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September 30 A new bottom line in business......There is a new bottom line in business - it measures Green House Gas (GHG) emissions . For example, News Corporation added 641 thousand tons of GHG emissions in 2006. To place that into some sort of perspective the average for US households is 59 tons while for non US households it is only 9.5 tons. But those are averages and it is highly likely that most middle class US households have a carbon footprint of something more than 100 tons. Alternatively those US households that are attempting to be GHG emissions neutral at present and into the future could be running at between 10 and 30 tons. In those households the family will use public transport, ride a bike, have a low GHG emissions vehicle, walk rather than drive, and use all forms of energy sparingly. In other words those households, wherein people have adopted a "leave no (carbon) footprint" mindset, produce around one third of the GHG emissions of those who live a mainstream lifestyle. News Corp does not have a huge carbon footprint but its audience around the globe surely does - estimates put its audiences' GHG emission measure at 7 Billion tons. WOW! What an opportunity News Corp has to influence its audience on GHG emissions. It appears the company is up for this challenge. It will start by getting its own house in order. It has set a new bottom line for all its businesses - it is on a pathway to carbon neutrality by 2010. New Corp's strategy is simple - reductions, renewables, and offsets. Reductions in GHG emissions come through new levels of energy efficiency in everything from lighting to transport. Renewable energy sources will be used as and when feasible and so this will be a gradual build up. Where reductions and renewables are not feasible then carbon trading offsets will be initiated. - a good example is its plan to contribute to a wind farm development in India. The company is determined to make energy efficiency an integral part of all its 'day to day' processes - there is a new bottom line at News Corp. There is a new purpose and responsibility for everyone at News Corp and the CEO, Rupert Murdoch, believes this will be good for business. September 28 Wheat farmers....In the past it was 'the canary down in our mineshaft' - the bird lived and so did our miners, otherwise. Now it may well be 'the wheat farmers in our food supply' - wheat farmers with record crops and low prices and we all live the good life, otherwise. At present wheat prices are at records and climbing - there is a global crisis in wheat supplies. This affects everyone. Wheat is a basic ingredient in our staple foodstuffs. It means the cost of food is about to rise and rise sharply. It means trouble is brewing in our food chain. It means expensive food is on the way to a supermarket near you. Wheat farmers are not high profile players on the world stage like bankers and so their crisis does not get the same attention the sub-prime mortgage brokers attract. Financial contagion is still impacting our lives and it hurts. But here comes a global wheat crisis and it will hurt too. It will change our eating habits too because there comes a point where rationing through the price mechanism means consumers are forced to look for substitutes to wheat-based foodstuffs. What business are you in? Growing, harvesting, and shipping wheat. How are wheat prices? Records are being set at present. WOW! really, I did not know that. So you are making a fortune, eh? Well actually I have to sell the farm, if I can, before the bank takes it away because this crop failed as did the last and one before that and ...... What is happening in your industry? Changing weather patterns, what you might call Climate Change, has brought a perennial drought to my part of our industry. What can you do about that - there must be some new technologies, new wheat strains, new ways of doing things that will help the industry so as a wheat farmer what can you do? Pray! Pray? Yeah all I can do is 'pray for rain' because without it my industry is moribund. September 27 Just how relevant is your business model?When you look at your business model and you look at the issues facing society today do the two match? Are they in accord? How do you test for that accord? Simply look at who your customers are this week. Look for new customers. Look for people who have come into your business today - not from a competitor - but as new arrivals to your industry. Look closely at what they are interested in buying from you. Listen carefully to them - note all the things they ask about that you do not supply or cater for in your business model. Ask questions about their needs beyond what you supply. Ask them about what they are looking for and what they see that attracts them to your business model. Then engage them in discussion about what they like most about your business model and why they see it as different to anything else they have seen recently. Find out from these new comers just how relevant your business model is to their world. If you are relevant they will tell their friends and next week you will have more new comers to interview. The word will get out that your business model is relevant and your business will grow quickly. September 26 A more complex world demands a simpler business model..Doing business on a global scale is complex. Doing business on a local scale is also complex because global factors affect it. The requirement for business today is a simple generic business model that can deal with today's complexities. One company is growing bigger and stronger everyday because it has a simple generic business model - News Corp. Rupert Murdoch is in the business of delivering the news pure and simple. He has a simple business model because he has a clear and present purpose. The business model is to deliver news with a good sprinkling of 'entertainment' to provide use value. Rupert operates in some of the most contested and complex business markets in the world today. He delivers the news and entertainment through a great variety of communication channels and so he has to 'stare down' a host of competitors or challengers. He does it well because he knows that each business has a simple purpose and a solid platform. Rupert's platform is simple even when his offerings are complex. His platform is simple even when that of his competition is not. His platform is robust even in the entertainment industry where content can be whimsical. Rupert retains a simple business model with a universal delivery platform from which he combats the complexity of his industry with a huge variety of one off, stand alone, or franchised offerings. Most businesses are mirror images of those run by Rupert. They have a confusion of platforms, supply chain mechanisms, sales ploys, etc that are all explained by a typically complex business model. They are a jumbled mess of visions, strategies, marketing campaigns, innovations, good ideas, and talented people who want to be heroes. This makes them unworkable in boom times and unsustainable in recessions. At least in a recession most business models become a lot simpler because the focus is on cost cutting and automation. Ahead is of us all is an era of larger and larger complex organisations. These will be networked organisations. They will eventually be 'low carbon footprint' businesses. The more successful of these will have a very simple business model, a culture of discipline, and a robust delivery platform as per Rupert Murdoch and News Corp. First mover advantageClimate Change means you have a once in a lifetime opportunity to take a first mover advantage in your industry. What have you done to address the impact of Climate Change on your customers? What can you do to reduce the 'carbon footprint' of your products and services? Are you engaged in a carbon credit system? If so can you now also seek to reduce the 'carbon footprint' in your supply chain? Climate Change demands new ways of living and doing business. Still most people have not yet begun to change their lifestyles. People are still living and working as if nothing has changed. People maintain the same wasteful habits and mindsets. People expect business to serve up the same 'carbon heavy' fare as they did yesterday. People read about Climate Change and talk about it with their cohorts, family, and friends but few are active participants in lowering their own or their community's 'carbon footprint'.
Climate Change outranks everything going on around the globe today. It demads a shift in thinking about what is viable, useful, and valuable. Land values are changing as a direct consequence of changing weather patterns - where once the water ran free there is suddenly none and where once there was fertile land now there is incessant flooding. Climate Change is about to cost business and consumers money. Food costs are about to treble. Transport costs are going up too as carbon taxes are levied around the globe. Water storage costs are also going up as the 'terms of trade' for water distribution or water rights soar. Every aspect of life on this planet is about to be directly affected by our changing weather patterns - these changes represent a threat and an opportunity for your business. Climate Change brings you the opportunity to move to an entirely new business model. One that gives you a distinctive 'first mover advantage' in your industry. One that enables you to scale your business quickly. One that enables you to increase your passive revenue flows. One that enables you to innovate your way to business success over the next two decades. One that ensures your business is drought and flood proof as the earth's polar caps melt. September 25 From people to ideas....The nature of the challenges ahead of our world dictates the next move in business models is from people to ideas. The world needs new business models that can ensure we are unbundled from our dependence on carbon emissions. Current business models have bundled us all into reliance on our existing carbon footprints. Most of those models are the same. They compete against each other on the basis of their people or talent. They spend extraordinary amounts of money recruiting, training, retaining, and pampering their talent. They spend little or nothing on reducing their dependence on their heavy carbon footprints. The next big thing for companies is their predictable move from obsessing over getting the best people or talent to drive their heavy carbon footprints to getting the best ideas or business models to ensure they "leave no (carbon) footprint". New business arrangements.....The new business arrangements are global networks with local connections. The challenge for new business is to integrate global scale with local flavour. What does this mean for new business operators? It means their business is likely to be spontaneous, experiential, and lumpy. It means their workers are under constant stress because they either have a heavy or no load. In addition the sentience boundary for their workforce is their local community not their global entity. It means workers are more interested in the social aspects of business than the economics of it. This interest in social rather than economic issues seems to be prevalent amongst voters too. At national elections around the globe right now, voters seem much more interested the future of their society than their economy. Thus our new business arrangements work well if, and only if, the business model can match the divergent needs of global systems and local people. September 24 The full impact of a new global business model comes home....It is chaotic in global financial markets right now because a butterfly flapped its wings in Detroit and its impact rippled out around the world. Financial contagion in the US sub-prime mortgage markets demonstrated to everyone the networked effects of our new global business models. Over the past few weeks the "price of risk" increased substantially around the globe because all the lenders are now inter-connected. This is both a negative and positive thing. It is a negative if you are running a business that is highly geared with flat revenue profiles. Why? Because there is a credit squeeze going on in the global financial system. This means your lines of credit have suddenly dried up. Why? Well here is the interesting aspect to all this the reason is the people in the system not the system itself. The real problem for you is there has been a breakdown of trust between bankers. They do not trust each other and therefore they will not lend to each other. So it is no longer the "shadow price" of risk that is the problem for you but the breakdown of trust. Any networked business is based on trust in relationships. Strong relationships facilitate global connections which enable scale in operations that were previously unknown. For example, all the sub-prime lending in Detroit may have been underwritten by superannuation funds in the UK, France, Australia, South Africa, etc. This is no longer a point-to-point business model and so risk is priced differently. Risk is pooled in different ways to those that were taught to me in my economics tutorials. There are new mechanisms for facilitating a line of credit. The result is a line of credit that is much much cheaper to establish, manage, and support but it carries a higher risk than the market is used to trading. Furthermore the risk is not secured in the same ways that it was in the old mortgage markets when banks held the deed to the property on their balance sheet as an asset. The asset behind these loans are in a sense essentially intangible. Thus these assets demand new business models. These models have stretched the productivity of lending to new levels. They have been a huge success as they provided credit to people who would otherwise not be able to obtain a loan. This is the positive in all new global networked systems it provides more than you could get before at discounted prices that you never dreamed possible. However these new business models have to be supervised in new and different ways - not managed because that is an old world concept. Supervision of this new sub-prime mortgage system was slack it had little in the way of "checks and balances" and so it has faltered as so many new systems have faltered before it. The end result of this mishap is as it always is the bystanders feel the full impact of something they did not know was even happening and so they were caught up in it tangentially. The full impact, both positive and negative, of a new global business model has come home. September 23 What is old is new again in business.....WOW! These are difficult times. There are just so many things happening. More importantly so many of these things are way beyond the control of our traditional institutions. Whenever this happens in the history of the world the end result is paradigms shift. Paradigm shifts are often talked about, especially in my business circles, but rarely eventuate. But this time is different. This time the result will be a transition that makes you believe that "what is old is new again". The turmoil at present is masking a series of fundamental changes for business. Climate change, peak oil, pricing of risk in financial markets, free "state of the art" technology/intellectual property, networked economies, break-down in the authority and power of the Nation State, etc. are all symptoms of some new beginnings for business. What is old is new again in business. The notion of the bazaar, local or in-house production, open systems trade with foreigners, mass migration, relationship based enterprise, fluid terms of trade, less control and more innovation. The broadband internet provides us all with a new (global) bazaar. Local production especially on the premises in retail. Open systems of trade will be developed to lower your carbon footprints - including Google, Skype, eBay. Mass migration is emerging as fuel for business innovation. The new terms of trade favour intangible over tangible assets. Finally we are about to move on beyond C20th management. Coming ready or not is a new business model for you. The biggest change in the emerging business models is that they will be based on relationships not managerial control. September 22 The new business of being in business....The new business of being in business is a huge challenge. Being in business in a time of continuous drought. Being in business in a time of cheap new technologies and labour. Being in business in a time when the price of risk is determined by sub-prime mortgage lenders in Detroit. Being in business when what we always held to be true is being tested again. What does it mean to be in business today? It means having a global perspective. It means providing "free" the goods and services that your "would be" competitors use to raise revenue. It means networking your assets. It means clustering your people - both staff and customers. It means compressing your supply chain to remove as much of its carbon footprint as possible then flattening it again. It means using cheap technologies and labour where possible to reduce the cost of your goods and services. It means establishing a business model and culture based on good relationships and experiences. It means discarding much of the C20th concepts and practices of management. It means allowing your employees and customers to innovate your business wherever and whenever possible. The new business of being in business starts with a simple question "what can I do for you?" Once you know the answer you set up your networks. Your business model is based on purpose. Your revenue model is based on use value. Your key performance indicator is cooperation. Your business mindset is focussed on your global connections and your business habits are centered on your local communities. September 21 Xerox has got it rightMy business is new business models. I work with clients to create, test, and deploy these models. There are as many fads and fashions with new business models as there are with clothes, cars, houses, etc. Over my professional life I have seen many wild business models become accepted into mainstream thinking (one of the wildest is the notion that you can build a global business if you start by "giving away free" your core Intellectual Property, service, or product). This has led to a break down in the notion that business thrives on scarcity and the exclusion principle. But over the years and decades one thing has not changed. If a business provides its customers with a good experience it will expand if it does not it will shrink. It sounds simple. It is simple for those who do it and it is far from simple for those who do not. Xerox has been one of, if not the best, businesses I have seen over the past few decades. It has not always had the best executive management. It has not always made the most of its talent and opportunities. But it has always been dedicated to providing its customers with the best possible Xerox experience. Provide customers with the best possible experience and you will be successful no matter what business model you have in play. September 20 Is it time for a new business DNA?A financial system meltdown, changing climate patterns, peak oil, and networked economies. The world is changing. The physical world is less predictable. The systemic world is less reliable. The business environment is uncertain. It is time for a new business DNA? The evidence around today suggests it is time. The emergence of global networks in mortgage lending is a leading example of the inadequacies of current business DNA. Contemporary lending to home buyers in regions of the USA, England, Australia, et al is a confusion of reckless business practices. Today extraordinary levels of mistrust have developed within the traditional banking sector. Banks whose business is to lend each other money have been paralysed by their lack of trust in each other and in each other's risk assessment systems. In a global network of lending many traditional business practices are moribund. Who do you lend to if you can no longer be sure of your assessments of a bank's exposure to bad loans or maverick lending practices? The banking system has been frozen by fear. A new business DNA is needed but it will take some time to develop - perhaps a century. However the building blocks for the new business models that will eventually lead the world to a new business DNA are being formed. As a result of the financial meltdown a new approach to risk assessment will be developed. Tangible assets will no longer be the great "store of value" they use to be. Land and its development is about to be re-assessed as a continuing store of value. For example, housing stocks around the globe have become part of an asset bubble that has yet to be pricked. By 2015 I imagine the world 's stock of housing assets will be revalued sharply down. These assets could remain deflated in value for decades if not for the remainder of the C21st. Similar mark downs will occur to other tangible assets as the world adjusts to a global economy in which scarcity is less and less relevant to price. For example waterfront properties around the globe are scare now but with the constant concern about rising sea levels, flooding rivers, torrents of rain, etc these assets will be marked down. Wild shifts in the assigned values of tangible assets are likely to occur in the next decade as the full impact of turbulent weather patterns, less and less cheap labour in China, truly expensive crude oil, networked economic effects are played out in local communities, and a decline in national government authority and impact on global issues takes hold of our mundane world. There is a definite need for a new business DNA but these are big picture issues and as yet not many commentators have raised their eyes to look at them because they are all down in the detail. They are too busy reporting on the implosion of the old business DNA. They are far too captivated by the old business DNA as it transform into a majestic yet fragile ice sculpture. September 19 What you need......What you need in this time of volatility is probably the same thing you need in a time of serenity. You need an island of certainty. A place where you are known and trusted. A space where you are calm and clear headed. You need a purpose that is unshakable. A perspective on things that others do not share as they ride up and down with the pundits. You need a business model that is stable. You need a model that is robust. You need a model that puts you just beyond the reach of others in the marketplace. You need a model that delivers use value greater than the dollar cost of its products or services. You need to be excited by the opportunities you see being presented by current ideas, challenges, disruptions, changes, technologies, paradigms, and events. What you need is to be open, trusting, adventurous, risk taking, and grounded in a clear and present purpose. Mainstream meltdown.....Mainstream business around the globe is running scared right now. Why? Because there is a global credit squeeze on. Why? Because fear has replaced trust in the business process. Why? Because the world has been "awash with money" due to two events - 9/11 and the Iraq War. Why? Because mainstream business fears uncertainty, ambiguity, and instability more than death and destruction. Why? Because mainstream business is not what it says it is or at least it strives to be - it is not innovative, creative, and risk taking. Why? Because mainstream business is like the mainstream communities it serves......... Mainstream business thinking is based on comparisons.... Mainstream business growth is based on compromises..... Mainstream business survival is based on established patterns, conventions, and continuities..... This credit meltdown presents an "inflection point" for business and those who are truly capable will transform their business thinking, purpose, and process to create new opportunities and new ways of doing business in the near and long-term future. September 18 Can an emerging iGoogle Team dissolve the Googleplex fortress?Google is not anything like most traditional businesses. It is built on, and driven by, a single purpose - search. Google has a passive income stream that is directly related to its primary activity but not integral to it. It has largely adopted the Stanford University culture and this has been successful to this point in the Google story. However in stark contrast to Stanford University in Palo Alto the Googleplex in Mountain View is now a "locked down" fortress. Google's innovative abilities are about to be tested. Google was, and still is, all about internet search results - iGoogle is and shall always be about personal search results. The movement from Google to iGoogle as a business venture therefore is a big challenge for the team at Mountain View. Personal search is about resolving the question in a searcher's mind
(ie iGoogle). This is related to but not as simple as ranking pages of search results and
linking them to passive income streams (ie Google). Searchers need help to formulate and clarify their questions. They need help with their "attack skills" when pursuing a vaguely formed question. They need a "virtual memory" to help them understand how they have gone about resolving similar questions in the past. They need to be able to work on and off line in a seamless way if they are to make speedy progress on their more complex questions. They need a search engine that "learns" with them as it learns about them and their mindset, interests, and information needs. They need iGoogle to succeed. Google Gears is a linchpin between Google and iGoogle as it allows a user to work on and off line in the pursuit of answers to questions. But can the people who built Google Gears create a new culture within Google? I doubt it because they are not core or original Googlers but simply the "Google Gears folk" who came to the Google party late. Can the Google Team develop the new type of culture needed to deliver iGoogle as the next purpose driven business from Mountain View? I doubt they can because I sense the present Googleplex culture has become the captive of past successes. I sense the Googleplex is becoming more and more like the Microsoft Campus at Redmond. It is too big, too focussed on the past, and too inflexible. September 17 Leave no footprint - TimberlandTimberland is moving its business thinking to accommodate the impact of Climate Change. Buy
a pair of Timberland grey fabric sneakers for $US50 with 40 kilograms
(clogs for $US105 with 30 kilograms) of carbon dioxide or other gases emitted in production. The sneakers are normal footwear whereas the
clogs come with leather outers and wool-lined inners. Timberland is
now keen to provide its customers with information about the carbon
footprint left by the production of its boots, sneakers, etc. It has a
green scale of 0 to 10 or 2.5 to 100 kilograms of carbon emissions. It
now includes information about the carbon footprint you leave behind
when you purchase their footwear. Timberland management is relying on this initiative to give them a "first mover" competitive advantage in their industry. It is changing its business model because it makes economic sense and because the company realises that consumers will soon be looking for a carbon footprint rating on labels. This may or may not be an environmental issue for the company and or its customers. But it is definitely a cost issue - being green is cheaper because good management of the carbon footprint in the supply chain reduces costs. Timberland is looking ahead to a economy wherein consumers seek to "leave no footprint" when they buy a good pair of walking boots. Doing business with clustersOver the distance here I have written a number of riffs about clusters and networking clusters. Clusters are not a new concept in business but they do demand some new ways of thinking. In a digital revenue model a cluster can be an online community, a formation of customers searching for a particular product or service, a sentience boundary for consumers with the same values, etc. When you connect directly to such clusters then doing business is a new experience. Digital revenue models are pull systems. Consumers hunt for your products and services. They demand free information about your product and services. They expect free trials of products and services. They are accustomed to receiving free products and services as the core, or the baseline, of a product or service. They willingly become "prosumers" who help you develop your products and services. They work with you for the benefits that are networked or shared with other like minded consumers. They know that a networked product or service becomes more and more valuable to them the more other people own and use exactly what they purchased from you. They form a sentience boundary around their use of your products or services. If you are already doing business with, or within, networked clusters you have a "clear space thinking" advantage. September 14 The new currency for businessThe new currency for business is energy and time. I suggest you set yourself to draw a line in the sand at the beginning of 2008. Beyond that line you are going to focus on energy and time. Both assets have to be treated in new ways due to Climate Change and Peak Oil. Rework, inefficiency, waste, delays, etc are added costs your business can not sustain. Beyond 2008 you must seek a first mover advantage within your industry as you remodel your business with a much much lower use of energy and time. Lower your carbon footprint and you will lower your energy use. Automate processes wherever you can save energy. Integrate processes wherever you can save energy. Compress processes wherever it leads you to save energy. Form cooperative process if and only if they save energy. Use "self service processes" if and only if they save energy. Adopt a minimalist mindset when it comes to the use of energy. Lower your carbon footprint by using new technologies and you will lower your time use. Deploy "purpose driven work groups" to save time. Measure work groups' success in terms of time saved. Use time saved to innovate in ways that increases time saved. Reduce core working hours of employees whenever you achieve a new time saving. Enhance your remuneration packages for employees with time savings. After 2008 your business model should be based on "networked clusters" designed to save energy and time. With these "networked clusters" you will take a first mover advantage within your industry. September 13 The wonderful new world of work....I was reading, yet again, about the impact of "different generations at work" - I do not buy it as regular readers of this riff know. Too often this sort of topic is used to fill books, workshops, and speaking engagements. But the workplace is changing. It is evolving. It is a more interesting space to be right now than it has been for the past couple of decades. So I left a comment as follows. A wonderful new world of work is evolving. A key factor in this new workspace is values. Thus some of the key questions today include:- Are my values shared by others in this workspace? Do we all have a shared purpose? Are we past the old need for vision, strategy, leadership, structure, and teams? If a workforce has a clear and present purpose and a set of shared values then it will be a success regards of age differentials. Being respected was important in the old workplace but being liked is much more valuable in the new workspace. The new workspace is purpose drive and so key questions include:-
What is my purpose? Am I on purpose? What needs to be done to get back
on purpose? September 12 Being exceptionalBusiness models are usually based on the notion that it is best to do what everyone else does but do it just that little bit better to assure business continuity. Business continuity is the springboard to growth. Growth is the key to future success. Competition for future growth is therefore what most business modeling is about today. But there is another way to do business. The other way is to be exceptional. For example, twenty years ago it was exceptional to believe that people wanted to eat the sandwich you wanted to eat rather than what everyone else ate. Two young lads in London gave it a go. They built a sandwich shop that developed into a chain of shops throughout London branded "Pret a Manger". Pret is now in New York, Hong Hong, and Singapore. It is no longer exceptional to provide "wholesome" slow food in a fast food shop. Being exceptional is still not at the core of most business models. However it was always at the core of The Body Shop, News Corp, Tesco, Wal Mart, Virgin, Qantas, Google, Skype, eBay, etc. Is being exceptional at the core of your business model? |
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