Category Archives: rants

Patent Pirates Are Still Plundering

According to this recent article over on CNN Money, “patent trolls” (Sep 21, 2011) have cost investors Half A Trillion Dollars over the last 20 years. Half A Trillion Dollars! That’s an awful lot of innovation down the drain!

At this point, I’m wondering which pirates are worse? The pirates off the coast of Somalia, who have escalated their attacks and brought ocean piracy to an all time high this year, with 142 attacks in the first quarter alone (and 346 attacks as of September 27). Now, it’s true that the attacks are sometimes violent and that 15 people have been killed this year, but for the most part, the Somali pirates are more focussed on taking hostages in return for ransoms, and release the hostages when they get the ransom. And while the ransoms are getting higher, with the average ransom reaching 5.4 Million in 2010, total payments in 2010 were only 238 Million. Yes, this is a big number, and 20 times 238 Million is a bigger number at 4.76 Billion, but that’s only 1% of losses that can be attributed to patent pirates. One percent!

And the “contributions” that the patent trolls supposedly make to innovation are essentially nonexistent. They’ve funnelled less than 10 Billion to R&D, or less than 1/50th of what they’ve cost investors and innovators. All they do is create a disincentive to innovate. And in SI’s view, they should be made to walk the plank.

Stop Hoarding and Invest In Your Supply Chain

By now you might think SI is a broken record, since this is the third day in a row it has complained about the fact that the “Global 2000” are hoarding cash like it’s never to be seen again, but when even Forbes.com decides companies are hoarding too much cash, as per its recent article on how cash isn’t king, this should drive the point home.

And the situation is even worse than Financial Director and Hackett reported. According to a recent Forbes article, the Federal Reserve reported in June that U.S. businesses were saving cash at unprecedented levels, with balances climbing to 1.9 Trillion! That’s 2.23 times the cash reserves of the top 1000. If the situation is the same in Europe, cash reserves must be topping 1.6 Trillion Euros (or 2.16 Trillion US). That’s an estimated 4 Trillion in cash reserves! To put this in perspective, this is 100 Million jobs for one year at the average US salary, and unemployment is roughly 74.7 Million across the US and the EU. Get the picture?

Now, saving for a rainy day sometimes makes sense, but when you start saving to the point where even your investors are concerned that cash is not being put to work earning a reasonable return, not only are you helping to tank the economy, but you are biting the hand that feeds. And given that, due to the lack of innovation and planning, which is largely due to the lack of manpower to do innovation and planning, your transportation costs are about to soar, your commodity costs are rising across the board, and your current talent pool is overworked, unhappy, and ready to change jobs as soon as the next better offer comes along (with job satisfaction at an all time low), how much longer can you really afford not to invest in new talent and new technology to help them innovate your way to a better future?

Then, as the Forbes article points out, as the ever increasing gap between high-quality borrowers (you) and low quality borrowers (your cash-poor suppliers) widens, more and more of your suppliers will experience cash flow issues (as you are not only hoarding all your cash, but borrowing from limited funding reserves to do so). This will lead some into bankruptcy and failure, which will create disruptions in the supply chain that will disrupt your operations and cost you sales and brand equity and, in the end, time and resources to regain your customers’ trust. But all of this can be prevented by investing into your supply chain up front. It’s your choice. Spend and profit. Or hoard and lose.

Is Good Corporate Citizenship At An All Time Low?

In yesterday’s post we noted that “working capital has bounced back” in Europe and that Europe’s biggest companies have seen the most significant revenue growth in five years. We also noted that, at the same time, these same companies are hoarding their cash and, in many cases, borrowing to do so, while smaller companies remain starved for capital and unemployment remains near 10% in the EU. And SI stated that this is, in its view, disgusting. A lack of jobs is resulting in significantly reduced spending across the board because the people out of work can’t spend while the rest of the people are fearing that they are next on the chopping block given that it’s been all bad news in the job market for a few years now. This reduced spending has significantly contributed to the global economic decline which has brought entire countries to the brink of defaulting on their (sovereign) debt.

Now, as per this recent article over on BNet on how “bad corporate management is killing the economy”, we find out, from a recent study by CFO Magazine and REL (a division of The Hackett Group), the thousand largest companies in the US are sitting on cash reserves of 853 Billion. Given the relative equality between the power, and cash position, of US and European multinationals these days, it’s probably a safe bet to say that the Global 2000 is probably sitting on 1.5 Trillion in cash reserves. Now, while it may be true that this is likely not enough to solve the economic crises of the world, given that the US National Debt is almost 15 Trillion, we have to remember that there are only 11 countries in the world with a GDP greater than 1.5 Trillion. We also have to remember that the national average wage in the US is slightly under 41 K, and that this means that these companies could collectively employ another 36.5M people for one year without going into debt. To put this in perspective, at the current published unemployment rates, there are only 27.9 M unemployed people in the US and 46.8 M unemployed people in the EU. That means half of the unemployed people could be working at the top 2,000 corporations in the US and the EU. This would give effective unemployment rates of 4.5 and 4.8 in the US and the EU. The last time the unemployment rate dropped below 4.6 in the US was back in 2000, and the economy was booming.

So while it’s not an absolute that corporations can fix the economy, it should be pretty clear that the author is right and that big corporations are killing the economy when they could be the economic saviours. Instead of hoarding cash, they should be focussed on innovation and hiring bodies to propel that innovation forward. That’s how you print money in a knowledge economy, and with the current state of affairs in most public sectors and banks around the world, they are the only organization left with a license to print cash. But they have to be willing to use it.

Nothing for Nothing

After reading this recent article over on Chief Executive on how 66% of CEOs Plan to Freeze or Downsize Workforce Size which also pointed out how the majority of CEOs expect capital expenditures to remain flat, as per Chief Executive’s monthly survey of CEOs’ perception of overall business conditions (that garnered 247 responses), I can’t help but think of No Sale, No Store by the Arrogant Worms:

…
This week!
This week only!
We pay the GST!
We pay the PST!
We pay for delivery!
We pay for everything!
How do we do it?
How do we offer these fabulous deals?
Volume!
We got the most!
The best!
The worst!
We've got it all!
We’ve got everything!
Except one thing...
What’s that?
We've got no store!
No products!
So come on down!
This week!
…
Every week!
Every year!
No money down!
No payment ever!
That’s nothing for nothing!

Simply put, no new investments into new technology to increase productivity to give current staff time to create new products and services and no new staff to create new products and services creates an innovation free company. An innovation free company has nothing to offer. And you get nothing for nothing. It’s a lose-lose all the way around (as new technologies sit on the shelf and talent sits on the couch.) There’s no sale, as there’s no store.

The Cloud is Full of Sweet Fluffy Dreams

If you want to win favour with the doctor, this is a good way to start. Over in the recent edition of the SIG newsletter, Kent Parker, COO of Ariba, wrote an article on how the Cloud represents a more scalable, efficient way to do business on a global basis because it requires no software, hardware or resources to deploy and time to value is near immediate. However, he noted that these rewards can only be reaped if the organizations providing these networked community capabilities transform in ways that enable them to deliver products and services that meet a completely new set of business challenges and customer needs. Otherwise, the benefit of the Cloud will remain nothing more than sweet, fluffy dreams.

In the article, Kent presented six new rules that companies need to follow if they are to transform in a way that will enable them to deliver the products and services that are required in today’s knowledge-based network economy. The first four were quite obvious:

  • break down application silos
    the goal is to connect all of your applications and let data flow through the lifecycle
  • make innovation a constant
    customers expect improvements on a rapid timeline
  • focus on quality
    because, simply put, no one wants cr@p
  • stay agile
    or you will be outmaneuvered by your competition

However, the last two were not and keys to success in today’s economy:

  • overhaul customer support
    In an always-on community, customers demand immediate, proactive response to their issues, particularly as they impact business commerce continuity. But if you’ve outsourced most of the function of internal IT to an external provider, then you need to make sure the provider is not only offering the service level guarantees, but that it has the competency to provide the necessary support. In the IT world, system restoration sometime between 8 am and 5 pm on the next business day is NOT acceptable.
  • redefine customer relationships
    Go-live is the beginning, not the end, of a customer relationship. In a network-driven cloud community, customers and other participants require more continuous, ongoing assistance with enabling and institutionalizing business commerce capabilities. A company that offers a cloud-based solution has to be willing to continuously work and support the customer on that solution. Or the customer will go elsewhere.