Tesco Business Model in Trouble

The economist reports on the trouble of Tesco as UK consumers shopping habits change and the German discounters Aldi and Lidl roll our their operational models in the UK.

By any measure the figures were eye-popping, worse even than most analysts had expected of the struggling company. Tesco made the largest pre-tax loss, of £6.4 billion ($9.6 billion), in British retail history, eight times as much as the previous record, set by Morrisons last year. This was also the sixth-largest loss in the country’s corporate history. Most of it (about £4.7 billion) was due to a fall in the property value of Tesco’s British stores. This was not merely an accounting matter, but a sign of how its out-of-town hypermarkets have fallen out of favour with consumers who shop online or use smaller convenience stores. Underlying profits were 68% down on the previous year, at £961m, and overall sales were down by 1.8%. The stock that Tesco keeps in its warehouses is worth £570m less than previously thought, and the pension scheme is £3.89 billion in deficit. And so on.

Full Story on Economist.com

Posted on Apr 25, 15

Gerhard Steidl’s Fundamental Objective for his Printing Business

Gerhardt Steidl was asked: Many people call you the “king of printing” and some artists will trust no one else with their books. In what way are Steidl’s books different than other books?

He replied:

Most of the publishing houses in the world are owned by shareholder companies and their interest is to make profit. My publishing house is a private business. I founded it in 1968 and it is still owned by me. It is a family business. It is a Manufaktur and we don’t set any limits on cost. A Steidl book is always made in Germany, in Göttingen, in Düstere Straße 4 and there is a guy, Gerhard Steidl, who is hands on. So, believe it or not, I oversee every sheet that tumbles out of our press. This craftsmanship and this know-how we bring to every one of our babies, our books, makes a huge difference compared to the production processes of other companies.

Source:  The Talks

Posted on Apr 14, 15

Short Case Study of Oracle’s Transformation

The Arc of Company Life - and How to Prolong it provides a good story case illustration using the transformation of Oracle

Posted on Apr 12, 15

What is impact investing

CEO of Qantas highlights that some private investors explicitly do not focus on financial returns but on social impact. This is called impact investing. 

Joyce writes on LinkedIn: It’s not a well-known term in Australia, perhaps because our economic prosperity makes it seem less relevant. But the impact investment market here is growing, targeting areas of social disadvantage that government funding alone can’t fix, from unemployment to homelessness. The point of difference is that an investment relationship requires much more sustained engagement between the investor and the business they’re supporting, compared with a one-off donation or grant.

Indigenous businesses have a particular interest in the potential for impact investment. The Forrest report found that Indigenous enterprises are 100 times more likely to employ Indigenous Australians than other businesses, so building the capacity of these enterprises is vital. Organisations like the CAPE Fund in Canada and Indigenous Business Australia show the way forward, and Qantas is playing a role through our Reconciliation Action Plan, partnerships with Career Trackers and Supply Nation, and backing for ventures such as the North Kimberley carbon offset project.

To read more about impact investing on the Inside Policy blog, click here, and to read John Simon’s landmark report, More than Money, click here.

Posted on Apr 10, 15

Bookshops are closing, here is new business model for a pop-up bookshop

I have seen a lot of bookshops go out of business, including the famous bookshop on Telegraph Avenue in Berkeley. From Adelaide comes a new business model for having a physical bookshop that moves to different locations in the city.  A pop-up bookshop. The owners write:

Curating an ever-evolving, eclectic mix of old, new and collectible books (in itself somewhat out of step), we’ve popped up in various locations, in various styles, within Adelaide’s CBD. On the street, at boutique markets, in cafes, empty shopfronts, arcades. The idea being that by putting ourselves in plain view, we remind people that bookshops exist.

Well, that’s our story too. In November 2013, we pushed ourselves by leasing a space on Adelaide’s main retail strip, Rundle Mall. Next door to French Connection, across from Nespresso, sharing mall frontage with Apple and Nike. It was a make-or-break philosophy – and we received the most amazing reactions from the public who just couldn’t believe what they’d stumbled upon. It lasted four months and we were encouraged enough by that success to give Rundle Mall another go this year. We’re putting a bookshop on the main stage in a city where people constantly – interminably to us – decry the fact there are “no bookshops in Adelaide”.

But how can this work? Our bookshop is a business. Businesses survive by making money. Bookshops don’t make enough money to pay big rents. All these statements are true, more or less. All we have is a complete, unfaltering faith that what we’re doing is worthwhile and important and, because of this, we’ll be OK.

At the moment, we sell just enough books to pay our wealthy landlord, buy stock and cover our modest living expenses. It’s long hours, risky and stressful but we love it. We need to make money to survive but aren’t driven by money. In fact, the short answer to the “how can it work?” question is that we sacrifice money for lifestyle. We treat it as a seasonal occupation, working unsustainably hard for a short period of time then taking a break.

 

Full Story in the Guardian

Posted on Mar 20, 15

Fundamental Redesign of CIA Organizational Structure

The director of CIA has decided to that CIA needs a radical overhaul of its structure.  The NY Times reports:

Drawing from disparate sources — from the Pentagon to corporate America — Mr. Brennan’s plan would partly abandon the agency’s current structure that keeps spies and analysts separate as they target specific regions or countries. Instead, C.I.A. officers will be assigned to 10 new mission centers focused on terrorism, weapons proliferation, the Middle East and other areas with responsibility for espionage operations, intelligence analysis and covert actions.

During a briefing with reporters on Wednesday, Mr. Brennan gave few specifics about how a new structure would make the C.I.A. better at spying in an era of continued terrorism, cyberspying and tumult across the Middle East. But he said the current structure of having undercover spies and analysts cloistered separately — with little interaction and answering to different bosses — was anachronistic given the myriad global issues the agency faces.

During his two years as C.I.A. director, Mr. Brennan has become known for working long days but also for being loath to delegate decisions to lower levels of C.I.A. bureaucracy. During the briefing on Wednesday, he showed flashes of frustration that, under the C.I.A.’s current structure, there is not one single person in charge of — and to hold accountable for — a number of pressing issues.

Source: NY Times

Posted on Mar 06, 15

Australia Post Swings to Losses in first time in 30 years

The Guardian reports on the problems of the existing business model:

Australia Post has warned its losses will amount to $6bn over the next 10 years unless the government allows it to change the price of sending letters.

The national carrier is forecasting its first full-year loss in 30 years, or since before it was corporatised.

Its chief executive, Ahmed Fahour, said Australia Post had a competitive parcel business, but losses from its letters business were swallowing up profits.

Fahour said the government understood the scale of the problem. “They either fund the next 10 years of losses, which could amount to $6bn, or we’re out of business,” he told Fairfax radio on Monday.

Australia Post reported a first-half profit after tax of $98m, down 56% on the first-half result of the previous year.

The letters business lost $151m, 57% worse than the loss in the first half of last financial year.

Fahour said Australia Post had never been subsidised and had always paid dividends to the government, but the world had changed.

“Either we get a massive injection from the government to keep the business going, or they give us the permission to manage the business and therefore no subsidy is required and the business can continue,” he said.

Letter volume decline accelerated to 8.2% year-on-year, the largest fall recorded since Australia Post’s letter volumes started falling in 2008.

Posted on Feb 22, 15

A Good Strategy is like a Good Story

In this context this quote by Jim March also is relevant: 

“Leadership involves plumbing as well as poetry.”

Posted on Feb 21, 15

Fairfax had trouble financing existing newspaper operations

The Guardian provides an update on how Fairfax, a company we features in our course 7 years ago, is doing:

Hywood counters by claiming that readership has never been higher – Fairfax’s website is the most popular news site in the country, and a barely-believable 5.1 million visitors access it every month. However, this is missing the point.

It is not readers, it is revenue that is needed to run those great full-service newsrooms. And cut-throat competition has driven online advertising through the floor – for every dollar a newspaper loses in print advertising it is lucky to recoup 10 cents online. Few newspapers are lucky enough to be owned by a trust, rather than accountable to shareholders, like the Guardian, or to attract a fairy-godfather like Amazon’s Jeff Bezos, who has adopted the Washington Post.

Hywood’s solution has been to diversify into a dozen different fields. Fairfax’s metropolitan newspapers now produce less than half its revenue. The company has morphed into selling baby goods, organising fun runs and ocean swims, a dating service, a real estate site. It has partnered with Channel Nine to launch a video-to-the-home service, though many fear this will end in tears. Apart from its unlikely name of Stan, it is about to face formidable competition from the world’s largest and most aggressive player in video-streaming, the US giant Netflix, which launches in Australia next month.

But many fear these ventures are just postponing the inevitable demise of the newspapers that have chronicled the country since the earliest days of white settlement, leaving Murdoch, at least for now, with a monopoly on everything Australians read in print. “They’ve saved the company, but f——d the papers,” as one analyst told me.

Posted on Feb 21, 15

The Rapid Decline of Printed Guidebooks

The digital revolution is devouring printed travel guides. Lonely planet is a case in point.  The BBC bought the company forf $210 in 2007 and sold it last year for roughly $121 million. Here is a instructive figure charting the decline in printed guide sales.

Lonely Planet and the rapid decline of the printed guidebook

Posted on Apr 19, 14

John Borghetti calls on the government not to pick winners in the Australian airline industry

Posted on Feb 28, 14

Microsoft’s New CEO Nadella on how to organize for innovation

In a wide-ranging interview with the NY Times, Nadella explained his views on how to organize for innovation.

Q. Your company has acknowledged that it needs to create much more of a unified “one Microsoft” culture. How are you going to do that?

A. One thing we’ve talked a lot about, even in the first leadership meeting, was, what’s the purpose of our leadership team? The framework we came up with is the notion that our purpose is to bring clarity, alignment and intensity. What is it that we want to get done? Are we aligned in order to be able to get it done? And are we pursuing that with intensity? That’s really the job.

Culturally, I think we have operated as if we had the formula figured out, and it was all about optimizing, in its various constituent parts, the formula. Now it is about discovering the new formula. So the question is: How do we take the intellectual capital of 130,000 people and innovate where none of the category definitions of the past will matter? Any organizational structure you have today is irrelevant because no competition or innovation is going to respect those boundaries. Everything now is going to have to be much more compressed in terms of both cycle times and response times.

So how do you create that self-organizing capability to drive innovation and be focused? And the high-tech business is perhaps one of the toughest ones, because something can be a real failure until it’s not. It’s just an absolute dud until it’s a hit. So you have to be able to sense those early indicators of success, and the leadership has to really lean in and not let things die on the vine. When you have a $70 billion business, something that’s $1 million can feel irrelevant. But that $1 million business might be the most relevant thing we are doing.

To me, that is perhaps the big culture change — recognizing innovation and fostering its growth. It’s not going to come because of an org chart or the organizational boundaries. Most people have a very strong sense of organizational ownership, but I think what people have to own is an innovation agenda, and everything is shared in terms of the implementation.

Source:  NY Times

Posted on Feb 24, 14

Founders sell WhatsApp to Facebook: Motives not clear

The founders of Whatsapp were very clear that did not not what to sell advertisement through the messaging app.  (See their 2012 statement.They did not even want to collect data on their users.  So why did they sell themselves to Facebook, which is all about collecting more data on us to sell it to advertisers?  Here is a clue in their blog.  Maybe they were tired of having to manage a business rather than just design a product.

Posted on Feb 21, 14

Two Diagrams that show why PC makers have trouble

Click on “more” to see chart that combines PC and tablet sales.

More...

Posted on Oct 14, 13

AOL tries to reinvent its business model

AOL, whose dial-up internet business was destroyed by fast cable, DSL and not mobile phone internet connections connections (see graph) is trying to reinvent itself as a content company. It was to write local news and take the Huffington Post global.  Read details on Economist.com:  AOL’s second life.

Posted on Apr 27, 13