What is the inherent value your business brings to others? Would you describe that as your “market” or something different?
I used to laugh when overnight a Hong Kong office furnishing business, Wing Lai, I walked based everyday on my walk to work in late 1999 rebranded as a dotcom. It was as if the owner heard at the height of the tech goldrush that he could transform his business valuation, as a proptech company. Yet nothing discernibly changed. The same old vans would pull up everyday with a cadre of hard grafting Cantonese berating each other, and lugging office fixtures and fittings into their building. It was an illusion.
Today, I meet a great many entrepreneurs, who are so immersed in their technology or methodology that they see themselves in a market that they really are not. Not for opportunism but clarity of mind about their value.
For example, if you are digitising the process of managing personal money, you are really in the personal financial logistics market. At scale, you might look to what Amazon is doing (user experience, frictionless delivery etc.), as a bellwether, for how you innovate more impressively.
In you are seeking maximal clarity before taking a risk, it is incumbent upon you to
Not divorce “risk management” from the risk-taking decision (same class of decisions under uncertainty)
Keep things that are simple simple (avoid complexity)
Apply vastly more rigour that that found in textbooks to the risk-taking decision (real world skills and awareness)
Huuge swathes of businesses, notionally in the risk-taking business, corporates, investors, brokers and professional services firms, are neither organised structurally (speed and quality) to achieve those outcomes or possessing of the leadership to do it. If you doubted that there is “opportunity” out there, apply those criteria to any sector.
For example, the insurance business. Over five decades, the role of the “risk manager” and “risk management” (back office) in mid to large corporates (“Insureds”) has gained a momentum only matched by the need for Human Resources superstructures and people. It has grown to a point that the function and people are largely divorced from the risk takers in a mid/large commercial organisation. They are non-risk takers espousing upon risk with no skin-in-the-game.
They are an “after thought”, largely to protect the organisation’s vulnerability to risk-taking decisions that have already been taken, and to provide comfort to the regulator. They are rarely a “peer” of the risk takers, nor do they routinely “hang out” with them. They speak when invited at the Executive Meeting but largely to present options to transfer risk to others (lower cost of capital) and avoid getting whacked. Indeed, they run gatherings like “RIMS” or “Risk Minds”, where well-intended souls are an object of interest to their peers, insurance brokers and underwriters but not risk takers. Their work rarely enhances the institutional memory of the risk takers, it lives in its’ own vacuum, marked “painful lessons”.
I have met many of them, and they are decent people. There are limits to their value because with rare exception, their work is divorced from the risk takers, it confuses complexity with their ego, and demands slavishly following textbook risk management approaches (Markowitz’s “Modern Portfolio Theory”), which we know don’t stand up to real world scrutiny with complex risks.
In classical mythology, they paid for overestimating their abilities and underestimating what can go wrong with their own lives (Xerxes). Not so much today today.
If you doubt me for a millisecond, why are so many mid and large national and global corporates so trained on a naive trained reliance on government bailouts? Why in the greatest risk management crisis for 75 years are companies so fragile to largely a low-probability, high-impact event? Where is the Risk Manager and their accountability in this situation and future events?
My health insurer, Axa PPP Healthcare writes to tell me from 1st January, I can book a 20 minute same-day video appointment with a Virtual UK GP 24/7, anywhere in the world.
My fixed line, broadband and television provider, BT plc, sends a faulty television box, and their Belfast-based technician tells me his employer won’t allow him to be connected by FaceTime, WhatsApp etc. with me to quickly test and resolve the matter. He must get one of his colleagues to send at significant mail expense another £250 unit. I should wait 3-4 days and I must self-install to see if it works. If I am unsuccessful, I should call him (15 min wait on an automated answering service) and discuss how to claim a credit.
BT Group plc is a limited-growth business, whose market cap has shrunk by 80% over the past 5 years, and ~40% alone, in the 21 months since Jansen has been at the helm. Only Telefonica SA in the big 6 international telcos (45% decrease LTM) has experienced worse performance.
“We feel — I feel — that really BT is undervalued for the kind of business that we are and the assets that we have,” Philip Jansen, told Morgan Stanley’s Technology, Media and Telecom conference last week.
Perhaps he should start by shopping his own business. The answer is at the end of his phone line.
The view from the rear of my London is daily interspersed with helicopters making their final descent for the London Heliport. The planes are fewer overhead in these weeks of lockdown in London. The road traffic quieter and the ever present construction workers and their drills renovating nearby properties more noticeable. There is constant movement and activity, it is just taking different forms, at different times of the day.
When I hear people saying “you cannot be sure what life will be like in 6 or 12 months” as a reason not to make decisions, not to land, and pursue a business opportunity, I smile. They are asking themselves the wrong question, trying to predict future risks rather than how can we minimise our vulnerability to them. You are better making a decision and correcting a bad one than never making a decision at all. Time is “fuel”, we are burning it whether we are circling a landing spot or second-guessing our own judgment. Make the business or investment decision, and move on, now.
Most complexity in business is driven by non-risk takers (managers, advisers) falsely believing that complexity equals irrefutable value. Risk takers know that making the complex simple, is the only sustainable value that matters.
My local hardware shop sold me a bath tap which much to everyone’s amazement split after a few weeks use. When this was pointed out to the CEO of the store, Leyland DSM, I had a call from him first thing the next morning, a generous offer to reimburse all out-of-pocket expenses and continue follow up. Acts of kindness and generosity like this far outweigh big business loyalty programmes.
I mean what use are those millions of miles stored in Marriott, British Airways or a Nectar loyalty programme, right now? Zilch! Indeed, those firms responsiveness to refunding or booking new travel this past 6 months hardly encourages new, repeat or referral business.
It is a reminder to all mid-sized and smaller companies, how impressive service in this period when customers are often highly inconvenienced is a huge opportunity to build enduring loyalty.
What can you do today that is immediately in your best customers self-interest? A proactive referral, an idea for immediate improvement in their clients’ condition or even a 10 minute call to keep they and their family’s spirits up. It counts. It is future goodwill in your firm’s bank account.
A prudent decision to do business with or borrow money from friends and family in business, is one that is BOTH wise before you start, and after you are done.
Trying to predict those outcomes is fraught with huge potential errors of judgement (attitudes and behaviours), and the costs of addressing your vulnerabilities to them rarely insignificant or time bound (relationships, repute, stress and so on).
None of us are living the lives that we led in February, and most have embraced dramatic changes in how we go about our daily business (working from home, Zoom meetings, digital presence etc).
Yet a great many client-facing people have yet to identify and adapt their time, energy and money on who their ideal buyers are NOW and tomorrow. They send out self-congratulatory LinkedIn messages about “how great it is to attend XYZ event and see ABC old friends and buyers speaking”. Why?
If you insist on investing in yesterday’s buyers, why do you think you will be today and tomorrow’s strongest competitor?
Most people think capitalism is about incentives, when really it is about disincentives.
Tattoo Tony, my local plumber, can take an emergency call, be on site, solve a water leak, recommend preventative action, process payment and email a receipt in 3 hours.
My banker, telecom provider and health insurer, subject me to 20 minutes of automated telephone systems, multiple security checks and touch points, push me to an online resolution, and typically I must wait for 24-48 hours to solve a minor inconvenience, so long as they have the accountability and authority.
Tony operates a small convenience business, the rest large inconvenience businesses.
There is an explicit disincentive for Tattoo Tony for slow responsiveness (skint) or unsuccessful work (no repeat or referral business).
The CEO’s of the other businesses collect above £3M total compensation annually. Their client service people will collect a comfortable salary and benefits this month whether I am happy or not with their responsiveness or the quality of their work. There is close to zero disincentive.
Which category would your clients say your business is in? Are your disincentives strong enough to encourage your clients’ desired behaviours and results?
If business leaders have learned anything from US politics this week, it is that they need to decide where support for their products, services and relationships is won or lost. They are not won or lost in their “base”, nor in their competitors’ heartlands, they are won and lost in the areas that are home to the great “undecided”. You better have people with the skills, behaviours and experience that appeal to that demographic.
