Tuesday Three: 3 ways to improve your business

Drinks are on the house, but only when in the house

  1. Buy staff beer and wine for Friday afternoons – but don’t put credit cards down at bars
  2. Cash in staff carparks – give them 50% share of the savings and encourage them to walk, use public transport, cycle or motorcycle
  3. Get everyone using IM – be it MSN, Skype or whatever. It’s far quicker than other methods and the new generation can’t functon without it. Oh – and it is free.
Posted in NZ Business | Tagged , | 1 Comment

Fix the Berl report on alcohol and drugs

The Costs of Harmful Alcohol and Other Drug Use report commissioned by the Ministry of Health and ACC has been the subject of some controversy. It was written by five authors from Business and Economic Research Limited (BERL), and they got support from a range of people, including 9 people from ACC or Ministry of Health, three from Otago University and two external reviewers – Prof. David Collins and Prof Helen Lapsey from Australia. The external reviewers are authors of a report that used similar methodology for a report in Australia.

While the level of professionalism to produce a credible report should command the (apparently) $135,000 fee, I am disappointed that people inside both Berl and the Department of Health are not reacting to the responses – indeed it seems defensive. While there has been some good robust discourse, but it seems a bit tit for tat, and much as we like to see a good fight, I’d rather see a quest for an agreed answer.

On such an important topic I feel that the only thing that matters is that we get the facts straight – and I would dearly like to see a re-worked and perhaps expanded paper that can be acceptable to academics, media, the public and even bloggers.

There is abundant material – so let me share the results of my own random walk through the topic by looking at each of the players involved.

The ACC is apparently a co-funder of the research, though there is no press release on the ACC website, and no mention in any recent speeches. From a public point of view they are out of it.

The Ministry of Health, through subsidiary National Drug Policy New Zealand, seems to be driving the activity. The NPD, which I was vaguely aware of, has the goal to:

Prevent and reduce the health, social and economic harms that are linked to tobacco, alcohol, illegal and other drug use. It does this through a balance of measures that:

  • control or limit the availability of drugs (supply control)
  • limit the use of drugs by individuals, including abstinence (demand reduction)
  • reduce the harm from existing drug use (problem limitation)

The NDP website is a bit out of date – showing former Associate Minister of Health – Jim Anderton – as the chair and eight other former minsters from the last Labour government on the Ministerial Committee for the NDP. It doesn’t bode well.

However the Berl report is on the site (reflecting their priorities perhaps), along with their latest report Research into knowledge and attitudes to illegal drugs which is not bad but by no means  flawless. For example they selected their sample of drug users from contacts and friends of contacts provided through drug treatment agencies – which is only going to capture those that have gone too far in their drug taking and their friends – not a representative sample. It’s liked selecting people for a study on alcohol from the people in a hospital detox unit and their friends, rather than from a pub on a Friday night.

That report also avoids digging into just why people take drugs – but only looks at the dark side.

Credit where it is due – the drug report does uncover that “just don’t do it” campaigns will not work – as people will do it anyway. It’s pretty good when it comes to formulating campaigns to reduce harmful use, just lousy as a policy forming instrument.

Back to the Berl report. From what I’m seeing on the NPD site it appears that the Ministry of Health is biased strongly towards stronger regulation of alcohol and drugs, whereas I would hope for a more nuanced approach from our normally balanced civil servants.

BERL

Business and Economic Research Limited has been around since 1958, and does, obviously, economic research. They clearly care about their reputation, and are, from what I saw at the Economic Conference, very good at presenting their findings. (Including a very entertaining and insightful one on the global financial crisis in NZ)

This reputation and lagacy makes the report and resulting kerfuffle all the more disconcerting. I am guessing that Berl are feeling a bit blindsided by all the media and academic reaction.

Their paper was presented at the NZ Economists Association Conference last week, but sadly I only saw the last few minutes. (I was diverted by a macro economic discussion of the global financial crises). I did see the reply, given by Messers Crampton and Burgess (below) but sadly at this standing room only event, the question period was killed in favour of lunch.What I did observe from the back of the room where several covered smiles and quiet snickers – while the sheer number of people in the room made it feel like a veritable lynch mob.

More concerning to Berl is that my understanding is that Berl are not revising the report in light of the academic and media criticism. I could be wrong, and I hope so, but I had a very brief chat with one of the authors at the conference – but he wasn’t happy talking to “a blogger”.

The Law Commission has been part of the news on the Berl report – and I really didn’t know much about them. Turns out the Commission..

…is an independent crown entity funded by government. It is a central advisory body established by statute to undertake the systematic review, reform and development of the law of New Zealand.

They also cover alcohol and drugs, it seems. The Law Commission used the Berl report in a speech in Nelson and another in Wellington by President Sir Geoffry Palmer SC.

While Sir Geoffrey says, in the second speech:

I do not believe it is the Law Commission’s job to advise New Zealanders about how much they should drink.

He later says that

The Law Commission will need to make recommendation about the legal framework for the sale and supply of alcohol.

The publicity arising from the first of these speeches is perhaps the reason that some, including the NBR, (and myself) initially thought that the Law Commission had paid for the report.

The Law Commission is publishing a “Review of the regulatory framework around the sale and supply of liquor” this month (July 2009). This is the policy response to the Berl report – and an important document as it feeds recommended law to the Government.

I’m a bit concerned that the Commission may be exhibiting a bit of anti-alcohol/drug bias, as evidenced by the paper published in May recommending that parliament does not use conscience votes for alcohol related laws – as they see that this makes it harder to pass strong anti-alcohol laws. This seems to be a disturbingly strong and one-sided recommendation that will help to ensure the next round of laws are passed. It may not matter too much, as the Government Whips managed, it seems, to have every National MP vote against a recent (albeit very poorly written) attempt at legalising medical marijuana.

Eric Crampton and Matt Burgess

Eric is from the Department of Economics and Finance at Canterbury University and Matt from iPredict [edited – I said both were from Canterbury earlier], and they wrote a compelling rebuttal to the Berl report, backing it up live at the NZAEC conference.

We find substantial flaws in BERL’s method that together account for well over 90% of BERL’s calculated costs of alcohol use. Corrected external costs of alcohol use amount to $662 million [Berl recorded $4,791.5m lw] and are roughly matched by the $516 million collected in alcohol excise taxes. The BERL report is wholly inadequate for use in assisting policy development.

Their three main issues with the report are:

  1. It uses a threshold for health costs to define a cutoff for economic costs
  2. It assumes anybody who drinks enough to cross an epidemiological threshold is
    irrational
  3. It assumes anyone who is irrational enjoys zero gross (not net) economic benefits
    from drinking

They are particularly concerned that the Berl report does not match any benefits with the costs, and point the finger at the Law Commission for referring to the Berl report’s ‘dramatic findings’, which, when you add the benefits back, are not a big deal.

They are also concerned (as am I) at the line by line calculations of the costs (and they apparently don’t reference well.) In the hope that people will actually read this I’ll leave out the details – they cover it well. Once systematic error is that they attribute 100% to alcohol costs from people that are already costing society through another condition, like mental illness.

Finally Dr Peter Bushnell – Deputy Secretary of the Treasury was pretty scathing in an NBR article:

the onus should be on the Law Commission to be rigorous ….”

“..What we’re saying is it’s your reputation that’s at risk here. It doesn’t reflect well on the Law Commission if it … backs [work], that doesn’t have a sound basis.”

doesn’t look like it meets the “normal standards you would expect”

Where to next?
We are now waiting for the Law Commission’s policy document – and the reaction to that will be interesting. Indeed the Berl report has probably had the effect of increasing awareness of the forthcoming policy and thus activated many people whom otherwise would not have been engaged. Like me.

<update – see the later post>

Posted in NZ Business | 4 Comments

Tuesday Three: 3 ways to improve your business

Spend like you spend, not like a corporate

  1. Stop buying refundable air fares – get the cheapest ones for 1/4 the price and throw them away when unused. It ends up being much cheaper
  2. Set your printers to print default black and white, double sided.
  3. Open up the internet – get rid of the expensive censorship tools that slow everything down and annoy everybody, and replace it with a policy that says “don’t be stupid”. Manage the person not the pipe.
Posted in NZ Business | Tagged , | 6 Comments

So you’ve got a good idea – now what?

I’ve been getting an increasing number of ideas over the transom over the last few weeks. It started before the radio interview last week, accelerated because of that, and tomorrow it seems I’m in the latest issue of Idealog.

It’s really good to receive them, and I enjoy helping out and even starting some businesses. However last week I’ve been a bit slow to reply to some of those messages – and I apologize for that. Some of them I’ve been checking out, others I’ve been thinking through and still others I have just left. I will get back to everyone eventually though.

But there is one problematic category of ideas, and it’s one where I want to give some very strong advice. The note or call I receive will go something like this:

I’ve got a great idea, I’m not going to tell you what it is (at least not without an NDA), but I am going to invest or have already invested a bunch of money into it.

I’ve seen everything from $5000 to close to half a million invested in or required for companies and products that you have never heard of or are not even described. I’m always willing to help people in these situations but they need to be more honest with themselves about the value of the idea. Holding it too close to your chest means the idea won’t be as good, the speed of execution will be much slower and the amount of money invested will be much higher.

Instead here is my take on what to do once you have that wonderful idea for the next big thing.

Before you start

  • Check the competition – If it is a great idea then it may well be done already. Get online and search for the product – and be very persistent. Check different channels to make sure it isn’t being sold already, and make sure also that there isn’t a close substitute. Be very thorough in this and, importantly, keep doing it forever.
  • Share and improve the idea – Shop it around your friends and family, talk to potential customers, experts in the field and determine that it is a good idea. Along the way you’ll hopefully find some people that you respect and that are energised by the concept. Ask them to help. Your idea may be good, but with the assistance of others you can make it great.
    Be flexible with the idea and tweak it as you learn new things. Write it down in a structured manner – and have very crisp and consistent descriptions for the product or business, why it is better and will sell and your path to develop it.
  • Estimate the size of the opportunity, and be tough. This means numbers – how many widgets will you sell, at what price and what margin. It’s important to test your projections against the real world – what does 1000 sales per day really mean per sales outlet, will people actually pay the retail price, what are the wholesale margins in the channel you are using and and so on. Track your business against these numbers.

Starting up

  • Focus on the few. What few things do you need to believe, what do you need to do and and what results do you need to see before you can truly prove that the business will succeed. Write them down. Then spend your time focusing on those things, trying to get to them in the cheapest, fastest way. If you cannot prove something then you may need a leap of faith, but if you disprove something then change tack or move to the next idea.
  • Pay with equity – have some partners and pay them with equity. It’s the best way to save on start-up costs, it means better results as people have genuine interest in seeing the business succeed and it’s a heck of a lot more fun. Stay well away from large suppliers that deal mainly with corporate customers – their fees are far too high and you are a low priority for them. If you are struggling to find the right partners that will work for equity then perhaps there is a hint there, and your idea isn’t The One. Note that you generally need to pay for actual purchases (like raw materials) but work performed in the early stages should be for equity.
  • Don’t spend anything material until you know you will get a return. Great entrepreneurship has very little financial risk, so be miserly until you know it will succeed. Put very little money down at the start, investing only in the critical raw materials or services that you need, and focus on investing your and your partners’ time. Wait for revenues – if the idea and execution is good then there will be plenty of money later.

Growing

  • Be prepared to stop, and stop fast if at any stage it is clear the business will not succeed. You are passionate about your idea, but you also need to be dispassionate enough to exit before you waste too much money. An informal or formal board can help a lot here. If you have already sunk money into a business that isn’t proven, then treat it as such – sunk money that is gone forever. Don’t fool yourself into thinking your new venture is valued at the amount of total investment – look instead at what the profits are and will be.
  • Go full time – a full time CEO is the only way to really drive a business forward. Once you know the idea has legs then quit your other pursuits and focus on growing this business. Or perhaps you are not the right person to be the CEO, so find someone who is and cut them in. Don’t be distracted by the next business idea – that’s pointless until you’ve either made this one work or killed it.
  • Spend as little as possible – don’t pay your self (or anybody for that matter) any more than you need to live – and live frugally. Wait until the business is sustainably making money and then start increasing the salaries of the contributors, eventually to market rates.
Posted in Internet Business, Investing, NZ Business | Tagged , | 10 Comments

Better culture, better people, better economy

It’s the most commented article on The Economist right now, and it’s a fractious topic.

Indian students have recently taken to the streets in protest against some of the worst ethnic-based attacks Australia has seen

The violence sprang to public notice when two Indian men were attacked with screwdrivers in Melbourne last month. One was robbed. Both ended up in hospital.

I don’t want to get into the wheres and wherefores of the topic, but do want to draw comparison between New Zealand and Australia.

Australian society has a pretty strong racist streak compared with New Zealand. It’s a combination of a number of things, but I let’s  it down to the following three.

  • Horrific indigenous population conditions and policies
  • Lack of exposure to non-white cultures – e.g. Aboriginal Australians make up 2.6% of the population
  • Lack of non White Australian (and male) leaders

In New Zealand we are continuously addressing these issues and as a result are far less inclined to have racially oriented violence. That’s not to say we don’t have it, nor that we don’t have racists, but it’s on a scale far below that of Australia. Even PM Kevin Rudd was in denial about the reasons behind the attacks as he:

..dismissed race as a motive, and called the violence “just a regrettable fact of urban life”

For a former diplomat Rudd has really miss-stepped. India is a growing market and power, and Australia isn’t doing their chances of a closer relationship any good:

It has also become a diplomatic embarrassment for Australia, at a time when it has been seeking to boost relations with India to what Stephen Smith, Australia’s foreign minister, calls “the front rank of our international partnerships”. Kumari Selja, India’s tourism minister, has cancelled a planned visit to Australia in July. And Manmohan Singh, the prime minister, has said he is “appalled” at the violence, calling some of it racially motivated.

New Zealand has steadily and deliberately moved over past 25 years to become a fairer, integrated multi-ethnic multi-cultural society. We’ve worked hard –  from the Te Reo programs, to treaty settlements, Maori seats in parliament, Maori broadcasting and so forth. Meanwhile we’ve experienced increased immigration from the Pacific, Africa and several countries in Asia.

As a result we, as a people, are better able to quickly understand, respect and work with foreign cultures. That helps make us even better global travelers and, along with our honest approach, good people to do business with.

Indeed a decent diplomatic corps may market a country as one thing, but just like a branded product, if there is a disconnect between rhetoric and reality then the reality will eventually shine through. New Zealand has always punched above our weight in global politics, and one reason is because our well-raised people are scattered throughout the world demonstrating every day what it is we stand for.

This helps our export driven economy. We are ever-increasing our reach into new markets, especially to the near 2 billion population inside countries that we have or are negotiating Free Trade agreements with. We are thus set up well to successfully do business within these very different societies and cultures.

Australia, in reality, is not that far behind, and this isn’t a win-lose game, but we’ll take any advantage we can get over the West Island.

Posted in Australia Business, NZ Business | Tagged , , , | 5 Comments

Snow job in Greenland

Whitewash

“A West Coast man has lost his feet and a hand to frostbite after surviving three days in an Arctic whiteout.”

Let’s look at the facts here. He had

  1. No EPIRB to locate him if all failed
  2. No Food
  3. No GPS
  4. Not enough fuel
  5. No tent
  6. No other survivial gear

Karamea’s Joseph Gibbons is a lucky man to survive three days near the highest point in Greenland during a storm. He lost some bits of his limbs in the process, but is eager to get back to work in the extreme cold.

Only luck prevented this from becoming a fatal accident. The real question is how the heck did he get into this situation, and more importantly, how the hell did his employer let him get into his situation?

“I went out for what I thought would be a 20 to 30-minute excursion, so I didn’t have any survival gear per se.”

One of the first lessons in extreme conditions is surely never to go out without the right gear. So why wasn’t the gear on the snowmobiles at all times? Why was Joe allowed off base without the minimum equipment? How can you be a contractor to do this sort of work if these basics are not part of the way you operate? Who are these shonky people? Who employed them?

Turns out his employer was an unnamed contractor working for the US Government, and the work was, amazingly,  “researching how camps could be put together to better survive the harsh conditions.”

That mission just makes it even worse. What the hell were the US Government thinking? I sincerely hope that this contractor has been stood down until the reasons behind this debacle are cleared up.

Joseph may be able to claim some compensation from his contractor employer, and by extension, the US Government. He can probably do this regardless of whether he broke the rules or not.

However if he did break the rules for his excursion, then he should never be employed in a safety environment again – and certainly not by that employer (unless he reforms and teaches HSE.)

So whether this was something only he did (his fault) or was systemic (contractor’s fault) or wasn’t against the rules at all (Government fault) it should never happen again. All parties need to do some soul searching here – Joe for going out without the right kit, the contractor for providing a working environment that allowed him to do so and the US Government for employing contractors that allow this sort of thing to happen.

Shame on all of them, and you are a lucky man Joseph Gibbons.

Posted in Business | 1 Comment

Tuesday Three: 3 ways to improve your business

<I pulled this post after posting as I wanted to expand it, but it was already commented on externally – so here it is again.>

Get out there

  1. Use OpenOffice.org as the default office application. Give Microsoft Office only to those that really need extra bells, whistles and TLC.
  2. Meet your customers every day – stand in the supermarket, visit their factory, man the telemarketing lines, blog and tweet with them online.
  3. Keep it safe – take responsibility for the safety of yourself and everyone around you  and work to continuously improve it. Give each other the right to stop work if you see a potentially unsafe act. Accidents can kill people. They can also destroy your business and put you behind bars.
Posted in NZ Business | Tagged , | 1 Comment