Tag Archives: Public companies

Should Businesses Begin at the End?

Beginning with the end in mind is a best practice that we hear about all the time. When I took my project management course it was pretty much the first thing that we were taught in it. While this likely is a good idea for short-term endeavors, is this really how we want people thinking when they start a business?

In the entrepreneurship classes I took, as well as books I’ve read and speakers I’ve gone to see, the “exit strategy” is a major focus. Essentially when you start a business you should have a timeframe to cashing out, most typically in the form of a sale.

While putting a timeline and dollar value on the sale of the company may be good for investors to see, is that really what is best for our companies or economy in general?

If your thought from the outset is that you are not going to be running the company for more than a few years, how will decision making be impacted? All decisions will be made with the short term in mind, which is never good for any company.

The idea of running a business for a few years then cashing out is nice and clean, especially academically when trying to teach about ownership, it doesn’t translate well into the real world.

I have a hard time believing that the entrepreneurs that I admire thought to themselves, “I have this great business idea that I can run for 5 years then retire.” I don’t remember ever reading the “Starting the Business with an Exit Strategy” chapter in any of their (auto)biographies.

If you want some more concrete examples, just look around. Bill Gates recently announced that he is taking more of a day-to-day role in Microsoft. Warren Buffett is in his 80s and still running the company. Steve Jobs came back to Apple (his baby), leaving behind another successful company. Richard Branson is still running around doing his thing.

All the above listed are rich enough to do pretty much anything they want. So what do they want to do? Stay involved in their companies!

Thinking in the longer term is also better for investors. It keeps the imagination going and the company focused on limitless growth, rather than hitting a number for sale. As a VC, would you prefer to have been an early funder of Facebook (a company that only when public when it had to) or Groupon (who rushed to IPO and is now tanking)?

One of the companies is focused on being around for a long time, while the other was focused on making a quick buck. And the results speak for themselves.

Privacy Concerns

Every time there is some report or Wiki Leak or Edward Snowden type that comes out and tells us about how the government is spying on all citizens, I’m always surprised at the outcry. Not at the fact that there is outcry, mind you, but rather the focus.

There is always a clear and loud cry about the government infringing on our privacy, but very little is said about how they are able to do that. Especially when the information the government is gathering is with the help of private companies, more often than not.

I don’t know if it’s thanks to the bias of media, the short attention span of the masses or some other factor, but every time there is a headline about how the NSA gathered more information, no one seems to give much thought to the foot note that it came from Apple, Google, Amazon, Yahoo, etc. While I don’t love that the American government has the ability to read my emails, I really don’t like how easy it seems for the private corporations to fork it over.

Paints a future that’s more Skynet than it is 1984.

To me it comes down to involvement of the commons. Even if it’s biased, skewed and corrupt, at least we the people have some involvement in government once every few years. Not too comforting, but there is something.

Also, the government could plausibly be using the information for security reasons. While it’s sneaky and unsettling, at least it’s an end that most of us can get behind. Even if you don’t support the means.

What I wonder about is what the corporations are gathering the information for, other than for personalized advertising and to give the government. You just know that it wasn’t sitting there unused until the big bad NSA bullied them into giving it up. If the information is being collected, it’s being collected with purpose.

I’m not really into conspiracy theories, nor am I that worried about what is being collected about me, to be honest. I know that I’m not doing anything criminal and can only assume that they have much, MUCH bigger fish to fry. I truly can’t see how my email is interesting to anyone other than me, and even then with some messages labeling me as “interested” is pushing it.

No, I’m more interested in human nature. Why it is that we’re so quick to jump all over our elected officials and give private companies the benefit of the doubt. Perhaps it is because we feel as though the government is accountable to us, while there is no use trying to change the course of corporations.

Or maybe we have actually reached a place in society where we trust public institutions less than what’s behind the curtain at our favourite brands.

Price Industries

Next on my list is Price Industries. I’ve been fortunate enough to had the opportunity to go on a tour of their facilities, and they are quite amazing. But I’ll take a step back before I get ahead of myself.

Price is a worldwide supplier of HVAC (heating, ventilation and air conditioning) units. Basically those metal boxes you see on the top of buildings that have fans in them.

Not only is being a world leader impressive enough, but the values that Price practices are almost exactly like any company that I would want to grow. This, of course, is no accident and takes years of careful action. While it may not always be easy, Price is an example of when the correct values are instilled properly into a company great things can happen.

First, Price’s is commitment to innovation is commendable. By investing in projects that may not see any direct cash inflows for many years, if ever, Price does what many companies refuse to do. Not focusing on quarterly profits, but rather the long-term future of the company is, in my mind, the best way to ensure the success.

Being a privately owned company, it is easier to make these decisions. Public companies can often fall victim of focusing on short term gains, rather than worrying about what’z going to be happening 10 years down the line.

What I appreciate most about Price is the fact that they started a Manitoba company and have stayed a Manitoba company. By operating here they bring skilled labour jobs, which is a great thing for our province! While it would likely make more financial sense to move operations to the US (or even next door to Saskatchewan for that matter) by staying here they can keep Manitobans employed with meaningful work.

I’m so sure that it would be less expensive to operate elsewhere thanks to the payroll tax. A company the size of Price has to deal with the Manitoba government taxing them for employing Manitobans. If that isn’t the most backwards thing I’ve ever heard, I don’t know what is.

So thank you to Price for staying in Manitoba and leading by example. in my mind they are exactly what every company should aim to be in their respective industries.

BBM Backlash

Well, BBM is here for iPhones and Androids and there is a very predictable backlash going on: People are very publicly stating all their reasons for wanting to or not wanting to download the program. I really hope this doesn’t become a trend for all apps that are released…

But of course it won’t! The only reason that there is such a strong reaction is because it is a program that RIM put out there for non-Blackberry devices. I think that it is safe to say to all those who are posting passionate comments on Facebook about why they will absolutely never download BBM (even though they have never tried it), is that no one cares. I repeat NO ONE CARES.

I find it hard to believe that anyone has dozens of friends hounding them day in and day out to get on BBM, interrupting meals and keeping the individual up at night. Or strangers stopping them in public to spread the BBM good news. No, this is some oddly pressured decision you have put on yourself and anyone that you currently text with will likely continue to text with you in the future, regardless of your intent to download a free app or not.

What’s more, for some people and businesses, BBM is a program that really could have some use. If Apple or some other company came out with it, it would probably be lauded as the best communication and collaboration app out there, but since it was given to us by the easy-to-hate-for-no-reason RIM, that won’t happen. People’s weird, irrational belief that RIM is the devil and because they make phones that are deemed inferior it is good when the company does poorly and thousands of Canadians lose their jobs.

So if you have no need for a program that allows you to avoid international texting fees, or collaborate and share information with a number of people, then don’t download the program. Believe me, there’s no hard feelings.

Put the “C” in Customer Service

In this case the “c” stands for crabby. You can let your imagination go on the word that I actually though of after the encounter I’m about to describe.

Normally I think I’m ok when it comes to useless customer service representatives. They usually have no power to make a real difference and are usually discouraged from using their brain, instead following narrow scripts that don’t really address the issue you have. Note: For an excellent book about the opposite of this method and how all customer service should be read Delivering Happiness by Tony Hsieh, CEO of Zappos.com.

For the reasons stated above I keep my cool and tend to let CSRs off the hook, but an encounter today (June 11) set me off and I’m now compelled to dissect it to come to some sort of peace. I’ll recount my story, marking the sections that pushed my buttons and explain why below. First some background:

I have two Visa cards. My primary and a secondary with the lowest limit possible. I use the secondary for parking meters, online purchases, etc. Basically any transaction that is higher risk, so if the card is compromised, I only have to worry about a $500 limit, not the one that’s higher than that and has all my bill payments coming off of it. The secondary card has been a bit spotty lately, but I use it so little that it didn’t bother me too much and I didn’t think much of it.

Today, however, I tried to make a purchase over the phone, which didn’t go through. I thought to myself, “enough is enough,” and tried calling CIBC Visa. The following recounts the call.

Started pleasent enough, getting my verification, asking what was wrong. As I started to explain I was interrupted (1) and asked if it was an issue with entering my PIN incorrectly. I said no and tried to explain, but was interrupted again with the same question (2). I said no again at which point I was told that I needed a new card, one was on the way and asked if I needed anything else (3).

At that point I was finally able to spit out that this happened with a telephone transaction. Taken aback I was told there were no notes on the card’s file and I was wrong (4). I’ll admit that at this point I was frustrated, I said goodbye quickly and not to worry about it. In my mind it was clear she was going to be no help, so I was just going to hang up.

As I was taking my phone away from my face I heard her yell that she was going to cancel my credit card (5). This obviously got my attention and I stayed on the line. I got yelled at that I’m not allowed to hang up (6) and if I did my card would be cancelled.

I, as calmly as possible, asked her what she was getting so upset about. She repeated that I can’t hang up and asked if I still wanted a replacement card. I declined and informed her that she essentially said that the card not working is my fault and there’s nothing she can do, so that’s why I was hanging up. At that point she said a quick “bye” and hung up on me (7).

So, here’s the way I see it:

  1.  This is the first time I was interrupted, but it wasn’t the last. A good CSR should hear the whole story before trying to help.
  2. Reasking the same question, especially when you haven’t allowed for me to tell the whole story AND the question implies fault on my end is a huge no-no for me. Never try to make the customer feel stupid. (Side note, this happened to me a month or so ago when I called 311 to report yard waste pick-up being days late on my street. I was asked no fewer than three times each if I put it in the right place [yes] and if my neighbour’s was still out [yes].)
  3. Jumped to an answer, still without fully understanding.
  4. Telling me I’m wrong about the issue I’m reporting. Again, don’t try to make the customer feel dumb.
  5. The customer can hang up at any time. There is no reason to make a threat, just chalk me up as an asshole and let it go.
  6. Yelling and again ordering me around didn’t help her cause.
  7. Hanging up on me, especially when I was told that “wasn’t allowed” isn’t the best way to finish a call.

Always trying to take some sort of positive from an experience, I think that I now know how not to treat people. Seriously, though, I think this is a case for better CSR training and allowing your people go go off script (but not in the way she did).

Being as this is a bank we’re talking about here, I’m guessing there isn’t a lot of empowerment of front-line staff. This person was likely doing everything she was allowed to, which is stay on a script and try to get me off the phone ASAP. I have to say this didn’t make me feel good as a client of over eight years, and a former employee for that matter.

Without empowerment there is frustration and that frustration may be directed at your clients, which is not a good thing for your company. Give people the tools to actually help.

We’re Failing Entrepreneurs

In case it isn’t clear in my other posts or any day-to-day conversations I may have with individual readers, I love entrepreneurship. Studied it in school, read all about it, love talking about, everything. As far as I’m concerned, creating something people are willing to part with their money for is amazing.

I know I’m not alone thinking this, either. People that I talk to, meetings that I attend and information I find online there are no shortage of entrepreneur supporters. At least those who say they are.

Truth of the matter is most of the supposed support is there for those who have already made it. Proven that they have something. If you’re small and just s tarting out, good luck. It’s dog eat dog out there and anyone who would be in the position to help wants nothing to do with you.

Just a few weeks ago, I was in a meeting with other people interested in startups and there was a banker talking to the group. Although the information was helpful, out of the six different financing programs he went over, zero of them had anything to do with the bank lending money. Rather it was about how he could help you apply for government programs (an of course take a cut).

I’m sure any bankers out there will talk about risk avoidance, but there doesn’t seem to be an issue lending out someone else’s money. Talk about speaking out of both sides of your mouth.

Now only this, but if you’re self-employed banks won’t look at lending anything to you personally for two years. So delay a mortgage and start saving if you want to start a business. The financing isn’t coming from anywhere else. Essentially would-be small business owners need to plan well in advance and delay their lives in order to start their company.

It’s not just the banks, either. Out of the countless government programs, there is more red tape than one person can deal with. Not only that, but if you try to call them for help you get the run-around and zero answers.

Something else that is happening is that large companies have got wise to the programs. Money meant for new businesses with innovative products is sitting there for the taking. So these large companies apply, depleting the fund for those who could really use it.

The one example that really bugs me is that MTS applies and receives SRED funding every year. Yes, I have no doubt that they fit to the letter of the application, but the money isn’t being reinvested. It’s going to pad profits. Then there’s less for a deserving small business owner.

There are countless other examples out there, but I’m sure I’ve already bored you. All I can say is I hope this becomes an issue that more people will be vocal about, because our economy (especially in Manitoba) relies on small business. If we ever want these companies to grow, there needs to be help to do so.

Bitcoins Intrigue Me

I find the growth of mainstream awareness of Bitcoins amazing. To be perfectly honest, I didn’t quite know what they were until the mainstream media starting reporting on them, and even then if I hadn’t done some of my own research would not have fully understood. If you’re in this group you can find out more on the Bitcoin official website and (even more helpful) Wikipedia page.

For those of you who trust me, a Bitcoin (BTC) is a boarder-less “crypto-currency” which first came into use in 2009. The concept is that there is no government backing the currency and it can be used from country to country without need for exchange. The control of the currency is all electronic, from management to transactions, and it’s release into use is scheduled from now until 2140, when it reaches the maximum of 21 million BTC.

Recently there have been some major Bitcoin developments: a man in Alberta is attempting to sell his house for Bitcoins, which is the largest “real world” transaction to date. Secondly, a Bitcoin ATM has been created, which is one step closer to making the currency something the majority could consider using, expanding it beyond it’s current internet sub-culture.

Now that I have, hopefully, provided enough evidence that this is a real thing and I’m not crazy, what does this all mean? As I’m sure you can imagine, with the increase in mainstream awareness, critics have been coming out of the woodwork. Every talking head on TV now has an opinion about them, and I’m sad to say that there are very few that are positive, or even thinking clearly.

To me, this type of monetary policy is actually a step in the right direction. To get to my reason why, I need to first explain a few of the criticisms and why I don’t think they’re valid:

It is not backed by any government.

So what? If the last 6 years have taught us anything is that money backed by a government can be worthless as well. Not only that, but when there is a government involved there are all types of lies and cover-ups to deal with. Along with competing priorities and human error.

It is primarily electronic.

Again, so what? The large majority of our current transactions are electronic, as well. When do you really use cash? With the use of cheques, debit and credit cards, along with the growing popularity of online shopping, people don’t have to see cash for years at a time if they really don’t want to. If you think that the government is printing all of the money they are releasing into the economy, give your head a shake.

It has no underlying value and relies on a group of users believing it is worth something.

… which is the exact same as our currency. Only difference is that there is a larger group of people who believe in it and a government who is telling us it’s all going to be ok. Ever since our currency was debased, it is just a made up system of numbers that rely on the users to believe it is worth something. In terms of “underlying value” it is not worth more than the paper it is printed on. At least with the Bitcoin there is no false confidence.

Why the Bitcoin interests me.

To me this is democratic currency. It is made by the people and it’s value is based on how it is adopted. The other interesting thing is that it is predictable, in a sense. We know how it is being released over the next 130 years, which is way more than could be said for government-run currency. All of the points raised by critics are nothing different from how world currency is being managed right now.

There is a large amount of volatility right now, so proceed with caution, but I think that once it has wider adoption some interesting things are going to happen.

Best Buy Layoffs

If you are paying attention to the news recently you would have heard about the layoffs and store closures for Best Buy and Future Shop (sister companies). When something like this happens it is easy for us observers to make criticisms of management. How did they not see this coming? Why didn’t the make the changes they are talking about now before it’s too late? I could have done a better job.

While these things may be true, i have to believe that experienced executives with all the information would have wanted to act in the best way possible for the company. It’s not like it was something overnight that happened to make them have to close those stores. So why did they not act?

I don’t think this failure has anything to do with lack of information or intelligent people. Sure, competition was there, but it always is. The business landscape is always changing and countless companies manage to survive and thrive. Why is it, then, that some companies with more than enough resources can’t seem to make it work?

I believe that it is because of the corporate system that public companies operate in now. The corporate structure is failing our businesses, shareholders, managers, employees and markets. Most importantly, it is failing innovation.

Now to get something straight, I am a capitalist at heart. I think at it’s purist it is the system that best represents human nature and facilitates progress. I have nothing wrong with capitalism, or corporations for that matter. In fact, I’m part owner in an incorporated company. We’re small, though, and because of that aren’t confined to the same restrictions of larger corporations.

The restrictions that I’m referring to are not imposed by any government or regulating body. They are created by the corporation in order to attempt to run it “better,” but management and progress struggle in because of it. Here is what I mean:

  • Companies are run day to day by managers. They have the most information about what is happening and are there to ensure that everything is running smoothly in the day-to-day.
  • Overseeing the management team is a board, who is typically used for strategic direction. The managers of the company are accountable to the board.
  • The board is said to represent the shareholders, meaning that is who they are accountable to. The shareholders usually number in the tens of thousands or more.

You can see from the above simplification of the relationships that the accountability stops at a group of thousands of people who have next to no knowledge about the operations of the company, who also don’t know who one another are, let along communicate on a regular basis. This is a problem.

Shareholders are constantly changing and all have different goals. I may invest in a company hoping to make a quick buck, while you buy shares for the long haul. Since this is the case, the board and management can’t stick to showing “success” on one investment timeline. Therefore boards, and the managers who take direction from them, focus on producing short term results, so that shareholders stay happy.

While this may work in the short term, it is not a formula for longevity. Long term initiatives are sacrificed for short term gains. Or because they are too expensive and risky, which is worse because nothing gets invented this way. Some companies know this.

Google, a company I personally admire for their focus on innovation, has a buffer between their shareholders: The co-founders control the majority of voting shares. I have no doubt that at some point in their history they could have cut a project or reduced the amount of capital they invest in random projects or free services. This may have helped them achieve higher returns for that quarter, but I don’t think they would be where they are now.

As a whole I think investors need to stop focusing on the short term, along with companies. Let the managers, the people who live that company every day, make the major decisions.

If you disagree, make a comment!