Casadellibro dilemma

As probably most of the companies Casa del Libro decided to catch the Internet wave since 1995. Having aggressive expectations they bought the most expensive technology available in the market. However, things turned out not as much sunny as expected and the CEO of Casa del Libro is facing a dilemma now: stay with the UNIX or change to Windows NT?

My decision would be to stay with the UNIX system and avoid developing a new one. Although redesigning the previous system would cost time and money, I think that starting from scratch involves more time and effort, especially from the senior management level. I assume that Casa del Libro can afford costs associated with UNIX and staying with UNIX will not lead them into huge losses/debts. I also assume that Casa del Libro is striving for excellence based on their aggressive projections, buying the "bestinbreed" technology and hiring prestigious consultants.

My decision is based on the following criteria:

1. UNIX is robust and can sustain a huge number of transactions. Of course this is not relevant at the time of the decision as the market declined, but it will enable the firm to avoid future problems when the market starts growing again. It's always ups and downs and definitely this was not a market that had matured and close to an end.

2. Designing a new platform from scratch, even if it's relatively cheaper and simpler, would still involve high costs unless they could use at least the technical specifications for the UNIX to design the Windows NT.

3. UNIX is more stable and in online shopping you wouldn't want any downtime.

4. Microsoft might seem to be cheap but most probably they'll keep selling you updates every month or so.

TESCO adventure

TESCO started in 1919 as a grocery stall in the East End of London and turned to be one of the market leaders in UK. How did they achieve that? Of course, the mission statement helps if you stick to it. "To create value for customers to earn their lifetime loyalty". Now how do you actually create value for customers throughout decades. Obviously you have to be aware of the changing customer needs throughout change in generations. You have to not give them what you think is best but what they think is best for them. Honestly, a lot of companies can do that, sometimes even better than TESCO. That's probably why they couldn't outbeat Sainsbury's for a long time. The real challenge is to be ahead of time and to predict the customer needs. To predict the changes in behaviour and customer habits and to offer them something they really wanted without recognising that yet. In my opinion that's what TESCO did with first starting the Clubcard and then moving into the online world. They always had the first mover advantage. They involved technologies as and when needed in order to create and sustain their competitive advantage and the results confirmed their position.

In 1996 TESCO opened an online shop where customers could buy not only groceries but many other products from TESCO's warehouses. It was a huge success and shortly TESCO received the number one e-grocer on the Web title. In a short period of time their online sales increased 77% to 176 million UK pounds. I believe the move to the online arena and all the online features provided actually not only helped their online sales but also sales in their retail stores. With all the database of individual shopping histories they received extensive information about customer buying behaviour which they had no access to before.

However, there's still a challenge there for TESCO as online sales, while being profitable and providing more than 50% of the UK online market, only represent 1.5% of their sales. They obviously need to increase this number without hugely harming their sales in retail stores. I believe in order to do that they should be again thinking ahead of time. Although they had almost all features of modern online shops back in 1996, such as remembering the customer, offering products, price check etc, which I was amazed at, there's always room for innovation and improvement. They entered into the segment of handicapped customers which was innovative, however represented a very small niche market. Now they also expanded to US and have to adapt to US buying habits, but how could they succeed?

I believe, thinking ahead again and creating competitive advantage would be somehow to show the actual goods before they get delivered, offer a possibility to smell or touch.......I know the technologies are not there yet or are too costly to be profitable, but in my opinion this will come in some time. The world is moving towards less and less friction and I probably don't buy from online groceries just because I cannot see or smell or touch the product. To keep the sales in retail stores on the other hand, I would convert them into something more than a store, probably involve technologies there as well, e.g. a simple touch to a product could show who of your friends bought or liked the product. I'm thinking of my preferences, trying to think our of the box and be creative, but generation Y may think even more ahead...

ERP - to be adapted or not?

Enterprise Resource Planning (ERP) is principally a software which integrates core business processes of a company providing the executives with a large database of information enabling them to make wise business decisions. ERP incorporates such functions as Human Resources, Supply Chain Management, Customer Relationship Management, Finance, Manufacturing Warehouse Management and Logistics which were previously stand-alone applications. Integration of those business functions into one depository is the main benefit of ERP improving productivity, speed and performance.

On one hand ERP is flexible and allows for customisation but on the other hand the functional customisation may be limited thus forcing the companies to change their business processes in order to adopt ERP. So what's best?

There are advantages and disadvantages on both sides:

Off-the-shelf - No customisation allows for less risks, easy updates, faster implementation, great use of the "best practices" incorporated in the development of the ERP packages, however, it may require rethinking of the business processes themselves to fit the package.

Adaptation - Functional customisation avoids redesign of business processes, therefore reducing the potential negative impact on the company and its employees, it also may lead to competitive advantage for the company, however, it involves more risks in the implementation and operation, makes it difficult to update and obviously, involves higher costs.

According to Panorama Consulting Group's 2008 ERP report, only 23% of organisations implemented ERP as off-the-shelf package, with 34% out of the remained having made significant changes to the package. Large companies with over $500 million in annual revenue, specifically companies in the aerospace, defense, and government industry verticals are more likely to make heavy changes to the ERP package.

I believe there is no single answer that suits all. Each company should think well before deciding whether to customise or not. That decision should be based on the size and structure of the company, sophistication of business processes, time and costs allowed for implementation, need for competitive advantage through the use of ERP.

Largely generalising I would say that small and medium sized companies with weakly defined business processes would largely benefit from adopting the "best practices" incorporated in the ERP packages and changing their business processes accordingly to match the "standard". Also, a change would be easier to manage in smaller organisations. In larger organisations, on the contrary, customisation of ERP packages will be a better solution if they have strongly defined and long operating effective business processes which give them a competitive advantage. Larger organisations may afford paying more and waiting longer for the package to be implemented. Moreover, for unique industries such as airospace and defense, the "best practices" might be simply not relevant.

Dell Hell

Ok, so what happened here. A famous blogger Jeff Jarvis starts criticising a Dell product on his blog and within a short period of time Dell finds itself in a trouble. Worst PR ever, declining sales and consequently profits.

Now how would I react if I was the CEO of Dell? Obviously I would be frustrated in the beginning and would want to find the blogger and make him pay for what he's done! After all this was just one computer which turned out to be a "lemon"! But that would be the initial reaction. Coming to my mind would also be denying all that was said, making Jeff Jarvis deny what he said........I should be smarter than that.

After all, even the worst PR in the world is still PR! So the best decision should be to capitalise on that.

First of all, what Jeff Jarvis was saying was obviously true and I should know that. So I would increase customer service and would ensure there's a platform where customers can leave their complaints which will be handled in due course. Now that everyone knows about Dell Hell, I would start a new campaign, a change in the quality of customer service under the name "Dell Hell", or something like "Dell Hell to Dell Heaven", and would hire Jeff Jarvis to manage the change in focus on customer. He would take care of the change management and would use his blog to give publicity to the important change.

Turning a bad publicity into a good one is a challenge but is feasible!

Google is not heaven?

Well, Google has achieved a great success and profits of course, but as any other company it has got its problems. The most important ones are listed below.

Internet censorship in China: On January 12 2010 Google announced that it will stop censoring search results in China. China is the largest internet market by users and Google is taking a huge risk doing this. Many analysts believe that China may easily ban an uncensored search engine. China prohibits content on websites which jeopardize political and social stability and therefore, Google is really risking the loss of market by unilaterally lifting the censorship. The US government is backing Google on this initiative. However, no other companies, except Yahoo, are backing Google, waiting for the giant to leave the market to take its place. The freedom of speech that Google values so much is understandable, however, it contradicts to their actions in India, where they removed offensive comments from the website even without the government asking them to. Some cynics say that Google's actions are just aimed to cutting small operations in China by also making a lot of PR on it. Although, according to Google, its reaction in China was reportedly accelerated by the hacker attack that hit Google and over 30 other companies and was allegedly initiated by the Chinese government. After a month of speculation Google finally stopped censoring Chinese search engine in March 2010 with hope that Chinese government will let them continue to operate. This is yet unclear.

Privacy: Following the launch of Google Buzz, Google's response to Facebook and Twitter, a lawsuit was filed in February 2010 in San Francisco claiming that Google is sharing personal data without consent. And this is not the first time Google's privacy practices have been criticised. In 2008 Google's data protection policies have been brought into question. Trying to make the data universally accessible Google at times overshares information without permission which raises privacy issues with the users and interested organisations. An article which I found very amusing on this topic was talking about Andrew McLaughlin, the White House's Deputy Chief Technology Officer and previous employee of Google whose frequent contacts with Google were revealed unintentionally after the launch of Google Buzz. Of course, these might have been just keeping up with friends or even correspondence while he was employed in Google (because Google Buzz reveals contacts that he e-mailed or chatted with most frequently in the past and not the recent ones), however this raised an increased interest and now the Consumer Watchdog is requesting the copies of e-mails exchanged between Andrew McLaughlin and his previous employer. At least this might make Google realise the price and importance of privacy.

Antitrust trouble: Google is so diverse and tries to enter so many online markets that it always runs into the antitrust regulators. First problem came out last year when Google wanted to sign a long-term partnership with Yahoo. The deal was cancelled by Google following the increased interest by the Department of Justice (DoJ). DoJ is now interested in Google's contracts for building a book search engine, partnering with publishers. There's also an allegation by the European Antitrust regulators about the Google's search practices, claiming that Google gives lower rankings to its competitors in the search results. The latest DoJ interference, which however ended up successfully for Google, was the proposed acquisition of the mobile advertising network AdMob. In short, being successfully present in every online market possible, Google is now facing trouble in every new endeavour.

Will Microsoft last forever?

Well, nothing's gonna last forever, but do I expect to see Microsoft as a leader in the next couple of years, I definitely do.

To start off I listened to Steve Ballmer at Microsoft CEO Summit 2010 http://www.microsoft.com/presspass/events/ceosummit/liveevent.aspx. He sounded really optimistic about the future and mentioned five key areas of competitive advantage:

1. best talent
2. balanced investment
3. innovating in the right areas
4. product flow
5. future bet: cloud

Listening to Microsoft CEO is kind of biased but still to me as a happy PC user he sounded quite convincing. I must admit though that I'm quite a conservative person when it comes to technology. But setting conservativeness aside, I have to be objective. Microsoft is by far the leader in Desktop OS, browsers and it's all time winning solution, the Microsoft Office. Competitors are getting innovative but Microsoft can always follow and it will pay off in their case. Users will not change to competitors that easily. Moreover, by being the follower, Microsoft can capitalise on improving the weaknesses of the competitors.

I tried to analyse Google Docs just for example. Google Docs becomes increasingly popular but is it really better than Microsof Office Live? It seems that the main advantage of Google Docs is the real-time collaboration, whereas all the rest of the features are better with Microsoft. http://www.pcworld.com/article/168309/microsoft_office_vsgoogle_docs_a_web_apps_showdown.html
Microsoft products have bugs of course but well it does not preclude them from having the largest market share. I don't want to talk about Vista and it's failure. The idea was not executed correctly and I think Microsoft is huge enough to afford that.

It's a huge corporation and has got the right talent and enough finances to be able to research, innovate, follow and continue to be the leader. I don't think Microsoft is going to give up anytime soon...

Foursquare - sell or not?

OK What is Foursquare all about…letting your friends know where you are, getting into a competition to earn statuses in several places, getting credits in places you visit most…these are all benefits perceived by the users. Launched 13 months ago, Foursquare now has almost 1 million users, according to CEO and co-founder Dennis Crowley. But what’s there for Foursquare. It all started as a mobile application, a game for iPhone, but now it’s growing so fast it’s quite logical that Foursquare started thinking about profits.

On Foursquare’s website, they invite businesses to engage with Foursquare in order to get closer to their customers, track their behaviour and reward loyal customers. It’s free for the moment but things will change at some point I think.

So where will the money be coming from? I see a few options:

First thing would be to start getting subscription fees from users. We’ve seen a few social networks, e.g. schoolmates (the Russian version of Facebook), who started selling subscriptions. The amount is very marginal, but considering the growing number of users it might be a good idea. The mentioned network started selling on top additional possibilities, like blocking comments, million of smileys, etc. In fact Facebook is thinking of starting subscriptions as well. But that’s not what I would go for. It’s risky in the sense that it can limit the growth of the customers.

The second option I thought about is advertising, but not in terms of putting ads, but in terms of cross selling. Like Amazon makes recommendations to users, Foursquare does the same by recommending nearby places to it’s users and it could also recommend places that the users might like. I believe that Foursquare can get paid by the companies to get their names out more often.

The third option I see is getting paid by the companies for selling user profiles and behavioural patterns, and that’s probably the one that I would go for. Foursquare already has partnerships with a few “Big Names” and makes some money out of it. The potential market for this type of business is very large including “Big Names” at one end of the spectrum and small owner-run businesses on the other.

Foursquare came up with the right idea at the right time and there’s a big potential in it. The rumors that Yahoo wants to buy it for around $125m can as well be true. With such a fast growing user base and huge potential market, it’s not surprising to me. However, I am somewhat conscious of the competition. The main competitor at the moment is Gowalla and it kind of does the same thing but is not as popular as Foursquare. The problem with this type of social networks is that once the one gets more popular, people are going to subscribe to the one to which their friends are subscribed to. Therefore I don’t see much threat in Gowalla. However, there is one important thing that has to be taken into account and that’s Facebook. Currently Facebook has a much larger user base and they decided to launch geolocation features shortly. If Facebook is successful in its launch, incorporates all the important elements from Foursquare and enters into a direct competition with Foursquare, for the above mentioned reasons, I don’t believe that Foursquare will be worth the money it’s worth now.