That was week ending 25th May 2012

I had intended that this week’s look at last week would focus on the more humorous side of business, the economy and politics.  However there have not been many stories to chuckle about.  Even those that contained some vaguely amusing aspects left me not knowing whether to laugh or cry.  So here are a few of last week’s stories that illustrate some interesting aspects of human behaviour.

Regan of the SFO

This is an extraordinary story.  The Serious Fraud Office’s pursuit of the Tchenguiz brothers is more like an episode of the Sweeny than a serious investigation. Last year the brothers were arrested in a dawn raid on their properties (screeching tyres and “go, go, go" no doubt). Whatever the SFO hoped to find clearly they didn’t as neither of the brothers have been charged and both continue to deny any wrongdoing.

Not finding evidence never seemed to bother the Sweeney and it doesn’t seem to bother the SFO either. They continue to pursue the case and are now threatening a high profile investigation lasting 5 to 10 years (which we would pay for) if the brothers don’t agree to a financial settlement. Not even being accused by a high court judge of “sheer incompetence” has deterred the SFO from blundering on. I don’t know whether the Tchenguiz brothers are laughing or crying but I do have this mental picture of senior SFO investigators snarling “shut it” at anyone who suggests they don’t have a case.

En garde c’est Lagarde

IMF director Christine Lagarde endorsed the coalition’s austerity policy as the right course for the UK. However she also warned that further measures were needed to get the economy growing again. So a sort of “has done well, but now must do better” school report from the economics mistress.

She also used a new term to describe austerity measures, “fiscal consolidation”. Amazingly no politician has picked up on this so far. It is difficult to get people to vote for austerity as we all know what that means. Or if we didn’t we do now. “Fiscal consolidation” on the other hand might just sound sufficiently nothing really to do with the rest of us to sneak under the radar.

Talking of politicians, the shadow chancellor Ed Balls leapt up to claim that Ms Lagarde was right because she was agreeing with him. In her statement “when trying to imagine what the situation would be like today of no such fiscal consolidation programme had been decided, I shiver” she was clearly talking about him, but not necessarily agreeing with him. When challenged in interview, Balls responded that where she did not agree with his views she was wrong. Right and wrong at the same time it seems.

Yell no more

I had thought that the most extreme example of pointless rebranding had been the renaming of Norwich Union, one of the most well established and trusted brand names in the financial services industry. This became subsumed into Aviva, which sounds like a cross between a bus company and a 1970’s Vauxhall.

However Yell have hilariously gone way beyond this and announced last week that the new name for the business will be, wait for it ….. “hibu”. Heavily in debt and making huge losses this is the best they can come up with. Mike Pocock, Chief Executive said that the company needed a new name because it was “viewed as a dinosaur”. Was he suggesting that if Tyrannosaurus Rex had changed its name this would have saved it from extinction? Another step down the road to extinction for Yell, sorry “HIBU”.

HP and Autonomy

HP announced 25,000 jobs cuts. It was going to be 24,999 but they decided to include Mike Lynch, CEO of Autonomy that HP had paid $10.3bn to acquire just seven months ago. “Licence revenue was disappointing, sales execution was a challenge and big deals were taking longer to close”, said HP’s finance director, Kathie Lesjak.

However long before the sale to HP UK stock market analysts were critical of Autonomy and advising investors to sell. Mike Lynch claimed these critics did not understand complex software businesses like his. Apart from one, the critics could not quite put their finger on what made them uncomfortable about Autonomy. The one who did was Marc Geall and he had actually worked for Autonomy for 2 years, before joining Deutche Bank in June 2010. Here are some extracts from a note Geall issued in October 2010.

“The management structure, control and systems at Autonomy are more representative of a start-up than a major global player … Autonomy's sales force are "hunters not farmers" …the investment in the business has lagged revenues ... [which] could affect customer satisfaction towards the product and value it delivers."

Most of the other analysts applied conventional analysis criteria to Autonomy. These were easily batted away by Lynch, who believed they did not really apply to his business. By contrast Geall comments on aspects of the core characteristics of Autonomy's organisational culture, how it thinks and behaves and how these could impact on future performance. You can read the full article we published in 2010 by clicking here.

Much is being made of the bureaucratic HP culture stifling the entrepreneurial spirit in Autonomy, with some justification. However what Geall’s analysis showed was that Autonomy’s culture which was once its strength was becoming its weakness and this has now manifested itself under HP’s ownership after just seven months.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

That was week ending 18th may 2012

Eurozone crunch

Greece and the Eurozone occupied so much of the business, economic and political headlines last week. As no one can possibly know what is going to happen this has allowed many learned and not so learned people to speculate on what might happen, so we feel entitled to join in.

Greece may or may not default and leave the euro. Either way this is not going to be Greece’s decision, much as some of their politicians might like to think so. Even pretending they haven’t got a government so there is no one to talk to for another month will now make little difference to the outcome. The election of François Hollande may or may not result in renegotiation of the fiscal pact. As it is entirely unclear who, apart from Germany has actually agreed with the existing pact this may or may not make much difference.

So basically no one will know what is going to happen till it happens. We advise businesses to prepare for a sharp post Lehman style tightening of credit. So if you are negotiating a facility with your bank right now it would be good idea to conclude those discussions now.  However there are two factors that don’t seem to feature yet in all this.

The first is that the banking system has a whole still has huge hidden liabilities, that they and the politicians have not owned up to yet. It may even be difficult to indentify exactly what some of these are. Either way this situation is a major drag on growth as it perpetuates the tightness of credit markets. One perverse benefit of a final crunch in the Eurozone is that it could finally force governments and central banks to turn on the money hoses and get to grips with fixing this problem. At least they would know where the fires actually were.

The second factor which is hardly mentioned in the austerity vs. growth debate is competitiveness. Unless the developed economies can regain their competitiveness to world class standards not only will fixing the debt problem be more difficult and prolonged but the decline will continue.

Which brings us to a bit of good news for the UK.

Three cheers for Ellesmere Port.

GM has confirmed new investment for Vauxhall's Ellesmere Port plant, including the creation of up to 700 new jobs. This also confirms that Ellesmere will be part of GM Europe’s future. The plant closures that GM needs to balance supply with demand will take place elsewhere.
Divisions of major international businesses have to compete just as hard internally for investment as they do externally to win sales and customers. Several commentators have pointed out that the Ellesmere project is a text book example of an “industrial growth strategy” in action and we agree. Make it clear that the sector is a key part of the UK’ economic future, back the key players in that sector, including the supply chain and the development of the skills required and you give confidence to the investors that you are serious.
This set the framework for unions and employers at Ellesmere Port to deliver what GM needed, including flexible working and a two year pay freeze and hey presto, you get the investment and the job security that goes with it.
UK Governments have been reluctant to be seen to be “picking winners”. This is mainly due to the disastrous track record of attempting this in the 1950s 60s and 70s. Ellesemere Port is one of the most productive automotive plants in the world. So this is about “backing winners” especially those who are already winners. Perhaps the government should try the same approach to other sectors, such as aviation where right now you would hardly have the confidence to land a plane in the UK much less run an airline service from here.

Facebook IPO – no surprises

Facebook’s IPO went much as predicted on Friday, resulting in a business that started just 10 years ago and making $1bn profit being valued at $100bn. What did not go as predicted was the expectation that the shares would pretty quickly trade at a premium.  Apart from a brief flurry by the end of trading they were back to the IPO price. This had the effect of lowering stock prices of other internet companies such as Groupon because the markets had expected a Facebook premium would benefit their share price.
It’s still pretty impressive but we have to say we are not impressed. Facebooks’s founder, CEO and still the majority shareholder says that making money doesn’t really interest him. Now he has a lot of other people’s money in the business is this really the right attitude to have?

One comment we noted was that “Facebook is a pretty new business and it is too much to expect brands and Facebook to have totally resolved what the new business model is”. Well at a valuation of 100 times annual pre tax profit we would have expected them to be pretty clear on this by now. GM seems to have made its mind up as they pulled their advertising off Facebook on the Tuesday before the IPO.

We are not saying that Facebook is not a good business now, or that it may not have potential to be a great business. However it is not there yet nor has it demonstrated its capability to be a great business so it is not worth $100bn. We see our old friends fear and greed at work here. The fear of missing out on the “next big thing” seems to be greater amongst the investment community than the fear of losing the money it has to bet on this company outperforming almost anything that has come before it.

But we shall see.


So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

That was week ending 11th May 2012

Queen speaks – government creaks

It is difficult to find much inspiration in this year’s Queen’s Speech. It contained only one piece of proposed legislation – overhaul of employment tribunals – that had anything to do with encouraging economic growth. Yet just the day before the PM and Deputy PM had declared that economic growth was the coalition’s first priority. We keep hearing this ambitious talk about growth from this government but this is not matched by ambitious action for growth.

The deficit reduction policy and programme has been clear and decisive and consequently has been supported by UK business and the financial markets. By contrast economic growth policy is muddled, piece meal at best and there is a growing suspicion that the government does not actually know what to do. There are also signs that concern about the UK economy in financial markets is shifting from the deficit to lack of growth. Waiting to see what happens and a reluctance to take risks is the way many businesses are thinking and government is feeding this rather than taking action to change it.

The budget did deliver some welcome measures.  However if economic growth is the first priority then what does taxing grannies and putting VAT on takeaway pasties have to do with it?  We are all in favour of “tax simplification” but the right now only simplification measures that are directly connected to economic growth should be considered.

As we have said before we would like to see three things – more spending on infrastructure – a significant reduction in employers national insurance for firms that take on more people – more generous tax relief on capital investment. On the latter the government argues that reductions in corporation tax have made up for the reduction in tax relief on investment. We would argue that right now that is putting too much of the incentive at the wrong end.

These three measures or something like them would be seen as bold and decisive action to boost the economy. This would show that the government is as serious about economic growth as it is about deficit reduction and it knows how to make it happen.

Deficit – what is that really all about?

Last week saw another day of strikes and protest by public sector workers. Feelings are clearly running high which is understandable given that much of the fallout from reducing government expenditure will affect public sector workers.

However there is a bigger challenge to come and that challenge is the reform of public services themselves. British Industry in the 1970’s was over manned, badly managed, in thrall to the unions and just hopelessly uncompetitive on just about any measure you cared to use. Our public sector looks very like this now. For example Steve Hilton, David Cameron’s director of implementation who is leaving to take up a university post in America has told the Prime Minister that the Civil Service could function effectively with just 10 per cent of the current staff.

It would be easy to dismiss this opinion as the scale of change it implies is almost unbelievable. However it is a similar scale of change to that which was needed to make British businesses competitive again and the process is still going on.  Current public sector cuts are simply reducing expenditure. The job of reforming our public sector to deliver affordable public services has hardly begun.

JP Morgan – fear and greed in action

In our last article we wrote about those two powerful human emotions, fear and greed and the need to understand how they influenced the behaviour that led to the financial crisis. Now JP Morgan has given us a classic demonstration of how these emotions led to a $2bn trading loss.

The Chief Investment Office (CIO) was supposed to be hedging or de- risking the bank’s exposure to credit. Then the greed kicked in and they began to push the trades further towards proprietary trading. This produced what looked like really attractive returns, doing great things for bank profits and for individuals’ reward packages. Then the fear kicked in. No one wanted to lose those profits and rewards so they kept the game going even though the bank’s senior executives were warned that the CIO was “an accident waiting to happen”.

Another characteristic of these disasters is that at least one of the key players has been given a silly nickname.  A senior trader at the CIO collected two of these. Bruno Iksil was known as the “London whale” and “Lord Voldemort”. This really is a sign of that both the individual and the organisation he works for have lost all touch with reality.

Holywell springs eternal

Finally a great David & Goliath story. Two years ago CocaCola closed down Malvern Water and refused to sell the Malvern brand to any other buyers. Now tiny (just 6 employees) Holywell Spring Water have registered the trademark Holywell Malvern Spring Water and they have got away with it. Holywell spring in Malvern Wells was deemed to be the original source of Malvern water so EU trademark law allows Holywell to use the Malvern branding on its products.

Ironically the company tried for two years to buy the Malvern trade name from CocaCola, but were refused. CocaCola just don’t seem to be able to get this bottled water business right do they?

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

That was week ending 4th May 2012

Mervyn swervin’

In his BBC lecture last week Mervyn King, Governor of the Bank of England inferred that he had seen the banking crisis coming but had been unable to convince the government to take action.  “In hindsight … we should have shouted from the rooftops … we should have tried harder”.

I have seen Mervyn King speak and he comes across as logical and capable with considerable brain power throbbing away under that urbane and calm exterior. However when you reflect on what he says not all of it hangs together quite as neatly as it first sounds.

In particular, given that the BoE is to have a central role in regulation of the financial sector in future, he continues to duck the issue of an inquiry into the part played by the BoE itself in the financial crisis. Mervyn King has neatly side stepped any suggestions of this mainly on the grounds that the bank had no direct role in regulating the financial sector at the time.

For us this is just another indication that we have not really got to the core of what went wrong to cause the global financial crisis and subsequent recession.  Various proposed changes such as BoE becoming the key regulator and separation of retail from investment banking sound as though they might work. However they seem rather more “knee jerk” than based on thorough analysis and assessment of cause and effect. In particular we don’t think the “people factor” has been examined thoroughly.

The flaw in the machine

There is a widely held but flawed belief that organisations can be operated like machines. Operate them according to the manual, pull the right levers and they will produce the results you expect. However there is one highly unreliable and unpredictable component in these machines – people. People have emotions so they do not always behave or respond as you expect.

Two of the most powerful of human emotions are fear and greed and it has long been acknowledged that these are powerful drivers of financial markets. They don’t just influence the bankers, investors and so on; they also influence politicians and governments. Politicians were more than happy to let the credit dance go on because they believed voters would give them the credit for choosing the music.

We believe a more thorough study of the behaviours, both within BoE and elsewhere is needed before a really robust solution for preventing or at least containing future financial crises can be devised.

Shareholders – even more revolting

After a third of Barclay’s shareholders refused to support the company’s remuneration report, 59% of Aviva shareholders voted against theirs, in spite of last minute concessions over directors’ pay. At Immarsat 61% of shareholders refused to back its report. Now Sly Bailey, CE of Trinity Mirror Group will step down at the end of the year. Ms Bailey has received around £14m in the nine years she has been in the job whilst Trinity’s share price dropped over 90% in the same period.

It is beginning to look as though shareholders big and small are starting to demand better performance from their directors. Perhaps now is the time for Vince Cable to nip smartly through the gap that is opening up and touch down with some legislation for binding shareholder votes on directors’ pay. Or even better if companies get ahead of the game and do this themselves.

Effective government.

The coalition government managed to go a whole week without tripping over its own feet. However that’s mostly politics. We are more concerned about government’s inability to deliver effectively for UK citizens. Here are just a few examples.

HMRC sent out thousands of letters fining taxpayers for not submitting tax returns who did not need to submit tax returns. It was also reported that HMRC's response time to phone calls has increased to an average of 4 mins compared 1.5 min in 2010. In our experience anyone who gets through to HMRC in 4 minutes is on such a winning streak they should make serious investments in lottery tickets. The odds of winning are better than getting through to HMRC in 4 mins. As for the person who got through in 1.5 mins in 2010, well we'd like to meet them!

UK Border Force seems to think that the only way to prevent illegal or unwelcome visitors to the UK is to make life miserable for all travellers. We were told last week of a hospital paying £200 for a computer cable that you can buy almost anywhere for £29 and being charged £800 for moving 2 computers.  There are now 33 different schemes for helping unemployed teenagers. Soon there will be enough schemes to employ all the unemployed teenagers to help each other, job done!

It seems that just “doing something”, rather than delivering effective outcomes is seen as the primary purpose for their existence by too many government departments and agencies. Ministers talk about “efficiency” (and “efficiency savings” whatever those are). We would like to hear them using and understanding “effective”.

Got no satisfaction

Yet another study from CIPD, showing that whilst 80% of managers thought their staff were satisfied or very satisfied with them as a manager only 58% of their staff returned the compliment. CIPD, as you would expect puts this down to inadequate management training.

The word “satisfied” caught our attention. Our message to managers is never be satisfied with “satisfied”, “OK”, “not bad” and so on. Seek out dissatisfied; find out what could be better and what would be really, really good if it could be made to happen. This is the way to find those golden nuggets of opportunities to improve that will pay off for you, your staff and your business.

Any sympathy for ...?

Mark Zuckerberg founder of Facebook who will sell part of his shareholding when the company goes public and collect $1bn in the process. However it is reported he will have to pay most of this in tax. So he may be an internet genius but don't ask him for tax advice.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

That was week ending 27th April 2012

Well that was a week wasn’t it!  What with the Murdochs at the Leveson Inquiry, a technical double dip recession and the collapse of the Dutch government, it was a week in which business, the economy and politics became inextricably and messily entangled. It’s hard to know where to start, but here goes.

Flat Earth Society

The previous week I sat down with a group of East Midlands’ business people and the regional agent for the Bank of England. “Our best quarter ever” and “optimistic about 2012” were just some of the positive views expressed, significantly more positive than the Bank of England man had expected.

Then we learn that the economy contracted by 0.2% and we are technically in double dip recession. Would this have come as a surprise to those people at that meeting? Well probably not, because what they also all agreed on was that there are and will continue to be winners and losers out there. Therefore the net overall improvement, if any improvement at all, will be small.
So whether the economy is 0.2% up or down makes little real difference. The economy continues broadly flat with nothing significant in prospect to change that any time soon. We have been telling our clients for some time that they should develop their strategy on this basis, but that does not mean that they cannot grow. What it does mean is that without growth in the wider economy they have to win market share and that often requires a different business model, strategy and attitude.

The group at the meeting agreed and that the key difference between the winners and losers was “attitude”. Those who believe the earth (and the economy) is flat are afraid to venture far and try anything new. Those who believe the earth is round know there are opportunities out there, even if they can’t see them yet over the horizon and are prepared to venture out after them.

Yes but …

We do need to get the economy as a whole to grow and a roughly equal balance of winners and losers is not going to do what’s needed. We think there are three key challenges to overcome, where government has a key role to play.

First there are two types of small business with potential to grow, the relatively new business with innovative products and services and the established business that fought its way through recession, often at considerable cost to profits and balance sheet but is now able to grow again. However the financing requirements for both types of business are all about the future, whilst conventional lenders’ criteria are based on past performance and current balance sheets.

These two perspectives are fundamentally incompatible so it should be no surprise that banks are not providing sufficient finance to fuel growth for smaller businesses. “The banks are not lending, there’s no demand” arguments are getting us nowhere and we need new radical thinking with government providing the catalyst.

The second challenge is how to unlock the mountains of cash currently being hoarded by many businesses, both big and small.  This is about “risk” or at least the perception of risk. Psychologically business people need to feel the prospect of reward from investment to be significantly greater than the risk. Right now many can see the risks but not the reward. But just look at the effect the changes to the “patent box” tax regime had on investment intentions at GSK and others. This approach should be used across the business tax spectrum, especially where it would encourage employment.

Third, government should switch on more spending on infrastructure related projects and the OECD now appear to agree. This may need more radical thinking on transferring spending from other areas plus, as the OECD suggest, some easing of the time frame for deficit reduction. Not easy as the transfer would likely come from areas such as welfare and local services. However the boost to the economy and employment would be significant in a relatively short period of time.

If effective strategies were implemented to overcome these three challenges we believe we would see the economy growing within 12 months. Anybody got any better ideas?

Shareholders are revolting

The story on Barclays CEO Bob Diamond’s pay package continued. Nearly a third voted against the remuneration report or abstained. Chairman Marcus Agius appears to think it is all about communication. "Evidently we have not done a good enough job in articulating our case: on some matters we should have communicated earlier and more clearly". However just how you tell shareholders " we are paying ourselves three times a much as your total dividends" without making them think enough is enough is beyond us.

It is too early to say if finally the big institutional shareholders are really going to hold their directors’ feet to the fire and insist reward must reflect performance. However for all the politicians’ huffing and puffing and the sheer exasperation of the rest of us the resolution of over the top reward for mostly mediocre performance was only ever going to come from shareholder pressure. If Barclay’s directors have to buckle maybe this will be the catalyst for change.

Thought for the week

We are grateful to Sally Anderson of Sally Anderson Executive Support Services for this quote from Rosa Parks. On first read it seems a bit “motherpie and applehood” but then it grows on you.  See what you think.

“Stand for something or you will fall for anything.  Today’s mighty oak is yesterday’s nut that held its ground”.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

That was week ending 20th April 2012

When is BIG TOO BIG?

On Wednesday we had the long trailed statement from Tesco’s Chief Executive Philip Clarke confirming reduced profits in their UK operation. He announced a £1bn investment in UK stores focusing on improving staffing levels, smartening up stores and delivering better prices and product ranges. Clarke said this plan would “… put the heart and soul back in to Tesco”.

However commentators have warned that Tesco is now so big that it will be very difficult if not impossible to achieve a turn around fast enough to out pace the competition. So apart from wondering what Tesco have been doing if they have not been “improving staffing levels, smartening up stores and delivering better prices and product ranges” this also made us think about when is BIG just TOO BIG.

There are different types of TOO BIG - too big to manage, too big for stretched financial resources, too big for market demand and so on. However we think the real issue is when a business becomes TOO BIG TO CHANGE. So size doesn’t matter, what really matters is CHANGEABILITY, the personal and organisational ability and capacity for change. If your business has grown beyond your CHANGEABILITY then it is TOO BIG, for you at least.

So think about what might cause you to need to change your business significantly and rapidly and how you would do that, fast and effectively. How good are you right now at implementing changes in your business, fast and effectively? One tip – if you think this is “change management” you are likely to miss the point.

Off their Marks

M&S also announced disappointing sales figures. By way of explanation, they stated how many items of shoes and clothing they did not sell because they did not buy enough stock. We think it is pretty clever of M&S to actually track what they did not sell but are perplexed as to why they were not clever enough to anticipate a cold snap in February.  Have M&S now become so clever with systems that they have lost sight of some the “arts” of retailing?  Tesco also perhaps?

More Women of the Year please

Congratulations to British fashion designer Anya Hindmarch, for winning the Veuve Clicquot Business Woman of the Year Award. The run up to the awards stimulated more debate on women in the boardroom, or rather the lack of them.  There are many different views on why there are still so few women in senior positions in British companies and just as many on what should be done about it.

For us though a fundamental factor in the debate has somehow been lost. It may be considered non PC to say this but …. “women are different from men and men are different from women”. Part of the problem is an unwillingness and lack of skill to manage these differences in ways that can unlock the potential from those differences. It is easier to prefer someone who “will fit in”, “won’t rock the boat”, “will be a team player” in our team and playing the way we think it always has and always should be played.

Show us a board or management group that is largely composed of the same kind of person, male or female and we will show a group of people less productive, innovative and effective than they could be. They may have a nice time together but eventually they will waste away and fail. The “differences” are the reason why we need both women and men at all levels in all organisations.

Women showing how it's done

Finally, CIPD published a labour market analysis which reported that there are 271,000 more women over 50 in the labour market since 2008, an 8pc increase. Of these 172,000 are self-employed, up 16.3%.  By contrast only 3,000 older men are in work.

The report suggest various reason for this. However for us there is a clear message. When the going got tough these older women got going. Now isn’t that the attitude we all want to see in our businesses at all levels?

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

That was week ending 13th April 2012

Politicians tax affairs

This one will probably run for a while but it was certainly around last week. However most of the pressure for publication of politicians' tax affairs seems to be coming from politicians themselves and of course journalists. I am not sure just how interested the rest of us actually are. Politicians appear to want to boast that "my income is smaller than yours" which is a bit perverse when you think about it, whilst journalists are hoping for a juicy story with possibly a ministerial scalp at the end of it for which they can claim the credit.
However if government policy is that everyone should pay their fair share of income tax then if they are to have any credibility at all Ministers at least must show that they are personally paying their fair share. It's called "setting an example" something that has always been an essential element of good leadership. If politicians could remember this then they might just do the right thing, first time, more often.

Facebook - coasting not surfing?

Facebook's acquisition of Instagram raised a few eyebrows. They paid $1bn dollars for a business less than 2 years old and with no revenues. Several commentators have understandably speculated whether this is a sign of another tech bubble. However others have noted that this looks more like Facebook taking out a smaller more innovative competitor whilst it has the financial firepower to do so.

We agree. To us Facebook looks just too comfortable, coasting towards its supposedly record IPO sometime soon. Google continues to produce new services and find innovative ways to exploit its expertise but Facebook just seems to be still, well, just Facebook.  In particular they appear have lost any clear sense of purpose, other than the big IPO. Unless something changes this will catch them out, just look at Yahoo.

So we wouldn't touch Facebook's IPO with a barge pole. In the meantime if you want to make money out of Facebook then come up with a small innovative idea that looks like a threat and you may well find they throw money at you.

Mothercare - into care?

Another week another retail casualty. Mothercare announced more job losses and store closures in its UK business. It will have just 200 stores, less than half the number it had in 1981 when founder Selim Zilkha sold out to Terence Conran's Storehouse (remember them). When Zilkha floated Mothercare he said " we will continue to do what has made us successful, provide everything for mothers-to-be, for their babies and young children".  He did this with a highly effective combination of stores and mail order, the nearest thing at the time to a "clicks and mortar" operation.

So here was a clear sense of purpose and effective system to deliver it. But with Zilkha and his team gone both were soon lost. First in the confusion that was Storehouse and then in the struggle to cope with competition they had allowed to overtake them in almost every respect.  True they had success overseas, but mostly built on joint ventures and franchising.  If the UK business continues to struggle this will affect the confidence of its current and potential overseas partners.

Businesses with a clear sense of purpose find they can make the right decisions to grow and sustain themselves. Those that have lost it or never had it just get lost as Mothercare has been for over 30 years.

More oil & higher prices

Finally, we spotted a report from the International Energy Agency that a combination of increased production from Opec and sluggish demand has resulted in oil supply constraints easing. Current high prices are say both IEA and Opec more to do with perceived than actual shortages. Much of the extra supply has so far been stockpiled on land and at sea and it will be interesting to see how long that situation can be sustained. Whilst we might all be pretty pleased to see some of the speculators involved with their fingers on fire, the pleasure would be short lived and not actually the point.

The situation is finely balanced. Unless we want to endure near recession levels of global economic growth energy costs will continue to rise over the medium to long term. Any business, big or small that does not have as part of its strategic plan the means by which it will significantly reduce its energy consumption year on year will only find out why it needed this when it is too late.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.