The end of Kiwibank?

<updated to clarify this is for Kiwibank’s Core Banking System>

Fairfax Media report that Kiwibank is signing up to SAP as their “principal computer platform” provider for their core banking system. The core banking system runs the business of the bank – including real time transactions, interest calculations and payments., and it is unclear where the line is drawn between this and the other systems in the bank. 

If the reports are true, then that’s arguably very problematic.

SAP, and I’ve been through a few cycles of SAP rollouts, is a vast, complex and barely usable system for managing complex businesses. It has a history of failure, but I also sense that much of the failure is unreported.

SAP and other ERP systems are sold, as I understand, on making it easy for the most senior managers to manage their sprawling businesses. But SAP and other systems like it generally make it very very difficult for the huge numbers of end users inside the company to actually do business. The recurring joke is that  SAP promises to save tens of millions, costs hundreds of millions and causes billions of dollars in lost productivity and opportunity.

I can’t back that up, as I have never done a study on it, and I could never talk about anything I have seen, but I can refer to the AU$1.3 billion and six years that Commonwealth Bank reportedly spent on upgrading <update – it was a new install for core banking, and they run Peoplesoft/Oracle for their ERP> their SAP system to be able to do live transactions and for compliance with new laws. Note that ASB, which CommBank owns, coded and delivered their own live transactions banking system themselves back in 1969 – and it still works. And also note that in September last year Tom Groenfeldt reported only two SAP core banking replacements – CommBank and Nationwide Building Society in the UK.

CommBank is huge, and arguably needed the complexity of something like SAP. While the project was a big risk, they were able to throw vast resources at it and no doubt customise it to better fit their business. It looks like they got away with it.

Moving to a system like SAP (or installing any large IT project) is a very risky endeavour, and generally means changing the way you do business. The waterfall-like approach to these projects means that requirements are set years before delivery, and the rigidity and complexity of software like SAP almost always means failure to deliver on promised costs or benefits.

For Kiwibank I worry that they are too small, with only 850,000 customers, and with little money to invest, they will have to use the out of the box solution. And to quote Groenfeldt on smaller banks “When they do a core replacement, they make a fundamental decision to adopt the structures and procedures defined in the vendor’s package with minimal customisation.

So I worry not just that the cost of implementation will be high and the result may be poor, but that the very nature of what Kiwibank is will irreversibly change.

But then again I know very little about SAP for Banking, and I hope for their customer’s sake that I am wrong.

The ideal solution is, of course, for Kiwibank to wake up to the very strong  local development talent, hire them in and give them true power and air cover to reinvent banking, piece by piece and digital-first.  It’s that approach is good enough for the entire UK government, it’s good enough for a tiny antipodean retail bank. 

Posted in NZ Business | 41 Comments

UFB progress at 1.5% – who wants other 98.5%?

It’s great to see the UFB project continue, with the Quarterly Broadband Deployment Update for December 2013 showing over 27% of premises passed to date.

The real question is how we can increase the pace of actual connections, currently at 1.5%. I’m trying to connect myself and can confirm that the anecdotes I’ve heard to date about the complexity and time are true. There is plenty of money to be made by private sector businesses who accelerate this adoption, and I look forward to seeing who the winners are.

Posted in NZ Business | 3 Comments

What Board Skills and Experience do you need?

BHP Billiton created this deceptively simple chart on the skills and experience of their Board of Directors in their excellent 2013 Summary Review.

I challenge all boards to do the same.

The categories in the table are interesting as they show what BHP Billiton sees as important. They want deep experience across the table in the business itself (Mining, Oil & Gas, Capital Projects, Marketing and Global Experience), with working with major stakeholders (Public Policy), as well as all of the things that companies do (Health Safety and Environment, Strategy, Executive Leadership, Finance, Renumeration).

But most importantly experience in “Governance” is only one of the 12 items on the list, and arguably for me the least important, as it is not possible to successfully govern a business that you are not equipped to understand.

I’d like to see on the table two more lines.

The first would be something about experience in investment or portfolio management at a global macro level (beyond Financial Acumen). BHP Billiton is a hybrid of an operating company running huge mines and plants, a marketing company dealing in commodities and an investment company that manages long term positions in commodities. The major decisions about which areas to invest in or divest drive long term profitability, and need a strong collective grasp of the global macroeconomic situation. The director bios does show some evidence for this experience.

But I’d also like to see a little experience in IT on the list, as even a mining giant relies heavily on IT, and they can and do spend billions on SAP implementations. Those major IT projects can have a disastrous impacts if done poorly, and the board should be able to understand how they work, or not. The director bios show no evidence of this experience.

But I’m nitpicking – BHP Billiton have done an excellent job here, and it’s what every board should do.

It’s what every board should do

However most boards will struggle to show the high numbers of directors that have close to the complete set of key skills and experiences required, as that BHP Billiton’s have. And while most companies are not delivering US$65 billion in revenue and US$11 billion in EBIT, they do need to get close enough. At the very least every CEO/management team should write down the areas that they believe the board should be skilled in, and work with the board to plugs the gaps.

But even the discussion about which categories to include in the checklist will be difficult for many firms, and the evidence today is that many boards of large companies in New Zealand have huge gaps, especially with IT and the internet implications, but we also see  people with little relevant experience in any areas of the business that they are governing.

What about your business?

Rather than give examples, instead here is my quick take on the sorts of skills I’d want to see in boards for three types of companies. Let me know what you think – what’s missing? What don’t they need?

NZ Retail Bank

For a bank you want a people who have a prudent approach to business, and who are not going to advocate short term profits at the expense of unbalanced and increased risk. However they will also need to understand customer needs across the sectors (corporate, business, small business, retail) and lead the industry transition from retail stores to digital banking. IT systems are incredibly important, as Ralph Norris’ career showed, and banks have a mix of legacy ones and new websites and mobile apps. I would expect a mix of ages on a retail bank board – the wisdom and steady hands required for a trusted bank along with the youth that associates closely with the younger ages that are the battlegrounds for attracting customers. A first draft for me (done without looking at any NZ bank boards) would include:

  • Executive leadership
  • Risk management, esp with banking
  • Finance
  • Legal
  • Banking (including investment banking)
  • Strategy
  • IT – Security and big projects
  • Internet business and IT – Web, mobile and media
  • Retail and customer service
  • Farming, Housing, corporate and SME finance
  • Real estate
  • Governance and regulation
  • Design thinking (or similar)

Early stage SAAS Company
A very early stage company needs a small board, but one that is very strong on strategy and getting things done with the founders. As they grow they need to understand the end users and customers, and always they need to be comfortable and experienced with the pace, change and techniques of start-ups. They should also collectively bring strong connections with funders and other industry players, and patience and sage advice for the CEO and other founders. While it’s tempting to choose the directors from CEOs of companies that have succeeded, make sure they earned lessons, and consider also  founders who have failed if they understand the lessons learned.

This is likely to be a younger board as the number of seasoned directors that truly understand internet businesses and can operate at speed are distressingly few. I would also, especially after reading the Twitter book and some recent conversations, be very active in churning the board, quickly swapping out members who don’t agree with the core strategy or are essentially negative for the company, and moving on people whose contributions relate to stages of growth that are either too early or too mature to be required at a particular time. High growth companies change quickly, and there is no shame in passing the baton to another group, or waiting until the company grows up.

I’ve deliberately written this draft list without looking at the board members of any particular company, so treat it as simply a provocation as you make your own list.

  • Start-up and fast growing company experience (including handling failure)
  • Strategy for early stage companies (Design Thinking, Lean start-up etc.)
  • Leadership and culture/staff development
  • Web and mobile IT
  • Targeted customer sector experience (e.g. “accounting” for Xero)
  • Selling and marketing in target markets (i.e. USA, NZ etc.)
  • Fund raising experience & connections & investor relations
  • Finance and capital markets experience (when nearing IPO)
  • Governance and financial discipline
  • Legal (lots of contracts)

Internet  NZ
Internet NZ is a not for profit incorporated society, and councillors are elected, not selected. (I am one). It’s tricky as InternetNZ has both commercial and non-commercial goals, with the first enabling the second. It needs to be run professionally, and aims to research, engage stakeholders and spread the world on the open and uncapturable Internet for all. The membership base is in transition from being dominated by the people who got the Internet going in NZ to those who are passionate about issues like privacy, copyright and accessibility.
Internet NZ derives income from its mandate to administer the .NZ domain space, has some of those funds invested and has very conservative policy around looking after payments in advance. That’s a long term focus, which will build capacity of the organisation over time. The Council is responsible for two subsidiaries, and has delegated much of this responsibility to their professional boards.

Without recourse to the Councillor role description, again here is my first impression of what we would desire around the table. Remember this is my own take and even I won’t stand behind it, as I’d want to get a lot more input, but it’s a interesting exercise nonetheless.

  • CE-level experience – the primary role is to select and support the CE
  • Governance (we do train councillors, but knowing how to behave is important)
  • Public sector – working with Government is critical
  • Policy creation and engagement
  • Knowledge of our focus areas
  • Internet technology (some very deep knowledge required)
  • Internet-related business
  • Media/ PR
  • Private sector (we were a business)
  • Finance and legal
  • Investment management
  • Event/ facilitation experience (NetHui)
  • Political
  • Community relations and collective diversity of communities represented

Surprisingly enough the Council has pretty decent coverage in most these areas at the moment, though the recent resignation of Nat Torkington meant that we lost one tick from most of those categories. The last point, representation from different communities is traditionally a tough one, with council dominated by white males. We now have two women councillors and several strong non-white-male candidates for the bye-election.

NZ Based Oil Company

I’m assuming the company has a stake in Marsden Point refinery, and operates a chain of petroleum dispensing service stations. The business can win or lose on fuel hedging and purchasing decisions, while the retail strategy and execution is also critical, as are IT systems and the internet. But above all this is a safety-first business, as dealing with flammable liquids safety needs to be designed in to everything.

  • Executive experience
  • Downstream oil industry
  • Upstream oil (or similar for the refining)
  • Logistics
  • Strategy and pricing
  • Finance
  • Retail and customer service
  • Health, Safety and Environment
  • Large and small IT business, including retail and EFTPOS
  • Fuel trading and hedging
  • Government and community relations
  • Governance

I am guessing that Z Energy, who are doing a huge amount well, have most of this covered. Again I didn’t cheat and look.

Amusingly enough my own experience covers almost all of the items listed on this page. But that’s also clearly my own experience coming to play, and the board will need a list  formulated by several people with dissimilar perspectives. One suggestion is that the CEO firstly drafts it, but then test it with managers and more junior staff before working on it with the Chair or board. Another is for the board to do this themselves.

Posted in NZ Business | 3 Comments

Picking stocks and housing bubbles

Professor Robert J Shiller won the Nobel prize this year (with Eugene Fama and Lars Peter Hansen) for his work on the analysis of prices of various assets. He repeated his Nobel lecture at the Yale School of Management today, and I grabbed a couple of screenshots from the livecast.

His early work tested whether the value of shares is equal to their future dividend streams, and it did. Later he observed that the volatility of share prices (against his model) was mainly due to “innovation” from the companies and the market.

Picking Stocks

For me this means investors should hold stocks in companies which have secure dividend streams for regular portfolio growth (e.g. Meridian), pick stocks in companies that will deliver disruptive innovation to get outsize returns (e.g. Xero), and avoid stocks where the companies are subject to being disrupted by innovators and are unable to respond (e.g. Yellow).

Later in his career Shiller came up with the definitive house price index for the USA, which tracks prices for repeat sales:

I raise this because he then put up a slide of Los Angeles house prices versus personal income, relating a story about how extreme ratios a few years ago made it hard for people to choose move there.

So how are we doing in New Zealand? Even I, a housing price cynic, was shocked by the result when I crudely replicated the analysis.

Our latest median house price, states REINZ, was $425,000 in November last year. The latest statistic for median income in New Zealand from NZ Statistics is $29,900, from the June Quarter last year. That gives a ratio of $425,000/ $29,900 = 14.21.

That wouldn’t even fit on the chart above, so here’s how it would need to be amended to show New Zealand.

A bit more searching and I found the 2004 paper where Case and Shiller asked “Is there are bubble in the housing market?“, and showed that while for most US States the housing prices were directly related to income, but a few (about eight) states were well out of whack, showing more volatility along with higher average ratios.

Picking Bubbles

The chart that Shiller showed above shows that the LA prices dropped by over 50% versus income from 2006 until now. My own take is that there is clearly also room in New Zealand for a very very steep plunge in house prices. It would need a catalyst, but let’s remember to not blame whatever that catalyst is, but the system of incentives that has delivered us this ridiculous and very dangerous situation.

And remember – if you are selling your house, then its smart to do so using the latest tools, real estate agent experience and low commissions at 200Square.



I forgot to add into housing index that Shiller put together. How I would love to invest (short) on this for NZ.

Posted in NZ Business | 6 Comments

What if you knew how to stop cycling deaths. Would you do anything?

Last April Auckland Transport received a report they had commissioned on Why do Cyclists run red lights?

A decommissioning the report was an excellent move by Auckland Transport.

Sadly the report is only available as a powerpoint presentation, but what we can see is excellent. They observed over 22,000 vehicle, pedestrian and cyclist movements across five key Auckland intersections and also interviewed cyclists.

What they found is that cyclists run red lights largely due to safety reasons, and most infractions are during the pedestrian phase of the lights (they call this the Barnes dance).

The yellow part of the charts below are cyclists crossing with pedestrians – an activity which I classify as safe if done with consideration and at the speed of the pedestrians. I, like it seems the cyclists surveyed, see this as often a lot safer than crossing with the cars, and it also helps motorists as it gets the people on bicycles out of the way.

Unfortunately this is not legal under current NZ law, and nor is it legal to ride on the footpath. The only legal thing to do is to walk the bike across.

The cyclists’ comments shown in the report are all about safety.

The report concluded that road conditions were such that cyclists have to choose between safety and being legal, and often (and correctly) chose safety. They authors suggested that we must fix this, and came up with four simple, cheap and effective recommendations.

So how have we done with those recommendations in the 9 months since the report was received? Sadly from what I can see – very little or nothing has changed. I stand to be corrected on this, and would welcome any evidence to the contrary. Let’s not be too hasty in pointing the finger at Auckland Transport either, as they have done some great work here, but most likely need more political clout and resolve to make this happen quickly.

Number 1: Sadly I don’t know of any cyclist-first intersections in downtown Auckland.

Number 2: The law still prevents safely turning left on a red light for cyclists.

Number 3: The law still prevents cyclists from legally crossing with pedestrians.

Number 4: I know of no changes to sensor locations or sensitivity. This is the hardest to evaluate and may well have happened, to be fair. It’s under Auckland Transport’s direct control and is the most likely to have changed. But I’m not seeing it so:

Two of the four, lights to clear cyclists and improve cyclist detection, are under the control of Auckland Transport (as far as I can tell).

The other two will likely require changes to national road rules, to allow cyclists to turn left, and to allow cyclists to cross with pedestrians at lights.  That’s up to the Ministry of Transport and NZTA and the national Government.

The proposed solutions are clear, cheap and high impact. Let’s do what we can to help Auckland Council, Auckland Transport and the government to prioritise these.

Posted in NZ Business | 18 Comments

A typically deadly commute – let’s fix it

My partner rides a bicycle to and from work. Her town bike has a basket on the front and back, and she is small, wears normal street clothes and obeys traffic rules. This is what a ride home looks like. (She takes the long way home to get exercise).

She’s fast right?

You might have caught two or three scary moments — let’s look at the worst one, on what is essentially a random day — today.

Here she is nearing the top of College Hill Road. She is not very big and goes pretty quickly up hills — and enjoys passing the occasional middle aged man in lycra. She sometimes does that when those baskets are full of groceries.

She is approaching a carpark – and as there are no cars today she had a clear run. This is great as normally the parked cars force her into the often fast moving traffic that is chaotic due to a complex intersection ahead. This, by the way, is on the safest route she has found to get some exercise while riding home.

The cars at the front by the light are stopped, and the closest car, the red one in the car lane to the right, is slowing to a stop. There is lots of traffic so it’s pretty noisy.

With the empty carpark she has a clear run to the head of the intersection and can stay well out of the way of motorised traffic. She could alternatively choose to cross to her right to get behind the red car, but that decision would have killed her, as you will see shortly. When cycling or motorcycling making decisions about not dying are fairly constant, with the key rule to stay the away from high speed differentials with large vehicles.

From nowhere comes a bus at high speed:

The bus is trying to cut between my partner, who is riding quickly, and the parked red car, and then take the left hand turn at the end of the street. The green bus has a large amount of momentum and very little room for error on either side. My partner is still riding in the designated car park.

A few seconds later the bus and the bike have braked almost to a stop – but look how far it took the bus to do so. The bus driver chose not to hit the red car from behind, and instead cut in front of the person on a bicycle, potentially fatally. Perhaps it would have been safer to graze or hit the car than to risk squashing an unprotected rider – a potential judgement call that should be discussed in an incident investigation, but clearly won’t be because this incident is a sadly regular occurrence for both buses and cyclists, and they are never investigated as far as I can tell.

Luckily my partner, riding the bicycle, braked very hard, and a tragedy was averted. However once again I get to greet a distraught partner when she arrived home.

There really was no room for error if she had continued.

But the bus made it through, the car was untouched and the my partner got to come home physically unscathed tonight — and I am grateful for that. But for the sake of about 3 seconds of time, the bus driver’s dangerous driving was exposing the driver of the red car to an accident and injury, and the cyclist to a potentially fatal accident. That’s not worth it, and the driver should instead have slowed down to follow the bicycle.

Let’s look at it all in real time speed. What would you have done? Are you confident enough to stop safely? How about if your bike was full of groceries?

This sort of incident is, tragically, quite usual for Auckland roads. While every cycling day is packed with the normal dangers to avoid, most days also see specific dangerous driving actions like this one, and that’s what we have to stop.

Our worst story

One reason my partner gets distraught at these sorts of near misses is that she was knocked off her bike in late 2012 by a woman who works for an insurance company. That person dangerously crossed a busy road by driving her car illegally through a stop sign from one side street to another. My partner was descending and the car hit her, knocking her off her bike and she slid for quite some time, luckily avoiding hitting anything. Even more luckily she had just avoided a perhaps fatal T-bone accident, and escaped “only” with lacerations, bruising, swelling and a couple of trips to the doctor. She was also very shaken up.

Strangely, for someone I discovered to be a communications professional, the driver, provided only her first name (Michelle) and phone number. As a victim my partner wanted as little as possible to do with the driver or her insurer company, but I was glad to  help. Even then, while my Google foo was strong enough to find the driver, I had to ask her quite firmly to formally identify herself so that we could settle accounts. I also actually enjoyed jousting with her insurance company (which was not her employer), who as always are not exactly there to meet your full costs unless you fight. Incidentally — if something like this happens to you there are people out there who really enjoy negotiating with insurance companies — so don’t be afraid to ask around.

We did report the incident to the police, who were wonderful. However we were later disgusted to find that  the end result was not a loss of license or worse for what was clearly careless or dangerous driving, but essentially a traffic ticket. My partner had had enough, and didn’t feel she could handle a court case, and so we let it slide, as victims often do. I’m certain that this is very common, and it’s just sad that dangerous driving against cyclists seems to be treated as irrelevant.

What we did

The first thing we did afterwards was to purchase Go Pro cameras for riding. They provide great evidence of dangerous driving, and I highly recommend riding or driving with a camera to everyone. If in doubt, search for “Russian driving video” or similar.

I did not write about the incident at the time, also because my partner did not feel she could cope with it. Overall I do not feel that there was natural justice, and feel that at the very least the driver should be compelled to go through some sort of remedial course.

However as with all accidents, it was not all the fault of one person. The real fault is the design of the road where vehicles have to cross a large road with cars traveling at high speeds. The side roads should either be closed, for example, or some sort of traffic control put in place. There should be no surprise to learn that nothing has happened yet, but we did go to the Ponsonby Road Masterplan public hearing.

What can we do?

Do buy a camera and use it to name and shame, but most of all to show other road users that their behaviour will not go unobserved.

Please do respond, and drown out, the vocal minority of selfish commenters on a variety of forums who seem to think it’s okay to mow down people with their car.

Please consider riding a bike yourself – as the more people on bicycles commuting to work, the faster we will change behaviour.

Please ask your local and national politicians what they are doing to stop the killing of cyclists and to make Auckland, Wellington, Christchurch and all of New Zealand have vibrant life-filled streets and the best urban and rural cycleways in the world.

Let’s make it happen.

Posted in NZ Business | 17 Comments

How simple it can be to create protected bike lanes

This is a piece received via email from Gloria Williams (@caniwiwilliams) that she has given me permission to post.

I read your thoughtful column on cycling safety this morning and I thought I’d send along this photo which shows just how simple it can be to create protected bike lanes. This is Vancouver, a city similar in size to Auckland and this photo is on a main street within the CBD.

Yesterday I walked to St Heliers on the footpath and made these observations about the so called cycle path ( the one on the footpath, not the road)

  1. There are signposts cemented into the middle of the bike path in places ( bus stop signs, crossing signs etc etc)
  2. When parked cars open their passenger doors it blocks the entire bike oath ( witnessed a near accident because of this) Car passengers don’t look of course.
  3. Of course we know how bumpy and uneven it is (tree roots etc)
  4. It’s very narrow, not wide enough for bike travelling both directions.
  5. It’s poorly marked. The little painted bicycle sign is not used near enough and they are quite faded anyway.
  6. People and their leashed dogs, strollers, scooters, skateboards, joggers etc all stray into the lane, or use it intentionally.

So no wonder cyclists take their chances on the road, where the haphazard attempt at bike lanes are just as bad, too narrow, used by cars, intermittent, car door hazards, etc etc.

What all this shows me is that bike lanes are just an afterthought, we are trying to fit them in around very other usage without dedicating any real space to it.


Posted in NZ Business | 3 Comments