getting outsized valuations "because this time is different." The trouble is you can outsource nearly any action but you can not outsource responsibility.

Technical Success - Business Failure

Back in the early days of the personal computer, Texas Instruments sold an advanced computer as a personal computer. It was one of the most advanced systems on the market and garnered quite an interesting set of partners. Yet, it was a huge business failure. It is possible to have a fantastic technical success and fail in business.

Motivating is Hard Work

We want to motivate our employees. There are lots of people offering suggestions on how to motivate them. Inc. Magazine has a list of �Perks that work.� Many other lists of ways to motivate people are out there. However, much on these lists fail after a while. People may be motivated once and then ignore the offered perks. The problem is that no technique, not perk, no workplace setup will guarantee employee motivation.

The Challenges of History

History is always challenging us. We have a history of making decisions in certain ways. However, the world around us keeps changing. At some point, that way of making decisions is going to fail.

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