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商业 | business | 상업

Liars Poker Personal Edition

Reading Time: 2 minutes

RTE programme Primetime carried a great introduction to a scandal in the UK and Ireland that mirrors the Savings and Loans scandal that gripped the US in the 1980’s. During the 1980’s, Savings and Loans companies (kind of equivalent to building societies in the UK and Ireland) bought complex financial products that they did not understand. Many of these blew up in their faces taking down their institutions, while the large banks such as Solomon Smith Barney and Goldman Sachs made fortunes of trading commissions, advice fees and various revenue opportunities from assembling these financial timebombs. Michael Lewis documented is process in his book Liars Poker.The same thing that happened to big money happened to individual homeowners in the UK and Ireland. People seeking a home loan were sold an interest only loan and a life policy that would pay off the principal and leave them allegedly with a bonus at the end. Much of the projections were over optimistic, the financial institutions got fat off transaction fees, commission, setting up charges and fund management fees. The first years endowment premiums on a 25-year loan went in fees, often the cost of the transactions were masked from the consumer.

Now financial institutions have had to write to consumers telling them how much of a shortfall they will owe at the end of their policy. In many casese it is alleged that the companies willingly missold the financial products to customers with data that ther actuaries knew to be false. This situation has also encouraged a breed of jackals who buy early surrender policies from distressed home owners and fund them through to completion in expectation of a more realistic return. The home owners have already taken a hit upfront on all fees associated with the endowment policy.

For those of you who have got a bit hot under the collar over all the swindling we have gone on about, I would recommend having a look at Akiyoshi Kitaoka’s photographs of Japan. They are absolutely stunning.

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商业 | business | 상업

Sucker Punch From a Dot.Bomb

Reading Time: < 1 minute

I went to my friend Jo’s wedding the other month and later wrote on this blog about The Gift Registry: a wedding present service that seemed like a good idea at the time. The high concept was that the site kept the wedding list online which could be compiled from items stocked by a number of good quality department stores. Guests bought the bride and groom gifts they wanted, the company delivered and the wedding was less hassle from a gift wrapping and carting the present to and from the venue point of view.

Today I received an email from the bride and groom that the business had gone bankrupt together with advice to get a refund from my credit card company.

In my phone call with Jo what surprised her was that a dot.com with a sensible business proposition could go under, we are so used to dot.com being part of the mainstream shopping experience now that many people tend to forget that in the late 1990s Amazon was making a five dollar loss on each shipment. A similarly good prospect was CD retailer Boxman.com, who purchased CDs from the cheapest legitimate suppliers across Europe, and distributed centrally from a warehouse in the Netherlands, they then passed on some of the savings to the customer. Boxman was let down in the operational department by poorly implemented software from IBM. Travel site and gift e-tailer lastminute.com improved dramatically with the appointment of retail management guru Alan Leighton as chairman. The moral is that even with a winning business idea, operations expertise and processes are critical.

Here is a link to an article on the demise of The Gift Registry from Accountancy Age.

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商业 | business | 상업

Growth Crusader

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Andy Kessler has been a banker, analyst and fund manager. Through all this experience has a growth investor, that is someone who invests in what might be rather than a value investor. A value investor is someone who invests in companies that work hard to husband what they have already and try not to rock the boat too much.

Andy is a smart guy, smart enough to admit that he is fallable, he also writes a mean bit of copy. I am working through his book Running Money and will post a review when I have finished. In the meantime I’ll give you a link to Andy’s blog so you can see for yourself.

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商业 | business | 상업

Deep Thinking

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Summer must have been quiet in the analyst community, as I recently covered Forrester’s efforts on taking a consultative approach to the innovation organisation and am currently working through a 53-page white paper from McKinsey. CurrentAnalysis, an up and coming analyst shop last month issued a whitepaper called Competitive Response: A New Lens for Evaluating Company Performance. No link I am afraid as the paper arrived as an email attachment.

CurrentAnalysis have obviously put a lot of the thought into the document with a view to having their competitive response quadrant quoted as widely as the BCG matrix is at present.
Very simply:

High business performance/ low competitive responsiveness: vulnerable coasters

High business performance and competitive responsiveness: responsive performers

Low business performance and competitive responsiveness: laggards

Low business performance / high competitive responsiveness: under acheivers

What is competitive responsiveness?Competitive responsiveness is the measure of a company’s capability to respond to changes in external conditions and events. (So it sounds like the agile business concept that many companies such as Microsoft try to hang their hat on.)

What the key attributes influencing creative responsiveness?

We have identified three recurring dimensions that companies should use to measure competitive responsiveness: speed, consistency and effectiveness.

The model is an externally driven view of the business

They view the competitive response model as consisting of six stages that occur in iterative cycles:

  • Sense & capture
  • Interpret & create awareness
  • Analyse & inform
  • Deliberate & decide
  • Respond & engage
  • Measure & correct

In summary, CurrentAnalysis’ paper is interesting but presupposes a value based approach to running a business rather than a growth approach. Amazon for instance would would be ranked unduly low in the quadrant because they pursued a rigorous policy of growing the business to critical mass.

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商业 | business | 상업

Riches beyond compare

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Here is a link to all the Forbes coverage of their 400 richest people in America, complete with some video an profiles on list newbies. Enjoy, if that’s the right word. More interesting and providing a certain sense of schadenfreude is the roll call of drop-offs including Michael Eisner, whose fall matches his relentless decline as a self-styled media mogul. More interesting and telling is the fate of Jim Clark and Vinod Khosla. Jim changed the way businesses were financed and momentarily tipped the table in favour of the founders, Vinod is one of Silicon Valley’s most respected VCs and a bit of a statemen since he has been both a founder and a financier. Their relative decline has occured as people have woken up to the fact that the technology sector has become a mature market with relatively little opportunity for growth.New start-ups live in constant fear of having their business crushed my monopoly software player Microsoft, even large firms like Google, Yahoo or Apple are not immune.