Callaghan Files

Last year I went along to hear a lecture by Professor Paul Callaghan, who is head of the MacDiarmid Institute at Victoria University, called “Beyond The Farm And Themepark”.

It was an excellent thought provoking presentation which I recommend to anybody who is interested in NZs place in the world.

Set aside 90 minutes and watch it online here:

Hot Science – Beyond The Farm And Themepark

Here is the description from that site:

Leading science communicator, Professor Paul Callaghan, outlines his vision for New Zealand’s future prosperity in this lecture at Auckland War Memorial Museum as part of The Royal Society of New Zealand 2007 Distinguished Speaker series. Converting most of our forest into greenhouse gas has given us an abundance of grass and a thriving dairy industry. Yet through good fortune and some wise heads, we have, notwithstanding attempts to subdue it, sufficient residual natural environment to claim the label “clean and green”. Our landscape is magnificent and helps define who we are. But this lecture will argue that we have the potential to be a great deal more besides, and that we must be if we are to build the society we want our children to thrive in. It will argue that we can enhance our prosperity through sensible investment in science and technology, coupled with culture change. The first part is the easy bit. The second requires self-belief and a sense of purpose. David Lange once said New Zealand’s destiny was to be a theme park (and Australia’s, a quarry). We can surely think and act beyond that. Indeed New Zealand is such an interesting place to live precisely because we are so capable of determining our future.

There has also been a series of interviews with prominent NZ business people running on Stratos over the last few months.  Unfortunately I think this channel is only available to Sky Digital subscribers, and probably even them most of those will be blissfully unaware of it.  But, the interviews themselves are available on the MacDiarmid website:

The Paul Callaghan Interviews

What do you make of all of this?  Do you agree with his suggestions?

Or are we happy being well regarded as farmers and tour guides?

Online Retail

The NZ Herald ran an article this week about the The Warehouse’s new online site (I would include a link to the site, but it’s not actually live yet).

I was interested in the list of online retailers that was included at the bottom:

All four are traditional retailers.  While all four sites are okay, none of them really feel like online natives – for reasons I can’t explain all include banner like advertising (promoting their own sales and the like), and all prominently include a “Locate a store” feature.

I doubt that online sales are contribute significantly to the bottom line of any of them (if I’m wrong about that I’m happy to be corrected).

If you didn’t click the link, here are some quotes from retail analyst Tim Morris, of Coriolis Research from the article:

“Internet retailing in New Zealand is behind where it is in other countries, and that’s got nothing to do, I think, with the innate willingness of New Zealanders to buy things online. I think where it falls over is in the execution.”

“There’s really not a lot of good models in New Zealand for New Zealand-based companies doing everything right, especially as you get closer and closer to moving real things, not just nominal things like airline tickets.”

He’s right about Air New Zealand.  They kick ass, with a top-ten site.  While none of the four sites listed above are listed in Neilsen’s ratings.

But what about the pure online retailers?  We have them in NZ too, right?

I’m much more likely to buy from Ascent (Computer hardware and software), Fishpond (Books, DVDs and Music) or Mr. Vintage (T-shirts etc) than any of those stores listed above,

My guess is that there are some really successful small/medium business selling new stuff online, not the least because they don’t have to pay high street rents, but the reporter from the Herald probably hasn’t heard of any of them.

So, let’s make a list.  Where do you love shopping for new goods online?  I’m looking for New Zealand based retailers only.  Add your suggestions in the comments below or flick me an email and if I get enough responses I’ll publish a list of the best ones in a future post (if you post about your own business I’d appreciate it if you could identify yourself as the owner etc).

Disclaimer: I am indirectly a shareholder in Fishpond.

True Fans

According to Kevin Kelly to be successful an artist needs to find just 1000 true fans.  He defines a true fan as somebody who will buy anything and everything you produce.  The assumption is that each of people will spend $100 per annum on average and that $100,000 (less expenses) is enough for somebody to live on.

I was reminded of this when John from Ponoko posted this video of one of their customers:

That’s a true fan.  999 more to go!

But, is that enough?

I’m sure that this guy is not the only person who loves what Ponoko is doing.  So, if 1000 is the target then it’s fewer than that.

The actual number of true fans required for a business like Ponoko to be viable depends on:

  • How much they can convince each true fan to spend
  • How much it costs them to run the business to support those fans

I don’t know all of those details for Ponoko (and those I do know are not for me to divulge here), so I’ll leave the example there.

But, the point is the maths is not complicated.

How many true fans do you need?  Is that number achievable?

Once you understand the impact of these two variables it will focus your attention on the things you can do to improve each of them.

How can you increase the average amount that each true fan spends?

And, how can you eliminate costs that do not contribute to supporting true fans? (see #10 from the “Margin Manifesto” list by Tim Ferris)

FAQs with attitude

I like websites which demonstrate the personality of the people behind them.

I’ve written about this here several times previously:

Here’s another nice example I spotted recently…

Two of the frequently asked questions listed on instapaper.com:

Will you add (useful feature)?

Maybe!

Instapaper is brand new, and it’s a side project of a developer who works on something bigger, so development time is limited. But great features are always possible, especially if enough people request them.

There are some great ideas in the works… stay tuned.

Will you add (obscure feature)?

Probably not, sorry.

There are plenty of other sites that offer similar functionality but with thousands of additional features to satisfy every obscure desire. Instapaper is great because it’s so simple, and keeping it simple is the first priority.

Nice!

Bernard, on stuff and things

When I first started to read the business pages in the Dominion the editor was Bernard Hickey.

(As an aside, I’m often surprised by how people who read the business pages assume that everybody else does too. Anecdotally, that just isn’t the case. But, I wonder if there are any hard numbers to prove or disprove this?)

Later I briefly crossed paths with him during my time at Trade Me. He was then Head of Digital at Fairfax Media and was part of our advisory board.

He now works as the Managing Editor at interest.co.nz and seems to be popping up as a commentator all over the place (good PR for the site, I suppose).

He also still runs a blog that I enjoy on stuff.co.nz:

www.stuff.co.nz/blogs/showmethemoney

Lately the business and finance news has thrown up a number of great topics for him to get stuck into. Here are a few that have caught my eye over the last couple of months…

On why a capital gains tax is unlikely:

“Why wasn’t there more of a debate about the issues behind the serious [housing affordability] proposals?

My theory is that the New Zealanders who run the place haven’t really confronted and don’t want to confront the ugly truth. I’m talking about the generations who graduated in the 1970s and 1980s and who now run both central and local goverments, who run the media and who generally set the parameters in a national debate.

These are the generations who graduated without student loans into good jobs when a home loan cost less than 40% of after-tax pay to service. They bought houses before 2003 and are now sitting on massive capital gains. Many have become semi-professional landlords with fancy Loss Attributing Qualifying Companies that allow them to offset operational losses on their rental properties against their salaries to reduce their tax bills. They have become addicted to the tax free capital gains on these properties. They’ve started consuming some of those gains in the form of holidays, electronics, cars and boats financed through their mortgages.”

Helen’s lucky and selfish generation

On the meltdown on Wall St. and it’s implications for NZ:

“Put simply, panic and fear rule in the world’s financial capitals right now and it will cost us all in one way or another and sooner or later.

In previous periods any panic on financial markets affected us most directly through our stock market. When Wall St fell, that hit the New Zealand stock market. Back in 1986 we had a lot of money invested in stocks, proportionate to our total net worth. Reserve Bank figures showed that 50% of household net wealth was in financial assets in 1986, mostly in shares. The other 50% was in the value of our houses. So when Wall St sneezed we caught a cold fast.

The direct link is much more muted now. The most recent Reserve Bank figures show financial assets, again mostly shares, made up NZ$186 billion or just 31% of household net worth in 2006, whereas housing (minus housing debt) makes up $407 billion or 69% of household net worth. But that housing debt is now much more important than it used to be. Whereas in 1986 we had $65 billion worth of financial assets, we had over $150 billion of housing debt at the end of 2006.

What does that all mean? It means we care more now about interest rates and how they affect house prices than we do about share prices. But this global financial crisis is affecting both of these things too. It’s just not as direct and immediate as in previous crises. This global credit crunch has increased interest rates globally and that’s how this financial crisis is hitting us this time.”

What panic on Wall St means for us

On Fonterra’s decision to suspect their plans to float part of the company:

“This decision shows that the most important single group of investors in New Zealand (the 11,000 farmers who own Fonterra) don’t have faith in the managers of Fonterra, don’t believe in our capital markets and don’t have the ambition to become a truly global company.

Just like so many investment decisions made by our mostly elderly investing classes, they are so obsessed with property valuations and their own searing experience of the 1987 stockmarket crash that they can’t bring themselves to take any risk associated with the equity markets and the professional managerial classes. Instead they are more than happy to take enormous risks with debt-fund investments in property they can walk on. It shows a lack of imagination and, frankly, intelligence.”

NZ investors addicted to medioricity

On the prospects for property prices:

“The property-owning generation who do know the famous line from Dad’s Army have been reciting it to each other and their real estate agent friends for a few months now.

“Don’t panic Captain Mainwaring (yes the spelling’s right, although it is pronounced Mannering),” they’ve been saying about the threat of falling house prices. It will never happen here, they say. We have never had big falls in prices before and it won’t happen this time, they say. We’ll have a period of relative stability and then we’ll be back up, up and away on our merry way. Sit tight, they say.

But they are wrong. The latest batch of statistics say they are wrong and any rational examination of housing affordability in this country shows they are wrong. Prices here are currently at least 30 per cent over-valued and it’s now a question of how much and how fast they fall rather than if they will fall.”

Don’t panic Captain Mainwaring, don’t panic

Atlassian’s 20% Time Experiment

I’ve had a couple of opportunities to meet Mike Cannon-Brookes from Atlassian in the last 12 months, first at Morgo and more recently at Kiwi Foo Camp.

He is a nice mix of very smart but still approachable. I like that.

Atlassian are an impressive company, and a good role model for a couple of the businesses I’m working with.

He recently blogged about an experiment they are running at the moment where they are allowing staff to spend 20% of their time on their own pet projects. This in itself is obviously not an original idea. What makes this interesting is that, unlike Google, they are going to be open about how it works for them in reality:

Atlassian’s 20% Time Experiment

Lots of companies talk about doing this sort of thing, but hardly any I’m aware of have actually gone as far as trying it out. Doing so in the open is pretty brave. Here is what they say about the potential impact on customers:

“What does it mean for customers?

In the short term, this will mean slower or smaller, but more innovative releases. How much slower, smaller and more innovative? We’re not sure – we’ll find out and be honest in communicating it here.

(From my back of the envelope calculations, for 7 products we’ve made over 50 releases in the last 12 months.)

The long term thinking is that some of the 20% results will filter into the products and outweigh the short term release slow down in terms of customer benefits.”

You have to give them credit for that at least.

I wish them luck, and will watch with interest to see how it goes.

$44.6 billion

I have to smile at the way the price that Microsoft are offering to pay for Yahoo is often rounded down to a straight $44 billion when it’s reported.

For example, last week on ReadWriteWeb: Plan B for Microsoft

It’s actually $44.6 billion. That “.6” is $600 million, so not exactly trivial.

In fact it’s more than News Corp paid for MySpace or (at least at current exchange rates) Fairfax paid for Trade Me.

I guess at some point you just get numb to the number of zeros?

Etsy is Swimmy

What a great way to announce an investment round…

Etsy’s first five years

Watch the video which is part of this announcement – it’s excellent.

“Etsy is a young company: we’re not yet three years old, the majority of our employees are under 35 years of age, and we have an exuberance that knows no age. We have certainly had our fair share of what I call ‘conducting our education in public,’ and this is something I am proud of.

Throughout the myriad challenges since we launched the website, we have worked day and night to see things through. We’re in this for the long haul. We believe that the world cannot keep consuming the way it does now, and that buying handmade is part of the solution.”

They are wise beyond their years I’d say and have an inspiring vision for their company.

And, oh yeah, they just raised $27m to help them get there.

One hit wonder

Dilbert Cartoon

Via: http://dilbert.com/comics/dilbert/archive/dilbert-20071110.html

Here is an excellent guest post from TechCrunch by Glenn Kelman, CEO of Redfin, about second-time entrepreneurs:

Entrepreneur 2.0

“[We] insist on believing in the serial entrepreneur with the Midas Touch. We make celebrities of our entrepreneurs because we’d rather believe in talent than luck. And we tend to overlook reasons why second-time entrepreneurs are actually worse, not better, for their experience.

For example, many second-time entrepreneurs are so intent on replicating their success that they manufacture an inferior idea where the first one grew naturally out of a problem that had been bothering them. Some become so obsessed with how great their first company was that they spend all their time trying to copy it rather than building something different and new. They often hire top-heavy teams from past ventures, or strain to grow fast enough to meet higher expectations. Most strike out on their own without the partners they depended on for candor in their first success.”

Hmmm, interesting!

But, I don’t think it’s quite as simple as that.

As with lots of things, I think it all comes down to motivation. And, I think this is true whether you’ve been successful in the past or not.

Have you found a problem you can solve, or do you just need a reason to get out of the house?

What are you trying to prove?

Who are you trying to impress?

What do you get out of it? Is it all about a big cheque at the end?

How much are you prepared to risk to be successful?

It’s been said before: the next big thing is most likely to come from some hungry young guys in a skanky flat with a laptop and an idea to change the world.

The rest of us are just resigned to working on our golf swings, I suppose?

Get a Mac

The Mac and PC characters have become famous on the back of the Apple ads. Recently they’ve appeared in some cheeky online ads which have been running on a few tech sites.

The actor who plays PC even appears as a guest star in one episode of the Flight of the Conchords HBO series.

Here in NZ we get the US ads, but in some other countries they have their own local variation, and it’s interesting to see how they transplant the humour.

For example, in the UK they use comedians David Mitchell and Robert Webb from the Peep Show. Some of the ads are straight copies of the US scripts, but some are new …

http://www.youtube.com/watch?v=pBeuKagEiKk

And in Japan they have these two guys (is it just me or are the physical differences between Mac and PC a bit more subtle in this incarnation?) …

http://www.youtube.com/watch?v=2qokrYYDCMc

And, my favourite, South Park …

http://www.youtube.com/watch?v=Id_kGL3M5Cg

:-)

(Ironically Firefox crashed with a spinning beachball of death when I tried to preview this post … is somebody watching??)

Be remarkable

What makes a “hockey stick”?

That sort of viral growth is a result of you not having to chase each sale one at a time. It only happens when your product spreads via word-of-mouth.

In order for this to work you need a product that is remarkable.

That is, containing at least one feature that people feel compelled to tell their friends about.

For Trade Me this is the ability to sell something that you thought was worthless to somebody you’ve never met. When that happens it’s all you can talk about for a week. Hence the exponential growth curves and low cost of sales.

There was another good example of this over the weekend with the latest version of OS X:

You can argue about whether this icon is funny or smarmy (for what it’s worth I personally tend to agree with Anil – it makes Apple look a bit insecure to me). Either way, while it’s not an especially interesting or impactful feature, it’s the one that everybody is talking about.

So …

What’s remarkable about your product?

What’s going to make people blab about how good it is unprompted?

If you can’t think of anything then probably best you flatten out your projected growth curves.

PS. The photo above is from Flickr. It’s the Crazy Chief of the Podface Tree. There are hundreds of thousands of photos on that site, but this is one that I thought was remarkable, and now I’ve told you about it and the site it’s hosted on too. :-)

UPDATED: unfortunately the photo I used in this post is no longer available to be embedded.  It’s still on Flickr, and now also on Getty Images.  A shame, as far fewer people are likely to remark about it now, I would have thought?

Blackhole marketing

These days most people working on the web understand the importance of word-of-mouth.

It’s cheap.

It’s effective, because people still believe things their friends and family tell them!

It’s also easy, provided you follow a few simple rules.

It’s not quick though, so you do need to be patient. To quote Rachel Hunter: “It won’t happen overnight, but it will happen”. So, don’t burn all your cash in the first 6 months.

But, is “viral” growth enough?

Every week there are memes which spread online like a virus, only to disappear just as quickly, normally never to be seen or heard from again.

If you look at the sites which have been most successful with this sort of approach they have another critical ingredient: something which keeps people coming back.

To extend the virus analogy you need to infect people and make sure they stay infected.

Perhaps we need a different (more positive) way of describing the desired effect?

How about “Blackhole Marketing”? The product needs to draw you in and continue to hold your attention.

The feedback system used by sites like eBay and Trade Me is a good example. Once you’ve done a few trades and established that you are a trustworthy member it’s much easier for you to continue to buy and sell via Trade Me than it is to switch to a different site.

Josh from First Round Capital talked about a similar idea recently in relation to social networking sites: “Catch And Release” Business Models

Apart from eBay and Facebook, what are some other examples of sites that have the blackhole effect?