As is usual when I take a long break from writing, my blog posts end up becoming insanely long. Take it as you will, but I’ve tried to make it as coherent a post as possible. P.S. this is a post written under de cover of my “leave of absence,” which means I still write, but less frequently. – - Vincent.

A good friend of mine, Zihni Ozdil from the Netherlands / Turkey, Historian Extraordinaire, is now publishing his wisdom online. If history, politics, and culture (“beyond the superficial”) is something you find interesting, I encourage you to check it out. On his site, I found an article entitled ‘the real Evil Empire,’ which, ignoring the provocative title, deals with the interesting topic of the cold war and the ‘demonification’ of Russia and communism at that time.

Yesterday, I had an interesting discussion with some Canadian Swedes that moved to Florida with their kids and had trouble finding a school. The only way, it seemed, to guarantee that their kid ended up in a good one is to have an A-class school in your district (which you can find via a website that profiles attendees according to race and economic background… wow…) and to have paid your electricity bills. It worked out well for them, but clearly suggests the underlying problem of a long-term selection bias.

Last night, meeting the Canadian Swedes, where I was also in the company of a Russian and a Japanese, I noted that it was strange that while both Russia and Japan, being superpowers in their own right, have infamously challenging education systems, which result in some pretty smart people graduating from either country, the US does not seem to follow that pattern, at least not at the high school level, and certainly not across all demographics. Yet, by all accounts, the US is a superpower, if not the superpower of this and the last century.

My post today is not about comparing countries’ education systems, it’s more about the strategic purpose of education. Many people don’t know this about me, but I don’t vote and I don’t generally care about (regional) politics. To me, our planet should be one country, where anyone can move and work anywhere, and services don’t have to be moved just because you physically moved  XX km/miles to another country. But I do recognise the power of competition and how that can lead to excellence. Versus a ‘group think’-like mediocrity where everyone just tries to be like everyone else and no one exceeds. So, in a way, I endorse a system of divided regions, because I think it leads to competition and thus excellence.

Education plays a strong role on the competitive advantage of nations, as it does in certain companies. Last year, applying to a lot of consultancy companies and working as one myself, I was struck at the importance that the accumulation of knowledge plays in this industry. If I were to start my own consultancy, continuous education of the staff would most certainly be a cornerstone of the business strategy, because knowledge is your product as a consultant.

I know that this thinking plays a strong part in government circles as well: how to make your/our country as strong as possible, not (just) in military terms, but in the sense of knowledge, mostly measured by the no. of graduates and the no. of patents that are published every year (as well the commercialisation thereof, which doesn’t go quite as smoothly).

I know that the no. of graduates coming out of Chinese universities is tremendous, and the no. of patents coming out of US ones is among the highest in the world also. So clearly, the US, superpower extraordinaire, is doing something right. I don’t however entirely understand why the primary/secondary school system is so abysmal then in the US. My only explanation is that, in academic circles, there are no national boundaries, and a Russian researcher can just as well (if not better) produce patents in the US as anywhere else.

There are other dimensions to the US superpower status as well, of course. It’s a military superpower, it is a cultural superpower (in terms of films, music, and literature), it has a large consumer-base. These three dimensions—safety through military strength, an easily adopted culture, a consumer’s paradise—also have the effect that they serve as an attraction point for outside academic or other talent. And while other countries may have strong educational bases, the other aspects are perhaps ignored just a little too much, still making the US a prime export location for knowlegde.

In the strategic literature, there is the concept of the resource-based view, which stipulates that company strategies are nothing more than a collection of resources, some of which are internalised and some that are not. I think that in the context of the US and education, the resources that must be internalised are those that lead to the commercial exploitation of technological advantage, which sounds abstract, but basically means making sure that the best technology/knowledge is produced in-house and generates economic benefits in-house as well.

But there other resources that must most certainly not be held onto in-house. These include standards, which facilitate the assimilation of knowledge. In education, the standards that we use are the bachelor-master-phd system, which can easily be studied in different combinations and locations. And text-books, which as many students know, are often from US-origins.

In many ways, the cultural exports from the US—movies, music, literature—are nothing more than the spreading of a standard, that of a language and a way of thinking, which makes assimilation of outside talent easier. And as long as that outside talent is used for the benefit of the US, in the form of patent exploitation, the US benefits, even if their own primary/secondary education system is quite uneven.

As mentioned, I don’t care about politics, country-differences, or governments. But if my logic is correct, I wonder if a metaphor exists for commercial superpowers, i.e. companies that are market leaders and remain so by attracting the greatest talent and finding ways to turn that into economic benefits.

Organisations are not complete economies like governments are and also have the benefit of being mobile—by law they are considered single persons, which have residence, pay taxes, etc. just like everyone else. So, as long as they obey the law, they can choose where they stay and choose to ignore local conditions, much like, I theorise, some governments do, instead focussing on the bottom-line: attracting excellence and turning that into profit, while keeping ‘unnecessary’ expenses as low as possible. Well, at least that is the stereotype of an organisation, while pressures have certainly lead some to adopt a more socially-responsible attitude.

Clearly, the question of talent, whether attracting or training it, remains a vital one for both countries and organisations. But I don’t think there is necessarily a correlation between talent and local conditions.. at all.. though local conditions do play a part in the quality of life, or lack thereof, which affects the talent’s in question desire for a certain location.

Vincent out.

(Picture courtesy of thehindubusinessline.com)

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I hate breaks in anything I do, blogging, work, sports, love, etc., because it’s always harder to return back into the zone. Similarly, I already knew subconsciously that it would be hard to return back to blogging after the proposed hiatus. Routines are good and when they are moved aside, they get replaced by something else.

The human body is a machine and everything, from hours in the day, to food and exercise, to making money, to relationships, are all pieces in the machine of life. There’s only so many hours in the day is a well-familiar phrase to most of us and reflects the difficulty in balancing different activities and responsibilities, with some just falling off the map.

I am not saying that I plan to stop blogging, but I do think that we all need to make choices in our lives which will affect other, previous ones, like domino blocks.

Dynamics…

I just bookmarked a blog post on delicious on forming sales teams in a startup. It’s a good one and you should all read it. As I tagged and bookmarked however, I immediately thought, hey, I’m pretty sure no one on my company will read it. Why? Maybe because we already figured it out… Maybe because we figure stuff out as we are doing it… Your choice.

Blogging or any kind of writing for public purposes brings several complications to business people:

• it is public knowledge, meaning that the competitive advantages are slim: I don’t think this is a major factor, as most innovations are combinations of different ingredients that may or may not be public knowledge. Great artists steal, as they say.
• Writing is processed explicit knowledge from something that was previously implicit and needs to be made implicit again by the reader for it to be useful in a practical context: I’ve written about the knowledge-generating company and the knowledge spiral twice before. Another phrase, “You can’t help yourself, because your *self* sucks!” also comes to mind.

It’s the latter that represents the greatest challenge to authors and consumers of their work. I’ve also previously written about the benefit of formal education, which, I think, tries to recreate the knowledge spiral, turning explicit knowledge into the implicit kind, to be used by students in their work later on.

The dynamics of business is that there are expenses—YOU, the team, the office, etc.—which need to be recuperated by your work—the work you do for customers, after which they pay you. It leaves very little time for reflection, e.g. through blogging, etc., and for making things explicit, e.g. through blogging, etc.

I’m still a big fan of Michael Gerber’s E-myth revisited, which is really about writing that franchise manual for your business, so you can both understand the processes happening in your company, and expand on those, by more easily passing on knowledge. It’s Taylorism, of course, or Scientific Management, or any of the other management methodologies that followed in the past century.

But these activities require time, time which people inside organisations usually do not have, and hence prefer to outsource to outside consultants, who then need to make their knowledge explicit and again implicit in the minds and methods of their clients’ organisation.

It’s a real nightmare for people (like me) who think to much and always aim for something higher. And who want to blog. And who want to do good business…

Thoughts?
Vincent

(Picture courtesy of Fisica & Psychica)

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It’s been a while since I wrote about food and retail, an area that I still like (and actually find much more interesting than tech or simple business), but which I’ve put on the backburner for now. I don’t like Starbucks as a business nor as a coffee, for a number of reasons that I will elaborate on in this post, but I do like that the company, back under the helm of Schultz, is undertaking some new initiatives.

Reasons why Starbucks bothers me include, most of all, that it is not a coffeeshop with a European target-audience. We Europeans have plenty of choice and tradition in terms of coffee, and I have no problem finding a place of atmosphere with some kickin’ coffee at half the price of one of those Americanos (which, btw. taste terrible). The only attraction of Starbucks is for me as a take-away place, but that was not really the aim of the business, as described in Schultz’s book.

Starbucks was meant to be a “3rd Place,” a place where people can temporarily reside that is not their office or their home, and that is where Starbucks, in my opinion, fails. It should also not seen in isolation from other chains, like McDonalds, Subways, and the many “CloneBucks’s” that have arisen since the writing of Schultz’s book—it is basically a manual for how to start your very own Starbucks and, apart from its partnerships, it’s a low-tech business. Right now, when you enter a Starbucks in say, Cologne, Germany, it will look exactly the same as the one in Paris, France, and that act of replication already devalues the concept in my eyes. All Starbucks Cafés are very clean-looking, unlike a Hard Rock Café for instance, which doesn’t make them all that much better than a McDonalds (Café), which serves coffee equally well.

End complaints about Starbucks, a chain I had all but given up on.

The most depressing part of this business is the ease at which McDonalds managed to replicate its basic features, ……… but let’s not forget that the Starbucks people aren’t stupid and learning goes both ways. Clearly, McDonalds (another business, I’m a fan of) has strong process-advantages, which are also quite apparent to the observer and can be benefitted from by outsiders. Something that, it turns out, Starbucks exploited and will hopefully lead to a more efficient machine of a business, while (hopefully) placing the focus back on the “3rd Place” idea.

And now, it has been revealed, Starbucks is trying to get back into that game with its “community coffeeshops initiative.” While I don’t think that this will drastically improve the Starbucks offering, I do hope that it allows for more creativity and individuality down the road.

That said, there is still a lot of room for “3rd Places,” also in terms of building chains of them, they just need to be better designed to actually be a 3rd place. From books, to music, to zen-gardens, people like me are still looking for the equivalent of what was before probably known as the “gentlemen’s club,” by I mean, in an entirely un-sexist way, a place where you can go and relax, alone or with friends.

Starbucks seems to have gotten lost on the path and retreated down to the level of commoditization. It make me wonder if perhaps these types of qualitative initiatives simply cannot be undertaken quantitatively, without losing too much in the process.

Vincent

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In many ways, I consider this the best strategy book, I’ve ever read. “Valuation,” by George Norton, is, as the name suggests, a book that uses financial models as a basis to build (sound) strategies. It is also a textbook—my version is hardcover and 190 pages long—but written in a format that reads easily and is structured to be implemented—ca. 30% of the book are (group-)exercises meant to implement what the book suggests.

If I had to criticise it, it’s that I don’t consider it very practical in an entrepreneurial setting. One thing that such methodologies require, is time, which is often a luxury that smaller/younger companies and projects do not have. Building up a set of co-ordinated, organisation-wide strategies can be a matter of years, and, I expect that if you were to follow the book’s advice, you’d engage in a 6 month trajectory, at least.

That said, it is a well-written book and achieves the objective of a book, which is to make understood its topic. In this case, valuation means understanding the value of companies, their products, and business activities. The financial part only really plays a part in the first third and last third of the book, while the middle is more about the actual coming up of the company’s mission, its broader goals, its objectives, and its strategies—the latter being the nitty-gritty activities of how to fulfil the grander vision.

And, where valuation comes in, everything will affect the cash position of the business: some activities may be research-intensive (= costly), but lead to greater rewards in the long-term; others will be quick-sale actions, which generate revenue, but may not always improve the long-term position of the business, unless that revenue is re-invested in more sustainable growth.

I find that these principles easily translate into small business- and individual activities, but only if taken on a holistic level, in which case reading this book may be overkill. But if you’re a finance-geek that wants to learn how to better translate the numbers into practical company-activities, or, vice versa, if you’re a creative business-person, who wants a relatively easy intro into the financial fundamentals behind strategies, then this book may be for you.

Vincent

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One of the first thesis topics that was proposed to me, as part of my strategic management master, was to research why companies are located where they are. Turned out that this is some super-secret thing and there hardly is any data on it. Our assumption was that this must hence be strategically significant.

I abandoned the project, after making this super-complex mindmap about it. I decided, I just wasn’t interested enough in the topic and that the reason was probably a very boring thing, like taxes.

(click on pic to see full pdf in Scribd)

Yesterday, I had a pretty cool meeting with a software-company that has been running successfully for about 10 years. Only it was in the middle of nowhere, close to some Dutch village that you will never have heard of. After the meeting, I asked why on earth they had located there (no thesis-related motive at all)!? Turns out that when you start a company and start hiring locally, your loyal employees won’t be so loyal anymore if you decide to move to e.g. Amsterdam (about 2 hours away).

Sometimes the simplest answer can be hidden under a lot of complexity…

Vincent

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I read too much and review too little. Following is a list of books, I’ve enjoyed and a single line to describe what I learned from them.

• What the CEO wants you to know: turnover is the lifeblood of a business.
• The E-Myth Revisited: assign roles and responsibility for every aspect of your organisation (even if it’s an organisation of one!).
• Valuation: behind every strategy should be solid financial reasoning.
• Positioning: every choice you make about the outside-face of your business will affect the way consumers perceive and buy you.
• The one-minute manager: You can’t manage people without setting clear goals, measuring results, and encouraging good / discouraging bad behaviour.
• Blue Ocean Strategy: focus on what your competitors can’t do.

Coming up (sometime in the near future): a number of one-line unconventional book-reviews!
Vincent out

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The matter of Rhine Capitalism vs. Anglo Saxon Capitalism, referring to the battle between the capitalist system that has long reigned in the US vs. the more socialist system that came forth from European countries, is one that is on the table right now. The question is this: should we let the market be free, assuming that all information is perfect and hence that all decisions are rational? Or should there be a big brother figure, keeping an eye on market movements and stepping in when necessary?

More banally, should we be paying 50% of our income to regulators in the form of taxes, as it is common in my country, the Netherlands, and several more, or should we minimise that spending to a much lower figure, again betting that everything will sort itself out without expensive regulation? I think that anyone who’s ever had to fork out 30% or more of their hard-earned cash, wished that there was no government at one time or other.

The fallacy of “freedom”
Getting back to free markets and the perfect distribution of information required to make rational decisions. I think it is clear that the latter is not the case. For information to be available to all, there should be no barriers to entry, everyone should be sufficiently sound of mind to process information and everyone should have access to it, either because it is “free” (paid for by taxes), or because they are wealthy enough to afford commercially collected information.

In other words, we are talking about at least middle-class income levels on a massive scale here, which correlates with education and job-prospects. We are also talking about basic education for everyone, the ability to make decisions based on accumulated intelligence. This is not the case in the US, nor any other country that endorses the “free market w/o government intervention” philosophy.

The Credit Crunch and aftermath
More complex is the matter of the credit crunch, which hasn’t been happening on a level that you and me typically frequent; it has been going on between businesses, banks, and ultimately those taking out mortgages and those being shareholders of one of the companies involved. What happened here is 100% a free market problem on a global scale; the belief that investing in housing is a safe bet and the laissez-faire attitude of regulators towards the businesses involved. And the aftermath, which is that banks are being quasi-nationalised on a massive scale.

We are seeing the return of Rhine Capitalism, which has been waging a losing war since the Second World War.

Rhine Capitalism automatically comes with higher taxes. It comes with a re-empowerment of the government and the popular belief that, once again, the government is our parent with all the answers. Both the increase in taxes and the added income from the acquired banks also has another effect, that governments will be richer, will be able to, once again, afford to better provide for the general population, something that we have left to commercial parties in the last years, some of which has been good and some of which bad. This will hopefully lead to better education and perhaps even an alternative solution towards the masses of greying populations that we’ve all be told to fear.

Will it be good for business, the strongest voice opposed to Rhine Capitalism? No, certainly not.

Rhine Capitalism isn’t the solution either
Yes, as my words show, I’m a firm believer in education for everyone, in lowering the barriers to entry for those of low income. I believe in empowerment of people and hope that it will lead to better decision-making on all sides. But I think that going back to the government being daddy is devolution, not evolution.

These last decades, we have seen plenty of progress, particularly on a technological scale, but also accompanied by plenty of others, facilitated by technology. We’ve seen massive developments in science, in logistics, in productivity. We’ve seen a greater awareness in people of global issues and the exchange of information, which has exploded. We’re half-way towards a world, where regulation is an automatic consequence of the fact that everything is becoming transparent.

Eventually, we will also see that issues like the credit crunch will no longer arise, because barriers to national data, to local data, to individual data will fall, allowing individuals and businesses managing their money, to make truly rational decisions.

What happened these last 15 months or so (perhaps even longer) is a warning shot, telling us that we’re not there yet. What happened this last week and the coming weeks is a consequence of exponential decisions based on negative emotions (mainly greed, fear, and ignorance). What should happen today and tomorrow is for people to use this as a lesson to shape our future world and build technology and systems that are designed to overcome these problems and replace the need for the current devolution towards an inefficient, but necessary system of regulation.

There is still a place for the government, as long as large portions of the global population are being suppressed. But, hopefully, it will actually do what it’s meant to meant to do, which is taking care of the people, instead of markets and businesses. But that is certainly something that will have to wait for several more years, until this current mess sorts itself out.

Vincent

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I have to say that I (Vincent) am a little baffled by the amount of effort that goes into IT or ICT. I thought we had these discussions some years ago and the general consensus was: IT is not the source of sustainable competitive advantage.

Yet, when I opened my Economist from two weeks ago (I’m always a few weeks behind), an article mentioned that with this credit crunch, mergers and acquisitions are going down, and with that a major cash-cow for consultants: IT systems consolidation.

I guess I’m wondering why companies, particularly those young babies being acquired, are still working with proprietary systems? Is there some kind of competitive advantage to doing it “your own way?” Or is that simply a myth that people believe in?

For myself, I’ve whined a-plenty about how Excel sucks and Powerpoint sucks, and how I’d like to have software work in my “right-brained way.” But I still believe that Excel and Powerpoint works fine for 95% of the population and for 95% of the time, and that there is no need for a custom-built solution on that—the administrative—end.

There is of course multiple sides to IT, particularly if you are an IT-company or one where IT plays a leading role. Let’s take Amazon, which won’t be acquired anytime soon, which relies heavily on its proprietary technologies, being so specialised that it decided to become an IT-service-provider. Or Lucas Arts, which develops effects for films, also 3rd party, and will certainly use custom-built software.

But when I think IT-consolidation, I think databases, and I’m wondering if one database is better than the other. And I’m wondering, why there isn’t a standard for this yet, as the Amazon’s of this world are clearly pushing for it.

What am I missing here? Why do we need consultants again? Why aren’t we doing everything in the cloud?

Vincent
(give me smart answers, and I may write a smarter post about it )

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So some short thoughts. Plenty of people have been criticising both the Seinfeld+Gates ads and now the crowdsourced variant of “I’m a PC.” I’ve only really read three points of view, namely Micheal Arrington’s (a media guy), John Gruber’s (a Mac-head), and Jason Kottke’s (an (alternative internet-)culture guy). All three have been fairly negative about it.

[youtube=http://www.youtube.com/watch?v=kkZdkHylJ3w&color1=0xb1b1b1&color2=0xcfcfcf&hl=en&fs=1]

Jason writes:

“That’s the problem with Microsoft’s ads. They’re still #1 and the bigger company, but by referencing Apple’s successful ad campaign, they’re acting like Apple is #1.”

I think this pretty much echoes John’s point of view.

The problem here is that both treat PCs as being one market… the Apple-one, which is students, “stupid users (like me) who don’t want to know what’s under the hood,” and a certain type of individualistic professional. In that market, yes, Apple appears to be doing quite well.

Microsoft has a somewhat different segmentation of customers. It has the three above, it also has the cheapskate (those that have it pre-installed with a $400 PC or those that pirate it), the business-traveller, and the Dell-crowd (lot’s and lot’s of grey machines in big equally grey buildings).

What has Microsoft done with the “I’m a PC” advert? It has attacked a strong player in one segment that it and Apple are both competing for. Apple’s “I’m a Mac” has been promoting Macs as the easy and elegant solution, while Microsoft-PCs are the clunky and slightly psychotic alternative that nobody wants. By showing a diverse set of PC-users, Microsoft simply removed the foundation that Apple built this last year and a half, and has levelled the playing-field.

Is it a me-too ad? Definitely! But we all know about Apple by now and there’s no use pretending it doesn’t exist. Will it affect Apple’s bottom-line? I’m not much of a believer in advertising, but at the very least Apple will have to change their game. I think that Micheal Arrington makes a similar point here.

Does this have any effect at all on Microsoft’s no. 1 market, the Dell-one? It does if you believe that students, “stupid users,” and individualistic professionals will bring about a revolution in the work-place, which may happen eventually. In the short-to-medium term (the one the stock-market cares most about) however, my gut tells me that all of this is pretty irrelevant to that business-only segment, which cares about creating products that work on a massive scale, and about buying PCs that become cheaper with economies of scale.

Vincent

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The way I blog is pretty much continuous; I try to relate everything—from fashion, to relevance, to mobile-commerce, to SOA, etc.—to a general theme, which I eventually hope to use as a framework of principles and values in my future activities. I guess that this to some extent answers my previous question of whether process-coding is good or bad. It is good, as long as it takes environmental variables into account that may affect its effectiveness, as well as the fact that a basic human prerogative is to exercise the freedom of will and choice.

This post will be a little academic, as I’ll be quoting from a number of sources from that field. The reason I thought of writing it was because of following paragraph, I read this morning, by Michael Porter, strategy-expert extraordinaire:

“Strategy, in modern language, is a solution to the agency problem that arises because senior management cannot participate in or monitor all decisions and directly ensure the consistency of the myriad of individual actions and choices that make up a firm’s ongoing activities. If an overarching strategy is well understood throughout the organization, many actions are obviously ruled out and individuals can devise their own ways to contribute to the strategy that management would be hard pressed to replicate.” (Source)

This quote comes from a 3-part framework of firm-success, the first being a clear strategy, the second an alignment with external (industrial) conditions, and the third being the exploitation of ‘distinctive competencies.’

In other words, setting strategy is a form of ‘process-coding’ the behaviour of individuals within an organisation. This is easier said than done. According to another book I am reading, called “Valuation,” the process of reviewing the state of a larger organisation’s functions (marketing, sales, production, finance, research, etc.), in order to paint a picture of the historical and future “deployment of assets and resources” (the author’s definition of strategy), and their (expected) returns, is both a qualitative and quantitative process, which can take years to complete. I quote:

“The installation of a top-to-bottom, comprehensive planning system endorsed by all members of the organization and practised by people well-educated in its use is a process that usually takes three to five years.“

For smaller and younger organisations, I imagine that many of the exercises, described in the ‘E-Myth Revisited,’ will do just fine.

Last, but not least, Harvard Business Review recently published an article on ‘strategy execution,’ which is in the end the most important part of strategy—how well it is carried out. It is well-worth a read and I’ll just share the first five success-factors, out of a total of 17, with you:

The results came out of a 1000-company survey and are pretty telling; the more explicit the company strategy, the more explicit the role of individuals within the organisational context, the higher the success-rate of strategy execution. Meaning that no matter how hard it is to achieve just that, it is well worth the effort.

Something to think about.

Vincent

P.S. if you want to read a horror-story of how not to do it, check this out.

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Context: I’m currently in discussion with a number of companies that are involved with SOA-vending & -consulting. As a result, I’ve been studying up a little on this market and hope to learn more by writing about it. Note: Since I know, judging by the response to other articles on enterprise-software, this isn’t exactly the most sexy of topics, I expect the number of comments to be minimal.

Jeremy has already written about this topic (primarily in terms of Software-as-a-Service (Saas) and Software + Service (S+S)) before (here, here, and especially here), so I won’t go very deeply into it, but SOA is roughly defined as:

“guidelines that allow software developers to design systems in stand-alone chunks of computer code, each specifying the critical outcomes, performance metrics, and interfaces between a discrete activity and other services.” (Src: HBR, June 2008)

If that’s a little abstract, I see it as a selling you a ticket to Lego-land, where you can play with legos all you like, those lego-blocks representing individual applications that can be used by businesses through a web (SaaS) or hybrid (Software+Service) interface, and Lego-land being the SOA-system that integrates all of them for you. This is opposed to the historical approach of buying a lego-box, which you eventually replace by another and another (side-prediction: we will eventually see Lego-world online).

SOA’s value-proposition

While traditionally it has been so that in order to compete in a technological world, you have to be technological, the idea of SOA is to remove that element, instead allowing individuals and businesses to focus on what they do best. I, personally, like that very much.

Other, more measurable advantages are that it is dramatically more cost-efficient. If you imagine that 5+ years ago, every company had to either invest into a powerful wide-area network (WAN) to be able to centralise IT-services, or replicate islands of IT-systems for each business-location, SOA removes that idea entirely, using a freely available infrastructure, the internet, and removing the need to build IT anywhere, instead paying-as-you-go for singular services that an external provider hosts and distributes. Added to this is the idea that performance now becomes accountable, in the sense that it is covered by contracts (e.g. QoS or SLA), something that was much harder to do with a permanently employed IT-staff.

With all these advantages and several more, it is no surprise that, in 2007, over 50% of mission-critical IT-projects were estimated to be SOA-based, a figure which is believed to increase to 80% in 2010 (these figures are from Gartner and may be US-only).

SOA’s hurdles

While this sounds pretty great, anytime you’re talking about system-wide change, you have to consider that this will meet resistance and involve a great many stakeholders, i.e. take a lot of time. And the question is here, who will you talk to as an SOA-vendor? Will it be the business-side of your client, as you are selling easy-to-understand lego-blocks, or will it be the technology-side, as you are selling technology? This is a serious question, so please answer it in the comments!

Added to this, a SOA-deployment is a strategic issue for your customer, meaning that your selling-proposition will also need to include the option of strategic support, aka consulting-services. This means that technology-only SOA-providers (vendors) will likely have to work with third-party consultants that pick-and-choose the best SOA-package for their client.

Related to this, the lego-like quality of SOA, which promises values like agility, flexibility, price, and reuse, and several more, all very important in this recession-prone time, also mean that someone can quite easily replace your service with someone else’s legos. Arguably this is much less the case if you provide an architectural framework and focus on building ecosystems (create lock-ins). But that is easier said than done, and as such this is a field dominated by few big players that buy up smaller ones.

Some more things, which I haven’t researched, are the degree that open source is a factor/issue here, and different revenue-models.

Grasping the paradigm-change

On the customer-side, there’s two ways of seeing this trend. On the one hand, extreme efficiencies, which also follows Nick Carr’s view that IT is no longer a competitive advantage. On the other hand, you’re giving away a lot of responsibility, which can be bad in two ways.

One, you’re giving away a lot of power to an industry, which will continue to consolidate. It’s something that may not be a problem now, but may become one.

Two, delegating a problem does not necessarily solve it. Taking the retail-industry, the biggest problem here is logistical inefficiencies, caused by delays, unnecessary replication of processes, or otherwise. Here, SOA, as long as it spans across the value-chain of manufacturers-transport-retailers-customer, is clearly a good thing. But it still requires a solid understanding of how IT does and can help your supply chain reap better results, something an independent SOA-vendor may not do as well. My opinion here is purely hypothetical, but it may be worth investigating how the masters of retail (Wal-Mart, Tesco, Carrefour, etc.) solve it. And if this is a problem, I imagine it is elsewhere too.

The SOA playing field

This post is getting a little long, so I’ll briefly go into this. Following Forrester-graphs show the players in the integrating corner of things (consultants) and, on the right, the vendors (also note the time-difference (the second one is Q4 2007) and region). You can find the originals here and here.

Clearly this industry is very layered, with some offering the complete package, including strategic assistance, and others providing either the SOA or a part of it (SaaS or similar). There is a lot of movement in this field with players buying each other out or moving into related industries, either on the hardware or software-side.

Final thoughts

Because I’m not a soft-/web-ware guy, I’m still very much undecided whether to head in the software-only direction myself, though I see much merit for an integrated business-consulting + software-deployment approach, and I also prefer selling Lego-blocks to rubber-trees. Feel free to convince me of your points of view.

All of this was initial thinking of course, and as such I’m happy to hear if you have anything to add or if I made some obvious mistakes. Again, considering the relative unsexiness of this area, I don’t expect too much

Vincent

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Judging from Vincent’s latest post (and the comments!) about why he thinks Android will suck, there are many misunderstandings about global smartphone markets. First of all, they are a small subset of all handset market – just about 10%. There are many who are blinded by their US-centric power-user views. The echo chamber of blogs doesn’t help much, especially because most blogs are also U.S.-based. This smartphone market share graph by Volker Weber is one of the best to illustrate that North America is totally different than other markets. The differences do not limit to smartphones, there are huge differences in mobile usage also.

The other thing to note is that the dominating player right now with more than two thirds of the market is Symbian, which is backed by, among others, the number one mobile manufacturer, Nokia. Both have summarily dismissed iPhone and Android as nothing more than niche (“iPhone is nice, but that’s about it”, “Just another Linux phone”?). They are also both usually missing from all reporting concerning Android and iPhone. Not taking them into account is like talking about PC industry and forgetting about Windows and Dell.

It’s always a good reminder that Nokia is also the world’s largest MP3 player and digital camera manufacturer. They also have more than half of the smartphone market. From a U.S. perspective this might not be so visible, because in the U.S. market the best selling smartphones are Blackberry Pearl, Motorola Q and Apple iPhone. If these are your idea of smartphones, do yourself a favour and familiarise yourself with Nokia’s Nseries (for consumers) and Eseries (for enterprise).

In the Open Handset Alliance’s FAQ, the alliance says that the benefits of an open platform for operators and manufacturers are lower costs and flexibility to offer services. For consumers, they promise cheaper prices, but given that most phones are given free by the operator or that it doesn’t actually make any business-sense to do give phones on a discount without a reason, this is probably a joke. Also, do not read too much into the “partnerships” in OHA, as many of those companies are also involved with Symbian and many other mobile initiatives.

The business model of your average mobile carrier is to make money out of you by offering you value-added services. The problem in the marketplace is that most people are just fine with voice and SMS. In the EU, many people feel that mobile data is still too expensive to the extent that the EU will probably mandate some price limits. Seriously, this is an industry that thought WAP and walled gardens were the future. Open competition is an anathema for them.

What the carriers with their monopoly mindset didn’t see coming was that internet is everywhere for far more competitive price and experience than what they can deliver. A surprise hit in Finland is a USB-device with 3G connection with gives you mobile broadband to your laptop with fixed monthly price. Why not just use your mobile’s Bluetooth instead is something a more technically oriented guy would think. But that’s why this guy can’t understand either why Google sees more search activity from an iPhone than from other handsets.

Many ISPs have started to adopt the mobile operators’ tactics now that the basic service is so low-margin. Of course, they can’t go as far as they’d love – you can’t imagine your ISP mandating what kind of computer you can use to connect to the net. In part, this is what the net neutrality discussion is about.

Google reported some time ago, that iPhone is by far the most used mobile user-agent. You can take this as a success story to Apple (and AT&T), but you could also see the sorry state of internet on mobile. A device with a tiny market share dominates internet usage? This is of course good news for iPhone carriers, who would love to have more customers like that. The question is, is the reason that using the web is so easy on an iPhone or because the iPhone owners behave differently? A little bit of both is always the easy way out, but whatever, the bottom line is that it brings more internet traffic revenue to mobile carriers. One point of warning, though, one reason for iPhone’s search dominance to keep in mind is only hinted in the article – the default search engine for many mobiles isn’t Google, but Yahoo! or even an operator’s own.

Then there’s the talk about the open platform of Android. One problem when talking about iPhone SDK and Android is that, right now, neither are “real” in the sense that so far all we have seen is hype. As a Symbian boss said, “We take [Android] seriously but we are the ones with real phones, real phone platforms and a wealth of volume built up over years”. In 2007, 141 different models and 77,3 million Symbian phones were sold. The fight between Android and iPhone SDK is pointless if you don’t include Symbian in it. It is open (to an extent), it’s free, there’s no AppStore (which is good and bad), there’s digital signatures (which is good and bad). And there are almost 9,000 third-party applications.

Want IM and VoIP on your smartphone today? Here’s a Gizmo client for Symbian S60 -platforms by Nokia (See the site for other cool apps if you happen to have a compatible phone). Do not forget the power mobile operators have over their networks, even that app can’t use VoIP on 3G, just on WLAN. Apple and Google are not mobile companies and that’s why they try to change the rules more to the their liking. This is a good thing, but history has proved these efforts have so far been very futile.

This Wired article on Motorola ROKR couple years back is a good reminder of some laws of the mobile market. Of course, the article didn’t age that well (which seems to be quite common at Wired), but the middle part with Nokia’s Vanjoki is worth a second read, especially now that Nokia is busy with Ovi.

PS. I’m a low-profit customer for my mobile operator, I have a simple SonyEricsson K610i with Opera Mini that I use web with like three times a year. I tried to use mobile internet while “outside the grid” (e.g. WLAN or DSL), but because I happened to be outside a major city (and 3G connectivity), the experience sucked a lot. We wanted to see a YouTube movie but were unable to. And this was 2008.

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After two months in my new life as an entrepreneur, having turned my back to the  corporate world, all I can say is that it’s been so much fun – & hard work, that I believe, & I know that I made the right decision. Let alone that I strongly advocate all my mates to forget about six figure salaries costing them their souls and go it alone with the best people they’ve ever worked with, like I did with a team of guys a thousand times more talented than I am, to try and change the world. Becoming an entrepreneur when you’re still very young is, I think, the best way to become successful and to make your stakeholders (employees, clients, suppliers, investors) happy.

I’m turning 25 today, a good enough window of opportunity to provide you with 10 good enough reasons you should start a startup before turning 25. There you go. Before turning 25..

1. You have no fancy habits: I’ve never, or hardly, ever been spoiled by perks like a corporate car, four-star hotels on business trips, & unlimited long distance phone calls. My lifestyle is still the one of the student I used to be until June 07: in many ways very inexpensive. And I don’t mind spending 100 hours working-sleeping-living in a room with a bunch of brilliant minds eating pizzas. If you’ve recognized yourself in this pattern, then this is the first reason you should consider starting a company.
2. It is easier to raise business angel money: as a young entrepreneur, especially in Europe, raising VC money can prove extremely time-consuming and challenging. The venture capital crowd is an elitist herd that needs to show its limited partners (institutional investors providing them with the funds later invested in startups) a serious track record for the entrepreneurs they’ve bet on, just in case things turn wrong with their investees. Turning to business angels, whose decisions rely on a simpler governance since they invest their own money, is therefore the most viable option on the condition that you treat business angels like a VC – that is to say like a tough-minded, selective investor. By & large, there are two kinds of business angels: successful entrepreneurs, & successful executives who never found the time or will to start their own company. I regard being young when trying to raise angel money as a huge asset: angels want to have an impact, and the chance they’ll make the difference with a younger, more flexible mind is larger than with a seasoned former large-corp executive. Business angel are more likely to patronage youngsters than grey hairs.
3. You most of the time have no family to take care of: before turning 25, you should still have at least a couple years to go before having babies and all that jazz. So, from a personal risk standpoint, taking professional risks is not risky. On top of this, you don’t have too tight a deadline to start getting a decent salary. Last, at the end of the day, hunger seriously makes you bootstrap your butt off.
4. You face less social pressure: few of your former classmates but the entrepreneurs already make millions so you don’t feel like the tramp in the room at alumni reunions & events; today, you all eat pasta & rice, but when the time comes some of them will be reasonably wealthy (most probably those working in investment banking, market & risk finance & real estate), you’ll be the one with two exits on the tally.
5. You haven’t been corrupted by ill corporate habits taken from procedural organization: politics, unethical struggles for promotion, pyramidal hierarchies, etc. I don’t know anything (almost; for instance in my last corporate experience, I was told ‘white’ on the one day, and ‘black’ on the other: it’s okay except when it’s about your career. So I started wondering whether people really cared, and I want no one except myself to take care about my career anymore) about it and feel good about being certain not to reproduce such wrong behavioral patterns in my startup.
6. Ignorance is bliss…No fear, can-do attitude. That’s you. Same for us: we’re running for the next big thing: high risk, high return. We’re not there to play pussies & since the opportunity is huge, the chance that we have an impact on the world is significant. We deeply want to make of the world a better place. We’re embedding meaning in our quest. That may sound naive, but as Mahatma Gandhi once said: “Almost everything you do will seem insignificant, but it is important that you do it”.
7. You have no regret for a job as an apparatchik in a large corp, since you don’t know how comfortable it can be & how hard it can be to find the guts to say “good bye” to.
8. You have plenty of time to do it again: being an entrepreneur isn’t a job. It is a state of mind. Once you become an entrepreneur, you’re an entrepreneur for an entire lifetime. I can picture so many first time entrepreneurs who, in their fifties or even forties, know they’ll have time to build only one success story on their own – if not zero. This is a very frustrating situation because those who succeed most, financially speaking, are repeat entrepreneurs. Because repeat entrepreneurs learn not to repeat their mistakes and hence do things everyday better. As far as I’m concerned, I see starting young as a huge asset because I’ll have time to build a number of companies (say 5) over time.
9. Your cost of failure is zero, not to say negative; say you fail and don’t want to do it again (which is unlikely) then you’re off to the job market at a premium because everybody’s looking for entrepreneur-minded people. An experience, be it a failure or a success, as an entrepreneur is worth every MBA-trained strategy consultants altogether. Your cost of failure may, depending on your cost of opportunity & the necessarily small amount of money you invested in your own venture, actually even be negative: failed entrepreneurs are a scarce resource on the job market. Those with large corp experiences are largely commiditized against those with startup ones.
10. You will get rich faster than if you had worn dark suits because you’re working and hence creating value for yourself rather than for someone else.

Convincing enough?

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Here’s a quick question to all people used to either interact with or being part of software development teams.

Consider a software vendor, a good one, and its technical headcount. It is no secret that R&D teams aren’t made of software developers only. In order to be deployed successfully, architectures and code need to be tested by a QA department (QA = quality assurance) where professional testers run through thousands of automatized-or-not scenarii; documentation; technical support staff help the install base with potential regressions occuring during updates and coping with changing information system environments; localization project managers monitor translations of the software: and last but not least, application engineers actually parameterize the software at clients.

Now my question, how many technical staff should you account for every software development engineer? I figured out an average ratio of 1 to 4, that is to say, for every technical team of 100 there should be around 25 software developers actually hacking code.

I know there exists extremes but by and large, from what I’ve seen, I don’t think I’m too far from the reality with a 1:4 developer / all-categories-technical-staff ratio.

What do you think? Feel free to describe what the company does when sharing your experience, because, since there are very large discrepancies between, say, an SAP that manufactures ‘heavy’ enterprise software and any web application designer that may not necessarily run industrialized testing and that has no professional service department, we might not get nuances at first sight.

PS: the ratio will also depend on the maturity stage of the company: at Microsoft, [# of develops]/[develops + Microsoft Consulting Services staff + developer evangelists + localization engineers + testers (1 for each develop) + architects] approximately equals 1/4 (1 to probably 5 ot 6 adding documentation specialists; & 1 to much more if you consider the system integrator ecosystem that actually does the application engineering). But the company is rather mature and therefore can afford to focus on quality of execution rather than productivity in execution. Which probably wouldn’t be the case for an enterprise software startup for obvious resource reasons. Anything to share? Best and worse practices, per specific industry (Web 2 / UGC, Video Games, enterprise, affordable consumer traditional applications, etc.) most welcome. I need to test my own budgeting assumptions

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I usually don’t ’steal’ posts from others -especially without adding any value-adding comment, but I couldn’t help sharing this one – found on Richard’s blog thanks to Twitter (follow him). Here’s a very inspiring slideshow by Index Ventures VC & founder of Open Coffee Saul Klein:

[slideshare id=58242&doc=nextweb2007-saul-1518&w=425]

The slideshow speaks for itself, doesn’t it? And even if you don’t chose to become an entrepreneur yourself at this very moment, in Europe or elsewhere, my take is that you should join an early-stage startup. Let me tell you a quick story about this.

The first time I thought of leaving MS to start a startup (a thought that never occurred again, believe it or not, before I actually walked out to either join another company or take the big plunge), I hadn’t even joined Microsoft. I was at Capital IT, a major VC forum in Paris, as a Microsoftee although I was due to join the company a few days later. There I met, for the first and last time so far, Pascal Mercier, a French fundraiser whose firm Aelios Finance is pretty successful at matching the best entrepreneurs and smart money (to my knowledge both angels & VCs). I was introduced as a recent graduate and the second we met, Pascal Mercier asked: “Why didn’t you choose to join a startup rather?”. The best answer I found was: “but I do work for startups!” Which I thought was true since 1) MS is just a damn successful startup (you would be surprised to see the easy-going startup atmosphere within the company); 2) I was part of the team that took care of emerging ISVs in France. Acknowledging reason #2 only I guess, Pascal nodded and we parted ways. I later realized though that working for startups, and working in a startup, are clearly two different things. When you represent Microsoft, you may call whoever you want and the door will be opened the next day. Your brand power is so strong that at the end of the day, you never know whether you achieved great things because you’re damn so good, or because your company is so powerful in its industry. As an entrepreneur, and I’ve been facing this issue already, you need to fight like a pitbull to get passed through the right person on the phone, and fight again to get an appointment. I should also mention that you’ll need to deliver the best pitch of your life, after waiting for an hour in the lobby without even being served a cup of coffee, to actually get to the point where you may pretend to try and sell your solution. This struggle for survival is real life and that makes entrepreneurs fully accountable for their success or failure.

The same rationale goes for early-stage startups, without a brand name yet: life will be tougher for sure than if you worked for a big name, but the impact you can have on such companies is huge (eg double revenues in 6 months, etc. something unachievable in an 85K-strong corporation like Microsoft – or even at Google, a 20K-strong company & definitely not a startup anymore). Whether you want to be an entrepreneur or join a larger group later in your career (or both), an unknown and yet ambitious startup is where you should start your career to acquire the right survival toolkit. By the way, did I mention the stock option plan?

My two cents…

Addendum 11am: check out comment #3 to discover how to spot startups that will pay you better than large corporations and resign from consulting, banking and Fortune 500 companies to join them!

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