Is Amazon under control or under the influence?

July 28, 2014

Bezos bullet train
Amazon announces disturbing financial figures. Its charismatic chairman Jeff Bezos will, as ever, be taking the long view

The mighty Amazon – the company not the river – may be in temporary trouble. Its second quarter sales reported on Thursday [24th July, 2014] showed powerful growth in revenues but unanticipated losses. The results worried the numbers people. Shares, already drifting downward, slumped around 10% on Wall Street the following day.

Taking the long view

Its founder and leader Jeff Bezos is famed for taking the long view. He is a business visionary who fitted the bill as a great leader for the near classic story he has helped bring about at Amazon. His leadership style is restless and remorseless.

He is noted for personal involvement and fermenting a culture of creative challenge. He also likes to ‘back-engineer’ strategy from a desired future to reach and deal with imminent decisions.

The immediate future

The immediate future suggests that his enthusiasm for innovation in the interests of that more distant future may have incurred costs for the present. The ideas at times have breath-taking simplicity. Sometimes there is an initial appearance of craziness that often accompanies great creativity. Think Steve Jobs, or Napoleon even.

This week, the craziness appears to be found in the diversity of effort which may suggest a lack of a cohesive plan. The results were timed to accompany the launch of the company’s new smartphone, the Fire Phone. Other recent plans have included grocery delivery, video streaming, and drone delivery of products.

Not to mention The Washington Post

Then there was the recent takeover of the Washington Post, with assurances from Bezos that under his ownership the newspaper will retain its independence, and certainly without influence brought to bear to advance Amazon’s interests.

Bezos is a fascinating business personality. He has created one of the Century’s most successful businesses with a simplicity of its core competence of rapid, safe product delivery at highly competitive prices. Perhaps its strategic trajectory constrains the creative impulses of its remarkable founder.

To be continued

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The Lenovo Juggernaut Rolls on Unabated

June 10, 2014

Dr Pikay Richardson

Chinese personal-computer maker Lenovo Group is looking to acquisition to fuel further growth. The company has great ambitions, and cash to fund its plans. Will it be able to balance innovation and efficiency?

Lenovo recently concluded two deals worth collectively about $5bn. The company has acquired IBM’s low-end server business for $2.3bn and from Google, Motorola Mobility handset operations for $2.9bn. Both were seen as Lenovo’s efforts to diversify beyond PCs into other faster growing areas of the computer industry.

Growing through acquisitions

Lenovo’s foray into other business segments was not entirely surprising. Having beaten HP to become the world’s largest PC maker by shipments, it has been looking for new sources of growth, mainly in smart phones and servers and storage systems. “We will continue to use acquisitions as a means to grow”, Lenovo Chief Executive Yang Yuanqing said after a shareholders meeting in Hong Kong. “Wherever there is a good opportunity, we will grasp it”.

The company has great ambitions, and an extra cash store to match. After paying $4.7bn, it still has $2bn on hand, according to Wang Wai Ming, Lenovo’s chief financial officer. What is more, the current low-interest environment provides opportunity to raise further funds, which Lenovo is considering, according to Mr Wang.

Lenovo’s strong corporate governance regime

Investor confidence is high. On 21st May, Lenovo announced its full-year results in Hong Kong where it has been listed since 1994. Its revenues were 14% higher than the year before, at $38.7bn, while pre-tax profits topped over $1bn for the first time in its history, up 27% on the year before. But this is only part of what is causing the investor euphoria. The other is that, Lenovo unusually for a Chinese Company, claims a strong corporate governance regime, as well as consistently delivering predictable returns.

Lenovo’s ability to turn around the controversial $2.9bn purchase of Motorola Mobility has been questioned. The pioneer mobile phone has fallen on hard times, but Mr Yang has responded to skepticism by saying that he was confident his company will be able to turn around the unprofitable business in four to six quarters, based on a strategy of increasing economies of scale rather than trimming staff.

From losers to treasures

“We have a good track record of turning around money-losing businesses into treasure”, he said, pointing to Lenovo’s first foray into foreign markets when it bought IBM’s loss-making PC business in 2005. Few believed then that an obscure Chinese company could save a Western premium brand, but this is precisely what Lenovo has done. Yang went on “Lenovo is the best company in the world when it comes to balancing innovation and efficiency.”

Whether or not this claim is sustainable is more a matter of “wait and see”.


African Entrepreneurs suffer from venture capital shortage

February 14, 2014

African EntrepreneursLocal Entrepreneurs in Africa are disadvantaged by a lack of venture capital

In an article for Computer World, [November 2013] journalist Rebecca Wanjiku suggests several factors that may be contributing to a shortage of funds for new technology start-ups. There is no parallel with the vibrant venture capital hubs such as Silicon Valley in America or the University spin-off science pars flourishing in Cambridge [American or English versions].

The perceived challenges of businesses operating in Africa as well as the higher costs of due diligence and inexperience of the investors and entrepreneurs in the region have all worked to dampen the growth of venture capital funding for tech start-ups and mid-level businesses on the continent, according to industry insiders.
Local start-ups have held discussions and wondered whether their lack of success in raising big money had racial overtones. Companies run by whites seem to be luckier in securing funds. The problem, however, seems to be more about the perception of inexperience and a lack of contacts than race.
“I don’t think it’s about being white or black, it’s about your network; highly networked Kenyans have an easier time too,” added Erik Hersman, founder of the iHub Nairobi, a co-working space for techies.
“Innovative early stage ventures with the potential to yield high social and environmental impact and requiring less than $500,000 in financing remain the most difficult segment of the SME pipeline to reach,” said Ben White, founder of VC4Africa. VC4Africa is an online portal that brings together 13,000 entrepreneurs, VCs and angel investors interested in Africa. It was kicked off at the annual congress of the African Venture Capital Association in Dakar, Senegal, in 2007. Last year, VC4Africa start-ups secured $80,000 in funding while companies seeking expansion secured an average of $237,000 in funding.
VC4Africa works with entrepreneurs in 40 African countries but the number of start-ups and growing companies seeking funding outstrips the available capital. The lack of in-country funding mechanisms and lack of tech-specific financial facilities from the public sector most likely means that the problems will persist.

Leadership challenges

Leadership challenges abound. The contrast with the developments emerging in China, is stark. A similar sense of the availability of entrepreneurial venture backing is reported in India.


Hollywood blockbusters and the message for Big Pharma

January 6, 2014

AvatarThe business model for blockbusting films is coming under increasing scrutiny. There may be a message for the major drug companies

Last year, [2013] 26 films costing more than $100m each were released by the major Hollywood studios – more than ever before. They are likely to have raked in tens of billions of dollars in worldwide box office revenues as a result. But despite the runaway successes, there are concerns that blockbuster budgets are getting dangerously high.

The business model

The business model works because the large blockbuster is more the visible part of a process than a stand-alone product. The basic plan is to develop a series of movies after an initial demonstrated [financial] success. Each successor is part of marketing campaign now well-routinized of spin-off products and deals.

Only a fraction of revenues come from ticket sales with the bulk coming from television licensing, DVD sales, and assorted merchandising deals. Arguably it is the model for sporting franchises as well.

“There’s eventually going to be an implosion, or a big meltdown,” said Hollywood elder statesman Steven Spielberg in a speech earlier this year. “Three or four or maybe even a half dozen mega-budget movies are going to go crashing into the ground, and that’s going to change the paradigm.”

Spielberg had warned of an “implosion” in Hollywood as In 1980, Heaven’s Gate effectively bankrupted United Artists.

Half full or half empty?

British film academics John Sedgwick and Mike Pokorny have found that blockbuster films become have become more reliably profitable: in the late 80s just 50% of major studio films turned a profit. In 2009 it was 90%. Flops have become rare. Spielberg worries with others who note the changes in the market place. DVD sales are threatened by online streaming services such as Netflix. Studios are seeing profits growing more from their TV interests.

Aesthetic bankruptcy

Others refer to dumbing-down and “aesthetic bankruptcy”. Screenwriting talent is increasingly moving over to television.

Entertainment has flourished on change since silent moves found its voice, and later its glorious in sound and visual transformations. The blockbuster model may well be bust. The challenge to Hollywood is one that also applies to the giants in Big Pharma

A message for Big Pharma?

It is the challenge facing other industries where the early winners face being overtaken by outsiders as the name of the business game changes. Maybe Big Pharma will learn from Hollywood that the days of searching for big blockbusting drugs are over.

What else?

The question may be addressed by the stirrings of interest in new leadership approaches in recent years. The last movement to claim New Leadership was in the 1980s. That involving visions and transformations. Newer ideas are trying to recentre business leadership as utterly concerned with ethics and also with distribution of power and authority. [see here for a more critical view of distributed leadership]. It calls for further rethinking of the ultimate rationale for organizational structures and patterns of behaviour.

We not be able to wait another forty years for such ideas to be applied effectively and globally.


The filing system of the future

January 2, 2014

IT Innovations have made the traditional filing system obsolete. Leaders we deserve offers a glimpse into the future of personal information systems

Filing cabinet [floor version]

Filing cabinet [floor version]

In the early hours of 2014,

In the early hours of 2014, the editor of Leaders We Deserve examined his filing system in anticipation of resuming his labours …

The image reveals the superficial structure of the existing system, post-modern with a hint of bricolage – even if his spell-checker continued to suggest there is a hint of bricklayer rather than bricolage about it.

What’s the sphere?

The spherical object is a word-ball which provides, yes you guessed it, words to help fill otherwise blank spaces in blog posts as and where required. The much-used red dictionary in the background serves a similar purpose.

The elements within the filing system

The system is designed to accommodate books of all sizes, reports, office products, folders, games, IT relics, recycled boxes, tins plus items I would have to examine more closely before I could identify them.

The dynamism of chaos

There is a dynamism of chaotic forms. Their apparent timelessness is defective. [Or as my spell checker suggests, detective].

The chaotic aspect visible in my filing system masks a deeper order. If I produced a time-lapse film it would show the changes as a project progresses. As the project tails off, so the filing system resumes an earlier state

The Filing system of the future

The filing system I have in mind for he future is already taking shape in my mind. It is more distantiated, if I can borrow a term from a lecture by Tony Giddens I attended some years ago. It occupies a different and more virtual space. The floorspace could be extended to the under-utilized area beneath the desk. Some piles of objects could be increased in height by removing irregularly shaped ones thus forming new clusters in office space.

Hyperspace is already beckoning.

My assorted pictures are increasingly tagged for retrieval. My array of student theses is no longer growing as physical and bound volumes. E versions are accessible from the University archives. Increasingly, the textual materials are up there somewhere in the cloud.

Perhaps in Second Life, an Avatar Archivist will soon be able to stack and unstack items, like a zero-hours worker from a Tesco’s in hyperspace.


HS2, the attacker’s advantage, and the decision dilemma

October 30, 2013


A debate continues in the UK over building high speed train connections between London and the regions. An old concept in innovation theory may be useful in examining the decision to act

There has been much debate in the UK over the proposed HS2 link. Some years ago, there appeared to be a reasonable political consensus in its favour. The issue is now clouded. Labour is indicating ‘no blank cheque’ if they regain power. There is opposition to HS2 from those opposed to big government or big technological schemes threatening environmental consequences.

No simple vision

A simple vision to share with the public vanishes if it is not presented as having a key factor. Faster journeys was a simple vision but the more complex ‘making travel nice, fast, safe and economically good value for money approach is much trickier to present.

The result is increasingly unconvincing arguments. Economic justification relies on experts commissioned by protagonists. Most large technological projects come with unexpected extra costs. Other costs might be anticipated but are covered up by those with a position to advocate. Benefits, the other side of the decision dilemma, remain too loosely coupled with costs.

The attacker’s advantage

Pondering on these matters, I recall a simplification offered in innovation theory by a McKinsey consultant Richard Foster. In his book The Attacker’s Advantage [still in print] he presents the change as a shift from one s-curve to another. Using rather simple economic assumptions, it is possible to identify a region over time in which the economic advantages of shifting is compelling. Sometimes there is no such region or window of opportunity.

The attacker’s advantage always struck me as more of a useful conceptual map or thinking tool than a decision-making algorithm. It is better at isolating a more ‘either-or’ decision between two competing technologies. Between, for example, costs to the tax payer and costs to the traveller. Who pays through taxes is a political decision; who pays in travel fares is a commercial one.

Where do I stand?

I stand for a more informed, more disinterested debate. The current efforts of politicians leave me suspicious of there ever being a simple resolution of the decision. It seems more clear that ‘doing nothing’ is accumulating the problems building up within the transport connections between the wealthy commercial South of England and what is crudely classed as ‘The North’ . In this case, the North w includes Watford (gateway to the North), Birmingham (North of Watford), Manchester and Leeds (North West and North East of Birmingham) and Glasgow (very North indeed, no country for soft old southerners, which may have border guards, by the time HS2 is built).

As I mull these arguments over, I reach a few not very startling conclusions. HS2 will not be built without overcoming strenuous opposition. If it is built at all, it will result in unforeseen advantages and disadvantages. And the longer it takes to decide, the narrower will be the ‘window of opportunity’ for an attacker’s advantage.


Not Very Smart Phones: Why George and Ira Gershwin would have foreseen the touch screen

October 22, 2013

George and Ira Gershwin would have foreseen the touch screen, argues LWD blogger William Thompson. They knew the dangers of mocking pioneers for their new ideas

‘They all laughed at Christopher Columbus
When he said the world was round
They all laughed when Edison recorded sound
They all laughed at Wilbur and his brother
When they said that man could fly
They told Marconi
Wireless was a phony…’

How long it is since every up and coming business executive could not be seen without their BlackBerry in hand, with that iconic QWERTY keyboard at the ready to make those all-important calls?
The Canadian-based company that cut 4500 jobs to counter losses has now been bought for £3 billion by a consortium led by Fairfax Financial. The parent company RIM did not see the touch-screen coming. Their CEO Thorsten Heins had made his presentation in Florida to launch new touch screen lifesaving models, but the smart phone community are not convinced, saying the company is too late.
In 2007 they laughed at Apple’s iPhone, asking the question who would pay $500 for a phone without a keyboard? The answer came back – everyone.

Nokia

Nokia, the one-time brand leader in the smart phone business was bought by Microsoft [September 2013] for 5.44 billion euros. Nokia employs over 100,000 people in 120 countries, so the fortunes of Nokia matter to many people. The Nokia operating system Symbian was allowed to become obsolete and outdated compared to Apple’s IOS 6 and now 7 and Google’s Android operating system. Nokia’s place in the smart phone market slumped as the company lost 40% of their share of the market in just over 12 months.

Apple

Steve Jobs resigned in 2011 as CEO of Apple after a period of serious illness. He handed over to Tim Cook. Sadly Jobs later died. As he left the company, iPhone 4 was their top phone; it has now been discontinued. A year is a long time in the smart phone business.

Apple launched their new operating system IOS 7 stating that it was their most secure system to date, yet within twenty four hours it was discovered that their lock screen pin code could be easily by passed. They were forced to issue IOS 7.2 to correct this security issue. Apple sold nine million of its new iPhone models in three days.

Smart Phone CEOs

The CEOs of the smart phone companies are high profile international figures. Steve Jobs’ keynote presentations were viewed worldwide: he was the messiah of the smart phone world community. Anonymous leaders they are not. Most of all they need to be seen as leaders who can see the ship heading for the rocks and make a change of course before collision. They need to see the touch-screen coming and the keyboard going, an operating system dying and another bursting into life, to see the rocks before the collision, to make life and death decisions at the right time in the product life cycle. They need to be chess players who can see three moves ahead.

Editor’s note:

William Thompson writes with insight about the leadership challenges in so-called high velocity environments. Leadership students may wish to ‘road test’ his suggestions, looking for difficulties in “seeing the rocks, and acting decisively”.

See also our earlier blog on GeekSpeak at Blackberry


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