May
07
2013

Entrepreneurship is an Art, Not a Science

Posted by: Paul Zagoridis in Categories: Psychology of the Deal.
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Street Lights 2 photo

Street Lights 2 photo by Michael Lorenzo, Pasig, Philippines

The earliest reference I can find is by Paul Willax from 1 July 1996

Entrepreneurship is an art, not a science. The Greeks recognized that there were techniques (“techne”) that could not be explained in words, but learned only through apprenticeship and experience.

My search was not extensive, but I’m happy that the quote has been around for at least 17 years.

This is why competing advice is possible and can lead to failure and success. Even more importantly, this is why Entrepreneurship is learnt and perfected by experience.

There are subject matter experts who can teach or manage accounting, marketing, logistics, customer service, manufacturing, supply chain, procurement, finance, human resources, leadership and development, training, quality control and assurance, risk management, legal affairs, decision support, corporate governance, and even sales. However the unique mix of problems and opportunities that every business faces do not work in a reductionist, reproducible manner. What experience teaches is to be comfortable with uncertainty.

Actually experienced has taught me that when the going gets tough how to pivot and fight for revenue. I know I don’t have all the answers, I don’t even know all the questions.

Experience is a proxy for flexibility and insight. Some people, particularly those who have had success early often mistake that experience for wisdom. Nothing is more painful than thinking your previous business or entrepreneurial experience is applicable in the current circumstances only to discover that this situation is different. Successful people pick themselves up from under that misapprehension, dust themselves off and learn from the experience.

Some people learn to avoid risk altogether after a failure. While I feel a little sad for them, I totally understand where they are coming from. Failure batters the ego. That is why I celebrate the people with multiple successes. They almost certainly have failed forward along the way. That’s also why I admire successful, experienced sports people. I don’t really spend time wondering about the lucky few for whom success comes easily. I want to hear about people looking at themselves late at night, with no one else around, and deciding to get up one more time after being knocked over. That’s a cliched statement, but it’s a story I never tire of.

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May
03
2013
Red Curtain

Red Curtain by djnorway http://www.sxc.hu/photo/1374248

There is a lot of gnashing of teeth about the future of the film industry given that “Between 2007 and 2011, pre-tax profits of the five studios controlled by large media conglomerates fell by around 40%”.

The business of film making (as opposed to TV) will change. The Internet has disrupted theatrical distribution, home video and home entertainment.

Hollywood has responded to the threat to their business model by pursuing tentpole releases. Big event movies that prop up the bottom line the way a pole props up a tent at the circus. That’s still a broken business model which sees the studios make fewer movies which each carry a greater share of the risk. $300 million USD to make and another $50-100 million to market. Now in the world on mega corporations those numbers are not significant.

The problem is that the large media conglomerates are too big. If they had a movie that cost $25 million to make and market, and it made $75 million that’s a great result. But it doesn’t mean a drop in the ocean for conglomerates that big.

In the long run I expect the film production business will be a big but not huge business. Mature competitive markets eventually generate zero abnormal profits. In the long run mature markets can be measured by return on equity (ROE pr ROCE). I don’t see something as bespoke as film production becoming that reliable. Television drama with it’s focus on reaching 100 episodes can produce a product range over 3 or 4 years.

Public ownership of movie production companies is not a good fit for the model. Smaller companies and smaller movies will always find a way to make money in a smaller market.

Interestingly, are there any publicly listed Art production companies? No, but that doesn’t stop artists from creating work, and the most successful of them making a very good living at it.

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Nov
07
2012

NBN Co National Broadband Network logoI am now a supporter of the NBN despite the price tag, politically motivated slow rollout, poor ROI and political lies.

The National Broadband Network is a hugely expensive ($40B), fibre-to-the-premises (FTTP), wholesale network that will reach 93% of the Australian population over 10 years. Oh! And paid for by the taxpayers.

The Gillard Government has some numbers claiming that it will pay for itself in the long run. I don’t believe it will ever reach its return on investment of 7% if those numbers are ever audited in the same way private enterprise auditors operate.

I used to see it as a massive waste of money, that Fibre-To-The-Node (FTTN) was a more affordable but almost as good solution for one-third to one-quarter of the cost. I thought that Rob Oakshot and Tony Windsor held the nation hostage in order to get good internet in the bush first – a lower order national policy outcome.

I wasn’t wrong on any of those points. But I have a new perspective that makes them irrelevant.

  1. $40 Billion over 10 years is a drop in the bucket when it comes to the Gillard (and Labor) Government’s waste. In comparison, the Greens in 2011 stated that Australia’s offshore detention and border protection would cost over $2B in the next year alone. Those are the best numbers I’ve found on a quick search, but other media outlets published similar numbers.
  2. The copper network is obsolete. Patchwork repairs (like those over the last 30 years) will never see copper achieving anything close to the theoretical and technical optimums. There is no incentive nor financial return to Telstra to refresh the copper network.
  3. If you live in a multi-unit-dwelling or more than 500 metres from an exchange in a major city, and you want the fastest currently available broadband you already know the difference between the broadband speed you are sold and what you can consistently achieve. For those that haven’t tried it yet, it’s an intermittent and variable painful game of random chance.

Therefore if what we have is currently unusable, it doesn’t matter if we can save even $30billion by going FTTN, because the last mile of internet connectivity relies on the copper network which will never be fixed.

Worse for multi-unit-dwellings there is currently the endless game of pass-the-buck where the ISP blames the Telstra copper or your building wiring and nobody is responsible for providing your service. The NBN removes this debate for a significant and growing proportion of the population.

If you don’t believe governments are wasteful then the cost debate doesn’t matter. If you do believe governments are wasteful then the waste on the NBN is justifiable given the national productivity and long term infrastructure arguments.

What do you think?

3 Comments
Oct
29
2012

Always be coolWhen my mobile phone service came off contract I wanted to go month to month while I waited for the new iPhone’s to come out this year. Optus at the time were running some compelling prepaid deals. So I signed up.

I converted to a post paid accout and accepted a dealer’s offer for a shiny new iPhone 4S. That’s when the nightmare started.

The dealer ordered a white iPhone 4S when I asked for a black one. The dealer cancelled the order for the white and raised a new order for the black. Optus meanwhile cancelled my pre-paid service and with the cancellation of the white iPhone, my number suddenly became unlinked to any services and went into limbo.

Suddenly Optus claimed I could no longer keep my number. The number that I’d had since the mid 1990′s when GSM phones were introduced. This is a number everyone had. As I’m not famous enough to be overly harassed by people trying to do deals with me, I therefore want to be found. Changing phone numbers is a bad thing.

Aside: should I ever be successful or famous enough that I need a gatekeeper, I will keep that number, but give it to a PA to filter calls. People who I’ve worked with or known in the past will be able to reach me.

Optus prepaid and post-paid customer support escalated my problem but post-paid CS claimed I didn’t have an account (yet) and the prepaid CS had zero influence. After all prepaid mobile services weren’t worth keeping were they? Despite the fact that the call rates on pre-paid are highest and there is no bad debt or accounts receivable problems. Sounds like a great business to be in.

It finally took a call to the Telecommunications Industry Ombudsman to get the issue to someone powerful enough in Optus to fix my problem. In the meanwhile I’d lost a client worth $12,000 p.a. as they had an urgent problem and couldn’t get through to me. Lesson: Always have two phone numbers a client can reach you on especially if your primary number is a mobile.

Optus’s TIO contact asked me to quantify the client loss and raise a claim. I was angry enough to do it at first. But after I’d calmed down I realised I’d contributed to the loss at least a bit. Better to spend my energy building my business than raising claims against well protected telco’s. Chalk it up to experience and move on.

2 Comments
Dec
20
2011

30 Things to Stop Doing to Yourself

Posted by: Paul Zagoridis in Categories: Psychology of the Deal.
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As I prepare to set goals for 2012, I came across this brilliant post 30 Things to Stop Doing to Yourself. It reminds me to clear the decks mentally, emotionally and spiritually before trying to drive through to new or old goals.

Effective planning or goal setting starts with an understanding of where we’re at now. I’ve fallen into the trap of trying to “apply myself more diligently” or “redouble my effort” without looking at what I needed to get rid of to reach my goals.

Every human being is doing the best they can right now. They may be happy or unhappy with their outcomes, but in order to have a different outcome, they must change something in their life. The important word is “change” as in transform, not add to. They may need to transform their knowledge or understanding before they change how or what they spend their time on.

I made a plan to review the list of 30 every day for 30 days. That is how habits are made. People have varying lengths of time for how long it takes to form or break a habit. Repetition of the idea is key.

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Sep
28
2011

How badly do you want success?

Posted by: Paul Zagoridis in Categories: Psychology of the Deal.
Using Tags: ,

Sports are often a metaphor for success. Often it’s a stretch to make the connection, as sports aren’t about life and death and sports have highly artificial rules to increase the stakes.

That said, success in life isn’t always about life and death either. It’s about mediocrity and extraordinary. So often the metaphor is right.

This video is about the focus required to succeed. I agree with it.

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Aug
31
2011

Clicks and mortar retailer TrollAndToad.com came in at #1063 in the Inc. 5000  fastest growing private companies in America for the second year with 285% revenue growth over the last three years. TrollAndToad.com is a the world’s largest retailer of collectible games. That is the very definition of niche.

So these guys are successful retailers. They are even more successful story tellers to attract customers, press buzz and decent management talent to the company.

Their website encourages sharing across the range of social media networks their customers may like. They have dedicated themselves to getting their story out.

I’m impressed because they get it. Sadly many companies do not. So the message is

  1. execute the business
  2. tell the world to attract customers, staff and media.

Successful businesses must do both, well.

TrollAndToad.Com’s also credit their growth and success to  acquiring the most talented people in the industry to oversee its growing divisions.  In an effort to rapidly expand its brick-and-mortar retail endeavors, the company has brought hobby retail store veteran Marcus King on board to chart and direct the course for this initiative.

King was a Board Member of the GAMA Retail Division (GRD) for many years. He also served as Vice President of the Game Manufacturers Association (GAMA) Board of Directors, helping to oversee all the activities of that body.  ”I will be working with, and in, the newly opened Richmond, Kentucky store,” King explained, “and opening more Troll And Toad Retail and Tournament Centers — first in Kentucky, then across the nation.”

So they hired an expert. Some  companies try to do everything in-house especially when they are not good at it.

I knew a CEO who wanted to write every press release despite being a poor writer. I mean bad grammar, limited vocabulary and shocking spelling. He was smart, but had no talent with words. This industrial company boasted they put 20 press releases out in their best year. They needed to put 2000 releases out and engage with journalists in covering industries. Instead they worried about cost. What did it cost for the CEO to spend two hours on a press release? If he doesn’t add $400+ per hour in value, fire him.

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Aug
30
2011

Red Bull Mobile AustraliaRed Bull has been busy extending their brand into the GSM mobile space globally. The next step on the path to world domination is Australia.

Technically they are mobile virtual network operator (MVNO) just like Virgin Mobile, which means they sell access to an existing network with their own branding and price structure.

Virgin Mobile would be the only other similar brand in that space in Australia. I think it’s a move worth making. The costs of becoming a MVNO are relatively low for a global brand but they get instant brand recognition in the new market. This is a great brand extension policy.

Red Bull have added to that by using social media to get the word out. I’ve got  a free SIM card from Red Bull Australia because I am an account at Klout. If you are quick and in Australia you can also get a free Red Bull Australia Mobile SIM.

The customer acquisition cost of this strategy has got to be ridiculously cheap. Compare what it would cost You&Me Inc to attract young brand aware consumers to a new mobile phone network.

If that link worked for you, and you got a free SIM, please comment below, and a like, +1 or other thanks would be appreciated.

Update 20 Aug 2011 @13:00:

A third party, Aggregato, will provide retail sales and distribution management and customer service support for Red Bull MOBILE.

Aggregato owns GRL Mobile who are rebranding as Red Bull MOBILE from 7 September according to this news announcement.

That reinforces my point about customer acquisition costs. GRLmobile’s total customer acquisition spend will rise under this deal, but their cost per customer acquisition will go down. Customers don’t have to overcome the “who are they?” question

Red Bull may only be taking a licensing fee for all I know, but given Red Bull Mobile’s international rollout,  it seems like they’ve put some resources behind establishing their brand in the mobile space.

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Aug
03
2011

Involved or Committed

Posted by: Paul Zagoridis in Categories: Psychology of the Deal.
Bacon & Eggs

photo by Anna Moderska, Warsaw, Mazowieckie, Poland

I like the following metaphor.

In a bacon and eggs breakfast, the chicken is involved while the pig is committed.

The normal mode in business is to look for people who are committed. Those that get the company logo tattooed on their bodies.

For senior executives, founders and entrepreneurs that is the spirit which drives a company forward.

However is it fair or reasonable to expect that from everyone in the organization?

At the senior executive or board level it is vital that there is someone who has not “drunk the kool-aid”. This person provides vital perspective and challenges the assumptions to avoid group-think.

At the front-line staff level having committed staff is certainly a competitive advantage. The main challenge then is to scale the business with a keen and engaged workforce. The second obstacle is managing attrition or top-grading when staff become disengaged.

Alternatively a business can design its systems to be executed by the average available hire. McDonald’s and American Express do this well. McDonald’s front-line staff are among the most committed in the fast food industry – compare staff at Burger King or KFC. But nobody is kidding them that this is a career. McDonalds managers and above are very committed and engaged. The whole business is executed by 15-19 year-olds.

American Express also chooses the best call center staff they can find. There is  still high employee turnover. But once people in the rest of the business make it past 3 years they are often there for life.

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Jul
11
2011
Forex Foreign Exchange Rate

Stranger in a Strange Land, photo by A Syed, Midland, MI, United States

Guest contribution provided by Forex Traders

For many investors, learning the intricacies of investing is a continuing effort that focuses on expanding personal knowledge of the principles involved and on gaining experience at the craft. Unfortunately, many of these individuals tend to be unaware or just plain forget that the most important ingredient for success, the third “leg of the stool”, is emotional control.

Understanding the psychology of trading and acting upon its precepts are often easier said than done. Not only must one react properly to the “socially-driven” movements of the market, but one also must be aware of his personal tendencies and how to prevent his mind from undermining his well-thought out trading strategies.

Studies in the field of trading psychology have confirmed time after time that our subconscious mind, programmed from birth by our personal external experiences, can often become our worst enemy when trading in a stressful environment, especially when real money is on the line and the fear of loss is present. These conditions exist in all investing markets, but the intensity is heightened when trading currencies in the forex world. Time frames are compressed. Market reversals can be swift, and successful traders must be technically nimble and decisive in asserting their trading plans.

If truth be known, behavioral dynamics actually are the contributing factor that make our markets tradable in the first place. When major currencies were allowed to float back in the seventies after years of regimented central bank control, finance officials reacted with amazement to the level of volatility in the forex markets. Each currency pair developed its own personality, fluctuating daily well beyond previous standards that had been maintained for decades following World War II. The interpretation of fundamental and technical factors can vary by individual, and these varying opinions are what lead to wavelike market patterns before a consensus equilibrium is reached.

For the individual trader, psychological factors manifest primarily in an inability “to pull the trigger” before opening or closing a forex position. This “hesitancy” can result from several causes, but the most probable reasons fall into two categories. First, a lack of confidence when applying trading principles to react to various patterns and trade set-ups can stop a trader in his tracks if he lacks experience in how he trades and in the methods that he has been taught. More practice trading on free demo accounts is the recipe, as most experienced and successful traders swear by their practice regimens.

The second reason can be termed “performance anxiety”. Fear of loss or accountability can wreak havoc on a trader’s mind. Your subconscious mind is a storehouse of many uncomfortable experiences, accompanied by coping responses that will prevent a recurrence of the previous trauma. Opening a position can generally be a more positive situation, invoking hope for future gain and displaying assertiveness when confronted by a particular market situation. Closing that position can be quite the opposite set of events. Should I or shouldn’t I? When do I pull the plug? Why now and not later? Suddenly, the threat of poor performance results in hesitancy and procrastination, a recipe for failure in the world of forex trading.

So what is a trader to do? Trading simulation systems are the only way to gain the necessary confidence and consistency with your individual training plans, but the “cure” is more about extensive practice routines to “habitualize” your step-by-step trading plan. Creative visualizations also help to define exit “triggers”, but a trusted and disciplined routine is the only known method for preventing unwanted mental intervention in the course of trading positions. And keep in mind that, even if practice accounts and theoretic trading are great for learning, they have many limitations and do not necessarily reflect real market conditions.

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