SOPHISTICATED FINANCE

Ohio Entrepreneurship Workshop

I am taking my show on the road. I am joining the folks at Bold Thinking to do a two day advanced workshop on entrepreneurship in Cincinnati on October 24-25. The "advanced" workshop is for company founders who are already in business but are probably struggling with their growth strategy or value creation. Bold Thinking's approach is summarized in this quote:

"The most important tool that today’s entrepreneur must possess is the ability to make value sustaining decisions that directly relate to their enterprise’s ability to remain competitive.  The Bold Thinking methodology provides a proven framework for decision-making designed to enhance the creation of value and strengthen competitive advantage." 

The workshop will combine lectures with case studies to improve business owner decision making. Also, each attendee will be able to work one-on-one with each of the workshop presenters to refine their business model and value creation strategy.

Bold Thinking was founded by Dr. Jeff Stamp and Colleen Post. Jeff is a widely recognized expert on innovation and creativity. He has worked with companies such as Pepsi and American Express on new product development and consulted to large companies around the world. He has also started four or five companies. Colleen and I worked together at the Pino Entrepreneuraship Center at FIU and she was instrumental in encouraging me to develop my workshop series on business model and financial planning. Colleen's area of expertise is in helping companies understand how their customers see them, a valuable but rarely discussed subject.

For more information on the workshop, send an email to post@boldthinking.com or contact me.

A Conundrum: The Press

Two recent "facts". First from President Obama:

"Journalistic integrity, you know, fact-based reporting, serious investigative reporting, how to retain those ethics in all these different new media and how to make sure that it's paid for, is really a challenge," Mr. Obama said. "But it's something that I think is absolutely critical to the health of our democracy." Source

From The Daily Stat (Harvard Business Publishing):

"The American public's assessment of the accuracy of the news media has reached a new low. 63% of American adults say that news stories are often inaccurate, compared to 53% in 2007 and 34% in 1985. 70% say that the news media tries to cover up its mistakes, and 27% describe the press as "not professional.""

Recognize that the Obama quote came from a newspaper, which perhaps makes it  suspect. The thought that President Obama views newspapers as serious investigative reporting is a bit outdated. Some bloggers have speculated that Obama is going to do a bailout of the certain prominent newspapers. This has to be a joke given Obama's previous experience as a constitutional law professor.

If newspapers want to succeed they need to re-establish their position as trusted news and information sources and stop trying to compete with breaking news sources such as CNN or MSNBC. However, re-establishing trust is a daunting challenge. Google did not call for consulting advice on the Facebook/FriendFeed acquisition, so I still have some time free to save the New York Times :).

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Miami, FL

Computing Power-OLPC Uruguay

President Tabaré Vasquez of Uruguay is perhaps the first president of a country to commit to provide a free computer to each student in a country. Uruguay has provided 400,000 OLPC computers to date. The benefits of providing the computers with connectivity (Internet access) and following closely the educational philosophy of OLPC have created social progress at levels that were never anticipated. This video makes that point clearly.

Miami,FL

Enterprise IT

Jeremiah Owyang is a former star analyst at Forrester Research and writes a well regarded blog called Web Strategy. In a post today he writes about collaboration and says:

"...IT must develop a collaboration strategy or run the risk of being blind-sided by business units developing it without them." (My emphasis)

At first this comment struck me as uncharacteristically not profound. Then I realized the real error--it begs the question of what is the mission of enterprise IT today. Web 2.0 and social media has turned all of us (with a heart beat) into "guerrilla" content providers, videographers, entertainers and diarists. The related technologies have unleashed a worldwide creative potential probably not seen since Gutenberg. To think that these technologies and methods will not be brought into the workplace is naive, but to think that the "company" should control these technologies is to miss the really big opportunity. These technologies liberate the workforce, foster unparalleled creativity and unencumbered by corporate IT departments will lead to a pace of change in business process and business model that is unheard of in corporate America.

What I think enterprise IT should become in the face of this dramatic change is:

1. The operators of the network (somebody has to maintain and upgrade connectivity and maybe maintain security)
2. Special forces type operators who possess certain special skills (e.g. Oracle, AWS, etc.) and are parachuted in to do quick prototyping for a project, if needed

Everything else is handled by individual employees. Productivity software selection becomes a personal decision (perhaps within a budget constraint), collaboration products are selected largely on the basis of who on a team will take the responsibility to maintain the collaboration platform, enterprise software is in the cloud and all that is really needed is domain expertise (accounting, finance, etc.) and whatever does not fall into these categories is probably outsourced to SAAS providers.

Some will argue that today's workforce requires training on software and therefore my model is tragically flawed. In another 5-10 years a whole generation of workers will have grown up with computers. There is no training or training manual for Facebook and workers will have developed the skills to learn software without help, especially if they get to pick the software they use. This new generation is also learning to use their "communities" for help on all kinds of questions and will naturally reach out to these informal sources for help.

The new technologies are breaking down the centralized control model of business in favor of greater individual initiative. Enterprise IT people better buy paratrooper boots (for dropping in) or go to work for cloud computing and SAAS companies.

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Miami, FL

Standards Affect Outcomes

 

Yesterday I heard Nicholas Negroponte speak at a conference. Dr. Negroponte was the founder of the world famous MIT Media Lab and now devotes considerable time to the One Laptop Per Child project (OLPC) which he also founded. Through OLPC, Dr. Negroponte is credited with inventing the netbook computers that are becoming so popular.

Dr. Negroponte told a story about how he founded the MIT Media Lab and decided that he would not solicit government grant money as the means to finance the organization. His concern was that the reporting and review process related to government grants would limit the risks that the researchers would be prepared to take in exploring new applications of computer technology.

The management lesson here is that how you set the standards for performance has an effect on the outcomes derived. Dr. Negroponte was willing to accept some failures in order to achieve significant breakthroughs and therefore eliminated standards (government grant review) that conflicted with this approach.

An example from my days in retailing may illustrate the point more simply. We started a new merchandise department in the stores. The merchandise we selected sold out in one day. All the buyers were ecstatic because they had achieved their sales goal so quickly. I asked "how much more of that same merchandise can we sell". By asking this simple question, I was able to change the standard to the riskier but more profitable goal of maximizing sales rather than selling out the inventory. The department went on to achieve $40 million in annual sales.

My experience is that people are incredibly resourceful and effective in achieving goals, given the proper resources, training, standards and goals. If results are sub-par but you have given the proper resources and training, the problem could be that you have established the wrong standards and you may not be encouraging people to take enough risk.

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Miami, FL

Interesting Accounting Workshop at FIU

Much as Spanish is the language of Miami, accounting is perhaps the language of business. Without an understanding of accounting, one cannot prepare or interpret financial statements and key performance indicators may or may not be valid indicators of a company's performance. While understanding a business may start with the business model, the real understanding comes from accounting information.

I have been asked by the Pino Entrepreneurship Center to expand their workshop series to include an "interesting" workshop on accounting. On October 16 I will present the first "interesting" presentation on accounting in the history of the world :) Not being a trained accountant, but being a long time practitioner as a CFO, we will avoid the minutiae, GAAP, and boring stuff and focus on the practical, useful art of financial analysis. I will also show that all accounting is really just six journal entries. This little known secret was shared with me by a Buddhist monk in Malaysia on the condition that I pass it on to humanity. (Really--just six journal entries.) If you have never understood accounting before, this is the chance to find enlightenment.

After the groundbreaking morning session on accounting, the afternoon is devoted to relating accounting to business model and key performance indicators.

To sign up for the workshop, register here. Proceeds go the Pino Center.

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Miami, FL

Business Opportunities in Cloud Computing

Chip Hazard, a partner at Flybridge Capital in Boston (VC firm), has a new blog which focuses on IT. His first post is about opportunities in cloud computing, a topic which I have discussed as recently as yesterday (and here and here.) Hazard identifies four major types of new business opportunities from cloud computing:

1. Enable enterprise data centers to be more cloud like (enterprise IT will operate using a cloud computing model)
2. Bridge the cloud and enterprise boundary (enterprise computing will use cloud computing to handle peak loads)
3. Provide tools to better manage cloud environments (self-explanatory)
4. Develop SaaS applications for vertical markets (Hazard believes that horizontal SAAS (CRM, ERP, etc.) is closed but industry specific applications are wide open

Hazard's last point is perhaps the most important for entrepreneurs--create companies enabled by the cloud.

"One of the aspects of cloud computing that excites us the most is that it is a huge enabler of innovation.  Cloud computing makes it so easy to develop and deploy applications that it levels the playing field for start-ups versus large, well capitalized, competitors.  As an entrepreneur, I can now buy access to world-class data center infrastructure for dollars an hour that would have previously cost me millions to purchase and deploy.  As a result, savvy start-up executives can look to create companies that would have previously been too capital intensive to contemplate."

Think about the perfect business model from a financial/economic perspective. It would have three characteristics:

1. Low initial capital requirement
2. Low fixed costs
3. Marginal cost to scale the business

Cloud computing allows the entrepreneur to meet all three requirements. As additional technology is added to cloud computing (e.g. Oracle, Calais, etc.) it will only get easier and more attractive to start new businesses.

I found Chip Hazard's blog through a tweet by @bussgang, his partner at Flybridge who writes a terrific blog.

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Miami, FL

Open Calais on Oracle

Much coverage is given to semantic search but few of the examples cited have much merit so far. One technology that is increasingly getting more attention is Thompson-Reuters' Calais, which I first wrote about in February 2008.

"The Calais Web service enables publishers, bloggers and sites of all kinds to automatically metatag the people, places, facts and events in their content to increase its search relevance and accessibility on the Web. It also lets content consumers, such as search engines, news portals, bookmarking services and RSS readers, submit content for automatic semantic metatagging that is performed in well under a second." (Thompson-Reuters)

Last week Oracle announced that it was integrating Calais into its database products to provide "semantic document indexing". As Oracle looks to build more functionality at the database product level, it's interesting to me that they chose Calais. Now combine this with Oracle available on Amazon Web Services and you have some powerful technology to start exploiting for new businesses.

If you are not following Calais, I think you should.

I found this story on Semanticweb.com

FIU Fall Entrepreneurship Workshop Series

The Pino Entrepreneurship Center at FIU has a full series of entrepreneurship workshops planned for this fall (see below). A new workshop on the Venture Capital Process by Nick Robbins should be particularly interesting. For additional information click here. All proceeds go to Pino.

Oligarchy Is Under Appreciated

Oligarchy is a form of government that does not get much discussion or support here in the U.S. After watching this video of Representative Pete Stark from California the viability of democracy may be called into question.

This video was sent by a loyal reader who found it on Zero Hedge. Profanity from the Representative may offend certain readers and you may wish to close the office door before viewing.

Knight Foundation Business Competition

The Knight Foundation is perhaps the largest philanthropic organization based in Miami. They have been a long time supporter of the Pino Entrepreneurship Center at FIU, which as a Board member I very much appreciate.

The Knight Foundation has just announced the 2010 Knight News Challenge, which awards up to $5 million for the development of the most innovative business concept using digital technology for community news. If anybody is interested to form a team from south Florida to win this competition, please contact me or leave a comment below.

I found the announcement on ReadWriteWeb.

Miami, FL