Police, Metrics and the missing comedy of the Red Beads

April 5, 2014April 5, 2014ianwaring Management, Metrics, Training Leave a comment

I heard a report on Friday related to the Metropolitan Police possessing an internal “culture of fear” because of a “draconian” use of Performance targets, based on an interview and survey with 250 police officers. The report author went on to say that officers who missed targets were put on a “hit list”, with some facing potential misconduct action. Some of the targets were:

20% arrest rate for stop and searches
20% of stop and searches should be for weapons
40% for neighbourhood property crime
40% for drugs

and some for one policing team in 2011:

PCs to make one arrest and five stop and searches per shift
Special Constabulary officers to make one arrest per month and perform 5 stop and searches per shift
Police Community Support Officers (PCSOs) to make five stop-and-accounts per shift, and two criminal reports per shift

But Metropolitan Police Assistant Commissioner accused the reports authors of “sensationalising” the issue. He also then said something that threw the red flag up in my simple brain – that “it was the Met’s job to bring down crime“. Then said that since it had a “more accountable way of doing things”, rates were down by nearly 10%”.

One officer told the report: “Every month we are named and shamed with a league table by our supervisors, which does seem very bullying/overbearing.”

Another officer refers to a “bullying-type culture”.

The report says: “There is evidence of a persistent and growing culture of fear spawned by the vigorous and often draconian application of performance targets, with many officers reporting that they feel almost constantly under threat of being blamed and subsequently punished for failing to hit targets.”

But Scotland Yard denied officers were being unfairly pressurised. In a statement, the force said it was faced with many challenges, but insisted it did not have a bullying culture.”We make no excuses for having a culture that values performance,” it said.

“We have pledged to reduce crime, increase confidence and cut costs. It’s a big task and we have a robust framework in place to ensure we achieve this. The public expects no less.”

A source of confusion here

I thought that the “it was the Mets job to bring down crime” comment was a very curious thing to say, not least that I traced it’s origin to his ultimate boss, the Home Secretary, who also said the only Police metric important to her was that of reducing crime.

Think about that for a moment. Does the Police have total control to dictate the crime rate? I wouldn’t dispute they have some behavioral, presence and advisory influences, but in the final analysis, there are many external influences (outside their control) that i’d suspect have a much greater impact on that measure. With that, you’re entering into a world where your main control at your disposal – that of diligently recording the statistics to back up a political narrative – is wide open to wholesale abuse.

Meanwhile in Bristol

The private sector is far from immune also. At one stage earlier in my career, I worked out of a company branch office in Bristol, serving IT customers in the South West UK. For the most part, we were very matter of fact, honest and straightforward with customers. And then came the annual customer satisfaction survey, a multiple choice questionnaire sent to the IT Managers at most of the key customers we dealt with in our work.

I remember being in an office with the IT Manager at Camborne School of Mines (we had a big VAX doing scientific work, supporting their drilling for warm underground water as a potential future energy source). The customer satisfaction survey was sitting open on his desk, with the page showing his yet to be filled in customer satisfaction measure for quality of Field Service Maintenance. In walks the Field Service engineer who’d just arrived, said “Hello, i’m here” around the door, and was called back by the IT Manager. The Manager then held the tip of his pen over the 1-10 rating boxes on the survey, and said “When can we have the new disk drive that arrived yesterday installed?”. Field Service engineer said “Is next Wednesday okay?”. Pen moves over to the 1/10 Customer Sat box. “Eh, I can probably do it just after lunchtime today!”. Pen moves over the 10/10 box. “Yes, you’ll have everything working this afternoon”. With that, the 10/10 box was ticked. A wry smile from everyone, and a thought that if genuine feedback was sent back by customers in general, it would result in service improvements that benefitted the company.

As it turns out, very naive on our part.

A missive rolled down from the European HQ in Geneva that said our office was the 3rd worst office for customer satisfaction in Europe, and hence someone in the office would be nominated to enact changes to improve performance for next year – with serious consequences if big improvements weren’t delivered. And with that, the European President said – to all 30,000 staff in Europe – is that the minimum acceptable performance next year would be an overall 8/10.

So, what happened? The guy in the office nominated to manage the transition to high quality (wry smile here) was the same guy who did the large scale benchmarking exercises for prospective customers against competitors of that time. Where the main skill was politically getting things coded into the customers benchmarking spec handed out to every vendor that suited the performance characteristics of our own machines, and in generally playing whatever games he could to win on key measures on which the bidding competition would be judged.

Customers known to be unhappy magically disappeared from the survey mailing list. Anyone visiting customers routinely in their working week were trained on how to set customer expectations that anything under 9/10 was deemed a failure, and that 10/10 was a norm. And everyone knew who was going to get a survey, and worked doubly hard to ensure those customers were as happy as we could make them – with the minimum marking scores in mind. Several thought of it no more than one week when they had more blackmail capital than at any other time of the year, but otherwise complied with the expressed wishes.

End result: Top office in customer satisfaction in the country, and only 3rd among all the branches in Europe (1 and 2 in Austria – suspicious that, but hey).

Were customers any happier? No. Was the survey a useful improvement device? No. Did it suit the back story for the political narrative? You bet! And with that the years continued to roll on.

My own Lightbulb moment

Somewhere along the line between Bristol and more senior roles in the same company, I came upon one W Edwards Deming, and one thing he routinely did to managers to fix this sort of malaise. But a slight detour first (based on what I did after that following my experiencing one of his lessons).

Doing things right (I think)

When I was Director of Merchandising and Operations at Computacenter’s Software Business Unit, the internal Licensing Desk reported into me; a team of five people who dispensed advice about how to buy software in the most cost effective way possible without unwanted surprises. And administering all the large license orders with vendors in support of this. A super team, managed by Claire Hallissey.

Claire had one member of her team consolidating data collection on the number of calls coming into the team and how long each enquiry was taking to handle; not something i’d imposed on the team at all, but I suspect for her own management use. It became pretty obvious from the graphs that growth in demand to use her team was far outpacing the revenue growth of the Business Unit, at a time when we were likely to be under pressure not to increase headcount.

So, what did we do? I indicated that the data collection was brilliant, and didn’t want to see effort or accuracy of that compromised in any way. However, if they managed to work out any way of reducing the volume and length of calls into her team by 15% by the next quarter end, i’d put a £150 bonus in each of their pay packets. The thinking here is that they were the folks who could ask “why” most effectively, and enact changes – be it local office new sales support hire training, simplifying documentation, and generally tracing back why people were calling in the first place. And then relentless putting their corrective actions into play.

In the event, they got overall call volume down by 25%, the source data quality stood up to my light scrutiny, and all duly got the £150 bonus each – plus senior accolades for that achievement. One of the innovations was adding a sentence or two to standard template response emails they’d built to answer common secondary questions too – and hence to take out repeat calls with better content in the first email answer sent back. With that, the work volume growth trailed the sales volume increases, and the group more productive – and less bored by the same repeat questions, ad nauseum.

Then in Southend

Likewise on day 2 of my job at Demon Internet, when a group of us walked into the Southend Tech Support Centre to see a maxed out floor of people on the phones to customers, and a classroom with 10 new recruits being trained. The Support Centre manager, looking very harassed, just said “that’s this weeks intake. We’ve got another 10 next week, and another 10 the week after that”. I think I completely threw him when I said nonchalantly “But why are customers calling in?”. He just looked at me as if i’d asked a very stupid question, and replied “We just haven’t got enough staff to handle the phone calls”.

Fortunately, his deputy was able to give us a dump of their Remedy system, so a couple of us could sample the call reasons and what specifically was requiring technical assistance. In the event, 27% of the calls related to setting up the various TCP/IP settings; we then changed the product and simplified it’s supporting documentation to work those issues away. At least some respite until Microsoft shipped Internet Explorer 6, which resulted in the Customer Services Director admitting later as having “fundamentally broken my call centre”. But that’s another story.

W Edwards Deming

But back to metrics. The one thing in all my career that made my light bulb go on related to measures and metrics was an experiment conducted by W Edwards Deming. Deming was an American statistician who was sent to Japan after World War 2 to assist in it’s reconstruction, and found himself teaching motorcycle and car manufacturers on how to improve the quality of their products. As quality improved, they also found prices went down, and companies like Honda, Suzuki, Kawasaki, Datsun (now Nissan) and Toyota went from local to worldwide attention with motorcycles, then cars. The products from which, unlike their western counterparts, rarely broke down and remained inexpensive – so much so, western governments instituted quotas to arrest the siege on their own manufacturing industries. To this day, the highest accolade for excellence of quality in Japan remains “The Deming Prize”. It was only much later that the work of Deming was widely acknowledged, and then used, by western manufacturers as well.

During his training seminars, Deming conducts what is known as “The Red Bead” experiment. Unfortunately, the comedy of promoting good workers, firing underperformers, and urging improved performance with no control over the components of a process is largely lost in videos of him running this himself, given that he was well into his 90’s when recorded. His dry humour is a bit harder to spot than it would have been earlier in his career – when he openly acknowledged that some Japanese managers routinely imposed the same class of bad metrics on their staff as those of the worst examples he found in the West.

If you can buy a copy of his seminal book Out of the Crisis, you can see the full description between pages 109-112, in Chapter 3, “Diseases and Obstacles”, following the subtitle “Fair Rating is impossible”. Something the Home Secretary, and all echelons of Managers in the Public Sector, should read and internalise. If they did, I think the general public would be pleased with the changes i’m sure they’d enact based on his wise knowledge.

In the absence of an original Deming version, a more basic version of the same “your job security depends on things outside your control” sentiments can be found on this (it’s around 2 minutes long):

or a longer 24 minute version, truer to the original real McCoy:

A modern take on peoples valiant attempts to get attention

April 4, 2014April 5, 2014ianwaring Facebook, Google, Management, Marketing, Newspapers Leave a comment

A really well written story in Techcrunch today, which relates the ever increasing difficulty of getting a message you publish in front of people you know. Well worth a read if you have a spare 5 minutes: http://techcrunch.com/2014/04/03/the-filtered-feed-problem/

The main surprise for me is that if you “Like” a particular vendors Facebook page, the best historical chance (from Feb 2012) of seeing one individual post from them was around 1 in 6 – 16%. With an increase in potential traffic to go into your personal news feed, it is (in March 2014) now down to 1 in 15 – 6.51%. So, businesses are facing the same challenges to that of the Advertising industry in general, even on these new platforms.

Despite the sheer amount of signal data available to them, even folks like Facebook (and I guess the same is true of Google, Twitter, LinkedIn, Pinterest, etc) have a big challenge to separate what we value seeing, and what we skip by. Even why we look at these social media sites can be interpreted in many different ways from the get go. One of my ex-work colleagues, at a s Senior Management program at Harvard, had a professor saying that males were on Facebook for the eye candy, and females to one-plus their looks and social life among their social circle (and had a habit of publishing less flattering pictures of other women in the same!).

The challenge of these sites is one of the few true need for “big data” analyses that isn’t just IT industry hype to sell more kit. Their own future depends on getting a rich vein of signals from users they act as a content platform for, while feeding paid content into the stream that advertisers are willing to subvert in their favo(u)r – which is a centuries old pursuit and nothing remarkable, nor new.

Over the past few weeks, i’ve increased the number of times per week I go out for a walk with my wife. This week, Google Now on my Nexus 5 flashed this up:

So, it knows i’m walking, and how far! I guess this isn’t unusual. I know that the complete stock of photographs people upload also contain location data (deduced from GPS or the SSID of Wireless routers close by), date/time and readily admit the make and model of the device that it was taken on. And if you have a professional DSLR camera, often with the serial number of the camera and lens on board (hence some organisations offering to trace stolen cameras by looking at the EXIF data in uploaded photographs).

Individually identifiable data like that is not inserted by any of the popular mobile phones (to the best of my knowledge), and besides, most social media sites strip the EXIF data out of pictures they display publicly anyway. You’d need a warrant to request a search of that sort of data from the social media company, case by case. That said, Facebook and their ilk do have access to the data, and also a fair guess at your social circle given who gets tagged in your pictures!

Traditional media will instead trot out statistics on OTS (aka “Opportunities to see” an advert) and be able to supply some basic demographics – gleaned from subscriptions and competition entries – to work out the typical demographics of their audience you can pay to address. Getting “likely purchase intent” signals is much, much more difficult.

When doing advertising for Demon Internet, we used to ask the person calling up for a trial CD some basic questions about where they’d seen the advert that led them to contact us. Knowing the media used, and it’s placement cost, we could in time measure the cost per customer acquired and work to keep that as low as possible. We routinely shared that data every week with our external media buyers, who used the data as part of their advertising space buying negotiation patter, and could relate back which positions and advert sizes in each publication pulled the best response.

The main gotcha is that if you ask, you may not get an accurate answer from the customer, or you can be undone by your own staff misattributing the call. We noticed this when we were planning to do a small trial some TV advertising, so had “TV” put on the response systems menu – as it happens, it appeared as the first option on the list. We were somewhat bemused after a week that TV was our best source of new customers – but before any of our ads had been aired. So, a little nudge to our phone staff to please be more accurate, while we changed every ad, for each different media title we used, to different 0800 numbers – and could hence take the response readings off the switch, cutting out the question and generally making the initial customer experience a bit more friction free.

With that, our cost per acquired customer stayed around the £20 each mark, and cost per long term retained customer kept at around £30 (we found, along the way, some publications had high response rates, but high churn rates to go with them).

The best response rates of all were getting the Royal Mail franking machines to cancel stamps on half of all stamped letters in the UK for two two-week periods – which came out at £7 per acquired customer; a great result for Michelle Laufer, who followed up when she noticed letters arriving at home cancelled with “Have a Break, Have a Kit Kat”. Unfortunately, the Royal Mail stopped allowing ads to be done in this way, probably in the knowledge that seeing “Demon Internet” on letters resulted in a few complaints from people and places with a nervous disposition (one Mental Hospital as a case in point).

The main challenge for people carrying a Marketing job title these days is to be relentless on their testing, so they can measure – with whatever signals they can collect – what works, what doesn’t and what (from two alternative different treatments) pulls better. Unfortunately, many such departments are littered with people with no wherewithal beyond “please get this mailer out”. Poorest of Amateur behaviour, and wasting money unnecessarily for their shareholders.

As in most walks in life, those that try slightly harder get a much greater proportion of the resulting spoils for their organisation. And that is why seminal books like “Commonsense Direct and Digital Marketing“, and indeed folks like Google, Facebook et al, are anal about the thoroughness of testing everything they do.

Treating Employees right – or how to freak your Manager out!

March 28, 2014March 28, 2014ianwaring Management, Marketing, Training Leave a comment

I’ve always been impressed with the output of Scott Adams and his Dilbert books. He did a sterling job in two of his books after reviewing the stupidity that happens in offices around the world, but then asked the intelligent questions. Like, if what it says in your Job Plan or your Personal Objectives is so bad, what would one that did things properly look like?

One of the gold nuggets in the appendix of one of his books was what he termed the “Out at 5” or “OA5” plan. At one fairly young company down my career, I employed two recently minted Marketing Graduates. In the absence of any template used by the company at that stage, I stole the theme completely – and the result is below.

When I moved to be a Director of the Software Business Unit at Computacenter, I asked my boss if she was okay with me using the same form of OA5 plan for all my employees there. She read one and sort of freaked out. I understood her concern after she explained her nervousness: that people would take advantage of the words literally, albeit my experience was that people followed the spirit of it instead – and worked hard regardless. So, in that instance, I filed it away and used the Corporate standard process in place instead.

I nevertheless executed using its sentiments – and ensured that if there was a vendor conference in the USA, it was my newly minted Product Managers that went on behalf of the team (they after all needed the context to explain how developments fitted in with future product roadmaps – better they know and impress people with their authoritative knowledge, rather than having to defer to me all the time). They always grew in stature very fast by being thrown in at the deep end (albeit with a safety rope to tug on if ever needed), and were a joy to see blossom into key employees of the future.

Pity I couldn’t put things in writing though. I found some of the same sentiments in the excellent ROWE (Results Orientated Work Environment) Books, though explicitly offering clock off time to go to the cinema mid afternoon, or to work remotely for an extended period of time, would have been a tougher management sell at the time. That said, I always found everyone enjoyed their work more with the below in place. This is a real plan, bar names and dates removed to protect the innocent!

OA5 Plan: (Employee Name)

You will sometimes find yourself surrounded by people who have different goals to you, who will unknowingly do things that undermine your projects, or that generally behave outside the best interests of (Company Name). Your task is to rise above this, and despite all obstacles, deliver:

180,000 subscribers by the end of (date)
Complete the National Advertising for (4 month date span), including the test of a radio campaign
Complete the Corporate Brochure, Welcome Packs and other tasks that we mutually agree that you should execute
Full participation as a member of the Marketing Services Team
Help your Manager put together a spend plan for the new financial year starting (date)
Tests of everything you do. It’s a much safer world if we get to know what works, what doesn’t, and that we’ve learnt. Within the bounds of experimental exercises, we should strive for continuous improvement

Functions of your Manager

In support of the above goals, your Manager will assist in the following ways:

Eliminating Assholes. If anyone or anything is standing in the way of you meeting your objectives, please seek assistance to get the obstacle cleared. It is his role to absorb uncertainty and to provide an environment where you can deliver your projects unhindered. We want you to enjoy your work and be proud of your achievements.
Your manager will do his best to provide an environment where you are learning (and helping the company learn) every day. Requests for training are welcome. Sharing of ideas and distribution of your learnings to your Manager and your colleagues, ideally in small digestible chunks, is encouraged. And you are expected to make mistakes; that’s the way we all learn.
Seek forgiveness, not permission. In the same way you can escalate issues to your Manager, there will be times when the data, or key staff, aren’t available for us to hit a key decision deadline. Time to market is key; having weighed up the pros and cons, make the decision that you believe is right for the company, our customers, and preferably both.
Building your Personal Network. It’s often a case of who you know; contact with suppliers, customers and other departments in (Company) is actively encouraged. Please keep details of everyone you talk to, and don’t be afraid to seek advice from anyone with pertinent experience that you deem appropriate. The strength of your Personal Network – particularly outside the company – should build to be a significant personal asset.
Timekeeping and Attendance. We wish to provide an environment where you can discharge your commitments between 9:00am and 5:30pm. If there are times when you prefer to work from home, or from another location, please let us know your whereabouts so we can find you if needed. Should you work extended hours (attending press announcements or any work related activity outside hours), you may take this time off in lieu; again, please let us know so we can correctly set expectations of anyone that asks for you.
No Retribution. Your Manager is available to help in any way, at any time, day or night. However, if anything concerns you in any way, you are free to talk to (Manager’s Manager name), any other Director, or the Personnel Department directly.

Manager: Ian Waring
Office: (office direct dial phone number)
Mobile: (work mobile phone number)
Home: (Home phone number)
Email: (Work email address) or (Home email address)

Cutting Software Spend: a Checklist

March 26, 2014ianwaring Budgets, Enterprise IT, Management, Pricing, Purchasing, Software Leave a comment

No real rocket science, but if you’ve been put in a position to try to make savings on your software spend, this is the sort of checklist i’d run down. It is straight off the top of my head, so if there are nuggets you know that i’ve missed, please throw a comment at the end, and i’ll improve it. The list applies whether you are looking at a single organisations spend, or are trying to reconcile the combined assets from any company merger or acquisition.

General rules:

Don’t buy new when you have redundant assets already
Be mindful that committing to buy in volume is lower unit cost than buying individually
Beware of committing to spend over several years where the vendor prices any agreement assuming straight line deployment toward your total user base at the end of the term. Assume most of the deployment will happen much faster – and that your projected spend will front-load with large true-up costs at annual contract anniversaries.
Don’t pay extra for software updates where no updates are planned in the license term
Don’t pay for software you’re not using!

So, the checklist:

If there is a recommended software list to be deployed for a new employee, be sure to engage HR with a weekly list of leavers, and ensure their license assets are returned to a central pool. Licenses in that central pool should be reallocated out of that pool before electing to go forward with any new purchase. I’ve seen one company save 23% of their total desktop software spend just by implementing this one process.
Draw up a master list of all boxed software (termed “Fully Packaged Product” or “FPP”) that appears to have been historically purchased by the organisation. The associated licenses are normally invisible to the software vendor from a purchase history point of view. Two main uses: (a) it forms a list of what should or could be purchased at more favourable terms in the future using an appropriate volume licensing agreement and (b) it’s a useful defence if your CFO receives a spurious “demand for unpaid licenses” from a vendor. I’ve seen one case of a subsequent reconciliation of previous purchases result in an unsolicited £6m invoice being settled for £1.8m instead.
Likewise, compile a list of the various software licenses purchased, per vendor. This is often complicated because a single vendors products can be purchased from multiple sources, and there are several licensing programs in every vendor. You will often find purchases made for a specific project, where an organisation wide reconciliation can take overall licensing and support prices down – but only if centralising the negotiation supports each projects goals. I have seen one such reconciliation of a vendors licenses in one large multinational company run to 80 pages (and a huge discount to bring in an end-of-financial year renewal), though most result in a 1-2 page reconciliation. You then have the data to explore available change options with a vendor or reseller of your choice.
Ensure that the support levels purchased are appropriate for the use of the products. There is no point paying “Software Assurance” for the remainder of a 3 year term if no new version is scheduled to be released in that timeframe (most effective resellers will have visibility of these release pipelines if you can’t get them directly from the vendor). Likewise, you probably don’t need 24/7/365 support on an asset that is used casually.
Finally, don’t buy support on products that you’re no longer using. While this sounds like a flash of the obvious, knowing what is and isn’t being used is often a lengthy consolidation exercise. There are a variety of companies that sell software that can reconcile server based software use, and likewise others (like Camwood) that do an excellent job in reconciling what is present, and used/unused, across a population of Windows PCs. Doing this step is usually a major undertaking and will involve some consultancy spend.

If the level of your buying activity is large enough to be likely to attract the attention of a vendor or reseller salesperson visiting you in person, a few extra considerations:

Be conscious of their business model; it is different for PC software vendors, Enterprise Software Vendors and Vendors predominantly selling “Software as a Service” or Open Source Software based subscriptions. Likewise for the channels of distribution they employ between themselves and your organisation – including the elements of the sales processes a reseller is financially incented to follow. Probably the subject for another day, but let me know if that’s of any interest.
Know a resellers and vendors fiscal quarter year, and particularly their end of financial year, date boundaries. The extent to which prices will flex in your favour will blossom at no other time like these. The quid pro quo is that you need to return the favour to commit your approved order to be placed before their order cut off schedule.
Beware getting locked into products with data formats exclusive to or controlled by one supplier; an escape route with your data assets (and associated processes) intact ensures you don’t get held to future ransom
Consider “Software as a Service” subscriptions wherever possible, aka pay in line with the user population or data sizes actually employed, and flex with any changes up or down. You normally absolve your IT dept from having to update software releases and doing backups for you in the price, and you should get scale advantages to keep that price low. That said, (3) still applies – being able to retrieve your data assets is key to keep pricing honest.
Always be conscious of substitutable products. Nothing oils the wheels of a larger than expected discount from a vendor than that of the presence of a hated competitor. If it’s Microsoft, that’s Google!
Benchmark. If you’re trading with a reseller with many customers, they have an unparalleled view of previous deals of similar dimensions to your own – including past discounts offered, special deal allowances and all the components needed to lower a price. At the very least, an assurance that you’re “getting a good deal”. I have seen one example of a project deferred when it became apparent that the vendor was giving a hitherto good customer a comparatively poor deal that time around.
For multinational companies, explore the cost differences in different territories you buy through and use the software in. I did one exercise for a well known bank that resulted in a 30% drop in their unit costs with one specific vendor – two years running.

So, what nuggets have I missed? Comments most welcome.

Pricing: How low can you go?

March 25, 2014March 25, 2014ianwaring Amazon, Digital Ocean, Future Trends, Management, Netcraft, Pricing, Rackspace Leave a comment

While I was at Demon Internet, and a good year before Amazon appeared in the UK, we used to promote a small local company called Bookpages, who were selling Books online. At one point, I heard that US-based Amazon had a meeting with the Directors of the company in London, so guessed they’d enter the UK soon – but kept absolutely quiet. In the event, they jumped into the UK market by buying Bookpages, inheriting all their management team – all a complete surprise to me. Just very glad that I had kept shtum throughout.

Around a year later, I called in to see the Business Development Director in Amazon Slough for a chat about advertising to our customers. I was offered a tour after our meeting; I ended up confronted with a football pitch size warehouse that looked exactly like this:

Having been used to walking around warehouses from my time in IT Distribution, I asked the Business Development Director how many days inventory was in the building. He said: 2 days. Like, wow – they’d fill and empty that warehouse 180 times a year; the scale was absolutely intimidating.

We finished the tour passing the packing/shipping area, where a flood of books were being served on conveyor belts to four or so teams; all items relentlessly being sealed into cardboard packing to the incessant bass of loud beat music, and sent over the loading bay into one of the waiting 40 ton Royal Mail lorries.

Genius

I’ve been a customer of Amazon ever since, and these days hold shares in the company. At some point i’ll get the bandwidth to read the The Everything Store: Jeff Bezos and the Age of Amazon, one book waiting for me on my iPad. There are several strokes of genius in their business model, one of which is their focus to live on the bottom rung of the value chain ladder. To suck all the oxygen out from potential competitors trying to attack them from underneath – which is the way most large companies get disrupted.

I found this great article that explains Amazon’s pricing strategy very eloquently. It’s also the first time I’ve heard that Apple rotate their stock faster than Amazon do, which is an amazing feat for a manufacturing company.

Enjoy: http://www.eugenewei.com/blog/2012/11/28/amazon-and-margins

Amazon Web Services

The one surprise to me these days is the public perception of Amazon Web Services being the 100 pound industry gorilla selling Cloud Computing Capacity at lowest prices, that keep ratcheting down as their scale advantages allow them to do so. The largely unknown secret is that they are being completely murdered at the low end and with software developers by relative newcomer Digital Ocean, who have recently got VC funding from Andreessen Horowitz (A16Z).

Future Trouble at t’Mill?

The WordPress network from which this site is served is hosted on Digital Ocean in Amsterdam – cost $12/month for a Linux virtual server, 30GB of flash storage and 3TB of Network capacity per month, which includes the cost of backups and snapshots. When I talk to AWS and indeed to Google, it doesn’t take long to be given special offers paying the first $2000 of my hosting cost – which suggests their pricing is way higher than what i’m able to develop on already. Probably more sophisticated than I need right now, but I guess it’ll be some time before I need to scale to a size that will become interesting to them.

Amazon are far from alone. While folks like Rackspace are a leading proponent of OpenStack to commoditise Hosting Centre Infrastructure, Digital Ocean are walsing way with thousands of their previous customers; it is almost like they are paying no attention to Netcraft Hosting Provider Switching Stats – and at the same time, issuing profit warnings of their own.

I wonder if Amazon similarly start feeling the same heat in the months ahead – and if they are likely to address it before Digital Ocean go flying past.

Jean-Louis Gassee, Priorities, Targets and Aims

March 24, 2014March 24, 2014ianwaring Apple, Future Trends, Management, Marketing, Money, Pricing Leave a comment

Every Sunday I get a “Monday Note” email from Jean-Louis Gassee, who earlier in his career had the esteemed position of Chief Technology Officer at Apple. Besides the common sense, some of it is laugh out loud funny. Like the time he was invited to a US Meeting of Senior Nokia employees in New York, asked to present on what he’d do to revitalise their fortunes, nominally based on his experience at Apple (see the unvarnished comment in the “ps:” at the end of this blog post). He listed two priorities; One was to fire the CEO (this was the one with a finance background, ahead of when Stephen Elop was appointed). The second was to co-opt Android. I can only imagine the look on the then CEO’s face when he read that out to all the Nokia employees in the audience.

Nokia have now done both, though not before Elop had thrown the company under the Microsoft Bus and where the first million orders for their low end Android phone is set to appear after Microsoft finally take control of the company.

More Priorities

Another instance is when he was still at Apple, and a fellow (new) executive was asked to present their priorities to the Board. Jean Louis describes it thus (the full article, relating to priorities for the incoming CEO at Microsoft, is here):

Once upon a distant time, the new CFO of a colorful personal computer company walks into his first executive staff meeting and proudly shares his thoughts:

“I’ve taken the past few weeks to study the business, and I’d now like to present my top thirty-five priorities…”

This isn’t a fairy tale, I was in the room. I didn’t speak Californian as fluently as I do now, so rather than encourage the fellow with mellifluous platitudes — ‘Interesting’ or, even better, ‘Fascinating, great vision!’ — I spoke my mind, possibly much too clearly:

“This is terrible, disorganized thinking. Claiming to have thirty-five priorities is, in fact, a damning admission: You have none, you don’t even know where to start. Give us your ONE priority and show us how everything else serves that goal…”

The CFO, a sharp, competent businessman, didn’t lose his cool and, after an awkward silence, stepped through his list. Afterwards, with calm poise, he graciously accepted my apologies for having been so abrupt…

Still, you can’t have a litany of priorities.

Growing a Software Business

That reminds me of the first time I was given a software business to run. At Digital, we had two Distributors selling systems to resellers. Newly transferred into that team after DEC had switched the lights out on its first foray into the world of Personal Computers, I was asked to come up with a few ideas on how to grow the amount of software sold via that channel. At the time, the previous year it had transacted around £770,000 worth of software, and was the smallest Software selling “Sales District” in Digital UK.

I duly went and sat on the sales desk at the two Distributors – Rapid Recall (who were Intel’s first UK Components Distributor) and Hawke Systems (who started in the same area, but primarily with Motorola). I talked to sales people. I listened to their phone conversations. I talked to some of their customers. I talked to their product managers. After a few intense weeks of note taking, I produced a 35 page document on ways to increase the software business via the Distributors.

My then boss, Keith Smith, read it and just said “Go do it”. Shit. Where do I start? By a stroke of luck, I got as far as the end of the first three ideas – in two years – and the business was up to over £6 million/year, and now the largest Software Sales “District” in the company. From that base, I got given my next gig, which was to start the DECdirect Software Business; selling VAX Enterprise Software, armed only with a catalogue, 8 telesellers, 2 tech support, 25,000 potential customers and direct delivery from Software Manufacturing in Galway – which had an even bigger impact. It went 0 to over $100 Million in 18 months, at 89% gross margins.

Growing a Systems Business

A few years later, I got given a flatlining Distribution IT systems business to improve. That started off with a brainstorm on all the potential ways to grow the business, which ended up with 36 specific ideas on the board. What we then did was to list all 36 ideas down the left hand side of a table, and put 4 additional columns across the top:

Ease of Implementation (1-5): on the scale, 5 was easy, 1 was hard
Chances of Success (1-5): 5 for a Sure Thing, through to 1 if unlikely to prevail
Revenue Potential if successful: we made an educated guess on likely business levels if all went well
Total of (1) x (2) x (3)

We then went down the whole table, taking the teams view of scores for each of the 36 business ideas. Once done, filled in column (4), we picked 3 strategies with the highest total scores, and binned the rest. Those were our three priorities. That business went from £12 million per year to £52 million per year within 2 years, while our primary other Distributor competitor went from £10 million per year to… £10 million per year.

Likewise, much later on, applying the same disciplines to the VMware business I ran at Computacenter for 2 years (alongside looking after 1,071 other vendors as well in our team of 4), we got from 7% market share to 21% in two years, and won their prestigious “Global Solution Partner of the Year, 2012” award. The whole underlying strategy had 2 key aims, and 3 subsidiary development goals. Worked a treat:

The top 3-5 priorities are the only ones to focus on

Ever since, every business i’ve run has boiled down to 3-5 priorities, in order of impact – which is very much like organising a set of bowling pins and knowing, at all times, what you’re aiming at.

If you get down to brass tacks – and this is something I learnt from Microsoft when selling their wares – there are four key levers in any business. To improve profits, you sell:

More Product(s)
to More People
More Often
At More Margin (which is higher price and/or lowest cost)

Graphing the number of *different* products you sell per year, how many different customers you sell to per year, the average purchase frequency per customer per year and the overall margin percentages per year, all on separate graphs, will normally isolate pretty quickly where a business is succeeding, failing or (at the very least) which way it is trending. Towards future success, or alternatively, towards oblivion. Once you understand the dynamics you’re faced with, you can start addressing how you’re going to push things forward.

And i’m far from alone:

Equally applicable, I noticed on my weekly Quora Digest this morning that someone had asked how to prioritise feature requests submitted to a Product Manager. I thought the answer from Ian McAllister of Amazon was extremely good – see it in the flesh here – not least because if follows the same sort of process i’ve found has worked well down all the years in my sordid past.

DEC: company long gone, but Corporate Philosophy very much alive

March 21, 2014March 21, 2014ianwaring DEC, Learning, Management, Marketing Leave a comment

I worked for Digital Equipment for 17 years. Having done my A-Level project implementing a subset of the Joss language interpreter in PDP-8 PAL-III assembler at Grammar School, I left on a Friday and started at Digital the very next Monday. I ended up running their UK Software Products Group, the source of around one third of the UK subsidiaries profits.

This was the place where you were trusted “to do the right thing” and “to seek forgiveness, not permission”. We even had a Field Service Engineer in Welwyn told to get a part over from Galway Manufacturing to fix a fault in a customers downed DECsystem-10 as quickly as possible, “whatever it takes” said his manager. He chartered a plane, and when his boss found out, he just quoted the “seek forgiveness” line – which was an edict we had from Jean-Claude Peterschmitt, who ran the whole of Europe for the Company.

My Division also had a written policy that said we should always look after current customers before starting to chase new ones. Not to mention that the Salesfolks were not commissioned, so their honesty shone through and we got far more than our fair share of evangelistic senior customers.

Above all, we were taught to throw responsibility to our teams, and to help them grow. And to value honesty above all else, with no retribution if anything screwed up. If it did, it was probably my fault along the way anyway, so a good learning experience.

These traits last with me to this day. I’ve had many fantastic employees, and have pride in what virtually all of them have achieved – be they from my time at Digital, Metrologie, Demon Internet, BT, Trafficmaster, CCD or Computacenter.

Ask not what your mobile phone can do for you, …

March 16, 2014March 16, 2014ianwaring Enterprise IT, Facebook, Future Trends, Google, Management, Mobiles, Money Leave a comment

Last nights Gillmor Gang felt like it arrived at a conclusion that the next big frontier for mobile platforms was the message bus that is notifications. From a consumer perspective, Google are good at this, albeit Google Now and Google Plus tread over each other occasionally, and Google Plus’s Circles quickly fall into disrepute. Apple’s notification system is mostly empty and unused. It was perceived that Microsoft didn’t have a strategy at all. Meanwhile, the messaging vendors running across multiple platforms are lined up for a battle royal to keep their respective user bases growing, and applicable in their niche use contexts (WhatsApp, Line, WeChat, Hangouts, Skype, Linc, Secret, Snapchat, Chatter, Twitter, LinkedIn, etc).

For me, interesting and pertinent comment tends to come from Feedly (mainly RSS feeds), my DoggCatcher Podcast consumption, a couple of mailing lists and the occasional post on Twitter, Facebook, Google+ and very rarely, in LinkedIn. For the most part, all of these social apps shift ungodly amounts of pollution in my stream, and are systematically getting worse. It really doesn’t surprise me that Twitter have had over 1 billion registrations, of whom only 1/4 are regular users now; the daily requests to add more suggested users does nothing for my feed quality – and in fact precisely the opposite.

My Nexus 5 with Google Now already flashes up a bus timetable and next bus eta when I walk past a bus stop. It has all the performance of the stocks I own already tabulated. It tells me the result of Aston Villa’s last match (1-0 against Chelsea – must be a bug there somewhere) and soon will tell me the next match due, along with the relevant league stats of both teams. And at the moment, it will throw in the name of someone from Google+ whose Birthday is today, although i’ve never heard of any of the folks listed in the 5 months since i’ve switched to Android. And if I have worked out how to integrate my calendar, it will tell me if I need to leave early for my next meeting in light of the current traffic conditions.

With that, most of my future use cases that help *me* are largely covered. Improving the efficiency of me recording my food intake and exercise routines may help; i’ve logged all my food intake and have it summarised as carbs, protein, fat, calories and exercise calories expended by day, every day since June 3rd 2002. My weekly weight readings go back that far too. My fitbit does a reasonable job counting my steps and I get a £5 book voucher to spend every 4 months or so for the privilege of admitting my exercise stats. So, an Apple iWatch with heart rate/pressure monitoring may add a bit more data meat for me to have graphed. So, what’s next to help… me?

The industry is now off the starting blocks and into the calls of “Big Data”, “Internet of Things”, “Sensors everywhere”. My phone already knows the time, my location, who i’m calling, who’s calling me, how fast i’m travelling, where i’m headed (be it in my calendar or set as my navigation destination) and where I have notification of tracking data for an inbound package from Amazon. Some data based on data clues i’ve shared with Google (location, searches, Chromecast media consumption) and Amazon (purchases). I wonder if any Visa/Mastercard data makes it back. And now that the role of “information hub” has escaped from living room Games Consoles and into that Smartphone into my pocket, what value to I get back from it now?

A lot of the benefits are going to accrue higher up the food chain – in which case Steve Gillmor’s words may (as usual) be prescient.

One of my previous employers had over 10,000 staff, thousands of suppliers and a large number of B2B customers. One system there collected the metadata from email on who was conversing with who; anyone could go onto the system and see (in priority order) who was engaged with a specific supplier, or all the touch points into large enterprises they serviced. That speeded up the engagements (as it would do in any knowledge based business). That may also work for phone calls made or received on the company mobile in the future.

The same company also have high water marks in various business processes, so if an iceberg is heading your way that will break the customers SLAs, the management chain get the needed urgency and corrective actions instilled – before the customers notice. However, it is silo’d on specific tracking systems that managers have to dip into regularly.

For an Enterprise, one of the keys is to be able to link business processes and the exception handling flows so that the relevant people know whatever is important to them, when it is important to them. Some of my previous work was to graph important things simply to show, for example, what the flow of incoming cash was, it’s sources and any queries that may impale the chances of a customer paying their invoice(s) on time. Very much like the sort of card dished out by Google Now, but with some limited interactivity to dig down deeper into a prioritised list – to enable fast spotting of the root cause to address. It worked spectacularly well to help eradicate potential problems and to markedly improve DSO.

(For what it’s worth, once I could reach the database tables I needed, I prototyped the reporting needed to address the business issues very quickly in Tableau Desktop Professional. Then in line with corporate reporting platform decisions, self learnt then reimplemented the whole lot in Microsoft SQL Services Reporting Services (aka SSRS) – a very bitty, detailed and long process – where the reports still run to this day).

Some time ago, Facebook provided an alternative UI that made your friends the centre of your mobile experience. This largely fell into disrepute as many of the apps on a phone are gateways into simple process tasks, and the entry point wasn’t specific to a designated “friend”. John Borthwick wrote a piece on Medium about which Mobile apps appeared on a wide variety of home screens. Yahoo bought startup Aviate who provide a launcher that moves icons to the home screen – for immediate availability – based on the context of where you are and what you do regularly. I’m yet to see any analysis that segments which apps are used, when and how often; that would be a useful base to ask further questions.

In the meantime, linking apps into appropriate notifications from Enterprise systems may well be a useful thing for mobile applications. That historically has been the domain of Microsoft applications with custom extensions written in VBA (Visual Basic for Applications). It’s probably a sign of genius that you can do likewise with Google Apps now (Chrome Extensions were announced last week) – with add-on code written JavaScript – the most popular programming language in the world.

The main downside is that, for a business process, JavaScript (as indeed is true of VBA) is akin to writing stuff in very basic assembler. Mind bogglingly long winded and subject to excruciating minute detail. I think there’s probably a lot of mileage in being able to provide Google Now type cards with graphs and data you can drill into out of the box – all thrown into the notifications stream with an interface not unlike IFTTT (If This then That – one of John Borthwicks companies) to deliver the information to the correct people, at the right time, only.

I’m just waiting for the first signs that the Enterprise Software vendors will start putting the hooks in to enable Google to undertake the assault on this hitherto Microsoft stronghold using Chrome Extensions.

In the meantime, I also ask myself how folks like SAP and Oracle survive with their very clunky ERP software, all of which looks ripe for disruption with modern open source based software – but that’s another story about money, customisation and organisational inertia all by itself.

Did you know 2.8% of your customers are dead?

March 14, 2014March 14, 2014ianwaring Enterprise IT, Learning, Management, Marketing, MySQL Leave a comment

Those are the exact words I mentioned to the CEO of a B2C company – where customers were paying monthly subscription fees. Unfortunately, his immediate question back was “Okay, but how many of those are on Direct Debit?”. I think my reaction to his interest in the number of people paying for his service, but not using it, was one where I thought he’d do damage to his brand than earn him extra profits.

It’s long been an accepted view that Marketing in IT circles is often considered a set of “hail Mary” throws to attract new potential customers, with little of the precision of folks who have that title in Fast Moving Consumer Goods (FMCG) companies. I’ve sat in meetings with a roomful of IT reseller “Marketing” folks to find I was the only company present doing systematic testing to find out what works, what didn’t and to use this learning to continuously improve. More a case of “getting the letter out” and losing the ability to learn anything; surely much better to send two different wordings out, to see which one pulled better – at the very least.

I’m reminded of one person I met who worked in the field for a Chocolate vendor, and like all his industry colleagues, could relate to 1/10 of one percent shifts in his market share in the retail outlets he supplied through. He was expected to have an action plan in place if anything slipped a little, or to do more of anything that slightly increased his share. One day, fed up selling Chocolate bars, he decided to move to a company selling software to large IBM computer installations.

He walked in to see his new boss, and made the fundamental mistake of asking what his software products market share was in IBM Mainframe installations working in the Finance Industry and in the counties of Avon and Somerset. His new boss looked at him as if he’d arrived from the Planet Zog, and told him just to get on the road and sell something. He ended up thinking this was dumb, and set up his own company to fix the gap.

He elected to start sending out questionnaires to all the large IBM customer sites in the UK (there were, at the time, some 1,000-1,500 of them), getting a telesales team to help profile each site, and to reflect the use of hardware and software products in each. Then sent out a quarterly summary, segmented by industry, of what everyones peers were using – so the survey participants saw value in knowing what their peers in like organisations were doing. He subsequently extended the scope to cover other vendors, and gradually picked up a thorough profile of some 30,000 installations, covering over 80% of Enterprise IT spend in the country.

At that point, he had an ever-evolving database of all mix of hardware and software in each, coupled with all the senior decision makers details, and even the names of IT projects both planned and underway in each. The last time I had a meeting with him, he could aim me into the best 5-10 prospects for my IT products and services that aligned with what my ideal customer would look like (in terms of associated prerequisite products they were already running) – with a single rifle shot – allowing sales focus and without spreading sales effort over many unproductive lead follow-ups. Marketing (and Sales) Gold. Expensive to use, by worth every penny.

He subsequently sold his company and the database to Ziff Davis, then to Harte Hanks – the same folks who compile the list of dead people (from published UK Death Certificates) that was part of the profiling exercise I undertook and that I mentioned above. They then sold the same Database assets and it’s regular surveys to the company where it resides today.

Apart from that data, there are a number of other useful sources you can draw on. I once managed to persuade MySQL (before Sun, long before Oracle, ownership) to get their customers profiled, just by relating postcodes we deduced from sampling contact addresses and/or the same from location information on their web sites. It turned out that 26% of their base existed in System Integrators, Web Development and Software companies, while the remaining 74% was flat as a pancake over 300 other SIC codes. Very difficult to target as a whole unless you had the full list of customers – which only they did! There are also various mailing lists, MeetUps, forums and resources like GitHub where you can get a view of where specific developer skills are active.

All very basic compared to Consumer Marketing, where armed with a name, a date of birth and/or a postcode, you can deduce a pretty compelling picture of what your B2C customer looks like, family make-up, what they read and their relative wealth. When I was at Demon Internet (first UK Internet Service Provider), we could even spot one segment of very heavy users that, back in 1997, turned out to be 16-19 year olds living in crowded accommodation, playing online games and with no parental supervision of the associated phone costs. We also had the benefit of one external consultant who was adept at summarising 550 pages of BMRB Internet Survey number tables, producing an actionable and succinct 3-5 pages of A4 trends to ride on.

Today, with even the most expensive mobile smartphones starting to commoditise – and vendors looking to emphasize even the smallest differentiation now – I wasn’t too surprised that Samsung in the USA have today landed an ex-VP of Proctor & Gamble to head their Marketing Efforts going forward.

With that, the IT industry has now come full circle – and FMCG class Marketing skills will start to become ever more important in our midst.

Crossing the Chasm – on one page of A4

March 12, 2014March 27, 2014ianwaring Books, Enterprise IT, Future Trends, Management Leave a comment

Among my many Business books, I thought the insights in Geoffrey Moores Book “Crossing the Chasm” were brilliant – and useful for helping grow some of the product businesses i’ve run. The only gotcha is that I found myself keeping on cross referencing different parts of the book when trying to build a go-to-market plan for DEC Alpha AXP Servers (my first use of his work) back in the mid-1990’s – the time I worked for one of Digital’s Distributors.

So, suitably bored when my wife was watching J.R.Ewing being mischievous in the first UK run of “Dallas” on TV, I sat on the living room floor and penned this one page summary of the books major points. We grew the DEC business from £12m to £52m in 2 years after using this work, so a lot of the lessons appeared to be good ones. Just click it to download the PDF with my compliments. Or watch him describe the model in under 14 minutes at the recent O’Reilly Strata Conference here. Or alternatively, go buy the latest edition of his book:

I did use this as part of a project to increase sales of Trafficmaster SmartNav jam-avoiding in-car navigation systems, which I conducted with the assistance of two professors from Cranfield Business School. We picked three target use cases to take us over the Chasm, with varied success.

I did manage to get 300 of them installed in the complete Virgin Atlantic “Upper Class” Chauffeur Car Fleet, which avoided the normal driver practice of having to wake the passenger up with an abrupt piece of braking as they neared the customers destination. Also saved a phone around to find out who was closest to a customer who just called in (found that the McDonalds outlets around Airports was a favourite haunt of their drivers).

By hook and by crook, we also managed to get test units in the cars of board members of 7 of the top 10 System Integrators in the UK at the time (given they had hundreds of expensive staff on the road every day; thought keeping them out of traffic jams would help their bottom line). Incorrect thought as it turned out; staff competitions to win a one of ten SmartNavs in each company (to promote them down the line, hoping for bottom up demand) invariably ended up with a glut of them on eBay.

Trying to engineer a bridge over a chasm proved difficult when the product is already designed and the B2B use cases wide ranging, especially when sales appeared to be over a myriad of different small segments. The company subsequently went B2C, and I suspect directly into the headlights of the steam roller that TomTom became.

My PA redrew my hand-drawn sheet of A4 into the Microsoft Publisher document that output the one page PDF. I may have the source file somewhere, so if you want a copy of the source file, please let me know – drop a request to: [email protected].

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