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THE WEATHER REPORT

At the end of last month, there was a fantastically interesting article in the Financial Times entitled ‘But Will it Fly?’ in which ten of the newspaper’s writers were asked to identify an idea that is going to reshape the business world in the coming decade. These are the concepts they came up with:

Blue sky computing. Richard Waters, the San Francisco bureau chief, highlighted blue sky computing. He said there were two parts to the opportunity. The first was to do with processing power and data storage, which had been moving away from individual computers into massive, centralised data centres. This is bringing industrial scale to number crunching and is making it possible to unleash super computing power on everyday tasks. He saw the second part as lying in the billions of intelligent personal devices – everything from smart phones to netbooks – capable of plugging into this centralised computing resource via the Internet. This means that individuals and not just companies and governments are now able to take advantage of information ‘clouds’. Why is this so important? Because it makes information and processing power available at a very low cost. He also felt that personal computing devices would become super smart, as they would be able to draw on the intelligence of the whole ‘cloud’. Just to give you one example, Google is apparently talking about instant voice translation while you are speaking on the phone. Work longer, work older. Luke Johnson, an entrepreneur who runs a private equity firm, feels that the coming decade will see older people working longer. His theory is that because people will find that at 65 they no longer have enough money to retire they will carry on working to make ends meet. He believes that, faced with this situation, many of them will decide to start their own businesses, and he coined the term ‘olderpreneurs’. He also felt that the 50-plus generation could be the ones to kick-start the recovery.
Information does have a value. Andrew Edgecliffe-Johnson, the US media editor, feels that the content free-for-all on the Internet has eroded media companies’ business models and risks overloading communication networks. He feels that the era when everything on the Internet is free is now coming to an end.
Greed isn’t as good as we thought. John Kaye, a regular weekly columnist, feels that the concept of maximising shareholder value is now coming to an end. He believes that the failure of so many giant businesses from Enron to Leman Brothers – which all focused entirely on profit – is going to change business thinking. Instead, he believes that businesses are going to refocus on the idea of providing a product and service that consumers want and that profit will then follow. In other words, an end to profit-driven enterprise.
Energy sources get smarter. Chris Nuttal, the FT’s technology correspondent, anticipates that smarter electrical appliances (including such things as utility meters) will lead to huge energy savings. For instance, appliances will communicate with the grid so the clothes dryer might shut off during peak, high tariff hours and on again when energy gets cheaper. He also sees energy sources changing when it comes to small devices. Free energy can be harvested from sources such as body heat or radio waves from mobile phone towers and Wi-Fi.
Generation X-ers come into their own. Adam Jones, senior companies reporter, anticipates that the young generation who made such a splash in the late 1990s and early 2000s (called Generation X) will now begin to come into their own. He says they have been held back by baby boomers (such as myself!) and that they have the next generation snapping at their heels. And that the two forces will motivate them to perform better.
Gain from the pain of failure. Tim Hartford, known as the undercover economist, believes that the most important thing to do is to learn from failure. He points out that with so many recent failures there has been plenty for entrepreneurs to learn. Trial and error should be starting to take its rightful place as a business technique rather than the dirty little secret of capitalism.
Do more with less. Stefan Stern, a management writer, believes that the inevitable triumph of the BRIC countries – Brazil, Russia, India and China – is going to change the way established businesses in mature markets think. There is a wave of powerful new competitors on the horizon who can price their goods and services at startlingly low levels. Incumbents are going to have to get more efficient and increase their productivity.
Jump on the hedge. Jennifer Hughes, senior markets correspondent, sees risk management as having a major role to play in the next ten years. She thinks there will be huge innovation in which investors enjoy all sorts of new ways in which to make money. For instance, last month a group of banks, pension funds and insurers announced they were developing a new market for longevity products – the risk that people live longer than expected. Rather than seeing the recent banking crisis as a disaster she says that it merely shows that much more work needs to be done to democratise finance.
Deliver us from shopping. Jonathan Birchall, US retail correspondent, feels that Internet shopping is going to reshape all retailing. The Web is going to change how things are sold and what’s on retail shelves. He pointed out that a customer standing in a shop and armed with a smart phone can call up comparative prices from rivals – unless the item in question is only available at that particular store. So he thinks there will be more pressure on retailers to negotiate exclusive deals with leading brands – or to develop their own label versions of everything.

What, you may ask, does all that have to do with running your business? Well, the answer is: a great deal. Every great entrepreneur in the world made his or her money by anticipating a trend. It is only too easy for all of us to get tunnel vision and forget the bigger picture.

On my bedside table

I haven’t actually been travelling this month so all my reading has been done in bed as opposed to on an aeroplane. The thing about reading in bed is that if the book isn’t actually gripping I fall asleep and then never bother to pick it up again. Of the 20 or so free books I got sent over the last month, here are the ones that kept me awake.

Switch: How to change things when change is hard by Dan Heath and Chip Heath. The thing I liked about this book was the fact that it explored lots of different case histories that I found relevant to my own business dealings. For instance, they told a story of Johns Hopkins University researchers, frustrated by the high-school drop-out rate, who went looking for early warning signs among students in Philadelphia. What were the telltale markers of students who wouldn’t graduate? The analysis came back with astonishing clarity. Pouring over eight grade attendance records, they found hundreds of students who had missed more than one out of every five class days. Of these frequent absentees, 78% eventually quit high school. So if you want to tackle drop-outs, start by tackling poor attendance when the students are much younger.

They went on to point out that it would be invaluable if one could identify the early-warning signs of a business problem in the same way. Of course, some companies do attempt to do this. Credit card providers have learnt that by charting the normal spending habits of their cardholders they can more quickly spot fraudulent use. Google executives realised in November 2008 that flu outbreaks could be detected early on by monitoring the number of times people searched for terms such as ‘flu’ and ‘influenza’. Because the searches are logged instantly epidemiologists can spot flu outbreaks a full one to two weeks faster than they could have before.

The authors then explained that your source of data doesn’t need to be high tech. They cited the case history of Van Halen, the 1980s pop group. You may remember that there was a clause in their touring contract that demanded a bowl of M&Ms backstage with all brown ones removed. Why? Not because David Lee Roth, the lead singer, was behaving like a rock star diva. But because they realised that if the venue they were playing at hadn’t put in the M&Ms it meant they hadn’t read the contract and that this – in turn – would almost certainly mean there would be problems with such things as lighting and sound. The way they tested the venue was to simply go into the dressing room and see whether the M&Ms were there. Those venue providers who had put the M&Ms in the dressing room turned out to be 100% on the ball. Those who hadn’t, a disaster.

Fascinate: Your seven triggers to persuasion and captivation by Sally Hogshead. The main theory of this marketing book is that entrepreneurs must strive to fascinate people beyond the bounds of rationality. You must activate such mental triggers as lust, mystique, power, trust and vice. What the author is really saying is that there is so much information bombarding consumers that if you wish to stand out from the crowd you must use unusual and more noticeable techniques. There are dozens of different examples in this book, my favourite being an LA restaurant in which the garlic crab is prepared in a secret kitchen only accessible to members of the founding family. Sounds silly… but it works!

The Yugo: The rise and fall of the worst car in history: Jason Vuic’s book about the Yugo is packed full of Yugo jokes. For instance, Question: What do you call a Yugo with brakes? Answer: Customised. The author details how the Balkan lemon first came to be exported 25 years ago and what happened to it subsequently. In a way, of course, the man behind the export of the Yugo’s international marketing drive, Malcolm Bricklin, was ahead of his time. He was the first to see that there would be demand for an inexpensive, low-tech car made in a developing country. It is just a shame that the car he chose to promote was so utterly useless. Anyway, a gripping read.

Free Sourcing: How to start a business with no money by Jonathan Yeats. Well, what a great title! If you are planning to launch your own business but are worried about where the finance is going to come from, this may be the book for you. Jonathan Yeats, a successful entrepreneur, guides you through every area of the new start-up and explains how it can be done for nothing, mainly by making full use of the Internet (once you have sorted out a free computer, obviously). The only thing that doesn’t come free in the book is the book. That will cost you £9.99.

Have you got a book in you?

If you want to put your business on the map – if you want lots of free publicity – and you want to add to the credibility of whatever you are doing, get a book published. Why? Because, regardless of the growing popularity of digital books, good old-fashioned paper and print versions are still selling by the millions and are, more to the point, respected to the point of veneration.

However, you may say, it is easy to say ‘get a book published’… but much harder to do. Not any more. Digital publishing has made it possible and affordable for almost anyone to design and print their own book, and many self-made authors are increasingly sidestepping traditional publishing houses and going direct to the market. The technology of digital publishing, so-called publishing on demand, allows for books to be printed and distributed, post-sale, in print runs as small as a single book. For authors that means low-risk, low-investment, editorial control, speed to market and a larger slice of the royalties.

The process is straightforward, too, involving the upload of content to the websites of self-publishing companies, which then offer a sliding scale of hand holding. This ranges from the DIY royalties-free printing and shipping option from companies like Blurb to the team of designers, editors and publicists that can be bolted on to a publishing package at somewhere like AuthorHouse UK for a percentage of the costs and slices of the royalties pie.

What other companies are in the business? Well, you could try Xlibris, On Demand Books or Create Space, which is run by Amazon. If you would like to read more about this, Amazon publishes a self-help guide called Aiming at Amazon: The new business of self-publishing as well as A Successful Self Publisher System for Profiting from Non-fiction Books with Print On Demand and Book Marketing on Amazon.com (cripes what a long title) by someone called Aaron Shephard.

New business ideas

Here is my usual round-up of new business concepts and ideas, some suitable for international trade… others more suitable to start at home.

Become a wine maker

I have read two articles recently (one in the Wall Street Journal and one… actually I can’t remember where) about a new breed of winemakers. You probably assume that the wine in your glass comes from a winemaker who tended the grapevines, crushed the grapes and then carefully aged the wine until it was ready to bottle. In truth, this is rarely the case. Many of the wines lining supermarket and off-licence shelves have been pieced together like patchwork quilts. The people who do this are called négociants – they buy and blend wine made by others and then sell it under their own label. It is an honoured profession in Europe, but in the New World (the United States, Australia, New Zealand etc.) it has been an entry-level game dominated by fringe players and dabblers and is generally looked down upon by the winemaking elite.

What fools they are! There is very good money to be made as a négociant. This is how it works. First of all, you buy ready-made wine that may or may not be aged. You could buy it from wineries but more often you will do it by going to a broker such as a company called Ciatti Co or another one called Turrentine Brokerage.

These brokers sell excess product from wineries around the world. The cost, believe it or not, could be as little as $10 a gallon.

Having got your samples from the brokers, specifying the region, type of grape etc. that you want, you go to work. No sophisticated laboratory equipment is required to do your blending. You can literally sit at your kitchen table tasting samples until you find one that can stand alone or seems generally drinkable. Then you come up with a catchy name and a trendy label. All you have to do is sell a few thousand cases and pocket the profit. This, incidentally, explains why so many wines are one-offs. This has happened to me a lot. I have bought a wine and gone back for more only to discover that it is no longer available.

Interestingly, with so many winemakers struggling to sell their product the opportunities for négociants are ever-increasing.

If you would like to read more about this, I suggest you go to the website of a company called Bronco Wine Company, which is based in California. The man who owns the business is not a broker, but he buys up vast quantities of wines that winemakers can’t sell elsewhere and sells it at an unbelievably low price (as low as $1.99 a bottle).

Big potatoes from glasses

Years ago, I remember reading the story of a vegetable wholesaler with a giant empire who had started out by buying bags of potatoes from farmers and then driving around in his van and selling them direct to consumers. Well, I recently read a story that reminded me what a good way this is for any entrepreneur to get started. In this case it was an optician who buys inexpensive (but good-quality) reading glasses in China exports them to India and Africa and trains and then employs salesmen to bicycle around the countryside selling the glasses to people in need. It is a brilliant concept and, apparently, is making an excellent profit with minimum risk. This year the company concerned expects to sell half a million pairs of reading glasses. Apparently, they aim to make about 50p profit per pair. Quarter of a million pounds. Not bad. And, of course, there is the added satisfaction of doing something socially useful.

Social entrepreneurship at its best

Talking of social entrepreneurship, a San Francisco-based social enterprise called Samasouce has been training refugees in camps to do IT work. For instance, they recently trained Somali and Sudanese refugees to use the Web at a computer centre run by a charity in Kenya. The recruits performed simple online tasks, such as compiling lists of corporate websites and tagging roads on maps. The pay is $2 an hour – four times the daily wage for breaking rocks in a nearby quarry. Refugee camp residents are, normally, marginalised, though some do have sufficient education to perform quite skilled tasks. Clients such as Google and Stanford University Library now see this as an excellent way to find inexpensive, willing and hard-working employees. Where Samasource has gone surely other entrepreneurs will follow.

Three interesting products for export?

Here are three products that caught my eye. The first is something called the Anti-Theft Lunch Bag (www.thinkofthe.com). These are, basically, Ziploc bags printed with green splotches designed to make it look as if the sandwich within is mould-ridden and inedible. Silly, but maybe it works.

Eat What Evers 2-Step Breath Fresheners (www.eat-whatever.com). Do exactly what they say on the package. The vegan-friendly gel packs kill bad breath in the stomach and then you pop in a mint for a bit of instant freshness.

Third, I rather like the Rationalizer Biofeedback System (www.design.philips.com), which is a biofeedback system that tells online investors when it is time to take a chill pill. When the monitoring band (the so-called Emo-bracelet) picks up signs of stress the light from a desktop indicator turns a brighter red. Anyway, it is a neat idea and I am sure there is a market for it.

Go solar

Were I looking for an interesting public company to invest in, I think I might choose something called First Solar, which is listed on the S&P 500. The company’s overriding goal is to drive down the cost of solar power modules until they compete with traditional power. It has used every strategy at its disposal, from newly patented technologies, overseas mass production to vertical integration at all levels of a project – all while managing to sidestep economic landmines and navigate the shifting policy landscape. It is now producing solar energy at around 85 cents per watt… which is cheap! What’s more, the company reckons that it will bring it down to around 50 cents a watt in the next year or two. And, if I didn’t invest in the company I’d be looking at its products and asking myself whether I couldn’t be importing them somewhere or copying them and doing the same sort of thing myself.

Get into algal fuel

Talking of alternative fuel production, you may like to keep an eye on a company called Synthetic Genomics. There is no money to be made from this business yet… but I think it is worth watching. A biologist, called Craig Venter, has collaborated with Exxon Mobile to engineer strains or super-algae capable of churning out huge quantities of biofuel. Exxon has invested a staggering $600 million in the project, even though full-scale commercial production of Algal Fuel is still years away. The reason for the optimism, however, is that wild-type algae can produce about ten times more fuel per planted acre than conventional biofuel crops such as corn and canola. Apparently, renewable fuel at under $2 per gallon could be in the making.

Websites to watch

Here is a little mini round-up of websites – all of which are relatively inexpensive to set up – that I believe are well worth watching… and, perhaps, copying.

Groupon. This website transforms the art of the deal into a truly collaborative effort. Every day Groupon.com presents an irresistible bargain from a local retailer or restaurant, with just one catch – the offer is good only if a predetermined number of consumers take advantage within a 24-hour period. If the user minimum is met, everyone who signed up is charged for their purchase and mailed a link to print their Groupon to be redeemed. If not, the deal is cancelled. Based in Chicago the company also encourages bargains that promote social interaction among users, such as dining opportunities, spa treatments and even extreme sports. Groupon demands… wait for it… roughly half of each deal it sells. By the end of last year it had sold more than 1.1 million Groupons translated into a combined saving of more than $58 million and it now reaches about two million subscribers across 28 US markets. Pretty impressive, eh?
The Good Guide sorts through health, environmental and the social profiles of everyday products and the companies that manufacture them distilling hundreds of pieces of data into a simple ten-point rating system accessible on its website (www.goodguide.com). The object is to inform the public about manufacturers’ behaviour. For instance, I discovered that the milk I normally buy when I am in America (Horizon Organic) actually has a worse environmental track record than Nesquick strawberry milk. I also discovered that Nature’s Gate baby soothing shampoo is more toxic than other products on the market. No one, so far as I know, is doing a similar job anywhere in Europe.
Every day the Gilt Groupe runs a daily sample sale of designer clothing. So what? you might say. Well, the company has only been going two years and yet is going to turn over $500 million in 2010. Basically, it now has such buying clout that major designers are only too happy to either offload unsold products or even to create special products for the Gilt Groupe to sell. This is such a simple idea and yet I am amazed that no one seems to be doing it in the UK, Europe or indeed many other parts of the world.
Glam media is clever. Unlike other online publishers, they don’t commission any content but simply work as a portal bringing together a vertically integrated women’s network of 1,500 blogs and websites via their site (http://glam.com). As a result, they can sell advertising which reaches hundreds of micro audiences while at the same time increasing ad revenue for the hottest women’s lifestyle and fashion bloggers. They also have a mail site called brash.com (http://uk.brash.com/) as well as a social media site (http://tinker.com). All terribly clever and an inexpensive way to capitalise on the online publishing opportunities.
Finally, speaking of publishing opportunities, I must just tell you about an offline publisher that is doing well. It is called Politico and although it has a website (www.politico.com) the newspaper circulation of 33,000 is what’s allowing it to make a profit. What is it? It is a newspaper that covers politics and which has become a daily must-read for anyone obsessed with America’s power players. Its secret, says its co-founder Jim Vandehei, is that they employ “damn good reporters”.

The hot new thing: coconut water

Remember: you heard it here first – coconut water is tipped to become the next big health drink. Why? Well, it is electrolyte-rich… and that, apparently, is a good thing. You can be certain it is hot news because both Pepsi and Coca Cola have recently made major acquisitions. One of a company called Amacoco and the other of a company called Zico. There is also an independent company called Vitacoco that controls nearly 70% of the $30 million US market. You would be nuts (groan, groan) to ignore this opportunity.