Category Archives: management

Death by accountant

Some people are not very good at their jobs. Accountants are one of the critical roles in a successful company. If they are good, the company can flourish. If they are bad, it can die. I have come to the conclusion that the worst employee a company can have is an accountant who thinks they are clever but is actually an idiot. If they work with an equivalent self-regarding idiot from marketing, they can destroy a company. Again, many marketing people are essential and very talented, but some just aren’t.

Permit me one rant as a good example:

My dishwasher just broke, again. It is Hotpoint. I wasted a fortune and six hours of my time to get one of their engineers out to fix it, under guarantee, then another to repair the damage he’d done by doing it wrong. Total repair time was 3.5 weeks because they don’t have enough engineers. They cost money apparently. The 6 hours was because an accountant had decided that they should use fewer staff in the call centre to save costs, and even though their customers probably earn more than a call centre staff member, that would be their money, not Hotpoint’s. It’s OK to waste customer’s money and time, even if they never want to buy from you again as a result. And I won’t!

I would normally have trashed the dishwasher, but the girl in the call centre assured me that this model should last for several years after the repair, and they’d give me a 3 month extended guarantee. So I did. Big mistake. Now, 3.5 months later, it has broken again, £110 for 3.5 months dishwasher, not good value at all. This time I decided to fix it myself, but I’d watched a TV program about people who had dishwashers repaired by independent engineers and they wouldn’t work because they weren’t allowed the codes to reset the machine. An accountant had worked out that that blocking independent fair-priced repairs would guarantee high-priced work for their own engineers. However, this is a broken hinge, so might not be part of the control system. I found the broken part, a far-too-thin for the job bolt, which had sheared due to normal everyday forces on it. The thin bolt is cheaper than a strong one, saving several pounds a year for Hotpoint, and designed to last past the initial parts and labour guarantee. After that, the few pence for the bolt is covered by the 5 years by the parts guarantee, but changing it is a £110 call-out fee. Savings are minimal, the potential extra high value work for already overloaded engineers is actually minimal, but the cost of no more sales of white goods ever again to that customer is large. The outcome is a small short term gain, followed eventually by death as customers blacklist them one by one.

This kind of accountancy decision happens everywhere. Identifying tiny savings here and there presumably wins a little praise from a line manager, perhaps an extra bonus for the staff that thought it up, but who  checks the cost of losing the customer by thoroughly annoying them? That usually isn’t one of the beans that gets counted.

Comet went bust a while back. I remember going there. They had a price guarantee on all their products, so why would anyone need to go anywhere else? Well, an accountant and a marketer decided they could offer a price guarantee to fool all their dumb customers by adding a different letter at the end of each product code, so that they could claim that it wasn’t actually the same product, so the comparison didn’t count. So all their customers stopped buying from them. Death by accountant.

A few of our local restaurants suffered presumed death by accountant too. They were doing very well, filling the place, with lots of happy customers. One day, they look at the books and an accountant explained that if they sold lower quality food, or smaller portions, then profit per meal would be higher. But they presumably didn’t take into account the effect on sales volume of selling lower quality food or reducing portions. Customers stop coming and buying, so they went bust. Death by accountant again.

One or two well-known supermarket chains frequently tried for far too long to fool their customers with fake half price offers and selling large packs at higher price per kilo than small ones. Then it seemed to catch them by surprise that people were going elsewhere. Their accountants and marketers presumably think that customers don’t ever realise the tricks and don’t mind having their intelligence insulted and their time wasted calculating value every time they visit. Their accountants and marketers are actually by far the most valuable employees to their competitors, who see their market share increasing rapidly at their expense.

Telecoms companies, TV companies and many others who sell contract based services take confusion marketing and trick contracts to extremes, with relative novelties such as putting everything possible on their sites except links to let you end a contract, which they make as difficult and time consuming and error ridden as possible. Tricking customers by auto-renewing and making sure that the auto-renew engages a month before a contract expires, and not letting the customer know near that time is tantamount to fraud, but is apparently legal. As long as they mention it in the small print once during the entire life of the contract they can avoid punishment. Obviously their customers don’t check every service they have every week and enter diary reminders to check years ahead on everything they buy, so this is very deliberate trickery. It might make a short-term win, but once a customer is fooled once, they are very likely to avoid doing business with that company again. It may take time, but those customer migrations will eventually be death by accountant too.

Automatically increasing insurance and hoping customers won’t check also trades short term wins against long term survival. The problem seems to affect many industry sectors. This suicide-by-accountant trend seems to be an epidemic at the moment. It must surely end soon, because customers are proving that they are willing eventually to migrate their custom to companies that treat them better. Those accountants that are praising their own cleverness today are actually accumulating a huge volume of angry customers who will happily leave them to die when the market inevitably provides such a sensible competitor.

Customers aren’t stupid. You can treat them as fools for a while, but eventually they will resent it. Then you’ll lose far more than you ever gained.

Complete course covering company conception – cremation

If you’re sick of crappy management guides that insist on using the same letter for each point, fight back in kind:

Corporate Cycle

The bright potential future for BT

I left BT in 2007 after 22 years. (For my US readers, BT is Britain’s version of AT&T). Like most employees of most companies, I had a few gripes over the years, but overall, BT was a good company to work for – humane to its staff, while trying to do a good job for both shareholders and customers in a difficult political climate, with pretty sound ethics. It wasn’t perfect, but what company is?

I currently have BT broadband problems, as you do, again, but I still like BT and still keep all my shares, hoping one day they might get back up to what I paid for them. BT holds a unique place in my investments, being the only one I have ever lost money on (well, if I actually sold my shares now I’d lose). But it is a good company, and entirely fixable. My perhaps unjustifiably high regard for the company in spite of any evidence to the contrary doesn’t extend to the board. BT has a lot of excellent and devoted staff, and they are the reason for its survival, I would say very much in spite of it a long history of rubbish CEOs, including Livingstone. (I would exclude Vallance from my rubbish CEO list, I thought he actually did a pretty good job in the circumstances he faced.) As an engineer who could see the vast potential profits from relatively small investments that were open to a decent sized IT company, they all seemed incompetent to me, determined to ignore those potential markets and investing stupidly in others but focusing mainly on cost cutting as the only tool they could really understand. I don’t think any BT CEO since 1985 has deserved their grade or pay. BT gives its staff appraisals, and if I was his boss, I’d have given Livingstone 3 out of 10. At least now he’s in government, he will just be one incompetent among many so he will blend in just fine.

I won’t bother with the details of mistakes made. They are history. The future could still be bright if the new CEO is any good. Sadly, I don’t know Patterson. He joined the board after I left and I had no contact with him beforehand so I know nothing about him. I wish him the very best of success, for everyone’s sakes and if he does well, I’ll very happily sing his praises.

(I know it’s easy to say I could have done a far better job than most BT CEOs. I am certain that I could, and I certainly wouldn’t have made most of the huge errors that I saw, but anyone could say that and of course it is unprovable , and in any case,  I knew lots of other employees that would still have done much better than me. I guess it is a bit like US presidents. With 300 million people to pick from, you really have to wonder how the hell some of them ever got elected.)

So, what should BT do now? I declare my financial interests. I have a few shares, and one day if I am still alive they’ll give me a pension, and I remain a customer, so I do really want them to flourish, but otherwise I have had no financial exchanges with BT since I left in 2007.

A lot of the potential for BT has existed for a long time, and it is proof of previous CEO incompetence that it remains mostly untapped. Other areas are quite new.

There are a few valuable assets that BT makes too little use of to date. One is trust. BT has always achieved a very high trust rating from customers. Sure, they might whine about occasional lousy customer service or call centre delays, but mostly they still trust BT. Technically, customers assume their kit will work pretty reliably and they will eventually fix it with only modest annoyance when it fails. That’s better than it sounds compared to a lot of companies (Hotpoint, British Gas and O2 to name three at the very top of my most recent customer service hate list). They also trust BT on security, again an advantage not to be sniffed at. More importantly, customers trust it morally. It is quite a nice company. It pays its taxes. It has good old fashioned values and doesn’t do services that are morally questionable except where required to by law. It leans towards the customer’s side on questions of privacy v state surveillance. Again, a whole lot better on several important topical points than many big IT and web companies right now. A decent CEO would make his marketing departments do wonders with those advantages.

BT’s main physical asset is a very widespread network, much of which is fibre. But is has seriously floundered on decent speed broadband roll-out for badly miscalculated economic reasons and has ended up losing large numbers of customers onto mobile and other broadband providers. Firstly, it has to fix that by greatly accelerating its roll-out of fibre to cover the entire population within towns and suburbs. Further than that, it can plead poverty to government to extract subsidies for uneconomic roll-outs in some country areas, and fob others off with custom solutions. How close the fibre actually gets to the end customer is not important and there are many feasible architectural solutions. The data rate the customer gets is important.

The data rates it needs to provide via that fibre must be at least 50Mbit/s, which I calculated a long time ago is the latent demand of an average household today. It must be ready to increase those basic rates quickly through 100Mbit/s in 2015 into Gbits/s soon after.

It should by default provide high speed wireless from all of those homes into the nearby area. This will allow serious competition with mobile companies, especially since many customers carry tablets with only wireless LAN access. Those tablets and many smartphones rely on cloud provision for many services such as photo, video and music storage, as well as download services such as TV on demand. Decent wireless rates in the vicinity of most homes and business properties would make fairly ubiquitous broadband a reality, with none of the tiny date rate limits and poor connections offered by mobile operators. (As an aside, not doing that ages ago instead of crippling the company with the costs of unnecessary 3G licenses was one of the big errors I mentioned).

With high speed ubiquitous access, and still loads of building space to place storage and servers, BT could be a first class cloud provider (as Bonfield should have understood, coming from a computing company in the days when the cloud was still called distributed computing and computing on demand). Its engineers have understood cloud technology principles since the 80s, but it has never really invested in it properly. Now that other companies are threatening to put in their own access to their own clouds, BT is vulnerable to attack if it doesn’t quickly seize the opportunity by the throat. This may well become another missed opportunity for BT.

Another one (that CEO Heiffer should have understood, coming as he did from the finance world) is banking. BT manages to charge profitably on calls that cost just a few pence. Micro-payments is resurfacing once again as a valuable service. So far, no company has succeeded in delivering an acceptable micro-payments service but BT has the geographic coverage and technical skill to pull it off. It could go further and do proper full-service community banking. Again, a huge advantage has fallen into its lap thanks to the demise of trust in conventional banks. If any company could make community based banking work, BT could. The political climate is very favourable to get appropriate regulatory consent, society is ready and even eager, and the technology is available and proven with which to make it. Trust is the magic extra ingredient that BT has more of than other players.

Cloud financing, buying and other community based enterprises are all up-and-coming now, drawing from social and business versions of cloud thinking. Again, the core ideas go back decades. BT has been involved in their debates since over 20 years ago and holds a good hand of cards. It still could help a great deal to stimulate economic redevelopment of the UK by implementing just some of its ideas in this space. It is ironic that Livinsgtone failed to understand this enormous opportunity while he was CEO of BT, yet has now been made Minister of State for Trade and Investment. Why would anyone think he will suddenly understand now?

BT could also develop some of its many inventions made at its research labs. In many cases, small development costs are all that should be needed to generate large incomes. BT’s policy for ages has been to starve any forward looking R&D and only feed proven markets. That is no way to grow. Serious R&D investment could reap many times over in rewards. AI, convergence of IT with biotech, sponge nets, augmented reality, novel interfaces, 3D comms, digital bubbles, biomimetics and many others offer potential. Even the railways are open to attack. Conventional rail is still only equivalent to BT’s old circuit-switched lines that it used until the 1970s. A company that has been in front runners for 40 years of packet switching developments ought to be able to apply equivalent thinking to rail and road to gain rich rewards, converging time-wise as it does now with self driving cars, electrics, self organisation, high speed wireless, super-capacitor development and a host of other technologies BT understands well. Here again, rich pickings are available, and BT has one of the best positions to capitalise.

I could go on, but that is enough examples for now. BT has been offered a fresh start with a fresh CEO. If he is even a bit brave he could easily achieve things very far beyond any of his predecessors. As I said, I don’t know him so have no idea if he will be good or bad. Let’s hope he is up to the job and not just another huge disappointment.

Deep surveillance – how much privacy could you lose?

The news that seems to have caught much of the media in shock, that our electronic activities were being monitored, comes as no surprise at all to anyone working in IT for the last decade or two. In fact, I can’t see what’s new. I’ve always assumed since the early 90s that everything I write and do on-line or say or text on a phone or watch on digital TV or do on a game console is recorded forever and checked by computers now or will be checked some time in the future for anything bad. If I don’t want anyone to know I am thinking something, I keep it in my head. Am I paranoid? No. If you think I am, then it’s you who is being naive.

I know that if some technically competent spy with lots of time and resources really wants to monitor everything I do day and night and listen to pretty much everything I say, they could, but I am not important enough, bad enough, threatening enough or even interesting enough, and that conveys far more privacy than any amount of technology barriers ever could. I live in a world of finite but just about acceptable risk of privacy invasion. I’d like more privacy, but it’s too much hassle.

Although government, big business and malicious software might want to record everything I do just in case it might be useful one day, I still assume some privacy, even if it is already technically possible to bypass it. For example, I assume that I can still say what I want in my home without the police turning up even if I am not always politically correct. I am well aware that it is possible to use a function built into the networks called no-ring dial-up to activate the microphone on my phones without me knowing, but I assume nobody bothers. They could, but probably don’t. Same with malware on my mobiles.

I also assume that the police don’t use millimetre wave scanning to video me or my wife through the walls and closed curtains. They could, but probably don’t. And there are plenty of sexier targets to point spycams at so I am probably safe there too.

Probably, nobody bothers to activate the cameras on my iphone or Nexus, but I am still a bit cautious where I point them, just in case. There is simply too much malware out there to ever assume my IT is safe. I do only plug a camera and microphone into my office PC when I need to. I am sure watching me type or read is pretty boring, and few people would do it for long, but I have my office blinds drawn and close the living room curtains in the evening for the same reason – I don’t like being watched.

In a busy tube train, it is often impossible to stop people getting close enough to use an NFC scanner to copy details from my debit card and Barclaycard, but they can be copied at any till or in any restaurant just as easily, so there is a small risk but it is both unavoidable and acceptable. Banks discovered long ago that it costs far more to prevent fraud 100% than it does to just limit it and accept some. I adopt a similar policy.

Enough of today. What of tomorrow? This is a futures blog – usually.

Well, as MM Wave systems develop, they could become much more widespread so burglars and voyeurs might start using them to check if there is anything worth stealing or videoing. Maybe some search company making visual street maps might ‘accidentally’ capture a detailed 3d map of the inside of your house when they come round as well or instead of everything they could access via your wireless LAN. Not deliberately of course, but they can’t check every line of code that some junior might have put in by mistake when they didn’t fully understand the brief.

Some of the next generation games machines will have 3D scanners and HD cameras that can apparently even see blood flow in your skin. If these are hacked or left switched on – and social networking video is one of the applications they are aiming to capture, so they’ll be on often – someone could watch you all evening, capture the most intimate body details, film your facial expressions while you are looking at a known image on a particular part of the screen. Monitoring pupil dilation, smiles, anguished expressions etc could provide a lot of evidence for your emotional state, with a detailed record of what you were watching and doing at exactly that moment, with whom. By monitoring blood flow, pulse and possibly monitoring your skin conductivity via the controller, level of excitement, stress or relaxation can easily be inferred. If given to the authorities, this sort of data might be useful to identify paedophiles or murderers, by seeing which men are excited by seeing kids on TV or those who get pleasure from violent games, so obviously we must allow it, mustn’t we? We know that Microsoft’s OS has had the capability for many years to provide a back door for the authorities. Should we assume that the new Xbox is different?

Monitoring skin conductivity is already routine in IT labs as an input. Thought recognition is possible too and though primitive today, we will see that spread as the technology progresses. So your thoughts can be monitored too. Thoughts added to emotional reactions and knowledge of circumstances would allow a very detailed picture of someone’s attitudes. By using high speed future computers to data mine zillions of hours of full sensory data input on every one of us gathered via all this routine IT exposure, a future government or big business that is prone to bend the rules could deduce everyone’s attitudes to just about everything – the real truth about our attitudes to every friend and family member or TV celebrity or politician or product, our detailed sexual orientation, any fetishes or perversions, our racial attitudes, political allegiances, attitudes to almost every topic ever aired on TV or everyday conversation, how hard we are working, how much stress we are experiencing, many aspects of our medical state. And they could steal your ideas, if you still have any after putting all your effort into self censorship.

It doesn’t even stop there. If you dare to go outside, innumerable cameras and microphones on phones, visors, and high street surveillance will automatically record all this same stuff for everyone. Thought crimes already exist in many countries including the UK. In depth evidence will become available to back up prosecutions of crimes that today would not even be noticed. Computers that can retrospectively date mine evidence collected over decades and link it all together will be able to identify billions of crimes.

Active skin will one day link your nervous system to your IT, allowing you to record and replay sensations. You will never be able to be sure that you are the only one that can access that data either. I could easily hide algorithms in a chip or program that only I know about, that no amount of testing or inspection could ever reveal. If I can, any decent software engineer can too. That’s the main reason I have never trusted my IT – I am quite nice but I would probably be tempted to put in some secret stuff on any IT I designed. Just because I could and could almost certainly get away with it. If someone was making electronics to link to your nervous system, they’d probably be at least tempted to put a back door in too, or be told to by the authorities.

Cameron utters the old line: “if you are innocent, you have nothing to fear”. Only idiots believe that. Do you know anyone who is innocent? Of everything? Who has never ever done or even thought anything even a little bit wrong? Who has never wanted to do anything nasty to a call centre operator? And that’s before you even start to factor in corruption of the police or mistakes or being framed or dumb juries or secret courts. The real problem here is not what Prism does and what the US authorities are giving to our guys. It is what is being and will be collected and stored, forever, that will be available to all future governments of all persuasions. That’s the problem. They don’t delete it. I’ve said often that our governments are often incompetent but not malicious. Most of our leaders are nice guys, even if some are a little corrupt in some cases. But what if it all goes wrong, and we somehow end up with a deeply divided society and the wrong government or a dictatorship gets in. Which of us can be sure we won’t be up against the wall one day?

We have already lost the battle to defend our privacy. Most of it is long gone, and the only bits left are those where the technology hasn’t caught up yet. In the future, not even the deepest, most hidden parts of your mind will be private. Ever.

Phoenix-based business strategy will win in a fast-changing world

I am leaving for a conference in a few minutes, so this one will be brief. I hate working in airports and hotels.

Businesses worry how they will survive the next 5, 10, 15 years. They should perhaps stop worrying. The primary purpose of a business is to make money. So here is a better strategy than worrying and spending loads on long term planning:

Spot opportunity

Use cloud based thinking and virtuality to get business up and running explosively quickly.

Employ as few staff as possible as full employees, buy the rest in on short term consultancy contracts and freelancing. That keeps admin overheads minimal. Make them use their own kit and use cloud for IT support and provision. That makes IT staff, risks and costs minimal.

Develop quickly and make your money fast with no regard to longevity.

When competition or other market erosion forces start making an impact, cash in and close down while value is still good

Re-invest in next idea, rising like a phoenix using the cash from the last business

This approach is very light-weight. It needs far less administrative load and can be far more task focused, with higher profit margins.

Live fast, die young, resurrect.

OK, flight to catch.

 

The rise and fall of the web

This is my part of a joint newsletter with Rohit Talwar, his was published just now as a guest blog.

The rise and fall of the web

20 years ago, the web was in its infancy and the first conferences appeared where we could all discuss what was coming next. Even then the need was obvious for search engines, portal sites, firewalls, social networking, online shopping, auctions, discount buying schemes and so on and even the seedier side of the web was already obvious back then. Not much around today on the web wasn’t being discussed 20 years ago. It just took that long to emerge and evolve into what was anticipated. What has happened is exposure of the naïve optimism of some of the early debate.

Over the coming years we saw the expected creation of companies like Amazon and ebay, Facebook, Twitter and Google, and the rise of already existing companies such as Microsoft, Apple and Samsung, in some cases from niche player to market dominance. Without exception, the companies I mentioned deserve praise for struggling through the difficult phases of market creation and the sometimes huge and prolonged losses leading up to break-even and eventual profitability. They all started with a dream and made it happen, knowing they would succeed if they worked hard enough at it.

Without wanting to remove any of that praise, it is hard not to wonder if at least part of the dream is starting to turn sour. Is there evidence now that power corrupts? Does possession of a strong market position always lead inevitably to market abuse?

In each case, there are recent examples of less-than-saintly behaviour, but some issues are spreading as a problem, so rather than pick on individual companies, I’ll focus on the issues. In each case, a large company with little effective competition is in strong position to force these policies since they know customers and clients can’t easily just walk away. There is no cartel, but if a problem happens to affect all the main providers for a service, or it is a de-facto monopoly, you really have no choice.

Privacy invasion or at least scant regard for privacy is the biggest issue for some, introducing policies that make it hard for users to remain private. In this case, the reason is obvious. Privacy conflicts with extracting maximum market value from a customer’s personal data. I don’t personally want everyone to know what I just bought online, what I watch on TV, what games I play or what music I am listening to, or to have full access to everything I ever typed on a social networking page. The choice we seem to be presented with is simple. If you don’t want to be fully exposed 24-7, either don’t use the web or a mobile app, or be prepared to spend time frequently to check every site you use carefully for their latest policy changes to make sure an oversight doesn’t allow your privacy doesn’t fall through a new hole they just dug. But even that may not be the real choice now. The emerging pattern seem to be that changes may be introduced retrospectively, eradicating any value in privacy commitments in existing policy. If that behaviour spreads, then any privacy you think you have today is merely an illusion.

Burning the candle at both ends is another recent issue. Although the web has few of the costs associated the with high street, large web companies are charging high fees now to companies to sell via their site, much the same as property developers with the best locations can charge high fees to shops. That end of the candle is well alight, but customers are finding the discounts offered are often far less now too. Now that they have been psychologically hooked by the web empires, prices are rising.

Walled gardens were a consideration for regulators when mobile and broadband networks were emerging – I took part in several workshops discussing their merits and drawbacks. Telecoms regulators understood well that dominant telecoms companies might try to force customers to use only services within their own areas of control, i.e. to stay in their walled garden, and they legislated accordingly to protect customers. It was presumed that competition would suffer greatly if people were not free to wander as they pleased and exploitation would follow soon after.  However, although some of the web giants are heading rapidly and determinedly down exactly that path, the authorities are either looking the other direction or unable to do anything about it. It seems that any regulators that do exist have too vague boundaries on their remits, or the companies fall outside their jurisdiction geographically, or they simply have too many issues to deal with and can’t keep up. It is unacceptable that we now by default have arrived at a business platform that lends itself to abuse but isn’t being properly controlled by the normal regulator processes that apply as standard elsewhere.

Arrogance is a term we hear thrown at web giants frequently now, and it does seem appropriate when a large company ignores protests by its customers and imposes policies that significantly affect the terms and conditions that applied when they first became a customer. Even incrementally small changes can add up to large change in a short time, but if customers have invested time and effort building a profile or establishing a place or network on a site, the personal costs of migration can be too high. There ought to be equivalent rights protecting the interests of customers online just as in the physical world, but online providers appear to be able to make their own conditions of use with much greater scope for abuses, knowing that very few customers will read many pages of small print. Especially where websites feature heavily in everyday use, and where not being a user might even may be a career or social impediment, there should be more protection from arrogance and unilateral determination and management of user rights. Some regulatory body should be making sure terms and conditions are fair and balanced because the market isn’t doing that by itself.

Another aspect of arrogance is the enthusiasm to avoid taxes by exploiting holes in the law, and reading between the lines, it is as if the companies think they know best how money should be spent for humankind’s best interests, not governments. They may be right about government, but that doesn’t excuse arrogance.

Reintermediation is a direct consequence of walled gardens but is an issue in its own right. Early analysis of the web suggested it would lead to perfect markets, where people would be in direct contact with suppliers, thereby cutting out the middle man and his costs while forcing perfect information and hence maximum competitiveness. With good search, it would be easy to find all potential suppliers for something and compare them directly, and there would be no need to go via an agency. What we have now is interesting in that the search sites have themselves become intermediaries, and comparison sites another layer of that, listing results from a subset of suppliers. So instead of removing an intermediary we generated two new ones, three if you use an app store to do it. Everyone wants a slice of the pie of course, but the web was meant to bypass that, and it simply hasn’t. People can go direct, but it doesn’t take long to discover that using a search engine will often put hundreds of pages of the wrong sites before the one you search for. Most of the listings on the first several pages will often be intermediary sites.

In spite of all this, the potential of the web hasn’t gone away. It still allows word of new sites to spread rapidly, for reputations to be made and lost, for empires to spring up overnight, and for old ones to crash and burn. Boredom is under-rated as a motivation to change too. Social network sites in particular are highly vulnerable to their customers simply getting bored and leaving, but new designs and novel ideas can present a real threat to any of them. The sword of Damocles hangs over all.

For all their size and momentum, none of the web giants is guaranteed longevity. As some of yesterday’s giants discovered, a startup can replace them in just a few years. Maybe the first generation of web giants has climbed high, but decadence and abuse of power have made them ripe for conquest. All we need now is to wait for the imminent emergence of the second generation.

Technology Convergence – What’s your Plan? Guest post by Rohit Talwar

Rohit is CEO of Fastfuture and a long-standing friend as well as an excellent futurist. He and I used to do a joint newsletter, and we have started again. Rohit sends it out to his mailing list as a proper newletter and because I don’t use mailing lists, I guest post it here. I’ll post my bit immediately after this one. I’m especially impressed since his bit ticks almost as many filing category boxes as it uses words.

Here is Rohit’s piece:

Technology Convergence – What’s your Plan?

I have just returned from South Korea where I was delivering a keynote speech to a cross-industry forum on how to prepare for and benefit from the opportunities arising from industry convergence. South Korea has made a major strategic commitment starting with government and running through the economy to be a leader in exploiting the potential opportunities arising from the convergence of industries made possible by advances in a range of disciplines. These include information and communications technology, biological and genetic sciences, energy and environmental sciences, cognitive science, materials science and nanotechnology.  From environmental monitoring, smart cars, and intelligent grids through to adaptive bioengineered materials and clothing-embedded wearable sensor device that monitor our health on a continuous basis – the potential is vast.

What struck me about the situation in Korea was how the opportunity is being viewed as a central component of the long-term future of Korea’s economy and how this is manifested in practice. Alongside a national plan, a government sponsored association has been established to drive and facilitate cross-industry collaboration to achieve convergence. In addition to various government-led support initiatives, a range of conferences are being created to help every major sector of the economy understand, explore, act on and realise the potential arising out of convergence.

I am fortunate to get the opportunity to visit 20-25 countries a year across all six continents and get to study and see a lot of what is happening to create tomorrow’s economy. Whilst my perspective is by no means complete, I am not aware of any country where such a systematic and rigorous approach is being taken to driving industry convergence. Those who study Korea know that this approach is nothing new for them – long term research and strategic planning are acknowledged to have played a major role in the evolution of its knowledge economy and rise of Korea and its technology brands on the global stage. Coming from the UK, where it seems that long term thinking and national policy are now long lost relatives, I wonder why it is that so few countries are willing to or capable of taking such a strategic approach.

Rohit on the Road

In the next few months Rohit will delivering speeches in Oslo, Paris, Vilnius, Warsaw, Frankfurt, Helsinki, Denver, Las Vegas, Oman, Leeds and London. Topics to be covered include human enhancement, the future of professional services, the future of HR, transformational forces in business, global drivers of change, how smart businesses create the future, the future technology timeline, the future of travel and tourism, the future of airlines and airports and the future of education. If you would like to arrange a meeting with Rohit in one of these cities or are interested in arranging a presentation or workshop for your organisation, please contact rohit@fastfuture.com

Starbucks isn’t wrong to avoid tax, the law is wrong. A universal payment tax would fix it.

Tax avoidance is in the news a lot at the moment. Maybe that is partly because tax as it is now is seen to be unfair and unjust so people feel less bad about trying to avoid it.  In response, the idiots in charge of our taxing seem to think they should ask people and companies to pay taxes voluntarily.

Companies usually exist to make money, and it would be bad management to voluntarily pay more tax anywhere than is required by law. The world offers a wide range of tax regimes and of course a multinational corporation will do its best to exploit the different rates. But governments are meant to be in charge of law, that’s what they are for. It is their job to ensure that the law is fair and that everyone has to pay their share of taxes. But they aren’t doing that at all well. Governments are at fault, not companies or individuals that choose to pay the (creatively) legal minimum. The tax net may be full of holes, and companies are walking through them, but it is government that designed, made and maintains the net. 

Companies such as Starbucks can legally avoid paying UK tax by paying fees for licenses, use of the brand name and other intellectual property to overseas companies in low tax areas. The value and price of intellectual property can be set at pretty much any arbitrary level, and it can be moved around the world instantly so it is an especially useful tool for tax avoidance schemes. We have been in the information economy for decades now, and it is a reflection of competence and extreme sluggishness of the tax authorities that tax law hasn’t kept up. Starbucks have paid their due taxes, there is just a huge mismatch between what is due and what should be due in a competent tax regime.

It isn’t an impossible task to tax properly. There are lots of ways of taxing things so that all companies pay a fair contribution. The situation now is simply ridiculous and government should pick a mechanism and implement it quickly.

The most obvious perhaps is that the government could regulate that all companies must pay tax on the same proportion of their global profits as the proportion of their revenue that is earned in the UK. And that must include web sales and downloads, and most importantly, any intellectual property such as licenses. If Starbucks buys licenses to operate in their particular way, the license sellers would pay the appropriate taxes on the corresponding proportion of their global profits too.

Of course, that would get complicated if overseas suppliers could simply refuse to pay or even to surrender data on their accounts. But that can be solved by allowing accountants to offset purchases only from licensed companies. The responsibility to either pay the tax themselves, or buy from someone also paying tax here would then stay with Starbucks.

Another way of ensuring companies pay proper tax would be to demand payments based on an industry average cost pattern. This would be subject to arguments and would be more complex so would be more expensive to administer.

A third way is using a purchase tax in place of corporation tax. Every company would pay the purchase tax on everything they buy. If it appears as a cost on the UK balance sheet, purchase tax must be paid on it. What a company does overseas should be of no concern of the UK authorities, but if they want to put a UK operating license from a subsidiary or partner on their UK accounts, tax must be paid on it. If this tax is set at the right level so that the total government tax take stays the same overall, the economy should benefit through simplicity and administrative cost reduction.

It is possible to have different tax levels for different kinds of purchase, exceptions, special cases and so on, but each paragraph of extra regulation is another than can be interpreted and used by creative accountants and lawyers.

One of the implications of having a simple purchase tax is that there is a huge incentive to simplify the value chain into as few links as possible. If money is taxed each time it leaves a company, then having fewer company boundaries in the value chain would be cheaper. Keeping as much of the value chain in house as possible would reduce this, but there would be strong pressure to allow reclaiming of purchase taxes across boundaries in the value chain. Of course, that is getting quite close to what VAT is, and we are all familiar with that already. Companies collect VAT on their sales and claim back VAT on purchases. It therefore doesn’t discriminate against companies on the basis of value chain design. It just collects tax on the difference in value between the raw materials and finished products.

So, why not abolish corporation tax entirely and switch to a refined version of VAT, at a higher rate if need be? Why indeed. This refined VAT would be payable on all purchases, from anywhere, but we could modify it so it could still be reclaimed by businesses for purchase from other UK VAT paying suppliers. The important thing is notionally to seal the borders so that all purchases in the UK are taxed. I am not personally in favour of making this refined VAT reclaimable, I think that draws an unjustifiable distinction between companies and individuals that can then be exploited by company owners and is the source of much tax evasion even today. I think facilitating virtual companies and optimising end to end value chain design is the best approach.

Extending this approach, why not also replace income tax and national insurance by a sort of VAT on salary? That would amount to a flat tax, but people who get paid more would pay more tax too, and that in itself is already an improvement to today. If this VAT also was applied to payment of dividends, capital gains, bank interest, inheritance and all other forms of payments, then the person on the ordinary payroll would pay the same rate as the owner of the company, someone selling their shares, the shareholders, inheritors, everyone. What’s not to like? Rich people pay more, poor people pay less. Everything is simple, all loopholes removed. All outgoings from companies taxed at the same level, and all forms of income ditto. A single page of tax law to replace 18000 pages. People living off shore wouldn’t escape any more because their UK-sourced income is taxed at its UK point of payment. Their income from other countries is the affair of those other countries. Just like usually happens today, the money is taxed when coming into the company as a sale, and once when paid out to someone as wages or dividends. But twice would be a huge improvement on the hundreds of times money is taxed today via all the hidden taxes. This revised system would be far simpler and more transparent and if it is kept simple and transparent, with no added loopholes, people would see its fairness. The more secure net means that everyone would pay less tax except those who had previously been avoiding it.

A wannabe tax-avoiding ‘consultant’ might arrange to work for free in the UK, with no UK payments to be taxed, paid instead by an offshore company into an off-shore account, but to avoid tax, that money would need to have come from an overseas operation. If it came from UK profits, it would have been taxed when the money came into the company, and again when it was paid out to the overseas one. People paid by overseas companies out of overseas money are not the UK’s affair. As far as the UK is concerned, they are working for free.

Smarter people than I have calculated that we’d need to set the rate to take about 20% of each transaction. Just a bit more than VAT already is then (VAT adds 20% on so takes 20/120ths=16.67%). So, if that is right, and we seal all the holes and charge it on everything, we can all look forward to a country with no other taxes except a slightly refined form of VAT, that is paid on everything.

So it wouldn’t matter how you got your money. 20% would be paid when you are given it and on any interest the banks pay you on the remaining 80% from saving it. When you spend it, another 20% is gone, leaving 64% of actual value. This compares favourably with today where hundreds of taxes hide away unobserved. They should all go.

I am greatly in favour of the simplicity this offers, but it isn’t without problems. What about selling shares, or houses? If you have to pay 20% on the full cost every time you buy a new house that would greatly penalise people who move often. It also cripples the stock market if people pay 20% each time they swap shares. People would demand exceptions, but each time exceptions are created, new opportunities to avoid tax arise, that can be exploited by clever accountants. So any exceptions would have to be few and well designed with tax avoidance avoidance in mind.

The future of women in work

Women v men: the glass ceiling is full of holes

Most people I think would agree that at least in the West. the glass ceiling stopping women getting to the top maybe hasn’t vanished but has at least huge gaping holes in it. Most big companies and organisations have anti-discrimination policies, and many go as far as having have quotas and other forms of positive discrimination. There are still some where women get a second class deal, but not many now. So assuming that the war is almost won on that front, what does the future hold for women in work? Well, mixed news I think, some good and some bad.

Winner and loser industries

Technology tends not to have all its impact in one lump, rather working over decades to accomplish its full impacts. Such it is with Artificial intelligence and robotics. Lots of manufacturing shop floor jobs have already been gradually replaced by robotics, with more impact to come, and many analytical and professional tasks will gradually be displaced by AI, with many others outsourced. Traditionally male-dominated jobs are being hardest hit and will continue to be, while gender neutral or female-dominated jobs such as policing, social work, sales and marketing, teaching, nursing etc will hardly be affected. Many of the men made redundant will be able to readjust and re-skill, but many will find it hard to do so, with consequent social strains.

Just as power tools have reduced the economic advantage of being physically strong, so future AI will reduce the economic advantage of being smart. What is left is dominated by essentially emotional skills, and although the polarisation certainly isn’t complete here by any means, this is traditionally an area where women dominate.

Looking at this over the whole spectrum, this pic shows some example areas likely to suffer v those that will flourish. Obviously I can’t list every bit of the entire economy.The consequences of AI are mainly influenced by the fact that few jobs are 100% information processing or intellect. Some is usually interpersonal interaction. Administrators will find that the pen-pushing and decision parts of their jobs will decline, and they will spend more of their time on the human side, the emotional side. Professionals will find that they spend more time with clients dealing with the relationship. Managers will spend more time on motivation, leadership and nurturing. Interpersonal skills, emotional skills, empathy, sympathy, caring, leadership, motivation – these are the primary skills human will provide in the AI world. The information economy will decline and gradually be replaced by the ‘care economy’. Although men can and do offer some of the skills in this list, it is clear that many are more associated with women, so the clear conclusion is that women will acquire an increasing dominance in the workplace.

Global v local

However, another consequence of the same forces is that globalisation of work will start to reverse in some fields, because if high quality human contact is essential part of the job, it is harder to do it from a distance. Some jobs require actual physical contact and can’t be done except by someone next to the customer. Looking at a diverse basket of forces, this is how it works out:Another trend in favour of women is that with increasing restructuring or businesses around small cooperatives of complementarily skilled people, networking is an increasingly important skill.

Low pay will still be an issue

Although women will generally have an easier time than men if emotional skills dominate, the evidence today is that most such work is not highly paid, so even though women will have less difficulty in finding work, it will not be high paid work. High end interpersonal skills such as senior management will fare better, but with extensive industry restructuring, there may be less need for senior managers.

Polarisation of pay

In spite of these trend that affect the vast majority of people, star performers aren’t affected in the same way. Although the markets are already depressing wage levels for groups where there is a lot of supply available, the elite are being rewarded more and more highly, and this trend will continue. The hard facts of life are that a very few individuals make a real difference to the success or failure of a company. The superstar designer, scientist, market analyst, manager or negotiator can make a company win. Letting them go to the competition is business suicide, so they justify and demand high remuneration. Sadly, 99%of us are outside the top 1%. Think about it. There are 70 million people in the global top 1%. Even spread across every sector, and ignoring those too young or old to work, that is stiff competition.

Market gender neutrality

Especially on a large scale, the marketplace is essentially gender neutral in the sense that customers generally don’t care whether a business is run by men or women (it certainly isn’t neutral in the mix of male and female customers for particular products and services of course). The market cares about marketing, price, quality, availability and location and a few other things. Gender has little impact. Companies can’t survive on the gender make-up of their staff, only results really count in the market.

Turbulence in the market caused by rapidly changing technology, especially IT, accelerates levelling of the playing field by favouring new business models and adaptable companies and wiping out those that can’t or won’t adapt. By contributing to accelerating change, IT thus acts in accelerating the downfall of a patriarchal business environment in favour of one based purely on merit. It expedites the end of the war of women v men but when it runs to completion, women will play against men and against each other on a truly level playing field.

Women v women: attractive v plain, young v old

Now that the glass ceiling is less of an issue, the battleground is moving on to appearance discrimination, which obviously links to age too. We now often hear older or plainer women complaining that the best jobs are going to pretty young things instead of the more experienced women who sadly have left their prettier days behind, especially in high profile media and customer facing jobs.

A real world example illustrates the problem well. A while back, the BBC’s treatment of older women was ruled discriminatory by the courts because they had favoured attractive younger women to put in front of cameras over older, less attractive ones. However fair it might be, such a ruling puts the customer in conflict with the regulator. Although such a ruling may appear fair, actually all the female presenters lose, as viewers will simply swap channels to programmes hosted by presenters they want to watch. The trouble is that regulators can rule how companies must behave internally, but they can’t prevent customers from using their free choice what to buy. If some viewers prefer to watch attractive young news readers, they can and will. Those programmes hosted by less attractive ones will see a reduction in viewer numbers, and consequential drop in revenue from advertising on those programmes, or in the BBC’s case, just a drop in viewers. Unless the customer has no choice in what they watch, the courts can’t level the playing field.

It isn’t just on TV that such discrimination occurs, but throughout industry. In male dominated areas, with mostly men at the top, attractive women will be favoured at interview time, and will then tend to dominate senior posts, so that quotas can be filled but men get to choose which women fill them. In airlines, it is hard not to notice if you fly frequently, that the most attractive stewardesses end up in first and business class, with the less attractive and older ones serving the economy cabin. And on a front reception desk, bar, sales jobs, and PR, attractive women have an obvious advantage too.

It looks as if this issue is likely to dominate as we move into an economy where women as a whole have the advantage over men. And it will be much harder to legislate equality in this case.

Experience v looks & IQ

With the pension crisis growing daily, it is inevitable that people will have to work longer than today. Social skills tend to grow with age and experience in contrast with intellectual speed and agility and physical beauty, which tend to decline with age. This is a fortunate trend as it enables work to be done by older people at just the time that retirement age will have to increase.

Only pay top pay for top people

We often hear organisations say they need the best people, therefore have to pay the best too. This line of argument is seriously flawed but is cited in every boardroom remuneration battle. It too often results in highly excessive reward for mediocre performance. In many cases, someone as good or even better could be employed for far less.

I meet a great many CXOs in my line of work, and with a few exceptions who really are worth their pay, I have noticed very little correlation between rank and overall capability or quality of judgement. Why should people be paid much better if they aren’t a lot better than their potential replacements? There are a few stars who ought to be rewarded, but most senior posts can be filled just as well at lower cost. Only vested interests maintain the ubiquity and longevity of this flawed reasoning that top executives have to be paid very richly within a company. 

In the vast majority of situations, and at every stage of promotion, a number of candidates apply for the job. There is usually very little to choose between the top candidates, but someone has to get the job, and it goes to the one who performed marginally better in the interview. What is then forgotten is that although the job has been filled, there are still several equally good people who could do it. If the winning candidate were to move on for higher pay elsewhere, any one of the others could easily pick up the baton and probably do just as well. It is therefore nonsense that the pay for the job has to be a lot higher than the grade below. If it were just 5% bigger than the lower grade, it would still be filled by someone just as competent. People would still want the more senior job because it is more senior. Pay is actually one of the lesser incentives, power being a greater one.

If each grade were paid 5% more than the grade below, wages would be much flatter. Typical blue chips have about 7 layers of management, and even this is open to question in terms of wisdom. That means that the top job only really needs to pay 40% more than the lowest grade. If an executive then performs far better than expected, they could be rewarded by bonuses, just like any other staff. If such a remuneration policy were implemented, it would save companies a great deal of money.

Of course, experience should be rewarded too and a wage scale within each grade is still useful to reward people who stay with a company as they become more useful. It would be reasonable to implement a bigger differential between the top and bottom of a scale than between scales. A higher grade might mean more responsibility or longer hours, but doesn’t necessarily need significantly more talent, and usually the job could be done by any number of people at the layer below. Therefore, promotion should be rewarded less lucratively than progress up each pay scale according to experience and tenure, which does correlate very highly with being more useful. Too often, someone who is excellent at their job is promoted to one where they are less excellent, and the company suffers (as does the person). Rewarding skill and experience within the job is often a better idea than promoting someone.

Clearly, some people do deserve to be paid much more than their colleagues. In many fields – design, leadership, research, engineering, teaching, law, medicine and so on, there are always a few high fliers who are so good at their job that they produce many times the value of their more ordinary colleagues. A top engineer might invent many of the key products on which the company depends, whereas many others perform at levels where they are easily replaced or outsourced. A top designer might make the product so appealing that it sells far better than it would otherwise. Companies should try hard to keep such people since they generate a disproportionate amount of income. But even here, pay is only one of a range of incentives that appeal to people, so companies should spend more effort looking at the individual’s goals and desires and target them more accurately. Bonuses and pay can be used of course if that is appropriate. In this case, there is no good reason a top designer should not be paid more than the CEO.

So, the problem is not that some people should not be paid more, it is that it isn’t always necessary to pay more. Just beating a few other candidates at an interview does not in itself guarantee that a person is much more valuable than others who also applied. In most cases they aren’t.

So, how to identify those that should be paid more? Simple. Top people stick out. If they don’t stick out, they aren’t top people. Top people don’t get discovered at job interviews. Often they don’t even apply for promotions because they are already exactly where they want to be.

If a product is hailed as having a wonderful design, find the people who were responsible and reward them. If a team performs well ahead of expectation, first reward them, and then ask them why they did so well. If they think that excellent leadership was a key factor, then reward the leader again too. Just don’t always jump to conclusions and always reward the people who happen to be in charge at the time something goes right. It may well have happened anyway, or even in spite of their involvement.

One of the big problems that many companies are now discovering is that top people no longer want to work for them. Often those people have found that thanks to the net, they can work freelance on a contract by contract basis for the highest bidder. Some of them can’t now be bought at any price as permanent employees, other will respond to higher offers. The result will be a small elite who are highly rewarded, and a large majority who are simply commodities and whose skills can be acquired at low cost either locally or from other countries.

So, what of the companies paying high salaries for top people. Well, some of them deserve it. Having them on board can save a company or dramatically improve its performance. But the simple truth is that most of the so-called top people are not top at all, but only marginally better than the competition at a series of interviews. They deserve 40% more than the junior manager, and not a penny more. We need to spend a lot less on high blanket remuneration of all executives, and start spending a little effort on identifying the really top people and reward them instead. It doesn’t take that much more effort, because as I said, the top people really stick out, and if they don’t, they simply aren’t top people.