Archive for January, 2015

Are You Thinking What I Was Thinking IV

Thursday, January 29th, 2015
  • Apple announces record quarterly profits and unprecedented growth in China and news organisations (BBC, CNN, CNBC) immediately fire bullets at the Company’s tax policies rather than celebrate or understand their success
  • 50 years on from Winston Churchill’s death I am hard-pressed to nominate a world leader today who is fit to tie his bespoke John Lobb shoelaces
  • In a era of big data and predictive analytics our ability to predict catastrophes accurately (winter storms in New York, radical Greek political machinations and so on) is still very suspect
  • We rush to judgement on so much that we know so little about (celebrity relationships, diets, climate change)
  • We omit to think about and take action about matters we know an awful lot about (our own behaviour, our state of overwhelm, our time management)
  • There is 256 variables that life insurers apply to determine your life expectancy, at any one time we probably focus on a maximum of 5 health and well-being improvements, why worry?
  • Stock markets and major indices are largely set for another impressive year of growth, all this with a global war on radical Islam, strife in the Ukraine, hunger and pandemic diseases in Africa and the Indian subcontinent
  • Breaking point: Superbowl Sunday 30-second halftime ads are 100 times more expensive (US$4.5 million) and viewership in the US has only tripled since 1967
  • Major cities such as New York, London, Mumbai and Shanghai have invested record amounts in transportation infrastructure, yet the improvement in the time taken to cross the City can be measured in seconds rather than minutes
  • Seven years of quantitative easing while helpful to global trade, has created asset bubbles (London real estate, global art market), where market makers and investors need to tread extremely carefully
  • Award ceremonies (Oscars, Grammys, BAFTA etc.) are more about the participants vanity than the quality of the work created
  • London feels like the centre of the world when nations such as Qatar are now the largest real estate owner and you can walk into a West End eaterie and hear 25 languages spoken on a Wednesday evening in January
  • We are in a period of unprecedented global growth yet the media would have you believe we are stuck in an economic vortex (woe in Europe and US, slowing Chinese consumer demand and insipid Japanese industrial output)
  • 2015 will see an unprecedented level of merger and acquisition activity driven by convergence of capital, distribution and technology leaving few business niches untouched.
  • Businesses are going to have to take up the slack educating and generally readying (on the job training) new entrants to the workforce in response to gaping holes in the quality of public education in North America and W. Europe
  • “Data rights” are going to be as valuable as mineral, land, media or image rights in the next 5 years, and just as contentious, when companies such as Google and Amazon seek to monetise the data in ways we never envisaged

© James Berkeley 2014. All Rights Reserved.

Diversification or Specialisation

Thursday, January 29th, 2015

How much diversification or specialisation is a good thing? We live in an age where there is an unhealthy presumption that to attract buyers of professional services, financial services, insurance and so on, you must be a “niche” expert to succeed.  Where is the evidence that is true? Buyers largely want three things: “ESR” Expertise (breadth of intellect, knowledge and IP), Speed (rapid and permanent resolution of an issue) and Results (tremendous return on investment).

Pick any mid and large sized organisation and the following five priorities plus others you wish to add, will largely top their list:

  1. Top line revenue growth (enhanced success selling new products to existing clients, resulting in increased profit margins on repeat sales)
  2. Dramatic improvement in operating margins (reduction or elimination of unproductive resource and risks that eat away at profit margins)
  3. Rapid reduction in business acquisition overheads (closer proximity to the client and multiple channels to distribute your products and services)
  4. Increased emphasis on profitable growth and expansion (greater focus on innovation and reinvention, not problem-solving)
  5. Increased success attracting key talent (greater propensity to invest in and build up the key strategic area of the business e.g. sales and marketing or research and development)

Today, this is where the greatest amount of money and motivation is to buy advice and raise performance to new levels. To accomplish any of the above challenges there is a series of inter-connected issues that need to resolved.

For example, take a US$1 billion insurance company with aspirations to double its top line revenues, build a stronger and more powerful brand, leverage that brand’s equity to attract more impressive clients and talented employees. In so doing dramatically increase its’ EBITDA contribution and the value to its’ stockholders. Should top management decide they want external “help” to supplement or replace internal competencies to proceed rapidly towards their goals, they are going to pick up the phone to the person(s), who brings a high degree of “wisdom”. By wisdom, I am talking about ideas, not solutions. Proven success practices (new ways to compete or deploy capital productively), industry insights, innovative concepts (distribution, underwriting), examples, provocative thinking and persuasive language about “what”, “where”, “when”  and “why” they should take action. If your expertise is a US mutual professional liability reinsurance broker or an insurance data analyst, I am sorry you are unlikely to get the call. If your expertise is accelerating the profitable growth and expansion of financial services businesses, chances are if you have a strong brand and a trusting relationship with the management team, you are going to be on the shortlist.

Large and mid-sized advisory businesses are awash with people, who know a hell of a lot about a very little. Over the past 25 years the beliefs of the leadership in those firms have governed their career development and hiring practices. There is a huge misalignment between corporate clients (buyers), the complexity of their business challenges and the breadth and relevance of expertise they can call upon. Assuming you have or can acquire the competencies and passion to address a broad spectrum of client needs, why wouldn’t you do so? That of course, presumes  that you and your colleagues have the inclination and confidence to reinvest in your own firm (new intellectual property, provocative thought leadership) and the belief that only constant reinvention will allow the practice to thrive.

© James Berkeley 2014. All Rights Reserved.

 

Predicting The Future

Wednesday, January 28th, 2015

As a teenager at boarding school in the early 1980’s I supplemented my Parents allowance for the term by selling horse racing tips to friends, family and others. Typically it was two or three horses selected for the forthcoming weekend’s horse racing in England. I would choose big races because the field was largely known and published by a Wednesday and I could easily mail out, telephone or pass on in person my predictions so that my clients could place their bets in time. My assessment was largely based on intuition of a horse’s past form, going, racetrack, distance, trainer/jockey combination and the relative chances of each horse in the race. I was pretty successful in a modest way at attracting and increasing numbers of clients by word of mouth. Advertising my success was not an option unless I wanted my Parents to receive a fateful call from the Housemaster! Email and other forms of electronic communication were not available to me and neither was electronic storage and processing of data (form, time, responsiveness etc). I tell the story because we now live in an age where all those tools would be readily available to me at extremely low cost.  Indeed we are awash with abundant processes and systems. The challenge today is picking the right one.

The fascination with “big data” (the ability to carve out highly valuable pieces of information in real time at low cost) and  “predictive analytics” to enhance the probability and accuracy of picking winners, are concepts based on solid common sense. Where I depart from the evangelists, who blindly bang the drum, is in their application.

Why is big data or predictive analytics the best process to achieve the desired result? Undoubtedly there are profound societal (crime), health (genetics) and other well-being issues (poverty), where large quantities of data can be formatted into information and the information applied to our current knowledge to make wise decisions about where to deploy capital, human resources and fixed resources to improve our condition (sustainable healthcare, lower energy costs and so on). Equally, I can make a very strong case that there are better processes and systems to profitably grow businesses, predict corporate buyers propensity to buy a product or service or even pick horse race winners.

My point is that just as in horse racing, it is a case of “horses for courses”. Big data and predictive analytics should be treated with the same standard as any other process and system:

1.A demonstrable  track record of success generating impressive results (highly relevant examples, similar case studies, powerful testimonials, war stories etc.)

2. Minimal investment required (time, capital, labour intensity)

3. Dramatically enhances credibility and rapport with your target audience (intellect, instant value,rapid responsiveness, trust and so on)

Be wary of any system or process which you cannot definitely answer “Yes” to all the above questions.

 

© James Berkeley 2014. All Rights Reserved.

Partnership Perpetuation

Sunday, January 11th, 2015

Partnerships in most professional services firms hinder not support perpetuation. Long the favoured organisational structure for establishing and building businesses, unless three key ingredients exist, the very survival of the firm is in danger:

1. Accountability for profitable growth and transition is clearly defined. Delegated individuals have the ability to make decisions and move with haste, when required.

2. The core values and operating beliefs are aligned with the firm’s strategy at all times. If the core value is “we put our clients interest first at all times”, and the operating belief of partners nearing retirement is “I will only support investments that minimise my personal risk”, you potentially have a misalignment with long-term investments (upgrading skills and technology) that enhance the client value proposition.

3. The focus is on success (perpetuation) not perfection (unequivocal partner support).

The hallmark of great partnerships is that succession planning is not accidental, it is planned and actively managed.

There is a fine line between triumph and disaster. Recent implosions of law firms Bingham McCutcheon and Davenport Lyons show how poorly managed perpetuation can result in a dramatic collapse. Time is rarely on a partnership’s side.

© James Berkeley 2014. All Rights Reserved.

First Impression

Wednesday, January 7th, 2015

I am asked by a client to approach a potential investor to garner interest in an early-stage growth opportunity. The investor is but one of a thousand or more firms chasing diamonds in the rough. Calls to their Home Office reception for the mail, telephone and email address prove fruitless “Sorry Sir, I don’t have a listing for that individual or business unit, let me see if I can refer you to a colleague.” A public tour of their organisation’s website has a a one-page summary of their expertise and an “info@” email address where friendly emails go unanswered for weeks on end. A personal introduction from a friendly competitor falls on deaf ears. We are not talking about getting hold of Warren Buffett or Li Ka Shing. This is a small group of investment partners in a $40 billion financial services business, who are accountable for attracting world-class entrepreneurs with leading-edge business ideas and the volition to transition those ideas into large multinational businesses in return for capital support.

Speed is as important as the quality of your response. When you don’t hold yourself and your colleagues accountable for answering the door (in person, by phone, email or other means) in a timely and professional manner, why should I wait?

Is it little wonder that the most attractive clients and prospects move on and rarely return? “If the communication is so poor at the outset, imagine what it would be like working with/for these guys”.

More troubling, when this becomes a pattern, is it a surprise when others preface a referral or comment about your brand with “be warned, they aren’t good with paper or returning calls or emails” because they fear the embarrassment that you might create for them with the lack of respect shown?

Contrary to a lot of nonsense, we individually control the first impression with our prospective clients, peers and others. There is no one, who cannot answer a call, reply to a letter or respond to an email within 24 hours (my standard is 4 hours or less) anywhere in the world. Travel and holidays, I am sorry are not a credible excuse. Neither is volume of calls, emails and so on. I can achieve that standard without any additional help in a solo practice and basic technology. There is no reason a corporate manager in a mid or large sized business cannot organise themselves and their time appropriately. It starts with having the requisite enthusiasm, a willingness to hold yourself and your peers accountable (appropriate penalties), and the belief that my/our first impression is critical to my/our success. You need all three elements.

© James Berkeley 2014. All Rights Reserved.

 

An Interview With Me From VOA News

Tuesday, January 6th, 2015

VOA News reporter Mil Arcega in conversation with James about global economic prospects and the impact of an end to monetary stimulus in the US on international investors and businesses:

 “Year End Global Economy”